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Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-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 of goods and services .."

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INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



HEARINGS 

BEFORE THE 

TEMPOEAEY NATIONAL ECONOMIC COMMITTEE 
COMKESS OF THE UNITED STATES 

SEVENTY-SIXTH CONGRESS 

FIRST SESSION 
PURSUANT TO 

Public Resolution No. 113 
(Seventy-fifth Congress) 

AUTHORIZING AND DIRECTING A SELECT COMMITTEE TO 
MAKE A FULL AND COMPLETE STUDY AND INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION OF 
GOODS AND SERVICES 



PART 5-A 



FEDERAL TRADE COMMISSION REPORT 

ON MONOPOLISTIC PRACTICES 

IN INDUSTRIES 



MARCH 2, 1939 



Printed for the use of the Temporary National Economic Committee 




UNITED STATES 

GOVERNMENT PRINTING OFFICE 

WASHINGTON : 1939 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

(Created pursuant to Public Res. 113, 75th Cong.) 

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

HATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM H. KING, Senator from Utah 

WILLIAM E. BORAH. Senator from Idaho 

B. CARROLL REECE, Representative from Tennessee 

CLYDE WILLIAMS, Representative from Missouri 

THURMAN W. ARNOLD, Assistant Attorney General 

•WENDELL BEROE, Special Assistant to the Attorney General 

Representing the Department of Justice 

WILLIAM O. DOUGLAS, Chairman 

•JEROME N. FRANK, Commissioner, Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

•EWIN L. DAVIS, Commissioner. Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Lahor 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 

•CHRISTIAN JOY PEOPLES, Director of Procurement 

Representing the Department of the Treasury 

RICHARD C. PATTERSON, Jr., Assistant Secretary 

Representing the Department of Commerce 

LEON HENDERSON, Executive Secretary 

•Alternates. 



CONTENTS 

Page 
Part I. R6sum6 of formal action in restraint of trade cases, except 
sections 7 and 8 of the Clayton Act and the Robinson-Patman 

Act, July 1, 1930, to date 2305 

Pending complaints 2358 

P.irt II-A. Discussion of court decisions and summary of formal action in 

cases under sections 7 and 8 of the Clayton Act 2361 

Part II-B. Informal investigations under section 7 of the Clayton Act.. . 2373 
Fart III. Available economic material: 

Introd uctory . 2387 

Agricultural implement and machinery industry 2387 

Agricultural income inquiry., z L 2390 

Chain stores I 2394 

Competition and profits in bread and flour 2398 

Cooperative marketing T 2399 

House furnishings industries: 

Household furniture 2400 

Household stoves 2401 

Kitchen furnishings and domestic appliances 2402 

Milk and milk products 2403 

Open-price trade associations 2404 

Packer consent decree 2405 

Petrioleum industry — Prices, profits, and competition 2405 

Prem urn prices on anthracite 2407 

Price bases inquiry: 

Portland cement 2407 

Range boilers 2408 

Utility corporations: 

Propaganda 24 10 

Holding and operating companies of electric and 

gas utilities... 2412 

Financial and accounting practices 2413 

Natural-gas-producing, pipe-line, and utility in- 
dustries '. 2415 

Federal incorporation or licensing of corporations 2417 

index: 

Part I _ - I 

Part II - Hi 

Part II-B ----- _.- iv 

in 



EXHIBITS 



PART I 

F. T. C. Ex. No. 
Findings as to the Facts, Conclusions, Orders to Cease and Desist, 
Court Decisions, and Material Relative Thereto, etc. (except 
cases arising under sees. 7 and 8 of the Clayton Act, and the 

Robinson-Patman Act) — _ 1-81-1 

Pending Complaints _ 82-124-G 

PART II-A 

Complaints, Orders, Decrees, etc. (under sees. 7 and 8 of the Clay- 
ton Act).. _ _ 125-168 

PART II-B 

Photostated Material (from Informal Investigational Files, under 

see. 7 of the Clayton Act) 169-192 

PART III 

Economic Material 

reports 

F. T. C. Ex. No. 

Agricultural Implement and Machinery Industry 193 

Agricultural Income Investigation: 

Principal Farm Products 194-A 

Fruits, Vegetables, and Grapes 194-B 

Supplementary Report — --.. 194-C 

Chain Stores 195, A to E 

inclusive. 

Competition and Profits in Bread and Flour 196 

Cooperative Marketing 197 

House Furnishings Industry: 

Household Furniture 198-A 

Household Stoves. 198-B 

Kitchen Furnishings and Domestic Appliances 198-C 

Milk and Milk Products: 

Connecticut and Philadelphia Milk Sheds 199-A, 199-B 

Chicago Sales Area T 199-C 

Boston, Baltimore, Cincinnati, and St. Louis Milk Sheds 199-D 

Minneapblis-St. Paul Area 199-E 

New York Milk Sales Area _■ 199-F 

Summary Report on Conditions with Respect to the Sale and 

Distribution of Milk and Dairy Products 199-G 

Open-Price Trade Associations 200 

Packer Consent Decree 201 

Petroleum Industry — Prices, Profits, and Competition 202 

Premium Prices of Anthracite 203 

Price Bases Inquiry: 

Portland Cement 204-A 

Range Boilers 204-B 

Utility Corporations: 

Propaganda 205-A 

Publicity and Propaganda Activities . 205-B 

Holding and Operating Companies of Electric and Gas Utili- 
ties. ...: 205-C;205-D 

Natural-Gas-Producing, Pipe-Line, and Utility Industries 205-E 

Federal Incorporation or Licensing of Corporations 205-F 

« The exhibits were admitted to the record during hearings held March 1, 1939, marked "Exhibit No. 
305" and are on file with the Committee. 



INVESTIGATION OF CONCENTKATION OF ECONOMIC POWER 



THURSDAY, MARCH 2, 1939 

United States Senate, 
Temporary National Economic Committee, 

Washington, D. C. 

EXHIBIT NO. 308 » 

Federal Trade Commission, 

Washington. 

REPORT OF FEDERAL TRADE COMMISSION TO THE TEMPORARY 
NATIONAL ECONOMIC COMMITTEE RE MONOPOLISTIC PRACTICES 
IN INDUSTRIES 

PART I 

Resum6 of data concerning formal action taken by the Federal Trade Commis- 
sion in cases involving unlawful monopolistic practices and restraints of trade 
(except cases arising under sees. 7 and 8 of the Clayton Act, and the Robinson- 
Patman Act) covering the period July 1, 1930, to date. 

Introductory 

During the month of July 1938 there was submitted to the Temporary National 
Economic Committee for its consideration a compiled list of data relating to 
matters upon which the Commission had' taken formal action in the view that 
such matters involved unlawful monopolistic practices and restraints of trade in 
interstate commerce, which data were available in the records of the Commission. 

It is the purpose in this part I, to present to the Committee a brief resume of the 
cases therein referred to, consisting of a brief statement of fact pertaining to each 
case, the commodity involved, the nature and extent of the monopolistic practices 
used and the effect thereof as found by the Commission upon the evidentiary 
facts in the record. A descriptive generalization of these acts and practices is 
that they are all calculated and tend to interfere with the natural play of normal 
competitive forces, with a resultant increased concentration of private economic 
power in the hands of private and limited groups, and in the imposition of un- 
natural limitations and restrictions on trade with consequent injury to the public. 

Documentary evidence submitted with this report is identified herein by exhibit 
numbers such as "F. T. C. Ex. No. 1." The cases are arranged chronologically 
and indexed as to companies and commodities. The Federal Trade Commission 
Act is indicated by the letters FTCA, the Clayton Act, by the letters CA, and the 
numeral following such abbreviation indicates the section of the act referred to. 
Where the findings and orders of the Commission have been published in volume 
form, the reference is made to the Federal Trade Commission Reports as "14 
F. T. C. 261." 



November 17, 1930 Food — Canned Syrups and Molasses 

(CA-3) Penick & Ford, Ltd., and Penick & Ford Sales Com- 

(FTCA-5) pany, Inc., Respondents. Docket. No. 1580 

statement op facts 

Penick & Ford, Ltd., a Delaware corporation, controlled the stock of Penick <fe 
Ford Sales Company, Inc., and certain of the officers and directors of the two cor- 
porations were the same. The former engaged in the business of packing various 
1 Entered in the record March ?, 1039. Pec Hearings, Part V. p. 1769. 

2305 



2306 CONCENTRATION OF ECONOMIC POWER 

canned syrups, in plants located in Alabama, Louisiana, Iowa, and Vermont, and 
selling its entire output to the Sales Company for resale to wholesale and retail 
grocers. Between 1924 and 1927 the Sales Company was the largest vendor of 
canned cane syrups in Mississippi, Louisiana, Arkansas, and Texas, and the only 
vendor in the Southern States selling a complete line of canned cane, corn, and 
blended syrups and molasses. 

MONOPOLISTIC PRACTICES 

The Sales Company pursued the policy and practice of entering into agreements 
with its wholesale grocer customers whereby such customers would deal in its 
canned syrups and molasses to the exclusion of the merchandise of its competitors, 
in return for sales assistance and cooperation to be furnished by the Sales Company. 
This sales assistance was refused or discontinued in the event that the wholesale 
grocer customer sold any competitive products. In furtherance of this sales 
policy, which was a violation of section 3 of the Clayton Act, and of section 5 of 
the Federal Trade Commission Act, the respondent Sales Company, in one in- 
stance, purchased from a wholesale grocer 2,500 cases of a competitive syrup which 
it repacked under its own labels and resold at less than its cost to respondent. 



By the aforesaid practice, the public was deprived of a substantial proportion 
of the competition previously existing between the Sales Company and its com- 
petitors in numerous Southern markets by virtue of the closing of outlets for this 
class of merchandise to competitors. This had a direct tendency toward monopoly 
in canned syrups and molasses and the Commission ordered cessation of such 
practice. 

A copy of the Commission's findings as to the facts and conclusion, and its 
order to cease and desist, is herewith submitted, marked "F. T. C. Ex. No. 1." 
The order was directed against the Sales Company only, because the parent 
company was not engaged in interstate commerce and was not the Sales Com- 
pany's principal (14 F. T. C. 261). 



March 24. 1931 Clothing — Mercerized Cotton Yarn 

(FTCA-5) Mercerizers Association of America, et al. Docket No. 1755 

statement of facts 

The Association was a voluntary, unincorporated association of nine competing 
companies, located in Massachusetts, Pennsylvania, North Carolina, and Ten- 
nessee and engaged in the manufacture, processing and mercerizing of plied 
cotton yarns and in the sale and distribution of the same to manufacturers of 
hosiery, underwear, and other garments. They had an aggregate capacity of 
1,200,000 pounds of yarn per year, and occupied a dominant position in this 
industry. 

MONOPOLISTIC PRACTICES 

By understandings, agreements, and combinations, through the Association, 
respondents fixed and maintained uniform prices^ terms, and discounts, and 
uniform extra charges and thereby suppressed competition in the sale of the 
mercerized yarns at wholesale to garment manufacturers located throughout 
the United States. 

EFFECT 

Between August 1, 1926, and August 1, 1929, prices on said product advanced 
without respect to the raw cotton yarn market or the cost of the raw yarns to 
the respondents, competition in the sale of the product was substantially lessened, 
restricted, and suppressed, and the Commission ordered the respondents to cease 
and desist. 

A copy of the Commission's findings as to the facts and conclusion, together 
with its order to cease and desist, is submitted, marked "F. T. C. Ex. No. 2" 
(15 F. T. C. 1). 



CONCENTRATION OF ECONOMIC POWER 2307 

September 21, 1931 Draft Gears 

(FTCA-5) Waugh Equipment Company, and Three Individual 

Respondents. Docket No. 1779 

statement of facts 

Waugh Equipment Company, a Maine corporation, manufactured draft gears, 
which are devices for use on railway cars. Selling its products to railroads in 
competition with some eight principal competitors it sold less than 1 percent of 
the total draft gears sold for new freight equipment. 

The individual respondents were executive officials of Armour and Company, 
who, together with other officials and employees thereof, owned or controlled a 
majority of the common stock of the Waugh Equipment Company. In 1924 the 
promoters of the respondent corporation gave 1,666 shares of that company's 
stock to these individual respondents as consideration for them to use their influ- 
ence with railroad officials in advancing the sale of the corporate respondent's 
draft gear and, pursuant to such agreement, respondents succeeded in making 
substantial sales to some fifteen railroads during the period from 1924 to 1929. 

Armour and Company, one of the largest meat packing concerns in the world, 
in connection with its shipping of meat products from its various plants to more 
than 500 distributing depots in the principal towns and cities of the United States, 
then utilized for that purpose more than 7,000 refrigerator and other cars owned 
by it or its subsidiaries, and in the regular course of its business, negotiated with 
the various railroad companies with respect to the transportation of approximately 
275,000 carloads annually. Mueh of said traffic was competitive and eagerly and 
insistently sought for by the railroad companies. 

MONOPOLISTIC PRACTICES 

Actively exenising their influence as executive officials of the Armour and 
Company, the individual respondents, in cooperation with the corporate re- 
spondent, by promises of freight traffic to be shipped by Armour and Company, 
and by threats of withdrawal of traffic, coercively and oppressively used the 
large volume of the Armour traffic to secure the sale of the respondent company's 
draft gears to the various railroads in preference to draft gears sold by com- 
panies who did not have any appreciable traffic to offer as an inducement. 



Despite the fact that respondent corporation, between August 1924 and August 
1929, was manufacturing and selling practically an unknown gear in competition 
with well-established competitors, the proportion of its sales to the total sales 
of this industry rose from 1 percent in 1924 to 25 percent in 1929, and 35 percent 
in 1930. 

The factors ordinarily conducive to sales, namely, quality, price, and sales- 
manship, were replaced and overcome by the coercive and oppressive factors used 
by these respondents in cooperation with one another and were to the injury of 
the public and respondent's competitors; unduly tended to suppress competition 
between respondent corporation and competing manufacturers of draft gears and 
to create a monopoly in respondent corporation in the sale and distribution of 
draft gears and other railroad equipment. Customers were thereby prevented 
from exercising free will and judgment as to which competitive device was the 
most efficient in serving their needs at the lowest net cost over a period of time. 
There was thus injected into this competitive filed an unfair, abnormal, and un- 
economic element, tending to give to the concern controlling the largest volume 
of freight traffic an unfair advantage which would more than offset the higher 
efficiency in the production and sales methods of competing concerns controlling 
no such traffic. The Commission ordered the respondents to cease and desist 
from such practices, and a copy of the Commission's findings as to the facts and 
conclusion, together with such order, is herewith submitted, marked "F. T. C. 
Ex. No. 3" (15 F. T. C. 232). 



2308 CONCENTRATION OF ECONOMIC POWER 

March 4, 1932 Draft Gears and Other Railway Equipment 

FTCA-5) Mechanical Manufacturing Company, and Two 

Individual Respondents. Docket No. 1727 

STATEMENT of facts 

Mechanical Manufacturing Company, an Illinois corporation, manufactured 
meat packing h<£use machinery and equipment and, from 1912 to 1932, made, 
sold, and delivered pumping posts, draft gears, and coupler-centering devices to 
the principal railways in the United States. 

The individual respondents were stockholders in Mechanical Manufacturing 
Company and also executives of the Transportation Department of Swift & Co., 
meat packers. Swift & Co. had headquarters in Chicago, 111., and plants in 
Illinois and various other states. It shipped its meat and other products in 
approximately 7,500 refrigerator icars to more than 500 principal cities and 
towns of the United States. 

The principal stockholders of Swift & Co. owned and controlled the stock of 
Mechanical Manufacturing Company. The directors of Swift & Co., together 
with three of its employees, constituted the Mechanical Manufacturing Com- 
pany's board of directors. 

monopolistic »ractices 

The respondents cooperated in using their official positions in Swift & Co. to 
induce and compel the officials of various railway companies to give undue prefer- 
ence to the draft gears and other railway equipment manufactured and sold by 
Mechanical Manufacturing Company, by threatening to withhold, and promises 
to increase, Swift & Co.'s traffic routings. 



The respondent corporation, cooperating with the individual respondents, had 
created and taken advantage of a competitive weapon, oppressive and coercive 
in nature, which prevented the customers to whom the respondent corporation 
and its competitors were trying to sell their products from exercising their free 
will and judgment in determining which competitive device was the most efficient 
and had thus injected an abnormal and unfair element in this competitive field, 
tending to give the concern controlling the largest volume of freight traffic an 
unfair advantage, and to operate as an unlawful restraint of trade in the draft- 
gear industry, and the Commission ordered the respondents to cease and desist 
from such practices. 

A copv of the Commission's findings as to the facts and conclusion, together 
with the order, is herewith submitted and marked "F. T. C. Ex. No. 4" (16 
F. T. C. 67). 



September 29, 1932 Machine Tools — Heavy Machinery 
(FTCA-5) Machine Tool Distributors, Chicago District, and 

Members. Docket No. 1882 

statement of facts 

This respondent was a voluntary, unincorporated association, composed of 22 
members engaged in the business of manufacturing and selling heavy machinery 
known as "machine tools," such as presses, lathes, planers, boring machines, etc., 
in a territory comprising all of Iowa and large parts of the States of Illinois, 
Indiana, Wisconsin, Michigan, and Nebraska. These members transacted 
approximately 85 percent of the total volume of sales of new tool machinery 
made in that territory. Many of the members accepted used machinery as part 
payment on the purchase price and, prior to the adoption of the monopolistic 
practices hereinafter described, the members competed with one another in 
bidding for such used machinery. 

monopolistic practices 

In 1928 the association, with the purpose and effect of eliminating competitive 
bidding and limiting the amounts offered by them for the used machinery taken 
in as "trade-ins," maintained and enforced a method of cooperation controlling 
such allowances, known as "the Chicago appraisal plan." In substance, this 



CONCENTRATION OF ECONOMIC POWER 2309 

plan obligated the members to register their bids for used machinery with the 
association's central office and advise themselves of prior competitive offers 
before making their own firm cash offers. The plan also provided that the 
member making the initital or highest appraisal might be called upon to accept 
the used machinery at that price, irrespective of whether or not he secured the 
order. 

EFFECT 

This plan resulted in a tendency on the part of members to refrain from in- 
creasing appraisal prices on the old machines offered as "trade-ins" and to 
deprive their customers, principally machine shops and manufacturing establish- 
ments, of the benefits of bidding on their old machines and compelling them 
to accept a smaller allowance for their used machinery. This resulted in the 
customers paying higher prices for such new machinery. The members of the 
association were the only dealers in new machine tools in the above territory 
who did accept used machinery as part payment for new machines. Such prac- 
tice tended to suppress competition and restrain trade in interstate commerce 
in violation of the Federal Trade Commission Act, and the Commission ordered 
the cessation of such practices. 

A copy of the Commission's findings as to the facts and conclusion, and order 
to cease and desist is submitted herewith as "F. T. C. Ex. No. 5" (17 F. T. C. 
48). 



January 23, 1935 Sea Food 

(FTCA-5) Washington Sea Food Dealers Association et al. 

Docket No. 2189 

STATEMENT of facts 

The respondent was an unincorporated association of some twenty brokers, 
commission merchants, wholesale and retail dealers engaged in the District of 
Columbia in the business of selling fish, oysters, clams, shrimp, and other sea- 
food products, who, for their mutual interest, associated together for the purpose 
of accomplishing the monopolistic practices hereinafter described. 

MONOPOLISTIC PRACTICES 

For the purpose and with the effect of eliminating price competition among- 
themselves, and between themselves and others of their competitors, they entered 
into and maintained agreements, combinations, and conspiracies to fix and main- 
tain prices in sea food. As a, means of accomplishing that end, they agreed to 
furnish and did furnish schedules of minimum prices to each member and agreed 
with each other not to sell at any lower price. 



Together, these respondents constituted a large and influential factor both in 
the business of selling and in the business of purchasing sea foods for resale in 
the District of Columbia and, in that way, lessened, hindered, and prevented 
price competition between themselves and their other competitors, in violation 
of section 5 of the Federal Trade Commission Act. The Commission thereupon 
issued its order to cease and desist. 

A copy of the findings as to the facts and conclusion, and order is herewith 
submitted and marked "F. T. C. Ex. No. 6" (20 F. T. C. 106). 



June 20, 1935 Magazines 

(FTCA-5) Butterick Publishing Company, et al. Docket No. 

2171 

STATEMENT of facts 

The Butterick Publishing Company, McFadden Publications, Frank A. Munsey 
Co., Street & Smith Publications, Inc., and the Pictorial Review Company pub- 
lished and sold periodicals throughout the United States and the District of 
Columbia. 



2310 CONCENTRATION OF ECONOMIC POWER 

Respondents International Circulation Company, Inc., S-M News Company, and 
Midwest Distributors, Inc., sold and distributed periodicals throughout the United 
States and in the District of Columbia in competition with each other; and with 
publishing sellers of periodicals; and with distributors and sellers of back-number 
magazines. The magazine publishers sold principally to distributors or whole- 
salers. It was the custom in this industry for the covers of unsold magazines 
to be returned to the publishers for credit to the wholesaler or retailer in the amount 
paid therefor. The remaining body of the magazine was sold as waste paper. 

Also, throughout the United States there were persons and companies engaged 
in the business of collecting back numbers of story magazines from waste paper 
and junk dealers and the Salvation Army and selling them to news stands, drug 
stores, and other retailers who handled current magazines, for resale as "back 
numbers" at from one-third to one-fourth of the original sale-price of the same 
magazine while current. Two distributors dealing only in back-number maga- 
zines (as distinguished from coverless magazines" or returns) in 1932 had an aggre- 
gate of 800 retail dealers, 90 percent of whom were also dealers in current maga- 
zines. 

MONOPOLISTIC PRACTICES 

Respondents got together and formed a special committee on magazine dis- 
tribution, which wrote the wholesalers handling their magazines, demanding that 
they inform their retail-dealer customers thafrthe handling of back-number maga- 
zines would no longer be permitted, upon penalty of being cut off from further 
supplies of current issues. The wholesalers complied, and about half of their 
retail-dealer customers discontinued handling back-number magazines. Also, by 
letters and other pressure, the special committee sought to interfere with the 
sources of supply of the distributors of back-number magazines. 



Competition between respondents and the distributors of back-number maga- 
zines was substantially lessened and the public was deprived of the benefits nor- 
mally flowing from such competition, in violation of section 5 of the Federal Trade 
Commission Act. The Commission ordered respondents to cease and desist from 
such practice. 

A copy of the findings of fact, conclusion, and order to cease and desist is sub- 
mitted herewith, marked "F. T. C. Ex. No. 7" (20 F. T. C. 429). 

Respondents filed a petition for review in the United States Circuit Court of 
Appeals for the Second Circuit, which court, on July 13, 1936 (85 Fed. 2d. 522), 
affirmed the order of the Commission. In so holding, the court, speaking through 
Judge Chase expressed, among other, the following conclusions: 

"Though any one publisher acting alone may sell or not sell his magazines as he 
may choose, Federal Trade Commission v. Raymond Bros. — Clark Co. (263 U. S. 
565), two or more may not combine in such refusal if the result is to harm the 
public or any person against whom the concerted action is taken. Binderup v. 
Pathe Exchange (263 U. S. 291). 

"While the Federal Trade Commission is not an agency for the enforcement of- 
the Sherman Anti-Trust Act, that act does require consideration in deciding what, 
in view of the public policy so declared, are unfair methods of competition which 
the Commission is authorized to suppress (Federal Trade Commission v. Beech- 
Nut Packing Co. (257 U. S. 441)). And an unfair method of competition which is 
against public policy may be stopped by the Commission for that alone (Federal 
Trade Commission v. Klesner (280 U. S. 19))." 



December 13, 1935 Linen Coats, Towels, and Aprons 

(FTCA-5) Linen Supply Association of the District or Columbia, 

et al. Docket No. 2256 

STATEMENT op facts 

This voluntary unincorporated Association consisted of fourteen individuals 
and companies engaged in furnishing *to businesses in the District of Columbia 
and nearby Virginia and Maryland linen coats, towels, aprons, frocks, trousers, 
table and other linens. The Association represented 87H percent of all the linen 
supply firms engaged in this industry in the District of Columbia. 



CONCENTRATION OP ECONOMIC POWER 



MONOPOLISTIC PRACTICES 



2311 



The members combined and cooperated through the Association with the pur- 
pose and effect of adopting certain rules and regulations, assessing penalties for 
their violation, fixing uniform prices, exchanging information of contemplated 
changes in prices, discounts, terms and conditions of sale, allocating customers 
among the members, obligating themselves not to compete for the business of 
each other's customers and imposing fines on those members who cut prices. 



Competition in this industry was suppressed, hindered, and obstructed and the 
free flow of said products in the channels of commerce was unlawfully restrained. 
The Commission ordered respondents to cease and desist therefrom. 

Copy of said findings as to the facts and conclusion, and order is submitted 
herewith, marked "F. T. C. Ex. No. 8" (21 F. T. C. 666). 



March 5, 1936 , Rubber Tires 

(CA-2) Goodyear Tire and Rubber Company. Docket No. 

2116 

STATEMENT OF FACTS 

Respondent, an Ohio corporation, with principal place of business at Akron, 
Ohio, was the largest manufacturer and distributor of pneumatic rubber tires in 
the United States, distributing most of its product which was sold for resale 
through approximately 25,000 retail dealers. Through subsidiary corporations 
it operated tire-manufacturing plants at Los Angeles, Calif., and in Gadsden, 
.Ala., Cuyahoga Falls, Ohio, and other plants in Canada, Australia, Argentina, 
and England. Auxiliary to its business and also through subsidiary corporations, 
it owned and operated cotton plantations in Arizona; rubber plantations in 
Sumatra and East Indies; textile mills in Decatur, Ala.; New Bedford, Mass.; 
in Canada; Georgia; and California. In 1926 respondent's crude rubber require- 
ments represented nearly one-seventh of the world's total production and exceeded 
by nearly 50 percent that of any other manufacturer. 

Sears, Roebuck and Co. was a New York corporation with its principal office 
in Chicago, 111., engaged in the distribution, among other general merchandise 
of pneumatic rubber tires and tubes by mail order and through chain stores to the 
consuming public, and was reputed to be the largest mail-order house and chain- 
store operator in the United States. 

In March 1926 respondent and Sears, Roebuck and Co. entered into a contract 
whereby respondent agreed to manufacture and to sell and Sears to purchase on a 
basis of cost plus 6 to 6)4 percent Sears' requirements of rubber tires. This 
contract, with minor modifications, was renewed May 17, 1928, and again October 
5, 1931, and under the- terms of the last renewal was to remain in force until 
December 31, 1942. 

When^the last contract was made, a secret agreement was entered into between 
the two by which respondent assigned to Sears' 18,000 shares of Goodyear common 
capital stock and $800,000 in cash to be used in the purchase of 32,000 more 
shares as a consideration for the signing of such contract without opening it to 
competition. 

Under these contracts the respondent, with minor exceptions, manufactured 
and sold to Sears the latter's requirements of rubber tires which it sold at retail. 

Pursuant to the terms of these contracts, respondent sold tires to Sears at prices 
substantially lower than it sold tires of comparable grade and quality to inde- 
pendent retail tire dealers. The average gross discrimination on four sizes for 
the entire period of time, from May 1926 to December 1931, was approximately 
40 percent. On other sizes the gross discrimination over the entire period varied 
from 32 to 42 percent. 

The net average sales-price discrimination remaining after deductions had been 
made from the dealer prices for discounts and allowances and transportation over 
the entire period varied from 29 to 40 percent on eight sizes of tires. The total 
aggregate net discrimination, after making such allowances, amounted to approxi- 
mately $41,000,000, or approximately 26 percent of the aggregate net sales price 
to independent dealers on a volume Of business comparable to the volume sold to 
Sears. 



2312 CONCENTRATION OF ECONOMIC POWER 

MONOPOLISTIC PRACTICES 

The Commission issued and served its complaint on September 13, 1933, and 
on March 5, 1936, after receiving testimony and other evidence from all of the 
representative tire manufacturers in the industry, from independent retail tire 
dealers representing the retail branch of the industry over a territory consisting 
of 24 States and the District of Columbia generally and 59 cities in particular, and 
from leading economists and others, found that such discrimination in prices 
constituted a violation of section 2 of the Clayton Act, and was not given to Sears 
on account of differences in quantity of the commodity sold nor to make only due 
allowance for differences in the cost of selling or transportation. It found that the 
net price discrimination, after making due allowance for selling and transportation 
costs, ranged from 1 1 to 22 percent on 8 popular sizes of tires. 

The Commission also found that such discriminatory prices were not made to 
Sears in good faith to meet competition; that no competitor of the financial 
responsibility necessary to meet Sears' requirements as to quantity and quality 
of tires had ever solicited its business by offering tires of Goodyear quality to 
Sears at prices so low. 

The respondent concealed the prices and terms at which it was selling its tires 
to Sears from its own sales organization and from the trade generally, and never 
offered to its own dealers like prices on tires of equal or comparable quality. 



None of Sears' competitors had the advantages of similar low prices and Sears 
was thereby enabled by discount discriminations to undersell at a substantial profit 
to itself all retail tire distributors, including retail dealers selling respondent's 
brands of tires and competing dealers selling tires of other manufacturers. 
' Sears did persistently, systematically, and substantially undersell such dealers 
by 20 to 25 percent on tires of comparable grade and quality, except during 
the year 1933, when the Sears prices were only about 10 percent lower. Sears 
volume of sales increased more rapidly than that of any other retail distributor 
from 1926 to 1930 and, in 1933, it was still the largest retail distributor of tires in 
the United States. Sears usually led in industry price declines during the period 
of the contracts and the competition thus brought into the retail tire market in 
the several States was a major factor in forcing out of business a large number of 
retail tire dealers by reducing their volume of sales or by curtailing profits, or both. 

This competition became destructive and Sears was enabled, through its dis- 
criminatory price advantages, to engross for itself abnormal profits while at the 
same time curtailing the profits of all its competitors. 

This competition was a major factor in curtailing the number of competitors 
who were independent tire dealers and a major factor in substituting for them mass 
distributors and other large-volume dealers. 

All this, in turn, drove out of business numerous small tire manufacturers and 
thus reduced the manufacture and sale of rubber tires to a smaller an.d smaller 
number of independent manufacturers and dealers. 

Respondent, as a result of the increased volume it obtained through the sale of 
tires to Sears and the reduction in the number of independent manufacturers 
and dealers, substantially increased its percentage of the total industry renewal 
sales and increased its dominant position in the tire industry. 

The Commission considered that a manufacturer, under the Clayton Act, is 
under a duty to comply with the law, and he may not make his bargains according 
to his own interest bv discriminating as he pleases, however honest and Justifiable 
such course might be from the standpoint of commercial principles. Large 
industrial companies, through price discrimination, can control competitive 
business conditions among their customers to the extent of enriching some and 
ruining others. The practice here involved of a large manufacturer giving dis- 
proportionately large discounts was held by the Commission to be unjustified, 
and that such a discrimination, when made merely on account of size, tended 
toward monopoly and the suppression of competition. In order to maintain 
the principle of equalitv to purchasers intended by section 2 of the Clayton Act, 
it was necessary that the difference in price be reasonably related to a difference 
in cost and not a covert means of favoritism. If it were left to a manufacturer 
to make the price solely on account of quantity, he could easily make discounts 
by reason of quantity so high as to be practically open to the largest dealers 
only, and in that manner might hand over the whole trade in his line of commerce 
to a few or a single dealer 



CONCENTRATION OF ECONOMIC POWER 2313 

The evidence found by the Commission showed that the normal result of the 
discrimination as it affected the retail tire dealer was that it enabled Sears, at a 
35 to 40 percent profit, to sell to the consumer a Goodyear-manufactured tire 
for a price which was the same as or less than the cost to the independent dealer 
for a Goodyear-made tire of comparable grade and quality. 

The Commission's order forbade any further discrimination such as that above* 
described, and required Good ear to report the manner in which its order wafe 
being complied with. This Goodyear failed and refused to do and on April 5, 
1936, filed in the United States Circuit Court of Appeals for the Sixth Circuit, 
its petition to review the order. 

On June 19, 1936, Congress passed the Robinson-Patman Act, amending 
section 2 in certain respects. On October 5, 1937, during oral argument before 
that court, Goodvear stated for the first time that the aforesaid contract had 
been canceled and the price discrimination stopped. 

While contending before that court that the case was not moot, counsel for 
Goodyear, having in a footnote to their brief indicated that such contention 
was technical only and, during the course of the argument having further invited 
the court's attention to that possibility, the court, on November 5, 1937, without 
passing upon the merits of the controversy, held that the case had become moot 
and set aside the Commission's order. 

Thereupon, the Commission applied for and obtained a writ of certiorari from 
the Supreme Court of the United States and the matter was argued there. On 
May 16, 1938, by a per curiam decision, the Supreme Court reversed the circuit 
court's decision and remanded the case for a determination of the merits. . 

The case was reargued upon the merits by counsel for the Commission and 
counsel for respondent on December 9, 1938, and at the time of writing, the 
circuit court still has the case under advisement. 

There are submitted herewith the following: Four volumes of transcript of 
record and exhibits filed with the Circuit Court of Appeals, marked "F. T. C. 
Exs. Nos. 9-a, 9-b, 9-c, and 9-d," rerpectively; a copy of the decision of the 
United States Circuit Court of Appeals for the Sixth Circuit, marked "F. T. C. 
Ex. No. 10;" and a copy of the decision of the Supreme Court of the United 
States, marked "F. T. C. Ex. No. 11." The findings as to the facts, conclusions, 
and order of the Commission will be found in volume I (F. T. C. Ex. No. 9-a) of 
the transcript of record (at pages 26-142), and a separate copv thereof is also 
submitted herewith, marked "F. T. C. Ex. No. 12." 



March 31, 1936 Zinc and Copper Plates 

(FTCA-5) Edes Manufacturing Company, et al. Docket No. 

2660 

STATEMENT OP FACTS 

Eleven companies, manufacturing more than 90 percent of the zinc- and copper- 
plate products in the United States, and variously incorporated under the laws 
of Massachusetts, New Jersey, New York, Illinois, California, Indiana, Pennsyl- 
vania, and Connecticut, formed a voluntary unincorporated trade association 
known as Photo Engravers Copper Zinc and Grinders Association, organized in 
the city of Pittsburgh. This association acted as a clearing house for the exchange 
of information among the various members as to reports of sales, prices, discounts, 
and terms and, from time to time the members met, discussed, agreed upon and 
established trade policies to be followed and prices to be charged in the interstate- 
sale and distribution of their products. 

MONOPOLISTIC PRACTICES 

Cooperating to fix and maintain uniform prices, terms, and discounts by meeting 
and exchanging price information through an association. 



The effect of the practice was to restrict and suppress competiton, particularly 
in the prices quoted and discounts allowed, thus enhancing prices of zinc and 
copper engravers' plates above the prices which would prevail under normal, 
natural, and open competition between the respondents and between them and 



2314 CONCENTRATION OF ECONOMIC POWER 

others, and also a tendency to create a monopoly in the corporate respondents in- 
the manufacture and sale of such products in interstate commerce. 

A copy of the Commission's findings as to the facts, conclusion, and order is 
submitted herewith, marked "F. T. C. Ex. No. 13." 



January 1, 1936 Confectionary 

(FTCA-5) New York State Wholesale Confectionery Associa- 

tions, Inc., et al. Docket No. 2613 

statement of facts 

About 1933 the New York State Wholesale Confectionery Associations, Inc., 
with headquarters in Syracuse, N. Y., eight local and regional member associations 
consisting of wholesale candy distributors and the Empire State Candy Club, 
Inc., an organization of candy brokers and agents with headquarters in Utica, 
N. Y., and the officers and members of all these associations, totaling more than 
700 respondents, combined and conspired with the purpose and effect of fixing 
uniform prices and obstructing commerce in the candy trade in New York and 
Pennsylvania and other connected territory. 

These associations and their members occupied an important position in the 
candy trade of the United States, particularly in the Eastern States, and their 
members did a substantial part of all the wholesale candy business in the States 
of New York and Pennsylvania. 

MONOPOLISTIC PRACTICES 

The regional and local associations organized the respondent New York State 
Wholesale Confectionery Association to assist them in carrying out agreements, 
combinations, and conspiracies among themselves to prevent competing dealers 
from obtaining candy and allied products directly from the manufacturers and 
to establish themselves as a elass of "recognized" wholesalers, distributors, and 
brokers. 

Several methods were used to accomplish these objectives, among which were 
the following: 

"Agreements among the association members to fix and maintain uniform prices 
and to induce manufacturers not to sell to dealers who sold or would resell at 
less than the prices fixed. 

"Exacting pledges and other promises of agreements from 'recognized' dealers, 
members, manufacturers, and producers to support the associations' programs. 

"Publishing so-called 'white lists' of 'recognized' dealer members and inducing 
manufacturers to cease dealing with dealers, brokers and distributors not listed 
therein. 

"Concerted action, boycott, and threats of boycott against manufacturers, 
dealers and others to require them to conform to the price program and to refrain 
from selling to nonmembers of the associations. 

"Holding of meetings to devise ways of influencing manufacturers, producers, 
brokers, dealers, and others engaged in the tobacco and confectionery trade to 
abide by the program." 

The Empire State Candy Club, among whose membership were brokers and 
factory salesmen, also was organized to assist and did assist the said local and 
regional associations in making the aforesaid program effective. 



Numerous outlets in New York and Pennsylvania, for the sale by candy manu- 
facturers located in other States of candies shipped into New York and Pennsyl- 
vania, were closed with a tendency to give the respondents and the dealers recog- 
nized by them a monopoly in the business of dealing in and distributing confec- 
tionery, candy, and allied products, depriving the public of advantages in price 
and service which they would receive under normal competitive conditions. It 
had the effect of discriminating against small business enterprises and others who 
did not desire to, but were compelled to, conform to the respondent's program, 
and spread into States other than New' York the same methods of boycotting and 
"white listing" as those employed by the respondent associations. All of which 
unreasonably lessened, eliminated, restrained, stifled, hampered, and suppressed 
competition in the confectionery industry in the State of New York, and unlaw- 
fully obstructed the natural flow of commerce in the channels of interstate trade. 



