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Full text of "Investigation of concentration of economic power; monograph no. 1[-43]"

^®q5 b ° »^^®®^1 senate committee print 

da session J 



INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



TEMPORARY NATIONAL ECONOMIC 
COMMITTEE 

A STUDY MADE UNDER THE AUSPICES OF THE FEDERAL 

TRADE COMMISSION FOR THE TEMPORARY NATIONAL 

ECONOMIC COMMITTEE, SEVENTY-SIXTH CONGRESS, 

THIRD SESSION, PURSUANT TO PUBLIC RESOLUTION 

NO. 113 (SEVENTY-FIFTH CONGRESS), AUTHORIZING 

AND DIRECTING A SELECT COMMITTEE TO MAKE A 

FULL AND COMPLETE STUDY AND INVESTIGATION 

WITH RESPECT TO THE CONCENTRATION OF ECONOMIC 

POWER IN, AND FINANCIAL CONTROL OVER, 

PRODUCTION AND DISTRIBUTION 

OF GOODS AND SERVICES 



MONOGRAPH No. 34 

CONTROL OF UNFAIR COMPETITIVE PRACTICES 

THROUGH TRADE PRACTICE CONFERENCE 

PROCEDURE OF THE FEDERAL TRADE 

COMMISSION 



Printed for the use of the 
Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1941 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

JOSEPH C. O'MAHONEY, Senator from Wyoming, Chairman 

HATTON W. SUMNERS, Represeniatire from Teias, Vice Chairman 

WILLIAM H. KING, Senator from Utah 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General, 

•WENDELL BEROE, Special Assistf^nt to the Attorney General, 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

♦SUMNER T. PIKE, Comm.issioner, 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Com.missioner, 

*EWIN L. DAVIS, Chairman, 

Representing the Fed^-ral Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics, 

♦A. FORD HINRICHS, Chief Economist, Bureau of Labor Statistics, 

Representing the Department of Labor 

JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel, 

•CHARLES L. KADES, Special Assistant to the General Counsel, 

Representing the Department of the Treasury 

* * * 

Represei ting the Department of Comn:erce 

LEON HENDERSON. Economic Coordinator 

DEWEY ANDERSON, Executive Secretary 

THEODORE J. KREPS, Economic Adviser 

•Alternates 

Monograph No. 34 

FEDERAL TRADE COMMISSION 
n 



ACKNOWLEDGMENT 



The Temporary National Economic Committee is greatly indebted 
to the Federal Ttade Commission for this contribution to the litera- 
ture of the subject under review. 

The status of the materials in this volume is precisely the same as that 
of other carefully prepared testimony when given by individual witrtesses; 
it is information submitted jor Committee deliberation. No matter what 
the official capacity oj the vritness or author may be, the publication of 
his testimony, report, or monograph by the Committee in.no way signifies 
nor implies assent to, or approval of, any of the facts, opinions, or recom- 
mendations, nor acceptance thereof in whole or in part by the members of 
the Temporary National Economic Committee, individually or collec- 
tively. Sole and undivided responsibility for every statement in such 
testimony, reports, or monographs rests entirely upon the respective 
authors. 

Joseph C. O'Mahoney, 
Chairman, Temporary National Economic Committee. 



TABLE OF CONTENTS 



Page 

Letter of transmittal vii 

Introduction 1 

Legal objectives 1 

Actual operation extends through 20 years 1 

Procedure 2 

Public interest of primary concern 2 

Industry conference 3 

Public hearing 3 

Approval and promulgation of rules 3 

Requirements for approval of rules 3 

Classification of rules and enforceability 4 

Group I. Mandatory requirements 4 

Group II rules. Advisory and optional provisions 5 

Industries and types of trade practices covered 6 

Size and type of industries 6 

Typical practices covered by promulgated rules 8 

Illustrations of effective treatment of difficult industry problems 1ft 

Some distinctive advantages of the trade practice conference procedure. . 14 

Voluntary correction en masse 14 

Application of compulsory process against persistent violators facil- 
itated .' 15 

Certainty as to application of the law; rallying point for constructive 

forces in industry; aid to small business 15 

Corrective effect in specifying harmful practices 16 

Plan tested by actual experience 16 

Public acceptance and recognition 16 

Minimum standards of product 16 

Flexibility to meet changing conditions ^ 16 

Supervised self-regulation in business afforded 17 

Consumer rights, as well as those of sellers, protected 17 

Advantage in economy of operation 18 

Administrative agencj' of quasi-judicial and nonpartisan character-. 18 
Constructive accomplishments as indicated in expressions of members of 

industry, trade organizations, and from authoritative writings 19 

From individual members and representatives of industry 19 

Published statements from 'authoritative sources 22 

Conclusion 25 



APPENDIX A 



Kules of procedure relating to the trade practice conference work of the 

Federal Trade Commission 27 

APPENDIX B 

Trade practice rules 29 

Baby chick industry 29 

Radio receiving set manufacturing industry . 39 

Rubber tir6 industry 47 

Silk industry 53 

V 



LETTER OF TRANSMITTAL 

September 18, 1940. 
Dr. H. Dewey Anderson, 

Executive Secretary to the Temporary National Economic 

Com-niiitee, Federal Trade Commission Building, 

Washington, D. C. 

Dear Dr. Anderson: I am transmitting herewith for consideration 
by the Temporary National Economic Committee a report of the Fed- 
eral Trade Commission entitled ''Control of Unfair Competitive Prac- 
tices Through Trade Practice Conference Procedm-e of the Federal 
Trade Commission." 

This report has been read and approved by the Commission. 
Very truly yours, 

Willis J. Ballinger, 
Director oj Temporary National Economic Committee Studies 

for the Federal Trade Commission. 

VII 



CONTROL OF UNFAIR COMPETITIVE PRACTICES THROUGH 
TRADE PRACTICE CONFERENCE PROCEDURE OF THE 
FEDERAL TRADE COMMISSION 

INTRODUCTION 

To maintain free and fair competition in trade and commerce, to aid 
business, and to protect the public interest, rules of fair trade practices 
are established by the Commission for respective industries, under 
what is known as the trade practice conference procedure. This is a 
cooperative method for preventing unfair methods of competition, 
monopolistic restraints, and other business practices that are contrary 
to the laws which the Commission is directed to enforce. 

The procedure involves the holding of trade practice conferences in 
industries and the voluntary participation of industry groups and 
affected parties with the Commission in joint undertaking to formulate 
the rules and to carry them into effect. The rules are passed upon 
and approved by the Commission, and are promulgated as com- 
petitive standards for the respective industries to which they apply. 
Trade practices in the industry which are harmful and unfair are 
defined and cataloged, and provision is made for the elimination of 
such evils. Voluntary cooperation is utilized as a primary means to 
this end. 

In addition to providing such detailed specifications as to unfair or 
harmful practices to be avoided, provision may also be made, and 
often is, whereby certain positive trade methods in the particular 
industry are defined and sanctioned as being proper and promotive of 
sound business methods in keeping with the policy of the law and the 
public interest. 

The organization and encouragement of voluntary cooperative 
effort to end trade abuses, the creation of officially recognized standards 
of fair competition with consequent guidance to industry as to what 
may or may not be done under the law, and the exercise of a sub- 
stantial measure of self-regulation in business under supervision of the 
Commission, are distinctive features of the plan. 

Legal objectives. — Under the organic act creating the Federal 
Trade Commission,^ that body was set up as an agency to deal with 
competitive conditions in industry, and to act in prevention of unfair 
methods of competition and other unfair practices in interstate com- 
merce. Subsequently, by the Clayton Act and amendments thereto, 
other practices of a monopolistic character were more specifically 
brought within the orbit of the Commission's correctional functions. 
To effectuate observance of these laws by industry-wide cooperative 
action under rules is, in legal contemplation, the immediate objective 
of the trade practice conference procedure. 

Actual operation extends through 20 years. — The trade practice con- 
ference plan has been in operation ior some 20 years, and rules have 

' Federal Trade Commission Act, passed September 26, 1914, amended March 21, 1938 (16 U. 8. C. A. 41-68). 

1 
283999— 41— No. 34 2 



2 CONCENTRATION OF ECONOMIC POWER 

been established thereunder for many industries. The inception of 
the idea goes as far back as 1918. In an early report of the Commis- 
sion, the procedure was referred to, in part, as follows: 

The trade practice conference was the logical development of the efforts of the 
Commission, cooperating with industry, to protect the public against unfair 
methods of competition and to raise the standards of business practices. As 
early as the year 1919 the Commission established the procedure of holding con- 
ferences witl\ industry for the purpose of eliminating unfair methods of competi- 
tion as well as trade abuses existing therein .* 

Since the early beginnings in 1918 and 1919, there has been a 
steadily increasing application of the plan. It has become progres- 
sively popular as a needful and effective method for treating the com- 
plicated questions in the elevation of standards of business practices 
and the removal of obstructions from the channels of distribution and 
commerce. Through demonstrated results its various advantages 
have received recognition on the part of industry and the public, and 
this has led to widening demands for the help such conference method 
affords' in the solution of competitive problems. Growth has taken 
place not only in number of industries covered, but also in scope of 
usefulness and subject matter treated. In addition to the numerous 
industries which are now operating under established trade practice 
conference rules, applications from other industries are being received 
by the Commission in sustained volume. 

PROCEDURE 

The Commission's rules of procedure applicable to its trade practice 
conference work are set forth in appendix A (p. 27). These point out 
that the plan affords opportunity for voluntary participation by in- 
dustry groups and that any interested party or group desiring to do 
so may file application for trade practice conference rules for an in- 
dustry. Proceedings are usually initiated upon application commg 
from the industry itself. It was in this way generally that the pro- 
ceedings for those industries for which rules have heretofore been 
established had their inception. Such appendix A also sets out the 
applicable provisions as to form and content of the application, and as 
to opportunity for informal meetings and discussions with the Commis- 
sion's staff, the holding of the industry conference, the subsequent 
public notice to and hearing of intefested or affected parties, and the 
final approval and promulgation of rules. 

Public interest of primary concern. — The Commission acts in the 
public interest and trade practice conference proceedings are not 
authorized by the Commission, either upon application or otherwise, 
unless it appears that they would substantially serve such interest of 
the public. On the question of public interest in authorizing pro- 
ceedings for a particular industry, the Commission may consider 
whether under the circumstances existing in the case the undertaking 
is feasible and shows substantial possibilities of constructively advanc- 
ing the best interests of industry on sound competitive principles in 
consonance with public policy, and of bringing about more adequate 
and equitable observance of the laws under which the Commission 
has jurisdiction. The public interest extends to the welfare of both 
the purchaser and the seller, and all facts which constructively sup- 
port their legitimate interests are pertinent. Consumer protection is, 
of course, a matter of major concern (cf. p. 17). 

» Annual report of the Federal Trade Commission for flscal year 1933. 



CONCENTRATION OF ECONOMIC POWER 3 

Industry conjerence. — When proceedings for an industry are directed 
to be undertaken, a trade practice conference of all members of the 
industry is called by the Commission to consider and submit sugges- 
tions and proposed rules for the elimination of unfair trade practices 
and the improvement of competitive conditions in the industry. 
Public notice of the time and place of such conference is issued and all 
members are invited to attend and participate in the proceedings. 
Each is encouraged to contribute his views and best thought on the 
subject, in joint effort to arrive at constructive results within the law. 

Members of the industry and interested parties are afforded every 
assistance by the Commission. Preliminary meetings and discus- 
sions by members of the Commission's staff are had with industry 
committees, members, or parties in interest, to afford guidance and 
assistance in fully understandmg the proceed.ing and its objectives, in 
preparing applications and drafts of proposed rules, and in working 
out solutions of competitive problems in a manner which will avoid 
hardships and be constructive. 

A transcript is made of the general industry conference, recording 
ail proposed rules, resolutions, amendments, and other matters offered, 
and the discussion concerning the same. Such record, the proposals 
and suggestions developed at the conference, and the industry prob- 
lems involved, are submitted to the Commission. They are examined 
and studied by the Commission's staff, to the end that the rules finally 
approved may cover adequately and constructively the unfair com- 
petitive practices and trade abuses affecting the industry and be 
within the boundaries of legal propriety. 

Public hearing. — ^As part of the Commission's collaboration with all 
parties in interest and before final action is taken, a draft of proposed 
rules, based upon a study of the various problems and suggestions 
made and the requirements of law and the public interest involved, 
is prepared and made available by the Commission to all concerned. 
Public notice is also issued in connection therewith, affording the 
members of the industry and all interested or affected parties oppor- 
tunity to consider the proposals in concrete form, to submit such 
pertinent information, views, suggestions, amendments, or objections 
as they desire to present for consideration of the Commission, and to 
be heard at public hearing held for the purpose. Thus all parties 
concerned in the matter, whether members of the industry or not, are 
invited to collaborate with the Commission, to present their views 
and suggestions, and to be heard. 

Approval and promulgation of rules. — After due consideration of the 
entire matter the Commission proceeds to final action in the premises, 
and the rules as thereupon approved and received by the Commission 
are promulgated and put into effect as rules for the industry. Such 
promulgation is made officially through the Federal Register. Copies 
of the rules are supplied to all members of the industry, and each is 
afforded opportunity to record his intention to observe the rules in 
the conduct of his business by signing an acceptance form which is 
filed with the Commission. 

REQUIREMENTS FOR APPROVAL OF RULES 

In passing upon the rules proposed for approval and acceptance, 
the Commission applies the test of law. The rules must not sanction 
practices which are contrars' to law, or which v^hen put into effect 



4 CONCENTRATION OP ECONOMIC POWER 

may bring about a result that is illegal or opposed to the public 
interest. The possibilities of inequities or of undue advantage of 
one group over another are also guarded against. The rules must be 
such as are well calculated to elevate the standards of competitive 
practices in the industry and to promote law observance, to the end 
that business may be liberated fn the waste and fetters of unfair 
practices and the rights of the public may be protected. 

CLASSIFICATION OF RULES AND ENFORCEABILITY 

Rules under Trade Commission procedure are divided into two 
classes — :"Group I" and "Group II." Group I rules contain the man- 
datory requirements, and Group II the advisory or voluntary pro- 
visions. 

Group I. Mandatory requirements. — Approved provisions which 
proscribe practices as being unfair are placed in Group I and are 
mandatory because they are expressive of legal requirements. They 
may therefore be said to have the force of law behind them. They 
cover as "unfair trade practices" types of competitive conduct which 
fall within the broad inhibitions in acts of Congress under which the 
Commission exercises enforcement powers. The offender or party 
indulging in such inhibited practices, in a manner involving that com- 
merce which is subject to Federal control, renders himself liable to 
corrective proceedings under such acts. These statutes are the 
Federal Trade Commission Act, the Webb-Pomerene Export Trade 
Act, certain sections of the Clayton Act, and tlie Robinson-Patman 
Antidiscrimination Act. The Group I rules may include any type 
of practice which in contemplation of law comes within the broad 
field of "unfair methods of competition" or of "unfair or deceptive 
acts or practices in commerce," ^ or which falls within the categories 
of discriminatory and monopolistic restraints condemned by the 
Robinson-Patman Antidiscrimination Act/ the Clayton Act,^ or the 
Federal Trade Commission Act.' 

There are many volumes of court and Commission decisions con- 
struing such statutes, and these decisions, as well as the pro^■isions of 
the laws themselves and their legislative histories, supply a large body 
of source material which is drawn upon in determinmg wlir ther a given 
rule is eligible for Group I. 

As indicated elsewhere, the Group I rules comprise about 90 per- 
cent of the entire set for an industry. They are of major importance, 
largely because of the fact that they strike directly at the trade evvils 
in the industry. Group I rules being aligned with and detailing legal 
inhibitions, obedience to their requirements is not a matter of choice. 
The obligation to observe such requirements in interstate distribu- 
tion, and to refrain from practices thus prohibited within the scope 
of the law, is binding upon all, quite irrespective of the fact that the 
alleged offender may have refused to take part in the establishment 
of the rules, or refused or failed to pledge obedience thereto. Vol- 
untary adherence is general under approved trade practice rules, and 
nsually resort to the compulsory processes becomes necessary only in 
comparatively few cases which may arise from a recalcitrant minority. 

' Section 5, Federal Trade Commission Act, 15 U. S. C. A. 45, as amended, and section 4 of the Webb- 
Pomerene Export Trade Act, 15 U. S. C. A. 64. 
« 15 U. S. C. A. 13, and 13a and b; 49 Stat. 1526; amended 52 Stat. 446. 
« 15 U. S. C. A. 14, 18, 19, 21. 



CONCENTRATION OF ECONOMIC POWER 5 

Group I rules as projnulgated by the Commission carry a headnote 
in which their enforceabihty is described as follows: 

Unfair trade practices which are embraced in these Group I rules are considered 
to be unfair methods of competition, unfair or deceptive acts or practices, or 
other illegal practices, prohibited under laws administered by the Federal Trade 
Commission, as construed in the decisions of the Commission or the courts; and 
appropriate proceedings in the public interest will be taken by the Commission 
to prevent the use, by any person, partnership, corporation, or other organization 
subject to its jurisdiction, of such unlawful practices in or directly affecting inter- 
state commerce. 

When cases of alleged violation come to the attention of the Com- 
mission by way of complaint or otherwise, inquiry into the facts is 
made by the Commission, and if such infraction as may be found is 
not corrected through voluntary action, compulsorj'- process is 
brought into play to effect the needed correction and bring the 
offender's practices into harmony with the law as expressed in the 
rules. This process is prescribed by the statutes mentioned. Under 
these statutes and the rules of the Commission, all legal and constitu- 
tional rights are accorded the accused. He has the right to file answer 
to formal charges, the right to have a trial, to cross-examine witnesses, 
.introduce evidence on his own behalf, file briefs, and be heard; also to 
seek court review. 

The members of the industry, through their trade association or in 
direct contact, assist the Commission in seeing that the rules are 
equitably observed, to the end that infractions are avoided or cor- 
rected. In some industries a trade practice committee is estabhshed 
under the rules to cooperate with the Commission in the compliance 
work. An important point is that such trade practice committee is 
not authorized to exercise any governmental powers, but serves as a 
medium for keeping the Commission informed as to activities in the 
industry in relation to the rules and to supply the Commission with 
other information and helpful service. 

Group II Rules. Advisory and optional provisions. — While the Group 
I rules express compulsory requirements, in Group II are placed the 
permissive practices and recommended volimtary restrictions, which 
a,re to be promoted and followed on an optional basis. This status is 
likewise explained in a headnote to such rules, which reads as follows: 

Compliance with the trade practice provisions embraced in the Group II rules 
is considered to be conducive to sound business methods and is to be encouraged 
and promoted individually or through voluntary cooperation exercised in accord- 
ance with existing law. Nonobservance of such rules does not, per se, consti- 
tute violation of law. Where, however, the practice of not complying with any 
such Group II rules is followed in such manner as to result in unfair methods of 
competition, or unfair or deceptive acts or practices, corrective proceedings may 
be instituted by the Commission as in the case of a violation of Group I rules. 

Frequently there are instances in which the industry desires to 
promote and foster certain practices on a purely voluntary basis, 
with governmental acceptance. The opportunity to do so and to go 
on record in support of such rules is afforded under the Group II 
classification. Although not necessarily compulsory, provisions of this 
class are those which are found to be within the law and are considered 
desirable in the interests of good business and the promotion of fair 
competitive conditions. 

Adherence to Group II rules, on a voluntary basis and without 
compulsion, is in general sufficiently adequate and effective. This 
may be accounted for by the fact that ordinarily the Group II rules 



^ CONCENTRATION OF EC^ONOMIC POWER 

are such that members of the mdustry are only too glad to abide by 
them once they are assured through Commission acceptance that it is 
proper to follow them and to cooperate with others in doing so. 

Representative practices covered in the Group II and also in the 
Group I rules are listed on pp. 8-10. 

INDUSTRIES AND TYPES OF TRADE PRACTICES COVERED 

Over 200 conference proceedings for industries have been conducted 
by the Commission since the inception of this phase of its work. 
The following are representaitive of these industries and of the 
established rules: 



Subscription and mail order book 
publishing industry. 

Tuna industry. 

Resistance welder manufacturing in- 
dustry. 

Ripe olive industry. 

Uniform industry 

Folding paper box industry. 

Umbrella industry. 

Sardine industry. 

Curled hair industry. 

Public seating industry. 

Marking devices industry. 

Cotton converting industry. 

Radio receiving set manufacturing in- 
dustry. 

Mirror manufacturing industry. 

Putty manufacturing industry. 

Wine industry. 

Ribbon industry. 

Infants' and children's knitted outer- 
wear industry. 

Paint and varnish brush manufacturing 
industry. 

Baby chick industry. 

Silk industry. 

Oleomargarine manufacturing industry. 

Tomato paste manufacturing industry. 

Macaroni, noodles, and related products 
industry. 

Shrinkage of woven cotton yard goods. 

Fur industry. 

Carbon dioxide manufacturing industry. 



Metal clad door and accessories manu- 
facturing industry. 

Toilet brush manufacturing industry. 

Popular priced dress manufacturing in- 
dustry. 

House dress and wash frock mauufac- 
facturing industry. 

Rayon industry. 

Concrete burial vault manufacturing 
industry. 

Wet ground mica industry. 

Tubular pipings and trimmings manu- 
facturing industry. 

Covered button and buckle manufac- 
turing industry. 

School supplies and equipment dis- 
tributing industry. 

Private home study schools. 

Rubber tire industry. 

Preserve manufacturing industry. 

Ladies' handbag manufacturing indus- 
try. 

Juvenile wheel goods manufacturing in- 
du.stry. 

Flat glass manufacturing industry. 

Buff and polishing wheel manufacturing 
industry. 

Paper drinking straw manufacturing in- 
dustry. 

