Dáil Éireann díospóireacht -
Wednesday, 26 Feb 1958

Vol. 165 No. 5

Committee on Finance. - Tea (Purchase and Importation) Bill, 1957—Committee Stage.

SECTION 1.

Question proposed: "That Section 1 stand part of the Bill."

General Mulcahy

This appears to me to be as strange a Bill in its structure as ever there was in relation to the company. A kind of ghostly shadow is thrown over the Bill. The Minister gave us some kind of impression in his speech as to what kind of animal the company will be, but, as far as the Bill is concerned, the Bill says "a company is intended". It goes on to say that the memorandum and articles of association can only be changed with the approval of the Minister.

There is nothing in the Bill to show how the company is formed or what the structure is. There is nothing to show what its articles of association are intended to be. The Minister is taking power in the Bill to prevent articles of association being changed. There is no suggestion at all that the Minister has any kind of power over the formation of the company, the financial arrangements that will be made or the articles of association. I should like to ask the Minister is there any precedent for a company throwing its shadow over a Bill like this. There is a company, but it is a ghostly thing as far as this measure is concerned.

Mr. S. Lemass

The position is as I explained. This Bill has to be considered in relation to this announced intention of the Wholesale Tea Traders' Association to establish a company which will have certain characteristics. The characteristics we are concerned with are these, that it will have a capital of £250,000 divided into 100 shares of £2,500 each, that these shares will be available to be taken up only by tea traders registered with the Department of Industry and Commerce, and that its shares will be available to be taken up by any tea traders. There is also the limitation, beyond those I have mentioned, that it will accept the dividend limitation condition to which I have referred.

The company will not be concerned with making profit other than the reasonable remuneration of the capital invested in it. That capital will be inadequate to finance its operations and a great deal of bank credit will have to be employed. To the extent it does utilise its own capital, it will seek to remunerate that capital and no more than that. These are the conditions, which it is essential from my point of view that the company should not have the power to change. That is why Section 2 appears in the Bill. The company will engage in the business of trading in tea, shares in the business will be available to be taken up by registered tea traders and these will be the dividend limitation.

Mr. Cosgrave

Can the Minister say if I put up £2,500, when this Bill becomes law can I become registered?

Mr. S. Lemass

Yes, anybody can.

General Mulcahy

Is that part of the arrangements behind the scenes?

Mr. S. Lemass

Let me reply to Deputy Cosgrave. You do not have to put down £2,500 to become a registered tea trader.

Mr. Cosgrave

Under Section 4 anybody who is an Irish citizen and financed within the State——

Mr. S. Lemass

——can become a registered tea trader.

General Mulcahy

Can the Minister square that with his suggestion that there will only be 100?

Mr. S. Lemass

One hundred is a figure which will leave a number of shares available. On the register maintained under the existing law, there are 90 tea wholesalers. It is generally assumed that a number of these would be in the trade in a small way and therefore would not be likely to acquire shares in this company. The expectation is that about 50 will, so that there will always be available shares to be taken up by anybody who wants to get into the company.

Mr. M.J. O'Higgins

I want to urge again on the Minister the point of view which Deputy Mulcahy urged. Is there any violent urgency as to why this Bill should be introduced before the company is established?

Mr. S. Lemass

The company will not be established until the Bill is passed.

Mr. M.J. O'Higgins

That puts the House in a bit of a cleft stick. Deputy Mulcahy has pointed out, and quite rightly, that as far as Deputies, who are solemnly meeting here to consider this legislation, are concerned, we are legislating in a particular way, and in a particularly restrictive way as far as the general public are concerned, in favour of a company which has not yet been established, in favour of a company that ultimately will go along to the company's office with its memorandum and articles of association, will set out a long string of objects in its memorandum and articles and will give particular powers to the directors and so on, assuming it is following along the pattern of any normal company.

Mr. S. Lemass

The memorandum and articles of association have been agreed to and approved by me. All that process of negotiation has already been completed.

Mr. M.J. O'Higgins

My suggestion is that the Minister should postpone consideration of the Bill until Deputies have an opportunity of studying fully the memorandum and articles of the proposed company. I must say it will look very odd in our legislation that we should legislate in this way, on the basis that it is intended for a group of individuals doing a particular thing at some later date.

Mr. S. Lemass

Is the Deputy unable to understand that this company cannot be formed until there is a registered tea trade? One of the conditions is that they must be registered tea traders, so that the actual formation of the company must follow on the enactment of this measure.

I see no difficulty at all in getting a copy of the draft articles tabled and made available to Deputies. You will find the only essential things in them that really concern the Dáil are the things I mentioned: the number of shareholders, shareholding qualifications, the condition that any registered tea trader can become a share-holder——

Mr. M.J. O'Higgins

I agree those are the primary things.