CONCENTRATION OP ECONOMIC POWER 2315 

Respondent associations, after service of the complaint upon them, filed answers 
admitting all of the material allegations of the Commission's complaint to be 
true. There are, therefore, submitted a copy of the Commission's complaint 
issued November 6, 1935, marked "F. T. C. Ex. No. 14"; the answer of the New 
York State Wholesale Confectionery Associations, Inc., marked "F. T. C. Ex. 
No. 15"; the answer of the Rochester Area Wholesale Confectioners Association, 
Inc., marked "F. T. C. Ex. No. 16"; the answer of the Capital District Wholesale 
Confectioners Association, Inc., marked "F. T. C. Ex. No. 17"; the answer of the 
Northern New York Wholesale Confectioners Association, Inc., marked "F. T. C. 
Ex. No. 18"- the answer of the Central New York Wholesale Confectionery 
Distributors, Inc., marked "F. T. C. Ex. No. 19"; the answer of the Hudson Valley 
Candy Distributors Association, marked "F. T. C. Ex. No. 20"; the answer of 
the Greater Buffalo Wholesale Confectioners Association, marked "F. T. C. Ex. 
-No. 21"; and the answer of the Empire State Candy Club, Inc., marked "F. T. C. 
Ex. No. 22"; the answer of Mohawk Valley Candv Distributors Association, 
marked "F. T. C. Ex. No. 22-A"; and the answer of Southern Tier Candy Dis- 
tributors Association, marked "F. T. C. Ex. No. 22-B"; and a copy of the Federal 
Trade Commission's findings as to the facts, conclusion, and order to cease and 
desist, entered June 1, 1936, marked "F. T. C. Ex. No. 23." 



June 24, 1936 Tin Plate 

(FTCA-5) American Sheet and Tin Plate Company et al. Docket 

No 2741 

STATEMENT OF FACTS 

The American Sheet and Tin Plate Company (merged in 1936 into Carnegie- 
Illinois Steel Corporation), Bethlehem Steel Company, Canton Tin Plate Corpora- 
tion, Columbia Steel Company, Trustees of Follansbee Brothers Company, 
Granite City Steel Company, Inland Steel Corporation, Jones and Laughlin Steel 
Corporation, McKeesport Tin Plate Company, Republic Steel Corporation, 
N. & G. Taylor Company, Washington Tin Plate Company, Weirton Steel Com- 
pany, Wheeling Steel Corporation, and the Youngstown Sheet and Tube Com- 
pany were severally engaged in the manufacture, among other products, of tin 
plate which they sold to tin-plate jobbers and manufacturers of tin cans and other 
metal containers located throughout the United States. The American and 
Continental Can Companies were the principal purchasers. 

Respondents produced this tin plate in several grades designated as "production 
plate" — tin plate manufactured to the customer's specifications; "stock plate" — 
seconds, surpluses, and "warming up" sizes accumulated due to difficulties in 
controlling production in the manufacture of production plate; and "waste- 
waste" — tin plate containing defects so great as to disqualify it for use as "seconds." 

Prior to 1935 respondents had sold a substantial portion of their accumulation 
of "stock plate" to tin-plate jobbers who resold it to small can manufacturers and 
packers unable to carry "production plate" in stock in various sizes and quantities 
required. 

MONOPOLISTIC PRACTICES 

Late in 1934 these respondents conferred and agreed to cease the production 
and sale of "stock plate" after January 1, 1935, and further agreed to require 
buyers of "production plate" to accept "seconds" up to 25 percent of their orders. 
This constituted a combination and conspiracy not to cut prices on "stock plate" 
to jobbers and manufacturers, thereby restricting and eliminating competition in 
the interstate sale and distribution of that kind of plate. 

The respondents, after January 1, 1935, cooperated to carry out the terms of 
such agreements. To that end they sold some of their accumulations of "stock 
plate" as "production plate" at prices higher than the prices theretofore received 
for "stock plate" and cut up some of their "stock plate" into such shapes as to 
make it unfit for use ;n the manufacture of tin cans or other metal containers so 
that it was classified by respondents as "wastewaste." 

One defense presented for the consideration of the Commission was that in 
1933 the respondents, operating under the National Recovery Act of June 16, 
1933, and the Code of Fair Competition for the Iron and Steel Industry, adopted 
pursuant thereto, were required to file prices with the Code Authority for that 
industry and to refrain from certain unfair-trade practices defined in said code. 
124491 — 39 — pt. 5a 2 



2316 CONCENTRATION OF ECONOMIC POWER 

Many manufactu rs, it was alleged, acting in evasion of the provisions of that 
act and code, sol as "stock plate" that plate which was properly classified as 
"production plate," and, while apparently selling at the same prices, to disciminate 
in price between different customers, making corrective action within the industry 
necessary. 

The Commission did not consider this to be a good defense or that it authorized 
the making and execution of the aforesaid agreements. 



The above practices tended unduly to suppress competition in the sale of tin 
plate, particularly in the sale of "stock plant," and enhanced the prices of "stock 
plate" which would have prevailed under normal competition. It tended to 
destroy the business of jobbers of tin plate and create a monopoly in the manu- 
facture of tin containers in the American Can Company and the Continental Can 
Company through depriving small competitors of their normal source of supply 
of tin plate, and forced smaller manufacturers to buy "production plate" at 
prices substantially higher than they formerly paid for "stock plate." 

A copy of the findings as to the facts, conclusion, and order of the Commission 
requiring the respondents to cease and desist from such practices is submitted 
herewith, marked "F. T. C. Ex. No. 24." 

August 19, 1936 Clothing — Sportswear — Flannel Skirts 

(FTCA-5) Boston Sportswear Company, et al. Docket No. 2755 

statement op facts 

Prior to October 5, 1935, five corporations and three individuals manufactured 
practically all of the flannel skirts made in the New England States, and sold them 
in interstate commerce in competition with each other and others. 

monopolistic practices 

On October 5, 1935, they agreed with each other to sell their flannel skirts at a 
uniform price of $16.50 per dozen, and notified their respective customers to that 
effect, in writing. Pursuant to their agreement and notice, sales were made at 
that uniform price. 

EFFECT 

This unduly restricted and suppressed competition in the sale of flannel skirts 
throughout the United States, particularly in New England. 

A copy of the Commission's complaint issued August 19, 1936, is herewith 
submitted, marked "F. T. C. Ex. No. 25." Photostatic copies of respondents' 
several answers, admitting the allegations of fact contained in said complaint to 
be true, are also submitted, marked "F. T. C. Exs. Nos. 26 to 33," inclusive, 
together with a copy of the Commission's findings as to the facts, conclusion, and 
order to cease and desist, marked "F. T. C. Ex. No. 34." 



December 2, 1936 Clothing — Women's Garments 

(FTCA-5) • Conde Nast Publications, Inc. Docket No. 2399 

statement of facts 

Conde Nast Publications, Inc., was a New York corporation which published 
and sold magazines, including "Vogue." Vogue is a women's style magazine 
having 150,000 circulation throughout every State of the United States and in 
England and France. In its field it is considered a style leader and its opinions 
and recommendations have great weight with women and a large portion of dress 
manufacturers and retailers. 

Vogue had a department called "Vogue's Finds of the Fortnight." In connec- 
tion with this department, it entered into contracts with garment manufacturers 
and retailers. The contract with the manufacturers provided in substance that, 
in return for recommending in this department a model of garment from the 
manufacturer's line, it would receive a service fee of 5 percent on all that manu- 
facturer's sales; that Vogue would furnish the manufacturer with a list of the 
retailers featuring such garments, such a list to be published in Vogue; and that 



CONCENTRATION OF ECONOMIC POWER 2317 

the manufacturer would not sell these garments to any other retailers without 
Vogue's written consent. 

With the retailers it was agreed that, in return for publishing in each issue the 
name of the retailer as an outlet for the particular models therein recommended, 
the retailer would purchase a minimum number of garments shown each issue in 
that department of the magazine and, for a period of at least 1 month, would 
maintain the retail price thereof as quoted. Also, Vogue promised the retailer 
that, for a period at least of 2 months after delivery of these models, the same 
model would not be sold by the manufacturer thereof to any other retailer in the 
same city except under identical terms. 

During 1932 respondent entered into such contracts with 73 dress-garment 
manufacturers in New York City; in 1934 with 73; and in 1935 with 40 such manu- 
facturers. Manufacturers outside of New York City were not permitted to partici- 
pate in the plan. The wholesale-price range of dresses featured by Vogue in its 
"Finds of the Fortnight" department were from $10.75 to $39.50. In New York 
City there were about 200 manufacturers of dresses of this class, approximately 
160 of whom Vogue approached with its plan. In each issue, Vogue favored 
from 4 to 7 New York manufacturers against the remainder of those in New York 
and all manufacturers outside of New York. The selected manufacturers, of 
course, stressed to their trade the fact of their selection by Vogue. 

The retail dealers with whom Vogue contracted did business in about 75 different 
cities in the United States besides New York and, after the plan was adopted, 
written contracts were made with a total of 137 retail dealers. Failure by retailers 
to maintain the resale prices for the garments as fixed by respondent and quoted 
in Vogue would result in denial to the retailer of further participation in the plan. 
In 1934 Vogue's circulation increased approximately 15,000 copies per issue, due 
in large part to this department, "Finds of the Fortnight," and the plan under 
which the department was operated resulted in the sale of 32,459 garments in 
1933, 32,301 in 1934, and 9,937 in the first 7 months of 1935. 

MONOPOLISTIC PRACTICES 

The publishers of Vogue agreed with retailers in fixing retail prices, and with 
manufacturers in limiting the number of their retail dealer customers, pursuant 
to the aforesaid plan of conducting its "Finds of the Fortnight" department. 



The effect was to insure the maintenance by the selected retail dealers Of the 
resale prices published in Vogue, and to deprive the public of normal price compe- 
tition among the retailers of such garments. The plan operated to the substan- 
tial injury of manufacturers and retailers of the class of garments featured in the 
respondent's "Finds of the Fortnight" department who did not participate in the 
practice. 

The Commission ordered the respondent to discontinue this plan and a copy 
of the findings as to the facts, conclusion, and order is submitted herewith, marked 
"F. T. C. Ex. No. 35." 



December 9, 1936 Groceries 

(FTCA-5) Fall River Wholesale Grocers' Association, et al. 

Docket No. 2677 

statement of facts 

Nine wholesale grocery concerns, trading in the Fall River region comprising 
the city of Fall River, Mass., and the trade area contiguous to it in the State of 
Rhode Island, constituted the membership of the Fall River Wholesale Grocers' 
Association, located at Fall River, Mass. Each of the members had been com- 
petitively engaged in the wholesaling of groceries purchased by them from various 
States of the United States and sold to retailers in Massachusetts and Rhode 
Island. 

MONOPOLISTIC PRACTICES 

They combined in an agreement to refuse to deal with manufacturers of grocery 
products who sold direct to retailers in that region and informed such manufac- 
turers of their policy in that respect. They threatened boycott in the event of 
the manufacturers' refusal to comply with their wishes. The Association wrote 



2318 CONCENTRATION OF ECONOMIC POWER 

one large manufacturer of milk products that surplus evaporated milk shipped in 
pool cars must not be delivered to a public warehouse, upon penalty of refusal to 
deal, and the company addressed, to save itself from loss of business, did discon- 
tinue selling its products to two competitors of the members of the Association. 
It maintained an "unfair list" and warned its members to cease handling the 
products of companies on that list, under penalty of forfeiting certain deposits 
made with said Association for the purpose of securing compliance with its rules. 
It wrote and disributed a letter announcing that its members had definitely 
decided to cooperate only with those producers, packers, or manufacturers who 
confined their sales to wholesale grocers, and asked for replies. It entered into a 
working agreement with a retail association of grocers in that region, to prevent 
purchases by retailers direct from manufacturers, and threatened to suspend any 
member who refused to sign and subscribe to the agreement. A similar course of 
action was taken against large manufacturers of sugar and of coffee and such 
manufacturers were coerced into refusing to sell to retailers. 



The effect was to unduly lessen, restrain, and suppress competition in the inter- 
state sale of grocery products in that region and to deprive the public of any 
benefits which would have accrued to it from the maintenance of normal compe- 
tition in the distribution and sale of groceries. 

The Commission ordered the respondents to cease and desist from these prac- 
tices, and a copy of its findings as to the facts, conclusion, and order is herewith 
submitted, marked "F. T. C. Ex. No. 36." Said order was based upon answers 
filed by these respondents admitting all the material allegations of the Commis- 
sion's complaint to be true. Wherefore, there are also submitted a copy of the 
Commission's complaint filed January 4, 1936, marked "F. T. C. Ex. No. 37," 
and photostatic copy of the answer of all the respondents, marked "F. T. C. Ex. 
No. 38." 

December 15, 1936 Pin Tickets 

(FTCA-5) A. Kimball Co. et al. Docket No. 2329 

STATEMENT OF FACTS 

Seven companies incorporated in the States of New York, Pennsylvania, Con- 
necticut, Illinois, Ohio, and Rhode Island, who were engaged in the manufacture of 
pin tickets which are. small tickets for temporary attachment to clothing, fabrics, 
and like materials by pin-like fasteners and upon which the dealer customarily 
enters the cost and selling price, etc., sold their product competitively to jobbers 
throughout the United States. These seven companies represented practically 
the entire source of the supplv of this product, their annual sales aggtegating about 
$750,000. 

MONOPOLISTIC PRACTICES 

Prior to 1931 the prices at which these manufacturers sold were competitive. 
In 1931, 1932, and 1933 they held a series of meetings at which time they dis- 
cussed and compared prices, and at such meetings came to an agreement to fix 
uniform prices at which they would and did thereafter sell such product. 



Prices were kept at an artificial level, price competition restricted, and inter- 
state trade unlawfully restrained. 

After the issuance of the complaint herein on March 15, 1935, a stipulation of 
fact was entered into between the Commission and +he respondents' attorney of 
record, upon which the Commission's findings as to the facts, conclusion, and order 
were based. 

The complaint is submitted as "F. T. C. Ex. No. 39;" a photostatic copy of the 
stipulation of fact as "F. T. C. Ex. No. 40;" and a copy of the findings as to the 
facts, conclusion and order as "F. T. C. Ex. No. 41." 



CONCENTRATION OF ECONOMIC POWER 2319 

December 29, 1^6 Power Cable and Rubber Covered Building Wire 
(FTCA-5) National Electrical Manufacturers Association et 

al. Docket No. 2565 

statement op facts 

The complaint in this case was brought against 16 principal manufacturers of 

copper cable and wire for electrical transmission as representative of several 

. hundred corporations, individuals, and firms producing, selling, and distributing 

the major part of, and in some cases all of, the output of such commodities in the 

United States. 

Among the manufacturers specifically named were General Electric Company, 
American Electrical Works, American Steel and Wire Company, Anaconda Wire 
and Cable Company, and United States Rubber Products, Inc. The cable and 
wire usually were sold directly to the larger consumers, but some of the manufac- 
turers supplied the smaller requirements of such consumers, and the entire require- 
ments of smaller consumers, through jobbers and retailers. 

The power cable and wire are used for transmission of large voltage electric 
current. Among the largest purchasers of these commodities are public utilities, 
municipal, State and Federal Governments and large industrial plants. The 
cable and wire are used in lighting streets, parks, highways, and public buildings. 

These manufacturers combined in the National Electrical Manufacturers Asso- 
ciation, and established within the Association a number of separate groups, each 
composed of manufacturers selling similar and competing kinds of electrical wire 
and cable. 

MONOPOLISTIC PRACTICES 

Normally in competition with one another these' respondent members, by 
concerted action and agreement among themselves, put into effect the following 
practices : 

(a) Established subsidiary sectional organizations of groups of manufac- 
turers selling similar kinds of electrical wire and cable. 

(b) Held meetings and conferences resulting in agreements to quote and 
sell their goods at identical delivered prices, terms, and sales conditions. 

(c) Maintained fixed and uniform selling prices on said commodities. 

(d) Some of the larger manufacturers compiled and circulated exceedingly 
complex and detailed price lists assuring their competitors that if the latter 
would not quote and sell at less than the list prices contained therein, the 
former would immediately notify such competitors of all proposed price 
changes or methods of calculating the same, for the purpose and with the 
effect of avoiding and suppressing price competition among all of the re- 
spondents. 

(e) Agreed that no customer should be allowed to purchase, except on a 
delivered price basis; and circulated a formula by which such prices were to 
be calculated. As to some products there was a single delivered price through- 
out the United States, including Panama, Puerto Rico, Hawaii, and Alaska. 
As to other products, the territory was divided into zones, each composed of 
a number of states, for the purpose of effectuating the delivered price policy, 
the effect of which was to prevent the members from allowing differences in 

•the proximity of any given customer to their respective plants to result in 
any differences in the amount to be paid by him as a delivered price. 

(/) They adopted and carried on a system of reporting to each other 
detailed information as to prices at which the products were sold, made 
investigations into cases of alleged price cutting, and, in the case of offenders, 
disciplined them. 
One of the kinds of wire sold by respondents was "Safecote," upon which there 
were patents. Under cover of a licensing contract between themselves as licen- 
sees and the National Electrical Products Company as licensor, the respondents 
first jointly determined upon an identical price for this product and thereafter 
imposed such price in the licensing contract. 

In addition to the foregoing, the respondent manufacturers of power cable 
adopted identical discounts from their published list prices to cover sales to 
jobbers. Then established a system of resale price maintenance by jointly re- 
quiring jobbers to maintain minimum resale prices under penalty of joint refusal 
to deal with them if they failed to maintain them. 



2320 CONCENTRATION OF ECONOMIC POWER 



One of the necessary incidents to a system of delivered prices such as these 
respondents adopted is the discrimination in price among the various customers 
after making due allowance for cost of transportation, exacting higher prices from 
customers having little or no transportation expense and lower prices frqm those 
having heavy transportation expense. That is, that customers located in or near 
the place of manufacture and shipment are deprived of the normal economic 
advantage of their location, and are required to contribute to the cost of trans- 
portation to more distant customers.. 

The foregoing practices deprived purchasers of power cable and rubber covered 
building wire of the advantages of normal competition formerly existing ajnong 
the respondent manufacturers and compelled unorganized purchasers -tiJ buy 
such commodities at artificially enhanced prices. The increased amounts thus 
obtained from public utilities, municipalities, and the Government, as an incident 
to the transmission of light and power, became a part of the permanent investment 
on which consumers of electricity had to pay a continual return (in the case of 
privately owned utilities) and, if publicly owned, an amount sufficient to retire 
the investment in such utilities. In all events the amounts exacted by the com- 
bination and conspiracy became a part of the utility and Government operating 
expenses to be borne by the rate payers. 

A copy of the Commission's findings as to the. facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 42." 



December 31, 1936 Furniture 

(FTCA-5) Retail Furniture Dealers Association of St. Louis, 

et al. Docket No. 2757 

STATEMENT OF FACTS 

The respondent Association in this case was composed of approximately 36 retail 
furniture dealers located in St. Louis, Mo., for the protection of their common 
interests. These retailers purchased furniture and allied products from various 
manufacturers and wholesalers in different States of the United States for resale 
to consumers in Missouri and Illinois and States adjacent thereto, and were in 
normal competition with each other and with other retail furniture dealers not 
members of the Association. 

Between August 1, 1933 and May 27, 1935, the Association adopted and main- 
tained certain methods and trade practices hereinafter described which were 
found to be in violation of the Federal Trade Commission Act. 

MONOPOLISTIC PRACTICES 

They requested wholesalers, jobbers, and manufacturers selling furniture in that 
area: 

1. Not to make sales directly to ultimate consumers, contractors, institu- 
tions, hotels, apartment-house operators, real-estate dealers, or large industrial 
plants. 

2. Not to accept orders from dealers in cities other than St. Louis, Mo., or 
East St. Louis, 111., for delivery in St. Louis or East St. Louis. 

3. Not to give away any merchandise, or sell it on a consignment basis, 
except for display purposes. 

4. Not to sell retailers who, while retailing, represented themselves as 
contract home furnishers operating on a basis similar to that of wholesalers. 

5. Not to talk to purchasers or prospective purchasers on the sales floor 
of any retail dealer. 

The Association published the names of the sellers who had agreed to cooperate, 
and informed the sellers of those whom the Association asserted were not entitled 
and should not be permitted, to buy furniture at wholesale prices, and obtained 
th promises and assurances of cooperation by manufacturers, wholesalers, and 
'jobbers, that all the purchasing public would be refused the advantage of buying 
at wholesale. 

Further, some of the members called upon certain manufacturers engaged in 
interstate commerce in that area in furtherance of their desire that the manufac- 
turers adopt a pohcy of selling only to retail dealers who imposed a carrying charge " 
in addition to the cash prices whenever merchandise was sold on installments. 



CONCENTRATION OF ECONOMIC POWER 2321 



Some of the manufacturers and distributors believed the Association would 
cease buying from them if they did not comply with the Association's wishes. 

This tended to place a monopoly in the hands of members of the Association 
and to deprive consumers of price advantages normally obtainable, as well as to 
increase the cost of furniture, refrigerators, radios, and other hourse furnishings. 

A copy of the findings as to the facts, conclusion, and order of the Commission 
to cease and desist from such practices is submitted herewith, marked "F. T. C. 
Ex. No. 43." The findings were based on a stipulation, a photostatic copy of 
which is marked "F. T. C. Ex. No. 44." 



January 22, 1937 Rubber Heels and Soles 

(FTCA-5) The I. T. S. Compan*y and National Federation op 

Master Shoe Rebuilders, et al. Docket No. 2802 

STATEMENT OF FACTS 

The I. T. S. Company was an Ohio corporation engaged as a wholesaler of 
rubber heels and soles which it purchased from B. F. Goodrich Company. 

Normally, commerce in this industry flows from the makers of the product 
through shoe manufacturers, shoe findings jobbers, shoe repairers, five- and ten- 
cent stores, and hardware stores to the public. The I. T. S. Company did not sell 
to the five- and ten-cent stores, but had competitors who did. The National 
Federation of Master Shoe Rebuilders, had a large and constantly changing 
membership. 

MONOPOLISTIC PRACTICES 

In 1935 the company and the federation united in an agreement to close the 
normal channels of distribution to competitors selling five- and ten-cent stores, 
and solicited the boycotting of those dealers who sold to such outlets, by circu- 
larizing the trade. They asked every shoe maker and jobber to make a New 
Year's resolution that they would not buy from heel manufacturers supplying that 
type of competitor. They published a list of those manufacturers and whole- 
salers who did not sell to five- and ten-cent stores, and the I. T. S. Company used 
persuasion, intimidation, and threats of boycott on shoe findings jobbers to get 
them to stop handling the products of manufacturers or wholesalers who did not 
comply with its wishes. 

EFFECT 

Commerce in the rubber heel and sole industry was unduly restrained, competi- 
tion substantially suppressed, and the consuming public deprived of the benefits 
normally accruing from competition. 

A copy of the Commission's findings as to the facts, conclusion, and order re- 
quiring the I. T. S. Company to cease and desist from these practices is submitted 
herewith, marked "F. T. C. Ex. No. 45." 



April 2, 1937 Turbine Generators 

(FTCA-5) General Electric Company, et al. Docket No. 2941 

STATEMENT OF FACTS 

The General Electric Company, Westinghouse Electric & Manufacturing Co.» 
Allis-Chalmers Manufacturing Co., and Elliott Company manufactured and sold 
turbine generators principally to private corporations and to municipal, State, 
and Federal Governments. Combined, they were so influential as to influence 
and control trade in such products. Before 1933, they competed. Efficiency 
and performance guaranties, as well as the initial cost, were vital factors in 
making sales. 

MONOPOLISTIC PRACTICES - 

To eliminate price competition, these companies agreed to fix and maintain 
uniform delivered prices and performance guaranties for turbine generators. 
They adopted and adhered to, as their own, the delivered pricing sheets and 



2322 CONCENTRATION OF ECONOMIC POWER 

confidential performance data, compiled by one of them, without giving any 
consideration to their, respective costs or the true theoretical performance of their 
turbine generators. 

EFFECT 

This monopolized the business of selling turbine generators, unreasonably 
restrained, stifled, and suppressed competition in the industry, and deprived the 
public of price, service, and other advantages which would otherwise have accrued. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist from such practices is submitted herewith, marked "F. T. C. 
Ex. No. 46." 

Simultaneously, the Commission issued its findings and order against all of the 
corporations, except General Electric Co., named in the same complaint, and 
who were engaged in the manufacture and sale of condensers, and who had 
combined with each other to accomplish the same objectives with reference to their 
condensers, and who had used the same means. 

A copy of the findings as to the facts, conclusion, and order against the condenser 
manufacturers and sellers is herewith submitted, marked "F. T. C. Ex. No. 47." 



April 29, 1937 Clothing — Women's Hats . 

(FTCA-5) Millinery Quality Guild, Inc., etal. Docket No. 2812 

STATEMENT OF FACTS 

Fourteen New York corporation?, engaged in the designing and manufacturing 
of millinery at their factories located in the States of New York and California, 
combined in an organization known as Millinery Quality Guild, Inc., which organi- 
zation they dominated and controlled. These respondents, together with some 
10 other New York corporations, designated as affiliate members, formed a sub- 
stantial majority of the originators of leading styles in high-grade millinery and 
were recognized leaders in that field. High-grade retailers, in order to offer a full 
line of women's hats, were required to procure some of their models from them. 

These hats wholesaled at $8 per hat and they orginated their own designs. In 
this industry, some manufacturers do not originate their own designs but copy 
designs of other manufacturers. This is known as "style piracy." Many of the 
respondents maintain designing departments and employ stylists who- visit Paris, 
consult the prevailing French stylists, determine style trends, and make original 
creations for their respective manufacturers. 

MONOPOLISTIC PRACTICES 

In 1934, through the Guild, the members adopted a plan to prevent, so far as 
possible, the piracy of styles. They secured the cooperation of the affiliate 
members in a working agreement to the effect that aiter July 16, 1934, none of 
them would make sales or show merchandise to any retail store which had failed 
to enter into a so-called "Declaration of Cooperation Agreement" with the 
Millinery Quality Guild, Inc. 

A registration bureau was established by the Guild for the registration of 
models which, upon registration, were regarded as an original design of the 
registrant. Approximately 1,600 high-grade retail dealers in women's hats were 
solicited to sign such cooperative agreement, which provided in substance that 
the retailer would instruct its buyer not to buy any copies of pirated styles 
created by members of the association, and would place all orders for hats con- 
ditionally upon the seller's warranty that the styles of hats so ordered were not 
copies of styles originated between members of the Millinery Quality Guild, Inc. 
By letters sent to various retail stores the Guild advised them that its member- 
ship comprised practically every important creative firm in the industry and only 
those stores which had signed the agreement could inspect or purchase women's 
hats from them, and the members of the Guild jointly refused to sell their products 
to retail dealers who failed to sign. They also expelled from membership any 
one who would not so agree. In some cases, by declaring that certain hats were 
copies of styles originated by members, the Guild induced retail stores to return 
them to manufacturers who had sold them. 



CONCENTRATION OF ECONOMIC POWER 2323 



This limited the retail outlets for such products and interfered with retail 
dealers' source of supply; deprived the public of the benefits of normal price 
competition; and prevented retailers from purchasing their requirements of hats 
in interstate commerce, except subject to the limitations and restrictions of the 
plan. Prices to retailers and consumers were increased and control of business 
practices in the industry was placed in the hands of the members. They prevented 
the sale of women's hats which they claimed were copies of styles and designs 
originated by the members and registered with the Guild. It also tended to 
limit interstate commerce in high-grade hats to models originated and designed 
by the manufacturers thereof or to copies produced by his permission. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is submitted herewith, marked "F. T. C. Ex. No. 48." 



May 18, 1937 — Water Gate Valves, Hydrants, and Fittings 
(FTCA-5) The Water Works Valve and Hydrant Group of the 

Valve and Fittings Institute, et al. Docket No. 2958. 

STATEMENT of facts 

Approximately 31 corporations engaged in the business of manufacturing water- 
gate valves, hydrants, fittings, and similar products and in the sale thereof to 
towns, cities, muncipalities, State and Federal Governments, comprised substan- 
tially all of the manufacturers of such products used for water-supply systems 
and, prior to December 1933, were in competition with each other as to price. 

They were incorporated and had their principal offices and places of business in 
some 17 different States of the United States and were members of the Water 
Valve and Hydrant Group of the Valve and Fittings Institute, a New York cor- 
poration. From December 1933 until January 3, 1935, the valve and fittings 
manufacturing industry operated under Code Authority pursuant to the Na- 
tional Industrial Recovery Act, and some of the respondents named were adminis- 
trative officers of that Authority. 

monopolistic practices 

They agreed among themselves to fix and maintain, and did fix and maintain, 
enhanced uniform delivered prices for their products, dividing the United States 
into zones, fixing uniform discounts to distributors, and requiring the distributors 
to maintain uniform minimum resale prices and, by intimidation and persuasion, 
certain of the respondents induced others of them to raise prices to the prices 
agreed upon. 

By uniform delivered prices the various members were prevented from allowing 
differences in the proximity of any given customer to their respective manufac- 
turing plants to result in any differences in the amount to be paid as the delivered 
price. 

effect 

This uniform delivered price system results in discrimination in price between 
the various customers after making due allowance for cost of transportation, 
exacting higher prices from customers having little or no transportation expense 
and lower prices from those having heavy transportation expense. That is to say, 
customers located in or near the place of manufacture and shipment are deprived 
of the normal economic advantage of their location and are required to contribute 
to the cost of transportation to more distant customers. The Commission found 
that these acts and practices had a dangerous tendency and they actually had 
hindered price competition in the sale and resale of the aforesaid products and had 
created in the respondent members of the Water Works Valve and Hydrant Group 
a monopoly unreasonably and unlawfully restraining interstate commerce. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 49." 



2324 CONCENTRATION OF ECONOMIC POWER 

January 8, 1937 Butter Tubs 

. (FTCA-5) Menasha Wooden Ware Corporation et al. Docket 

(CA-2) No. 2650 

STATEMENT of facts 

The Menasha Wooden Ware Corporation, the Creamery Package Manufac- 
turing Company,, Elgin Butter Tub Company, Wisconsin Butter Tub Company, 
Bousfield Wooden Ware Company, and Storey City Butter Tub Company made 
and sold butter tubs to jobbers and creameries for use in packing butter. The 
Butter Tub Manufacturers Council, which was also a respondent in this case, 
was an association of substantially all of the butter-tub manufacturers of the 
United States. For many years, prior to 1932, competition between butter-tub 
manufacturers was very keen, extending throughout the dairying regions of the 
United States where most of the product is sold, and the price of butter tubs 
had reached a new low. It was fo remedy chaotic conditions in the industry 
and to stabilize the 1 competitive situation that the Butter Tub Manufacturers 
Council was organized in 1932. 

In Minneapolis, Minn., there was a cooperative creamery corporation known 
as the Land O'Lakes Creameries, Inc., which handled creamery supplies as a 
wholesaler, and had, prior to 1931, been purchasing butter tubs from the manu- 
facturers at jobbers' prices. Since July 1931 the regular jobbers' discount to 
it was discontinued, because the Butter Tub Manufacturers Council decided 
not to recognize it as a jobber. 

These respondents manufactured and sold more than 90 percent of the total 
volume of new butter tubs in interstate commerce. About 75 percent of such 
tubs were sold in the States of Illinois, Minnesota, Nebraska, North Dakota, 
South Dakota, and Wisconsin. 

MONOPOLISTIC PRACTICES • 

The respondents, cooperating through their Council, conspired to restrict and 
suppress competition in the interstate sale of butter tubs by agreeing upon uniform 
prices, terms, and discounts; exchanged information with regard to .past and 
future prices of their product, including lists of preferred customers and reports 
of sales and adopted special lists of preferred customers who were to be allowed 
extra discounts, amounting to favorable discriminations in price. 



Competition in the sale of butter tubs throughout the several States, particularly 
in the prices quoted and the discounts allowed to distributors was substantially 
lessened and restrained, and the prices of said butter tubs enhanced above the 
prices theretofore prevailing under the normal and open competition which 
theretofore existed. 

A Qppy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 50." 



June 10, 1937 Clothing — Caps 

(FTCA-5) Cap Association of the United States, Inc. Docket 

No. 2530 

STATEMENT OF FACTS 

A trade association of 100 manufacturers of all types of caps, an association 
with 27 members who were manufacturers of uniform caps, and companies making 
and selling vizors and trimmings used in their manufacture, sold such caps through- 
out the United States for use by the Military, Naval, Postal, and Coast Guard 
Services of the United States, the military services of the States, police and fire 
departments, railway employees, chauffeurs, telegram messengers, theatre attend- 
ants, and fraternal organizations, in competition with each other and with others. 
It is not practicable for the average uniform cap manufacturer to manufacture 
his own vizors and trimmings and those of the respondents engaged in that busi- 
ness supplied approximately 60 percent of the total volume of vizors and trimmings 
used by the uniform-cap-manufacturing industry. 



CONCENTRATION OF ECONOMIC POWER 2325 

MONOPOLISTIC PRACTICES 

In July 1933 the respondents commenced to hold meetings at which they 
discussed and compared prices and came to an agreement fixing the prices at 
which said caps were thereafter to be sold. They agreed that they would adhere 
to and enforce this program and the price schedules so agreed upon. In connec- 
tion therewith, they caused to be printed and circulated lists containing the names 
of all uniform-cap manufacturers who refused to sell at the suggested prices, 
both members and nonmembers, and induced the vizor and trimming manufac- 
turers to refuse to sell to the offenders who were so reported. This plan, or policy, 
was cooperatively enforced through threats of boycott and other concerted action. 
In some instances fines were agreed upon and imposed and collected from mem- 
bers who sold below the suggested prices. On one occasion a uniform-cap manu- 
facturer was threatened with a fine of $2,000 and with strike and labor troubles. 
The methods used earned for the respondent manufacturers the title of "police- 
men of industry." 

EFFECT 

As a result of the combination and agreement above described, the prices of 
uniform caps were raised to higher levels and the prices of vizors and trimmings 
Used in their manufacture were advanced, thereby depriving the purchasing 
public of price and service advantages which they would normally receive and 
enjoy under conditions of free competition in this industry. Of course, such acts 
also resulted in oppression and discrimination against small-business enterprises 
who were competitively engaged with the members of the Association. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is submitted herewith, marked "F. T. C. Ex. No. 51." 



June 30, 1937 Canned and Dried Foods 

(FTCA-5) California Packing Corporation, Alaska Packers 

Association, and Six Corporate Officers. Docket 

No. 2786 

statement of facts 

California Packing Corporation, organized in California .in 1916, was engaged 
in packing and distributing food products such as dried and canned fruits, canned 
vegetables and fish, canned pineapples, and coffee. It was one of the largest 
packers and distributors of such products in the world and an important factor 
in Hawaiian-pineapple industry and the packing of sardines and tuna fish since 
1936. It owned and controlled more than 100 canning factories located in 10 
States and in Alaska and Hawaii, and sold such products under brand names 
such as "Del Monte," "Sunkist," "Goldbar," etc. 

The Alaska Packers Association, another California corporation, engaged 
exclusively in the packing of salmon and the sale thereof, with nine canning 
factories located in Alaska and one on Puget Sound; 84 percent of its stock was 
owned by the California Packing Corporation. 

In the course of 'their respective businesses these two companies purchased 
substantial quantities of raw materials and manufactured products such as con- 
tainers and cartons, tin, steel, copper, paint, and other articles from the manu- 
facturers thereof throughout the United States, and both in the aforesaid sales 
of products and puchase of materials were in competition with other manufacturers 
and producers and purchasers using the same instrumentalities of distribution 
and transportation as respondents, including various ports, docks, wharves, and 
terminals located in San Francisco Bay and tributary waters. 

Encinal Terminals was a public wharfinger corporation in the city of Alameda, 
on the east side of San Francisco Bay, andleased the land upon which its facilities 
were located from the Alaska Packers Association. It was organized by the 
aforesaid two corporations who, since 1925, utilized its facilities in the distribution 
of their products. 

San Francisco Bay, upon which the cities of San Francisco, Oakland, and 
Alameda are located, is a land-locked harbor, 48 miles long, with 100 miles of 
shore line, and for many vears has been recognized as the principal harbor for 
steamships on the Pacific toast, and ranks second only to New York Harbor in 
the United States as to the number of steamship lines landing their cargoes at 



2326 CONCENTRATION OF ECONOMIC POWER 

docks and .wharves there. Approximately 166 steamship lines carry freight to 
and from those three ports which are under the immediate control of the Board 
of State Harbor Commissioners and are operated on a nonprofit basis. Five 
other terminal companies were there engaged in the public wharfinger business 
competitively with each other and with the Encinal Terminals. The function 
of each was to act as a connecting link from railroad to ocean carriers and vice 
versa, acting as the agents for both exporters and in-bound steamers. 

MONOPOLISTIC PRACTICES 

By promises that the said corporate respondents would buy or increase their 
volume of purchases from the suppliers of their raw and manufactured materials, 
and by threats of reduction or discontinuance in the purchase of such materials, 
they coerced and compelled a substantial number of such sellers to divert sub- 
stantial quantities of freight tonnage, which normally and usually would have 
been routed through the competitive terminals located on San Francisco Bay, to 
their owned and controlled Encinal Terminals company. 