Vegetable ivory button industry. 

Fire extinguishing appliance manufac- 
turing industry. 

Wholesale tobacco trade. 



Wholesale jewelry industry. 

Rules established for various other industries have been pubHshed 
in the form of pamphlets and small volumes issued by the Commission.® 
Codifications of Group I rules are also pubUshed in the Code of Federal 
Regulations of the United States of America (title 16, subchapter B, 
pp. 1 to 175, inclusive, and supplements thereto). 

Size and type of industries . — The industries covered are quite varied 
in character of product, number of niembers or units involved, and 
extent of operation or volume of business. To illustrate, the radio 
receiving set manufacturing industrv is reported as having annual 
sales of $460,000,000, consisting of between 7,000,000 and 8,000,000 
sets, exclusive of parts, accessories, etc. Ladies' handbag manufac- 
turing industry was reported, at the time, as having an annual sales 

« Trade Practice Submittals, July 6, 1925, Government Printing Office, 1925. 

Trade Practice Conferences, July 1, 1929, Government Printing Office, 1929. 

Trade Practice Conferences, June 30, 1933, Government Printing Office, 1933. 

Trade Practice Conferences, September 1, 1935, to August 31, 1939, Government Printing Office, 1940. 



CONCENTRATION OF ECONOMIC POWER 7 

volume of $33,000,000 wholesale; flat glass industry, an estimated 
annual volume of business of about $200,000,000, invested capital 
$125,000,000; preserve manufacturing industry, producing over 
$30,000,000 of preserves, annually ; rubber tire industry, $2,000,000,000 
invested capital, $750,000,000 annual sales volume, with manufac- 
turers, distributors, and dealers numbering 100,000; cotton convert- 
ing industry, annual sales volume over $500,000,000; rayon industry, 
annual production of the raw fiber amounting to nearly 400,000,000 
pounds, affecting processors, manufacturers, distributors, and dealers 
of textile merchandise throughout the United States; silk industry, 
annual sales volume of articles converted by American mills equaling 
approximately $600,000,000, and employing 250,000 persons; popular 
priced dress, house and wash frock manufacturing industries, com- 
bined annual sales volume of approximatel;^^ $285,000,000; fur in- 
dustry, annual sales volume $150,000,000 mvolving 10,000 stores 
besides trappere, fur farmers, processors, manufacturers, and others. 

In addition to these and other industries of considerable size, the 
trade practice conference procedure has also been made available to 
smaller industries, such as, for example, the metal clad door and 
accessories manufacturmg industry, total invested capital estimated 
at $2,000,000 and annual sales volume between eight and ten milhon 
dollars; paper drinking straw manufacturing industry, sales volume 
around a million dollars, with total employment of about 500 persons; 
wet ground mica industry, annual sales volume of about $300,000 and 
capital investment aggregating about $1,000,000. 

In addition to those listed on p. 6, other industries, for which 
conferences were held in prior years, embraced a large variety of 
products including the following: 

Creamery products. Wall paper. 

Rebuilt typewriters. Range boilers. 

Pyroxylin plastics. Greeting caMs. 

Oil (other than petroleum). Wool stock. 

Silver-plated hollowware. Concrete mixers and pavers. 

Gold-mounted knives. Medical gas. 

Watch cases. Ingot brass and bronze. 

Sheet music. Roll and machine tickets. 

Antihog cholera serum and virus. Millwork. 

Men'ding cotton. Spices. 

Furniture. Solvents. 

Castile soap. Structural clay tile. 

Woven furniture (includes baby and doll Edible oils. 

carriages). Machine embroidery. 

Golf balls and athletic goods. Cut nails, tacks, and staples. 

Hickory liandles (striking tools). Common or toilet pins. 

Knit underwear. Interior marble. 

Hardware. Walnut woods. 

Steel office furniture. China recess accessories. 

Kraft paper. Lightning rods. 

Milk and ice cream cans. Lime. 

Paper bags. Bank and commercial stationery. 

Common bricks. Paper bottle caps. 

Fabricated structural steel. Beauty and barber supplies. 

Bituminous coal. Insecticides and disinfectants. 

Mixed feeds. Feldspar. 

Steel window sash. Sleds. 

Vulcanized fibre. Educational jewelry (school jowelry). 

Fertilizer. Transi)arent and translucent printed 
Crushed ."^tone. materials. 

Face brick. Waxed paper. 

Cut stone. Groceries. 

Reinforcing steel for concrete. Household furniture and furnishings. 



8 CONCENTRATION OF ECONOMIC POWER 

Scrap iron and steel. Saws and blades. 

Feathers and down. Ice cream. 

Upholstery materials. Mopsticks. 

Metal burial vaults. Woodworking machinery. 

Waste paper. Cedar chests. 

Warm air furnaces. Barre granite. 

Furnace pipe and fittings. Musical merchandise. 

Fabricated ornamental jrpn, bronze, Rabbits and cavies. 

and wire. Drugs, and other industry products. 
Sanitary napkins. 

Typical 'practices covered by promulgated rules. — Practices covered 
in the promulgated rules are of wide variety, depending largely upon 
the peculiar problems of the respective industry. An authoritative 
writer on the general subject has stated in respect to this point: 

An examination of the approved rules reveals a wide diversity of provisions, 
some primarily concerned with maintaining competition between business rivals 
upon a desired plane, others oriented more directly toward the protection of the 
consumer, and still others showing concern with both these objectives.^ 

The forty some industries listed above as representative of the 
whole have a total of 834 rules. On the average, about 90 percent 
consists of Group I rules. In various instances individual rules cover a 
group of related practices. Analysis made by another writer in 1936 
resulted in his listing a total of 291 different trade practices as being 
covered by the rules promulgated for industries up to December 
1934.* Many more have, of course, been added since then. 

Various types of unfair methods, monopolistic restraints, and other 
practices are illustrated in the following partial list of subjects covered 
in rules heretofore promulgated: 

(Group I rules) Inducing breach of competitors' contracts; 
bribing competitors' employees or agents; procuring competitors' con- 
fidential information by unfair means; interfering with competitors' 
right of purchase or sale; coercing purchase of one product as pre- 
requisite to purchase of another; defaming competitors or disparaging 
their products, services, etc.; harassing competitors by circulating in 
bad faith threats of infringement suits ; imitating or simulating trade- 
marks, trade names, etc.; selling below cost with intent of injuring 
competitors and effect of unreasonably restraining trade, tending 
to create a monopoly, or substantially lessening competition; com- 
bining or conspiring to fix prices, uppress competition, or restrain 
trade; paying or receiving discriminatory prices, discounts, rebates, 
refunds, credits, etc., which injure, prevent, or destroy competition; 
granting or accepting of discriminatory advertising or promotional 
allowances, services, or facilities; use of inhibited brokerages or com- 
missions or allowances in lieu thereof; bribing customers' employees, 
agents, of representatives; substituting products without consent of 
purchasers; using lottery schemes in connection with sale of products; 
falsifying invoices ; using consignment distribution to close competitors' 
trade outlets; representing domestic products as imported or imported 
products as domestic; using deceptive types of containers simulating 
standard and generally recognized types; misrepresenting color fast- 
ness of product; using deceptive depictions (photographs, engravings, 
cuts, etc.) in describing industry products; using "loss leaders" as a 
deceptive or monopolistic practice; deception as to kind of glass in 

. ' Saul Nelson, economist. In Trade Practice Conference Rules and the Consumer, p. 452, The George 
Washington Law Review, January-February 1940. 
' 8. P. Kaidanovsky, Trade-Practice Conference Rules of the Federal Trade Commission (1919-1936). 



CONCENTRATION OF ECONOMIC POWER Q 

mirrors; using misleading guaranties, price quotations, price lists, 
terms of sale, etc. ; misrepresenting possible earnings or opportunities 
afforded on completion of correspondence school courses ; misrepresent- 
ing government connection with or endorsement of correspondence 
schools, or misrepresenting any training or services offered by such 
schools; falsely representing offers as "special" or "limited"; mis- 
representing regular lines as "close outs" or "bankrupt stock"; repre- 
senting products as conforming to recognized industry standards 
when such is not the fact; misusing such words or terms as "perfect," 
"genuine," "natural," etc., in describing precious stones or their 
imitations; misrepresenting geographical or zoological origin of furs; 
misusing terms relating to types of construction or weave of textiles; 
misrepresenting yardage of ribbon fabrics; deceptively inflating prices 
to cover trade-m allowances; circulating false or misleadmg reports 
as to transportation costs; representing retail prices as wholesale; 
using false or deceptive testimonials; misrepresenting character, ex- 
tent, or tj^pe of business; making false representations respecting tube 
capacity of radio sets or the range or receptivity thereof; misusing the 
terms "all wave," "world wave," "world-wide wave," etc.; misusing 
the words or terms "bristle," "pure bristle," etc., in describing brushes; 
deceptively using "help wanted" or other employment colunms; and 
various other forms of misrepresentation, including false or misleading 
advertising and deceptive labeling in respect to the quantity, quality, 
grade, size, material, content, composition, origin, use, manufacture, 
preparation, or distribution of any industry product ; aiding or abetting 
another in the use of an unfair trade practice. 

Other Group I provisions provide for disclosure of the fiber content 
and proper marking of textile merchandise made of rayon or silk, or of 
two or more fibers containing either rayon or silk; disclosure and 
marking of loading or adulterating materials in textile merchandise; 
disclosure as to remaining shrinkage in so-called preshrunk mer- 
chandise; disclosure and marking of fact that apparently new products 
are secondhand, rebuilt, or renovated; disclosure and marking that 
products are artificial or imitations and not real or genuine; disclosure 
and marking of country of origin of imported products; disclosure 
and marking as to the true composition of paint and varnish brushes 
containing material simulating bristle; disclosure and marking as to 
defective merchandise; disclosure and marking as to adulterants or 
substitutes for linseed oil in putty products, and as to metallic weight- 
ing in silk or silk products; disclosure as to quality, quantity, and size 
of products in opaque containers; proper marking of automobile tires 
as being recapped or rebuilt and not new, of mirrors as being window 
and plate glass. 

(Group II rules) Included in the Group II provisions are those 
encouraging the use of American agricultural products in the manu- 
facture of oleomargarine; the arbitration of disputes between industry 
members and their customers; the maintenance of accurate records 
for determining costs; the distribution of credit information; the 
publication of price lists by industry members acting individually 
and independently; compliance with safety requirements; the super- 
vision of sales representatives to prevent misrepresentation; the filing 
of trade-marks, trade names, labels, and brands with an agency 
designated by the inchistry; the dissemination.of information concern- 
ing treatment, care, and cleaning of product; differentiation, in 

283999 — 41— No. 34 3 



10 CONCENTRATION OF ECONOMIC POWER 

invoices, between width, thread count, and weight of cotton goods in 
the greige and in the finished state; the uniform closing of business 
offices on Saturdays and Sundays; and other affirmative practices 
promotive of fair competition. Certain Group II provisions condemn 
the return of merchandise without just cause; the repudiation of 
contracts; the failure to give notice of the change of shipping schedules; 
and other practices deemed to be inconsistent with sound and ethical 
business methods. 

ILLUSTRATIONS OF EFFECTIVE TREATMENT OF 
DIFFICULT INDUSTRY PROBLEMS 

On a broad scale the operation of trade practice rules since their 
inception, as a principal part of the Federal Trade Commission's 
activities in the field of fair trade and consumer protection, has had a 
constructive and wholesome effect upon the whole business structure. 
In the report of a recent review of \h.e subject, the authors said, "the 
trade practice conference procedure has performed for industry and 
the public a great educational service, the value of which in eliminating 
unethical practices, and cutting the cost of law enforcement, cannot 
be overestimated."^ 

The substantial good achieved by trade practice conference rules 
points to the possibilities of future growth for the benefit of our 
national economy. The following are illustrative situations in which 
rules have been employed in effective treatment of difficult competitive 
problems: 

Textiles. — In the textile field aggravated conditions of confusion, 
misrepresentation, and deceptive concealment in the merchandising 
of fabrics, and clothing and other products made therefrom, have been 
immeasurably improved by trade practice rules promulgated by the 
Commission in respect to rayon and rayon mixtures, shrinkage of 
woven cotton merchandise, silks and silk mixtures; also rules for dress 
industries, fur industry, cotton converting industry, mfants' and chil- 
dren's laiitted outerw^ear mdustry, and the ribbon industry. Further 
rules are in process of formulation for other branches of textiles. 

Action was taken by the Commission in these important lines at the 
request of industry and consumer groups beset by many types of 
unfair and destructive trade practices, including deceptive conceal- 
ment, false and misleading representations in labels and advertise- 
ments, and other forms of dishonest methods. 

The development of new fibers and new types of fabrics, and advances 
in the art of manipulating fabrics and of combining different fibers, 
have been such that the eye and sense of touch are no longer reliable 
guides to a purchaser as to what the fabrics are composed of. For 
example, simulations of silk, wool, and linen in fabrics containing no 
silk or no wool or no linen were developed to such an extent as to 
deceive even the experts. Complaints coming to the Commission 
from businessmen and from the public increased. The unfair com- 
petition made it difficult for the honest competitors to survive or to 
maintain high quality of their products. Deception of the buying 
public was rapidly undermining consumer confidence, so essential to 
a sound and prosperous business. A chaotic competitive condition 
ensued. 

' A Review of the Trade Practice Conferences of the Federal Trade Commission, by Sumner S. Kittelle 
•»nd Elmer Mostow, The George AVashington Law Review, January-February 1940, p. 450. 



CONCENTRATION OF ECONOMIC POWER H 

Examination of the problems in respect to clothing, household 
textiles, and similar articles showed that the evil was due basically 
to the concealment or nondisclosure of fiber content or composition 
of the goods, and to. lack of guiding specifications as to the type of 
nomenclature and designations considered proper for the several kinds 
of. products or goods involved. The remedy required comprehensive 
r.ules for adequate marking and disclosure at the source, to effect cor- 
rection of the confusion and misunderstanding palpably harmful to 
the buying public and to business as a whole. Such rules were ac- 
cordingly established to be followed with confidence as a guide for 
proper labeling and marking for the benefit of industry and consumers 
alike. The rules issued likewise cover various other unfair trade 
practices which it is necessary to curb in order that a high plane of 
competitive fairness may be maintained. (See appendix B.) 

In an editorial in "Retailing," July 25, 1938, this action of the 
Federal Trade Commission was referred to as follows: 

New Standards 

With consumers, retailers, and producers working for the same general end 
and with the help of the Federal Trade Commission there is slowly but surely 
being developed a precise and accurate manual of advertising and labehng for 
different types of merchandise. The Commission's rules for rayon, fur, silk, and 
shrinkage set a new high standard. They are the foundation, furthermore, for 
the building of a more satisfactory relationship all along the line from producer 
to consumer. 

This development, fought by some groups at first, is now being accepted as 
necessary and valuable. It marks a step forward in commercial relations which 
is probably without parallel in the world today. 

Lubber tire industry. — This is one of the largest industries in the 
country, having capital investment of over $2,000,000,000. It 
suffered in the main from widespread discriminatory practices and from 
confusion and deception as to various types and classes of tires. 
Rules were established by which these problems were attacked with 
much success. 

The different types of discrimination were proscribed by a compre- 
hensive rule on the subject. Provision was made against confusion 
and deception in regard to so-called "first line" tires, "standard" 
makes, "change over" tires, "rebuilt," "recapped," and "retreaded" 
tires, with provision for the proper marking of such rebuilt, recapped, 
or retreaded tires that the public maj^ not be deceived into believing 
them to be iiew when such, is not the fact. The use of guaranties, 
warranties, and adjustment policies which are not lived up to in good 
faith, or which otherwise are detrimental to the best interests of tlie 
buying public, was proscribed. False advertising and misbranding 
as to the grade, size, life, durability, and other properties of the 
respective brands or makes of tires or tubes offered to the public were 
likewise covered. Other objectionable maikcting methods were in- 
cluded in the list of practices inhibited, and the industry has thus 
been afforded comprehensive specifications as the basis of fair competi- 
tion. Trade practice rules promulgated by the Commission apply 
to this entire industry, including manufacturers, wholesalers, I'etail- 
ers, and processors. For expressions from members, see page 21. 

Afirror industry. — These trade practice rules treat a most imi)ortant 
problem from the standpoint of protecting the public and ethical 
business eleixients by, among other things, providing for proper 
labeling of mirrors to inform the purchaser whether the mirror ofl'ored 



12 CONCENTRATION OF ECONOMIC POWER 

for sale is made of plate glass or window glass. The qualities of and 
differences between the two types of glass are very material, yet it is 
impossible for a layman to know whether he is getting plate or window 
glass in his purchase unless the information is reliably transmitted to 
him from original sources. The confusion and deception stemming 
from this situation produced a chaotic competitive condition wherein 
the scrupulous businessman and the public suffered. As a corrective 
the rules made provision for a system of labeling mirrors as to the kind 
of glass. Provision also was made against various other related 
practices and unfair methods, thus affording the industry an officially 
recognized standard of fair competition under which the business can 
be operated with freedom and fairness for all (cf. p. 20). 

Baby chick industry. — This industry, producing the young for the 
Nation's poultry, is of tremendous public importance, to the farmer 
as well as to business and the consuming public. It is estimated that 
the industry hatches about 1,250,000,000 eggs a year. Its annual 
sales volume of baby chicks is about $60,000,000. The industry had 
as its principal problem the matter of bringing order out of chaos in 
respect to a multiplicity of selling claims which were confusing, mis- 
leading, and deceptive. In attacking these problems for the industry, 
the need was for development of rules which would not only cover 
specifically each of the numerous types of objectionable claims, but also 
the variations and subterfuges likely to b6 resorted to if not included. 

The rules established embrace comprehensive provisions which were 
immediately productive of improvements in the industry. They con- 
tain specific inhibitions to control unethical selling methods based upon 
false claims and deceptive representations relating to egg yield or egg- 
producing qualities, blood testing, sexing, vaccination, inoculation, 
puUorum testing, freedom from disease, purported bargain prices, trap 
nesting of flocks, livability and stamina of chicks. Also proscribed 
are such practices as the use of testimonials which are fictitious or 
misleading; unfairly assessing transportation costs in c. o. d. charges 
against purchasers; palming off cockerels as straight-run chicks; offer- 
ing superior stock but shipping substituted chicks of inferior quality; 
failure to live up to guaranties, or the use of fake guaranties; adver- 
tising fictitious prices ; and many other forms of unethical selling prac- 
tices injurious to the public and to scrupulous competitors. For 
expressions as to benefits derived see page 20. 

Preserve, macaroni, and tomato paste industries. — Rules promulgated 
by the Commission, applicable to these industries, relate to the adver- 
tising, sale, and distribution of fruit preserves, jams, jellies; of maca- 
roni, spaghetti, noodles, and related products; and of tomato paste 
products. Such rules were promulgated in the interest of maintaining 
fair competition and protecting the public interest. These industries 
were troubled with many competitive problems, involving a particu- 
larly aggravated situation due to lack of officially recognized minimum 
standards of product content, such as, for example, minimum percent- 
ages of fruit in genuine preserves, jams, and jellies; minimum amount 
of egg for genuine egg noodles; minimum concentration of solids in 
tomatc paste; etc. The rules provide definite specifications of such 
minimum standards, which were worked out in cooperation with the 
industry. Provision was made against the passing off of substandard 
or imitation products deficient in required ingredients, as, for example, 
deficient in fruit content in the case of preserves, jams, jellies; or 



CONCENTRATION OF ECONOMIC POWER 13 

deficient in egg or semolina or farina flour content in the case of maca- 
roni and related products; or lacking in sufficient concentration of 
solids in the case of tomato paste products. Adulteration, use of arti- 
ficial color to mask inferiority, use of false price quotations, false 
invoicing, unfair discrimination in prices and discounts, and many- 
forms of selling practices are also covered in the program of placing 
the industry on a high plane of competitive fairness for its own good 
and for protection of the buying public (cf. pp. 20-22). 

Private home study schools. — The exploitation of great masses of 
home study students throughout the country who are dependent for 
educational advancement upon self-help through correspondence 
schools was gaining wide proportions, with drastic effect upon the 
public. Because of the widespread character of the evils, wholesale 
attack became necessary. This was successfully undertaken by the 
establishment of trade practice rules to cover the sale and distribution 
of courses of instruction by correspondence schools. 

At the time the rules were promulgated there were approximately 
400 such private schools and institutions, with an annual enrollment 
of about 600,000 students or purchasers of courses of instruction. The 
various types of abuses in the nature of unfair trade practices which 
have been or may be resorted to, with the effect of deceiving or uneth- 
ically exploiting the public, are dealt with specifically in these rules, 
and provision is made for the eradication of such bad practices. To 
illustrate, some of the deceptive practices specifically proscribed are 
the use of confusing and misleading representations as to the scope of 
the course and educational services offered, actual or probable earn- 
ings or opportunities for employment of students who complete such 
courses, effectiveness of job-getting or employment service held out 
by the school, and the standing or character of the faculty. Specific 
provision is also made against presentation of so-called special offers 
or limited offers w^hich are fictitious or unsupported by fact; against 
use of money-back guaranty or refund agreements which are of little 
or no value in protecting the student; against use of certificates or 
diplomas which misrepresent the course of study; against improper 
use of papers simulating or counterfeiting court documents in collec- 
tion of tuition fees; improper use of ''help wanted" and blind adver- 
tisements; enrolling students and charging them tuition fees for courses 
in vocations for which they are manifestly unfit by reason of educa- 
tional or physical disqualifications. 

Under the rules ethical schools and the public are protected from 
the harmful effects of these and other sharp practices (cf. p. 22). 