Mr. S. Lemass

I shall certainly arrange to have copies of the draft articles made available.

General Mulcahy

We have no power over them.

Mr. S. Lemass

They cannot be altered without the consent of the Minister.

Dr. Esmonde

The Minister just stated, in reply to a query by Deputy Cosgrave, that anybody could become a member of the company provided they were Irish citizens and that they could register as tea traders provided they could produce £2,500.

Mr. S. Lemass

They do not have to produce £2,500 to register as traders.

Dr. Esmonde

The company is limited to 100 members——

Mr. S. Lemass

If the tea trade so developed that more than double the existing number of major tea wholesale traders wanted to become registered, we would just have to amend the legislation. By making it 100 shares we appear to have made provision for any possible extension in the number of tea wholesalers that will be concerned with the importation of tea.

Dr. Esmonde

The point I want to make is this. At the moment it is limited to 100 members putting up £2,500 each. It seems to me that this could be quite a good thing for anybody interested. It seems more than likely that you will have plenty of applicants to register as tea traders, people who see a good thing——

Mr. S. Lemass

Where does this arise? That does not produce any additional dividend for the shareholders.

Dr. Esmonde

Is it not a profit-making company? They are allowed to make profit? One hundred people who really have nothing to do with tea may register as tea traders by producing £2,500. They can control the tea of Ireland and make huge profits. What is there to stop them?

Mr. S. Lemass

They would not control the tea of Ireland. I am trying to make that clear to the Deputy.

Dr. Esmonde

They have complete control in regard to the importation of that tea. If 100 people get together and subscribe £2,500 each and form a company and are the sole importers of tea——

Mr. S. Lemass

They can make no additional profit.

Dr. Esmonde

—they are a cartel.

Mr. S. Lemass

I have been trying to explain that.

Dr. Esmonde

Why should they not make a profit?

Mr. S. Lemass

They could only sell tea to whom?

Dr. Esmonde

Whoever bought it. The retailers have to buy tea from someone and these people can sell the tea for what they like.

Mr. S. Lemass

The tea these people would bring in nobody could drink it. You could not drink it. The tea that the Deputy buys from the retail shops is a blend of a number of grades of tea. The tea that will be imported will be unblended tea. It is the wholesale merchant, buying different grades of tea, who blends them and sells them to secondary wholesalers. In the main, it will be the shipping agent for the individual wholesaler who will have already made his purchases on his own behalf in India and, having made the purchases, give the task of shipping the tea and insuring it in transit to this company to be delivered to him in Dublin. It is merely his agent.

Mr. Sweetman

Who arranges the finance?

Mr. S. Lemass

The wholesale merchant can arrange for his own finance and a number of them will have no difficulty to arrange finance of their own purchases. To meet the problem of the smaller trader who may not be able to get financial accommodation and ensure that he will be at no disadvantage whatever as compared with the larger traders, this company will be there to finance his purchases for him if he requires that facility. That is put in in order to ensure that the smallest trader who wants to buy tea direct from the country of origin will be at no disadvantage as compared with the largest.

Mr. Sweetman

Is the Minister serious?

Mr. S. Lemass

Yes.

Mr. Sweetman

Is it not obvious that the company is going to be made up of all the larger traders and that it will only be the large traders who will put up £2,500 each? If the Minister imagines that without a mandatory provision—and there is no mandatory provision in relation to finance—a company formed of large traders will finance, without mandatory provision, the small trader to come in and compete with them, well now, the Minister ought to get——

Mr. S. Lemass

The Deputy has not read the Bill. The Bill has a mandatory provision. Any tea trader has a right to command this company to give service. Section 8 puts on the company the obligation, at the request of a registered tea trader, to act as agent for the importation of tea.

Mr. Sweetman

Agent? That is an entirely different thing.

Mr. M.J. O'Higgins

I am confused by something the Minister said in reply to Deputy Dr. Esmonde. I understood the Minister, in reply to Deputy Dr. Esmonde, to say that the people coming together to form this company would not make any profit on the importation of tea.

Mr. S. Lemass

I did not say that. I said that this company, as such, will be limited in its dividend distribution and, therefore, would have no incentive to make a profit except to the extent required to remunerate the capital invested.

Mr. M.J. O'Higgins

The Minister referred Deputy Sweetman to Section 8. Is not all that is done by Section 8 is to put a statutory requirement, on this company, when it is formed, to act as agent?

Mr. S. Lemass

For any registered tea trader whether he is a member of the company or not.

Mr. M.J. O'Higgins

Is there anything in the Bill to fix the terms of the agent? Is there anything in it to prevent the company, when formed, deciding they will act as agents but that their agency commission will have to be 10 per cent., 15 per cent. or 25 per cent., or whatever you like?