By the same means they also coerced the routing through their terminal of 
shipments by steamship companies, although the services and facilities of the 
competitive terminals were equal to those of the Encinal Terminals and, in many 
instances, more economical to the said steamship companies and shippers. In- 
cidental to this program, the respondents coerced and compelled a number of 
steamship companies to disclose the identity of consignees of freight shipments 
and to allow confidential records and manifests to be inspected so as to enable 
the respondents to bring pressure and influence to bear upon the said consignees 
to divert traffic to their own terminals. Acting concertedly, and in cooperation 
with the individual respondent officers named, they spied upon the business of 
their competitors for the same purpose. 



The effect of these practices was that the distribution expenses of the California 
Packing Company and the Alaska Packers Association were reduced and their 
revenues increased, to the unfair advantage of their competitors who had been 
compelled, against interest, to route their products through the Encinal Terminals. 
This naturally caused the competitors to have to pay more for their raw materials 
and manufactured products and gave respondents an unfair competitive ad- 
vantage over all of their competitors who did not control a large tonnage of freight 
and wbo did not engage in such coercive practices. The usual and normal com- 
petitive considerations of quality, service, and price were thus displaced by 
respondents and this tended to create a monopoly in them in the sale and distri- 
bution of the food products above described. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
case and desist is herewith submitted, marked "F. T. C. Ex. No. 52." 



July 3, 1937 Rayon Yarn 

(FTCA-5) Viscose Company et al. Docket No. 2161 

STATEMENT OF FACTS 

Ten manufacturers of viscose rayon yarn sold it to makers of rayon cloth, who 
in turn, sold to manufacturers of rayon clothing. In the aggregate, these manu- 
facturers produced substantially all of the viscose rayon yarn manufactured in 
the United States 6ince 1913, and were normally in competition with each other, 
but on October 21, 1931, they combined, agreed, and conspired among them- 
selves to fix and maintain uniform prices. 

MONOPOLISTIC PRACTICES 

Combination and conspiracy to fix and maintain uniform prices. 



This prevented price competition and increased the prices of the yarn, the 
prices of cloth made from the yarn, and the prices of all rayon articles of wear 
to the consumer. 

A copy of the Commission's findings as to the facts, conclusion, and order io 
cease and desist from such practices is herewith submitted, marked "F. T. C. 
Ex. No. 53." 



CONCENTRATION OF ECONOMIC POWER 2327 

July 17, 1937 Clothing— Hats 

(CA-2) Hollywood Hat Company, Inc. Docket No. 3020 

(FTCA-5) 

STATEMENT OF FACTS 

The Hollywood Hat Company, Inc., a New York corporation, sold and dis- 
tributed women's hat". There are approximately 1,200 establishments in the 
millinery industry, more than half of which are located in New York City, and 
do about 70 percent of the millinery business in the United States. This business 
amounts to about $100,000,000 annually. 

This particular company purchased the so-called "body" of- the hats which it 
styled, reshaped, and ornamented for subsequent resale to jobbers and syndicates. 

MONOPOLISTIC PRACTICES 

In 1936 it sold its largest syndicate customer suede hats for $21 a dozen. At 
tne same time, it sold similar hats to that customer's competitors for from $24 
to $27 per dozen. Also it engaged in other similar discriminating practices. 



The effect of these discriminations was to injure, destroy, or prevent competi- 
tion with customers receiving the benefit of the more favorable prices. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist from these practices is submitted herewith, marked "F. T. C. 
Ex. No. 54." 



September 4, 1937 Clothing — Covered Buttons and Buckles 

(FTCA-5) Covered Button and Buckle Creators, Inc., Its 

Officers and Representative Members et al. 

Docket No. 3186 

STATEMENT OF FACTS 

About 1934 some 150 concerns, engaged chiefly in New York in the manu- 
facture of covered buttons, buckles, and novelties for use in the manufacture of 
wearing apparel and sales to dress manufacturers and those engaged in kindred 
industries, combined and conspired to maintain uniform prices for these products. 

These concerns together manufactured approximately 90 percent of all the 
covered buttons, buckles, and like novelties made in the United States. 

monopolistic practices 

In 1937 they agreed among themselves to fix and maintain uniform minimum 
prices and discounts at- which these products should be sold, and notified the. 
industry of their attempt to police it by a notice in Women'.?- Wear, a trade maga- 
zine of wide circulation, warning all who were not membo-s of their association 
that they would be held strictly accountable to the rules laia down by the Federal 
Trade Commission and subjected to legal action, for any violation. In this way 
it was impliedly represented that the rules of the association were approved 
by the Federal Trade Commission fair-trade-practice rules for the industry. That 
was not true. 

effect 

Such practices hindered and prevented competition in, and increased the prices 
of covered buttons, buckles, and novelties paid by dress manufacturers and 
indirectly the prices paid by the public for clothing on which those articles were 
used. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist from such practices is submitted herewith, marked "F. T. C. 
Ex. No. 55." Attention is invited to appendix 1 of the findings, which is a 
mimeographed copy of the Federal Tn- e Commission's trade-practice rules for 
that industry, approved by the Commission, which rules did not authorize the 
practices indulged in by these manufacturers. 



2328 CONCENTRATION OF ECONOMIC POWER 

September 30, 1937 Passbooks — Account Books, Etc. 
(FTCA-5) Christmas Club. Docket No. 3050. 

(CA-2(a) & 3) 

STATEMENT OF FACTS 

This Club sold passbooks, account books, advertising literature, and other 
paraphernalia used by banks for conducting Christmas Savings Clubs. The 
conduct of Christmas Clubs is a very popular form of saving. This particular 
company was the largest single dealer in the United States selling these "systems" 
to the banks. 

MONOPOLISTIC PRACTICES 

The Club falsely represented that it had exclusive rights to the term "Christmas 
Club" and that the phrase was trade-marked; also that it was the manufacturer 
and printer of the "systems" which it sold and that it spent more on advertising 
to promote the growth of Christmas clubs than it actually did spend. This was 
the violation of the Federal Trade. Commission Act. 

Also it sold its "systems" upon the condition, agreement, or understanding that 
its bank customers would not deal in the "systems" of any of its competitors. 
This constituted violation of section 3 of the Clayton Act which makes "tying 
agreements" illegal. 

In violation of the Robinson-Patman Act, which is section 2 (a) of the Clayton 
Act, the Club discriminated in price between its different customers. 

EFFECT 

The unfair methods of competition consisting of the false representations 
tended to divert trade to the Club from its competitors to their injury; the viola- 
tion of section 3 of the Clayton Act tended to promote a monopoly in the respond- 
ent and eliminate competition by agreement; and the violation of the Robinson- 
Patman Act tended to unduly restrain trade by giving an unfair competitive 
advantage to any customer selected by the Club as a beneficiary of its favorable 
and unlawful discriminatory price. 

A copy of the rinsings as to the facts, conclusion, and order to cease and desist 
is herewith submitted, marked "F. T. C. Ex. No. 56." 



October 4, 1937 Hot Air Furnaces 

(FTCA-5) New York Sheet Metal Roofing and Air-Conditioning 

Contractors' Association, Fox Furnace Company, 

et al. Docket No. 2931 

statement of facts 

The Fox Furnace Company manufactured and sold hot-air furnaces in inter- 
state commerce. The New York Association was a trade organization of plumb- 
ing contractors and dealers in sheet-metal roofing supplies and hot-air furnaces. 
The members competed with each other and with other plumbing contractors 
and dealers in similar commodities. The member dealers purchased their hot-air 
furnaces from various manufacturers, some of whom also sold such furnaces to 
large mail-order houses. 

About September 1934 the Association and the Fox Furnace Company agreed 
to, and did, make a list of those manufacturers who sold to mail-order houses and 
urged all their members not to buy from them. 

MONOPOLISTIC PRACTICES 

They held meetings at which means were devised to exert their combined 
influence and pressure on their own members and upon members of various other 
trade associations to confine their dealings to those manufacturers.who would not 
sell to mail-order houses located throughout the United States. To this end they 
printed and published so-called "white lists" containing the names of "approved" 
manufacturers and indulged in boycotts, threats of boycotts, and other united 
ction against all manufacturers not so listed. 



CONCENTRATION OF ECONOMIC POWER 2329 



This tended to monopolize in the members of the association the business of 
selling hot-air furnaces, supressed competition in this industry, and operated as 
an unreasonable restraint upon the legitimate competition of mail-order houses 
and others depriving the public of price and service advantages which it would 
otherwise have enjoyed. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No 57." 



November 30, 1937 Metal Windows 

(FTCA-5) Metal Window Institute et al. Docket No. 2978. 

STATEMENT OF FACTS 

Nineteen corporations, constituting substantially all of the manufacturers and 
distributors of steel window products in the United States, and who had been in 
active and substantial competition with each other, became members of the Metal 
Window Institute, a voluntary unincorporated trade association. 

The products manufactured and sold by these firms were used principally imthe 
construction of industrial and commercial buildings, generally through competitive 
bids. A substantial part of their sales for several years was to the United States 
and to the several States, as well as to municipalities or political subdivisions 
thereof, for use in the construction of public buildings. 

MONOPOLISTIC PRACTICES 

Before the association was formed certain of the members compiled and, after- 
ward, tnrough the association, revised and computed their sales prices by the 
application of discounts to gross or basic prices published in a so-called "basic 
price book," which was a comprehensive and detailed list of prices for all of the 
products of the metal window industry and contained formulas for determining 
prices. 

Acting through the association the firms mentioned established and maintained 
clearing bureaus to assist each other in checking estimates for metal window, 
products from plans and specifications under which bids were to be submitted. 
In connection with this .method of procedure they entered into agreements in 
furtherance of which they combined to establish and maintain uniform minimum 
prices, terms and conditions of sale, and schedules of discounts from basic prices. 
In any given geographic area the members would submit all estimates of bids, to 
be made on a project located there, to one of these clearing bureaus theretofore 
designated by the association as the bureau to clear bids or prices for that parti- 
cular area, and identical gross, and in some instances identical net price estimates 
were agreed upon and used in submitting bids on these projects. 

The association required its members to adhere to the established prices by 
actively policing. the industry and threatening to impose penalties on those who 
sold for less. 

One way in which nonmember competitors were prevented from becoming the 
successfuf bidders on projects, and were induced to join the association, was the 
agreement by the members that in certain cases the bidding should be "open." 
In those cases the members would concertedly underbid and undersell the '"non- 
cooperating" competitors. Sometimes, by concerted action, the members secured 
the withdrawal or cancelation of bids where the bids were less than the prices 
which they had established by mutual agreement. 



This unduly and unlawfully restrained trade in metal window products sub- 
stantially enhanced prices, maintained prices at artificial levels, and deprived 
the public of benefits which would have obtained from free and open competition 
in this industry. 

A copy of the Commission's findings as to the facts, conclusion and order t<> 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 58." 



2330 CONCENTRATION OF ECONOMIC POWER 

October 30, 1937 Window Glass 

(FTCA-5) Pittsburgh Plate Glass Co. et al. Docket No. 3154 

(CA-2 (a), (f)) 



STATEMENT of pacts 

The Pittsburgh Plate Glass Company manufactured and sold window glass 
and other glass products. It had a total of 8 factories located in Pennsylvania, 
Indiana, Missouri, Ohio, West Virginia, and Oklahoma, together with 70 ware- 
houses located in many different States from which it distributed its products. 
This company and 7 competing glass manufacturers comprised the membership of 
the Window Glass Manufacturers Association. 

The National Glass Distributors Association was composed of distributors of 
window glass and glass products. The 7 manufacturers above referred to, and 
1 more were associate members in this Association. The Pittsburgh Plate Glass, 
Company, however, held membership in the Distributors Association for 38 of 
its 70 distributing establishments. 

Except for the monopolistic practices and combinations engaged in by these 
manufacturing and distributor firms, the members of each group would have been 
in competitition with the other members of their class, and also in competition 
with other manufacturers and other distributors. The manufacturers who con- 
stituted the membership of the Manufacturers Association owned and controlled 
practically all of the factories producing window glass in the United States and the 
distributors group was so large and influential in the trade as to be able to influence 
the prices, terms, and conditions upon which all distributors must buy such 
products. 

MONOPOLISTIC PRACTICES 

About 1935 these manufacturing and distributing firms conspired and combined 
to enforce by coercive means, observance of certain policies and sales methods by 
distributors who were either not permitted to be or did not desire to be members 
of the Association. 

Some of these policies and practices were as follows: 

1. All buyers were classified as either, "quantity buyers" or "carload lot 
buyers," and lists so classifying the buyers were printed and circulated. 

2. Each of the manufacturers published only one window glass price list 
showing the prices for "quantity buyers," exclusively. 

3. The Distributors Association published price lists for "carload lot 
buyers," exclusively, and only their members could distribute them. 

4. All who were hot classified as "quantity buyers" had to buy glass from 
or through "quantity buyers." 

5. All buyers, except "quantity buyers" had to pay up to 7){ percent 
percent more for window glass of the same grade and quality than the price 
quoted to and paid by "quantity buyers." 

6. Sales of "quantity buyers" were confined to a restricted trade area ap- 
portioned the authorized "quantity buyer" who either never or very rarely 
accepted orders for window glass to be transmitted to the manufacturer 
from dealers located outside of that area. 

7. Two or more dealers were precluded from making pool purchases in car- 
load lots to get the benefit of the discount accruing to that classification. 
"Garload lot buyers" might not reconsign or divert the shipment to any other 
dealer. 

8. Distribution and outlets for the product were generally controlled. 

"Quantity buyers" were arbitrarily defined as those buyers purchasing from 
3,000 to 5,000 50-foot boxes of window glass for stock each year. The manufac- 
turers issued price lists for window glass to "carload lo't buyers" and refused to sell 
carload lots directly to any buyers except approved "quantity buyers" and sought 
and obtained the assurances of cooperation from one another in making these 
practices, policies, and pricing methods effective. The distributors, on the other 
hand, combined* to induce the manufacturers to grant the discriminatory prices 
and received and accepted such prices. 



All this tended to place control over the channels of distribution in the particu- 
lar manufacturers and distributors who had so combined. It also concentrated 
find limited in the "quantity buyers" the opportunity to buy window glass from 
the manufacturers at tin i I price; standardized prices art'! 



CONCENTRATION OF ECONOMIC POWER 2331 

favored certain purchasers through unlawful discrimination in prices to the unfair 
competitive disadvantage of others; and unreasonably restrained, stifled, and sup- 
pressed competition in the window-glass industry. In turn this tended to increase 
the cost to purchasers of such window glass; discriminated against small business 
enterprises; obstructed the establishment of new window glass distributing con- 
cerns; and otherwise interfered with the normal flow of trade in the general com- 
merce of window glass, to the injury of all dealers, distributors, and others who 
would not confrom to the program and policies of these two groups. Competition 
was substantially lessened and a monopoly in the sale and distribution of window 
glass promoted. Real competition between the manufacturers and their com- 
petitors was prevented. 

A copy of the findings as to the facts, conclusion, and order to cease and desist 
is herewith submitted, marked "F. T. C. Ex. No. 59." 



December 30, 1937 Building Materials and Building Supplies 
(FTCA-5) Building Material Dealers Alliance et al. Docket 

No, 2191 

STATEMENT of facts 

Building Material Dealers Alliance was organized in 1931 as an unincorporated 
trade association having as members over 150 dealers in building materials and 
builders' supplies who were located and traded in the Cleveland-Pittsburgh trade 
area. The materials dealt in included cement, brick, tile, clay products, sewer 
pipe, plaster, sand, gravel, stone, lime, lumber, lath, roofing, and other materials 
ordinarily used in the construction industry." The trade area named consisted of 
a portion of Ohio and Pennsylvania and was one of the largest markets in the 
country for the sale of such supplies. The Alliance was managed by a board of 
councilors who were representative of the dealer members. For the more effec- 
tive operation of the Alliance, the membership was divided into local associations 
or subdivisions. 

The Pittsburgh Builders Supply Club was an association of the largest business 
firms in this industry in Pittsburgh, Pa., who sold over 75 percent of the builders' 
supplies in that area. 

Dealers operating in the trade area around Cleveland banded together in an 
unincorporated trade association known as Building Material Institute. These 
dealers, with few exceptions, were also members of the Alliance. 

Dealers in the western half of Pennsylvania and the adjacent trade area (which 
territory was part of the Cleveland-Pittsburgh trade area) formed the Western 
Pennsylvania Builders Supply Alliance. This Alliance was affiliated and actively 
cooperated with the other associations in carrying out their joint programs and 
policies. Its members were also members of the Alliance. 

The Allied Construction Industries of Cleveland, Inc., was an Ohio corporation 
whose membership consisted of firms engaged in various lines related to the build- 
ing and construction industry, including certain building materials and builders' 
supplies dealers in and about Cleveland. Five of such dealers were listed as 
members of the Building Material Dealers Alliance. 

The Lime and Cement Exchange of Baltimore, Md., was an incorporated asso- 
ciation constituting an affiliated unit of the National Federation of Builders Sup- 
ply Associations. 

The Middle Atlantic Council of Builders Supply Associations was an unincor- 
porated trade association comprising eight builders' supply associations whoso 
members were engaged in this same industry. 

Maryland Builders Supply Association comprised dealers in builders' supplies 
from that part of the State of Maryland which is west of Chesapeake Bay and 
west and south of the Susquehanna River. It was a unit of the Middle Atlantic 
Council and the National Federation. 

The National Federation of Builders Supply Associations, incorporated in 1933 
under the laws of the State of New Jersey, comprised certain associations of 
dealers engaged in the several States and federated together for the purpose of 
promoting their common business interests. It consisted of 41 federated units 
located in approximately 32 States throughout the United States. 

The members of these organizations and associations bought their supplies 
from manufacturers and producers located throughout the United States and 
sold and shipped the same in interstate commerce, in the course of which, but for 
124491— 39— pt. 5a — -3 



2332 CONCENTRATION OF ECONOMIC POWER 

the combinations and conspiracies in which they conspired to engage, would have 
been in competition with each other and with other firms engaged in the industry. 

MONOPOLISTIC PRACTICES 

They classified their members and other approved concerns as "recognized" 
dealers. This classification theoretically depended upon whether the dealer 
seeking recognition could establish some economic justification for the existence 
of his business in the community which he served, or proposed to serve, but 
actually it depended upon the arbitrary decision of the officers and members of the 
associations and who were competitors or prospective competitors of the dealer 
who desired recognition. 

The main objective of the program, in which all of these associations and their 
members actively' cooperated, was to control and confine retail distribution in 
building materials and supplies to such "recognized" dealers, and to prevent the 
direct sale by manufacturers to all others, including consumers, non recognized 
dealers, contractors, State governments, and other political subdivisions; and to 
force all purchases and- flow of commerce in such materials to come through the 
"recognized" dealers channels upon terms or conditions of sale affording a profit 
to such "recognized" dealers. 

A further objective was to "limit the distribution of such supplies to carload 
quantities by rail, eliminating motortruck distribution so as to prevent com- 
petitors from obtaining truckload quantities; to prevent other than "recognized" 
dealers from participating in pool-car shipments; to prevent certain manufacturers 
from purchasing raw materials direct from other manufacturers and to facilitate 
price fixing among "recognized" dealers in their respective communities and to 
eliminate brokers. 

To these ends they procured written agreements from each member, from 
manufacturers, and from producers to support their program. By circulating 
statements of policy and threats of boycott against those who refused to cooperate 
these agreements were enforced. Insistent pressure was exerted by the dealers 
upon manufacturers and producers to cooperate. 

Price lists were furnished dealer members in some communities for their guid- 
ance. If a dealer failed to observe such prices the organizations brought pressure 
on manufacturers who sold to the offending dealer to refuse to make any further 
sales to him. 

At the last meeting of the Building Material Dealers Alliance, held on January 
5, 1933, the National "Federation of Builders Supply Associations was formed to 
apply on a national scale the foregoing principles and policies. In 1936 the 
National Federation issued a so-called "call to arms" to 500 or more dealers 
throughout the United States who had always sold more than one-half of all hard 
material distributed through dealer channels in this country. Various commodity 
committees were formed, such as committee on cement, clay products, metal 
lath, lime, etc. These various committees formulated certain recommendations. 
For instance, some of the recommendations of the cement committee which the 
Federation adopted were: 

1. That manufacturers should not ship to dealers outside the prescribed 
dealer territory. 

2. That the organized units, with their dealer members, should determine 
what that territory was to be. 

3. That cement manufacturers stop all warehouse operations. 

4. That all trucking of cement be stopped. 

5. That a minimum differential of 15 cents per barrel on sales of portland 
cement in carload quantities should be maintained. 

C. That the federated units should make revised lists of established dealers, 
to be furnished to all cement manufacturers shipping into their territory. 

In 1935 the United States, through the Procurement Division for the Relief 
Administration, attempted to buy direct from manufacturers and sent to manu- 
facturers within the State of Ohio an invitation for bids on 100,000 barrels of 
cement. As a result of prompt action, on the part of Ohio Builders Supply Asso- 
ciation, an affiliated unit of the National Federation, no cement company would 
quote prices. When the same invitation was mailed to manufacturers outside 
of Ohio, again no direct bids were made. The National Federation in this way 
succeeded in having the United States Government change its policy of direct 
purchases of materials for relief purposes, and a form letter was sent to the various 
units of the Federation referring to the last-described activities as "one of the 
finest pieces of cooperative work this industry ever engaged in in bucking a 
department of the Government." 



CONCENTRATION OF ECONOMIC POWER 2333 



Interstate commerce in the sale and distribution of building materials was 
restrained by eliminating so-called irregular dealers and manufacturers and 
producers selling to such dealers, and restricted and confined to such manu- 
facturers and producers and dealers as would adhere to the plan of combination 
of the various trade associations and their members. Competition in the sale of 
building materials was substantially lessened and suppressed. Competitors of 
members were unable to obtain interstate shipments of their requirements due to 
the combined will of the associations and their members. Manufacturers were 
injured in their business and in their freedom to sell their products direct to pur- 
chasers as they pleased. They dared not sell to many to whom they wished to sell 
and considered as dealers, and would not sell to consumers, contractors, the 
Government or its political subdivisions. Truck transportation was interfered 
with and the small purchaser injured by being prevented from obtaining supplies 
in small quantities to be transported by truck. Costs to the consuming public 
were increased and the consuming public denied the advantages in price which it 
would have obtained from the natural flow of commerce in free competition. 

A copy of the Commission's findings as to the facts and conclusion, together 
with order to cease and desist from such practices, is submitted herewith, marked 
"F. T. C. Ex. No. 60." 



January 5, 1938 Sponges 

(FTCA-5) Tarpon Springs Sponge Exchange, Inc., et al. Docket 

No. 3024 

STATEMENT OF FACTS 

The Tarpon Springs Sponge Exchange, Inc., was a Florida corporation which 
conducted an exchange for the benefit of its stockholders, in all approximately 25 
members, who bought sponges through the Exchange and sold them to wholesale 
and retail dealers throughout the United States. Except as competition was 
restricted and suppressed by the practices hereinafter described, they were in 
competition with each other and with others engaged in a like business. 

The Exchange built a rectangular building containing stalls opening into a 
middle court. These stalls were rented to boat captains to store sponge catches 
until ready for sale, and practfeallv all sponges brought into Tarpon Springs were 
stored there in piles to be sold at auction. The bidding was secret and each cap- 
tain free to accept or reject any bid made. 

After purchase at :U Exchange, the sponges were taken by the packer member 
to his warehouse to b prepared for shipment. 

Of four classes of sponges produced in the United States, namely, sheep's wool, 
yellow, wire, and grass, the first species exceeds in value all other varieties com- 
bined. They are best for automobile washing and the paint industry. Nearly 
all of them come from the waters of the Gulf of Mexico adjacent to Florida, and 
Tarpon Springs is the largest and most important sponge-producing center in the 
United States, producing more than 80 percent of the wool sponges, which have 
the reputation of being the finest wool sponges produced anywhere. Over 90 
percent of the population of that city was directly dependent on this industry. 

Wholesalers and retailers had to get their requirements of wool sponges from 
members of the Exchange, either directly or indirectly. Six Of the members of 
the Exchange, known as operators, advanced funds and supplies to the fishermen 
for a percentage of the proceeds of sale which were turned over to the operators 
who deducted a percentage and distributed the balance upon a share basis to those 
who gather the sponges. There were also some independent boat operators. 
Only member packers, and such others as might be able to secure permits, were 
permitted to purchase at the Exchange. 

For some time prior to 1934, due to a lessened demand for sponges, the industry 
at Tarpon Springs had been in a relatively chaotic condition so that at the end of 
1934 the packers were greatly overstocked and a considerable portion of this stock 
was heavily mortgaged. Collections were slow and financial credit exhausted. 

MONOPOLISTIC PRACTICES 

At a general meeting of all interested parties in the industry on January 10, 
1935, was discussed the problem of how to dispose of more than $100,000 worth 
of sponges which had accumulated in storage at the Exchange. An agreement was 



2334 CONCENTRATION OF ECONOMIC POWER 

reached whereby the packers could pay 60 percent in cash and the operators 
carry the remaining 40 percent. After a vote taken, the fishing-boat captains 
promised the Exchange not to sell any further wool-sponge catches, except those 
already in the Exchange, until after May 1, 1935. It was resolved that the catch 
on hand January 25, 1935, should be sold by February 15, 1935, and that new 
catches should not be offered for sale until after May 1, 1935. and that the 
Exchange should be closed as to all sales of wool sponges. It was further agreed 
that no buyers would be permitted to buy any wool sponges outside of the 
Exchange, except from one another to supply a shortage, and that any buyers 
who violated the agreement should be fined in amounts from $750 to $2,500, 
depending upon the extent of the violation. From February 16, to May 2, 1935, 
the Exchange was closed so far" as sales of wool sponges were concerned; the 
members, by concerted action, refusing to buy or sell them except from or to one 
another to fill outstanding orders. 



The purpose and effect of closing the Exchange to the sale of wool sponges was 
not only to prevent a further decline in prices, but to substantially increase them. 
Between February 16 and May 2, 1935, the normal flow of sponges in commerce 
from the Exchange to consumers in other States of the United States, in the 
District of Columbia, and in foreign countries was completely stopped, and the 
price of wool sponges to dealers and the public generally was increased. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist from such practices in submitted herewith, marked "F. T. C. 
Ex. No. 61." 



January 31, 1938 Automobile Testing Devices 

(FTCA-51 Joseph Weidenhoff, Inc. Docket No. 2675 

STATEMENT OF FACTS 

This corporation located in Chicago, 111., manufactured electrical and auto- 
mobile motor testing devices, together with accessories, and sold them to wholesale 
automotive-supply dealers located in various parts of the United States for resale 
to the public. It was the largest manufacturer in its line with an annual sales 
volume of about $450,000, and was in competition with five other manufacturers. 

In 1932 it purchased a patent pertaining to a vacuum gauge used in com- 
bination with an internal-combustion engine as an indicator of the load factor 
and relative fuel economy in the motor. This patent expired on December 2, 
1936. 

Afterward, it continued to manufacture and sell such testing devices at from 
$175 to $1,000 each. In the completed device many separate parts and items 
were assembled and the vaccum gauge was but a minor part, judged as to cost, 
relative value, and functional importance. Neither the other parts nor the com- 
pletely assembled device was protected by patent. 

MONOPOLISTIC PRACTICES 

by threatening suits for infringement, the Weidenhoff company tried to induce 
all of its competitors, and succeeded in inducing some of them, to enter into 
license agreements fixing resale prices which were 25 percent higher than formerly. 
The Weidenhoff company was to receive royalties. These provisions were not 
confined to the patent rights on said vacuum gauge but related to the completely 
assembled testing device, and all its unrelated parts. 



The license agreements exceeded all incidental ownership rights in the patent 
on the vacuum gauge, and were used to control competition and to fix prices. 
Ensuing higher prices caused injury both to purchasers, and competitors who 
were by coercion compelled to agree to this company's terms and conditions. 

A copy of the Commission's findings as to the facts, conclusion, and order to 

mar ' "".'. T. C. Ex. No. 62." 



CONCENTRATION OP ECONOMIC POWER 2335 

January 31, 1938 School Supplies— Chalk— Crayons 

(FTCA-5) American Crayon Company, et al. Docket No. 2967 

STATEMENT OP FACTS 

Fourteen corporations, who were engaged in the manufacture and sale of chalk 
and waxed crayons, water colors, and other items of school supplies and who, 
prior to 1933, had been engaged in selling them competitively, organized their 
industry under the name o( Paint and Crayon Industry Association and, about 
May 1936, formed the Crayon Water Color and Craft Institute. 

MONOPOLISTIC PRACTICES 

Acting in concert through the Association and the Institute the respective 
companies combined to fix uniform prices, terms, and discounts at which they sold 
such crayons and school supplies. The Association and the Institute acted as 
clearing houses for the exchange of price information. 



Price competition was substantially restricted between and among these con- 
cerns and the prices of crayons, water colors, and other school supplies main- 
tained at an artificial level. 

A copy of the Commission's findings as to the facts, conclusion, and order is 
herewith submitted, marked "F. T. C. Ex. No. 63," and a photostatic copy of the 
stipulation as to the facts entered into between the Commission and the respond- 
ents, upon which evidence the findings were based is also submitted herewith, 
marked "F. T. C. Ex. No. 64." 



February 25, 1938 Golf Balls 

(FTCA-5) Golf Ball Manufacturers' Association, et al. 

(CA-2 (a), (d), (f)) Docket No. 3161 

statement of facts 

The Golf Ball Manufacturers' Association had a membership consisting of 
manufacturers and wholesalers of golf balls. Representative members included 
A. G. Spalding and Brothers, John Wanamaker, Inc.. U. S. Rubber Products 
Company, Acushnet Process Company, and others. The manufacturers belong- 
ing to this Association produced most of the golf balls sold in the United States. 
They were in competition with other manufacturers and wholesalers of golf balls 
and, except for the practices hereinafter referred to, they would have been in 
competition with each other. 

The Professional Golfers' Association of America, known as "P. G. A.," was a 
nonprofit association created to promote the game of golf and the general welfare 
and interests of its members. Its membership consisted of approximately 1,500, 
out of an estimated total of 2,500, professional golfers who were engaged in the 
retail sale of golf balls ^.nd equipment throughout the United States in competi- 
tion with each other and with others. 

MONOPOLISTIC PRACTICES 

The two Associations adopted the policy and practice of coercing manufacturers 
and wholesalers to contact with "P. G. A." to pay the latter for the privilege of 
imprinting the letters "P. G. A." on the golf balls sold to that Association, a 
certain percentage of which was passed on to the retailing members. The re- 
mainder of the funds derived in this manner were used by "P. G. A." to create a 
preference on the part of the public for golf balls bearing that imprint. Under 
these agreements the manufacturers fixed and maintained uniform list prices at 
which they sold golf balls of equal grade and quality to members of the "P. G. A." 
and to nonmember retail dealers and refused to give any rebates or other dis- 
counts to retail dealers who were not members of the "P. G. A." 

The two Associations cooperated in supervising and investigating and policing 
the pricing practices and methods of retail dealers, and acted concertedly to 
"maintain the minimum resale prices agreed upon and otherwise control the retail 
market in golf balls. 



2336 CONCENTRATION OF ECONOMIC POWER 



The payment by the manufacturers to the "P. G. A." of royalties for the privi- 
lege of printing those letters on the golf balls sold by them, and the subsequent 
disposition of such payments to and for the benefit of the individual retail mem- 
bers of the "P. G. A." constituted an unlawful discrimination in violation of 
section 2 (a) of the Clayton Act and had the effect of enabling the Professional 
Golfer retail dealer members to drive out successful competition of nonmember 
retailers in the sale of golf balls of like grade and quality, since the latter, having 
received no such discounts or favorable discrimination, were not in position to 
meet the competition offered by the members of the Association. 

This unreasonably lessened and suppressed competition in the golf-ball trade 
and deprived the public of the price advantages that would otherwise have been 
received, and put small business enterprises, which had been engaged in 4he man- 
ufacturing, selling, and distributing of golf balls, to a serious disadvantage. It 
also prejudiced and injured manufacturers and wholesalers who did not conform 
to the sales program laid down -by the two Associations and their members, and 
tended to monopolize the manufacture and sale of golf balls in the members of 
the respective Associations. 

* A copy of the Commission's findihgs as to the facts, conclusion, and order to 
cease and desist from these practices is submitted herewith, marked "F. T. C. 
Ex. No. 65." 



January 23, 1938 Optical Lenses 

(CA-3) Soft-Lite Lens Company, Inc. Docket No. 2717 

STATEMENT OF FACTS 

The Soft-Lite Lens Company, Inc., was located in New York and manufactured 
and sold to wholesalers of optical goods and supplies a certain kind of glass lens 
under various trade names. These lenses were made in four different densities 
and in a tint or color known in the trade as '-'rose" or "flesh" and sold under the 
general trade name of "Soft-Lite." It was in competition with many others 
similarly engaged. 

MONOPOLISTIC PRACTICES 

The company, in the course of its business, required many retailers to enter 
into contracts with it, known as "Registered Dispensing Licenses." Under the 
terms of these agreements a license was granted to the retailer to sell Soft-Lite 
lenses at prices prevailing in the retailer's locality, and the retailer agreed that 
upon selling a Soft-Lite lens he would place an order with someone holding a 
license from the manufacturer to accept such orders. He also agreed not to sell 
or deal in any lenses slm'br in tint, color, or type to the Soft-Lite lenses. The 
manufacturer agreed to fin .i : i > ■ un sales promotional assistance and requested 
the wholesalers, to whom it sold, to resell only to the retailers whom it had licensed. 
More than 4,000 of these retail licensing agreements ,were entered into. 

EFFECT 

This was contrary to the provisions of the Clayton Act, section 3 of which makes 
it unlawful for anyone engaged in commerce to sell commodities upon the condi- 
tion, agreement, or understanding that the purchaser will not use or rleal in th3 
commodities of a competitor of the seller, where the effect may be to substantially 
lessen competition or tend to create a monopoly in any line of commerce. 

The Commission found that the effect of the use of the licensing agreements 
might be-to substantially lessen competition in the optical-lens business in the 
United States, and ordered th ■ Soft-Lite Lens Company, Inc., to cease and desist 
from such practice. 

A copy of the Commission's findings as to the facts, conclusions, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 66." 



CONCENTRATION OF ECONOMIC POWER 2337 

June 10, 1938 Alcoholic Beverages 

(FTC-5) Seagram-Distillers Corporation, Gooderham & Worts, 

Ltd., et al., Schenley Distillers Corporation, et al., 
Hiram Walker, Inc., et al., National Distillers 
Products Corporation, et al. Dockets Nos. 2988. 
2989, 2990, 2991, 2992 

statement of facts 

Seagram-Distillers Corporation was one of the four largest distributors of 
alcoholic liquors in the United States, selling wherever the sale of liquor was 
legalized, in an annual total dollar volume of about $70,000,000. It had sales 
offices in New York, Illinois, California, Louisiana, Michigan, Pennsylvania, and 
Massachusetts and employed a large number of salesmen who solicited the trade 
of wholesalers, retailers, hotels, bars, and restaurants throughout the United 
States. It did a very substantial amount of national advertising and made 
direct sales of all of its products to carefully chosen wholesale distributors, who 
in turn sold to package stores, retailers, and bars. From time to time it prepared 
price lists upon which were scheduled its prices to the wholesalers, the suggested 
minimum prices at which wholesalers were to resell to the retailers and the sug- 
gested minimum resale prices which the retailer should charge the consumer. 
These prices varied for different States. The liquors Were sold wholesalers upon 
the definite understanding and agreement that the wholesaler would observe the 
suggested minimum resale prices and would sell only to retailers who likewise 
observed the suggested minimum resale prices to the consumer. 

Gooderham & Worts, Ltd., was a Delaware corporation, affiliated with a 
Canadian corporation of the same name. It sold alcoholic beverages, some of 
which were manufactured and sold to it by the Canadian corporation and the 
balance of which it purchased from Hiram Walker & Sons, Inc., a Michigan dis- 
tilling corporation, with whom it was also affiliated. It had four large sales dis- 
tribution offices located in New York, Illinois, Colorado, and California and, with 
regard to- the maintenance of minimum resale prices, conducted its business in 
substantially the same manner as Seagram-Distillers. 

Schenley Distillers, a Delaware corporation, owned all the stock of many sub- 
sidiary distilleries, including some in Pennsylvania and Maryland. It also owned 
Schenley Products Company, its sales corporation. Together with its owned 
and controlled subsidiaries, it constituted one of the largest units for the distilling 
and distribution of alcoholic liquors in the United States. In 1935 its gross sales 
exceeded $63,000,000. It had sales offices in New York, California, Colorado, 
Florida, Kentucky, Louisiana, Illinois, New Jersey, Missouri, Massachusetts, 
Connecticut, and Arkansas and did a large amount of periodical and newspaper 
advertising. Substantially the same resale price maintenance practices were 
adopted and used, as are above described on the part of Seagram-Distillers Cor- 
poration. 

Hiram Walker, Inc., a Delaware corporation, another of the four largest dis- 
tributors of liquors in the United States, employed around 200 salesmen, did a 
large amount of national advertising, and made most of its sales to 49 carefully 
chosen distributors who, in turn, sold to package stores, retailers, bars, and 
others. For each sales division, were prepared price lists upon scheduling the 
respective prices at which it suggested the wholesaler and retailer should resell. 

The National Distillers Products Corporation was a Virginia corporation manu- 
facturing in its own name and through wholly owned and controlled subsidiary 
distilleries, including those formerly operated by the American Medicinal Spirits 
Corporation, Penn-Maryland Corporation, A. "Overholt & Company, Inc., the 
Old Taylor and Old Crow Distilleries near Frankfort, Ky., and man}-" others. 