Paint and varnish brush industry. — This is an important industry 
and the quality or value of its product is dependent largely iipon 
a tA^pe of hog bristle which is obtainable only in the Orient. In re- 
spect to this subject the trade practice rules promulgated for the in- 
dustry contain comprehensive provisions for labeling pauit and var- 
nish brushes so as to reveal the type of bristle or hair used in the 
brush, whether hog bristle, horsehair, fiber, or a mixture thereof. 
Inasmuch as the quality and value of the brush is largely dependent 
upon the type or proportion of bristle content, the truthful disclosure 
of such essential facts to the purchaser closes the door on unfair com- 
petition among the members of the industry and on deception and 
exploitation of the consuming public. Besides providing a solution 
for this problem, the rules also cover in a comprehensive form various 



14 COXCEXTKxVTION OF ECONOMIC POWER 

other types of comjietitive practices which the general welfare of the 
industry and the public required be thus brought under control. 

Putty industry. — This industry was materially helped by receiving 
for the first time guiding standards of fair practices in the form of 
rules promulgated by the Federal Trade Commission. These rules 
proscribe such practices as misrepresentation as to the oil content, 
whether the same is linseed oil or substitute oil ; the use of adulterants 
or substitute oils to mislead and deceive; the misrepresentation of 
the white lead and other pigment content; the use of slack-fUled or 
short-weight containers; the making of false guaranties; false invoicing; 
deception as to grade, quality, or character of product; and many 
other forms of unfair methods of competition. 

Radio receiving set industry. — ^This industry, though comparatively 
new, is one of the largest in the country, having an annual sales 
volume of more than $.460,000,000. The newness of its field of 
operation and the rapid growth and expansion inevitably gave rise 
to many difficult competitive problems. Confusion, misunderstand- 
ing, and deception existed as to what constituted an "all wave" set, 
as to what the proper limitations of "standard broadcast" are, etc. 
The rules provided this young industry with a standard of fair competi- 
tion which produced immediate improvement. Definite specifications 
are made as to the proper use of the designations "all wave," "world 
wave," "standard broadcast," etc. The rules likewise make provision 
for the proper designations of radio frequencies covered by the 
respective sets. They also .provide against deceptive or unfounded 
claims as to reception of foreign or distant broadcasts; as to freedom 
from fading, noise, electrical interference, static, and other phenomena; 
as to the performance of the receiving set in the locality of the pur- 
chaser, its ability to receive transmissions from or to ships at sea, 
amateur stations, or otlif^r types of transmissions. Concealment of 
defects or deficiencies, misrepresentations as to reception, and similar 
sharp practices are proliibited. Specific provision is made in respect 
to the designation of the tube capacity or power of a set and against 
the use of fake or "dummy" tubes. Also proscribed are the use of 
so-called reduced prices which represent fake or fictitious reductions; 
misrepresentation of the model; switching of cabinets to deceive; 
alteration of brand name to deceive; misrepresentation as to manu- 
factu.ing sponsor of set; and other forms of unfair selling methods. 
The hamperhig or destruction of fair com.petition through the use of 
"spiffs," push money, and commercial bribery constituted a serious 
problem for tlie industry, and rides to curb these harmful methods 
were worked out with the industry and promulgated by the Commis- 
sion. 

SOME DISTINCTIVE ADVANTAGES OF THE TRADE PRACTICE CONFER- 

ENCE PROCEDURE 

Voluntary correction en masse. — An outstanding advantage in this 
method of regulating business prachr.os lies in the wliolesule abandon- 
ment and prevention of unfair methods of competition, trade restraints, 
and abuses bj' voluntary, cooperative, and simultaneous action. The 
effect of the use of unfair methods of competition is to stifle and sup- 
press the development and expansion of trade and commerce; to make 
it more diflTicult, if not impossible, for business generally to render 
honest, efficient service to the public and be rewarded with a fair 



CONCENTRATION OF ECONOMIC POWER 15 

profit gained on a sound competitive basis. The eradication of such 
practices is in keeping ^<^ith the policy of the law and the best interests 
of everybody. 

Under the plan, problems are worked out in friendly, cooperative 
proceedings, where the best thought of all concerned may be pooled 
without reservation, in contrast to the compulsory method of dealing 
with individual concerns in an adversary proceeding. 

Businessmen are glad, as a rule, to lend their support to voluntary 
and simultaneous abandonment of bad practices. They welcome the 
chance to wipe the slate clean. The overwhelming majority are un- 
willing to stoop to unfair tactics. At times some may feel that they 
must do so in order to meet in kind the unfair or unethical competi- 
tion of. less scrupulous competitors. It is often the case that various 
concerns would like to abandon their use of unfair or unethical meth- 
ods if they can but be assured that their competitors will likewise stop 
and not take advantage of the situation. The trade practice confer- 
ence procedure affords a means whereby this can be accomplished in 
a substantial and gratifying degree, by having the rules placed in effect 
on a day certain, when by simultaneous action each may turn over a 
new leaf and make a fresh start on the same fair basis of competition. 

Experience has demonstrated such to be a most important means 
for achieving equity and even-handed justice among groups of com- 
petitors in the application of the corrective principles of law. In the 
Algoma Lumber Case (291 U. S. 67, 79), the Supreme Court said, "The 
careless and unscrupulous must rise to the standards of the scrupulous 
and diligent." The Commission's trade practice rules are a vital force 
in accomphshing and maintaining such elevation. The honest are 
assisted in their commendable efforts toward practicing their ethics, 
with a material lessening of the disadvantage of contending mean- 
while with the unethicar practices of the unscrupulous. 

Application oj compulsory process against persistent violators facili- 
tated. ^-^here the willful few do not choose voluntarily to abandon the 
unfair practices which have been defined and listed in the rules, com- 
pulsory proceedings maj" be resorted to with a minimum of delay and 
expense. By reason of the existence of the rules, such steps become 
more effective, because the Commission is able to concentrate its 
attention on the unscrupulous element and is not compelled to scatter 
the processes of the law among the many. 

Certainty as to application of the law; rallying point for constructive 
forces in industry: aid to small business. — The trade practice rules also 
afford a focal point around which the forces for good in industry may 
rally. Governmental sanction and approval of the rules brings about 
two most desirable features : ( 1 ) It lends to the underta king a standing 
and prestige which commands respect for the principles involved and 
encourages voluntary adherence to them, thereby substantially reduc- 
ing the need to resort to the more drastic method of excision through 
litigation. (2) Governmental sanction brings to the businessman 
reliable assurance of the propriety of the provisions of the rules under 
the law. In other words, through offirial approval of the rules the 
businessm.an is assui'cd tlint his observance of tlie practices specified 
in the rules and his cooperation with his competitors in jointly uphold- 
ing their provisions are proper under the law; that he may engage 
therein without fear of becoming a possible or unwitting transgressor 
of the law. ' 



1(5 CONCENTRATION OF ECONOMIC POWER 

The establishment of the rules and theu" approval likewise constitute, 
in relation to the practices covered by the rules, a substantial answer 
to "the businessman's quest for certainty" as to whether a given 
course of business conduct is or is not within the law. The possi- 
bilities for classification, definition, and particularization are substan- 
tial and are far greater than is practicable in statutory provisions. 

Corrective effect in specifying harmful practices. — Moreover, the 
rules have a salutary effect flowing from the definiug and cataloging, 
with official sanction, of the practices which are to be avoided as 
unfair. A convenient and authoritative means is made available for 
manufacturers, distributors, and buyers to learn what the legal re- 
quirements are as they apply to the particular industry or trade. 
This is especially helpful to the small businessman who generally 
does not have constantly at his command a legal department familiar 
with the subject. Codfiication of rules has an educational value and 
is an effective deterrent to violations which result from ignorance, 
carelessness, or even indifference. 

Plan tested by actual experience. — The trade practice conference 
procedure is not new or untried. It has long since passed beyond the 
experimental stage and has stood the test of experience. From its 
early beginning more than 20 years ago, it developed rapidly and 
has become well established within the limits possible imder existing 
law. While expansion and further implementation through amenda- 
tory legislation may be considered desirable, the procedure now avail- 
able is a firm foundation on which to buUd, and affords opportunity to 
business for constructive self-help and increased service to the public 
good. Actual experience is a good teacher, and the conference pro- 
cedure has profited well as a result of it. The Commission's years 
of work in this field of activity have made possible many improve- 
ments. 

Public acceptance and recognition. — The use and popularity of the 
plan among businessmen is showing a marked increase. Its service 
to the consumer and to the public interest generally is also being 
increasingly recognized. Many letters come to the Federal Trade 
Commission from all sections of our business life, indicative of good 
results. The trade press, authorities on the subject, and men experi- 
enced in the matter, have taken occasion to remark upon the construc- 
tive possibilities of the plan. Illustrations of these expressions are 
given on page 19 c^ seq. 

Minimum standards of product. — In some cases it is found that the 
industry's principal competitive difficulties are, in final analysis, due 
to the lack of guiding standards for their products. Where minimum 
standards of content of product are lacking, chaotic competitive con-" 
ditions often result through the lowermg of quality by the concealed 
substitution of cheapeners or by deficiencies in manufacture. The 
Commission has found it possible to assist industries in setting up in 
their rules wholesome standards to clear away the main stumbling 
block in their competitive problems. Not only is it possible in cer- 
tain situations, through industry and Commission collaboration, to 
formulate and establish minirrium standards of product content in 
the trade practice rules, but also to provide the necessary measure of 
enforcement to make them effective (cf. pp. 12-13). 

Flexibility to meet changing conditions. — Besides the guiding certainty 
which may be brought to business in the form of rules, another ad- 
vantage lies in their flexibility to keep pace with changing conditions 



CONCENTRATION OF ECONOMIC POWER 17 

or new problems as they arise in business. Trade practice rules may 
readily be amended, enlarged, or supplemented with a facility not 
possible in the case of rigid statutory specifications. Moreover, 
proper cooperative action on rules to end trade abuses lends itself to the 
treatment of problems in a manner which is often more effective and 
more economical and simpler than is possible tlirough the application 
of the processes of litigation or compulsory statutory remedies. The 
Supreme Court of the United States has recognized the efficacy of 
such voluntary cooperative effort, in bhe following statement from the 
opinion of the Court in the Sugar Institute Case, by Mr. Chief Justice 
Hughes: 

Voluntary action to end abuses and to foster fair competitive opportunities in 
the public interest may be more effective than legal processes. And cooperative 
endeavor may appropriately have wider objectives than merely the removal of 
evils which are infractions of positive law. (297 U. S. 553, 598.) 

Supervised self-regulation in business afforded, — A fair measure of 
self-regulation and self-discipline on the part of business in keeping 
its own house in order is possible in the trade practice conference 
plan. Through it the forces for good in an industry can be coor- 
dinated and implemented. Such available means for self-help and 
voluntary correction are effective methods for preventing trade evils 
from increasing to the point where major operations become necessary 
and correction must be brought about through compulsory processes 
of existing law or by the imposition of more stringent regulations 
through additional legislation. The supervision of the Commission 
and the boundaries of applicable requirements of law provide the 
necessary safeguards for preventing abuse of power. 

Consumer rights, as well as those oj sellers, protected. — The trade 
practice conference procedure takes into account the interest of the 
consuming public as a matter of primary importance, both legally 
and economically. Sound treatment of the subject of unfair practices 
in distribution requires that due consideration be given not only to 
the rights and requirements of business, but also to the interests and 
protection of the consumer. The rights of the buyer as well as those 
of the seller are, of course, entitled to fair consideration. 

The consumer has very substantial rights which it is the policy of 
the law to protect* In making his purchases in the channels of com- 
merce, he has the right to be protected from deception, positive or 
negative. He has the right to the full benefits which free and fair 
competition may bring to him in the matter of prices, services, quality 
of goods, etc. lie has the right to be free from those unfair conditions 
which obstruct or interfere with intelligent buying. No longer 
should the distributor, the seller, in good conscience rely upon the 
doctrine of caveat emptor [let the buyer beware] to the detriment of 
the consumer.'" 

Fair treatment of the buying public is essential to lasting and 
successful business and is fundamental in Federal Trade Commission 
proceedings. That this principle has been adhered to in established 
rules is well indicated in the following conclusion expressed in a 
learned analysis published in The George Washington Law Review: 

In general, therefore, the conference rules deal with the problem of maintaining 
competitive fair play in a manner showing very real consideration of the con- 
sumer's interest. 



10 Federal Trade Commission v. Standard Educatim^ Society, et al., 302 U. S. 112, 116. 
283999 — 41— No. 34 4 



[g CONCENTRATION OF ECONOMIC POWER 

Also that — 

Further analysis leads to the strong inference that in formulating these rules 
the Commission has accorded ipajor and apparently increasing emphasis to the 
protection of the consumer.^' 

Advantage in economy oj operation. — The trade practice conference 
procedure is perhaps the simplest and most economical method known 
for the elimination and prevention of trade evils. The savings of time 
and expense to both the Government and members of industry 
flirough avoidance of the necessity of litigation to reach the same 
results accomplished by cooperative action are most substantial. The 
s'imultaneous and voluntary ending of trade abuses under rules often 
effects immediate correction of competitive situations which would 
otherwise require the institution and prosecution of a number of pro- 
tracted suits. The mvestigation and trial of the type sometimes 
necessary, in one instance alone of this character, could well equal in 
expenditure the entire annual budget devoted to the trade practice 
conference work. Fiscal requirements for this work are extremely 
modest. The simplicity of the procedure and the economy of its 
operation are distinctive advantages of the plan, aside from the im- 
provements and savings afforded industry and the public in the general 
eradication of destructive trade practices. 

Administrative agency of quasi-judicial and nonpartisan character. — 
The Federal Trade Commission is an independent agency of the 
Government and a quasi-judicial tribunal having not only powers and 
facilities for administration and investigation, but also procedures for 
determination of issues by judicial processes, subject to court review. 
This is an important factor of much assistance in the successful han- 
dling of business problems of the type under consideration. It com- 
bines the desirable features inherent in the judicial approach with the 
advantages of administrative investigation and flexibility. The 
Supreme Court of the United States has explained that the Federal 
Trade Commission — 

was created with the avowed purpose of lodging the administrative functions 
committed to it in "a body specially competent to deal with them by reason of 
information, experience, and careful study of tlie business and ecortomic con- 
ditions of the industry affected," and it was organized in such a manner, with 
respect to the length and expiration of the terms of office of its members, as would 
"give to them an opportunity to acquire the expertness in dealing with these 
special questions concerning industrj' that comes from experience." '^ 

In another case the Supreme Court again reviewed the character 
of the Commission as established by law and said: 

The Commission is to be nonpartisan; and it must, from the very nature of its 
duties, act with entire impartiality. It is charged with the enforcement of no 
policy except the policy of the law. Its duties are neither political nor executive, 
but predominantly quasi-judicial and quasi-legislative. Like the Interstate 
Commerce Commission, its members are called upon to exercise the trained judg- 
ment of a body of experts "appointed by law and informed by experience." 
Illinois Central R. Co. v. Interstate Commerce Commission, 206 U. S. 441, 454; 
Standard Oil Co. v. United States, 283 U. S. 235, 238-239.'^ 

Experience supports the conclusion that the advantages with 
respect to the type of agency for the regulation of trade practices lie 
with such a tribunal, nonpartisan and expert in its field. 

" Trade Practice Conference Rules find the Consiimer, by Saul Nelson, economist, published at pp. 452 
et seq.. The George Washington Law Review, January-February IWO. 

" T\Ir. Justice Stone., in the opinion of the Supreme Court in the case of Federal Trade Commission v. 
n. /"■'. r<fppel A liro.. Inc., 291 U. S. 304. 

13 HathbUTi, Executor v. United States, 295 U. S. 602, C24. 



CONCENTRATION OF ECONOMIC POWER 19 

CONSTRUCTIVE ACCOMPLISHMENTS AS INDICATED IN EXPRESSIONS 
OF MEMBERS OF INDUSTRY, TRADE ORGANIZATIONS, AND FROM 
AUTHORITATIVE WRITINGS 

From members and representatives of industries operating under 
trade practice rules have come many communications to the Com- 
mission indicative of good results flowing from this method of helping 
industry to maintain free and fair competition in the public interest. 
Set out below are excerpts from a few of such communications, re- 
flecting the genera] tenor of the expressions of approval referred to. 
Similar illuminating expressions by trade organizations and from 
authoritative studies and other informed sources are also quoted 
below. 

From Individual Members and Representatives of Industry 

Tlie rules have reinstated in the silk industry that dignity which this industry 
formerly enjoyed and results have undoubtedly been most beneficial to the whole 
silk manufacturing trade. 



It is our opinion that the rules have been most beneficial not only to the con- 
suming public but also to the merchants who earnestly believe in the spirit of 
the rules and who have long suffered from the unscrupulous and unfair practice of 
certain traders. [Silk industry.] 



The work of your Commission has done much toward eliminating many of the 
unfair practices that existed in the cotton converting industry, and particularly 
80 in j'our ruling that made it necessary for the converters to show the residual 
shrinkage where shrunk cotton goods was sold. 



* * * the trade practice rules for cotton converting industry seem to be 
functioning perfectly and has certainly eliminated some of the most flagrant 
violations of fair trade practices. 



Trade practice rules have a double influence. In the first place it gives an 
industry a set of regulations to guide them in their business activities. In the 
second place it causes the companies in an industry to scrutinize their practices 
more carefully. * * * [School supplies and equipment distributing industry.] 



It is this Association's opinion that these recently passed rulings have been 
the savior of the retail fur business in this country. Misleading and bait adver- 
tising, as a result, has been practically abolished. To the reputable and legitimate 
retail furrier these rulings have been most welcomed. [Fur industry.] 



Most of our members are of the firm conviction that the new fur trade practice 
rules sponsored by the Federal Trade Commission have had their desired effect 
upon many of the August fur ads this year, as there is a decided improvement in 
the tone of the ads this season. 



It has been interesting to me to know that since our rules have been issued 
quite a number of other industries have recognized the value of these rules, and 
have applied to and received from the Commission rules which are practically 
identical with those you issued for this industry. On the basis of accomplishment 
I feel that the Federal Trade Commission has done a great service to industry in 
general. [Buff and polishins wheel manufacturing industry.] 



20 CONCENTRATION OF ECONOMIC POWER 

We wish to take this opportunity to say that we believe the work carried on by 
the Trade Practice Conference Division * * * jg the most constructive work 
which the Commission has undertaken. We know that the rules adopted for the 
shirting fabrics industry have resulted in cleaning up some of the trade abuses 
prevalent in the industry previous to the trade practice conference and we know 
that these abuses could not have been eliminated in so short a time had it not been 
for the trade practice conference method. We are heartily in favor of this plan 
and believe that it will go far toward remedying many of the abuses in the entire 
industrial and business world. 



We believe that these rules have done much to put the poultry industry on a 
better and higher plane. Many poultrymen and hatcheries have improved their 
stock very much due to the rules previously laid dow^n. They are for the benefit 
of all and should be observed by all. The stock offered by hatcheries will keep on 
being improved upon if these rules are observed and the purchasing and consiun- 
ing public as well as ourselves will be benefited thereby. Competition is keen but 
fair methods should be employed to meet this competition. [Baby chick industry.] 



The trade practice conference was of value to the concrete mixer and paver 
industry from more than one angle. For one thing it crystallized definitely in 
the minds of the manufacturers the specific practices which were bad. For an- 
other, it lent the weight of governmental sponsorship to the concerted efi'ort to 
eradicate these bad practices. And still from another angle the various meetings 
attended in some instances by officials of the Trade Commission looked toward 
a better understanding among the various manufacturers and I believe reduced 
the likelihood of their practicing one or another kind of unfair trade practice on 
each other. 



We further feel that the effects of the rule have gone a long way in correcting 
the unfair trade practices governed thereby and I believe it has benefited the 
consuming trade as they can readily see that they are not getting a plate glass 
mirror when window glass mirrors are being sold to them and nothing mentioned 
to the consumer as to wh£,t kind of mirror they were getting. 

We wish to further state that we are convinced that the trade practice rules 
will benefit the entire mirror industry and also the consuming trade. 



It is my opinion that our revised rules have had a most beneficial effect on the 
industry. Deceptive and misleading advertising, claiming that the mirrors adver- 
tised were made of special glass, has been practically eliminated. Observance 
of the labeling provisions of the rules has been quite generally accepted, particu- 
larly by the large manufacturers. * * * j have received many testimonials, 
both from members of the industry and their customers, as to the good effect 
of these trade practice rules. Speaking for the industry, or at least the better 
element of the industry, I can truthfully say that we are pleased with our trad© 
practice rules and appreciate the action of the Federal Trade Commission in pro- 
mulgating them for the industry. [Mirror industry.] 



Whatever we have accomplished in setting high merchandising standards for 
our industry * * * is chiefly to be credited to the Trade Practice Conference 
of the industry and the encouragement end backing of the Federal Trade Com- 
mission * * * the trade is impressed with the improvement in conditions 
* * *. [Scrap iron and steel industry.] 



Without going into any great detail I am of the opinion that the rules for this 
industry have had a considerable salutary effect upon the unethical practices 
employed by certain members of this industry prior to the effective date of the 
rules for this industry. * * * jf the protection afforded by the trade prac- 
Tjce rules was withdrawn incalculable harm would be done to this industry. 
(Macaroni, noodles, and related products industry.] 



CONCENTRATION OF ECONOMIC POWER 21 

It is our firm belief that the establishment of these ruler has resulted in benefits 
to the industry as a whole, and we are able to see the effect of these things in 
various industries as we are engaged in the manufacture of other products aside 
from metal wheel goods. [Juvenile wheel goods manufacturing industry.) 



It is our opinion and also the opinion of the manufacturers that the rules have 
assisted to a large extent in eliminating certain harmful practices which were 
prevalent in the past. [Flat glass industry.] 