Mr. S. Lemass

In order to provide against the remotest possibility of the company acting in that manner, we have also stipulated that the exemption for State companies contained in the Restrictive Trade Practices Act will not apply and that the Fair Trade Commission can investigate any time.

Mr. M.J. O'Higgins

Is it intended they will act as agents without commission?

Mr. S. Lemass

No, of course not.

Mr. M.J. O'Higgins

They will have commission?

Mr. S. Lemass

Of course they will charge for their services and charge interest on any money——

Mr. M.J. O'Higgins

Who will fix the charge?

Mr. Sweetman

Is this not for the purpose of pushing out the smaller trader for the bigger?

Mr. S. Lemass

On the contrary. I am trying to explain the whole purpose of this arrangement. One of the main functions of this company is to ensure that the small trader will have available to him an organisation which will act as his agent in buying tea in the country of origin and shipping that tea, an arrangement which will ensure that this change will not operate to his disadvantage. There is a number of companies in this country—some of the multiple store organisations—which will have available to them far more finance than this company but they will have no advantage whatever. There is a wide variety of circumstances under which some of the big firms sell their own blends in packets. You see the advertisements all over the country for different types of tea made up in packages by the wholesaler and sold by the retailers. Other traders prefer to make their own blends. You have O'Rourke's tea and O'Brien's tea—tea which is blended in the individual shops. The trend appears to be towards the package tea. In all circumstances, the trader who wants to avail of the liberty he has now got to buy the type of tea he wants in the country of origin, will have, through this company, the same opportunity of doing so and the same advantage of doing so as the strongest company in the business.

Mr. Cosgrave

In theory that is correct but is it not likely that what will happen is that the small trader, because of the pattern of the trade in which a small group of primary wholesalers import tea and subsequently sell it or distribute it to the secondary wholesaler and so on, will have to pay whatever commission the larger people fix for them? In that way they will trade at a disadvantage with those traders in a stronger financial position.

Mr. S. Lemass

If he goes to the Fair Trade Commission they will investigate his case.

Mr. T. Lynch

Did the Minister not say that the big multiple shops who have a good deal of money to spare are prevented under this Bill from competing with the small man?

Mr. S. Lemass

I said nothing of the sort.

Mr. T. Lynch

They are not put in any advantageous position?

Mr. S. Lemass

No. Let me give a word of explanation. I should imagine that some of those big multiple stores would possibly adopt the practice of going to the producer in India and buying his crop from him. The term used is "garden". They buy the output of the garden and in that way get the tea of the quality they require and can ensure reliability and uniformity of quality, which is very important, particularly when they are selling package tea in large quantities. Other traders go to the auctions where the tea is put up for sale and they buy the tea required at the price at which they can get it. I do not know if those who buy from the gardens have the advantage or if it is the other way round, but I should think that the normal practice of the big trader who sells package tea and wants to be able to guarantee the uniformity of the tea in every package is to buy in the gardens. These big traders will continue to do that——

Mr. M.J. O'Higgins

Does the Minister want to put a stop to the big firms doing that?

Mr. S. Lemass

No. On the contrary.

Mr. M.J. O'Higgins

I do not follow the argument.

Mr. S. Lemass

In the past the smaller trader, in so far as he survived at all in the trade here before the war, had no problem in financing his tea purchases because he purchased through a wholesaler in London on a monthly, or two-monthly basis in accordance with his financial resources. He did not have the obligation to finance a year's stock in advance. Therefore he might be at a disadvantage in present circumstances because of inability to finance a year's purchases and one of the reasons for this is to offset that disadvantage.

Mr. M.J. O'Higgins

But take the case that the Minister referred to, the firm in a position to buy the total output of a garden and possibly a year's supply. I am not speaking with any particular knowledge but it seems to be reasonable to suppose that the person who is fortunate enough to be in a position to do that is able to keep up the consistency of his tea and is best able to buy at such prices that he is enabled to pass on some reduction to the consumers——

Mr. S. Lemass

Not necessarily.

Mr. M.J. O'Higgins

I just want to put this point to the Minister. Under the set-up envisaged in this Bill unless those firms will in fact form the personnel of the company, is he not going to put a stop to that kind of activity because the bigger firms will not be able to do that——

Mr. S. Lemass

No, they can buy anywhere they like.

Mr. M.J. O'Higgins

But they cannot buy in London?

Mr. S. Lemass

No, they must buy from India.

Mr. Sweetman

Is not that a contradiction of what the Minister has said?

Mr. S. Lemass

If any of these firms go to India and arrange purchases, having arranged their purchases, this new company acts as their agents to arrange its importation.

Mr. M.J. O'Higgins

But——

An Ceann Comhairle

I have called on Deputy Russell several times.