One of the largest distillers in the United States, it maintained divisional sales 
offices in New York, Louisiana, California, and elsewhere; employed a large 
number of salesmen traveling throughout Uie (Jnited States soliciting the trade 
of wholesalers, retailers, hotels, bars, restaurants, chain stores including the 
Great Atlantic & Pacific Tea Company, Liggett's Drug Stores, Whclan [Jnited 
Drug Stores, and others. It did a large amount of national advertising and 
adopted the same resale price maintenance plan as above described for the other 
large distillers. 

monopolistic acts and practices 

In connection with the sale and distribution of their respective lines of products, 
these distillers, in order to stabilize and make uniform the resale prices of said 
products in the District of Columbia, adopted, established, and maintained what 



2338 CONCENTRATION OF ECONOMIC POWER 

is known as the "Beechnut System" of merchandising, whereby they fixed speci- 
fied, standard, and uniform resale prices, discounts, and mark-ups at which their 
said products should be resold by wholesale and retail dealers and received and 
accepted the active support and cooperation of said wholesalers and retail dealers 
in the maintenance of that system. 

In pursuance of this plan, the respective distillers had argeements or' under- 
standings with their respective wholesale distributors in the District of Columbia 
whereby : 

(1) The distributors agreed to sell only to those retailers who would agree 
to resell at the minimum prices suggested. 

(2) The distributors also agreed to sell the distillers' products at a uni- 
form fixed price to retailers, and without any discounts from the suggested 
list prices. 

(3) The distillers agreed to cooperate by so-called "missionary men" and 
other designated representatives in securing and furnishing all necessary in- 
formation for the purpose of enforcing the suggested prices. 

(4) The distillers also agreed to drop from their list of distributors any of 
them who were found offering to make or making a discount from their 
suggested list prices. 

(5) The distributors agreed to stop supplying retailers who cut prices and 
to compile and maintain reports or lists of those retailers who failed or refused 
to maintain the suggested minimum resale prices, and not to reinstate them 
until such reinstatement had been authorized by the distillers. 

(6) The distributors agreed to dismiss salesmen who offered or gave dis- 
counts or who divided their commission with retailers. 

(7) The distributors agreed to furnish the distillers with the names of 
wholesalers who offered, or who were suspected of offering, discounts to 
retailers. 

(8) The distillers agreed to supply their distributors with a list of retailers 
who did not maintain the minimum resale prices suggested. 

Employees of % he distillers were instructed to report any violations of the above 
agreements and the distillers received and acted upon such reports to the end 
that the supply of products on hand with offending retail liquor dealers might 
become exhausted; cut off the supplies of all price-cutting retail dealers and rein- 
stated offending price cutters who agreed to "behave." For their part the retail- 
dealer vendees, handling the distillers' respective lines, agreed with distributors 
and with distillers' representatives that the reti-.il-dealer's profit should be made 
uniform by fixing and maintaining uniform minimum prices for liquor, and that 
only such retail dealers who promised to maintain uniform minimum resale prices 
should be supplied with the distiller's products. They also agreed that whole- 
salers should be notified not to supply any price-cutting retailers. 

All of the foregoing agreements were carried out as far as possible by the con- 
certed and cooperative action of all concerned. 



The .direct effects of making and executing these agreements were to suppress 
competition among jobbers, wholesalers, and retailers in the District of Columbia; 
and to cause them to sell at the prices suggested rather than at such lower prices 
as they might deem adequate and warranted by their respective selling costs and 
trade conditions generally, thereby depriving purchasers of the price advantages 
which would otherwise have obtained from a natural and unobstructed flow of 
commerce. 

The Commission proceeded against each of the foregoing distilling corporations 
in five separate complaints, wherein, based on extensive investigations and inter- 
views with hundreds of prospective witnesses located throughout the New England 
and Atlantic seaboard areas, it was charged that these distillers had committed 
the above acts and practices throughout those areas. 

On August 17, 1937, by title VIII of an act to provide additional revenue for 
the District of Columbia and for other purposes, Congress passed the Miller- 
Tydings resale price maintenance law, amending section 1 of the Sherman Anti- 
trust Act, and section 5 of the Federal Trade Commission Act, so as to permit 
contracts and agreements for resale price maintenance, such as were involved in 
the instant cases, in all States or Territories where such contracts had been made 
lawful as applied to intrastate transactions under any statute, law, or public 
policy then or thereafter in effect in such State or Territory. 



CONCENTRATION OF ECONOMIC POWER 2339 

At the time of the passage of the Miller-Tydings Act approximately 42 States 
had enacted "fair trade" laws, permitting, under certain conditions, resale price 
mantenance agreements of the kind charged against these distillers; and, sub- 
sequently, a forty-third State, Mississippi, passed a similar, law. This left 
minimum resale contracts affecting commerce going into the District of Columbia 
and the States of Alabama, Delaware, Missouri, Texas, and Vermont as the only 
such contracts to which the Commission considered that its jurisdiction any longer 
applied. 

It appeared trom the investigational hies that, except for the distillers' above 
acts and practices occurring in connection with liquors shipped for resale in the 
District of Columbia, all the acts and practices charged in these complaints had 
occurred in one of the above 43 States. The Commission therefore limited its 
findings of fact and order to the acts and practices of these distillers in connection 
with liquor sold or shipped for resale into the District of Columbia. So that 
presumably, in the absence of any restraint except as to liquors sold in the District 
of Columbia or shipped for resale therein, the aforesaid distilling enterprises are, 
by the Miller-Tydings Act, enabled to, and do, continue by agreement to control 
the resale prices of their products elsewhere throughout the United States. 

In the Beech-Nut case (257 U. S. 441), a system of merchandising similar to that 
used by these distillers was held by the Supreme Court to suppress and prevent 
freedom in competition in violation of the declaration of public policy embraced in 
the Sherman Act, and to constitute an unfair method of competition in violation of 
the Federal Trade Commission Act. 

In the case of Old Dearborn Distributing Company v. Seagram-Distillers, et al., 
decided December 7, 1936 (299 U. S. 183), it was held that the Fair Trade Act of 
Illinois, which, except for minor differences not important to a consideration of 
the facts with which we are here concerned, was the same as the fair-trade laws of 
the other States, was not unconstitutional, and that prices in respect of "identified" 
or branded goods could be fixed under legislative leave by contract between the 
parties. 

•In this latter decision the Court referred to bills introduced in Congress from 
time to time, authorizing standardization of price agreements in respect of identi- 
fied goods upon which bills extensive hearings had been held by congressional 
committees. These bills were in all essential respects like the Illinois act. Ex- 
haustive legal briefs, testimony, and arguments for and against the economic 
value of the proposed laws were described in the records of these hearings. (See 
Hearings before Committee on Interstate and Foreign Commerce, House of 
Representatives, on H. R. 13305 (63d Cong., 2d and 3d sess.) ; H. R. 13568 (64th 
Cong., 1st and 2d sess.); Report of Federal Trade Commission on Resale Price 
Maintenance (70th Cong., 2d sess., H. Doc! No. 546). 

Copies of the Commission's complaints in these distiller cases, together with its 
findings as to the facts, conclusions, and orders to cease and desist, insofar as the 
District of Columbia io concerned, are submitted herewith, marked as hereinafter 
indicated. 

With the exception of Seagram-Distillers Corporation, the Commission's find- 
ings as to the facts, conclusions, and orders were based upon answers to the 
complaints in which the respective distillers admitted the acts and practices as 
charged, insofar as they related to liquors sold in or shipped for resale in the 
District of Columbia. In the case of Seagram-Distillers Corporation, however, 
prior to the filing of its answer, the Commission had caused the issues growing 
out of its complaint against Seagram-Distillers Corporation, and a former answer 
of denial filed by it, to be tried. A complete copy of the transcript of testimony, 
together with photostatic copies of certain of the exhibits referred to in the testi- 
mony, are also submitted herewith for the consideration of the committee, marked 
as exhibits to this report in accordance with the following schedule. 

A copy of the Commission's Report on Resale Price Maintenance, printed as 
House Document No. 546, Part I (70th Cong., 2d sess.), and which was referred 
to by the Court in its decision in the case of Dearborn v. Seagram, supra, is also 
submitted. This document comprises a report on the General Economic and 
Legal Aspects of Resale Price Maintenance and was undertaken on the initiative 
of the Commission. It covers information received in reply to questionnaires 
sent to manufacturers, wholesalers, retailers, and consumers, together with a dis- 
cussion of the Legal Status of Resale Price Maintenance in the United States and 
Certain Foreign Countries. It was transmitted to the Speaker of the House of 
Representatives on January 30, 1929, in two parts. Part II dealt with the com- 
mercial aspects and tendencies, and summarized the results of the inquiry under- 



2340 CONCENTRATION OF ECONOMIC POWER 

taken by the Commission, based on statistical information furnished by manu- 
facturers, wholesalers, and retailers, supplemented by direct oral inquiries made 
by agents of the Commission. 

Schedule of resale price maintenance exhibits 

F. T. C. Ex. No. 67: Copy of findings as to the facts, conclusion,, and order to 

cease and desist in the case of Seagram-Distillers Corporation, Docket No. 2988. 
F. T. C. Ex. No. 68: Copy of findings as to the facts, conclusion, and order to 

cease and desist in the case of Gooderham & Worts, Ltd., Docket No. 2989. 
'F. T. C. Ex. No. 69: Copy of findings as to the facts, conclusion, and order to 

cease and desist in the case of Schenley Distillers Corporation, Docket No. 2990. 
F. T. C. Ex. No. 70: Copy of findings as to the facts, conclusion, and order to 

cease and desist in the case of Hiram Walker, Inc., Docket No. 2991. 
F. T. C. Ex. No. 71: Copy of findings as to the facts, conclusion, and order to 

cease 'and desist in the case of National Distillers Products Corporation, Docket 

No. 2992. 
F. T. C. Ex. No. 72 (Parts 1-35, inch): Copy of transcript of testimony taken 

by the Commission in the case of Seagram-Distillers Corporation, Docket No. 

2988.1 
F. T. C. Ex. No. 73: Photostatic copies of certain documentary exhibits referred 

to in the preceding exhibit (Seagram-Distillers Corporation). 2 
F. T. C. Ex. No. 74-A: Report.of Federal Trade Commission, January 30, 1929, 

on the General Economic and Legal Aspects of Resale Price Maintenance, 

House Document No. 546, Part I (70th Cong., 2d sess.). 
F. T. C. Ex. No. 74-B: Commercial Aspects and Tendencies, Part II; of the 

Commission's report to the Seventieth Congress, second session, dated June 

22, 1931, Part I of which was printed as House Document No. 546. 



March 26, 1938 Rice 

(FTCA-5) California Rice Industry, Etc. Docket No. 3090 

STATEMENT OF FACTS 

The California Rice Industry was a voluntary unincorporated trade association 
in California. Two Boards, known as a Marketing and a Crop Board, controlled 
its policies and activities. The Marketing Board was composed of all the rice 
millers in California, eight in number, including the Rice Growers Association of 
California, a cooperative corporation which milled and processed the rice of its 
some three hundred rice-grower members, as well as others. 

The Crop Board was composed of representatives of California rice growers, 
whose interests it Was intended to protect; but, in time, four of the eight members 
of this Board became members of the Rice Growers Association of California, a 
miller organization, so that the millers rather than the growers dominated the 
activities of both the Marketing and the Crop Boards. 

Substantially all of the rice produced in California is a round, plump-grain rice 
commonly known as the "Japan" or "California-Japan type" and is distinguish- 
able from the long- or medium-grain rice produced in other sections of the United 
States. The average annual crop of the Japan-type rice grown in California is 
about three million 100-pound bags of paddy rice, which is equivalent to a million 
and one-half bags of clean rice, about half of which is shipped to Hawaii, 25 percent 
to Puerto Rico, and the rest sold in the United States. 

MONOPOLISTIC PRACTICES 

In September 1933 the said millers and growers entered into an "Interstate 
Marketing Agreement" which was in force until terminated by the Secretary of 
Agriculture September 14, 1935. On August 28, 1935, the said millers and growers 
entered into an "Intrastate Marketing Agreement" which became e'ffectivebn said 
date, but under which the Marketing Board did not begin to function until the 

' Special reference to Record pp. 312-329; 350-364; 542-550: 559-61S for press cooperation with distillers' 
resale price maintenance policies; also see Record, pp. 1196-1253; pp. 12*9-1330; and pp. 1348-1357 for specific 
instances of operation and effect of the policy on wholesale and retail trade. 

•Special reference is made to Commission's Exhibits Nos. 1-4: 5-125, for reports- 87, 88, 89, blacklists; 
189-C, statement of policy. 



CONCENTRATION OF ECONOMIC TOWER 2341 

beginning of the crop year, to-wit, October 1, 1935. Since October 1, 1935, the 
said millers and growers have fixed prices, terms of sale, quantity discounts, and 
brokerage fees in connection with the sales of processed rice sold and shipped to 
Hawaii, Puerto Rico, and the various States of the United States. On Tuesday 
of each week the Marketing Board, with the concurrence of the Crop Board, fixed 
an "industry price" for extra-fancy clean rice. From this price, by use of a formula 
adopted by said Board, the base price, producer's price, and trade prices for all 
grades of processed rice were computed. The miller members of the Marketing 
Board uniformly observed and maintained these prices not only for the purchase 
of paddy rice from the growers but on all sales of processed rice no matter where 
sold and shipped, so that, with rare exceptions, for the same grade of rice the 
trace prices charged by the millers were uniform at any given time. 

Prior to 1933 the millers and the growers were engaged in open competition in 
the purchase of paddy and in the sale of processed rice; since September 1933, 
there has been practically no competition. The price paid for paddy to the 
growers and the prices charged by the millers for processed rice have been uniform 
and fixed by agreement. 

The Marketing Board, during the time the Interstate Marketing Agreement 
was existing, organized the Hawaiian Rice Importers Association in the Territory 
of Hawaii, which Association is composed of the largest importers of rice in the 
Hawaiian Islands. The Marketing Board determined and classified the members 
of said Association as Island importers. The purpose of the organization of said 
Association was to monopolize the rice markets in the Hawaiian Islands for. the 
benefits of the miller members of said Marketing Board. The Marketing Board, 
under the Intrastate Marketing Agreement, and in agreement with the Hawaiian 
Rice Importers Association, fixed a discount of 22 cents a bag to purchasers of a 
minimum of forty thousand 100-pound bags of rice a month. This was later 
changed to 25 cents a bag' on a minimum of fifty thousand bags per month. No 
single purchaser could take shipments sufficiently large to entitle him to this 
discount, so the members of the Hawaiian Association pooled their requirements 
and thereby were able to achieve a practical monopoly of the rice industry in the 
Hawaiian Islands. Nonmembers of the Hawaiian Rice Importers Association, 
because of the afore-mentioned discounts, were unable to buy rice from the millers 
at competitive prices and only negligible sales were made to them. 

The price of the rice for Hawaii was fixed by the Marketing Board at 15 cents 
per 100-pound bag over the domestic price and this 15 cents per 100-pound bag 
became a deferred discount which was deducted from the price of rice sold to the 
Hawaiian Rice Importers Association and deposited by the miller vendors in 
banks in San Francisco to the credit of said Association. The remainder of 7 
cents was a quantity discount which was in most cases deducted from the face of 
the invoice. The said Association employed a firm of accountants to examine the 
invoicse of the miller members of the Marketing Board and to check the deposits 
at the bank in order to determine that the above-described discounts were prop- 
erly given and deposited to the credit of said Association. 

Further, an additional charge of 1 cent per bag was made by the miller members 
of the Marketing Board on all sales intended for members of the Hawaiian Asso- 
ciation, which 1 cent was remitted by the miller members of the Board to the 
Hawaiian Association as membeiship dues. 

Also, under the Intrastate Marketing Agreement, processing quotas were as- 
signed for each miller member who had to pay into a "Millers' Trust Fund" 10 
cents for each bag processed during the preceding month, and an additional 10 
cents per bag for any processed in excess of their said quota. After the expenses 
of the Marketing Board were paid from this fund it was distributed among the 
miller members subject to the deduction of a penalty to be imposed upon any 
miller member who violated the agreement. 

The Marketing Board also employed accountants to check records and invoices 
of the miller members to ascertain whether or not they were complying with the 
prices, terms of sale, quantity discounts, and brokerage rates as fixed by the Board, 
and these accountants or auditors made monthly reports which were discussed 
at meetings and except for a few instances, which were later corrected, showed 
that the terms of the agreement had been fulfilled. 



The effect as above indicated was the lessening and suppression of competition 
in the sale of rice and rice products, resulting in a monopoly in the sale of California- 
Japan type of rice in commerce. 



2342 CONCENTRATION OF ECONOMIC POWER 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist from such practices is herewith submitted, marked "F. T. C. 
Ex. No. 75." 

Petition for review was filed by the California Rice Industry in the United States 
Circuit Court of Appeals for the Ninth Circuit on May 20, 1938. The case is 
awaiting briefs and argument. 



June 14, 1938 Industrial Rivets 

(FTCA-5) Shelton Tubular Rivet Company bt al. Docket No. 

3107 

STATEMENT OF FACTS 

A Connecticut corporation, known as the Shelton Tack Company, traded under 
the name of Shelton Tubular Rivet Company. Two other Connecticut corpora- 
tions, two Massachusetts corporations, and two Illinois corporations, a Wisconsin 
corporation, a Virginia, Pennsylvania, New York, and Delaware corporation, and 
an association known as the Institute of Tubular Split and Outside Pronged 
Rivet Manufacturers, of which the aforesaid corporations were members, were 
the principal manufacturers of industrial rivets, which they sold and shipped in 
interstate commerce. They constituted a substantial majority of all manufac- 
turers of this product in the United States and prior to 1933 were in open competi- 
tion with each other. 

MONOPOLISTIC PRACTICES 

In 1933, for the purpose of eliminating price competition among themselves, 
they conspired and agreed to fix and maintain, and did fix and maintain, uniform 
prices and discounts, enforcing such agreement by the use of intimidation and 
persuasion to raise prices and influenced members with the "use of pressure, coercion, 
and other means to execute the agreements. 



The effect of such acts and practices was to monopolize, in the aforesaid cor- 
porations and the members of the association, the business of manufacturing and 
selling industrial rivets and to deprive the public of price service and other ad- 
vantages which would normally have been enjoyed in the absence of such con- 
spiracy. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 76." 



April 14, 1938 Fireworks 

(FTCA-5) Pyrotechnic Industries, Inc. Docket No. 3309 

STATEMENT OF FACTS 

Eight fireworks' manufacturers, consisting of two Maryland corporations and 
six others operating under the laws of New York, Massachusetts, Arizona, Cali- 
fornia, Connecticut, New Jersey, combined in a Delaware corporation known as 
the Fireworks Industries, Inc., for the purpose of controlling the pricing practices 
of the industry in the sale of fireworks to jobbers and others. Prior to such asso- 
ciation, these companies were in independent competition with each other and 
with other manufacturers. Also before the combination, the officers, representa- 
tives, agents,, and jobbers of the association had been in competition with each 
other in the sale at retail of such fireworks. 

MONOPOLISTIC PRACTICES 

In 1935 they organized and entered into and carried out an agreement providing 
for uniform prices and discounts to jobbers, and determined who should be 
jobbers. They organized and held meetings of groups of jobbers in various parts 
of the United States to devise means of enforcing the agreements through the use 
of pressure and coercion. Lists of chain stores were compiled to show which stores 
they would recognize as being entitled to special discounts and they then agreed 
to fix and maintain minimum retail prices of the fireworks throughout tht United 



CONCENTRATION OF ECONOMIC POWER 2343 

States. Through concerted refusal to sell, they boycotted certain jobbers, cui 
ting off their supplies of fireworks and maintained a schedule of special discounts 
to such concerns as would purchase fireworks in specified amounts. 

EFFECT 

These acts and practices had the effect of unduly restricting the sale of fireworks 
in commerce, and unlawfully enhancing prices to the'public by maintaining them 
at artificial levels. The public was thus deprived of the benefits of free and normal 
competition, not only between the respondent members of the association, but 
between respective jobbers and retailers in the retail sale of fireworks. This 
tended to create a monopoly in those who took part in the combination. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 77." 



July 23, 1938 Lumber and Building Materials 

(FTCA-5) California Lumbermen's Council, Five Lumbermen'^ 

Clubs, and Their Officers, Councilmen and Mem- 
bers. Docket No. 2898 

STATEMENT OF FACTS 

The California Lumbermen's Council, incorporated in 1934, was an association 
composed of affiliated organizations whose membership of retail dealers in, and 
vendors of, lumber air*l building materials constituted the membership of the 
Council. Prior to its incorporation the Council was a voluntary unincorporated 
association and its members were substantially the same. The dealer-members 
of the Council and members of the affiliated organizations were lumber dealers 
who supplied building materials to contractors, builders, dealers, consumers, and 
other purchasers. The affairs of the Council were administered by certain officers 
and a board of councilmen composed of 10 members, 2 from each of the affiliated 
organizations. The headquarters of the Council were located in California. 

The Coast Counties Lumbermen's Club, Central Valley Lumbermen's Club, 
Northern Counties Lumbermen's Club, Peninsula Lumbermen's Club, and the 
San Joaquin Lumbermen's Club were large associations of lumber and building 
material dealers in California who purchased their supplies from manufacturers, 
producers, and distributors located in various States, particularly Washington 
and Oregon, whence they were shipped to the dealers apd their customers in 
California. Except for the acts and practices hereinafter described, the several 
members of these different organizations would have been in competition with each 
other and they were in actual and potential competition with others not connected 
with the various organizations. 

The members of the organizations were such a large and important part of the 
lumber and building material dealers in California as to be able to substantially 
involve and affect the flow of trade and commtfto in that area. 

MONOPOLISTIC PRACTICES 

By common and concerted action, with the purpose and effect of enhancing 
the volume of trade and profits of the membership in these organizations* they 
adopted and enforced certain practices which were primarily intended to limit 
interstate shipments of lumber and building materials to the dealer members of 
these organizations and to prevent the direct sale of such products by manu- 
facturers, producers, and wholesalers to any nonmember dealers, sellers, contrac- 
tors, consumers, or other purchasers, including State and political subdivisions. 
Some of the other objects were to limit the sale of such materials by the dealer- 
members to areas surrounding the particular location of that dealer-member, 
and to keep other dealers from selling in a trading area where a dealer-member 
was located. 

Two of the organizations fixed and prepared price lists to be observed by their 
members in the respective territories where those organizations operated. These 
two organizations were the Coast Counties Lumbermen's Club and the Northern 
Counties Lumbermen's Club. 

The Coast Counties Lumbermen's Club fixed quotas of sales which a manu- 
facturer, producer, or wholesaler could make each month in its territory and 
also determined the quota of business which a dealer-member might do. 



2344 CONCENTRATION OF ECONOMIC POWER 

To accomplish their objectives, rosters listing the names of the officers and 
councilmen of the Council and the secretaries and members of all affiliate organ- 
izations were issued quarterly and distributed to a large number of manufacturers, 
producers, and wholesalers of lumber and building materials who serviced the 
markets within the territorial jurisdiction of these respective organizations. 

The secretaries of the Council, and the various organizations mentioned, 
informed manufacturers that the sale of lumber and building materials in the 
territories covered by these organizations should be confined to members thereof 
as listed on the^c rosters. Such manufacturers, producers, or wholesalers were 
eo informed, with implied threats that if they did not so restrict their sales the 
members of these organizations would boycott them. The secretary of each of 
the Clubs were directed to furnish the Council with a list of all nonmember retail 
lumber dealers in their districts, together with as complete a list as possible of the 
wholesalers from whom such nonmember dealers bought their requirements. 

The officials and members of these organizations spied upon the business of 
manufacturers, producers, wholesalers, members, and nonmembers; complained 
against manufacturers and producers who sold to other than members, bringing 
such competition to the attention of the various meetings of the affiliated organ- 
izations; and in other ways cooperated by disseminating and exchanging infor- 
mation which would enable them to accomplish their objectives. At times they 
demanded cash penalties or commissions from manufacturers, producers, or 
wholesalers who were found to have sold to nonmembers. A specific instance 
was where the secretary of the Coast Counties Lumbermen's Club requested 
the Smith Lumber Company of San Francisco, a wholesaler, either to stop sell- 
ing W. F. Sechrest, a nonmember dealer, or to charge him $2 or $3 more on each 
thousand feet and credit the amount to the Coast Counties Lumbermen's Club. 
The Smith Lumber Company, a large wholesaler, refused to comply and all the 
members of the Coast Counties Lumbermen's Club, except one, then stopped 
doing business with the Smith Lumber Company, and attempted to and did in- 
terfere with the various sources of supply of the Smith Lumber Company in the 
States of Washington and Oregon. 

The Coast Counties Lumbermen's Club required members to file monthly re- 
ports showing purchases and the names of the sellers, and attempted to equalize 
the sales among friendly manufacturers and wholesalers, notifying its members 
to buy from certain manufacturers and wholesalers who were selling below their 
quotas as fixed by the Club during a particular month, and to refrain from buy- 
ing from other manufacturers and wholesalers who were exceeding their quotas 
for that particular month. The secretary of the Club would examine the books 
of the members to see whether or not these requests were being complied with. 

The same Club imposed penaisies amounting to 10 percent of the total sales 
made by its members outside of their assigned territories. A further fine of $50 
was imposed on any member who disclosed anything whatever regarding the 
activities, agreements, and understandings of the Club. 

The Northern Counties Lumbermen's Club attempted to prevent the retail 
dealer-members of the Sacramento Lumbermen's Club from selling in the North- 
ern Counties Lumbermen's Club area, and requested the members of that Club 
to pay a 10 percent commission on all sales made in such territory, and attempted 
to interfere with the sources of supply of at least one dealer-member of the 
Sacramento Lumbermen's Club who failed to comply with such request. 



Commerce was restrained and interfered with, competition lessened, hindered, 
and suppressed in the territories of the respective organizations; manufacturers, 
producers, and wholesalers were injured in their business by restriction of demand 
and freedom to sell, and costs to the consuming public were increased by this 
policy of exclusive dealer-member distribution; and the public was denied the 
advantages in price that would otherwise have obtained. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
ceas? and desist is herewith submitted, marked "F. T. C. Ex. Xo. 78." 



CONCENTRATION OF ECONOMIC POWER 2345 

July 13, 1938 Snow Fence 

(FTCA-5 United Fence Manufacturers Association. Docket 

No. 3305 

STATEMENT OF FACTS 

United Fence Manufacturers was an unincorporated association of eight com- 
panies who made and sold snow fence. The Association's headquarters were at 
Burlington, N. J., and the member concerns were located at points in New York, 
Maine, Nebraska, New Jersey, New Hampshire, and several points in the Middle 
West. 

Snow fence is largely sold in carload lots, 8,000 feet constituting a minimum 
carload. Freight charges are a substantial part of the cost to the competing 
producer-members in' the sales of such product. 

MONOPOLISTIC PRACTICES 

The Association and its members wanted higher prices for the product within 
a sales area, comprised of 14 States: Namely, Maine, New Hampshire, Vermont, 
Massachusetts, Connecticut, New York, New Jersey, Pennsylvania, Delaware, 
Maryland, Virginia, West Virginia, and Ohio. Of all snow fence products sold 
in that said area, these member concerns sold about 95 percent. By concert and 
agreement they established and maintained a system of identical delivered prices 
for fence sold to customers within that area, regardless of the customers' locations 
and, without cost to the customers, whatever, defrayed all carriage charges inci- 
dent to the delivery. 

Delivered price lists, discounts, and terms of sale, were filed with the secretary 
of the Association and maintained until revised. Such delivered price charges 
were not made effective by all producer-, lembers on the same day, but soon 
after any producer-member filed one, the others followed. Delivered pi ices 
for carload and less-than-carload quantities were identical on snow-fence products 
of each standard type. Likewise, the discounts and terms of sale were identical. 

Although by the terms of their agreement, Government purchasing bodies were 
to be excepted from the application of this pricing policy, such exception was not 
made in practice. Producer-members refused to make shipments upon consign- 
ment, and reported all price cutting to their secretary, who undertook to stop it. 
Each producer-member agreed to submit to an investigation and examination, 
under oath, conducted by a board of trustees, if he were charged at any time with a 
violation of his undertakings pursuant to the aforesaid conspiracy and agreement. 
By agreement, the trade was arbitrarily classified as "distributors" and "dealers" 
who were to receive discounts of 20 and 10 percent, respectively, from the filed 
delivered prices. Lists of all customers were filed with the Association, and the 
Association then issued to producer-members a list of those distributors who 
would be entitled to the distributor's discount. 

Maintenance of resale prices was undertaken and distributors urged to report all 
instances of price cutting. Persuasion, constraint, and coercion were used on 
vendees of snow fence to make them maintain the resale prices so fixed. 

For instance, they agreed to refuse to sell anyone who would not maintain 
them, and threatened to cut off all supplies from such dealers. 

Sometimes, without the consent or knowledge of the purchaser, producer- 
members would divide among themselves large orders which had been awarded 
to one of them through supposedly competitive bidding. 

EFFECT 

The result was that there was no competition in delivered prices between 
producer-members for the business of any private or public buyer located in the 
14 States above mentioned. Many times producer-members sold and delivered 
their products at a long distance from their plants to customers who were near 
the plant of some other producer-member by whom such customer could have been 
more economically served. 

Each producer-member obtained his highest net return when he sold to cus- 
tomers located at or near the point where his own plant was located and from which 
the delivery charge was accordingly at a minimum; but he did not reduce his 
delivered price in the slighest to hold or to gain this, his most profitable actual or 
prospective business. Instead of doing so, he refrained from any acts of price 



2346 CONCENTRATION OF ECONOMIC POWER 

competition and made no effort, so far as price was concerned, to bid for such most 
profitable business. In return for refraining so to do he reciprocally gained the 
privilege of quoting and selling to customers in the high net return areas of other 
producer-members. Each producer-member knew that, so long as other producer- 
members adhered to the said concerted delivered pricing system, he would nowhere 
encounter competition in price. 

The cost of producing snow fence varied somewhat due to the differing costs, at 
respective plants, of the lumber, wire, and other materials and differing labor 
costs. By the said pricing system such variations in cost were nullified as an 
influence or check upon prices. Prices were made by producer-members with no 
regard to individual costs or to varying local conditions of supply or demand. 
Said prices were made in terms of the pricing system and were applied throughout 
the said 14 States. The producer-members maintained an artificial price level, 
little related to, and not governed by, truly competitive conditions. 

Under the said pricing system, producers more efficient, and better financed 
and equipped, and better located, as respects supplies, markets, and transporta- 
tion, in large measure waived these and other competitive advantages by adhering 
to the identical delivered pricing system. Thus their incentive toward efficiecy 
and economy was weakened. Any saving that might have been effected could 
not, under the system, be reflected in price concessions, or in the obtaining of 
increased volume of business. The same delivered prices were adhered to by all 
producer-members alike. 

The buying public lost the benefit of price competition in snow-fence products, 
both among producer-members and their distributor dealers in that area, and was 
obliged to pay artificially enhanced prices. Because these members controlled 
90 to 95 percent of such products in that area, the tendency of the above acts 
was to give them a monopoly. 

Under the delivered pricing system used by these concerns the prices quoted 
and charged were in excess of the net or true prices, except where the buyer was 
located in the same city as that of the producer-member making the sale, because 
such prices included not only the price of the fence but the price of its transporta- 
tion and delivery. In order to ascertain the net or true price received by a pro- 
ducer-member the actual carriage charges incurred by him must be deducted 
from the' price received. Each producer-member thereby made as many different 
prices to his customers as there were destinations to which the producer delivered, 
which destinations had different carriage charges from the location of his plant. 
It will thus be seen that there was inherent in such a system of delivered prices 
regular, constant, and substantial discrimination. This discrimination against 
buyers in their respective home territories was not indulged in merely for con- 
venience or by custom, but with the purpose and effect of destroying competition 
in price on the part of each producer-member. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 79." 



August 5, 1938 Concrete Pipe 

(FTCA-5) Lock Joint Pipe Company, et al. Docket No. 3127 

STATEMENT OF FACTS 

Lock Joint Pipe Company, a New Jersey corporation organized in 1905, owned 
and operated concrete plants in Colorado, Illinois, Missouri, Ohio, New Jersey, 
New York, Connecticut, and South America. The Gray Concrete Pipe Company 
had plants in North Carolina and Maryland. 

The Concrete Pipe and Products Company was' located in Virginia; Mid- 
Atlantic Concrete Pipe and Products Company had plants at Norfolk, Va., and 
Dover, Del.; and the Arlington Concrete Pipe Corporation, organized May 24, 
1935, had its home office and principal place of business at South Washington, Va. 

The holders of all the stock of Concrete Pipe and Products Company ako owned 
stock in Arlington Concrete Pipe Corporation, and took an active part in the 
direction of its affairs. The latter Corporation was organized by the other 
concerns mentioned who, together, owned all of its capital stock and manag?d its 
business. All of its officers and directors held some official position in one or more 
of the other concerns, all of which were engaged in the manufacture, sale, and 
distribution in commerce of concrete pipe and other concrete products. Their 
aggregate plants and machinery were valued at more than $375 000 and they did 



CONCENTRATION OF ECONOMIC POWER 2347 

about 40 percent of the concrete-pipe business in the territory constituting the 
eastern seaboard of the United States, extending from New Jersey and Pennsyl- 
vania on the north to North Carolina on the south. In the territory of Virginia, 
Maryland, and the District of Columbia they did about 75 percent of the total 
concrete-pipe business. 

Until February 10, 1934, all of them (except the Arlington Concrete Pipe Cor- 
poration, which had not yet been created), were in active competition with each 
other in Maryland, Virginia, and the District of Columbia. 

MONOPOLISTIC PRACTICES 

Shortly prior to February 10, 1934, the county of Arlington, Va., invited 
proposals to supply the county with $300,000 worth of concrete pipe in various 
sizes, the bids to be opened on that date. After the invitation was issued, but 
before February 10, 1934, there was a meeting held in Washington, D. C, at which 
were present representatives of the Lock Joint Pipe Company, the Gray Concrete 
Pipe Company, the Mid-Atlantic Concrete Pipe and Products Company, and the 
Concrete Pipe and Products Company. They there discussed the probable bids 
of their competitors, certain vitrified clay pipe companies, and laid plans to under- 
bid them; and the probable wage-and-hour requirements, and general conditions 
with reference to the supplying of this pipe. After the meeting they revised and 
laised certain prices, which had theretofore been prepared for submission in re- 
sponse to the proposal for bids, and deleted from their proposed bids certain items 
which had previously been included. When the bids were opened it was found 
that Concrete Pipe and Products Company was the lowest bidder on certain 
specified sizes and items, and the Lock Joint. Pipe Company was lowest bidder on 
several other items, but, together, the two' were lowest bidders on all items. 
Mid-Atlantic Concrete and Products Company was not low bidder on any item 
and the contract had not been awarded, but, about March 1934, the president 
of that company proceeded to A-lington County to locate a site on which to 
install a pipe plant to manufacture the pipe called for in the contract. After the 
contract had been awarded to the Lock Joint Pipe Company and the Concrete 
Pipe and Products Company, jointly, on May 16, 1934, and 8 days later, "the 
Arlington Concrete Pine Corporation was organized and the contract assigned to 
it. From then, October 11, 1935, the Arlington Concrete Pipe Corporation 
through its directors, who were also officials of the other companies, refused to 
permit that corporation to submit specific bids to supply any concrete pipe and 
directed it to promote sales generally in Virginia, Maryland, and the District of 
Columbia, and to help obtain contracts for the Gray Concrete Pipe Company 
and the Concrete Pipe and Products Company in that territory. 

Since October 11, 1935, the Arlington Concrete Pipe Corporation has been 
submitting bids to supply concrete pipe, and has been selling such pipe supplied 
to it by the Gray Concrete Pipe Company, to the public in that territory at 
prices fixed by the officials of the other companies. 

While under the direct control and management of the other respondents the 
Arlington Corporation, on five separate occasions, submitted bids to the United 
States Construction Quartermaster at prices below the production cost of the pipe, 
and on another occasion submitted a bid to supply pipe to the city of Alexandria, 
Va., below cost, so that during the years of 1936 and 1937 this corporation suffered 
a loss of over $9,000. After the Arlington Corporation was organized, none of 
the other companies competed for any concrete pipe business in Virginia, Mary- 
land, and the District of Columbia. 



The Arlington Concrete Pipe Corporation was intentionally used by the other 
pipe companies as a device to drive competition out of the territory of Virginia, 
Maryland, and the District of Columbia. Together, these companies constituted 
such a large and influential group that they were able to, and did, control to a 
substantial degree the flow of commerce in these products in this area. By the 
aforesaid agreements and conspiracies they drove out and suppressed competition; 
they failed and refused to compete with each other through competitive bids, 
all to the injury of competitors and the public. 

A copy of the findings as to the facts, conclusion, and order to cease and desist 
is herewith submitted, marked "F. T. C, Ex. No. 80." 



124491— 39— pt. 5a- 



2348 CONCENTRATION OF ECONOMIC POWER 

September 10, 1938 Building Supplies 

(FTCA-5) Florida Building Material Institute, Inc., Its Offi- 

cers and Directors. Docket No. 2857 

statement of facts 

This Institute was organized in 1934 under the laws of the State of Florida. 
Its active membership consisted of about 280 retail dealers engaged in the sale 
of lumber, building materials, and millwork. These active members, combined, 

Eossessed about 75 percent of the potential purchasers of such materials in the 
tate of Florida. Over 50 percent of the materials sold by them were manu- 
factured in other States. The Institute also had associate members consisting of 
about 47 manufacturers, producers, and wholesalers in the building-supplv indus- 
try, many of whom had their places of business in other States. In addition to 
the active and associate members, there were a number of cooperating dealers 
and approximately 288 cooperating manufacturers, producers, and wholesalers 
who conformed to the policies of the Institute as hereinafter set out. 

monopolistic practices 

For the purpose of carrying out its policies and practices, the Institute divided 
Florida into 15 divisions, "with a director and 5 committeemen for each division. 
In August 1935 a "Home Rule Plan" was adopted whereby the 15 divisions were 
divided into 5 districts, each of which was self-governed, subject to the authority 
of the State organization. The districts and divisions held frequent meetings, 
made laws for their own government, and established rates of fees, dues, and 
payments. Membership dues were prorated to the gross sales and divided between 
the local organizations and the Institute. The Institute adopted and circulated a 
definition of a "dealer," and anyone seeking active membership had to qualify in 
accordance with that definition. Nam? s of those not considered qualified by the 
Institute were, in one instance, officiall published and distributed. The Insti- 
tute, its officers, directors, and members, by concerted action, conspired to 
adopt and enforce the following practices to promote the members' volume of 
business: 

(a) They established the active members of the Institute as a class of 
recognized dealers in these materials so as to confine the sale of said products 
by manufacturers and producers to or through such member dealers. 