* * * it is the writer's opinion that the trade practice rules are being 
observed in this particular territory, and it is also my personal opinion that the 
rules of your Commission are decidedly beneficial to the members of the industry 
I represent. [Flat glass industry.! 



We want to take this opportunity to thank the Federal Trade Commission for 
their help and the interest thej^ have taken in the elimination of monopolies and 
unfair trade practices. We feel that your department should have the whole- 
hearted support of legitimate business all over the Nation. [Rubber tire industry.] 



May we also state that in our opinion the trade practice rules for the rubber 
tire industry has resulted in fine correction as it affected some of the chaos that 
has existed in this line for a great many years. We believe it is one of the most 
beneficial regulations in thv.' best interest of all the trade and sincerely hope the 
good work started will be continued. 



We can assure j'ou that considerable benefit has been derived as a result of the 
industry's trade practice conference and resulting rules. We fully realize that 
there is considerably more to be done and have every confidence that your depart- 
ment will continue its efforts in the interest of the smaller independent merchant 
and the consumer who have had to contend with such unfair trade practices in 
the past * * *. [Rubber tire industry.] 



It is gratifying that the Federal Trade Commission, through its division of 
trade practice conferences, is stimulating such joint effort on the part of business- 
men, and shows itself ready at all times to help the businessmen to understand 
and to correct their practices of trade abuses. [Jewelry industry.] 



As for the benefits accruing to the trade from the observance of such rules we 
think that they are invaluable in that they tend to strengthen consumer confidence 
in the branches of the industry as a whole and also tend to minimize destructive 
practices that legitimate wholesalers had to contend with prior to the promulgation 
of these rules. [Jewelry industry.] 



We feel that these conferences on trade practices are the most vital and worth- 
while work any department in Washington can render the commercial interests 
of the Nation. They are most timely and we are deeply interested in the results 
to be obtained. [Southern mixed feed industry.] 



I have been connected with the preserve business since 1918 and have been a. 
member of the National Preservers Association since that year and I do not think 
that anything has been done by the association that had done more good than 
securing tlie assistance of your Commission in the matter of enforcing definitions, 
and standards aid fair trade practices. 



The industry as a whole feels that the institution of these trade practice con- 
ference rules, with direct and substantial enforcement of them, is the most forward 



22 CONCENTRATION OF ECONOMIC POWER 

step that has been taken since the passage of the Pure Food and Drug Act in 
1906. The advantage in them lies in the fact that a direct measuring stick is 
now provided to determine the proper quality and labeling of preserves, jellies, 
and apple butter. * * * [Preserve manufacturing industry.] 



The value of these trade practice rules to the home study industry cannot be 
estimated in dollars and cents, but believe that they are playing a very important 
part in helping to clean the field of racketeering and unscrupulous companies and 
salesmen. Legitimate companies and honest salesmen are profiting greatly by 
the use of these trade practice rules through respect and confidence shown by the 
general public in adult education to all schools who employ and use these trade 
practice rules. [Private home study schools.] 



It is the writer's personal opinion that the Federal Trade Commission has done 
a splendid job in "cleaning up" the advertising and trade practices of the home 
study school industry. * * * 

Above all, it has given all ihembers of the industry a yard-stick for measuring 
values and therefore definitely established the limitations permissible in the matter 
of advertising and other printed literature. It is my personal belief that all of 
the higher grade schools are making a very honest effort to live up to the letter of 
the code and generally speaking I think they are succeeding most admirably. 
[Private home study schools.] 

Published Statements From Authoritative Sources 

Misleading labeling pertaining to shrinkage has brought great hardships to 
American consumers. * * * The Federal Trade Commission's new rul^s 
should end consumers' confusion caused by vague wording of labels. [Miss 
Lillian Locke, chairman of the textile section of the American Home Economics 
Association, as quoted in The Clothing Trade Journal, New York,. Tuly 1938.] 

The consumer deserves the right to know what she is buying. The Federal 
Trade Commission's rules should put an end to the vague labeling which has made 
millions of consumers think they were buying pre-shrunk garments only to find 
that the garments shrank so much they could not be worn. Now the consumer 
will be able to reh' on accurate labels pertaining to shrinkage and thus benefit 
from scientific methods which assure permanent fit. [Miss Mary Anna Grimes, 
textile and clothing specialist of the Texas Agricultural Fxperiment Station, as 
quoted in The Clothing Trade Journal, New York, July 1938.] 

From Daily News Record, New York, July 18, 1938, quoting Mr. 
John C. Turrell, of Cluett, Peabody & Co., Inc., regarding trade 
practice rules of the Commission: 

It is obvious that the purpose of the Federal Trade Commission's rules for the 
proper labeling of shrunk fabrics had two objectives, first, that they were pro- 
mulgated in the consumers' interest and second to eliminate unfair competition. 

******* 

In my opinion the textile industry is to be congratulated on these Federal Trade 
Commission shrinkage rules, for the reason that it will bring out into the open 
specific standards which will make for fair competition, and will create in the 
consumers' minds confidence in the serviceability of woven cotton fabrics. 

In my opinion the garment manufacturing industry is to be congratulated on 
the promulgation of these rules which will enable both manufacturers and retailers 
to pass on to the public exact factual information as to the serviceability perform- 
ance of washable cotton textiles with respect to shrinkage. The garment industry 
now can get goods with known shrinkage specifications, whereas, before, merchan- 
dise had been sold under meaningless terms resulting in riiisrepresentation, 
deception, and unfair competition. 

Consumers will welcom.e the end of misrepresentations pertaining to shrinkage — 
misrepresentations which have caused them endless confusion and dissatisfaction. 

From radio address of Mrs. Roberta Campbell Lawson, president, 
General Federation of Women's Clubs, October 26, 1937: 

In 1921 the General Federation undertook a program in which "truth in fabrics" 
played an important part. The first milestone in that program, and perhaps 



CONCENTRATION OF ECONOMIC POWER 23 

the most important until today, was the trade practice conference of the silk 
industry in 1932, in which the terms "pure dye silk" and "weighted silk" were 
defined and the latter required to be properly labelled. The effects of these rules 
were far-reaching. And the adulteration of fine silks which was so prevalent at 
that time presents no real problem to the consumer today. 

The second milestone is today's announcement of the Federal Trade Commis- 
sion's acceptance of rules for the rayon industry. We have long recognized the 
costliness of lack of information or misinformation about the fiber content of 
fabrics. These losses are expressed not only through improper care of garments 
and in the purchase of merchandise unsuitable for the individual need; but also in 
loss of a long established confidence and good-will between retailer and consumer 
which is so important to the continuance of existing methods of merchandising. 

Today's action of the Commission represents in our opinion an important step 
in the solution of this tangled textile problem. 

From radio address of Miss Julia K. Jaffray, chairman, division of 
economic adjustment, New York City Federation of Women's Clubs, 
October 26, 1937: 

Our confidence in the Federal Trade Commission is justified by its announce- 
ment made public only today of its acceptance and its willingness to promulgate 
the rules for the ra\'on industry presented at the October 8th trade practice con- 
ference for that industry. 

We give to the rules released today our unqualified supp>ort. * * * -phe 
record of the Commission hearing shows that many women from all over the 
Nation individually and through their organizations, voiced their approval of 
those rules as drafted and that many better business bureaus and a substantial 
proportion of the weavers of both silk and rayon, joined in urging their adoption. 

From The Federal Antitrust Law, a lecture delivered at the School 
of Business, Columbia University, 1929, by Charles Wesley Dunn, 
M. A.: 

The trade practice conference is the most constructive and potentially the most 
efiFective procedure used by the Commission. It is the most constructive pro- 
cedure because it substitutes cooperation with business for what is in effect the 
prosecution of it; because it encourages and promotes self-regulation by business. 
By self-regulation alone can the purpose of the act be most effectively realized. 
It is potentially the most effective procedure because it is directed to secure a 
general, as distinguished from an individual, discontinuance of unfair methods; 
because it is used to promote the discontinuance of all uneconomic and unethical 
methods, whether illegal or not. In short, the trade practice conference procedure 
presents a practical and safe plan of self-regulation and a preventive of Commission 
proceeding and Government regulation otherwise required. If and to the extent 
it fails, the fault is not in the procedure or in the Commission. It is in business 
itself. The Commission can do no more than to offer business the opportunity 
and means of self-regulation. And it should do no less. [Pages 42-43.] 

From Business Organization and Combination (Prentice-Hall, Inc., 
1934), by Richard N. Owens, Ph. D., C. P. A.: 

Trade practice conferences have been of much value. Their principal value 
lies in the elimination of abuses that otherwise would be unknown to the Com- 
mission. This is accomplished speedily and without the expense incident to the 
investigation and trial of complaints. The industry is benefited by the higher 
standards of business conduct which result and by the closer relationship estab- 
lished between the Commission and industry. [Page 608.] 

From Trust and Corporation Problems (Harper & Brothers, 1929), 
by Henry R. Seager and Charles A. Gulick, Jr.: 

There can be no doubt that these conferences are a much more logical method of 
meeting a dubious practice which has l>ecome widespread than a number of com- 
plaints against individual organizations. They have usuallj' tended to reduce the 
combative, resentful attitude which formal complaints too often engender, and 
in the long run probably secure better results. The trade practice conference has 
done more in aiding the business community to work out its problems than perhaps 
any other single activity of the Commission, it is one of the most useful devices 
which the Commission could have hit upon, and it should continue to be used 
extensively. [Page 530.] 



24 CONCENTRATION OF ECONOMIC POWER 

From Business Organization and Control (D. Van Nostrand Com- 
pany, Inc., 1932), by Charles S, Tippets, Ph. D., and Shaw Livermore, 
M. iB. A.: 

Cleansing the Augean stables was a Herculean task. Stamping oat the petty 
unfair practices of small business firms has threatened to assume similar propor- 
tions. A major attack on this problem evolved by the Commission is "the trade 
practice conference." This device has not only been helpful in holding down the 
number of actual complaints to be handled, but it has important implications for 
the whole future problem of regulation .* * * . [Page 601.] 

From Trade Associations, Their Services to Industry (the Ronald 
Press Co., 1930), by Joseph Henry Foth, Ph. D.: 

Trade practice conferences are comparatively new and their results are difficult 
to estimate in dollars and cents. But industries which have adopted codes of 
practice under the auspices of the Federal Trade Commission, and have given the 
plan a fair trial, are reporting very definite and beneficial results. * * * 

Trade practice conference procedure is sound in principle, in that it is based upon 
the mutual cooperation of industry and the Government, and the mutual interest 
of all branches and divisions of an industry. It is based upon the principle that 
business formulate its own rules of business conduct, subject to tlie sanction of the 
Government. This plan furnishes a system of control readily adaptable to chang- 
ing economic conditions, and protects public interest. 

The trade practice conference sets up rules for the game of business and points 
out the best available methods and technique for playing the game successfully. 

* * * [Pages 124 and 125.] 

From Trade ' Practice Conferences (Corporate Practice Review, 
June 1930), by Plarry C. McCarty: 

The trade practice conference marks the beginning of systematic cooperative 
effort between various progressive industries and the Government to establish 
and enforce intelligent rules of business conduct. * * * j^;^ creates among 
businessmen a more enlightened sense of their responsibility to the public, and 
it creates, and shoul'd create, in the public a similar sense of its responsibility to 
permit the business interests of the country to conduct business on sound economic 
principles of cooperative effort as distinguished from destructive competition 

* * * . [Page 29.] 

From the Chamber of Commerce of the United States : 

In one sense, the trade practice conference represents the culmination of efforts 
extending over a period of many years, to introduce high ethical standards into 
business operation. * * * Through the setting up of codes of ethics and the 
gradual acceptance of correct business principles as customs of the trade, much 
has been accomplished, ethically and from an economic standpoint, in the intro- 
duction of good practices in the purchase and sale of commodities within the 
United States. 

* * * * * * * 

The value of the trade practice conference as an instrumentality for the pro- 
motion of high standards of business conduct is more and more realized. * * * 
[From the Report of Committee II, Economic Factors Affecting Wholesaling 
(1929), Chamber of Commerce of the United States.] 



American business has achieved noteworthy progress in its efforts to improve 
the standards of business conduct concerning the relations between competitors 
and with the public. In carrying out this program, business has in the past 
received substantial aid and encouragement from the Federal Trade Commission. 
Reaffirming its belief in the value and importance of real cooperative action be- 
tween trade and industry and the Federal Trade Commission in bringing about 
the adoption of better business standards and the voluntary renunciation of 
unsound competitive practices, the Chamber endorses the principle of the trade 
practice conference as a useful and proper means of cooperation, which may be 
expected to promote better standards of business and the elimination of wasteful 
practices and trade abuses in many fields of industry and commerce. [From 
resolution adopted at the nineteenth annual meeting of the Chamber of Commerce 
of the United States at Atlantic City, N. J., May 1, 1931.] 



CONCENTRATION OF ECONOMIC POWER 25 

The principle of the trade practice conference procedure of the Federal Trade 
Commission is endorsed as a useful and proper means of promoting better stand- 
ards of business and the elimination of unfair competitive practices. There 
should be a full examination of the possibilities of the trade practice conference 
procedure by each industry desirous of raising the level of its competitive stand- 
ards, in order that it may properlj' evaluate the benefits which this method offers 
under the conditions confronting the industry involved. [Resolution of the 
Chamber of Commerce of the United States, adopted at the twenty-fifth annual 
convention, April 27-29, 1937.] 

From address before New England Council by Thurlow M. Gordon* 
attorney: 

It [the Federal Trade Commission] has made a real contribution to the guidance 
of industry in the trade practice rules approved under its present procedure — 
which have been welcomed and approved by businessmen throughout the country. 
[Forty-fourth quarterly meeting of the New England council, September 19, 1936.] 

CONCLUSION 

The trade practice conference procedure of the Federal Trade 
Commission has demonstrated its usefulness by actual experience. 
Much has been accomplished under the plan in the regulation of 
business practices in the public interest, with a view to having our 
competitive economy function freely and constructively. 

Its achievements show it to be effective as a means whereby in- 
dustry can be afforded guidance respecting the requirements of the 
law; as an aid to law enforcement and as a means for effectuating 
more uniform observance of the, laws against monopolistic practices 
and unfair competitive methods; as economical machinery for afford- 
ing a fuller protection of the public interest therein. The tried and 
proven experiences under this procedure afford a reliable basis for 
building effectively in the matter of control of monopoly and unfair 
trade practices. 



i!«30!)'J--41--No. 34- 



APPENDIX A 

RULES OF PROCEDURE RELATING TO THE TRADE 
PRACTICE CONFERENCE WORK OF THE FEDERAL 
TRADE COMMISSION 



(reprint of rule xxiv, rules, policy, and acts of the federal trade 
commission, dated may 21, 1938) 

Trade Practice Conference Procedure 

(a) Purpose. — The trade practice conference procedure has for its 
purpose the establishment, by the Federal Trade Commission, of 
trade practice rules in the interest af industry and the purchasing 
public. This procedure affords opportunity for voluntary participa- 
tion by industry groups or other interested parties in the formulation 
of rules to provide for elimination or prevention of unfair methods of 
competition, unfair or deceptive acts or practices, and other illegal 
trade practices. Thej'^ may also include provisions to foster and 
promote fair competitive conditions and to establish standards of 
ethical business practices in harmony with public policy. No pro- 
vision or rule, however, may be approved by the Commission which 
sanctions a practice contrary to law or which may aid or abet a prac- 
tice contrary to law. 

(6) When authorized. — Trade practice conference proceedings may 
be authorized by the Commission upon its own motion or upon appli- 
cation therefor whenever such proceedings appear to the Commission 
to be in the interest of the public. In authorizing proceedings, the 
Commission may consider whether such proceedings appear to have 
possibilities (1) of constructively advancing the best interests of 
industry on sound competitive principles in consonance with public 
policy, or (2) of bringing about more adequate or equitable observ- 
ance of laws under which the Commission has jurisdiction, or (3) of 
otherwise protecting or advancing the public interest. 

(c) Application. — Applications for a trade practice conference may 
be filed with the Commission by any interested party or group. 
Such application shall be in writing and be signed by the applicant or 
the duly authorized representative of the applicant or group desiring 
such conference. The following information, to the extent known to 
the applicant, shall be furnished with such application or in a supple- 
ment thereto: 

(1) A brief description of the industry, trade, or subject to be 
treated. 

(2) The kind and character of the products involved. 

(3) The size or extent, and the divisions, of the industry or 
trade groups concerned. 

27 



28 CONCENTRATION OF ECONOMIC POWER 

(4) The estimated total annual volume of production or sales 
of the commodities involved. 

(5) List of membership of the industry or trade groups con- 
cerned in the matter. 

(6) A brief statement of the acts, practices, methods of com- 
petition or other trade practices desired to be considered, or 
drafts of suggested trade practice rules, 

(7) Evidence of authority to so act, where the application is 
signed by a person or organization acting in behalf of others. 

(d) Injormal discussions with members of the Commission's staff. — 
Any interested party or group may, upon request, be granted oppor- 
tunity to confer in respect to any proposed trade practice conference 
with the Commission's trade practice conference division, either 
prior or subsequent to the filing of any such application. They may 
also submit any pertinent data or information which they desire to 
have considered. Such submission shall be made during such period 
of time as the Commission or its duly authorized official may designate. 

(e) Industry conferences. — Reasonable public notice of the time and 
place of any such authorized conference shall be issued by the Com- 
mission. A member of the Commission or of its staff shall have 
charge of the conference and shall conduct the conference pursuant 
to direction of the Commission and in such manner as will facilitate 
the proceeding and afford appropriate consideration of matters prop- 
erly coming before the conference. A transcript of the conference 
proceedings shall be made, which, together with all rules, resolutions, 
modifications, amendments, or other matters offered, shall be filed in 
the office of the Commission and submitted for its consideration. 

(J) Public hearing on proposed rules. — Before final approval by the 
Commission of any rules, and upon such reasonable public notice as 
to the Commission seems appropriate, further opportunity shall be 
afforded by the Commission to all interested persons, corporations, or 
other organizations, including consumers, to submit in writing relevant 
suggestions or objections and to appear and be heard at a designated 
time and place. 

(g) Promulgation of rules. — When trade practice rules shall have 
been finally approved and received by the Commission, they shall be 
promulgated by official order of the Commission and published, pur- 
suant to law, in the Federal Register. Said rules shall become effective 
upon such promulgation and publication or thereafter at such time 
as may be' specified. Copies of the final rules shall be made available 
at the office of the Commission to the public and to the members of 
the industry. Under the procedure of the Commission a copy of the 
trade practice rules as promulgated by the Commission is sent to each 
member of the industry whose name and address is available, together 
with an acceptance form providing opportunity to such member to 
signify his intention to observe the rules in the conduct of his business. 

(h) Violations. — Complaints as to the use,- by any pi^rson, corpora- 
tion, or other organization, of any act, practice, or method inhibited 
by the rules may be made to the Commission by anyone having infor- 
mation thereof. Sucli complaints, if warranted by the facts and the 
law, will receive the attention of the Commission in accordance with 
the law. In addition, the Commission may act upon its own motion 
in proceeding against the use of any act, practice, or method contrary 
to law. 



APPENDIX B 

Consisting of the trade practice rules promulgated by the Federal 
Trade Commission for the following four industries, which are given 
?»s specimens of the many sets of trade practice rules now in effect for 
different industries: 

Baby chick industry. 

Radio receiving set manufacturing industry. 

Rubber tire industry. 

Silk industry. 



Trade Practice Rules 

FOR THE 

BABY CHICK INDUSTRY 

AS PROMULGATED DECEMBER 31, 1938 

Statement by the Commission: 

Trade practice rules for the baby chick industry, as herein set forth 
are promulgated by the Federal Trade Commission under its trade 
practice conference procedure. 

The general purpose of the rules is to foster and promote fair com- 
petitive conditioiis and the protection of the purchasing and con- 
suming public, and to this end to eliminate and prevent misrepresenta- 
tion, deceptive concealment, and other unfair methods of competition 
or unfair or deceptive acts or practices. 

In the course of the proceedings an industry's conference was 
held in St. Paul, Minn., under the Commission's auspices, and proposed 
trade practice rules were submitted by members of the industry. 
Subsequently, tentative action was taken by the Commission on the 
rules so submitted and a draft of proposed rules was made available 
upon public notice of at least 15 days, in pursuance of wliich all 
interested and affected parties were afforded opportunity to present 
such pertinent facts, suggestions, or objections as they desired and 
to be heard in respect to the proposed rules. At the public hearing 
held in Washington all matters submitted orally o^ in writing were 
received and fded in the proceeding. 

Thereafter, and upon consideration of the entire matter, final action 
was taken and the rules in the form appearing herein under Group I 
and Group II were respectivel}' approved and received by the Com- 
mission . 

The rules for the baby chick industry herein promulgated supersede 
and replace prior rules for the industry as pubhshed by the Federal 
Trade Commission on November 25, 1933. 

These rules promulgated by the Commission are designed to foster 
and promote fair competitive conditions in the interest of the industry 

29 



30 CONCENTRATION OF ECONOMIC POWER 

and the public. They are not to be used, directly or indirectly, as 
part of or in connection with any combination or agreement to fix 
prices, or for the suppression of competition, or otherwise to unreason- 
ably restrain trade. 

Group I 

The unfair trade practices which are embraced in these Group I 
rules are considered to be unfair methods of competition, unfair or 
deceptive acts or practices, or other illegal practices, prohibited, 
within the purview of the Federal Government, by acts of Congress, 
as construed in the decisions of the Federal Trade Commission or the 
courts; and appropriate proceedings in the public interest will be 
taken by the Commission to prevent the use, by any person, partner- 
ship, corporation, or other organization, of such unlawful practices 
in or directly affecting intersta,te commerce. 