Mr. Russell

I did my best to rise. Would it be correct to say that the main or the only advantage for the small man is the fact that he has the opportunity to have his purchases financed by the new company? That seems to be the main advantage to him. The company itself will obviously not be big enough with capital of £250,000 even if its shares are fully subscribed and must run a very substantial overdraft——

Mr. S. Lemass

If the smaller trader can get a kindly bank manager to give the finance required on better terms than the company, he can avail of that.

Mr. Russell

He will not be squeezed out if he does not get better terms from the bank manager?

Mr. S. Lemass

That is correct.

Mr. Russell

Otherwise I do not see what the advantage would be. Presumably there is such a thing as quantity buying in these countries and presumably the bigger man will buy the bigger quantity at a better price——

Mr. S. Lemass

Not necessarily. I do not pretend to be an expert on the subject but the bigger the trader may be, the more important it is that he gets enough tea of the quality required in order to maintain the uniformity he is seeking. But it is quite possible that other teas, better in quality or cheaper in price, would be available to him and he cannot take them because there would not be enough of them for his purposes. These are all factors that must be taken into account. Tea Importers each year bought some tea at auctions and some in the gardens. They varied the procedure in accordance with their judgment as to where the advantage lay.

Mr. M.J. O'Higgins

I understood the trader has to go through the company——

An Ceann Comhairle

I am calling Deputy Lynch.

Mr. T. Lynch

Everybody in this House is always looking after the small man but I shall look after the big man. The big trader going to India can buy tea from the gardens but he cannot import it; he must go to this organisation and must give this organisation their "cut", commission or "rakeoff", whatever you like to call it. Does the Minister not think the people of this country would be better served if the big, multiple stores with all the money, could go to India, buy the tea, bring it in, and sell it here more cheaply?

Mr. S. Lemass

I think one can ship tea from India more cheaply if one can fill a boat with tea rather than bring in part boat loads.

Mr. T. Lynch

Then you could get sufficient multiple stores buying enough tea to fill a boat or two boats but they would not be allowed to bring it in here. They must give "the boys" their cut. Is not that what the Bill says?

Mr. M.J. O'Higgins

Is there any answer to that argument?

Mr. Sweetman

No.

Mr. S. Lemass

Let us start off from the assumption that the Irish tea wholesalers will set up a company and appoint as directors to that company people who are reasonably honest. Is not that a fair assumption? These will be people who will try to do a good job for the trade of the country——

Mr. M.J. O'Higgins

But they must act as agents and take the commission. The big firm can buy but cannot import. The Minister is asking us to legislate to that effect so that the question of honesty does not come into it. The company must act as agents and take commission whether they like it or not.

Mr. Sweetman

I think the Minister is completely wrong when he talks about the company financing under Section 8. Suppose I am an Irish citizen and I am qualified to become a registered tea trader, and if I start off and decide to buy £25,000 worth of tea there is nothing whatsoever in this Bill that obliges the company to finance me. If there is and if the Minister can point that out when we resume to-morrow on this Bill he will be a much cleverer man than I am. I would be amazed if there was anything of that kind in this measure because it must depend on the financial stability of the individual trader concerned.

My objection is that the financial stability will be judged by that individual's rivals in the trade. I think that is a very bad thing. There is nothing in the Bill to prevent the company from deciding that nobody shall bring in any smaller quantity than x lb. of tea. The big people who will be in this company will be able to lay down a minimum quantity of tea for importation in respect of which they will act as agents. They can fix that quantity to suit themselves.

We might as well be quite honest about it; the whole thing arises because of the Minister's spite against Mincing Lane. There is nothing else in it. Whatever happened in the past was, in my view, nothing that Mincing Lane did, but that does not matter——

Mr. S. Lemass

That explains the Deputy's opposition to the Bill, does it?

Mr. Sweetman

Whatever happened in the past was far less than happened in many countries of Europe that are working co-operatively to-day. The French and Germans have had to forget things that happened during the war and sit down to do what is best for their respective countries at the present time, regardless of what happened before. The Minister is not big enough to do that. We are talking about going into the Free Trade Area and the first thing that we do on the Bill is to provide that we cannot buy inside the Free Trade Area. I never heard anything so crazy.

Mr. S. Lemass

When the Deputy does start again, will he please not talk nonsense and start off by reading the Bill?

Mr. Sweetman

I have read the Bill much more carefully than the Minister. It is the Minister who is talking the utter nonsense about finance. There is a legal book on agency. I will advise the Minister to read it in the morning, to find out what "agent" means.

Mr. Coogan

Will the Minister indicate what number of inspectors he will appoint?

Mr. S. Lemass

Is the Deputy looking for a job?

Mr. Coogan

No, but there are many people outside who are looking for a job.

Progress reported: Committee to sit again.