(b) They required associate members and other manufacturers, producers, 
and wholesalers of lumber and like products to refrain from selling to dealers 
or other purchasers who were not recognized by the Institute and wh<~> were in 
competition in the retail sale of said products with the member dealers. 

(c) They interfered with the sources of supply of nonrecognized and non- 
cooperating dealers so as to monopolize trade in lumber, building material and 
supplies in the State of Florida in the members of the Institute and those 
cooperating with its policies. 

To the above ends, they disseminated information relative to noncooperating 
manufacturers, producers, and wholesalers; obtained from members written prom- 
ises of full compliance with the rules and regulations; obtained written statements 
from cooperating manufacturers, setting forth their intention to cooperate in the 
plan: listed names of manufacturers, producers, wholesalers, and deaWs found to 
be violating the Institute's policies, and distributed such information, with changes 
and corrections from time to time; engaged in espionage upon lumber shipments 
and building supplies coming into the State of Florida, and requested the shippers 
to state in writing whether they intended to cooperate with the Institute's policies 
or not. Pressure was exerted by the Institute in various ways to obtain coopera- 
tion, such as writing letters implying boycotts and threats of boycotts, and the 
officers and members kept a close surveillance on all shipments 'in the State of 
Florida of all manufacturers who had signified their intention to cooperate. 
When an associate member, cooperating manufacturer, producer, or wholesaler 
was found to be selling a nonmembcr or a noncooperative dealer, the Institute 
complained directly to such manufacturer, producer, or wholesaler by letter, tele- 
gram, or telephone with implied threats of boycotts by all member and cooperating 
dealers. 

Whenever a noncooperating manufacturer, wholesaler, or dealer satisfied the 
Institute that it would cooperate in the future, the charges against him would be 
released and notices to this effect given to the trade. The Institute issned 
"Credential Cards of Cooperation" to associate members and coo] orating manu- 



CONCENTRATION OF ECONOMIC POWER 2349 

facturers who had gone on record as intending to fully cooperate with the Insti- 
tute's policy, and requested the holders of such cards to concentrate on insisting 
that all concerns obtain those cards. 



Interstate commerce in the sale and distribution of lumber products, building 
materials, and builders' supplies was substantially restrained and restricted to 
the associate and cooperating members, manufacturers, producers, and whole- 
salers, because of the intimidatioivand coercion above described, confined their 
sales to the active members of and the dealers cooperating with the Institute. 
Shipments to noneooperating dealers and other purchasers were refused and 
cancelled because of this intimidation. Manufacturers, producers, and whole- 
salers located in North Carolina, South Carolina, Alabama, Georgia, and other 
States were restrained in making interstate shipments because of the interference 
of the Institute, and competition in and between the several States of the United 
States in these products was hindered and suppressed with the tendency and 
capacity of creating a monopoly in the sale of said products in the members of 
the Institute. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is submitted herewith, marked "F. T. C. Ex. No. 81." 



December 16, 1938 Liquid Chlorine 

(FTCA-5) Mathieson Alkali Works, Inc., et al. Docket No. 

3317 

STATEMENT of facts 

The Mathieson Alkali Works, a Virginia corporation, and eight other corpora- 
tions operating in the States of New York, Pennsylvania, West Virginia, and 
Missouri manufactured and sold liquid chlorine for industrial and commercial 
purposes to towns, cities, State, and Federal Governments and the subdivisions 
thereof, and together, since about 1930, either directly or through their various 
sales agents, manufactured substantially all of the liquid chlorine manufactured 
for commercial and industrial purposes and sold in the United States. Purchasers 
of this product since 1930 had no regular source of supply except these corpora- 
tions. Before 1931 they competed with one another as to the price at which 
they sold. 

MONOPOLISTIC PRACTICES 

In 1931, for the purpose of eliminating competition among themselves, these 
corporations entered into an agreement and carried it out whereby they fixed 
and maintained uniform prices which were higher than before; and, for the pur- 
pose of more effectively carrying out the agreement and maintaining these en- 
hanced prices, they agreed to and did divide the United States into zones. 



The Commission found that the effect of this combination and conspiracy 
operated to the injury of the public, tended to and actually hindered and pre- 
vented price competition in the sale of this product in commerce, and increased 
the prices which purchasers had to pay, thus creating a monopoly in interstate 
commerce, in the hands of these corporations. 

A copv of the findings as to the facts, conclusion, and order to cease and desist 
is herewith submitted, marked "F. T. C. Ex. No. 81-A." 



December 9, 1938 Paper, Pulp and Wooden Dishes 

(FTCA-5) Food Dish Associates of America et al. Docket No. 

3397. 

statement of facts 

In 1933 a large number of corporations, partnerships, firms, and individuals 
organized a voluntary unincorporated trade association known as Food Dish 
Associates of America. The membership was engaged in the sale and distribu- 
tion of paper, pulp, and wooden dishes or trays such as are ordinarily used by 



2350 CONCENTRATION OF ECONOMIC POWER 

grocery and delicatessen stores and butcher shops as containers for lard, butter 
meats, and other food products. 

From time to time after 1933 the membership was changed and, about July 
1936, the Association as formerly constituted became inactive. Eight of the 
members continued to act through the former secretary of the Association until 
about May 1937, at which time it was dissolved. Thereupon, a number of these 
manufacturers retained an "industrial engineer" to act as a price clearing house 
or intermediary and to keep them mutually informed of general marketing con- 
ditions, practices, discounts, and prices. They all filed their current price lists 
and agreed to adhere to such filed prices until further notice. In one instance 
the "industrial engineer" persuaded one of the manufacturer members to refuse 
to sell at a price below its filed prices. 

In the above manner and through the above agencies all of the respondents, at 
vaiious times during the period between 1933 and 1938, had combined and con- 
spired for the purpose of fixing uniform minimum pi ices and discounts to be 
made for the sale of their respective products, which prices otherwise and normally 
would have been competitive. 

MONOPOLISTIC PRACTICES 

These companies divided the United States into zones, fixing base prices for each 
zone; exchanged price lists with the purpose and effect of maintaining uniform 
fixed prices in each zone; and generally conformed to every arrangement which 
would promote that end. The respondents, who retained the services of the 
"industrial engineer" corporation, controlled about 45 percent of the total volume 
of all food trays sold in the United States. 



Paper, pulp, and wooden dishes or trays are competitiev in that they are equally 
acceptable to the trade, and the concerns named in the Commission's complaint, 
by fixing prices for such product in connection with the sale and distribution 
thereof, substantially lessened and virtually destroyed all competition therein. 

A copy of the findings as to the facts, conclusion, and order to cease and desist 
is herewith submitted, marked "F. T. C. Ex. No. 81-B." 



August 8, 1938 Waste Paper, Rags, and Other Waste Materials 

(FTCA-5) Letellier-Phillips Paper Co., Inc. Docket No. 3434 

statements or facts 

This was a Louisiana corporation which bought Wj,ste paper, rags, and other 
waste materials of various kinds throughout the Unit jd States and packed and sold 
them from its warehouses in New Orleans. For mr.ny years it had had a dominant 
control of the waste paper business in the South and Southwest generally, and 
particularly in the States of Louisiana, Texas, and Mississippi, so that large con- 
sumers of waste paper and waste materials in those sections were dependent upon 
the Letellier-Phillips Company for their i ecessary supply of these materials. 
Also, other and smaller dealers in waste materials were dependent upon the 
Letellier-Phillips Company as an outlet for their supplies. 

monopolistic practices 

Respondent unfairly disparaged its competitors and attempted to increase its 
dominant position by threats, intimidation, and boycott. Among other things, 
it threatened other waste-material dealers that it would discontinue all business 
relations with them should they continue either to purchase from or sell to cer- 
tain of respondent's competitors located in the Southern States. It threatened to 
stop supplying large consumers of waste products in the Southern States if said 
consumers purchased any waste materials from certain of respondent's com- 
petitors, and threatened various dealers located in other States that if they per- 
sisted in either purchasing from or selling to certain of respondent's competitors 
in the Southern States, it, the Letellier-Phillips Paper Co., would move into their 
territories and enter into active competition with them. 



CONCENTRATION OF ECONOMIC POWER 2351 

EFFECT 

The effect of these practices was to monopolize in the Letellier-Phillips Paper 
Co. the business of buying, packing, and selling waste paper, rags, and other waste 
materials in the South and Southwestern States; unreasonably lessen, restrain, 
hamper, and suppress competition in this industry, and deprive the purchasing 
public of the advantages that would otherwise be received and enjoyed under 
normal conditions of free and fair competition. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 81-C." 



December 2, 1938 Glass 

(FTCA-5) Pittsburgh Plate Glass Company et al. Dokcet No. 

3491 

STATEMENT OF FACTS 

The Pittsburgh Plate Glass Company, a Pennsylvania corporation, manu- 
factured and sold window glass and other products. It also conducted a glass 
glazing contracting business throughout that section of the United States east of 
the Rocky Mountains. It maintained and operated factories in Pennsylvania, 
Indiana, Missouri, Ohio, West Vriginia, and Oklahoma, together with 70 ware- 
houses located in many different States from which it distributed its products. 
It has a branch in St. Louis which conducted its glazing contracting business in 
that area. 

The Nurre Companies, Inc., an Indiana corporation with jobbing branches in 
Tennessee, Missouri, Ohio, and New Jersey, also sold and distributed its products 
in the St. Louis trade area, as did the Burroughs Glass Company and the Hadley- 
Dean Glass Company, two Missouri corporations. 

All four of these concerns, in the ordinary conduct of their businesses, purchased 
glass from manufacturers having factories located in many different States and 
caused it to be shipped in interstate commerce into the State of Missouri for the 
purpose of reselling and delivering the same to purchasers located in the States 
of Missouri and Illinois and, in some cases, in the States adjacent thereto, so 
that there was a continuous stream and flow of such commerce in glass across 
State lines from the place of manufacture to the warehouses of aforesaid companies 
and their branches and from the said warehouses and branches to the various 
purchasers thereof. 

Except insofar as competition was restrained and lessened by the acts and 
practices hereinafter set forth, these four concerns were normally in competition 
with each other. 

The National Glass Distributors' Association was composed of various glass 
distributors throughout the United States and one E. V. Hanser was its secretary. 
The glass distributors involved in this case employed him part time to police 
glazing contracting jobs and from time to time he functioned as their employee 
to effectuate some of the policies and practices hereinafter set forth. 

There were two local unions of painters, decorators, and paper hangers with 
their respective secretaries and business agents also involved in this proceeding. 

MONOPOLISTIC PRACTICES 

The respondent distributors in this case agreed among themselves to, and did, 
exchange information concerning prevailing prices, and contemplated changes 
in prices for plate window or structural glass used in the glazing contracting busi- 
ness. They exchanged information also concerning bids to be submitted by 
any one of them, with the purpose and result of predetermining which one of 
them would procure the contract in given areas which they attempted to allocate 
among themselves. They collectively agreed upon certain formulae to be used 
in computing costs for the purpose of regulating total amount of .such bids. In 
cooperation with the local unions of painters, decorators, and paper hangers, and 
with the purpose and effect of discouraging competition by smaller distributors 
and glazing contractors, they procured and helped maintain a requirement by 
the said labor organizations that all competing glazing contractors should be 
compelled to employ four glaziers steadily at the rate of $12 per day, each, 
whether needed or not, as a condition to securing glaziers to install glass in any 
structure or building, and also cooperated with the said unions in a requirement 



2352 CONCENTRATION OF ECONOMIC POWER 

that competing glazing contractors must have the glass glazed on the premises 
or glaziers could not be procured. 

EFFECT 

The effect of such policies and practices was to concentrate in these four dis- 
tributors the glazing contracting business in the St. Louis area; to maintain 
higher prices; to restrict and suppress competition and to burden, hamper, and 
interfere with the normal and natural flow of trade and commerce in glass into 
and through the various States of the United States, particularly those included 
in the St. Louis trade area. 

The public was affected by the resulting increase in the price of glass sold; 
the discrimination against small glazing contractors, who either were or might 
desire to become engaged in the glazing contracting busines in that area, cor- 
respondingly lessened the volume of private and public construction in which 
glass was used, and lessened opportunities for employment. This tended to raise 
the cost of public buildings and private structures in which glass was used, and 
tended to make them either less available to the public or to raise the rents and 
taxes by which the public paid for them. 

The Commission found that the above acts and things done by these respondents 
placed in them the power to control the glazing contracting business in that area, 
and tended to create a monopoly in them. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is submitted herewith, marked "F. T. C. Ex. No.«81-D." 



December 13, 1938 Calcium Chloride 

(FTCA-5) Columbia Alkali Corporation, et al. Docket No. 3519 

Statement of facts 

The Columbia Alkali Corporation and three other companies were the only 
manufacturers of flake calcium chloride in 'the United States, and also manu- 
factured over 75 percent of all other forms of calcium chloride, controlling the sale 
and distribution of a substantial majority of the entire output of this product in 
commerce in the United States and in the District of Columbia. Normally, 
and except for the acts and practices herein set out, they would have been in 
active and substantial competition. 

monopolisitc practices 

During the period of November 1937 to January 1938 they entered into under- 
standings, agreements, combinations, and conspiracies to fix atid maintain, and 
did so fix and maintain, uniform prices in the sale of this product. For that 
purpose they maintained a uniform zoning system; exchanged information with 
respect to the prices each was to charge for calcium chloride in its various forms 
and suggested what the retail prices should be. .When there was any change 
in the prices they all made the same change at the same time, and offered identical 
bids for carload and less than carload lots to prospective purchasers; they elim- 
inated cash discounts for prompt payment, and made identical raises in the 
prices of calcium chloride in various forms, acting in concert, one with the other. 



The Commission found that these acts and practices were to the prejudice of 
the public and had a dangerous tendency to hinder and prevent price competi- 
tion in the sale of calcium chloride in various forms in commerce in the United 
States, and constituted an unfair method of competition. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is submitted herewith, marked "F. T. C. Ex. No. 81-E." 



CONCENTRATION OF ECONOMIC POWER 2353 

December 15, 1938 Corn Cribs and Silos 

(FTCA-5) Rowe Manufacturing Company, et al. Docket No. 

3544 

STATEMENT OF FACTS 

The Rowe Manufacturing Company was an Illinois corporation and, together 
with one other Illinois corporation and two Iowa corporations, an individual and 
a partnership, engaged in the manufacture and sale, among other products, of 
combination wood and wire portable corn cribs and silos. Combined they pro- 
duced the major portion of such products in the industry, and were so large and 
influential as to be able to influence and control the flow of trade in such products 
in commerce in the United States. 

Portable corn cribs and silos are made from pine picket lathing, measuring 4 
feet by 1% inches by l /z inch, and spaced 2 inches apart, pointed at one end, woven 
together with galvanized wire, and painted with red mineral preservative, and 
are practically identical with snow fencing, differing only as to use. They are 
largely used in the corn-producing States of the Middle West, especially in the 
State of IOwa, for the storage and preservation of corn, ensilage, and other corn 
products. 

Normally these concerns were in competition with each other. 

MONOPOLISTIC PRACTICES 

They entered into joint agreements, combinations, and conspiracies with the 
purpose and effect of eliminating competition by agreeing to fix and maintain 
uniform delivered prices for said products to customers in the above-mentioned 
States. They allowed the Rowe Manufacturing Company to act as a clearing 
house for an exchange of price information and suggestions as to what prices 
should be charged; they initiated uniform prices for the State of Iowa, during 
the year 1936, and applied the Iowa program to the other States as closely as 
possible; granted uniform discounts; designated common basing points; made 
effective simultaneously all delivered price changes; reported upon price cutting 
nd urged others to so report, and acted upon such reports by negotiating with 
the price cutters in an attempt to eliminate further price concessions. 

EFFECT 

The Commission found that these acts and practices were to the prejudice of 
the public and said acts hindered and prevented price competition in the sale of 
portable corn cribs and silos in the above-named States, and placed in respond- 
ents the power to control and enhance prices, and tended to create a monopoly. 

A copy of the Commission's findings, conclusion and order to cease and desist 
is herewith submitted, marked "F. T. C. Ex. No. 81-F." 



January 18, 1939 Automobile Carburetors and Carburetor Parts 
(FTCA and CA-3) Carter Carburetor Corporation. Docket No. 3279 

STATEMENT OF FACTS 

The Carter Carburetor (Delaware) Corporation of St. Louis, Mo., manufactured 
and sold carburetors and parts for original standard equipment and for replace- 
ment. It and Bendix Products Corporation in 1937 supplied carburetors to more 
than 90 percent of domestic passenger cars. Marvel and Tillotson carburetors, 
and recently Chandler-Groves, have been made standard equipment on some 
popular makes of automobiles. In 1937, on 60 percent of passenger cars and 
trucks, and for 3 years prior to 1937, on more than half of all passenger cars and 
trucks sold, Carter carburetors were standard equipment. They were standard 
equipment on the 1937 and .1938 models of Chevrolet, Pontiac, Oldsmobilo, 
LaSalle V-8, DeSoto, Hudson, Terraplane, and Reo, also Chrysler- Royal, Ply- 
mouth DeLuxe model, Cadillac V-16, Dodge trucks, and some Studebaker cars 
and trucks. 

The two principal branches of commerce in carburetors are original equipment 
and replacement. During 1937 Carter Carburetor Corporation sold 1,635,000 
carburetors to automobile manufacturers as original equipment. In the same year 
it sold more than 103,000 replacement carburetors, the list prices of which ranged 
from $10 to $28 each, and this business was greatly increased by the sale of parts. 



2354 CONCENTRATION OF ECONOMIC POWER 

At first the replacement business of a. new manufacturer is relatively small and 
takes 2 or 3 years to develop, because ordinarily a carburetor does not have to be 
replaced or repaired during the first year. However, service-station distribution 
from the first is necessary to assure the automobile manufacturer, on whose models 
the carburetor is placed as standard equipment, that proper warranty service will 
be given. Also, the automobile makers rely on the service stations for a' ready 
supply of carburetor parts for making repairs. This service can be given only 
through a wide service-station distribution, the availability of which is a very 
important factor to consider when adopting any make of carburetor as standard 
equipment. 

The business of servicing, replacing and repairing automobiles and automobile 
equipment is carried on by about 60,000 independent service stations and garages 
in the United States, about 7,000 of which specialize in the service of electrical 
equipment and carburetors. Practically all such carburetor-service stations carry 
and sell Carter carburetors. 

A modern carburetor is a complicated mechanism of some 150 to 175 parts. 
Special equipment and training are necessary for proper service. So a large part 
of the carburetor-service business in their respective localities is handled by the 
7,000 specialized service stations. 

These stations were accustomed to stock and deal in competing lines of car- 
buretors constituting standard equipment. Large service stations carried 
practically all lines of such equipment and had contracts with competing manu- 
facturers. Not only does the average automobile driver not know the make of 
the carburetor on his car, but different models of the same make of car may and 
do carry different carburetors. 

As of January 1939 most of the stations handling Carter products also carried 
other lines and gave service on one or more competing carburetors. 

Customarily carburetor manufacturers contract with large independent service 
stations respecting the sale of their products; require the station to stock the 
manufacturer's equipment and parts and prescribe the price to be paid and dis- 
counts to be received by the service station. These are called official service 
stations of the particular carburetor manufacturer. 

Carter did not enter the service field on a large scale until about the year 1930, 
when it began to sell a "general parts cabinet" to about 6,000 stations throughout 
the country, which were known as "general cabinet" stations, and were allowed a 
discount of 40 percent compared with Carter's general trade discount of 25 
percent. 

In 1932 Carter began offering service-station contracts in many cases to sta- 
tions handling competing carburetors and, by January 1939, had between 900 
and 1,000 such stations in addition to its "general cabinet stations." These 
contracts allowed a discount of 50 percent, and in some cases 50 and 10 percent 
from list prices, and provided that the service station should sell at the prices 
and discounts recommended by Carter, as well as give warranty service. 

Carter sold f. o. b. St. Louis to distributors or wholesalers located in the various 
States of the United States, who were also under contract. Regional distributors 
received discounts of 60 and 10 percent and had exclusive territory covering, 
in the aggregate, the entire United States. Zone distributors, of whom there 
were 86, might purchase at 60 percent discount for shipment either direct from 
St. Louis or from the regional distributor. 

All distributors' contracts required resale at prices and discounts fixed by 
Carter. Catalog list prices were used as a basis for figuring the resale price. 

From time to time Carter furnished service and sales bulletins, charts, trade 
information, and other valuable literature to all of its stations, and employed 19 
field representatives to call on distributors and stations. It conducted short 
training courses where many service-station mechanics received special training 
in the servicing and repairing of carburetors. 

MONOPOLISTIC PRACTICES 

About April 1, 1937, the Carter Carburetor Corporation notified all its dis- 
tributors, service stations, cabinet stations, and personnel that if any new car- 
buretor lines were taken on without its written approval the above preferential 
discounts, service information, and Carter contracts would be discontinued, ft 
also notified its distributors that if a line of competing carburetors was taken on 
the distributor could not hold his Carter representation on an exclusive territorial 
basis. There were three carburetors which were made only since June 1934 
Chandler-Groves, Mallory, and Fish — the first of which is the only one which 



CONCENTRATION OF ECONOMIC POWER 2355 

has been adopted as standard equipment on automobiles. In 1936 Chandler- 
Groves carburetors had been adopted for use as standard equipment on Packard 
Six and Plymouth PT-50 truck. In 1937 Chandler-Groves became standard 
equipment on Plymouth passenger cars and, late in that year, ,were adopted for 
Lincoln-Zephyr and some Fords. The Carter Carburetor Corporation had 
received notice of the adoption of the Chandler-Groves carburetor by Plymouth 
in a bulletin issued March 10, 1937, a short time before it issued its above instruc- 
tions to its distributors. Prior thereto it had not objected to its service stations 
handling Chandler-Groves carburetors along with other competing lines. 

Field representatives were instructed to insist upon the enforcement of this 
policy and to check up on the service stations to see that it was carried out. 
They were notified that "our outlets must choose between Chandler-Groves and 
Carter" and, on April 5, 1937, they were told that "until they make up their 
minds, 25 percent will be their discount." All service stations handling the 
Chandler-Groves carburetors were told that if they kept on handling them after 
May 1, 1937, mailings to them would be discontinued and Carter contracts would 
lapse and they would get only the standard trade discount. 

Chandler-Groves Company had a sales set-up similar to that of the Carter Cor- 
poration and many of Chandler-Groves' service stations also had Carter contracts. 

Pursuant to its notice the Carter Carburetor Corporation cancelled its con- 
tracts and reduced the available discounts to about 19 service stations which 
refused to discontinue dealing in Chandler-Groves products. As a result of the 
choice with which the service station dealers were confronted many of them can- 
celled their contracts with Chandler-Groves and returned the Chandler-Groves 
stock in April and May 1937. Some of the stations which had contracts with 
Chandler-Groves were thereby induced to breach the terms of their sales con- 
tracts with Chandler-Groves to prominently display the advertising material of 
Chandler-Groves and, without returning their Chandler-Groves stock, kept such 
stock out of sight and ceased to promote the sale thereof. 

The Carter Carburetor Corporation entered into or renewed contracts for the 
sale of its products with more than 900 service stations on the condition or under- 
standing that they would not use or deal in any competing carburetor, and fixed 
the prices charged for its products and discounts from such prices to approxi- 
mately 7,000 service stations on the condition or understanding that the pur- 
chasers would not deal in competitive products. This was done in the regular 
course of its business. 

EFFECT 

The effect of the above practices, contracts, and the conditions and understand- 
ings was to substantially lessen competition and tend to create a monopoly in the 
sale and distribution of carburetors and carburetor parts in interstate commerce. 
By such practices Carter Carburetor Corporation induced, coerced, and compelled 
a large number of automobile-service stations throughout the United States to 
refuse to deal in or purchase the products of Chandler-Groves Company and to 
cancel and violate existing sales agreements with said competitor. This closed t(5 
said competitor a substantial number of actual and potential service-station out- 
lets for its products and diverted business and trade from it, and has prevented 
such service stations from dealing in a full line of standard carburetors and parts. 
This practice, which was directed at any new competition, directly affected and 
lessened potential competition in the original equipment field, since an automobile 
manufacturer is naturally reluctant to adopt as standard equipment a competing 
carburetor which cannot take care of its part of the usual 90-day warranty and 
cannot provide the purchaser of the automobile with adequate and expert carbu- 
retor station service. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist from such monopolistic practices is submitted herewith, marked 
"F. T. C. Ex. No. 81-G." 



January 17, 1939 Bakery and Packaged Food Products — Biscoits 
(CA-3 FTCA) National Biscuit Company. Docket No. 3607 



statement of facts 



National Biscuit Company is a New Jersey corporation with its office and prin- 
cipal place of business in New York. It sells bakery and packaged food products, 
including over 500 varieties of biscuits. The largest company of its kind in the 



2356 CONCENTRATION OF ECONOMIC POWER 

United States, it has factories in more than 21 different States, and with sales 
branches in approximately 257 cities through which it maintains an extensive sales 
and delivery organization, selling and delivering directly to retailers by motor- 
trucks. 

Of its competitors, many smaller concerns do not have localized delivery facilities 
and consequently are largely dependent upon jobbers and wholesalers for market- 
ing outlets. 

MONOPOLISTIC PRACTICES 

The National Biscuit Company entered into and performed agreements with 
certain jobbers and wholesalers to pay them a percentage or discount on sales by 
the company to certain allocated groups of retailers when such jobbers and whole- 
salers performed little or no service in connection with the sales. In return, the 
wholesalers and jobbers agreed not to deal in competitive products. 

Many customer and noncustomer wholesalers and jobbers received these dis- 
counts and percentages upon such understandings and agreements. The purposes 
were to prevent the wholesalers and jobbers from dealing in the products of com- 
petitors of the National Biscuit Company and to prevent retail dealers in competi- 
tive products from receiving the customary and ordinary services of jobbers or 
wholesalers. 

EFFECT 

These practices tended to greatly curtail the services of jobbers and wholesalers 
to competitors of National Biscuit Company in the marketing of their products 
so long as the jobbers and wholesalers continued to receive compensation from 
National Biscuit Company, the largest and most dominant factor in the industry, 
all resulting to the prejudice and injury of the public and the National Biscuit 
Company's competitors. 

A copy of the Commission's findings as to the facts, conclusion, and order to 
cease and desist is herewith submitted, marked "F. T. C. Ex. No. 81-H." 



December 12, 1938 Containers — Metal — Closure Parts — Patent Li- 
censes 
(FTCA-5) American Flange and Manufacturing Compant, 

(Ca-3) Inc. Docket No. 3391 

STATEMENT OF FACTS 

The American Flange and Manufacturing Company was an Illinois corporation 
with its principal office in Chicago, 111., and manufactured and sold "Tri-Sure" 
closure parts and seals for metal containers, such as oil drums. These closure 
parts consisted of a threaded flange and a metal plug fitting into the flange. These 
products were manufactured and sold by this company to numerous metal-drum 
manufacturers, who applied them to the drums to provide an opening through 
which the drum might be filled and emptied, and a stopper for such opening. The 
containers usually were sold by the manufacturers to concerns which filled them 
with oil, paint, and other liquid products marketed by the latter. The seals were 
used to seal the closure parts against tampering, leakage, etc., and were sold by 
the American Flange and Manufacturing Company largely to filler customers who 
purchased the drums from the drum manufacturers. 

MONOPOLISTIC PRACTICES 

The American Flange and Manufacturing Company held patents on these 
flanges, plugs, and seals, as well as patents on them as used in combination with 
metal drums. It also held patents on certain dies and tools which were used in 
applying "Tri-Sure" closure structures and sealing caps to metal containers. 
These dies and tools were leased by this company to purchasers of its closure parts. 

The American Flange and Manufacturing Company pursued a policy of solicit- 
ing both drum manufacturers and filler customers, buying its closure parts, to 
enter into a so-called license and service agreement. This agreement licensed these 
customers to use the patented tools and dies in applying "Tri-Sure" closure parts 
to metal containers. In consideration of this license for the use of such tools, 
the customer acknowledged the validity of the American Flange Company's 
patents on applying tools and dies and agreed not to infringe or contest such pat- 
ents. These provisions of the agreement were not challenged by the Commission's 
complaint, findings, or order. 



CONCENTRATION OF ECONOMIC POWER 2357 

However, the terms of the agreement in question also requried the customer 
buying "Tri-Sure" closure flanges and seals outright as an ordinary purchase and 
sale transaction to acknowledge the valitidy of the patents under which such 
products, so sold, were manufactured by the American Flange and Manufacturing 
Company, and such customer entering into the agreement was bound by it not 
to infringe or contest such patents. In addition to the patents which this company 
relied on, in protecting its manufactured closure structures, there were included 
among the patents enumerated in the agreement patents which it owned but did 
not use in the manufacture of its closure parts, as well as patents on combinations 
of its closure parts with metal drums, and pending patent applications on which 
no patents had been issued. The agreement listed about 50 patents and 15 
patent applications altogether. 

In the agreement the American Flange and Manufacturing Company agreed to 
indemnify customers against suits for infringement arising from their use of its 
products whieh might be instituted against them. 



The Commission found that the effect of such use of this company's policy of 
using its licensing and service agreements may have been to induce purchasers to 
buy "Tri-Sure" products to an extent which they might not have done in the 
absence of such agreements, and to lessen the sale of competing products; to 
obtain from customers acknowledgment of the validity of and an agreement not 
to infringe or contest certain patents and patent applications owned by the Ameri- 
can Flange and Manufacturing Company, without assurance as to their validity 
or without the means of obtaining such assurance; to obtain from customers an 
acknowledgment and agreement not to infringe or contest the validity of patents 
which this company owned but did not use or rely on in the manufacture and sale 
of its products; to induce customers to accept a license under its patents for 
closure parts, some of which were sold outright by the American Flange and 
Manufacturing Company, with knowledge that they were to be used in metal 
containers by the purchasers, and to induce purchasers to assist the company in 
making more effective its monopolies under such patents. 

The Commission concluded that the American Flange and Manufacturing 
Company's use of the agreement, insofar as it required customers to acknowledge 
the validity of, or to agree not to contest or infringe, patents covering products 
sold outright by respondent to its customers, pending patent applications and 
patents which it did not use in connection with the manufacture and sale of such 
patents, was an unfair method of competition in violation of section 5 of the 
Federal Trade Commission Act. 

The Commission, in issuing its order, took the position that the sale of this 
company's patented articles to its customers was to be distinguished from the 
leasing of its patented applying tools to them. The Commission's order does not 
interfere with the American Flange and Manufacturing Company in licensing the 
use of its patented applying tools, but it does not permit the company to induce 
its customers to accept licenses for the use of patents on products which it sells 
outright to them. 

VIOLATION OF SECTION 3 

The American Flange and Manufacturing Company's original license and 
service agreement further provided that if a customer, during any 6 months' 
period, should purchase "Tri-Sure" closures amounting to 80 percent of his total 
requirements for that period, he would be granted a so-called quantity discount 
of 10 percent. 

This provision was later modified by this company to the following effect: 

"We will consider that you have qualified for our quantity discount when, 
at the end of 6 months' periods you inform us by letter that during the period 
you have considered our flange and plug your standard, have recommended 
them to your customers without discrimination, and used them where you 
could." 

It was the Commission's conclusion that these discount provisions violated 
section 3 of the Clayton Act, as being the allowance of a discount on a condition 
which tended to induce purchasers not to deal in competing products. 

A copy of the Commission's findings, conclusion, and order to cease and desist 
is herewith submitted, marked "F. T. C. Ex. No. 81-1." 



2358 CONCENTRATION OF ECONOMIC POWER 

PENDING COMPLAINTS 

The following is a list of those cases which the Commission thinks should be 
brought to the attention of the committee in which no orders to cease and desist 
have issued, but in which the formal complaints of the Commission have been 
issued and served, and which cases are now pending for trial. 

These cases are of the same type as the cases heretofore described in which 
orders to cease and desist have been issued, in that the complaints charge respond- 
ents with acts and practices alleged to involve unlawful restraints of trade. 

The acts and practices charged are of the same general type as the cases in 
which orders have issued. The practices include combinations and conspiracies, 
cometimes through associations, to confine trade, to various groups or members 
of associations; the allocation and apportionment of sales territories; discrimina- 
tion among customers; the use of single or multiple basing-point systems of de- 
livered prices; zone basing-point systems; the maintenance of minimum resale 
prices; horizontal price fixing; concerted and cooperative action and agreements 
enforced by boycotts or threats of boycotts; combined refusal to deal, and other 
coercive action, all unlawfully lessening and suppressing competition and tending 
toward monopoly. 

The complaint in each case is based on investigational files and records which 
led the Commission to believe that there might have been a violation of law. The 
cases, however, are in various stages of procedure, either awaiting answer, on 
trial, or ready for trial. The complaints themselves, of course, are not evidence, 
and to present at this time the evidentiary facts forming the basis for their 
issuance might conceivably lead to embarrassment of the Commision and the 
parties complained against in the proper conduct of the trial. For these reasons 
only the complaints are submitted herewith marked as exhibits to this report, as 
indicated in the following table. This table also shows the date when, and the 
act under which, each complaint was issued, the commodity, and the Commis- 
sion's docket number. 



Act 


Date 


Docket 


Commodity 


Exhibit 


FTCA. 


Apr. 16,1936 


Fashion Originators Guild of 
America, Inc., et al. Docket 
No. 2769. 


Clothing— Fabrics 


F. T. C. Ex. No. 85. 


FTCA 


Oct. 14,1936 


National Standard Parts Asso- 
ciation et al. Docket No. 
2942. 


Automobile Accesso- 
ries. 


F. T. O. Ex. No. 86. 


FTCA 
RPA... 


JNov. 6,1936 


Bourjols, Incorporated, et al. 
Docket No. 2972. 


Toilet Preparations.. . 


F. T. C. Ex. No. 87. 


FTCA 


\ — -do 


Richard Hudnut et al. Dock- 


do 


F. T. C. Ex. No. 88. 


RPA... 


et No. 2973. 






FTCA. 


j....do 


Elmo, Incorporated, et al. 


do 


F. T. C. Ex. No. 89. 


RPA... 


Docket No. 2974. 






FTCA. 


|....do 


Coty, Inc., et al. Docket No. 


do 


F. T. C. Ex. No. 90. 


RPA... 


2975. 






FTCA. 
RPA... 


}Dec. 19,1936 


Charles of the Ritz, Inc. 
Docket No. 3017. 


do 


F. T. C. Ex. No. 91. 


FTCA. 


Dec. 23,1936 


Card Clothing Manufacturers' 
Association et al. Docket 
No. 3019. 


Card Clothing 


F. T. C. Ex. No. 02. 


FTCA. 


Dec. 29,1936 


The Sponge Institute et al. 
Docket No. 3025. 


Sponges 


F. T. C. Ex. No. 93. 


FTCA. 


}Mar. 26, 1937 


Cast Iron Soil Pipe Associa- 


Pipe— Cast Iron Soil.. 


F. T. C. Ex. No. 94. 


RPA... 


tion et al. Docket No. 3091. 






FTCA. 


Mar. 29, 1937 


Scientific Apparatus Makers of 
America et al. Docket No. 
3092. 


Paper— Reproduc- 
tion — Scientific Sup- 
plies. 


F. T. C. Ex. No. 95. 


FTCA. 
RPA... 


JMay 15,1937 


Elizabeth Arden, Inc., et al. 
Docket No. 3133. 


Toilet Preparations... 


F. T. C. Ex. No. 96. 


FTCA. 


May 20,1937 


Hershey Chocolate Corpora- 
tion et al. Docket No. 3134. 


Candy 


F. T. C. Ex. No. 97. 


OA.... 


June 12,1937 


Schenley Distillers Corpora- 
tion. Dooket No. 3150. 


Beverages— Whis- 
key— Gin. 


F. T. C. Ex. No. 98. 


FTCA. 


}june 15,1937 


General Motors Corporation 


Automobiles— Acces- 


F. T. C. Ex. No. 99. 


RPA... 


et al. Docket No. 3152. 


sories. 




FTCA. 


}july 2, 1937 


Cen ent Institute et al. 


Cement 


F. T. C.Ex. No. 100. 


RPA... 


Docket No. 3167. 






FTCA. 


Aug. 5,1937 


Daniel A. Brennan et al. 
Docket No. 3196. 


Fasteners, Paper 


F. T. C. Ex. No. 101. 


OA.... 


Nov. 3,1937 


Spcrry Corporation. Docket 
No. 3259. 


Instruments, Nauti- 
cal—Aircraft. 


F. T. C. Ex. No. 102. ' 


FTCA. 


Jan. 3, 1938 


Standard Container Manufac- 
turers' Association, Inc., et 
al. Docket No. 3289. 


Containers, Wooden.. 


F. T. C. Ex. No. 103. 



CONCENTRATION OF ECONOMIC POWER 



2359 



Act 


Date 


Docket 


Commodity 


Exhibit 


FTCA. 
RPA... 


}Feb. 