Definition. — The term "baby chicks" as used in these rules shall 
be understood as including turkey poults, goslings, ducklings, or 
Qther live young poultry to be raised for breeding purposes or 
for the production of eggs and other poultry products. 

Rule 1 . Misrepresentation oj Products. 

It is an unfair trade practice, in the course of or in connection with 
the offering for sale, sale or distribution of baby chicks, to make or 
publish, or cause to be made or published, directly or indirectly, any 
false, misleading, or deceptive statement or representation (whether 
in the form of advertisement, guaranty, warranty, testimonial, 
endorsement, depiction, illustration, or other form of representation, 
however disseminated or published) : 

(a) Concerning the grade, quality, quantity, breed, pedigree, 
type, sex, sexing, quick maturity, uniform development, char- 
acter, nature, origin, weight, color or size of such baby chicks; or 

(6) Concerning the production, sale or distribution of any 
such baby chicks; or 

(c) Concerning the purported supervision, endorsement or 
approval of any poultry breeding, hatching, or other operation 
by Federal, State, or other authority; or 

{d) Concerning any other matter in relation to such baby 
chicks. 

Rule 2. Deceptive Concealment oj Material Facts. 

In advertising, offering for sale or selling baby chicks, it is an unfair 
trade practice for any member of the industry to conceal or fail or 
refuse to disclose any material facts for the purpose or with the effect 
of thereby misleading or deceiving purchasers, as for example : 

(a) Filling baby chick orders with cockerels which have been 
obtained from sexed chicks oi: from other sources without having 
disclosed to the purchaser at the time of sale the fact that the 
baby chicks delivered are cockerels; 

(6) Adding surplus cockerel chicks to so-called "straight-run" 
chicks and offering for sale, selling, or delivering same to customers 
without informing the respective purchasers of the fact that such 
surplus, or added cockerels have been included and without obtain- 
ing such purchasers' consent thereto. 

(Note. — The above examples are but a few illustrations of the 
scope of rule 2.) 



CONCENTRATION OF ECONOMIC POWER 31 

Rvle 3. (a) Misuse of Words ^* Guaranteed to Live,^' Etc. 

(b) Use of Deceptive Guaranties as to Livahility oj Baby Chicks, 
Etc. 

(a) It is an unfair trade practice to advertise, guarantee, describe, or 
otherwise represent that baby chicks sold or offered for sale are "guar- 
anteed to live," or to make similar statements or representations, with 
the purpose or with the tendency and capacity or effect of misleading 
or deceiving purchasers or prospective purchasers into the erroneous 
belief that the said babj'^ chicks possess extraordinary stamina or other 
qualities which prevent disease or death. 

(6) It is an unfair trade practice to make or publish, or cause to be 
made or published, directly or indirectly, any false, misleading, or 
deceptive statement, guaranty, warranty or other representation 
concerning the livability, health, or stamina of baby chicks sold or 
offered for sale. 

Rule 4- Misrepresentation as to Yields of Eggs. 

It is an unfair trade practice to advertise, guarantee, describe, or 
otherwise represent, directly or indirectly, that very high yields of 
eggs are received from all flocks of a particular seller or producer when 
such is not the fact, or when such statement or representation is true 
only as to a small percentage or proportion of his flocks. 

Rule 5. Misrepresentation as to Blood Testing, Etc. 

(a) It is an unfair trade practice to advertise, guarantee, describe, 
or otherwise represent, directly or indirectly, that all baby chicks or 
other poultry sold or offered for sale have been blood tested, pullorum 
tested, vaccinated, inoculated, or otherwise treated for any ^disease 
when such is not the fact, or when only a portion of the flocks supplying 
the eggs have been so treated or tested during the current season. 

(6) It is an unfair trade practice to use any disease control term 
such as "pullorum tested," blood tested," or the like, in advertising 
or otherwise, in such manner as to have the tendency and capacity 
or effect of misleading or deceiving purchasers or prospective purchas- 
ers into the belief that officially approved methods have been used in 
making these tests when such is not the fact. 

Rule 6. Deceptive Substitution of Inferior Chicks for Those Ordered. 

It is an unfair trade practice to advertise, guarantee, describe, or 
otherwise represent that the flocks of a particular seller or producer 
possess certain good qualities, such as ability to resist disease or to 
produce high yields of eggs, or the like, and then upon receipt of cus- 
tomers' orders for baby chicks from the flocks advertised, filling same 
from flocks of an inferior quality, without informing the purchasers of 
such substitution. 

Rule 7. Deceptive Sale of Chicks at Purported Bargain Prices, 

It is an unfair trade practice to sell or offer to sell baby chicks of 
poor grade or quality at so-called "bargain prices" or at any other 
prices, through advertisements or otherwise, from a farm or hatchery 
advertised or bearing a reputation for high grade production, without 
informing purchasers or prospective purchasers as to the poor grade 
or quality of such chicks and with the tendency and capacity or 
effect of thereby misleading or deceiving them into the erroneous 
belief that they are receiving a bargain when such is not the fact. 



32 CONCENTRATION OF ECONOMIC POWER 

Rule 8. Misrepresentation as to Egg Production Qualities of Poultry. 

In the case of a producer of baby chicks mating with his flocks a 
hmited number of males having a record for transmitting high egg 
production qualities while mating therewith other males having no 
such record, it is an unfair trade practice to offer baby chicks for sale 
from his flocks, through advertising or otherwise, in such manner 
as to have the tendency and capacity or effect of misleading or de- 
ceiving purchasers or prospective purchasers into the belief that all 
of such chicks possess the same high egg production qualities as the 
said males of high pedigree, or that such flocks have been mated 
exclusively with males having a record for transmitting high egg 
production qualities, when such is not the fact. 

Rule 9. Deceptive Use of "Leaders.'* 

It is an unfair trade practice to oft'or for sale, advertise or otherwise 
represent baby chicks as being of a certain high grade or quality, 
offered at claimed "bargain prices" and under circinnstances which 
have the capacity and tendency or eft'ect of misleading or deceiving 
purchasers or prospective purchasers into the belief that an adequate 
supply of such chicks is available to purchasers at such prices, or 
that all chicks so offered for sale or sold under such representations 
and conditions are of the same high grade or quality, when such is 
not true in fact. 

Rule 10. Misuse of Words "Hatchery," "Chickery," "Chick Nursery," 
"Farm," "Poultry Farm," "Breeding Farm," "Incubators," etc. 
(a) It is an unfair trade practice for any person, partnership, or 
corporation, by trade or corporate name, through advertising or 
otherwise, to hold himself or itself out as owning or operating a 
hatchery, chickery, chick nursery, farm, poultry farm, breeding farm, 
incubators, or the like, when such is not the fact. 

(6) In the sale or offering for sale of baby chicks, through adver- 
tising or otherwise, it is an unfair trade practice for any person, 
partnership or corporation to represent that such chicks have been 
produced by the said person, partnership, or corporation, or have 
been produced under certain conditions, when such is not the fact. 

Rule 11. Deceptive Guarantees or Representations as to Percentage of 

Chicks Alive at Buyer's Destination. 

It is an unfair trade practice to make false, misleading or decep- 
tive guarantees, warranties, or other representations to the effect that 
a certain percentage of the chicks shipped will be alive at buyer's 
destination, and then fail to adjust losses pursuant to representations 
made, with the purpose or with the tendency and capacity or effect 
of misleading or deceiving purchasers or prospective purchasers. 

Rule 12. Misrepresenting Chicks Sold at Auction, Through Shipment to 
Fictitious Consignees, Through Agents, Salesmen, or Dealers, etc. 
It is an unfair trade practice to cause baby chicks to be sold under 
deceptive or misleading conditions, at auction sales, through shipment 
to fictitious consignees, or through agents, salesmen, dealers, or other- 
wise, whether by means of false, misleading, or deceptive statements 
or representations or by means of deceptive concealment of material 
facts. 



CONCENTRATION OF ECONOMIC POWER 33 

Rule 13. Deceptive Testimonials. 

It is an unfair trade practice for any member of the industry to 
publish or use misleading or deceptive testimonials regarding excep- 
tional results alleged to have been obtained by buyers of his chicks, 
which testimonials are so worded as to have the tendency and capacity 
or effect of inducing purchasers or prospective purchasers to believe 
that all of such member's chicks may be expected to produce similar 
results for all buyers when such is not the fact. 

Rule 14. Misuse of Word "jFree." 

The use of the word "free," or the equivalent thereof, where not 
properly or fairly qualified when the article is in fact not free, with 
the tendency or capacity to mislead or deceive purchasers or prospec- 
tive purchasers, is an unfair trade practice. 

Rule 15. Misrepresenting Chicks as irom Stock Entered in Egg-Laying 

Contests or Poultry Shows, etc. 

It is an unfair trade practice to advertise, guarantee, describe or 
otherwise represent that baby chicks sold or offered for sale are 
from, or are closely related to, stock entered in egg-laying contests or 
poultry shows, or the like, when such is not the fact. 

Rule 16. Misuse of Terms "Trapnest," "Trapped," etc. 

It is an unfair trade practice to use the terms "trapnest," 
"trapped," or the like, in such manner as to have the tendency and 
capacity or effect of misleading or deceiving purchasers or prospective 
purchasers into the belief that all baby chicks sold or offered for sale 
are hatched from eggs produced by hens that are actually being 
trapped, or have been trapped for at least one year, when such is not 
the fact. 

Rule 17. Deceptive Depictions. 

It is an unfair trade practice to use photographs, cuts, engravings, 
illustrations, or pictorial or other depictions or devices, in catalogs, 
sales literature, or advertisements, or otherwise, in such manner as to 
have the capacity and tendency or effect of misleading or deceiving 
purchasers or prospective purchasers as to the size, importance, or 
location of the premises occupied by a member of the industry, as to 
such member's equipment, as to his breeding flocks or poultry products, 
or as to any phase of his poultry hatching, breeding, or other operations. 

Rule 18. Deceptive Representations as to Earnings, etc. 

It is an unfair trade practice to make false, misleading, or deceptive 
statements or representations regarding opportunities for making 
money or actual or probable earnings of agents or dealers handling 
hatching eggs, baby chicks, or other poultry, or of purchasers raising 
baby chicks or other poultry, which products are being offered for sale 
or sold by a member of the industry. 

Rule 19. Deception as to Transportation Charges. 

(a) It is an unfair trade practice to sell or offer to sell baby chicks, 
through advertising or otherwise, in such manner as to mislead or 
deceive purchasers or prospective purchasers into the belief that the 
prices quoted for such chicks are the prepaid or delivered prices when 
such is not the fact. 



34 CONCENTRATION OF ECONOMIC POWER 

(6) It is an unfair trade practice, by failing correctly to inform 
customers or by other deception, to cause purchasers to believe that 
transportation costs will not be charged against them in e. o. d. 
charges or otherwise, when such is not true in fact. 

Rule 20. Publishing or Circulating of False or Misleading Price Quota- 
tions, Price Lists, etc. 

The publishing or circulating by any member of the industry of false 
or misleading price quotations, price lists, terms or conditions of 
sale, with the tendency and capacity or effect of misleading or deceiv- 
ing purchasers or prospective purchasers, is an unfair trade practice. 

Rule 21. Misrepresenting Ofer as ''Special" 

It is an unfair trade practice to represent an offer as "special" 
when it is in fact a "regular" offer. 

Rule 22. Fictitious Prices. 

Offering baby chicks for sale at prices purported to be reduced 
from what are m fact fictitious prices, or offering such chicks for sale 
at a purported reduction in price when such purported reduction is in 
fact fictitious, with the tendency and capacity or effect of misleading 
or deceiving purchasers or prospective purchasers, is an unfair trade 
practice. 

Rule 23. Misrepresenting Offer as Limited to Time, etc. 

It is an unfair trade practice to represent an offer to be limited as to 
time or otherwise when such is not the fact. 

Rule 24- Bogus Independents. 

It is an unfair trade practice to sell or offer to sell industry products 
through a pretended independent concern in such manner as to mis- 
lead or deceive purchasers or prospective purchasers into the erroneous 
belief that such concern is independent and in competition with that 
member of the industry owning or controlling such concern. 

Rule 25. Schemes Involving Lottery, Misrepresentation, or Fraud. 

The offering or giving of prizes, premiums, or gifts in connection 
with the sale of industry products or as an inducement thereto by 
any scheme which involves lottery, misrepresentation, or fraud, is an 
unfair trade practice. 

Rule 26. Misuse oj Word ''Guarantee," Etc. 

It is an unfair trade practice to use the word "guarantee," or any 
other word, expression, or representation of similar import, in such 
manner as to have the tendency and capacity or effect of misleading 
or deceiving purchasers or prospective purchasers. 

Rule 27. Defamation of Competitors or Disparagement of Their Products. 
The defamation of competitors by falsely imputing to them dis- 
honorable conduct, inability to perform contracts, questionable credit 
standing, or by other false representations, or the false disparagement 
of the grade, quality, or manufacture of the products of competitors, or 
of their business methods, selling prices, values, credit terms, poUcies, 
or services, is an unfair trade practice. 

Rule 28. "Loss Leaders." 

The practice of selling any product of the industry below the 
seller's cost as a "loss leader" to induce the purchase of any other prod-. 



CONCENTRATION OF ECONOMIC POWER 35 

uct of the industry, the sale of the latter being used to recoup the loss 
sustained on the "loss leader" product so sold, with the tendency or 
capacity to mislead or deceive purchasers or prospective purchasers, is 
an unfair trade practice. 

Rule 29. Inducing Breach oj Contract. 

Inducing or attempting to induce the breach of existing lawful 
contracts between competitors and their customers or their suppliers 
by any false or deceptive means whatsoever, or interfering with or 
obstructing the performance of any such contractual duties or services 
by any such means, with the purpose and effect of unduly hampering, 
injuring, or prejudicing competitors in their businesses, is an unfair 
trade practice. 

Rule 30. Enticing Away the Employees oj Competitors. 

Wilfully enticing away the employees of competitors, with the pur- 
pose and effect of unduly hampering, injuring, or prejudicing com- 
petitors in their businesses, is an unfair trade practice. 

Rule 31. Espionage. 

The securing of information from competitors concerning their 
businesses by false or misleading statements or representations or by 
false impersonation of one in authority and the wrongful use thereof 
to unduly hinder or stifle the competition of such competitors is an 
unfair trade practice. 

Rule 32. Coercing Purchase oj One Product as a Prerequisite to the 
Purchase oj Other Products. 
The practice of coercing the purchase of one or more products as a 
prerequisite to the purchase of one or more other products where the 
effect may be to substantially lessen competition or tend to create 
a monopoly or to unreasonably restrain trade is an unfair trade 
practice. 

Rule 33. Consignment Selling. 

It is an unfair trade practice for any member of the industry to use 
the practice of shipping goods to dealers or distributors on consign- 
ment or pretended consignment for the purpose and with the effect 
of artificially clogging trade outlets and imduly restricting competitors' 
use of said trade outlets in getting their goods to consumers through 
regular channels of distribution, or with such purpose to entirely 
close said trade outlets to such competitors so as to substantially lessen 
competition or tend to create a monopoly or to unreasonably restrain 
trade; provided, however, that nothing herein shall be construed or used 
as restricting or preventing consignment shipping or marketing of 
commodities in good faith, and without artificial interference with com- 
petitors' use of the usual channels of distribution in such manner as 
thereby to suppress competition or restrain trade. 

Rule 34- Selling Below Cost. 

The selling or offering for sale of baby chicks or "started chicks" 
below the seller's cost with the intent and with the effect of injuring 
a competitor and where the effect may be to substantially lessen com- 
petition or tend to create a monopoly or unreasonably restrain trade 
is an unfair trade practice; all elements recognized by good accounting 
practice as proper elements of such cost shall be included in determin- 
ing cost under this rule. 



36 CONCENTRATION OF ECONOMIC POWER 

Evle 36. 

(a) Prohibited discriminatory prices, or rebates, refunds, discounts, 
credits, etc}, which effect unlawful price discrimination. — It is an unfair 
trade practice for any member of the industry engaged in commerce,^ 
in the course of such commerce, to grant or allow, secretly or openly, 
directly or indirectly, any rebate, refund, discount, credit, or other 
form of price differential,^ where such rebate, refund, discount, credit, 
or other form of price differential effects a discrimination in price 
between different purchasers of goods of like grade and quality, where 
either or any of the purchases involved therein are in commerce,^ and 
where the effect thereof may be substantially to lessen competition 
or tend to create a monopoly in any line of comm.erce,^ or to injure, 
destroy, or prevent competition with any person who either grants or 
knowingly receives the benefit of such discrimination or with cus- 
tomers of either of them: Provided, however — 

(1) That the goods involved in any such transaction are sold 
for use, consumption, or resale within any place under the 
jurisdiction of the United States; 

(2) That nothing herem contained shall prevent differentials 
which make only due allowance for differences in the cost of man- 
ufa-cture, sale, or delivery resulting from the differing methods or 
quantities in which such commodities are to such purchasers sold 
or delivered ; 

(3) That nothing herein contained shall prevent persons 
engaged in selling goods, wares, or merchandise in commerce^ 
froin selecting their own customers in bona fide transactions and 
not in restraint of trade; 

(4) That nothing herein contamed shall prevent price changes 
from time to time where made in response to changing conditions 
affecting either (a) the market for the goods concerned, or (6) 
the marketability of the goods, such as, but not limited to, actual 
or imminent deterioration of perishable goods, obsolescence of 
seasonal goods, distress sales under court process, or sales in 
good faith in discontinuance of business in the goods concerned. 

(b) Prohibited brokerage and. commissions.— It is an unfair trade 
practice for any member of the industry engaged in commerce,^ in the 
course of such commerce, to pay or grant, or to receive or accept, 
anything of value as a commission, brokerage, or other compensation, 
or any allowance or discount in lieu thereof, except for services ren- 
dered in connection with the sale or purchase of goods, wares, or 
merchandise, either to the other party to such transaction or to an 
agent, representative, or other intermediary therein where such inter- 
mediary is acting in fact for or in behalf, or is subject to the direct or 
indirect control, of any party to such transaction other than the per- 
son by whom such compensation is so granted or paid. 

(c) Prohibited advertising or promotional allowances, etc. — It is an 
unfair trade practice for any member of the industry engaged in com- 

' Par. (a) of rule 35 shall not be construed as embracing practices prohibited by pars, (ft), (c), and (d) of 
this rule. 

2 As herein used, the word "commerce" means trade or commerce among the several States and with for- 
eign nations, or between the District of Columbia or any Territory of the United States and any State, Ter- 
ritory, or foreign nation, or between any insular possessions or other places under the jurisdiction of the 
United States, or between any such possession or place and any State or Territory of the United States or 
the District of Columbia or any foreign nation, or within the District of Columbia or any Territory or an 
insular possession or other place under the jurisdiction of the United States: Provided, That this shall not 
apply to the Philippine Islands. 



CONCENTRATION OF ECONOMIC POWER 37 

merce ^ to pay or contract for the payment of advertising or promo- 
tional allowances or any other thing of value to or for the benefit of a 
customer of such member in the course of such commerce as compen- 
sation or in consideration for any services or facilities furnished by or 
through such customer in connection with the processing, handling, 
sale, or offering for sale of any products or commodities manufactured, 
sold, or offered for sale bj' such member, unless such payment or con- 
sideration is available on proportionally equal terms to all other cus- 
tomers competing in the distribution of such products or com- 
modities. 

(d) Prohibited discriminatory services or facilities. — It is an unfair 
trade practice for any member of the industry engaged in commerce ^ 
to discriminate in favor of one purchaser against another purchaser or 
purchasers of a commodity bought for resale, with or without process- 
ing, by contracting to furnish or by furnishing, or by contributing to 
the furnishing of, any services or facilities connected with the process- 
ing, handling, sale or ofl'ermg for sale of sucxi commodity so purchased 
upon terms not accorded to all purchasers on proportionally equal 
terms. 

(e) Illegal price discrvnination. — It is an imfair trade practice for 
any member of the industry or other person engaged in commerce,^ 
in the Course of such commerce, to discriminate in price in any other 
respect contrary to section 2 of the Clayton Act as amended by the 
act of Congress approved June 19, 1936 (Public, No. 692, 74th Cong.), 
or knowingly to induce or receive a discrimination in price which is 
prohibited by such section as amended. 

Rule 36. Aiding or Abetting Use of Unfair Trade Practices. 

For any member of the industry knowingly to aid or abet another 
member, or any other person, firm or corporation, in the use of unfair 
trade practices, is an unfair trade practice. 

Group II 

The trade practices embraced in Group II rules do not, per se, 
constitute violations of law. They are considered by the industry 
either to be unethical, uneconomical, or otherwise objectionable; or 
to be conducive to sound business methods which the industry desires 
to encourage and promote. Such rules, when they conform to the 
above specifications and are not violative of law, will be received by 
the Commission, but the observance of said rules must depend upon 
and be 'accomplished through the cooperation of the members of the 
industry concerned, exercised in accordance with existing law. WTiere, 
however, such practices are used in such manner as to become unfair 
methods of competition in commerce or a violation of any law over 
which the Commission has jurisdiction, appropriate proceedings will 
be instituted by the Commission as in the case of violation of Group I 
rules. 

Rule A. 

The inc'istry condemns the practice of disposing of baby chicks 
by shipping them to fictitious consignees or without an order or other 
consent of the consignee, necessitating the sa^e of such undeliverablc 
shipments at public auction by agents of the common carrier in order 
to secure payment for transportation costs. Such practice is deemed 



38 CONCENTRATION OF ECONOMIC POWER 

by the industry to be harmful to the chicks and to facihtate the 
spread of disease. 

Rule B. 

The industry condemns the practice of failing to give proper notice 
to purchasers of baby chicks of any change in the shipping schedule 
of an order thereby causing inconvenience and loss to purchasers. 