11, 1938 


E. B. Muller & Company et 
al. Docket No. 3224. 


Chicory 


F. T. C. Ex. No. 108. 


FTCA. 


Mar. 


9. 1938 


Steel Office Furniture Insti- 
tute et al. Docket No. 3319. 


Furniture, Office- 
Steel. 


F.T. C. Ex. No. 106. 


FTCA. 


Apr. 


29,1938 


Johnson & Johnson et al. 
Docket No. 3393. 


Surgical Supplies 


F. T. C. Ex. No. 108. 


FTCA. 


May 


6, 1938 


Milton S. Kronheim & Son, 
Inc., et al. Docket No. 3400. 


Beverages, Spirituous. 


F. T. C. Ex. No. 110. 


FTCA 


May 


9. 1938 


Star Tobacco Company. 
Docket No. 3142. 


Tobacco Products and 
Candy. 


F. T. C. Ex. No. 111. 


FTCA. 


June 


15, 1938 


The Hardwood Institute et al. 
Docket No. 3418. 


Lumber, Hardwood. .. 


F. T. C. Ex. No. 113. 


CA.... 


July 


19,1938 


Gem.rd Comp- ny, Inc. et al 
Docket No. 3498. 


Machines, Wire-tying. 


F. T. C. Ex. No. 115. 


FTCA. 


Aug. 


24,1938 


United States Maltsters Asso- 
ci- tion et al. Docket No. 
3555. 


Malt .. 


F. T. C. Ex. No. 118. 


FTCA 


Aug. 


25. 1938 


American Veneer Package As- 
sociation Docket. No. 3556. 


Containers, Wooden.. 


F. T. C. Ex. No. 119. 


FTCA. 


Aug. 


26, 1938 


Chicago Medical Book Com- 
pany etal. Docket No. 3557. 
W. B. Saunders Company et 


Books, Medical 


F. T. C.Ex. No. 120. 


FTCA. 


do.. 


do 


F. T. C. Ex. No. 121. 








al. Docket No. 3558. 






FTCA. 


Sept. 


16, 1938 


Pine Hill Lime A'Stone Com- 
pany, etal. Docket No. 3591. 
The Brunswick-Balke-Collen- 


Lime, Chemical— Ag- 
ricultural. 


F. T. C. Ex. No. 122. 


FTCA. 


jsept 


23. 1938 


Sporting Goods — 


F. T. C. Ex. No. 123. 


CA.... 


der Company. Docket No. 
3604. 
Phil J. Bliffert. and Certain 


Bowling. 




FTCA. 


Oct. 


18, 1938 


Building Supplies 


F. T. C. Ex. No. 124- A. 








Building Supply Companies. 












Docket No. 3631. 






FTCA. 


Nov. 


1, 1938 


Joseph Dixon Crucible Co., et 

al. Docket No. 3S43. 
R. T. Vanderbilt Co., Inc., and 


Lead Pencils 


F. T. C. Ex. No. 124-B. 


FTCA. 


JNov. 


30, 1938 


Pyrophyllite 


F. T. C. Ex. No. 124-0. 


CA-3-. 


Standard Mineral Co., Inc 












Docket No. 3656. 






FTCA. 


Dec. 


10, 1938 


R. M. Hollingshead Corpora- 
tion. Docket No. 3661. 


Automobile Chemi- 
cals. 


F.T.C.Ex.No.l24-D. 


CA-3.. 


Jan. 


16, 1939 


Signode Steel Strapping Com- 
pany. Docket No. 3688. 


Flat Steel Strapping... 


F. T. C. Ex. No. 124-E. 


FTCA. 


Jan. 


19, 1939 


Power and Gang Mower Manu- 
facturers' Association, et al. 
Docket No. 3R89. 


Lawn Mowers, Power. 


F. T. C. Ex. No. 124-F. 


FTCA. 


Jan. 


24, 1939 


Mueller Company, et al. 
Docket No. 3690. 


Corporation Stopsand 
Curb Stops. 


F. T. C. Ex. No. 124-Q. 



PART II (A) 

DiscusnoN of Court Decisions and a Summary of Formal Action Taken 
by the Federal Trade Commission in Cases Arising Under Sections 7 
and 8 of the clayton act 

introductory 

The Sherman Act of 1890 (26 Stat. 209; U. S. C., title 15, sec. 1) made contracts, 
combinations, or conspiracies in restraint of interstate trade or commerce illegal. 

While the Sherman Act as interpreted by the United States Supreme Court 
was sufficient to break up certain combinations brought about by the purchase 
of the capital stock of competitors, mergers, consolidations, etc., where such 
acquisitions or mergers constituted monopolies or combinations in unreasonable 
restraint of trade, it was generally recognized that the result of decrees under 
the Sherman Act was not sufficient adequately to protect the public interest and, 
consequently, Congress deemed that there was need of further legislation to check 
corporate acquisitions, mergers, and interlocking directorates before they had 
resulted in monopoly. 

In 1914 the Clayton Act was passed by Congress, sections 7 and 8 of which 
were intended to supplement the Sherman Act in this respect. In the language 
of Judge Evans, speaking for the United States Circuit Court of Appeals for the 
Seventh Circuit in the Swift Case (8 Fed. 2d 595) : 

"Congress was dealing with business consolidations of large size. It was 
endeavoring to prevent the creation of trusts and monopolies. Corporations are 
the instrumentalities commonly used by those engaged in large enterprises. They 
lend themselves handily to activities of large proportions. Their control can be 
readily acquired. * * * Must Congress act only when the child has grown 
to the stature of a giant? If authority exists to curb — or to dissolve — a corpora- 
tion when it has reached the trust stage, may Congress not take steps to arrest 
the corporation's growth before the final stage has been reached? * * * As 
before stated, the Clayton Act (38 Stat. 730) supplemented the Sherman Law, 
the practical enforcement of which was found difficult and often resulted in hard- 
ships to innocent parties. The section under consideration sought by means, 
which the Congress deemed expedient and effective, to prevent a condition which 
the Sherman Law was designed to overcome when once it existed. * * * Jf 
competing corporations may not consolidate, it naturally follows that it will be 
difficult for one corporation ever to monopolize an industry." 

Authority to enforce compliance with sections 7 and 8 of the Clayton Act, by 
the persons respectively subject thereto, was by the act vested in the- Interstate 
Commerce Commission, where applicable to common carriers; in the Federal 
Reserve Board, where applicable to banks, banking associations, and trust com- 
panies; and in the Federal Trade Commission where applicable to all other 
character of commerce. By said act the Attorney General was authorized to 
institute proceedings in equity in the several district courts of the United States to 
prevent and restrain any violations of the act. 

Briefly, section 7 prohibits the acquisition by one corporation, engaged in 
commerce, 1 of the capital stock of another corporation, engaged also in commerce, 
where the effect of such acquisition "may be to substantially lessen competition 
between the corporation whose stock is so acquired and the corporation making 
the acquisition, or to restrain such commerce in any section or community, or 
tend to create a monopoly of any line of commerce." Section 7 also prohibits 
the acquisition by a holding company of the capital stock of two ormore corpora- 
tions engaged in commerce where the effect of such acquisition "ma, be to sub- 
stantially lessen competition between such corporations, or any of them, whose 
stock or other share capital is so acquired," or to restrain commerce or tend to 
create a monopoly as provided above. 

Section 8 of the Clayton Act prohibits the existence of interlocking directors in 
two or more competing corporations (other than banks and common carriers) 

• "Commerce" Is defined In the Clayton Act as "Interstate commerce." 

2361 



2362 CONCENTRATION OF ECONOMIC POWER 

engaged in commerce when either of them has capital, surplus, and undivided 

Erofits aggregating more than a million dollars, where elimination of competition 
y agreement between them would be a violation of any of the provisions of the 
antitrust laws. 

The act further directs that whenever the Federal Trade Commission has reason 
to believe that any person is violating Or has violated the provisions of sections 7 
and 8, it shall issue and serve upon such person its complaint to be followed by its 
order requiring him to cease and desist from further violation if, after the taking 
of testimony, the Commission shall be of the opinion that any of the provisions 
of these sections have been or are being violated. In the case of a violation of 
section 7, the Commission is directed to require the offending corporation to 
"divest itself of the stock held." In case of a violation of section 8, the order 
requires the company to "rid itself of the directors chosen" contrary to the pro- 
visions of that section. 

Three formal complaints were issued by the Commission under section 8 (Docket 
Nos. 457, 1180, and 1182), copies of which are submitted as exhibits to this report, 
marked "F. T. C. Ex. Nos. 125 to 127," inclusive. The case known as Docket 
No. 457 was dismissed following the resignation of the director who held office in 
both companies. This case was against the Western Meat Company of San 
Francisco and in which, a year before, the Supreme Court had confirmed an order 
of the Commission involving violation of section 7 of the Clayton Act. The cases 
known as Dockets Nos. 1180 and 1182 were dismissed because it was found that 
there was no interstate commerce and no public interest. 

In carrying out this mandate, the Commission has issued 60 formal complaints 
involving section 7 of the Clayton Act. After trial of these cases, orders of divest- 
iture were issued in 11 cases, 8 of which have been reviewed by the United States 
Circuit Court of Appeals. In 6 of these cases the Circuit Court of Appeals sus- 
tained the Commission's order; in 4 of them the Supreme Court of the United 
States reversed the United States Circuit Court of Appeals and set aside the Com- 
mission's order; and in 1 of them sustained the Circuit Court's affirmance of the 
Commission's order. One order, which was not reviewed by the Supreme Court, 
has been made ineffective by the action of the United States Circuit Court of 
Appeals in allowing the respondent to acquire the assets under a judgment. 

In the one case, where the Supreme Court sustained the Commission's order 
(Western Meat Co. v. Federal Trade Commission, 272 U. S. 554), an attempt was 
made by the company to acquire the assets under a judgment, but before the 
matter was presented to the Supreme Court an agreement was entered into allow- 
ing the respondent to divest itself of the stock and assets of a third party. 

In still another case, where an order is outstanding, the Commission recognized 
the futility of requiring the respondent to dispossess itself of the stock, when it 
might, under the law, acquire the assets, and took no action where the respondent 
acquired the assets. 

As will be seen from the digest of these cases, as set forth herein, the inability 
of the Commission to more effectively enforce these two sections of the Clayton 
Act has been due either to the inadequacy of the language of the statute, or to 
the narrow interpretation placed on the statute by the Courts. 



Standard Oil Co. of New York. — The first complaint of importance charging 
violation of section 7 was issued by the Commission against Standard Oil Co. of 
New York (Docket No. 92), on April 15, 1918. This complaint alleged that sec- 
tion 7 had been violated through the acquisition by Standard Oil Co. of the cap- 
ital stock of Magnolia Petroleum Company, a Texas joint-stock association, which 
marketed petroleum products in the States of Texas, Arkansas, and Oklahoma. 
Because the Magnolia was not a corporation and since the evidence showed that 
there was no existing competition between it and the Standard Oil Co., the Com- 
mission dismissed this complaint. A copy of the Commission's complaint in this 
case is submitted, marked "F. T. C. Ex. No. 128." 



Tobacco Products Corporation. — The next important case was against Tobacco 
Products Corporation, et al. (Docket No. 205), in which complaint was issued 
October 18, 1918. Involved here was the acquisition of the capital stock of the 
Melachrino Tobacco Trading Company and a number of other cigarette-manufac- 
turing concerns. However, it appeared that the respondent controlled only about 



CONCENTRATION OF ECONOMIC POWER 2363 

one-half of 1 percent of the smoking-tobacco business of the country and 2^ 
of 1 percent of all other tobacco business, and it was argued that the effect of such 
acquisition might tend to maintain and stimulate competition in the interest of 
the public against larger and more powerful concerns, such as the American. 
Tobacco Company. The Commission dismissed this complaint, a copy of which 
is herewith submitted, marked "F. T. C. Ex. No. 129." 



Aluminum Company of America.— The third important complaint issued by the 
Commission was against the Aluminum Company of America (Docket No. .248), 
issued February 6, 1919. In that case the Commission issued its order on March 
9, 1921, requiring the respondent to divest itself of the capital stock of the Alumi- 
num Rolling Mill Company, which it had organized to take over the rolling-mill 
business of the Cleveland Metal Products Company. (See F. T. C. Ex. No. 130). 
This order was upheld by the United States Circuit Court of Appeals for the Third 
Circuit on June 1, 1922 (284 Fed. 401). A petition for a writ of certiorari was 
denied by the Supreme Court. The application of the Federal Trade Commission 
to the said Circuit Court of Appeals for a modification of the decree affirming the 
Commission's order, so that the decree would enjoin the Aluminum Company 
from acquiring any of the physical assets of the Aluminum Rolling Mill Company, 
was denied June 24, 1924, solely on the inability of the Federal Trade Commission 
to establish fraud in connection with an indebtedness on a judgment for which 
the Aluminum Company was proceeding to recover. This denial permitted the 
Aluminum Company to take over the assets of the Rolling Mill Company under 
the said judgment and thus the effectiveness of the Commission's order was 
destroyed (299 Fed. 361). 



Bordens Farm Products Company, Inc. — On February 6, 1919, the Commission 
also issued its complaint against Bordens Farm Products Company, Inc., under 
section 7 of the Clayton Act (Docket No. 250). The complaint charged the 
unlawful acquisition by Bordens of the capital stock of Alexander Campbell Milk 
Company, of Brooklyn, N. Y. Both companies bought and sold fluid milk. 
By March 1921 neither the stock nor the corporation acquired by Bordens was 
any longer in existence and it was concluded by the Chief Counsel for the Com- 
mission that there was nothing upon which an order of the Commission could 
operate, and hence there was no effective remedy possible under the statute; that 
the Commission could not organize a new corporation and require the respondent 
to transfer to it the stock and properties of the acquired company; and that there 
had been very little competition in interstate commerce between the two corpora- 
tions. It was also considered by the Chief Counsel that in order for there to be a 
violation of the statute the corporations must be competitive in a substantial 
sense; i. e., a mere negligible amount of competition would not be sufficient in the 
absence of an attempt to monopolize and control the market. On July 3, 1922, 
the Commission dismissed the complaint without stating the reason for dismissal. 
A copy of the Commission's complaint issued February 6, 1919, is submitted as an 
exhibit to this report, marked "F. T. C. Ex. No. 131." 

MEAT PACKING INDUSTRY 

Following the Commission's investigation, in 1918, of the meat-packing indus- 
try, a number of complaints were issued against the meat packers including Wilson 
and Company, Dockets Nos. 449 and 450; Cudahy Packing Company, Docket No. 
451; Morris and Company, Docket No. 452; Swift & Company, Dockets Nos. 
453 and 454; Armour & Company, Dockets Nos. 351, 455, and 531; and Western 
Meat Company, Dockets Nos. 456, and 457 (sec. 8). Two of these cases reached 
the United States Supreme Court— Swift & Company, Docket No. 453; and 
Western Meat Company, Docket No. 456. 



The Swift Case. — The Commission's complaint against Swift & Company, 
Docket No. 453, was issued November 24, 1919, and alleged that the respondent 
had violated section 7 of the Clayton Act in the acquisition of the capital stock, 
in 1917, of the Moultrie Packing Company, Moultrie, Ga., and the Andalusia 
Packing Company, Andalusia, Ala. The Commission issued its findings and 

124491— 39— pt. 5a 5 



2364 CONCENTRATION OF ECONOMIC POWER 

order of divestiture on August 3, 1922, and its modified findings and order on 
November 17, 1922. Swift & Company filed a petition to review the Commis- 
sion's order with the United States Circuit Court of Appeals for the Seventh 
Circuit in October 1922. That court, on February 16, 1925, denied respondent's 
petition to set aside the Commission's order (8 Fed. 2d. 595). A copy of the 
Commission's findings and order in the Swift & Company case, supra, are attached 
as an exhibit to this report, marked "F. T. C. Ex. No. 132." The other complaints 
against the meat packers just above described are also submitted herewith, 
marked "F. T. C. Ex. Nos. 133 to 141," inclusive. 

On September 29, 1925, Swift & Company, after an unsuccessful attempt for 
rehearing in the lower court, filed a petition for certiorari with the United States 
Supreme Court. The writ of certiorari was granted and the matter was argued 
before the United States Supreme Court in conjunction with two other cases which 
had reached the Court through other lower courts, namely, the Western Meat 
Company, Docket No. 456; and the Thatcher Manufacturing Company, Docket 
No. 738. 

On November 23, 1926, the majority of the Supreme Court, through Mr. Justice 
McReynolds, set aside the Commission's order in the Swift Case (272 U. S. 554), 
on the ground that, as all property and business of the two competing companies 
was acquired prior to the filing of the Commission's complaint, the Commission 
was without authority to require one who had secured actual title and possession 
of physical property before proceedings were begun against it to dispose of the 
same although secured through an unlawful purchase of stock. The Commission 
was denied a rehearing. 

A strong dissenting opinion was written by Mr. Justice Brandeis and con- 
curred in by Chief Justice Taft, Mr. Justice Holmes, and Mr. Justice Stone. In 
the opinion of these four dissenting Justices, section 7 of the Clayton Act was not 
only to prevent the peculiar evils resulting from an acquisition of capital stock but, 
where the company took a transfer of the assets prior to the commencement of the 
Commission's proceeding, the Commission had power to require a retransfer of the 
assets so as to render effective the divestiture of the stock. 

From the foregoing, it will be seen that by the narrow margin of one Justice 
the purpose and intent of the Clayton Act, as indicated by the comments of the 
sponsors of the bill, were defeated, and the offending corporation was allowed to 
take advantage of its own illegal act, thus laying the foundation for the complete 
emasculation of the statute in a later decision. 



The Western Meal Company case. — In the Western Meat Company case, supra 
(Docket No. 456), the Commission's complaint, issued November 24, 1919, 
charged a violation of section 7 of the Clayton Act by the acquisition of the capital 
stock of the Nevada Packing Company, Reno, Nev. In this case the Western 
Meat Company had not yet acquired the assets of the Nevada Packing Company 
but. after its acquisition of the issued and outstanding capital stock, the Western 
Meat Company operated and controlled the Nevada Packing Company's packing 
plant and business to the entire elimination and suppression of the competition 
which had theretofore existed between the two. The Commission, in its order, 
required it to divest itself of the capital stock of the Nevada Packing Company, 
60 as to include in such divestment the Nevada Packing Company's plant and all 
property necessary to the conduct and operation thereof, and so as neither directly 
nor indirectly to retain any of the fruits of the acquisition of the capital stock of the 
Nevada Packing Company. 1 

An appeal was taken by the Western Meat Company, on July 27, 1923, from 
the Commission's order, to the United States Circuit Court of Appeals for the 
Ninth Circuit, which Court, on September 2, 1924, denied the petition (1 Fed. 
2d 95). It was contended by conusel for the Western Meat Company in a- peti- 
tion for rehearing that the Commission's order was too broad and exceeded its 
powers under the statute. The court granted a rehearing on November 24, 1924, 
with respect to that portion of the Commission's order requiring the divestment 
of the Nevada Packing Company's plant and all property necessary to theconduct 
and operation thereof, etc. On February 17, 1925, the court held that the Com- 
mission had no authority other than the authority to command the defending 
corporation to desist from holding stock in any corporation in violation of section 7, 

1 The case before the Commission is reported in 6 F. T. C. 417. 



CONCENTRATION OF ECONOMIC POWER 2365 

and that the Commission's order was too broad, and directed that the Com- 
mission's order be modified (4 Fed. 2d 223). 

Upon certiorari, the United States Supreme Court, on November 23, 1926, 
opinion delivered by Mr. Justice McReynolds, at the same time the Swift and 
Thatcher cases were decided, held that while the Commission might not go beyond 
the words of the statute properly construed, these words must be read in the 
light of the general purpose of the statute and applied with a view to effectuating 
■such purpose, namely, the preservation of established competition. The court 
then held that the divestment of the stock must be actual and complete and might 
not be effected by using the control resulting from the acquisition to secure title 
to the possessions of the acquired company and then to dissolve it (272 U. S. 
554). 

. On May 2, 1927, the United States Circuit Court of Appeals for the Ninth 
Circuit entered its order on mandate of the Supreme Court, carrying into effect 
the Commission's order. 

The effectiveness of the Commission's order was challenged, however, in later 
proceedings, when the Western Meat Company, following the decision in the 
Aluminum case, supra, secured the assets of the Nevada Packing Company in a 
judgment on an indebtedness and then sold all the capital stock of the packing 
company to a third party for a nominal sum. The Commission, on March 13, 
1929, filed a petition in the United States Circuit Court of Appeals for the Ninth 
Circuit, objecting to the report made by the Western Meat Company, setting 
forth the foregoing steps and, after argument, that court held, on June 24, 1929, 
that the respondent had complied with the decree, and denied the Commission's 
application (33 Fed. 2d 824). 

On September 3, 1929, the Commission again filed a petition for writ of certio- 
rari with the United States Supreme Court, and its writ was granted (280 U. S. 
545). Briefs were filed before that Court on the point raised, the Western Meat 
Company relying upon the Aluminum Company decision, supra. In the mean- 
time, before the case was argued, the Western Meat Company, on June 6, 1930, 
filed a supplemental report of compliance, showing that the assets had been trans- 
ferred to a third party, this agreement having been entered into with the consent 
and approval of the Commission. The Court ordered the supplemental report 
approved, and disposed of the proceeding, on May 19, 1930, by dismissing the 
writ of certiorari and granting the mandate on motion of Solicitor General Thatcher 
for the petitioner (281 U. S. 771). 



Three Other Meat Packer Cases. — The other packer cases were disposed of 
generally in the light of the decision of the Supreme Court in the Swift Case, 
although some were dismissed on other grounds, as, for instance, in the cases 
against Wilson & Company, Dockets Nos. 449 and 450, the property of the 
acquired corporations was sold under receivership; in the case of Cudahy Packing 
Company, Docket No. 451, the complaint was dismissed because the acquisitions 
took place prior to the passage of the Clayton Act; in the case of Morris '& Com- 
pany, Docket No. 452, the complaint was dismissed because Morris & Company 
had sold out to Armour, and the sale was approved by the Secretary of Agricul- 
ture under the Packers and Stockyards Act, approved August 15, 1921 (42 Stat. 2, 
159); and in the case of Swift & Company, Docket No. 454, the complaint was 
dismissed because there was insufficient competition between the two corporations. 



The Thatcher Case. — The next important complaint issued by the Commission 
in its attempt to enforce the Clavton Act was against the Thatcher Company, 
Docket No. 738, issued March 1, 1921, and amended July 18, 1922. The respond- 
ent had taken over the assets and dissolved the several acquired corporations 
before the commencement of the Commission's proceeding. When the respondent 
declined to comply with the Commission's order to divest itself of assets it had 
acquired pursuant to, and through, its stock' acquisition, the Commission peti- 
tioned the United States Circuit Court of Appeals for the Third Circuit for 
enforcement of its order. That court approved, and directed the enforcement 
of, the Commission's order, except as to one of the acquired companies (5 Fed. 
2d 615). The Supreme Court of the United States granted the Commission's 
petition for a writ of certiorari and this case was argued before that Court, 1 "."other 
with the Swift and Western Meat Cases, supra. On November 23, 1926, the 



2366 CONCENTRATION 01' ECONOMIC POWER 

Supreme Court held that the Commission was without authority to enter the 
order it had entered in the case, and that the act had no application to the owner- 
ship of a competitor's property and business obtained prior to any action by the 
Commission, even though this was brought about through stock unlawfully held. 
The Court observed that if purchase of property had produced an unlawful 
status, a remedy was provided through the courts. The Commission's petition 
for rehearing was denied (272 U. S. 554). 



Standard Oil Company of New Jersey. — In the case of Standard Oil Company 
of New Jersey, Docket No. 964, complaint was issued on February 1, 1923, 
charging the acquisition by Standard Oil Company of the capital stock of the 
Humble Oil and Refining Company, a large producer of crude oil and refined 
products, with refineries located in Texas. It was engaged in the sale of its 
finished products in the States of Oklahoma, Arkansas, Texas, and Louisiana. 
On January 26, 1926, the Commission dismissed its complaint in this case because 
there was no substantial competition between the two corporations. It was 
reasoned that there could therefore be no substantial reduction of competition 
as the result of the acquisition, a view similar to the view of the Supreme Court 
as later expressed in the opinion of Mr. Justice Sutherland in the case of Inter- 
national Shoe Company v. Federal Trade Commission (280 U. S. 291), on January 6, 
1930. The International Shoe Case will be discussed later herein. A copy of the 
Commission's complaint against the Standard Oil. Company of New Jersey 
is submitted herewith as an exhibit to this report marked "F. T. C. Ex. No. 142." 



Illinois Glass Company. — On April 9, 1923, the Commission issued its complaint 
against the Illinois Glass Company (Docket No. 1009, F. T. C. Ex. No. 143). 
This company was one of the largest manufacturers of glass bottles in the country 
and was the result of the numerous mergers oi' competing organizations made- 
over a period of approximately twenty years. This complaint was dismissed in 
October 1925. The merger was the result of acquisition of assets rather than of 
capital stock. 

International Shoe Company. — In the Commission's complaint against Inter- 
national Shoe Company, one of the largest shoe manufacturers in the country, 
Docket No. 1023, issued May 18, 1923, the respondent was charged with the 
acquisition of the capital stock of the W. H. McElwain Company, of Boston, 
Mass. The Commission, after taking testimony, issued its order on November 
25, 1925, requiring the respondent to divest itself of the capital stock of the 
acquired company and, on June 2, 1926, directed that the enforcement of its 
order be suspended until the Thatcher, Swift, and Western Meat Cases, supra, 
were decided by the Supreme Court. 

On May 31, 192&, the International Shoe Company filed a motion with the 
United States Circuit Court of Appeals for the First Circuit, asking that the 
Commission's complaint be judged insufficient in law. That court, on November 
27, 1928, affirmed the Commission's order (29 Fed. 2d 518). 

On February 25, 1929, the International Shoe Company filed its petition for 
writ of certiorari with the Supreme Court, which was denied on April 15, 1929 
(279 U. S. 849). On May 9, 1929, the International Shoe Company filed a 
petition for rehearing and, on October 17, 1929, the writ of certiorari was granted 
(279 U. S. 832). The matter was argued before the Supreme Court and, on 
January 6, 1930, that Court, speaking through Mr. Justice Sutherland, reversed 
the decision of the Circuit Court of Appeals, Justices Stone, Holmes, and Brandeis 
dissenting, and Mr. Justice Stone filing a dissenting opinion (280 U. S. 291). 
The proceedings before the Commission are reported in 9 F. T. C. 441. 

The two principal reasons for setting aside the Commission's order were: 
(1) There never was substantial competition between the two corporations, and, 
therefore, no foundation for the charge of substantial lessening of competition; 
and (2) the McElwain Company was in such financial condition that it was 
necessary to liquidate it, and, therefore, the prosnect for future competition is 
eliminated. 

In discussing the first proposition, the Court recognized that both companies 
sold a line of men's dress shoes, comparable in price, and to some degree in quality, 
but, it was pointed out, the McElwain shoes appealed more to city trade and tne 
International shoes to the small-town trade; the McElwain shows were sold 
generally to wholesalers and large retailers, while the International sold prin- 



CONCENTRATION OF ECONOMIC POWER 2367 

cipally to dealers in small communities. The Court found that in 95 percent of 
the business of the respondent no competition existed between it and the McEl- 
wain Company. The Court then laid down the proposition, theretofore held 
applicable to the Sherman Act, "that the standard of legality was the absence or 
presence of prejudice to the public interest by unduly restraining competition 
or unduly obstructing the due course of trade," and pointed out that when this 
rule is applied as section 7 cases, the act deals only with such acquisitions as 
probably will result in lessening competition to a substantial degree, "that is to 
say, to such a degree as will injuriously affect the public." The Court then con- 
tinued the application of the rule to the facts in the case by pointing out such 
acquisition would not produce the forbidden result if there were no preexisting 
substantial competition to be affected "for the public interest is not concerned in 
the lessening of competition which, to begin with, is itself without real sub-' 
stance." 

On the second ground the Court recognized that the financial condition of the 
McElwain Company had reached the point where it could not pay its debts and 
that its officials sought to prevent further loss and bankruptcy by selling out to 
the International Shoe Company. The Court held that, under these circum- 
stances, where the purpose was not to lessen competition but to mitigate serious 
injury, acquisition was not, in contemplation of law, prejudicial to the public 
and did not substantially lessen competition or restrain commerce within the 
meaning of the Clayton Act. 

While the International Shoe Case was pending, that is, between 1924 and 
1930, the enforcement of section 7 of the Clayton Act was much curtailed. During 
that period of time a few complaints were issued, but most of them were dismissed, 
some before and some after the decision in the International Shoe Case. 



Motor Wheel Corporation and Hayes Wheel Company. — Among the more im- 
portant cases where complaints were issued were the Motor Wheel Corporation, 
Docket No. 1215, issued August 6, 1924, and the Hayes Wheel Company, Jackson, 
Mich., Docket No. 1219, in which complaint issued August 12, 1924. The former 
complaint was dismissed in December 1928 and the latter on October 19, 1926. 
In both cases the respondents had acquired the assets after the Commission had 
issued its complaint. Copies of these two complaints are submitted as exhibits 
to this report, marked "F. T. C. Ex. Nos. 144 and 145," respectively. 



Allied Chemical and Dye Corporation. — Another important case during that 
period was a complaint against Allied Chemical and Dye Corporation, Docket 
No. 1247, in which complaint issued on November 28, 1924. This respondent is, 
of course, recognized as one of the largest industrial chemical concerns in the 
country, and it was alleged to have violated section 7 of the Clayton Act by the 
acquisition of the Barrett Company, the General Chemical Company, National 
Aniline and Chemical Company, Inc., The Solvay Process Company, and The 
Semet Solvay Company. The Commission dismissed the complaint in May 1927. 
It appeared from the Commission's investigational files that the competition 
between the various corporations acquired was not substantial and that inde- 
pendent dye manufacturers had no difficulty in purchasing materials required in 
the manufacture of dves. A copy of this complaint is herewith submitted, marked 
"F. T. C. Ex. No. 146." 

Fisk Rubber Company. — Another important complaint was against the Fisk 
Rubber Company, Docket No. 1248, which was issued December 9, 1924. The 
respondent was charged with violation of section 7 of the Clayton Act in the 
acquisition, in 1916, of 51 percent of the capital stock of the Federal Rubber 
Company. Investigation showed that in 1921 the respondent had taken over 
the physical assets of the Federal Rubber Company. Another reason for dis- 
missal was that there was probably very little competition between the two 
concerns. In April 1926 the Commission dismissed its complaint. A copy of the 
Commission's complaint in this case is submitted herewith, marked "F. T. C. 
Ex. No. 147." 



Midland Steel Products Co. — In February 1925 the Commissfon issued its com- 
plaint against Midland Steel Products Co., Docket No. 1291, charging the acquisi- 
tion of two of its competitors in Cleveland and Detroit, namely, the Parish & 



2368 CONCENTRATION OF ECONOMIC POWER 

Bingham Corporation and the Detroit Pressed Steel Company. It later appearing 
that the assets of the two concerns had been acquired by the Midland Steel 
Products Co. in exchange for its stock, and that there was no stock acquisition 
involved, the Commission dismissed its complaint in February 1926. A copy of 
this complaint is herewith submitted, marked "F. T. C. Ex. No. 148." 



Wickwire-Spencer Steel Corporation. — The Commission issued a complaint 
against the Wickwire-Spencer Steel Corporation, Docket No. 1298, in March 1925, 
charging it with violation of section 7 of the Clayton Act by the acquisition, in 
1922, of the capital stock of the American Wire Fabrics Corporation. This 
complaint was dismissed in October 1926 without prejudice to the Commission's 
resuming prosecution because the Commission was awaiting an interpretation 
of section 7 in the cases that were then pending in the Supreme Court of the 
United States. The respondent was the result, of a merger of the Wickwire- 
Spencer Steel Corporation and the American Wire Fabrics Company. The 
former company was in a precarious financial condition, and that, apparently, 
was the reason for the merger. A copy of this complaint is submitted as an 
exhibit to this report, marked "F. T. C. Ex. No. 149." 



Continental Baking Corporation. — On December 19, 1925, the Commission 
issued a complaint under section 7, against Continental Baking Corporation, 
Docket No. 1358. This corporation was charged with acquiring 25 corporations 
operating 85 bakeries throughout the United States. The complaint was dis- 
missed on April 7, 1926, on the ground that the subject matter thereof was being 
included by the Department of Justice in its District Court proceeding against 
the Ward Food Products Corporation, and others engaged in the baking industry, 
under the Sherman and Clayton Acts, alleging a combination and conspiracy to 
monopolize interstate commerce by acquisition of stock control of competing 
companies and by other means. On April 3', 1926, a consent decree was entered 
by Judge Rose, dissolving the Ward Food Products Corporation and enjoining 
the other acts complained of, but the case was by the said consent decree dis- 
missed as to the Continental Baking Corporation on the ground that the Com- 
mission was proceeding against that corporation for violation of section 7 of the 
Clayton Act. A copy of the Commission's complaint in this case is herewith 
submitted, marked "F. T. C. Ex. No. 150," and a copy of the consent decree 
entered by the District Court of the United States for the District of Maryland, 
on April 3, 1926, is also submitted, marked as "F. T. C. Ex. No. 151." 



Consolidated Cigar Corporation. — The Commission issued a complaint against 
the Consolidated Cigar Corporation, Docket No. 1451, on April 5, 1927, charging 
it with violation of section 7 of the Clayton Act in the acquisition, in 1920, of the 
capital stock of the 44 Cigar Company, and in the acquisition, in 1926, of the 
capital stock of the G. H. P. Cigar Company. The complaint was dismissed by 
the Commission, on January 22, 1930, about 2 weeks after the Supreme Court 
rendered its decision in the International Shoe Case, supra. It appeared from the 
record that the two corporations acquired by the Consolidated Cigar Corporation 
were not very large when compared with the entire industry, although the re- 
spondent was a very substantial concern, with factories in a number of States. 
A copy of the Commission's complaint in Docket No. 1451 is submitted herewith, 
marked "F. T. C. Ex. No. 152." 



V. Vivaudou, Inc. — In May 1927 the Commission issued a complaint against 
V. Vivaudou, Inc., Docket No. 1464, charging violation of section 7 of the Clayton 
Act in the acquisition of the capital stock, in 1925, of the Alfred H. Smith Com- 
pany and, in 1928, of Parfumerie Melba, Inc. On April 28, 1930 the Commission 
issued its order, directing V. Vivaudou, Inc. to divest itself of its stockholdings in 
those two^ companies. (See F. T. C. Ex. No. 152-A.) V. Vivaudou, Inc., peti- 
tioned the United States Circuit Court of Appeals for the Second Circuit for 
review. That court, on November 2, 1931, reversed the Commission's order (54 



CONCENTRATION OF ECONOMIC POWER 2369 

Fed. 2d. 273) on the ground that the competition between the corporations in- 
volved was not of sufficient substance to affect the public interest. A comparison 
was made of the quantity of business transacted by the corporations involved 
with the total volume in the industry. It based its decision squarely on the 
International Shoe decision. 



Arrow- Hart & Hegeman, Inc. — In March 1928 the Commission issued a com- 
plaint against Arrow-Hart & Hegeman, Inc., Docket No. 1498, and a supple- 
mental complaint against the Arrow-Hart & Hegeman Electric Company on 
June 29, 1929. In that case the original complaint alleged that the original 
respondents, Arrow-Hart & Hegeman, Inc., had acquired all the capital stock of 
two competing electrical device manufacturers, namely, the Arrow Electric 
company and Hart & Hegeman Manufacturing Company, both of Hartford, 
Conn. The supplemental complaint alleged that before the taking of testimony 
was begun on December 1, 1928, the original respondent caused a merger to take 
place under the laws of the State of Connecticu-t whereby the assets of the two 
operating companies were merged and the original respondent was dissolved. 

On July 6, 1932, the Commission ordered the Arrow-Hart & Hegeman Electric 
Company to divest itself of the stock of the two operating companies and also 
of the plant and properties received through the merger of the competing operating 
companies. This order was affirmed by the United States Circuit Court of Ap- 
peals for the Second Circuit May 29, 1933 (65 Fed. 2d. 336). 

On March 12, 1934, the Supreme Court, by a five-four decision (Messrs. Justices 
Stone, Hughes, Brandeis, and Cardozo dissenting) reversed the Circuit Court of 
Appeals, holding that the Commission lacked authority to issue any order against 
the petitioner requiring it to divest itself of stock held contrary to the terms of 
the act. The Court, speaking through Mr. Justice Roberts, stated: 

"The statute does not .forbid the acquirement of property, or the merger of 
corporations pursuant to State laws, nor does it provide any machinery for com- 
pelling a divestiture of assets acquired by purchase or otherwise, or the distribu- 
tion of physical property brought into a single ownership by merger. 

"If, instead of resorting to the holding company device, the shareholders of 
Arrow and Hart & Hegeman had caused a raerger, this action would not have 
been a violation of the act. And if, prior to complaint by the Commission, the 
holding company, in virtue of its si. tus as sole stockholder of the two operating 
companies, had caused a conveyance of their assets to it, the Commission would 
have been without power to set aside the transfers or to compel a reconveyance 
(Thatcher Mfg. Company v. Federal Trade Commission, 272 U. S. 554, 560, 561). 

"Clearly, also, if the holding company had, before complaint filed, divested 
itself of the shares of either or both of the manufacturing companies, the Commis- 
sion would have been without jurisdiction. And it might with impunity, prior 
to complaint, have distributed the shares it held pro rata amongst its stockholders. 
The fact that in such case^ the same group of stockholders would have owr^d 
shares in both companies, whereas theretofore some owned stock in one corpoia- 
tion only, and some held stock solely in the other, would not have operated to 
give the Commission jurisdiction. For if the holding corporation had effectually 
divested itself of the stock, the Commission could no f , deal with a condition there- 
after developing although thought by it to threaten results contrary to the 
intent of the act. Compare National Harness etc. Association v. Federal Trade 
Commission (268 Fed. 705); Chamber of Commerce v. Federal Trade Commission 
(280 Fed. 45). 