Rule a 

The industry condemns the practice of failing to ship baby chicks 
to customers as promptly as has been agreed upon, which practice 
frequently results in injury to the chicks and inconvenience and loss 
to customers. 

Rule D. 

The industry approves the practice of handling business disputes 
between members of the industry and their customers in a fair and 
reasonable manner, coupled with a spirit of moderation and good will, 
and every effort should be made by the disputants themselves to 
compose their differences. If unable to do so they should, if pos- 
sible, submit these disputes to arbitration. 

Rule E. 

Lawful contracts are business obligations which should be per- 
formed in letter and in spirit. The repudiation of contracts by 
sellers on a rising market or by buyers on a declining market is con- 
demned by the industry. 

A committee on trade practices is hereby created by the indus- 
try to cooperate with the Federal Trade Commission and to 
perform such acts as may be legal and proper to put these rules 
into effect. 

Promulgated and issued by the Federal Trade Commission as of 
December 31, 1938. 

Otis B. Johnson, Secretary. 



Trade Practice Rules 

FOR THE 

RADIO RECEIVING SET 
MANUFACTURING INDUSTRY 

AS PROMULGATED JULY 22, 1939 

Statement by the Commission: 

Trade practice rules for the radio receiving set manufacturing 
industry, as herein set forth, are promulgated by the Federal Trade 
Commission under the trade practice conference procedure. 

The rules provide for the elimination and prevention of false 
advertising, deceptive selling methods, and certain other unfair 
trade practices, and are issued in the interest of protecting the pur- 
chasing public and maintaining fair competitive conditions in the 
industry. Such rules are applicable to radio receiving sets, radio 
parts, accessories, and related products of the industry, and to their 
eale and distribution in commerce by manufacturers, jobbers, dis- 
tributors, dealers, or other marketers. 

Available statistics indicate that for the year 1937, the industry's 
total sales of radio receiving sets, parts, accessories, etc., amounted 
to slightly more than $460,000,000, retail value. For the year 1938, 
radio receiving sets sold by the industry, exclusive of parts, accessories, 
etc., totaled approximately 7,150,000, with &n estimated retail sales 
value of about $225,000,000. Vt the present time there is said to be 
in use in the United States about 41 ,000,000 radio sets. The industry, 
as a whole, has a large capital investment and employs many thousands 
of men and women in its manufacturing operations and in selling, 
distributing, and servicing its products. 

The proceeding for the establishment of rules was instituted upon 
application of the industry. In the course of the proceeding drafts 
of rules proposed for the industry were made available upon public 
notices, issued by the Commission to all interested or affected parties, 
whereby they were afforded opportunity to present to the Commission 
their views, including such suggestions or objections as they desired 
to submit, and to be heard in the premises. Accordingly, public 
hearings were held at Washington, D. C, and all matters presented at 
the hearings, or otherwise submitted in pursuance of such notices, 
were duly received and considered. 

Thereafter, and upon consideration of the entire proceeding, the 
rules appearing herein under Group I were given final approval by 
the Commission and are herewith promulgated as follows : 

The Rules 

These rules promulgated by the Commission are designed to foster 
and promote fair competitive conditions in the mterest of the industry 

39 



40 CONCENTRATION OF ECONOMIC POWER 

and the public. They are not to be used, directly or indirectly, as 
part of or in connection with any combination or agreement to fix 
prices, or for the suppression of competition, or otherwise to unreason- 
ably restrain trade. 

Group I 

The unfair trade practices which are embraced in the Group I 
rules are considered to be unfair methods of competition, unfair or 
deceptive acts or practices, or other illegal practices, prohibited, 
witliin the purview of the Federal Go"^ernment, by acts of Congress, 
as construed in the decisions of the Federal Trade Commission or the 
courts; and appropriate proceedings in the public interest will be taken 
by the Commission to p'ovent the use, by any person, partnership, 
corporation, or other organization, of such unlawful practices in or 
directly affecting interstate commerce. 

Rule 1 . Misbranding, Misre'p ^esentation, and Deceptive Selling Methods. 
It is an unfair trade practic for any member of the industry, in the 
course of or in relation to- the marketing or distribution of radio 
receiving sets, parts or accessoiies therefor, or other products of the 
industry, (1) to up-:, or to cause, promote, or further the use of, any 
marks, brands, labels, depictions, advertisements, trade promotional 
descriptions, or representatiens of any kind which, directly or by im- 
plication, are false, misleading, or deceptive to the purchasing or con- 
suming public; or (2) to offer for sale, sell, or distribute, or to cause or 
promote the sale or distribution of, radio receiving sets, parts or 
accessories therefor, or other products of the industry, under any 
other conditio^is or selling practices which have the capacity and 
tendency or eft'ebt of misleading or deceiving the purchasing or 
consuming public. 

Rule 2. ''All-Wave,'' ''Standard Broadcast,'' etc. 

In the application of these rules and for the purpose of avoiding 
confusion, misunderstanding, and deception: 

(a) Except as hereinafter provided, the terms "all-wave," "world- 
wave," "world-wide wave," or words, phrases, or representations of 
similar import, shall not be used as descriptive of a radio receiving set 
advertised, offered for sale, sold, or distributed m the American market 
when such set is not constructed to receive and capable of receiving, 
with reasonable or adequate consistency, the entire spectrum of 
radio frequencies in recognized use in the art — namely, all long-wave 
broadcasts and transmissions; all medium-wave and short-wave broad- 
casts and transmissions, and all other waves transmitted or broadcast, 
including both foreign and domestic; excepting, however, that such set 
so described or represented need not include within its capacity of 
reception such point-to-point transmissions as ar^ confidential and 
illegal for general reception and divulgence by members of the public, 
nor such unchanging signals as emanate from radio beacons or radio 
lighthouses, when such set is not otherwise falsely or deceptively 
described or represented, directly or indirectly, as b^ing constructed 
to receive, or as being capable of receiving, such point-to-point or 
beacon or lighthouse transmissions. 

(6) Nothing herein contained shall prohibit the use of the term 
"limited all-wave," "limited world-wave," "limited world-wide wave," 
or term or words of similar import, as descriptive of a radio receiving 



CONCENTRATION OF ECONOMIC POWER 41 

set advertised, offered for sale, sold, or distributed in the American 
market when such set is constructed for and capable of consistently 
receiving at least a continuous spectrum of frequencies from 540 
kUocycles to 18000 kilocycles, provided such term or words are im- 
mediately accompanied by words, plu^ases, or terms set forth conspicu- 
ously and clearly, unequivocally and truthfully stating the exact wave 
bands or frequencies which such set is capable of consistently receiving; 
for example: 

"LIMITED ALL-WAVE 
From 540 to 18000 Kilocycles" 

"LIMITED ALL-WAVE 

From 530 to 21000 Kilocycles" 

"LIMITED WORLD-WAVE 

From 540 to 18000 Kilocycles" 

"LIMITED WORLD-WIDE WAVE 
From 540 to 18000 Kilocycles" 

"LIMITED ALL-WAVE 

From 140 to 410 Kilocycles, and 

From 540 to 18000 Kilocycles" 

"LIMITED WORLD-WAVE 
From 540 to 18000 Kilocvcles, and 
From 19000 to 23500 Kilocycles" 

"LIMITED WORLD-WIDE WAVE 

From 150 to 400 Kilocycles, and 
From 540 to 35000 Kilocycles" 

(c) Nothing herein contained shall prohibit tlie use, as descriptive 
of a radio receiving set, of the term "all waves" as an integral part of 
a clause, sentence, or statement which truthfully and unequivocally 
sets forth the bands or radio frequencies such set rloes not cover, and 
wherein the words "all waves" are not given greater prominence or 
conspicuousness than the other parts of such clause, sentence, or 
statement; provided such set is constructed for and capable of re- 
ceiving with reasonable or adequate consistency all the waves or bands 
of frequencies from 540 to 18000 kilocycles and such other bands or 
frequencies as are represented to he within its receptive capacity. 
The following are illustrative of such j)ermissible phrases here provided 
for — 

"All waves except for frequencies above 21000 kilocycles and 
below 540 kilocycles." 

"AU waves except Asiatic stations." 

"All waves except foreign and domestic frequencies above 
18000 kilocycles and below 540 kilocycles." 

(d) The term "standard broadcast" shall not be used as descriptive 
of a radio receiving set which is not built for or cai)able of receiving 
with reasonable or adequate consistency a continuous spectrum of 
frequencies from 540 to at least 1000 kilocycles. 

(f) Also, the term "standard broadcast" as descriptive of a radio 
receiving set shall not be used in such manner as to lead the public to 
ijclitn-e (1) that such set is constructed for and capable of receiving 
with reasonable or adequate consistency a greater number of radio 
frequency signals than is in fact true of such set; or (2) that the set is 



42 CONCENTRATION OF ECONOMIC POWER 

capable of so receiving more than the continuous spectrum of frequen- 
cies from 540 to 1600 kilocycles. 

(/) In the advertisement or sale of radio receiving sets, disclosure 
of the exact bands of frequencies which such sets are constructed to 
receive and capable of receiving with reasonable or adequate con- 
sistency is deemed desirable in the interest of avoiding confusion, 
misunderstanding or deception of purchasers. Failure or refusal 
adequately to make such disclosure of frequencies, in connection with 
the use of the term "standard broadcast" or otherwise, when the 
capacity and tendency or effect thereof is to mislead or. deceive the 
purchasing or consuming public, is an unfair trade practice. 

(<7) Nothing in these rules shall prevent the use, in lieu of "kilo- 
cycles," of other recognized units of measurement, such as "meters" 
or "megacycles," when employed in a truthful and nondeceptive 
manner. 

Rule 3. Specific Types of Advertisements or Representations among 
Those Prohibited. 
It is an unfair trade practice for any member of the industry to use, 
or cause to be used, any of the following-described types of advertise- 
ments or representations: 

(a) Advertisements or representations stating, purporting or 
implying that any radio receiving set so advertised or represented 
will receive distant stations or any or all foreign broadcasts or 
transmissions easily or satisfactorily or as easily or satisfactorily 
as local or domestic reception, when such is not the fact. 

(6) Advertisements or representations stating, purporting or 
implying that any radio receiving set so advertised or represeiited, 
or the reception thereof, is not subject to interference or to being 
interfered with or interrupted by fading, noise, electrical inter- 
ference, atmospheric conditions, static or any other phenomena 
or conditions, when such is not the fact. 

(c) Advertisements or representations, with respect to the 
receiving capacity or performance of a radio receiving set, which 
make deceptively exaggerated or misleading claims, or claims 
which are not justified and supported by the fact or performance 
of such radio set in the locality in which it is so advertised, 
represented and sold. 

{d) Advertisements or representations which directly or by 
implication lead purchasers to believe that the radio set so 
advertised or represented is capable of greater or more consistent 
or satisfactory performance or reception than is in fact true. 

(e) Advertisements or representations stating, purporting or 
implying that any radio receiving set so advertised or represented 
will give world-wide continuous reception or other continuous 
reception, when such is not the fact; or that the radio receiving 
set will give such reception or other reception with loud speaker 
volume, when such is not the fact; or that the radio receiving set 
will give world-wide reception or other reception regularly or 
dependably, when such is not the fact. 

(/) Advertisements or representations which present claims or 
representations concerning any radio receiving set in such a way 
as deceptively to cover or conceal defects or deficiencies inherent 
in such set, or defects or deficiencies inherent in the contempo- 



CONCENTRATION OF ECONOMIC POWER 43 

raneous state of the art to which the receiving set is subject but 
which are not generally known to the purchasing public. 

(g) Advertisements or representations, of any radio receiving 
set, stating, purporting or implying that each station or any 
station, whether nearby or foreign or domestic, can be brought in, 
or brought in with sharp, clear or distinct reception or with ease, 
simplicity or regularity, by any radio receiving set so advertised 
or represented, when such is not the fact. 

(h) Advertisements or representations stating, purporting or 
implying that any radio receiving set so advertised or represented, 
will bring in or receive broadcasts from Europe, Africa, South 
America, Australia or Asia, or from any other designated locality; 
or that it will bring in such broadcasts, or any of them, consist- 
ently or satisfactorily, when such is not the fact. 

(i) Advertisements or representations stating, purporting or 
implying that any radio receiving set so advertised or repre- 
sented sifts out noise or is free from noise, or brings in far distant 
stations sharp or clear, when such is not the fact. 

(j) Advertisements or representations stating, purportmg or 
imph'^ing that any radio receiving set so advertised or represented 
will bring in or receive satisfactorily or consistently foreign sta- 
tions, police calls, aviation calls, radio transmissions from or to 
ships at sea, amateur stations or other types of radio transmis- 
sions, when such is not the fact, or when only a small part of any 
such class of radio frequencies transmitted or broadcast is so 
receivable and such fact, or the fact that others of the same class 
are not so receivable, is deceptively concealed. 

(k) Advertisements or representations stating, purporting or 
implying that any radio receiving set so advertised or represented 
contains a certain number of tubes or is of a certain tube capacity 
when one or more of such tubes in the set are dummy or fake 
tubes, or are tubes which perform no useful function, or are tubes 
which do not perform or were not placed in the set to perform 
the recognized and customary function of a radio receiving set 
tube in the detection, amplification, and reception of radio signals. 

(Note. — In order to avoid and prevent deceptive or misleading 
tendencies or results, so-called "ballast tubes", dial or other 
lamps used for illumination, so-called plug-in resistors, and other 
accessories or devices not serving the recognized and customary 
function of a radio receiving set tube, are not to be included as 
tubes in advertisements or representations of a radio receiving 
set which describe or refer to the set as having a certain number 
of tubes or as being of a specified tube capacity. References to 
rectifier tubes, and to tubes, devices, or accessories which do not 
serve as signal amplifying or detecting tubes or heterodyne oscil- 
lator tubes, should be such as to clearly avoid misunderstanding 
or deception of purchasers.) 

(^] Advertisements or rdpresentations of any radio receiving 
set, or of any part or accessory therefor whatsoever, in such a 
manner, as deceptively to conceal the true function of such part 
or in such manner as otherwise to mislead or deceive the purchas- 
ing or consuming public in respect to such set or such part or 
accessory. 



44 CONCENTRATION OF ECONOMIC POWER 

(m) Advertisements or representations stating, purporting or 
implying that the price of radio receiving sets, parts or accessories 
therefor so advertised or represented have been reduced or are 
reduced prices, or have been reduced a certain amount, when in 
fact such purported or represented price reduction is fictitious, 
or is otherwise misleading or deceptive. 

(n) Advertisements or representations stating, purporting or 
implying that radio receiving sets so advertised or represented 
are of the latest model, when such is not the fact; or advertise- 
ments or representations which, directly or indirectly, have the 
capacity and tendency or effect of leading the purchasing public to 
believe that the set is of the current year's model or has not been 
supplanted, superseded or succeeded by a newer or later model, 
when such is not true in fact; or advertisements or representations 
which are otherwise deceptive or misleading respecting the model 
of the set. 

(o) Advertisements or representations of radio receiving sets 
or prices therefor which deceptively or misleadingly conceal the 
fact that the advertised price does not cover necessary or adver- 
tised accessories or devices which must be purchased with the set 
at an additional charge; or which falsely or deceptively state or 
imply that the advertised price covers such accessories or devices, 
when such is not the fact. 

(p) Advertisements or representations of radio receiving sets 
which present former prices or so-called list prices which are 
fictitious. 

(g) Advertisements or representations of purported bona fide 
trade-in allowances when the price of the new set so oft'ered for 
sale has been deceptively inflated or marked up to offset the 
trade-in allowance. 

Rule 4. Sponsorship. 

It is an unfair trade practice to use, or cause to be used, advertise- 
ments or representations, of radio receiving sets, parts or accessories 
therefor, or of other products of the industry, which have the capacity 
and tendency or effect of misleading purchasers or the consuming 
public into the belief that such radio sets, parts, accessories, or products 
are sponsored or manufactured by, or are otherwise associated with, 
any person, concern, or organization which is or has been prominent 
or well known in the electrical or radio industry, or by or with any 
other person, firm, corporation, or association, wlien such is not the 
fact. 

Rule 5. 

(a) Alteration of brand name. — The defacement or removal of the 
correct name plate or brand name of a radio receiving set, or the 
replacement thereof by another name or mark, when done with the 
capacity and tendency or efl'ect of thereby misleading or deceiving 
the purchasing or consuming public in respect to the origin, manu- 
facture, or true name of such set, or in any other material respect, is 
an unfair trade practice. 

(b) Deceptive use or change of cabinets. — The placing of a radio 
receiving set or chassis in a cabinet designed or made for a set or 
chassis of a different manufacturer or for a set or chassis of a different 
size, type, or model, when done with the capacity and tendency or 



CONCENTRATION OF ECONOMIC POWER 45 

effect of thereby misleading or deceiving the purchasing or consuming 
pubhc as to the origin, size, capacity, make, manufacture, brand, or 
type of such set or cabinet, or when done to mislead or deceive pur- 
chasers in any other respect, is an unfair trade practice. 

Rule 6. Imit-ation of Trade-marks, Trade Names, Etc. 

The imitation or simulation of the trade-marks, trade names, labels, 
or brands of competitors, with the capacity and tendency or effect 
of misleading or deceiving the purchasing or consuming public, is an 
unfair trade practice. 

Rule 7. Commercial Bribery. 

It is an unfair trade practice for a member of the industry directly 
or indirectly to give, or offer to give, or permit or cause to be given, 
money or anything of value to agents, employees, or representatives 
of customers or prospective customers, or to agents, employees, or 
representatives of competitors' customers or prospective customers, 
without the knowledge of their employei's or principals, as an induce- 
ment to iiilhience their employers or principals to purchase or contract 
to purchase products manufactured or sold by such industry member 
or the maker of such gift or ofi'er, or to influence such employers or 
principals to refrain from dealing in the products of competitors or 
from dealing or contracting to deal with competitors. 

Rule 8. "Spiffs,'' "Push Money," Etc. 

It is an unfair trade practice for any member of the industry, 
directly or indirectly, to give, pay or contract to pay, to any clerk or 
salesperson of any customer-dealer handling two or more competitive 
brands of radio merchandise, "push money," "spiffs," or any other 
bonus, gratuity, or payment, as an inducement or encouragement to 
push or promote the sale of such member's product or products over 
competing products of other ULcmbers in the industry, 

(a) with the capacity and tendency or effect of thereby causing 
the purchasing or consuming public, when making purchases of 
such products, to be misled or deceived into the erroneous belief 
that such clerk or sales person is free from any such special 
interest or influence, or is not so subsidized or paid by such 
member; or 

(6) with the capacity and tendency or ellVct of thereby ham- 
pering and undul}^ i-estricting the legitimate, free and full use 
and enjoyment of such retail trade outlets for the distribution 
to the public of competing products; or 

(c) with the purpose or effect, directly or indirectly, of other- 
wise substantially lessening competition or unreasonably restrain- 
ing trade in the mari<eting of the products of the industry; or 

(r/) with the effect of thereby bringing about the granting of 
an illegally discriminatory service, payment or price contrary to 
section 2 of the Clayton Act as amended by the act of Congress 
approved June 19, 1930, known as the Robinson-Fatman Act. 



Promulgated and issued In' the Federal Trade Commission a.-; of 
July 22, 1939. 

Otis B. Johnsox, Secretary. 



Trade Practice Rules 

FOR THE 

RUBBER TIRE INDUSTRY 

AS PROMULGATED OCTOBER 17, 1936 

Statement by the Federal Trade Commission: 

Trade practice rules for the rubber tire industry, as herein set forth,, 
were today promulgated by the Commission under its trade practice 
conference procedure. A general conference for the entire industry 
was held, under the auspices of the Commission, at the Stevens Hotel, 
Chicago, 111., June 4, 1936. The Honorable Robert E. Freer, member 
of the Federal Trade Commission, presided, assisted by George 
McCorkle, director, and Henry Miller, assistant director, of Trade 
Practice Conferences. At such conference proposed rules were 
adopted and submitted by the industry to the Federal Trade Com- 
mission for its approval. 

The proposed rules were then tentatively passed upon by the Com- 
mission and released, with certain modifications, for a 15-day period 
upon public notice whereby opportunity was afforded to all interested 
or affected parties to present to the Commission their views regard- 
ing the same, including suggestions or objections, if any. Thereafter, 
some further amendments were adopted, and upon full consideration 
of the matter the rules as amended and herein set forth were approved 
by the Commission as to Group I, and as to Group II were received 
by the Commission as expressions of the industry. 

The rubber tire industry, for which these rules are promulgated, 
embraces the manufacturers of automotive tires and tubes and all 
distributing units and trade outlets, including the independent deal- 
ers, jobbers, wholesalers, oil company outlets, factory-owned stores, 
chain or mass distributors and the mail-order houses. 

According to information received, the manufacturers number about 
50 companies and the distributing units and trade outlets exceed 
100,000. The total capital investment of the industry is said to 
approximate $2,000,000,000 and the aggregate annual volume of busi- 
ness $750,000,000. 

These rules promulgated by the Commission are designed to foster 
and promote fair competitive conditions in the interest of industry 
and the public. They are not to be used, directly or indirectly, as 
part of or in connection with any combination or agreement to fix 
prices, or for the suppression of competition, or otherwise to unrea- 
sonably restrain trade. 

Group I 

The unfair trade practices which are embraced in Group I rules are 
considered to be unfair methods of competition or other illegal prac- 
tices within the decisions of the Federal Trade Commission or the 

47 



48 CONCENTRATION OF ECONOMIC POWER 

courts, and appropriate proceedings in the public interest will be. 
taken by the Commission to prevent the use of such unlawful prac- 
tices in or directly affecting interstate commerce. 

Rule 1. 

(a) Prohibited discriminatory differentials, rebates, rejunds, discounts, 
credits, and other allowances. — It is an unfair trade practice for any 
member of the industry engaged in commerce/ in the course of such 
commerce, to grant or allow, secretly or openly, directly or indirectly, 
any price differentials, rebates, refunds, discounts, credits or other 
allowances which effectuate a discrimination in price between differ- 
ent purchasers of goods of like grade and quality where either or any 
of the purchases involved therein are in commerce ' and where the 
effect thereof may be substantially to lessen competition or tend to 
create a monopoly in any line of commerce ' or to injure, destroy, or 
prevent competition with any person who either grants or knowingly 
receives the benefit of such discrimination or with customers of either 
of them: Provided, however- — 

(1) That the goods involved in any such transaction are sold 
for use, consumption, or resale within an}'^ place under the juris- 
diction of the United States; 

(2) That nothing herein contained shall prevent differentials 
which make only due allowance for differences in the cost of 
manufacture, sale or delivery resulting from the diffciing methods 
or quantities in which such commodities are to such purchasers 
sold or delivered ; 

(3) That nothing herein contained shall prevent persons en- 
gaged in selling goods, wares, or merchanflise in commerce ' from 
selecting their own customers in bona fide trjinsactions and not 
in restraint of trade; 

(4) That nothing herein contained shall prevent price ch.anges 
from time to time where made in response to changing conditions 
affecting either {a) the market for the goods coiu-orned, or (6) the 
marketability of the goods, such as, but not limited to, actual or 
imminent deterioration of pcrisl)able goods, obsolescence of 
seasonal goods, distress sales under court ])rocess, or sales in good 
faith in discontinuance of business in the goods concerned. 

(6) Prohibited brokerages and commissions. — It is an unfair trade 
practice for any mem])er of the in<histry engaged in commerce,' in 
the course of such commerce, to pay oi- graiit or to receive or accept, 
anything of value as a commission, brokerage, or othor compensation, 
or any allowance or discount in lieu thereof, ex('e])t for services ren- 
dered in connection with the sale or purchase of goods, wares, or 
merchandise, either to the other pai-ty to 9Mr\\ transaction or to an 
agent, representative, or othcM- intermediaiy therein where such 
intermediary is acting in fact for or in bt^nilf, or is sul)ject to the 
direct or indirect control, of aTiy party to such trnnsnction other tiian 
the person by whom such compensatioti is ^o granted or paid. 

(c) Prohibited advertising or jtromotionnl allowances, etc. — It is an 
unfair trade practice for any member of tlu* industry engaged in 
commerce ' to pay or contract for the payin(>nt of advertising or 
promotion allowances or any other thing of value to or for the beiiefit 
of a customer of such member in the course of such commerce as 

' See footnote, p. 49. 



CONCENTRATION OF ECONOMIC POWER 49 

compensation or in consideration for any services or facilities fur- 
nished by or through such customer in connection with the processing, 
handhng, sale, or ofl'ering iot sale of any products or commodities 
manufactured, sold, or offered for sale by such member, unless such 
payment or consideration is available on proportionally equal terms 
to all other customers competing in the distribution of such products 
or commodities. 

(d) Prohibited discriminatory services or facilities. — It is an unfair 
trade practice for any member of the industry engaged in commerce ^ 
to discriminate in favor of one purchaser against another purchaser or 
purchasers of a commodity bought for resale, with or without process- 
ing, by contracting to furnish or by furnishing, or by contributing 
to the furnishing of, any services or facilities connected with the 
processing, handling, sale, or offering for sale of such commodity so 
purchased upon terms not accorded to all purchasers on proportionally 
equal terms, 

(e) Illegal price discrimination. — It is an unfair trade practice for 
any member of the industry or other person engaged in commerce,' 
in the course of such commerce, to discriminate in price in any other 
respect contrary to section 2 of the Clayton Act as amended by the 
act of Congress approved June 19, 1936 (Public, No. 692, 74th Cong.), 
or knowingly to induce or receive a discrimination in price which 
is prohibited by such section as amended. 

Rule '2. 

The defamation of competitors by falsely imputing to them dis- 
honorable conduct, inability to perform contracts, questionable credit 
standing or by other false representations, or the false disparagement 
of the grade, quality, or manufacture of the products of competitors, 
or of their business methods, selling prices, values, credit terms, 
policies, or services, with the tendency, capacity, or effect of misleading 
or deceiving purchasers, prospective purchasers or the consuming 
public, is an unfair trade practice. 

Eule 3. 

The practice of selling goods below the seller's cost, with the intent 
and with the effect of injuring a competitor and where the effect may 
be to substantially lessen competition or tend to create a monopoly 
or unreasonably restrain trade;, is an unfair trade practice; all elements 
recognized by j^ood accounting practice as prop(>r elements of such 
cost shall be included in determining cost under this rule. 

Rule 4- 

The making, or causing or permitting to be made or published, 
any false, untrue, or deceptive statement, representation, guaranty, 
warranty, or adjustment l)oli('y, by way of advertisement or other- 
wise, concerning the grade, (|Uiility, quantity, substance, use, char- 
acter, nature, origin, size, manufacture, or distribution of any product 
of the industry or concerning i\u\ lif(>. or service of tires or tubes, or in 
any other material respect, having the tendency, capacity, or elFect 

' As hcri-in used, the word "commerce" nieans traili^ or commerce among the several States and with 
forcipn nations, or between the District of C'()liiniI)i!ror any 'I'crritory of the United States and any State, 
Territory, or foreipn nation, or between any insular poss< :-sions or other places under tlie jurisdiction of the 
United States, or between any sucti iiosscssiim or place and any State or Territory of the United Statics or 
the District of Columbia or any foreign nation, or within the District of Columbia or any Territory or any 
insular possession or other iilace under the jurisdiction of .the United States: Provided, That this shall not 
apply to the I'hilippinc Islands. 



50 CONCENTRATION OF ECONOMIC POWER 

of misleading or deceiving purchasers, prospective purchasers, or the 
consuming pubhc, is an unfair trade practice. 

Jlule 5. 

The false or deceptive marking or branding of products of the 
industry for the purpose or with the tendency, capacity, or effect of 
misleading or deceiving purchasers, prospective purchasers, or the 
consuming public with respect to the grade, quality, quantity, use, 
size, material, content, origin, preparation, manufactui'e, or distribu- 
tion of such products, or in any other material respect, is an unfair 
trade practice. 

Jiule 6. 

For any person, firm, or corporation to hold himself or itself out to 
the public as "an authorized dealer" when such is not the fact, or for 
any member of the industry to misrepresent the character of his 
business, with the tendency, capacity, or effect of misleading or deceiv- 
ing purchasers, prospective purchasers, or the consuming public, is an 
unfair trade practice. 

Rule 7. 

For any member of the industiy to represent, by advertising or 
otherwise, that he handles "all standard makes" of tires or tubes, when 
such is not the fact, with the tendency, capacity, or effect of mislead- 
ing or deceiving purchasers, prospective purchasers or the consuming 
public, is an unfair trade practice. 

Rule 8. 

Falsely representing in the sale or offering for sale of "change over" 
tires or tubes that such tires or tubes are new or unused when they are 
in fact not new or unused, with the tendency, capacity, or effect of 
misleading or deceiving purchasers, prospective purchasers, or the 
consuming public, is an unfair trade practice. 

Rule 9. 

Withholding from or inserting in the invoice or sale ticket, statements 
which make the invoice or sale ticket a false record, wholly or in part, 
-of the transaction represented on the face thereof, with the purpose 
or effect of thereby misleading or deceiving purchasers, prospective 
purchasers, or the consuming public, is an unfair trade practice. 

Rule 10. 

(a) The passing off, selling, or offering for sale of used, rebuilt, 
recapped, retreaded, or repaired tires as new or unused tires, is an 
unfair trade practice. 

(6) The sale or offering for sale of used, rebuilt, recapped, retreaded, 
or repaired tires which have been dressed or prepared so as to simulate 
new or unused tires without having durably and conspicuously 
branded or molded in the rubber thereof tlio word "SECOND- 
HAND,'' or the words" USED TIRE— REBUILT,'"' USED TIRE- 
RECAPPED," " USED TIRE— RETREADED," or " USED TIRE- 
REPAIRED," as the case may be, or without otherwise fully and 
truthfully disclosing to all purchasers and users the fact that such 
tires are not new but in truth are secondhand tires, or used tires which 
have been rebuilt, recapped, retreaded, or repaired, respectively, with 
the purpose or with the effect of misleading or deceiving purchasers, 
prospective purchasers, or the consuming public, or with the purpose 



CONCENTRATION OF ECONOMIC POWER 51 

or effect of placing an instrument of fraud or deception in the hands 
of d€aiers or in other channels of trade, is an unfair trade practice. 

Rule 11. 

Tlie direct or indirect misrepresentation of tires as being of a quality 
or grad« higher than in fact they are, or as being of first, second, tliird, 
fourtli or fifth line or grade when such is not the fact, having the 
tendency, capacity, or effect of misleading or deceiving purchasers, 
prospective purchasers, or the consuming public, is an unfair trade 
practice. 

Rule 12. 

The use in advertisements of illustrations or depictions of tires or 
tubes of a different brand, style, or size, or of a higher line,- grade, or 
quality than the tires or tubes to which the representations in such 
advertisements are truthfully applicable, having the capacity, tend- 
ency or effect of misleading or deceiving purchasers, prospective 
purchasers, or the consuming public, is an unfair trade practice. 

Rule 13. 

The use of advertisements or representations of tires or tubes, or of 
prices thereof , which are in fact applicable only to certain limited sizes, 
lines, grades, qualities, styles or brantls, without in such advertise- 
ments and representations truthfully and unequivocally disclosing 
the fact of such limitations, having the capacity, tendency or effect 
of misleading or deceiving purchasers, prospective purchasers or the 
consuming public, is an unfair trade practice. 

Group II 

The trade practices embraced in Group II rules do not, per se, con- 
stitute violations of law. They are considered by the industry either 
to be unethical, uneconomic, or otherwise objectionable; or to be 
conducive to sound business methods which the industry desires to 
encourage and promote. Such rules, when they conform to the above 
specifications and are not violative of law, will be received by the 
Commission, but the observance of said rules must depend upon and 
be accomplished through the cooperation of the members of the in- 
dustry concerned, exercised in accordance w^th existing law. Where, 
however, such practices are used in such manner as to become unfair 
methods of competition in commerce or a violation of any law over 
which the Commission has jurisdiction, appropriate proceedings will 
be instituted by the Commission as in the case of violation of Group I 
rules. 

Rule A. 

Wliere merchandise at wholesale and merchandise at retail are sold 
in the same establishment, the failure on the part of any member of 
the industry to correctly differentiate between or identify the two 
types of transactions, where the result may be to create confusion and 
deception as to the character of the transaction in the mind of pur- 
chasers or prospective purchasers, is condemned by the industry. 

Rule B. 

In the interest of public safety and the protection of purchasers 
and prospective purchasers from deception, it is the judgment of the 



52 CONCENTRATION OF ECONOMIC POWER 

industry that the members thereof manufacturing pneumatic auto- 
mobile tires should mark or brand such tires with words and figures 
or phrases, molded on or in the rubber of each side wall of such tires 
(or otherwise affixed on each such side in some equally permanent 
manner) which wi^l equivocally, conspicuously and truthfully indi- 
cate the number of plies existing in the construction of such tires 
(ply a? herein used meaning fabric running from bead to bead of tire), 
for example: "4-PLY," or "6-PLY," etc. 

The failure or refusal to so mark or brand tires as provided in this 
rule is condemned by the industry. 



By the Commission: 

Otis B. Johnson, Secretary. 



Trade Practice Rules 

FOR THE 

SILK INDUSTRY 

AS PROMULGATED NOVEMBER 4, 1938 

Statement by the Commission: 

Trade practice rules for the silk industry, as herein set forth, are 
promulgated by the Federal Trade Commission under its trade 
practice conference procedure. The general purpose of the rules 
is to foster and promote fair competitive conditions and the pro- 
tection of the purchasing and consuming public in the interest of 
both the industry and the public; to this end to provide for proper 
identification and disclosure of material content of merchandise 
containing or purporting to contain silk in whole or in part ; to make 
provision for accurate designations and descriptions to be used in 
marketing such products; and to eliminate and prevent misrepresenta- 
tion, deceptive concealment and other unfair methods of competition 
or unfair or deceptive acts or practices. 

In the course of the proceedings an industry's conference was held 
in Washington, D. C, under the Commission's auspices, and proposed 
trade practice rules were submitted by members of the industry. 
Thereafter tentative action was taken by the Commission on the 
rules so submitted and a draft of proposed rules was made available 
upon public notice of at least 15 days, in pursuance of which all 
interested and affected parties were afforded opportunity to present 
such pertinent facts, suggestions or objections as they desired and to 
be heard in respect to the proposed rules. Such hearing was held in 
Washington and all matters submitted oraUy or in writing were re- 
ceived and filed in the proceeding. 

Thereafter, and upon consideration of the entire matter, final 
action was taken and the rules in the form appearing herein under 
Group I and Group II were respectively approved and received by the 
Commission. 

Information received in the premises indicates that 57,815,573 
pounds of raw silk, with a dollar value of $106,594,358, were imported 
into the United States in 1937. This raw product was converted by 
American mills and factories into more than 60 varieties of finished 
goods with a total retail sales value of approximately $600,000,000. 
Such American industry is reported to have a capital investment of 
more than $500,000,000 and to afford direct employment in the United 
States to approximately 250,000 persons. 

As promulgated the Group I rules arc intended to afford a helpful 
guide to the industry and the public in respect to the described unfair 
trade practices, which are considered by the Commission to be harm- 

53 



54 CONCENTRATION OF ECONOMIC POWER 

ful and illegal. The requirements of law as expressed in such rules are 
binding upon all engaged directly or indirectly in promoting the sale 
or distribution or other marketing of the fiber, yarn, thread, strands, 
fabric, garments and products specified. 

The rules for the silk industry herein promulgated supersede and 
replace prior rules published by the Federal Trade Commission on 
June 18, 1932, concerning the subject of silk weighting. 

Said new silk rules are as follows : 

Group I 

The unfair trade practices which are embraced in these Group I 
rules are considered to be unfair methods of competition, unfair or 
deceptive acts or practices, or other illegal practices, prohibited, 
^v^thin the purview of the Federal Government, by acts of Congress 
as construed in the decisions of the Federal Trade Commission or the 
courts; and appropriate proceedings in the public interest will be 
taken by the Commission to prevent the use, by any person, partner- 
ship, corporation or other organization, of such unlawful practices in 
or directly affecting interstate commerce. 

Such provisions of the rules express requirements which are 
applicable to all sellers, whether importers, manufacturers, converters, 
distributors, dealers or other vendors. Each has the definite responsi- 
bility of seeing to it that the mcxchandise as it is advertised by him or 
as it is introduced by him into the channels of trade or commerce is 
properly labeled and represented in keeping with the requirements of 
such Group I rules. 

The labeling and other requirements respecting t)ie fiber, yarn, 
thread, strands, fabric or garment or other product covered by the 
rules apply to such merchandise in whatever form it may be sold or 
distributed. 

In the case of finished garments or articles manufactured for dis- 
tribution through the channels of trade to the ultimate consuming 
public without intermediate processing, it is deemed proper practice 
for manufacturers thereof not only to label the garment or article 
with proper disclosure of materiaJi content and other disclosure as 
is required by these rules, but also to cause the labeling (tagging or 
branding) to be done in such manner as to carry through the ordinary 
channels of trade to tlie ultimate consumer and be appropriate in 
the sale or resale of the garment or article to the consuming public, 
thereby rendering further or additional labeling as to material content 
unnecessary so long as the proper label, tag, or brand affixed by the 
manufacturer remains on the garment or article and the material 
content of the product has not been changed. This shall not, however, 
be construed as relieving dealers or other vendors of any of their 
responsibility under the rules of seeing to it that the garment or article 
bears a proper and appropriate label, brand, or tag disclosing the 
information required by these rules to be disclosetl and that it is 
not falsely or deceptively labeled, nor otherwise marked, advertised, 
represented, or offered for sale in a maimer contrary to the provisions 
of these rules. 

Rule 1. 

(a) Silk defined. — Silk is the natural fiber derived from the cocoon 
of the silkworm. 



CONCENTRATION OF ECONOMIC POWER 55 

(6) Decepiive passing off of silk. — It is an unfair trade practice to^ 
cause any silk fiber, yarn, thread, strands, fabric, or garment or other 
product made therefrom, to be sold, offered for sale, distributed, 
advertised, described, branded, labeled, or otherwise represented: 
(1) as not being silk; or (2) as being som.ething other than silk; 
or (3) without disclosure of the fact that such material or product 
is silk, made clearly and unequivocally in the invoices, in labels, tags,. 
or brands attached to the merchandise, and in whatever advertising 
matter, sales promotional descriptions or representations thereof 
may be used, however disseminated or published, where such non- 
disclosure has the capacity and tendency or effect of misleading or 
deceiving the purchasing or consuming public. 

(c) It is an unfair trade practice to cause any fiber, yarn, thread, 
strands, fabric, garment, or other product, containing or purporting 
to contain silk of any kind in whole or in part, to be offered for sale, 
sold, or distributed under any conditions of deceptive concealment of 
the fiber content or under an}^ other deceptive or misleading conditions 
or representations. 

Eule 2. Silk Noil. 

(a) Silk noil is waste silk produced in the operations incident to 
manufacture of spun silk. The term "silk noil" as used in these 
rules, however, shall not be construed as including spun silk, except 
to the extent such spun silk is made of silk noil. For purposes of 
making disclosure, under these rules, as to content of product, such 
silk noil mav be designated as "silk noil," "noil silk," "silk waste," 
or "waste silk." 

(6) In offering for sale, selling or distributing, or promoting the 
sale or distribution of, any fiber, yarn, thread, strands, fabric, or 
garment or other product, containing silk noil either in whole or in 
part, full and nondeceptive disclosure of the presence of such silk 
noil should be made in labels, tags, or brands affixed to the merchan- 
dise and in the invoices and in such advertising matter, sales promo- 
tional descriptions or representations as m,ay be used in respect 
thereof, however disseminated or published; and it is an unfair trade 
practice to deceptively conceal the presence of such silk noil or to 
fail or refuse to make said disclosure, having the capacity and tendency 
or effect of thereby misleading or deceiving the purchasing or con- 
suming public. In the use of the term "silk noil," "noil silk," "silk 
waste," or "waste silk," the words "noil" and "waste" shall not be 
misleadingly or deceptively minimized, obscured, remotely placed, or 
rendered inconspicuous. 

Rule 3. Pure Silk. 

(a) It is an unfair trade practice to use the term or phrase "pure 
silk," "all silk." "pure dye silk," or the distinctive term or phi-ase 
"pure dye" or the unquahfied word "silk," or any other word, term, 
phrase, designation, or representation of similar import, as descrip- 
tive of any fiber, yarn, thread, strands, fabric, or garment or. other 
product containing the same, (1) the fiber content of which is not 
silk exolusiveh^; or (2) which contains any metallic weighting what- 
soever; or (3) which contains any loading or adulterating materials, 
or other foreign or added substance or material (except the necessary 
dj^eing and/or finishing materials required to produce the color and 
finish of the product). Such necessary dyeing and/or finishing 



56 CONCENTRATION OF ECONOMIC POWER 

materials shall, however, in no case exceed 10 percent in the aggre- 
gate, except black, which shall not exceed 15 percent in the aggregate. 
These percentages shall be computed upon the weight of the silk in 
its finished state. Nothing in this rule shall be construed as per- 
mitting the use of dyeing or finishing materials, either within or in 
excess of such 10 percent and 15 percent limits, for the purpose or 
with the result of thereby deceptively loading the product with 
excess or unnecessary dyeing or finishing materials. 

(b) Nothing in this rule shall prohibit the use of the term or phrase 
"pure silk," "pure dye silk," or "silk," in a truthful and nondeceptive 
manner, as descriptive of the silk content of a mixed fabric, provided 
said content meets the requirements of the foregoing paragraph 
(a) of this rule 3 and the requirements of rule 7 as to mixed goods; 
arid provided, further, it is accurately and in immediate conjunction 
disclosed clearly and unequivocally that such term or phrase so em- 
ployed is used as applying only to the silk content of such mixed 
fabric — such as, for example: 

"Rayon and pure silk" 

or 

"Rayon and silk" 

or 

"60 percent rayon, 40 percent pure dye silk" 

JRule 4- Weighted Silk. 

(a) Full and nondeceptive disclosure of the presence of metallic 
T^eighting, together with the proportion or percentage thereof, in 
any silk or silk product of any kind, shall be made in labels, tags, or 
brands attached to the merchandise and in the invoices and in what- 
ever advertising matter, sales promotional descriptions or represen- 
tations may be, used in respect thereto, however disseminated or pub- 
lished, to the end that misrepresentation of the merchandise or 
deception of the purchasing or consuming public may be avoided and 
prevented; and it is an unfair trade practice (1) to fail or refuse to 
make such full and nondeceptive disclosure through the means stated 
and in conformity with the requirements of this rule; or (2) otherwise 
to deceptively conceal the presence of such metallic weighting or the 
percentage or proportion thereof, 

(6) The percentage or proportion of such metallic weighting to 
be disclosed under this rule shall be that proportion or percentage 
which the total weight of such metallic substance bears to the total 
weight of the silk in its finished state; subject, however, to the allow- 
ance of a tolerance of five points' variation from such stated percentage 
or proportion to the extent the variation is due to unavoidable varia- 
tions in processing and not to lack of reasonable effort to state the 
percentage or proportion accurately. The following are illustrative 
examples of the disclosure provided for in this rule : 

"Silk, weighted 25 percent" 

or 
"Silk with 25 percent metallic weighting" 

or 
"Silk (weighted 25 percent) and rayon." 