"Moreover, the holding company could have ousted the Commission's jurisdic- 
tion after complaint filed, by divesting itself of the shares, for that was all the 
Commission could order. And if it had so divested itself the transferees of the 
shares could immediately have brought about a corporate merger without violat- 
ing the Clayton Act. We think that is precisely the legal effect of what was done 
in the present case. The holding company divested itself of the shares, and there- 
after the owners of these common shares united with the holders of the preferred 
shares to bring about a merger" (291 U. S. 598). 

It will be seen from the foregoing decision that the death knell of the effectual 
enforcement of section 7 of the Clayton Act by the Commission was sounded. 
Corporations desiring to merge no longer feared the inteference of the Commission. 
A copy of the Commission's order to cease and desist in this case is submitted 
herewith, marked "F. T. C. Ex. No. 153." 



2370 CONCENTRATION OiP ECONOMIC POWER 

Temple Anthracite Coal Company. — Another complaint issued by the Commis- 
sion in this period of time was the Temple Anthracite Coal Company, Docket No. 
1537, issued October 11, 1928. In that case, the respondent was charged with the 
acquisition of the stock of the Temple Coal Company, of Scran ton, Pa., and the 
East Bear Ridge Colliery, also of Scranton. The Commission's order was set 
aside by the Circuit Court of Appeals for the Third Circuit in July 1931,' on the 
ground that there was no competition between the two mining companies prior 
to the acquisition of the stock, due to the fact that both companies sold their 
coal to the same selling agencies. Judge Wooley dissented from the majority 
of the court on the proposition that competition might still exist where common 
ownership resulted from the acquisition (51 Fed. 2d. 656). 



Purity Bakeries Corporation. — The Commission, on. December 22, 1930, dis- 
missed its complaint against the Purity Bakeries Corporation, Docket No. 1588, 
which had been issued on March 25, 1929. The Purity Corporation was charged 
with acquiring bakery companies in Minnesota, Michigan, Tennessee, and Ken- 
tucky. The percentage of competition between these various corporations was 
rather small. The dismissal was based on the International Shoe decision. A 
copy of the Commission's complaint in this case is submitted, marked "F. T. C. 
Ex. No. 154." 



Continental Steel Corporation. — The Commission, in September 1931, dis- 
missed its complaint against the Continental Steel Corporation, Docket No. 
1589, on the ground that the competition between it and the corporations it 
acquired would not exceed 1 percent of the business of the concerns involved. 
(See F. T. C. Ex. No. 155.) 

Crown Overall Manufacturing Company. — The Commission, on November 9, 
1931, dismissed its complaint against the Crown Overall Manufacturing Com- 
pany, Docket No. 1676, because the respondent had acquired the assets of the 
corporation whose stock had been acquired soon after the issuance of the com- 
plaint. (See F. T. C. Ex. No. 150.) 



McKesson cfe Bobbins, Inc. — Probably the most important case to be dismissed 
by the Commission since the decision in the International Shoe Case is that against 
McKesson & Robbins, Inc., Docket No. 1689. The case was quite similar in its 
acts to the Continental Baking Case and the Purity Baking Case, in that it in- 
volved a number of wholesale drug houses scattered throughout the country. 
The extent of the competition between them was very small, but the control by 
the combination of the wholesale drug business in the aggregate throughout the 
country was quite substantial. (See F. T. C. Ex. No. 157.) 



Vanadium- Alloys Steel Company. — There is still outstanding an order issued 
February 3, 1934, against the Vanadium-Alloys Steel Company, Latrobe, Pa., a 
tool steel manufacturer, Docket No. 1694, involving the acquisition of the capital 
stock of the Colonial Steel Company. The effectiveness of the Commission's 
order, however, is considerably dissipated by the action of the respondent in 
taking over the assets of the Colonial Steel Company in the fall of 1936. In 
view of the decision of the Supreme Court in the Arrow-Hart & Hegeman case, 
supra, the Commission has taken no further action in this case. A copy of the 
Commission's order is submitted, marked "F. T. C. Ex. No. 158." 



Philip Morris Consolidated, Inc. — The Commission dismissed its complaint 
against Philip Morris Consolidated, Inc., a cigarette manufacturer, Docket No. 
1705, in December 1931, upon the recommendation of the Chief Counsel, in whose 
opinion the evidence showed no tendency toward monopoly, no restraint of trade 
growing out of the acquisition, nor any proof of the lessening of competition be- 
tween the two companies whose stock had been acquired. (See F. T. C. Ex, 
No. 159.) 



CONCENTRATION OF ECONOMIC POWER 2371 

Charles Freshman Company, Inc. — The Commission dismissed its complaint 
against the Charles Freshman Company, Inc., a radio manufacturer, Docket No. 
1706, in March 1930, because of the precarious financial position of the Freed- 
Eisemann Corporation, the acquired corporation. (See F. T. 0. Ex. No. 160.) 



National Pastry Products Corporation. — The Commission dismissed its com- 
plaint against National Pastry Products Corporation, Docket No. 1760, on No- 
vember 11, 1931, in which respondent is charged with acquisition of a number of 
ice cream cone manufacturers, because of the showing that there was no substan- 
tial lessening of competition between the corporations and no tendency to create 
a monopoly. (See F. T. C. Ex. No. 161.) 



Borg-Warner Corporation. — The Commission dismissed its complaint against 
the Borg-Warner Corporation, Docket No. 1915, on September 29, 1932. The 
respondent was charged with acquiring the Long Manufacturing Company, a 
manufacturer of automobile clutches and radiators, and also the Detroit Gear & 
Machine Company, a manufacturer of automobile gears. It was contended by 
counsel for respondent that the complaint should be dismissed in the light of the 
International Shoe case, supra, because there was no substantial competition 
between the corporations before the acquisition. Borg-Warner Corporation now 
occupies a dominant position in the manufacture of clutches and transmissions 
for automobiles. (See F. T. C. Ex. No. 162.) 



Crown Zellerbach Corporation. — The Commission dismissed its complaint 
against the Crown Zellerbach Corporation, Docket No. 2135, in May 1935, on 
the ground that there was no existence of a monopoly. The case involved the 
stock merger of the Crown Willamette Paper Company, Portland, Oreg., and the 
Zellerbach Corporation, San Francisco, Calif. The adverse economic conditions 
in the paper industry on the Pacific coast probably had a great deal to do with 
the Commission's decision in this matter. It was developed in the testimony 
that the Swedish paper interests had been shipping considerable newsprint paper 
to the Pacific coast at low prices, which had taken business from the respondent 
during recent years, and had interfered with its control of the newsprint industry 
on the Pacific coast. There were also other close questions of fact and law in- 
volved in the case, particularly with respect to whether or not there was any 
competition between the corporations prior to the acquisition. (See F. T. C. 
Ex. No. 163.) 



Van Kannel Revolving Door Company. — The Commission, on April 22, 1936, dis-, 
missed its complaint against the Van Kannel Revolving Door Company, charging 
it with acquisition of the Atchison Revolving Door Company, Docket No. 2381, 
because of the financial condition of the respondent and also the acquired cor- 
poration, and because an order of divestment would, no doubt, work a distinct 
hardship upon the respondent and probably force it out of business. (See F. T. C. 
Ex. No. 164.) 

Sterling Products, Inc. — The Commission dismissed its complaint against Ster- 
ling Products, Inc., Docket No. 2502, on February 11, 1937, for the reason that the 
evidence showed that the purchase by the respondent corporation of the capital 
stock of the competing company, the R. L. Watkins Company, did not result in a 
substantial lessening of competition or restraint of trade. (See F. T. C. Ex. 
No. 165.) 



Laird & Company. — -The Commission dismissed its complaint against Laird <fc 
Company, Scobeyville, N. J., Docket No. 2754, in June 1936, on the authority of 
the Arrow-Hart & liegeman Case, for the reason that subsequent to the issuance of 
the complaint, but prior to the taking of testimony, the respondent purchased all 
the assets of the acquired corporation, the Hyland Distilling Companv, Haskell. 
N. J., which was then dissolved. (See F. T. C. Ex. No. 166.) 



2372 CONCENTRATION OF ECONOMIC POWER 

Schenley Distillers Corporation. — The Commission still has pending its case 
against the Schenley Distillers Corporation, Docket No. 3150, in which complaint 
was issued June 12, 1937, although at the opening session of the first hearing on the 
charges in the complaint counsel for the, respondent announced that the respondent 
had acquired all the assets of the Bernheim Distilling Company, the corporation 
whose stock had been previously acquired. Trial counsel was directed to take 
further testimony with respect to the effect of the acquisition. (See F. T. C. 
Ex. No. 167.) 

CONCLUSION 

There has been prepared for' the convenience of the Committee a digest of the 
facts, issues, findings, orders, and court decisions in all of the cases in which com- 
plaints were issued by the Commission under sections 7 and 8 of the Clayton Act 
including the cases referred to in the preceding discussion. This digest is marked 
"F. T. C. Ex. No. 168" and is for the use of the Committee in case it desires more 
detailed information, respecting such cases. The digest is indexed by the names 
of the companies and the different commodities in alphabetical order. 






PART II (B) 

Informal Investigations Under Section 7 of the Clayton Act 

introductory 

This part of the report deals with those situations into which a preliminary 
inquiry was made by the Commission and, as a result thereof, the matter was 
dropped for want of authority to take further action under section 7 of the Clayton 
Act. There are several reasons why the Commission lacked authority to act in 
the situations mentioned. These reasons will be discussed later in this memo- 
randum, and cases will be cited in connection therewith. The most important 
one, and one concerning which the Commission has repeatedly urged an amend- 
ment to the section, is that the acquisition was of assets rather than of stock. 
In many instances the files pertaining to the cases contain copies of the written 
agreements between the parties or companies involved, or other papers of an 
evidentiary nature which have been prepared, and photostatic copies of which are 
submitted as exhibits to this report, marked for identification as "F. T. C. Ex- 
hibits Nos. 136 to 159," inclusive. Attention must first be given to the number 
of such cases and to the extent and importance of the consolidations involved 
therein. 

NUMBER AND EXTENT OF ACQUISITIONS AND CONSOLIDATIONS 

From the latter part of 1932 until July of 1938 the Commission made inquiry 
into 134 situations which appeared violative of section 7, but which were, upon 
investigation, dismissed for various reasons without further action by the Com- 
mission (4 of the 134 were dismissed prior to 1932, but are included in the study 
because of their importance in this connection). Of these, 13 proved to involve 
no acquisition but were merely, rumors and indications of acquisitions which were 
investigated and dismissed. The others were situations in which acquisition had 
taken place, but in such a manner and under such circumstances as led the Com- 
mission to believe no action was warranted. The latter are the cases with which 
this part of the report is concerned. 

The 121 acquisitions covered by this study combined authorized capital of the 
acquiring companies having a stated par value of approximately $4,000,000,000, 
and no par value shares numbering approximately 136,000,000, with a total au- 
thorized capital of the acquired companies having a stated par value of approxi- 
mately $200,000,000, and no par shares numbering approximately 9,000,000. 
The acquiring companies had total assets of approximately $8,000,000,000, while 
the acquired companies had assets totaling approximately $600,000,000. Approxi- 
mate sales of the acquiring companies amounted to $2,500,000,000, while the 
acquired companies' approximate sales amounted to $500,000,000. These figures, 
while quite impressive in their own right, may be added to, since in a few instances 
the figures involved in the acquisitions were not immediately available. The 
figures indicate, as was actually the fact in most cases, that the acquisitions in- 
volved the absorption of relatively small companies by very large companies. 

IMPORTANT INDUSTRIES IN WHICH ACQUISITIONS AND MERGERS HAVE TAKEN PLACE 

Steel. — In the steel industry, inchiding those companies engaged in the manu- 
facture of finished steel products, there were either acquisitions or consolidations 
as a result of which the acquiring companies, having a total authorized capital 
of a stated par value of approximately $2,302,545,900, and no par shares numbering 
approximately 28,234,504, absorbed companies having a total authorized capital 
of a stated par value of approximately $109,133,900, and no par shares numbering 
approximately 952,500. Total assets of the acquiring companies, amounting to 
approximately $3,141,850,000, were combined with total assets of the acquired 
companies, amounting to approximately $217,450,000. Total sales of the acquir- 
ing companies, amounting to approximately $649,630,000, were combined with 
total sales of the acquired companies, amounting to approximately $90, 256, 000. 

2373 



2374 CONCENTRATION OF ECONOMIC POWER 

Automotive. — In the automotive industry including manufacturers of automobile 
parts and accessories, there were acquisitions or consolidations as a result of which 
the acquiring companies, having a total authorized capital of a stated par value 
of approximately $135,043,800, and no par shares numbering approximately 
7,333,000, absorbed companies having a total authorized capital of approximately 
$7,590,000, and no i<l± shares numbering approximately 1,022,100. Total assets 
of the acquiring companies, amounting to approximately $377,396,000, were com- 
bined with total assets of the acquired companies, amounting to approximately 
$27,739,268. Total sales of the acquiring companies, amounting to approximately 
$197,893,000, were combined with total sales of the acquired companies amounting 
to approximately $28,112,000. 



Petroleum. — In the petroleum industry there were acquisitions or consolidations 
as a result of which the acquiring companies, having a total authorized capital of 
a stated par value of approximately $513,601,200, and no-par shares numbering 
approximately 21,000,000, absorbed companies having a total authorized capital 
of a stated par value of approximately $8,100,000. Total assets of the acquiring 
companies, amountfng to approximately $832,200,000, were combined with total 
assets of the acquired companies, amounting to approximately $42,000,000. Total 
sales of the acquiring companies amounted to approximately $446,400,000. 



Railway Equipment. — In the railway-equipment industry there were acquisi- 
tions or consolidations as a result of which the acquiring companies, having a total 
authorized capital of a stated par value of approximately $37,500,000, and no-par 
shares numbering approximately 4,475,000, absorbed companies having a total 
authorized capital of a stated par value of approximately $24,629,500, and no 
par shares numbering approximately 2,044,000. Total assets of the acquiring 
companies, amounting to approximately $466,100,000, were combined with total 
assets of the acquired companies, amounting to approximately $52,000,000., Total 
sales of the acquiring companies, amounting to approximately $25,400,000, were 
combined with total sales of the acquired companies, amounting to approximately 
$1,800,000. 

Explosives. — In the explosives industry there were acquisitions or consolidations 
as a result of which the acquiring companies, having a total authorized capital of 
a stated par value of approximately $340,080,000, and no-par shares numbering 
approximately 1,450,000, absorbed companies having a total authorized capital 
of a stated par value of approximately $6,250,000, and no-par shares numbering 
approximately 967,000. Total assets of the acquiring companies, amounting to 
approximately $674,966,000, were combined with total assets of the acquired 
companies, amounting to approximately $20,000,000. Total sales of the acquiring 
companies, amounting to approximately $66,450,000, were combined with total 
sales of the acquired companies, amounting to approximately $8,000,000. 



Copper. — In the copper industry there were acquisitions or consolidations as a 
result of which the acquiring companies, having a total authorized capital of a 
stated par value of approximately $150,000,000, and no par shares numbering 
approximately 12,000,000, absorbed companies having a total authorized capital 
of a stated par value of approximately $1,000,000, and no par shares numbering 
approximately 300,000. Total assets of the acquiring companies, amounting to 
approximately $659,488,000, were combined with total assets of the acquired 
companies, amounting to approximately $18,000,000. Total sales of the acquiring 
companies amounted to approximately $36,000,000. 



Electric Household Appliances. — Companies engaged in the manufacture, sale, 
and distribution of electric household appliances, having a total authorized capital 
of a stated par value of approximately $29,397,463, and no-par shares numbering 
approximately 2,930,000, either by acquisition or consolidation obtained control 
of companies having a total authorized capital of a stated par value of approxi- 
mately $535,000, and no-par shares numbering approximately 2,000,000. Total 



CONCENTRATION OF ECONOMIC POWER 2375 

assets cf the acquiring companies, amounting to approximately $109,635,765, 
".-ore combined with total assets of the acquired companies, amounting to approxi- 
mately $26,962,000. Total sales of the acquiring companies, amounting to 
approximately $95,575,000, were combined with total sales of the acquired com- 
panies, amounting to approximately $38,330,000. 



Glass. — In the glass industry there were acquisitions or consolidations as a 
result of which the acquiring companies, having a total authorized capital of a 
stated par value of approximately $39,190,000, and no-par shares numbering ap- 
proximately 1,810,000, absorbed companies having a total authorized capital of 
a stated par value of approximately $3,580,000, and no-par shares numbering 
approximately 90,250. Total assets of the acquiring companies, amounting to 
approximately $91,530,000, were combined with total assets of the acquired 
companies, amounting to approximately $15,600,000. Total sales of the acquiring 
companies, amounting to approximately $34,730,000 were combined with total 
sales of the acquired companies, amounting to approximately $19,200,000. 



Industrial Chemicals Industry.— In the industrial-chemicals industry there were 
acquisitions or consolidations as a result of which the acquiring companies, hav- 
ing a total authorized capital of a stated par value of approximately $17,500,000, 
and no-par shares numbering approximately 1,150,000, absorbed companies hav- 
ing a total authorized capital of a stated par value of approximately $3,500,000, 
and no-par shares numbering approximately 555,636. Total assets of the acquir- 
ing companies, amounting to approximately $110,280,000, were combined with 
total assets of the acquired companies, amounting to approximately $12,190,000. 
Total sales of the acquiring companies, amounting to approximately $8,450,000, 
were combined with total sales of the acquired companies, amounting to approxi- 
mately $10,500,000. 



Building Materials. — In the building-materials industry there were acquisi- 
tions or consolidations as a result of which the acquiring companies, having a total 
authorized capital of a stated par value of approximately $378,700,000, and no- 
par shares numbering approximately 2,124,693, absorbed companies having a 
total authorized capital of a stated par value of approximately $2,800,000, and no- 
par shares numbering approximately 481,000. Total assets of the acquiring 
companies, amounting to approximately $378,468,000, were combined with total 
assets of the acquired companies, amounting to approximately $5,855,000. Total 
6ales of the acquiring companies, amounting to approximately $181,200,000, 
were combined with total sales of the acquired companies, amounting to approxi- 
mately $2,876,000. 

Motion Picture. — In the motion-picture industry there were acquisitions or "on- 
solidations as a result of which the acquiring companies, having a total authoimeu 
capital of 2,966,650 no-par shares, absorbed companies having a total authorized 
capital of a stated par value of approximately $1,000,000 and no-par shares num- 
bering approximately 100. Total assets of the acquiring companies, amounting 
to approximately $46,800,000, were combined with total assets of the acquired 
companies, amounting to approximately $4,100,000. Total sales of the acquiring 
companies, amounting to approximately $36,000,000, were combined with total 
sales of the acquired companies, amounting to approximately $8,200,000. 



Oxygen aw Acetylene Gas — Companies engaged in the manufacture, sale, and 
distribution of oxygen and acetylene gas, having a total authorized capital of a 
stated par value of approximately $1,000,000, and no-par shares numbering 
appxoximately 3,400,000, either by acquisition or consolidation obtained control 
of companies having a total authorized capital of a stated par value of approxi- 
mately $1,850,000, and no par shares numbering approximately 11,000. Total 
assets of the acquiring companies, amounting to approximately $49,200,000, were 
combined with total assets of the acquired companies, amounting to approxi- 
mately $2,444,500. Total sales of the acquiring companies, amounting to approx- 
imately $30,900,000, were combined with total sales of the acquired companies, 
amounting to approximately $1,748,000. 



2376 CONCENTRATION OF ECONOMIC POWER 

Tobacco. — In the tobacco industry there were acquisitions or consolidations as 
a result of which the acquiring companies, having a total authorized capital of a 
stated par value of approximately $2,650,000, absorbed companies having a total 
authorized capital of a stated par value of approximately $4,500,000. Total assets 
of the acquiring companies, amounting to approximately $3,700,000, were com- 
bined with total assets of the acquired companies, amounting to approximately 
$10,600,000. Total sales of the acquiring companies, amounting to approximately 
$629,000, were combined with total sales of the acquired companies, amounting 
to approximately $20,500,000. 

Bakery and Food Products. — Companies engaged in the manufacture, sale, and 
distribution of bakery and food products, having a total authorized capital of a 
stated par value of approximately $10,500,000, and no-par shares numbering 
approximately 13,550,000, either by acquisition or consolidation obtained control 
of companies having a total authorized capital of a stated par value of approxi- 
mately $560,000, and no-par shares numbering approximately 4,000. Total assets 
of the acquiring companies, amounting to approximately $203,099,000, were com- 
bined with total assets of the acquired companies, amounting to approximately 
$2,563,000. Total sales of the acquiring companies, amounting to approximately 
$308,300,000, were combined with total sales of the acquired companies, amounting 
to approximately $7,476,000. 



Fruit Auction. — Companies engaged in the fruit-auction business, having a total 
authorized capital of a stated par value of approximately $10,000,000, and no par 
shares numbering approximately 500,000, either by acquisition or consolidation 
obtained control of companies having a total authorized capital of a stated par 
value of approximately $1,500,000. Total assets of the acquiring companies 
amounted to approximately $20,632,354. Total sales of the acquiring companies, 
amounting to approximately $30,700,000, were combined with total sales of the 
acquired companies, amounting to approximately $26,000,000. 



Fuel and Ice. — In the fuel and ice industry there were acquisitions or consolida- 
tions as a result of which the acquiring companies, having a total authorized 
capital of a stated par value of approximately $36,000,000, and no par shares 
numbering approximately 3,000,000, absorbed companies having a total author- 
ized capital of a stated par value of approximately $2,950,000, and no par shares 
numbering approximately 207,500. Total assets of the acquiring companies, 
amounting to approximately $69,300,000, were combined with total assets of the 
acquired companies, amounting to approximately $10,700,000. Total sales of the 
acquiring companies, amounting to approximately $31,700,000, were combined 
with total sales of the acquired companies, amounting to approximately $4,080,000. 



Distilled Spirits. — In the distilled-spirits industry there were acquisitions or 
consolidations as a result of which the acquiring companies, having a total author- 
ized capital of a stated par value of approximately $26,110,480, and no par shares 
numbering approximately 2,929,587, absorbed companies having a total author- 
ized capital of a stated par value of approximately $901,250, and no par shares 
numbering approximately 60,000. Total assets of the acquiring companies, 
amounting to approximately $79,000,000, were combined with total assets of the 
acquired companies, amounting to approximately $7,130,000. Total sales of 
the acquiring companies amounting to approximately $63,690,000, were com- 
bined with total sales of the acquired companies, amounting to approximately 
$1,581,000. 

Miscellaneous. — Companies engaged in the manufacture, sale, and distribution 
of various kinds of products which do not readily fall within any classification by 
industry are grouped under the heading of miscellaneous industries. The acquir- 
ing companies grouped in this collective field had total authorized capital of the 
stated par value of $59,380,950 and no par shares numbering approximately 
2,350,000. Total asset? of the acquiring companies amounted to approximately 
$68,117,700, and total sales amounted to approximately $56,004,000. The 



CONCENTRATION OP ECONOMIC POWER 2377 

Acquired companies had total authorized capital of the stated par value of approxi- 
mately $2,060,000, and no par shares numbering approximately 58,110. Total 
assets of the acquired companies amounted to approximately $2,807,200, and 
total sales amounted to approximately $10,903,100.' 

SUBSTANTIVE RESTRICTIONS OF SECTION 7 BY LEGISLATIVE INTENT 

In 57 cases one of the principal reasons for the Commission's dropping the 
matter after making a preliminary investigation was the fact that the assets, and 
not the stock, of the acquired companies were purchased. Section 7 does not 
prohibit acquisition of physical assets and properties. The reason the section 
was never intended to prohibit such asset acquisition was undoubtedly that the 
usual method of acquisition at the time section 7 was enacted was through obtain- 
ing control of the capital stock. By reason of this limitation a way has been left 
open to accomplish the same result which the sectiou sought to prohibit. A 
few cases which were dismissed for the reason that they involved asset acquisition 
are summarized herein. 

Robert Gair Company, Inc. {File 17-7-848). — This company was one of the 
largest manufacturers of paper and fiberboard boxes and other containers in the 
country. During the period 1932 to 1934, inclusive, the company acquired the 
assets and properties of several corporations engaged in a similar line of business. 
The facts indicate that there was pre-existing competition between each of these 
companies and the Gair Company. In the same period the Robert Gair Company, 
Inc., acquired the capital stock of three large companies engaged in the same line 
of business. It was found that due to the location of the acquired companies 
there was only a small percentage of competition with the Gair Company. The 
procedure adopted in the acquisition of the businesses of the companies acquired 
by the. Robert Gair Company precluded jurisdiction by the Commission, although 
the facts show preexisting competition and a substantial enhancement of the 
Gair Company's business. (See F. T. C. Ex. No. 169.) 



The American Cyanamid Company (File 17-7-844)- — This company was one of 
the largest manufacturers of heavy chemicals. The company also manufactured 
nitrocellulose, fuses, blasting powders, fuse caps, and other explosives. In 
September 1933 the ' company acquired all the assets of the General Explosives 
Company, for which cash and stock of the acquiring company were paid. In 
October 1933 American Cyanamid Company acquired the assets of the Maryland 
Chemical Company, Inc. Both of the acquired companies were engaged in the 
manufacture of products similar to those manufactured and sold by the acquiring 
company. Since the acquisition was of assets and property, the Commission had 
no authority in tke matter. The files were closed without further action and were 
referred to the Department of Justice for such action as might seem advisable 
under the Sherman Act. 



The United States Gypsum Company (File 17-7-846).— The United States 
Gypsum Company was organized in 1920 as. the result of the consolidation of 35 
different producers of gypsum. In subsequent years the company has grown, 
through the acquisition of a number of other concerns engaged in the business of 
manufacturing similar and allied products. The company now occupies an out- 
standing position in the manufacture and sale of asphalt shingles and roofing, 
lime products, gypsum products and various other builders' supplies. In July 
1934 the United States Gypsum Company acquired the plant and other assets of 
the Star Roof Corporation. Star Roof Corporation was engaged in the manufac- 
ture and sale of roofing similar to that produced by the United States Gypsum 
Company. The roofing products of the two companies were sold on the Pacific 
coast in competition with each other. The Commission dismissed the matter for 
the reason that control of the Star Roof Corporation was brought about through 
purchase of assets rather than through the acquisition of stock. (See F. T. C. 
Ex. No. 170.) 

Standard Oil Company (Indiana) (File 17-8-8538). — This company one of 
the largest, if not the largest, companies in the country engaged in the production 
and distribution of petroleum products. The company controlled a number 



2378 CONCENTRATION OF ECONOMIC POWER 

of subsidiaries engaged in every phase of the petroleum industry. On July 29, 
1935, a Mr. Wright Morrow, of Houston, Tex., acquired all the stock of the 
Yount-Lee Oil Company. Prior to the acquisition, Yount-Lee Oil Company was 
engaged in the operation of petroleum producing properties in Texas and Louisi- 
ana. On the following day Mr. Morrow sold all the assets and properties of the 
Yount-Lee Oil Company to the Stanolind Oil and Gas Company, a subsidiary of 
the Standard Oil Company (Indiana). The inference is that the whole transac- 
tion was sponsored by Standard Oil Company (Indiana). In view of the fact that 
the acquisition of the Yount-Lee Oil Company by Stanolind Oil and Gas Company 
was one of assets, and since no evidence was secured to establish the fact that 
the Standard Oil Company interests acquired the capital stock of the Yount-Lee 
Oil Company indirectly through Wright Morrow, the Commission dismissed the 
case. (See F. T. C. Ex. No. 171.) 



The Fox Film Corporation (File 17-8-8550).— The Fox Film Corporation was 
both an operating and holding company. The company controlled subsidiaries 
engaged in every branch of the motion-picture industry. In July 1935 the Fox 
Film Corporation acquired all the property, assets, and business of Twentieth 
Century Pictures, Inc. After the acquisition, a new name — Twentieth Century 
Fox Film Corporation — was adopted for the two companies. The facts show 
that prior to the acquisition competition existed between the two companies, 
but due to the fact that the acquisition was of assets and property the Commission 
was without power to act under section 7 of the Clayton Act. (See F. T. C. 
Ex. No. 172.) 

The Owens-Illinois Glass Company (File 17-10-2321). — The Owens-Illinois Glass 
Company was recognized as the world's largest manufacturer of bottles. The 
company was the result of a merger of a number of bottle manufacturers. In 
December 1935 the Owens-Illinois Glass Company acquired the assets and busi- 
ness of the Libbey Glass Manufacturing Company. The acquisition represented 
a $5,000,000 transaction, and gave Owens-Illinois the largest thin-blown glass 
plant in the world. In January 1936 Owens-Illinois Glass Company acquired 
all the assets of the Tin Decorating Company of Baltimore. In March 1936 the 
Owens-Illinois Glass Company acquired all the outstanding shares of the Enter- 
prise Can Company. A study of the acquisitions involved in this case failed to 
indicate any preexisting competition between the Tin Decorating Company and 
Owens-Illinois, and between the Enterprise Can Company and Owens-Illinois. 
The acquisition of the Libbey Glass Company was effected through purchase of 
assets. For these reasons it was believed that the Commission had no authority 
to act. However, the transactions substantially enhanced the position of the 
Owens-Illinois Glass Company in the manufacture of a varied line of glass and 
metal containers. (See F. T. C. Ex. No. 173.) 



Thompson Products, Inc. (File 17-10-2457). — This company was one of the 
largest manufacturers of valves for automobile motors. The company also 
manufactured valve tappets, valve seats, pistons, piston pins, and other similar 
hardened-steel products. In November 1935 Thompson Products, Inc., acquired 
substantially all the assets and properties of the Toledo Steel Products Company, 
which company was also engaged in the manufacture of valves and other hardened- 
steel products. It seems that the two companies were in substantial competition 
prior to the acquisition. A very important part of the business of each was the 
manufacture of poppet valves. The acquisition placed Thompson Products, 
Inc., in an outstanding position in this field. Due to the nature of the acquisition, 
the Commission was precluded from taking any action in the matter. (See F. T. 
C. Ex. No. 174.) 

Republic Steel Corporation (File 17-11-2807). — This company was recognized 
as the third largest producer of steel in the United States. The company was 
reported to convert a greater percentage of its steel output into highly finished 

?roducts and manufactured articles than any other of the large steel companu i. 
'ursuant to an agreement dated March 2, 1937, Republic Steel Corporation 
purchased the entire property, assets, and business of the Gulf States Steel 



CONCENTRATION OF ECONOMIC POWER 2379 

Company. The Gulf States Steel Company was a relatively small unit. How- 
ever, it was reported to rank as the second largest steel producer in the South, 
with well integrated operations. It seems that from time to time Republic Steel 
Corporation acquired blocks of stock of the Gulf States Steel Company. Its 
consistent buying program was evidently intended to eventually effect the acquisi- 
tion of the Gulf States Steel Company; however, at no time prior to the acquisition 
did Republic hold a controlling interest in Gulf. For this reason it was the opinion 
of the Chief Counsel of the Commission that the acquisition was of assets rather 
than of capital stock and that the Commission was without authority to act in 
the matter. (See F. T. C. Ex. No. 175.) 



Distillers Corporation-Seagrams, Ltd., (File 17-11-3082). — This company was 
incorporated in 1928, in Canada. The Company is a holding company and, 
through American subsidiaries distills, blends, and markets in the United States 
rye, bourbon, and blended whiskies. Pursuant to an agreement dated August 5, 
1937, Durham Distillers, Inc., a subsidiary of Distillers Corporation-Seagrams, 
acquired all pi the property and assets, as a going business, of Carstairs Bros. 
Distilling Company, Inc. The acquisition in this case was important in that 
Distillers Corporation-Seagrams was already one of the largest manufacturers and 
distributors of whiskies in the world. While Carstairs Bros. Company was not a 
very large concern, still it was added to an already very large corporation. Due 
to the nature of the acquisition, the Commission dismissed the matter without 
further action. (See F. T. C. Ex. No. 176.) 



Drug, Inc. (File 1-5619).— This company was organized in 1928 for the purpose 
of consolidating a large number of manufacturers and distributors of drug-store 
merchandise and accessories. Subsequent to 1928, the time of incorporation, 
Drug, Inc., acquired the capital stock of several companies, and also the assets of 
several other companies. A study of the acquisition disclosed that those corpo- 
rations whose capital stock was acquired by Drug, Inc., were not previously in 
competition with companies controlled by Drug, Inc. The other acquisitions 
involved the purchase of assets. For these reasons the Chief Examiner of the 
Commission concluded that the Commission was without authority to act in the 
matter. (See F. T. C. Ex. No. 177.) 

H STRICTIONS OF SECTION 7 DUE TO COURT DECISIONS 

The International Shoe Co. Case. — By judicial interpretation many limitations 
other than those inherent to section 7 have been imposed upon the Commission's 
authority to act thereunder; in fact, it is believed that the effectiveness of this 
section has been completely emasculated as the result of court decisions. Among 
other things, the section clearly states "that no corporation engaged in commerce 
shall acquire, directly or indirectly, the whole or any part of the stock or other 
share capital of another corporation engaged also in commerce, where the effect 
of such acquisition may be to substantially lessen competition (732) between the 
corporation whose slock is so acquired and the corporation making the acquisition, or 
to restrain such commerce in any section or community, or tend to create a monop- 
oly of any line of commerce." [Italics supplied.] 

Consider the courts' interpretation of this provision in the light of a few decided 
cases. 

The Commission, on November 25, 1925, issued an order against International 
Shoe Company, the largest manufacturer of leather shoes in the United States, 
requiring it to dispossess itself of the capital stock of the McElwain Shoe Com- 
pany, a- New England manufacturer of shoes. The Commission's order was 
affirmed by Ahe United States Circuit Court of Appeals, First Circuit, on Novem- 
ber 27, 1928 (29 Fed. 2d. 518). The Supreme Court of the United States reversed 
the lower court on January 6, 1930 (2S0 U. S. 291). It held, with Justices Stone, 
Holmes, and Brandeis dissenting, that because the shoes made by the acquiring 
and acquired corporations differed in appearance and workmanship and appealed 
to the tastes of entirely different classes of consumers, there was no substantial 
competition between the two companies as to the great bulk of their business. 
The court was of the opinion that mere acquisition by one corporation of the stock 
of a competitor, even though it result in the lessening of some competition, is not 
124491— 39— pt. 6a 6 



2380 CONCENTRATION OF ECONOMIC POWER 

forbidden; that the act deal only with such acquisitions as would probably result 
in lessening competition in the industry to a substantial degree, that is, to such a 
degree as will injuriously affect the public. Such a decision applies no more than 
the Sherman Law test, and the test of competition between the two companies is 
disregarded. 

Another point in the International Shoe Company Case involved the financial 
distress of the McElwain Company. It was pointe out that a company in a state 
of near bankruptcy, as was the McElwain Company, is in no position to offer 
substantial competition to competing companies. Other Federal courts have 
adopted the test as to competition as laid down in the International Shoe Com- 
pany Case. 

In the Temple Anthracite Coal Company Case (51 Fed. 2d. 656) and in the 
V. Vivaudou Company Case (54 Fed. 2d. 273), the decisions rested squarely upon 
the International Shoe Company Case. In the Temple Anthracite Coal Company 
Case Justice Woolley, in a dissenting opinion, gave the best criticism of the test 
of competition laid down in the International Shoe Company Case in a statement 
in which he said, "In arriving at the conclusion that the evidence sustains the 
order of the Commission, I have kept in view the fact, at different times lost 
sight of in this case, that we are not concerned with the lessening of competition 
between these two companies and other companies in the industry, but are con- 
cerned with the lessening of competition between the two companies themselves." 
[Italics supplied.] 

In the light of tiie decision in the International Shoe Case, the Commission did 
not issue complaints in 77 cases during the period covered by this report, where 
the lack of substantial competition was one of the principal reasons for dismissal. 
A few of these cases are mentioned herein. 



The Minneapolis-Honeywell Regulator Company {File 17-7-859) . — This com- 
pany was one of the largest manufacturers of temperature-regulating devices 
and automatic controls for oil- and gas-heating systems. On December 31, 1934, 
the Minneapolis-Honeywell Regulator Company acquired the entire outstanding 
issue of common stock of the Brown Instrument Company. The Brown Instru- 
ment Company was engaged in the manufacture of products very similar to those 
manufactured by the Minneapolis-Honeywell Company. The acquisition of the 
Brown Company has placed Minneapolis-Honeywell in a very outstanding posi- 
tion in the field. Upon preliminary inquiry by the Commission, a great part of 
the products of these two companies were found to be used by different classes of 
consumers. For this reason it was believed that the competition between the 
two companies would be held insubstantial in the light of the International Shoe 
Decision. It is evident from the nature of the products that the two companies 
could have been in very substantial competition. (See F. T. C. Ex. No. 178.) 



The Inland Steel Company {File 17-8-8542) .—-This company was one of the 
larger independent manufacturers of steel and steel products. The company 
controlled a number of subsidiaries engaged in the mining and production of iron 
ore and in the fabrication of steel products. In 1935 Inland Steel Company 
acquired Joseph T. Ryerson & Son, Inc., which company was engaged in the sale 
and distribution of heavy iron and steel products. It was believed that the 
competition would not be held substantial since Inland was a producer of steel 
selling at wholesale and Ryerson was a distributor of steel selling at retail. The 
acquisition, however, has added to and rounded out the operations of the Inland 
Steel Company. Competition in the sale of the steel products might easily be 
lessened. (See F. T. C. Ex. No. 179.) 