(c) Nothing in this rule, however, shall be construed as prohibiting 
the making of such disclosure as to weighting and the percentage 



CONCENTRATION OF ECONOMIC POWER 57 

thereof by truthfully and nondeceptively disclosing that the weighting 
is not over a certain percentage, or that the weighting in such parts of 
the product as consist of weighted silk ranges from a certain minimum 
to a certain maximum figure, such as, for example • 

"Silk, weighted up to 50 percent" 
"Silk, weighted not over 50 percent" 
"Silk, weighted between 25 and 50 percent" 
"Silk with 25 to 50 percent weighting" 
"Silk, weighted from 25 to 50 percent." 

(d) In making disclosure under these rules as to weighting, the 
disclosure of the fact that the product, or respective part thereof, is 
weighted and of the percentage or proportion of weighting, shall be 
made plainly and unequivocally, also in immediate conjunction with 
such representations of content as are used, and shall not be set forth 
in such manner as to be misleadingly or deceptively minimized, ob- 
scured, remotely placed, or rendered inconspicuous. 

(e) In case any such product so weighted with metallic substance is 
silk noil, the fact that such is noil shall also be disclosed in accordance 
with the requirements of rule 2 and in addition to said disclosure as 
to weighting materials — such as, for example: 

"Silk noil, weighted 25 percent" 
"Noil sillc with 25 percent weighting." 

Rvle 5. Special Finishing Materials, Excess Finishing Materials, 
Loading or Adulterating Materials. 

(a) This rule applies to nonfibrous materials other than metaUic 
weighting provided for in rule 4 and other than the necessary dyeing 
and/or finishing materials referred to in rule 3. 

(6) The presence of such nonfibrous materials which have been 
added to any fiber, yarn, thread, strands, or fabric shall be truthfully 
and nondeceptively disclosed in accordance with the following re- 
quirements of this rule, to the end that misunderstanding, confusion, 
and deception of the purchasing or consuming public may be avoided 
and prevented. 

(c) In the case where such nonfibrous material has been added to 
the product as special finishing materials, the product shall be desig- 
nated and described in such manner as will clearly and nondeceptively 
disclose to the purchasing and sgonsuming public that such added 
finishing materials are present in the product. The term "special 
finishing materials" as used in this rule means such finishing materials 
as arc added to the product for the purpose and with the effect of 
thereby imparting certain useful properties to the product, such as 
water-repellent qualities, etc. 

(d) In cases of fiber, yarn, thread, strands, or fabric where nonfibrous 
materials have been added to or are present in the product as excess 
dyeing or finishing mq-terials, loading or adulterating materials, full, 
clear, and nondeceptive disclosure of the presence of such excess dyeing 
or finishing materials, or loading or adulterating materials, and of the 
maximum percentage or proportion in which such materials are present 
shall be made in tags, labels, or brands attached to the product, in the 
invoices and in whatever advertising or trade promotional descriptions 
or representations may be used in respect to the product, however 
disseminated or published. 



58 CONCENTRATION OF ECONOMIC POWER 

(e) It is an unfair trade practice to fail or refuse to make such 
disclosure provided for in this rule, such failure or refusal having the 
capacity and tendency or effect of misleading or deceiving the pur- 
chasing or consuming public; and it is an unfair trade practice to omit 
or fail to take such other steps as may be necessary to avoid the sale 
or distribution of such products in the channels of trade or to the 
purchasing or consuming public under false, misleading, of deceptive 
representations or conditions. 

Rule 6. Terms "Silk," "Wool," "Linen," "Flax," "Cotton," etc. 

It is an unfair trade practice to use, or cause to be used, as descrip- 
tive of any textile merchandise, the word "silk" or word, term, or 
representation of similar import, either alone or in conjunction with 
the words "wool,", "linen," "flax," "cotton," "rayon," or other term 
or representation, such as, for example, "silk rayon," "rayon silk," 
"silk linen,'' "linen silk," etc., so as to import or imply that the 
product is silk or contains silk or has the properties of silk, when such 
is not the fact. However, nothing in this rule shall prohibit the use 
of the w^ords "silk," "rayon," "wool,", "linen," "flax," or "cotton" 
in any truthful and nondeceptive designation or representation made 
in conformity with the requirements of rule 7 as to disclosure of mixed 
goods. 

Rule 7. Mixed Goods. 

In the case of any yarn, thread, strands, fabric, or garment or 
other product made therefrom, containing a mixture of any kind of 
silk and other fiber or fibers, full and nondeceptive disclosure of the 
fiber content of such merchandise should be made in accordance 
with the hereinafter stated provisions of this rule, to the end that the 
purchasing and consuming public may be informed as to the contents 
of such merchandise and that deceptive concealment, misunderstand- 
ing, misrepresentation, and unfair practices in the marketing of such 
merchandise in the channels of trade and to the public may be avoided 
and prevented. And it is an unfair trade practice to conceal the 
presence of any fiber constituent of such merchandise, or to fail or 
refuse to make said disclosure of fiber constituents, having the capac- 
ity, tejidency, or effect of misleading or deceiving the purchasing or 
consuming public. Such disclosure of the fiber content of said 
products, pursuant to this rule, shall be made by accurately desig- 
nating and naming each constituent fiber thereof in the order of its 
predominance by weight, beginning with the largest single constituent, 
such as, for example, "silk, rayon, and w^ool," for yarn, thread, strands, 
or fabric composed of silk, rayon, and w^ool and containing silk in larger 
proportion than either rayon or wool and containing rayon in greater 
proportion than wool; subject to the following: 

(I) Said disclosure shall be made in labels, brands, or tags attached 
to the merchandise, and in such advertising and sales promotional 
descriptions or representations of the product as may be used, however 
disseminated or published. Said disclosure shall also be made in 
such other documents, passing -from seller to purchaser, as may be 
necessary to fully inform purchasers of the fiber content of the mer- 
chandise and to avoid and prevent the sale or resale of the merchandise 
under deceptive or misleading conditions. 

(II) In setting forth a disclosure of the names of the fiber contained 
in any such mixed product of tw^o or more fibers, the respective name 



CONCENTRATION OF ECONOMIC POWER 59 

of any such fiber shall not be set forth in type or manner so dispropor- 
tionately enlarged, emphasized, or conspicuously placed as thereby 
to have the capacity, tendency, or effect of misleading or deceiving 
the purchasing or consuming public into the belief that a greater 
proportion of such overemphasized fiber is present than is in fact true; 
such as, for example, in printing or otherwise setting forth said illus- 
trative disclosure of "silk, rayon, and wool," the word "silk" or the 
the word "wool" shall not be disproportionately enlarged or otherwise 
emphasized in such manner as to have the capacity, tendency, or effect 
of misleading or deceiving the purchasing or consuming public in 
respect to the proportion or effective character of the silk or the wool 
in such mixed product. 

(III) In case the product contains silk noil, weighted silk, special 
or excess finishing materials or loading or adulterating materials, the 
disclosure thereof shall be made in conformity with the applicable 
provisions of the other Group I rules, namely, rule 2 respecting silk 
noil, rule 4 respecting weighted silk, rule 5 respecting special or excess 
finishing materials, loading, or adultering materials. 

(IV) \Yliere the fiber or fibers comprising at least 95 percent of the 
mixed product are disclosed not only by name as required by the 
foregoing provisions of this rule, but also with the percentage of each 
in the order of predominance by weight as recommended in rule A, 
Group II, then the remaining 5 percent or less of the fiber content of 
such product may be designated and disclosed as "other fibers" or 
"miscellaneous fibers," provided such 5 percent proportion or less is 
not definitely known to be composed of one fiber or readily ascertain- 
able as consisting of but one fiber, but on the contrary is composed of 
fibers which may be of various kinds, the percentages or quantities of 
each of which are not definitely known or readily ascertainable; and 
provided further, that such fiber content designated or disclosed as 
"other fibers" or "miscellaneous fibers" is not otherwise misrepresented. 
Illustrative examples of the disclosure provided for under this rule 
are as follows: "50 percent silk, 46 percent rayon, 4 percent other 
fibers" or "55 percent silk, 40 percent wool, 5 percent miscellaneous 
fibers" for products composed of the respective stated percentages of 
silk, rayon, and wool and composed in the remainder of fibers the 
proportion or percentage of each of which is not definitely known or 
readily ascertainable, including such small additional amounts of silk 
or rayon as may be present due to unavoidable variations in manu- 
facturing processes. 

(V) In making disclosure of fiber content under these rules by 
choosing to specifically name any particular fiber in any such mixed 
product which is present in the i)roportion of 5 percent or less by 
weight of the entire content, the luime of the fiber shall be accompanied 
in immediate conjunction therewith by accurate and nondeceptive 
disclosure of the percentage or proportion in which said specifically 
named fiber is present, such as, for example, "2 percent silk" or "2 
percent wool," to the end that the purchasing or consuming public 
rnay not be misled or deceived into the erroneous belief that sard 
fiber is present in a greater or lesser proportion than is in fact true. 
Nothing in this rule shall be construed as permitting the concealment, 
of the percentage in which any fiber is present above 5 percent where 
conditions or circumstances misleading or deceptive to the purchasing 
or consuming public may be produced by reason of such concealment. 



QQ CONCENTRATION OF ECONOMIC POWER 

(VI) In setting forth any item, name, statement, percentage, 
or other information required to be disclosed under this or any other 
rule hereof, the saine shall be set forth clearly and unequivocally and 
not in type or manner so disproportionate, or so minimized, obscured, 
or remotely or inconspicuously placed as to be misleading or deceptive 
to the purchasing or consuming public. 

Rule 8. Passing Off Merchandise as and for Silk. 

(a) It is an unfair trade practice to offer for sale, sell, distribute, 
describe, brand, label, advertise, or otherwise represent, directly or 
indirectly, any fiber, yam, thread, strands, fabric, or garment or other 
product made therefrom, as being sUk or as containing silk of any kind 
or as having any of the properties of silk when such is not the fact. 

(b) In the case of fiber, yam, thread, strands, fabric, or garment 
or other product, not containing silk of any kind but which has been 
manufactured or processed in such manner as to simulate silk or 
which purports to contain silk in whole or in part, the failure or refusal 
to make full and nondeceptive disclosure of the fiber content of such 
merchandise, in conformity with law and applicable rules and regula- 
tions thereunder, and so as to avoid and prevent deceptive conceal- 
ment, confusion, misunderstanding, and misrepresentation, is an 
unfair trade practice. 

Rule 9. Deteriorated or Damaged Merchandise. 

In any case of merchandise, composed wholly or in part of silk, 
the character, quality, or value of which has become impaired through 
age, deterioration, or damage, it is an unfair trade practice in the 
sale or distribution of such merchandise to conceal such impair- 
ment for the purpose or with the capacity and tendency or effect of 
misleading or deceiving the purchasing or consuming public in respect 
to the character, quality, value, or condition of such merchandise. 

Rule 10. Encouraging or Promoting Misleading Merchandising Methods. 
It is an unfair trade practice for any person, partnership, or corpora- 
tion to induce, aid, or abet an importer, converter, manufacturer, dis- 
tributor, dealer, or other person to cause any fiber, yarn, thread, 
strands, fabric, or garment or other product, containing or purporting 
to contain silk in whole or in part, to be advertised, represented, offered 
for sale, sold, or distributed through any means or devices or under 
any conditions which have the capacity and tendency or effect of 
causing, promoting, or aiding the marketing" of any-such merchandise 
in the channels of trade or to the consuming public under false, mis- 
leading, or deceptive circumstances or representations. 

Rule 11. Word ''Silk^' as Part of Trade or Corporate Name. 

(a) It is an unfair trade practice for any person, partnership, or 
corporation to use the word "silk," or word, term, or representation 
of similar import, as part of a trade or corporate name indicative of a 
silk business or silk products unless at least a substantial part of such 
businesses devoted to silk or silk products and, as to any merchandise 
of said business which is not composed wholly of silk, full and non- 
deceptive disclosure is made, in immediate conjunction with such trade 
or corporate name, of the fact that such merchandise is not silk but is 
composted of or contains other named fibers. 

(b) ,It is an unfair trade practice (1) to use the word ''silk," or word, 
term, or representation of similar import, in any trade-mark indicative 



CONCENTRATION OF ECONOMIC POWER gl 

of silk, when the merchandise which bears such mark, or which is 
advertised, offered for sale, sold, or distributed thereunder, is not in 
fact composed of silk; or (2) to use said trade-mark in any other 
manner, or under any other condition, which is misleading ordeceptive. 

Rule 12. Misrepresentations as to Being a Manufacturer, Producer, or 
Importer. 

(a) It is an unfair trade practice for any person, partnership, or 
corporation, by trade or corporate name or otherwise, to hold himself 
or itself out as being a manufacturer or producer of silk or silk products 
when such is not true in fact. 

(6) It is an unfair trade practice for any person, partnership, or 
corporation in the conduct of business to represent himself or itself, 
directly or indirectly, as having or operating a silk business in whole 
or in part, or a silk department or branch, or as being an importer of 
silk, when such is not true in fact; or in any other manner to misrepre- 
sent the character, nature, or status of the business of such person, 
partnership, or corporation. 

Rule 13. Inducing or Abetting Violation of Rules. 

(a) It is an unfair trade practice for any importer, manufacturer, 
producer, or organization to aid, abet, induce, or coerce a dealer, 
distributor, or other vendor to omit or refuse to make the disclosure 
as to content of merchandise required by the foregoing Group I rules, 
or to otherwise engage in any of the unfair trade practices specified 
in such rules. 

(6) It is an unfair trade practice for any dealer or other vendor or 
organization to induce, aid, abet, or coerce an importer, manufac- 
turer, producer, or other seller to omit or refuse to comply with the 
requirements of the foregoing Group I rules, or to otherwise engage in 
any unfair trade practice specified in such rules. 

Group II 

Compliance with the trade practice provisions embraced in these 
Group II rules is considered to be conducive to sound business methods 
and is to be encouraged and promoted individually or through volun- 
tary cooperation exercised in accordance with existing law. Non- 
observance of such rules does not, per se, constitute violation of law. 
Where, however, the practice of not complying with any such Group 
II rules is followed in such manner as to result in unfair methods of 
competition contrary to law, corrective proceedings may be instituted 
by the Commission as in the case of a violation of Group I rules. 

Rule A. Disclosure of Proportions of Constituent Fibers in Mixed 
Goods. 
The practice of making full and accurate disclosure of the propor- 
tions or percentages of the constituent fibers in mixed goods is ap- 
proved as a proper practice to the end that salespersons, dealers, and 
other marketers of such products may have accurate information of 
the fiber content thereof and may in turn correctly inform the pur- 
chasing and consuming pubhc, thereby avoiding confusion, misunder- 
standing, or misrepresentation as to the nature or content of such 
products. Any action taken in following this rule should be consonant 
with the requirements of the foregoing Group I rules. In the case 



Q2 CONCENTRATION OF ECONOMIC POWER 

where all fibers present are listed and disclosed by name, together 
with the percentage in which each is present, a tolerance of not to 
exceed 3 percent variation from the stated percentages may be 
allowed to the extent that such variation is due to unavoidable varia- 
tions in manufacturing processes and not to lack of reasonable effort 
to state such percentages accurately. 

Rule B. Terms Descriptive of Silk Fabrics or Relating to Weaves or 
Textures. 
Subject to, and in conformity with, the requirements of the fore- 
going Group I rules, the practice of truthfully qualifying by the word 
"silk" all words, terms, phrases, or representations which mean silk 
or are associated in the minds of the purchasing or consuming public 
with fabrics composed of silk is recommended as a desirable practice; 
for example, "silk chiffon," "silk crepe," "silk satin," "silk taffeta," 
etc. 

Rule C. Ivformation as to Treatment and Care oj Product. 

The practice, by producers, manufacturers, and distributors, of 
furnishing and disseminating, through tags, labels, advertisements, 
or other publicity, accurate information as to the proper treatment, 
care, and cleaning of the products covered by these rules is approved 
and recommended as a desirable practice to follow in the interest of 
enabling consumers to obtain and enjoy full benefit of the desirable 
qualities and services of such products. 



Promulgated and issued by the Federal Trade Commission as of 
November 4, 1938. 

Otis B. Johnson, Secretary. 



INDEX 

Page 

Administration: Economy of 15, 18, 23-25 

Adoption of rules. {See Group I and Group II rules.) 

Advantages in economy 15, 18, 23-25 

Advantages of Trade Practice Conferences. (See Trade Practice Con- 
ferences.) 

Applications for Trade Practice Conferences 27-28 

Approval of rules, requirements for 3-4 

Baby Chick Industry: 

Comments of member of 20 

Trade practice rules promulgated for 29-38 

Treatment of problems by rules 12 

Brush Industry, Paint and Varnish, treatment of problems by rules 13-14 

Certainty: Promotion of 15-16 

Chick Industry. {See Baby chick industry.) 

Comments on Trade Practice Conferences and rules 8, 10, 11, 17, 18, 19-25 

Competitive practices covered 8-10 

Conclusion 25 

Conferences. {See Trade Practice Conferences.) 

Consumer interests guarded 2, 17-18, 22 

Cooperation : 

By trade associations 5 

Inherent element of procedure 1, 17-23 

Description and nature of rules. {See Group I and Group II rules.) 

Economy in administration 15, 18, 23-25 

Enforceability. {See also Group I rules): Promoted by conference pro- 
cedure 4 

Examples of rules. {See Group I and Group II rules.) 

Federal Trade Commission, character of (its powers and facilities) 18 

Governmental sanction of business practices .. 15-16 

Group I Rules: 
Adoption of: 

Illustrative situations improved in specified industries 10-14 

Requirements for 3-4 

Cooperation by trade as.sociations 5 

Description and nature of 4-5 

Examples of 30-37,40-45,47-51,54-61 

Purpose of 1-2, 5-6 

Typical provisions of - 8-9 

Group II Rules: 
Adoption of: 

Illustrative situations improved in specified industries 10-14 

Voluntary on part of industry.. 5-6 

Description and nature of 5-6 

Examples of . 37-38,51-52, 61-62 

Purpose of 1-2, 5-0 

Typical provisions of 9-10 

Hearing on rules, public 3, 28 

Industries covered, scope of 6-8 

Industry problems, illustrative, improved in specified industries 10-14 

Industry rules: As promulgated for four specified industries 29-62 

Legal objectives of trade-practice conferences 1 

Legal requirements. {See Group I rules.) 

Macaroni, Noodles, and Related Prpducts Industry, treatment of problems 

by rules 12-13 

Mandatory requirements. {See Group I rules.) 

Methods of competition covered {see also Group I and Group II rules) 8-10 

63 



54 INDEX 

Minimum standards. (See Standards of products.) 

Mirror Industry: Page 

Comments on rules for 20 

Treatment of problems by rules 1 1-12 

Optional provisions. {See Group II rules.) 

Origin of trade-practice conferences. 1-2 

Paint and Varnish Brush Industry, treatment of problems by rules 13^14 

Practices, examples of, covered by rules (see also Group I and Group II 

rules) - 8-10,29-62 

Preserve, Macaroni, and Tomato Paste Industries: 

Comments on rules for : 21-22 

Treatment of problems by rules 12-13 

Private Home Study Schools: 

Comments on rules for 22 

Treatment of problems by rujes 13 

Procedure in Trade Practice Conferences 2-3, 27-28 

Products: Minimum standards of 16 

Public acceptance 16 

Public interest (see also Consumer interests) : Primary concern 2 

Public notice of proceedings 3, 28 

Purpose of procedure 1-2, 5-6 

Putty Industry, treatment of problems by rules 14 

Radio Receiving Set Industry: 

Trade practice rules promulgated for 39-45 

Treatment of problems by rules 14 

Requirements for approval of rules 3-4 

Results of trade-practice conferences 19-25, 29-62 

Rubber Tire Industry: 

Comments on rules for 21 

Trade-practice rules promulgated for . 47-52 

Treatment of problems by rules 11 

Rules : 

As promulgated for several specified industries 29-62 

Enforceability of (see also Group I) 4-5, 28 

Flexibility of, to changing industry conditions 16-17 

Group I. (*See Group I rules.) 
Group II. (-See Group II rules.) 

Practices, examples of, covered by 8-10, 29-62 

Procedural - 2-3,27-28 

Requirements for approval of trade practice 3-4 

Schools. {See Private Home Study Schools.) 

Self-regulation, encouragement and advantages of 17, 23 

Silk Industry: 

Comments on rules for 19, 23 

Trade-practice rules promulgated for 53-62 

Simplicity and economy of dealing with unlawful practices 15, 18, 23-25 

Small business: Aid to 15-16 

Standards of products: Setting of minimum 16 

Textile Industry (see also Silk), treatment of problems by rules 10-11 

Tire Industry: {See Rubber Tire Industry.) 

Tomato Paste Industry, treatment of problems by rules 12-13 

Trade Practice Conferences: 
Advantages of: 

Establishing minimum standards 16 

Flexibility of rules to changing industry conditions 16-17 

Governmental sanction of business practices 15-16 

Simplicity and economy of dealing with unlawful practices. 15, 18, 23-25 

Voluntary corrective action 14-15, 17 

Applications for 27-28 

Development and origination of 1-2 

Legal objectives 1 

Procedure in 2-3, 27-28 

Public interest a requisite '- — 2 

Purpose of 1 

Results of . 19-25,29-62 



INDEX 65 

Trade practices. (See Practices, examples of.) Page 

Typical provisions of rules 8-10 

Unfair competitive methods: 

Examples of, covered by rules , 8-10 

Illustrative situations improved in specified industries 10-14 

Purpose of procedure to eliminate 1-4, 27 

Voluntary cooperation en masse 14-15 

Voluntary corrections {see also Group II rules) 14-15, 17 

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