The Borg-Warner Corporation {File 17-8-8551). — This company was a holding 
company controlling a number of subsidiaries engaged in the manufacture of a 
varied line of automobile parts, household equipment, specialty steel, and fabri- 
cated-steel products. Since its organization in 1928 the company has acquired 
the capital stock of a number of concerns, each of which was long established and 
outstand ng in its field. Several of the acquisitions were the subject of inquiry by 
the Commission. In June 1935 the Borg-Warner Corporation acquired all the 
issued and outstanding capital of the Calumet Steel Company. The Calumet 



CONCENTRATION OF ECONOMIC POWER 2381 

Company, prior to acquisition by Borg- Warner, engaged in the manufacture of 
steel bars and other steel forms. Competition was believed to be insubstantial 
(International Shoe Case) for the reason that Borg- Warner manufactured specialty 
products from steel, while Calumet Steel Company was engaged in the production 
of unfabricated steel. The acquisition has enhanced the position of the Borg- 
Warner Company to a very great extent. (See F. T. C. Ex. No. 180.) 



The Anchor Cap Corporation (File 17-11-2523). — This company was the out- 
standing manufacturer of caps and seals for all kinds of bottles and for glass and 
tin containers. The company controlled subsidiaries engaged in the manufac- 
ture of bottles and other glassware. In July 1934 the Anchor Cap Corporation 
acquired all the outstanding stock of the Salem Glass Works. The Salem Glass 
Works manufactured pharmaceutical glassware and bottles for charged and min- 
eral waters. The Capstan Glass Company, a subsidiary of Anchor Cap Corpora- 
tion, was engaged in the manufacture of bottles and glassware which were used 
as food containers, and which products were similar to the products manufac- 
tured by the Salem Glass Works. Due to the fact that the products of the two 
companies were dissimilar in their uses, it was believed that competition between 
the two companies was insubstantial. (See F. T. C. Ex. No. 181.) 



Ground Gripper Shoe Company, Inc. (File 1-5673). — This company was engaged 
in the manufacture of what is known as "corrective footwear." In 1928 the Ground 
Gripper Shoe Company, Inc., acquired the Kahler Shoe Company, the Cantilever 
Corporation, Wm. Henne & Company, and the Crittenden Company, which four 
companies were also engaged in the manufacture of corrective footwear. As a 
result of investigation of the acquisitions, it was found that each company manu- 
factured different types of corrective footwear. No action was taken since there 
was no substantial competition, as competition is defined in the International 
Shoe Case, However, the acquisition has placed the Ground Gripper Company 
in a very outstanding position in the corrective-footwear field. 

In view of the decision in the International Shoe Case, the Commission did not 
issue complaints in eight cases during the period covered by this report for the 
reason that one, or all, of the companies involved in the acquisition was, or were, 
in a state of financial distress. One or two such instances are summarized herein. 



The Goodyear Tire & Rubber Company (File 17-7-863). — This company was 
the outstanding manufacturer of automobile tires, tubes, and other rubber prod- 
ucts in the United States. In May 1935 the Goodyear Company offered to buy, 
upon a reorganization basis, the Kelly-Springfield Tire Company, which company 
had been in receivership since December 1934. Conferences between the Good- 
year Company and the stock and noteholders of the Kelly-Springfield Company, 
who also had a plan of reorganization, resulted in an acceptance of a compromise 
plan whereby Goodyear acquired the Kelly-Springfield Company. From the 
statement of facts it was concluded that the Goodyear Tire & Rubber Company 
acquired the entire business of the Kelly-Springfield Tire Company through bank- 
ruptcy proceeding. For this reason the Chief Counsel was of the opinion that 
the Commission had no authority to act in the matter. (See F. T. C. Ex. No. 
182.) 



Consolidated Oil Corporation (File 17-10-2326). — This company was a New 
York corporation engaged in the production and sale of petroleum products. 
On April 12, 1934, Consolidated Oil Corporation purchased the outstanding 
capital stock of the Independent Oil and Gas Company at a bankruptcy sale of 
the Producers and Refiners Corporation, which corporation had formerly held all 
the stock of the Independent Company. On October 15, 1934, while the Richfield 
Oil Corporation of California was in bankruptcy and in the process of reorganiza- 
tion, the Consolidated Corporation made an offer to purchase the stock and 
accounts of Richfield Oil Corporation of New York, a subsidiary of the California 
Corporation. On November 15, 1934, the Court accepted the offer. In view of 
the financial conditions of the acquired companies, the Chief Counsel was of the 
opinion that there was no violation of the Clayton Act. (See F. T. C. Ex. No. 
183.) 



CONCENTRATION OF ECONOMIC POWER 

Swift and Thatcher Cases.— On November 23, 1926, the United States Supreme 
Court decided the Swift & Company and Thatcher Manufacturing Company cases 
(272 U. S. 554). The Court held, in those two cases, that the Commission had 
no power to order divestiture of property to which title and possession was 
secured before the Commission had issued a complaint, even where the property 
was acquired through the exercise of voting control of capital stock which had 
been illegally acquired. 

The decision of the Supreme Court in the Swift and Thatcher Cases was carried 
a step farther when the Court, on March 12, 1934., decided the Arrow-Hart & 
liegeman Case (291 U. S. 587). In that case the Court held that a holding 
company by divesting itself of capital stock before the issuance of the Commis- 
sion's order but subsequent to the Commission's complaint, ousted the Commis- 
sion from authority to act in the matter. The Court also held in that case that 
section 7 of the Clayton Act did not forbid the acquisition of property by mergers 
made pursuant to State laws or by mergers made by shareholders in lieu of a 
holding company. The point was made that the Commission is an administra- 
tive body possessing only power conveyed by statute, and hence its jurisdiction 
is confined to ordering disposition of illegally acquired stock. 

In the light of the decision of the Supreme Court in the Swift and Thatcher 
Cases, the Commission did not issue complaints in nine cases during the period 
1932 to July 1938. Some of the cases are summarized in this report. 



Phelps Dodge Corporation (File 1 7-7-867) .—This company was one of the three 
largest copper-producing companies in the United States. The company, through 
its subsidiaries, engaged in the mining, smelting, and refining of copper. The 
company also had subsidiaries engaged in the fabrication of all kinds of copper 
products. In February 1935 the Phelps Dodge Corporation acquired virtually 
all the outstanding stock of the United Verde Copper Company. After acquisi- 
tion of the capital stock, all the United Verde property and assets were sold and 
transferred to Phelps Dodge Corporation. The faots show that, just prior to 
the acquisition, Phelps Dodge Corporation was the leading copper producer in 
the Arizona Copper region, with United Verde ranking second. As the result of 
the acquisition, Phelps Dodge has obtained a dominant hold on the copper pro- 
duction in that section. However, as regards copper production in the United 
States as a whole, the company obtained no monopoly. In the light of the 
Swift case, the Chief Counsel was of the opinion that the Commission had no 
authority to act in the matter. 



The National Gypsum Company (File 17-10-2327). — This company was incor- 
porated in Delaware in 1925. As a result of a program of expansion, beginning 
in 1928, the company had become one of the largest in the United States offering 
a group of related lime, gypsum, and insulation products. As^of October 7, 1935, 
the National Gypsum Company acquired a controlling interest in the capital stock 
of the Universal Gypsum and Lime Company. On December 30, 1935, the as- 
sets and business of the Universal Gypsum and Lime Company were merged 
with the assets and business of the National Gypsum Company. Prior to the 
acquisition, the two companies involved were in substantial competition in the 
sale of their products. The Chief Counsel was of the opinion that due to the 
merger of assets the Commission had been deprived of authority to act in the 
matter. (See F. T. C. Ex. No. 184.) 



General American Transportation Corporation (File 17-10-3248). — This com- 
pany was engaged in the leasing of tank cars for the transportation of gasoline 
and other liquids. From time to time General American Transportation Cor- 
poration acquired the capital stock of the Penisylvania-Conley Tank Car Com- 
pany, until in 1930 all the issued common stock "of the Conley Company was in 
the hands of the General American Corporation. At the time inquiry was made 
into the matter, the General American Corporation had acquired all the assets 
of the Pennsylvania-Conley Company. In view of this fact the Chief Counsel 
was of the opinion that the Commission had no authority to act. (See F. T. C. 
Ex. No. 185.) 



CONCENTR YTION OF ECONOMIC POWER 2383 

Consolidated Biscuit Company (File 17-11-22 J t 0). — This company was one of 
the largest companies engaged in the manufacture and sale of crackers and other 
bakery products. The company marketed its products through both wholesale 
and retail channels. In June 1936 the Consolidated Biscuit Company acquired 
all the outstanding capital stock of Thinshell Products, Inc. The Thinshell 
Company was engaged in practically the same line of business. There is evidence 
that competition did exist between the two companies. However, after acquisi- 
tion by Consolidated of the capital stock of Thinshell Products, Inc., the assets 
and all properties of the Thinshell Company were transferred to Consolidated, 
and Thinshell was dissolved. For this reason the Chief Counsel was of the 
opinion that the Commission had no authority to act in this matter. (See 
F. T. C. Ex. No. 186.) 

Arrow-Hart & liegeman Case. — In the Arrow-Hart & Hegerman Case, as prev- 
iously mentioned herein, it was decided that section 7 did not forbid mergers 
made pursuant to State law. Since this decision (March 12, 1934), the Commis- 
sion has not issued complaints in nine cases in which mergers of competing com- 
panies were consummated under State law. A few of the cases are summarized 
herein. 



The Allegheny Steel Company (File 17-11-2226). — This company was engaged 
in the operation of open hearth and electric furnaces, break-down mills, annealing 
furnaces, and in the production of various kinds of alloy steels in the forms of 
sheets, billets, and bars. The company was one of the largest engaged in this 
business. On July 27, 1936, the Allegheny Steel Company and the West Leech- 
burg Steel Company were merged in accordance with the provisions of the Busi- 
ness Corporation Law of the Commonwealth of Pennsylvania. There was some 
distinction to be made in I lis products of the two companies, and for that reason 
the Chief Examiner was of the opinion that the products were not in substantial 
competition, as competition is defined in the International Shoe Case. Another 
reason for dismissing the case concerned the merger of the two corporations under 
State law (Arrow-Hart & liegeman Case). The result of the merger undoubtedly 
enhanced the position of the Allegheny Steel Company in the industry and elimi- 
nated possible competition between the companies. (See F. T. C. Ex. No. 187.) 



Vortex Cup Company and Individual Drinking Cup Company, Inc. (File 17-11- 
1915). — These companies were engaged in the manufacture and sale of paper cups 
manufactured under extensive patents. In January 1936 the two companies 
were merged in accordance with the Business Corporation Law of the Common- 
wealth of Pennsylvania and the General Corporation Law of the State of Dela- 
ware. The two companies were evidently in competition in the sale of their 
products; however, the products were sold in different price ranges. In view of 
this distinction in quality of the two products, it was believed that competition 
between them would be held insubstantial. The point of merger under State 
law also entered into the disposition of the case. In view of the outstanding 
position of the new corporation, the matter was referred to the Department of 
Justice for such action as that Department might deem advisable 'under the 
Sherman Act. (See F. T. C. Ex. No. 188.) 



Leslie-California Salt Company (File 17-11-2416). — This company was a 
producer and refiner of salt used for every purpose. Its principal products were 
refined vacuum salt and dried processed salt. Pursuant to an agreement dated 
September 18, 1936, the Leslie-California Salt Company and the Arden Salt 
Company were merged in accordance with section 59- of the General Corporation 
Law of the State of. Delaware and in accordance with trie. Civil Code of the State 
of California. It appears that the two companies were in competition in the 
production and sale of wet crude salt. In the case of Leslie-California Salt Com- 
pany, this product constituted about 15 percent of its sales, while in the case of 
the Arden Salt Company, the product constituted its entire production. In 
view of the method of consolidation and the relatively small percentage of com- 
petition between the companies, the Chief Examiner was of the opinion that the 
Commission had no authority to act in the matter. (See F. T. C. Ex. No. 189.) 



2384 CONCENTRATION OF ECONOMIC POWER 

Corning Glass Works (File 17-11-2808). — This company was engaged in the 
manufacture of electrical bulbs and tubing, laboratory and scientific apparatus, 
railroad-and marine-signal glassware, gauge glass, aviation and optical glassware, 
and other scientific-glass .products. In November 1936 Corning Glass Works 
was consolidated with the McBeth-Evans Glass Company under the provisions 
of the Stock Corporation Law of the State of New York and the Business Cor- 
poration Law of the Commonwealth of Pennsylvania. An analysis of the com- 
panies' sales indicated that approximately 10 percent of Coming's sales were 
competitive with those of McBeth-Evans and that approximately 15 percent of 
McBeth-Evans' sales were competitive with those of Corning. Due to the nature 
of the consolidation, and the relatively small percentage of competition, the 
matter was believed to be without the authority of the Commission. (See F. T. C. 
Ex. No. 190.) 



Alva Car-pet and Rug Company {File 17-11-2886). — This company was engaged 
in the manufacture of velvet-jute and velvet-wool rugs. The Parker-Wylie 
Carpet Manufacturing Company was engaged in the manufacture of axminister 
and jute rugs. On March 23, 1937, the two companies were merged under the 
name of General Carpet Corporation, according to the provisions of the Penn- 
sylvania Business Corporation Law. The individual products of these two cor- 
porations were unlike in type and character and, therefore, were believed to be 
noncompetitive in the light of the decision in the International Shoe Case. For 
this reason, and also for the reason that the merger was made under State law, 
the matter was believed to be without the authority of the Commission. (See 
F. R. C. Ex. No. 191.) 

CASES REFERRED TO THE DEPARTMENT OF JUSTICE FOR CONSIDERATION UNDER 
THE PROVISION OF THE SHERMAN ACT 

Eleven of the cases with which this part of the report is concerned were referred 
to the Department of Justice for such action. as that Department might consider 
advisable under the Sherman Act, or for other reasons. A few such instances 
are summarized herein. 



DiGiorgio Fruit Corporation (File 17-7-789). — This corporation was recognized 
as the second largest company of its kind in the world, being superseded only the 
the United Fruit Company. The Connolly Auction Company, one of the sub- 
sidiaries of the DiGiorgio Company, was engaged in the fruit-auction business 
in the city of New York. On January 1, 1933, the Connolly Company entered 
into an agreement with the Independent Fruit Auction Corporation whereby 
the Independent Fruit Auction Corporation would carry on Connolly's auction 
business from the period January 1, 1933, to December 31, 1942. Independent 
was to pay Connolly a flat sum of $100,000 per year, and the profits of Independent 
in excess of a certain amount were to be snared with Connolly. Connolly agreed 
to finance Independent for an amount limited by the contract. The agreement 
in no way provided for the acquisition of either capital stock or assets of the 
Connolly Auction Company. The arrangement between the two auction com- 
panies gave the DiGiorgio Fruit Corporation approximately 85 percent of all 
the commission auction business in the New York area. Later a new corpora- 
tion was organized under the laws of the State of New York. The object of the 
organization of the new corporation was to take over the business of the two con- 
cerns, Independent and Connolly. The DiGiorgio Fruit Corporation owned 
all of the stock of the new corporation. How DiGirogio acquired Independent's 
stock in the new corporation is not known. After an investigation by the Com- 
mission, the Chief Counsel was of the opinion that, if there was a violation of the 
law, it was only for the Department of Justice to investigate under the Sherman 
Act. The files were accordingly referred to that Department. 



Owens-Illinois Glass Company (File 17-7-814)- — This company has been recog- 
nized as the world's largest manufacturer of bottles. In January 1933 Owens- 
Illinois Glass Company contracted to acquire the entire assets of the Hemingray 
Glass Company of Muncie, Ind., a manufacturer of glass insulators, and the 
O'Neil Machine Company, makers of bottle-blowing machines of the vacuum 
type. At the same time it also acquired substantial stock interests in the Con- 



CONCENTRATION OF ECONOMIC POWER 2385 

tainer Corporation of America and National Distillers Products Corporation, 
which company was engaged in the manufacture and sale of spirits, ethyl alcohol, 
and denatured alcohol. The Chief Examiner did not conduct an extended in- 
vestigation of the matter because of the fact that as to the bottle companies the 
assets were acquired, and as to the other acquisitions there was apparently no 
competition. He recognized the tendency toward monopoly, but did not feel 
justified in instituting investigation without direction of the Commission. The 
Commission directed that the papers in this file be transferred to the Department 
of Justice. 



Outboard Motors Corporation (File 17-11-201,0). — This corporation was one of 
the largest companies engaged in the manufacture of outboard boat motors. 
In 1935 the company was controlled by three men, namely, Stephen F. Briggs, 
H. N. Stratton, and Ralph Evinrude. In November 1935 Stephen Ff Briggs 
purchased approximately 85 percent of the capital stock of the Johnson Motor 
Company. The Johnson Motor Company was also one of the largest companies 
engaged in the manufacture of outboard boat motors. ■ Following, or incident to, 
the purchase of the stock of the Johnson Motor Company, Mr. Briggs sold a part 
of the stock to Mr. Evinrude and the H. N. Stratton family, retaining for himself 
approximately 54 percent of the said Johnson stock. At the time of the acquisi- 
tion, Mr. Briggs was a substantial stockholder, director, and chairman of the 
board of directors of the Outboard Motors Corporation. Following the purchase 
of the capital stock of the Johnson Motor Company, Mr. Briggs resigned as chair- 
man and director of the Outboard Motors Corporation, but retained his stock 
holdings therein. It was the opinion of the examining attorney that the very 
close association of Briggs, Stratton, and Evinrude in the Johnson Motor Com- 
pany and the Outboard Motors Corporation might warrant consideration by the 
Department of Justice as a possible violation of the Sherman Act, inasmuch as 
it appeared that the two companies controlled a very large percentage of the 
outboard boat motors production. The file was, accordingly, referred to that 
Department. 

Three Rivers Glass Company (File 17-11-2365). — The Three Rivers Glass Com- 
pany was a small glass container manufacturing company located at Three 
Rivers, Tex., and operating principally in the States of Texas, Louisiana, Okla- 
homa, and New Mexico. The company was also able to ship its products by boat 
from Corpus Christi, Tex., to New York at very low water rates and thereby able 
to sell at reduced competitive prices on the Atlantic seaboard. In the years 1929 
and 1930 the company did a gross business in excess of one-half million dollars per 
year. At that time the company had just begun a program of expansion. All 
indications were that the business would grow and would be fairly successful in 
competing with the larger companies in the sale of their products in the territories 
in which Three Rivers operated. Late in 1930 the bottom dropped out of the 
business with a tremendous falling off in sales of bottles, the principal product of 
the company. As a result, the company was required to take large losses on 
inventory. In that year the company also lost heavily in bad accounts. In 
March 1932 the company defaulted in interest payments on its first-mortgage 
notes and, in November of that year, was placed in the hands of receivers. At- 
tempts were made to reorganize the company, and an application for an R. F. C. 
loan was made. However, a number of the company's noteholders and other 
creditors refused to subordinate their claims to the R. F. C.,. which Corporation 
had worked out a plan of reorganization for the Three Rivers Company whereby 
the company might reasonably have been expected to pull through its difficulties. 

The unwillingness on the part of the noteholders formed the basis of the applica- 
tion for complaint herein involved. Charles R. Tips, president of the Three 
Rivers Glass Company, accused certain of the large glass manufacturing com- 
panies, the names of which were unknown to him, of buying in Three Rivers Glass 
Company's first-mortgage notes through an agent who refused to disclose his prin- 
cipal, in an attempt to force liquidation of the company. An investigation of 
the matter was made by the Commission. In the course of the investigation, Mr. 
George A. Ball, vice president of Ball Brothers Company, and Leonidas L. 
Bracken, Mr. Ball's attorney, were interviewed on the subject. At this inter- 
view, both Mr. Ball and Mr. Bracken admitted that Ball had purchased the notes 
of the Three Rivers Glass Company, face value, $120,000, for the sum of $30,000, 
and that William C. Church, acting as agent for Ball, negotiated the deal. It was 



2386 CONCENTRATION OF ECONOMIC POWER 

also admitted by Mr. Ball that he contemplated purchasing the assets of the 
Three Rivers Glass Company at the receivers' sale which had been ordered by 
the court (according to information obtained from the Department of Justice the 
purchase was effected by Ball) . 

Due to the nature of the acquisition and the manner in which the purchase was 
accomplished, it was believed that the Commission had no authority to act in the 
matter. Accordingly the Commission's file was closed without prejudice to the 
right to reopen the same if and when warranted by the facts. The files were then 
referred to the Department of Justice for consideration as a possible violation of 
the Sherman Anti-Trust Law. 

There is submitted herewith, as F. T. C. Exhibit No. 192, a complete digest of 
all informal cases involving possible violation of section 7 of the Clayton Act 
where no formal action was taken by the Commission. The digest shows the 
nature and facts relating to the acquisition and the nature of the business and 
the disposition of the case. 

This digest has been indexed by companies and by commodities. Appended 
thereto is a chart consisting of six sheets, listing the names of the acquiring com- 
panies grouped as to industries. Opposite the name of each company, where the 
figures were available, is shown the stated par value of its authorized capital, 
number of par shares, assets, and sales, together with like information pertaining 
to the company which it acquired. Also, on the same line is shown the nature 
of the acquisition, whether of assets or stock, and the reasons for disposal of the 
case. This analysis makes comprehensive the gist of the more detailed digest. 



PART III 

Available Economic Material 

introductory 

On July 6, 1938, the Federal Trade Commission prepared a compilation of 
data available in its files for the use of the Temporary National Economic Com- 
mittee. The compilation included a list of economic material which is described 
briefly in the following pages. The reports and investigations upon which they 
were based were made in accordance with the powers granted to the Commission 
in section 6 of its organic act. 

The resume has been limited to a brief outline covering the origin and scope 
of the investigations, methods used in conducting same, and an indication as to 
the principal conclusions and recommendations, particularly in those instances 
where legislation has been recommended. Copies of the reports have been identi- 
fied as exhibits and are transmitted. With regard to the report on Utility Cor- 
porations, which consisted of 84 volumes, together with 7 accompanying volumes 
of exhibits and 11 special reports, only the summary reports have been submitted. 
All volumes are, however, available for submission if desired by the Committee. 

AGRICULTURAL IMPLEMENT AND MACHINERY INDUSTRY 

On June 24, 1936, the United States Congress, through Public Resolution No. 
130 (74th Cong., 2d sess.), directed the Federal Trade Commission to investigate 
and report on (1) the costs, selling prices, profits, distribution methods, and any 
any unfair trade practices or monopolistic tendencies in the manufacture of farm 
machinery; (2) the distributors' costs, selling prices, profits, and margins entering 
into the prices paid by farmers; (3) the facts relative to price movements of farm 
implements and machines since 1914; (4) a comparison of the price movement of 
farm implements and machinery of somewhat comparable material and labor; (5) 
the extent and basis of concentration of control of manufacture and distribution 
of farm implements and machines in the hands of particular manufacturers; (6) 
any developments and tendencies in the direction of monopoly and concentration 
of ownership or control of the means of manufacture, sale, or distribution; and 
(7) the facts, for the 3 years preceding the adoption of the resolution, regarding 
violations of the antitrust laws, including the nature, extent, and effects thereof. 
The investigation was divided into two parts. Part I covered the economic basis 
of the industry, the growth and organization of the principal corporations engaged 
in manufacturing farm implements and machinery, the organization of these cor- 
porations for production and distribution, and the cooperative activities of manu- 
facturers and distributors affecting competition. Part II dealt with investments, 
earnings, rates of return, domestic prices and price trends of farm implements and 
machinery, costs of production of particular farm implements and machines, a 
comparison of foreign with domestic prices, and a study of manufacturers, whole- 
salers, and retailers' bids in connection with Government purchases of farm imple- 
ments and machines. 

The inquiry into the farm implement and machinery industry covered all 
branches of the industry and all of the major activities of the manufacturers. 
The comprehensive scope of the inquiry called for the collection of a mass of data 
concerning all branches of the industry. Consequently, the Commission prepared 
and rent out to manufacturers and dealers four sets of report forms covering 
manufacturers' costs of implements, investments, and profits; wholesalers' invest- 
ments, costs, profits, prices, and distribution methods; retail dealers' investments, 
costs, profits, prices, and methods of distribution; and an organization report 
giving officers, directors, principal stockholders, kinds of stocks issued, together 
with States and date of incorporation. In addition to the use of these schedules, 
representative farmers were asked to report their experiences in the purchase of 
farm implements, as for example, prices paid; in case he had not purchased as 

2387 



2388 CONCENTRATION OF ECONOMIC POWER 

many implements as needed, the reason therefor; the farmer's opinion of the rela- 
tive durability and efficiency of the present implements and machines as compared 
with earlier models; interest charges for implements purchased on time, etc. 

Representatives of the Commission carefully examined the accounting records 
of 1 1 large manufacturers of farm implements and machines. They also attempted 
to obtain information direct from certain retail dealers, but it was discovered 
that this method was too expensive, and it was necessary to confine this phase of 
the investigation to reports furnished by dealers. These were not entirely 
satisfactory, due to the variety of items other than farm machinery carried by 
the retail dealers and the inadequacy of their accounting records. A considerable 
amount of correspondence was required to secure adequate reports. An examina- 
tion was made of the minutes and correspondence files of the manufacturers' and 
retail dealers' associations and of the larger manufacturing companies. The 
Commission further inquired into specific complaints made by farmers, dealers, 
and smaller manufacturers. 

The companies reporting to the Commission manufactured and sold over 95 
percent of farm implements made and sold in this country. The total invest- 
ment of the International Harvester Company in the United States exceeded 55 
percent of the combined investments of 62 companies reporting for the year 1936. 
The next particularly large company was Deere & Co., whose investment for 1936 
was about 19 percent of the total. International Harvester Company's sales of 
farm machinery during 1936, exclusive of motortrucks and binder twine, amounted 
to over 41 percent of the farm-machinery sales of all reporting companies com- 
bined. Deere & Co.'s sales were equal to about 21^ percent of the total. Com- 
pared with these two companies, the sales of nearly all of the other reporting 
companies were small. 

A study was made of 28 important implements and machines sold for use in 
the United States in 1936, and it was found that from 4 to 8 of the largest farm- 
machinery manufacturers made from 50 to 100 percent of each of 21 of the 28 
implements. For 13 of the 20 implements for which concentration was greatest, 
International Harvester Company and Deere & Co. made more than half of the 
total in the United States. For 17 of the 20 implements in which concentration 
was greatest, International Harvester Company was the largest producer, and 
for 16 of them Deere & Co. was the second largest producer. 

The dominance and price leadership by these companies was the result of their 
size and financial strength, which was brought about very largely through mergers, 
acquisition of control of former competing manufacturers, and the purchase of 
the plants and other assets of competing, and other, farm-implement companies. 
This growth in size and leadership facilitated the control of large companies over 
their dealer outlets and enabled the large companies to require their dealers to 
handle their respective lines exclusively. The Commission's study indicated that 
this policy of exclusive, dealing, or full-line forcing, was often brought about 
through pressure upon dealers by manufacturers to prevent them from handling 
products of competing manufacturers. 

The concnetration of production resulted in the establishment of a price level 
by the dominant manufacturers, which all manufacturers had to observe in the 
sale of farm implements. The small companies could not sell their products for 
more than the established prices of similar products of the large companies, and 
they hesitated to sell for less than the established prices for fear of setting up a 
price war in the industry in which their larger and financially stronger rivals would 
have all the advantages. As a result of this situation the small companies awaited 
the announcement of prices by the leading manufacturers before making their 
own at the beginning of the season and followed the price changes of the large 
companies during the selling season. The years of depression saw sharp reduc- 
tions in employment and production throughout the industry, but only slight 
reductions in prices. 

The average net profits of the International Harvester Company during the 4 
years of business recovery, 1934-37, closely approached the average net profits of 
this company during the 4-year period from 1927 to 1930, a period of the greatest 
business activity in the history of the Nation. On the other hand, the average 
annual cash income of the farmer for the period 1934-37 was approximately 
23.58 percent less than it was for the period 1927-30. 

In view of the fact that the manufacturers of farm machinery performed the 
great bulk of the wholesaling function, a relatively large proportion of the farmer's 
dollar represented manufacturer's realization. Freight rarely consumed as much 
as 7 cents and sometimes less than 1 cent of the farmer's dollar. Retail dis : 
tributor's gross margins were usually less than 25 cents and often less than 20 



CONCENTRATION OF ECONOMIC POWER 2389 

cents, which left 75 and 78 cents and, sometimes, as much as 80 cents of the 
farmer's dollar for manufacturer's realizations. It has been found that there are 
very few, if any, commodities in which the manufacturer receives such a large 
proportion of the farmer's dollar. 

Approximately 100 manufacturers of farm machinery formed a trade associa- 
tion known as the Farm Equipment Institute. The most active and influential 
members of the Institute were the large manufacturers who were also the largest 
contributors to its support. The Institute advertised in farm, trade, and tech- 
nical magazines and prepared special articles for trade and farm papers, and press 
statements for city and country newspapers. In addition, it prepared pamphlets 
and other material for general distribution to educational institutions, banks, 
farmers, and farmers' organizations. The Institute prepared and submitted to 
members certain recommendations regarding the standardization of implements 
and the equipment to be furnished as "regular" or "extra." It was shown that 
this was intended to, and to some extent did, limit competition. 

In the past, the mail-order house had not been particularly important in the 
field of dealer competition because only a small percentage of dealer sales and 
repair service could be given by mail. However, in recent years the mail-order 
houses set up chains of local retail stores, many of which sell farm implements. 

The most common complaints among retail dealers were to the effect that manu- 
facturers had set up more retail dealers than were needed to supply the total 
farmer trade; that certain manufacturers had set up their own retail outlets in 
some sections of the country in competition with independent dealers who con- 
stituted the principal outlets of the same manufacturers; that dealers were forced 
to take more machines than they were able to sell, as a result of which there was 
an excessive amount of selling below manufacturers' suggested retail prices; and 
that the dealer, whose contract was subject to cancellation at any time, was often 
left with stock which he had no reasonable chance to sell except at a great loss. 

In its general conclusions, the Commission summed up briefly the factors that 
indicated the existence of a serious monopolistic condition in the farm-machinery 
industry. Among these were the large advances in the majority of farm-machinery 
prices as compared with prices of other manufactured products since the origin 
of the International Harvester Company; the profits of that company, particu- 
larly in 1937, when its net profit exceeded that of 1929; rigidity of farm-maohincry 
prices during the depression; rapid recovery of farm-machinery prices after 1933; 
the increase of farm-machinery prices in 1938 in the face of the high earnings of 
1937; exchange of price lists among manufacturers; coercion of dealers; and the 
slight decline of farm-machinery prices during the depression as compared with 
a sharp decline of production and employment. 

Inasmuch as the high degree of concentration found in the farm-machinery 
industry had been the result of the acquisition of the capital stock or the assets 
of competitors prior to enactment of the Clayton Act and, thereafter, in the pur- 
chase of assets of competitors rather than in the purchase of their capital stock, 
the Commission made the following recommendation: 

"That section 7 of the Clayton Act be amended so as to make it unlawful for 
any corporation, directly or indirectly, through a holding company subsidiary, 
or otherwise, to acquire any of the stock or assets of a competing corporation when 
either of said corporations is engaged in interstate commerce; provided, this pro- 
hibition shall not apply where the corporations involved control, in the aggregate, 
less than 10 percent of the total output of any industry or branch thereof in the 
United States, or of the sale of the commodity as to which the corporations are 
in competition, unless the effect of such a quisition may be to restrain competition 
or tend to create a monopoly in any line of commerce." 1 

On June 6, 1938, the Commission submitted to the Congress its report on the 
Agricultural Implement and Machinery Industry. It was published as House 
Document No. 702 (75th Cong., 3d sess.). A copy of the report, consisting of 
1,176 printed pages, is attached hereto as Exhibit F. T. C. 193. 

i On December 19, 1938, the Wall Street Journal reported that price reductions on practically the complete 
line of light farm implements were being made in the 1939 dealer contracts. It asserted that, except for 
combines, prices on all implements had been reduced since October 1938. The reduction on light machinery 
was shown as approximately 10 percent, while the average cut was estimated as slightly less than 4 percent. 
In a discussion of the financial condition of the manufacturers, it was estimated that there was a decline of 
between 25 and 30 percent in the volume for the Industry as a whole. It further called attention to the fact 
that one manufacturer whose fiscal year ended on October 31 had reported a sales drop of only UH percent, 
while its decline in profits was in excess of 50 percent. Thus, we have a picture of price increases in the face 
of high earnings shortly before the Commission transmitted its report to the Congress, and price reductions 
in the face of declining volume and earnings shortly after that report was made public. This situation was 
likewise the subject of comment in Business Week, December 24, 1938. 



2390 CONCENTRATION OF ECONOMIC POWER 

AGRICULTURAL INCOME 

This inquiry was made by direction of Congress under Public Resolution No. 61 
(74th Cong., 1st sess.), approved August 27, 1935, and amended by Public Reso- 
luton No. 86 (74th Cong. 2d sess.), approved May 1, 1936. The resolution, as 
amended, authorized and directed the Federal Trade Commission to investigate 
and report the extent of decline in agricultural income in recent years; the increase 
or decrease for the same years of the income of the principal corporations or othei 
principal sellers engaged in handling or processing certain essential farm com- 
modities; the distribution of the consumer's dollar paid for those commodities, 
as between farmers, processors, and distributors; the growth of capitalization and 
assets of principal corporations and their costs, profits, investments, and rates of 
return; the avoidance of taxes by such corporation or their officers; the extent of 
control or monopoly in the handling or processing of those commodities and the 
methods and devices used for obtaining and maintaining such control or.monopoly; 
the extent to which any fraudulent, dishonest, unfair, and indirect methods are 
employed in the grading, warehousing, and transportation of those commodities, 
and the prevalence of producer-cooperative organizations and their effects on 
producer and consumer. The Commission was also directed to report its con- 
clusions and recommendations growing out of the inquiry. 

An interim report was made on December 26, 1935, and printed as House Docu- 
ment No. 380 (74th Cong., 2d sess.), and the final report, Principal Farm Products, 
Agricultural Income Inquiry, was submitted to the Congress March 2, 1937. The 
summary and conclusions and recommendations of the final report were printed 
as Senate Document No. 54 (75th Cong., 1st sess.). 



Principal farm products covered. — Principal farm products covered in the investi- 
gation were wheat, cotton, tobacco, potatoes, livestock, and milk. Wheat re- 
flected the greatest decline in gross income to farmers from 1929 to 1932. In 
1932 gross income from wheat amounted to only about 29 percent of the gross 
income of 1929. Milk showed the smallest decline, but the gross income of farmers 
from that commodity in 1932 was only 54.3 percent of that in 1929. The sharpest 
recovery in the gross income of farmers from the low year of 1932 was in tobacco. 
By 1934 the income from tobacco production aggregated 78.5 percent of that in 
1929. 

Generally speaking, the gross income represented by sales by the principal 
manufacturers, processors, and distributors of these products fell off less than the 
gross income of farmers from their production, and the recovery from the low point 
of the period by the manufacturers, processors, and distributors reached a higher 
percentage of the 1929 figure than was true of the gross income of the farmer- 
producers of these products. 

Division of the consumer' s dollar. — The report shows how the consumer's dollar 
was divided between distributor, processor, and farmer in the prices paid for 
butter, fluid milk, wheat flour, wheat bread, cigarettes, beef, veal, and pork during 
the period covered by the inquiry. Butter, as contrasted with bread, a product 
involving relatively large processing costs, showed a high percentage of the con- 
sumer's dollar going to the farmer. In 1934 in 51 cities the weighted average 
retail price of butter, graded 92 score or better, was 31.5 cents per pound. Of 
this retail price, wholesale and retail distributors received a combined average 
gross margin of about 25 percent, manufacturers about 16 percent, and producers 
about 59 percent. In 1935 in 51 cities the weighted average retail price of white 
wheat flour bread was 8.3 cents per pound. Retail distributors received about 19 
percent of this price as their average gross margin, bakeries 56 percent, flour 
millers 7 percent, wheat middlemen and transportation agencies 5 percent, and 
gross proceeds of wheat farmers were about 13 percent. 



Tobacco group's concentration of control. — The inquiry disclosed that 13 tobacco 
manufacturers sold in 1 year more than 97 percent of the cigarettes, more than 
90 percent of the smoking tobacco, upward of 75 percent of the chewing tobacco, 
and in excess of 98 percent of the snuff produced in the United States in 1934. 
The report discusses methods by which the larger companies obtained com- 
manding positions in their respective industries, which were shown to have been 
by acquisition of competing firms, or by expansion, or by both. 



CONCENTRATION OF ECONOMIC POWER 2391 

Rates of return on investment. — Rates of return on investment for the period 
covered, 1929 to 1935, inclusive, earned by the reporting tobacco manufacturers, 
the biscuit and cracker companies, an r ' the chain grocery companies, are shown 
in the report. The annual averages were 15.8 percent for tobacco manufacturers, 
14.6 percent for biscuit and cracker companies, and 16.4 percent for chain grocer- 
ies. Milk processors and distributors, wholesale baking companies, and wheat 
middlemen showed higher rates of return during the first 3 years of the period 
than for the last 3 years. Average annual returns for the entire period were 
9.57 percent for the milk companies, 8.76 percent for the bakers, and 10.59 percent 
for the wheat middlemen. Returns to wheat processors, wholesale flour dis- 
tributors, and chain drug store companies (large distributors of tobacco products) 
were substantial for all years except 1932 and averaged 7.76 percent, 9.61 percent, 
and 8.29 percent for these respective groups. Reporting meat packers had an 
average rate of return of 4.28 percent; shoe manufacturers, 4.77 percent; leaf- 
tobacco middlemen, 7.44 percent} tobacco wholesalers and jobbers, 4.43 percent; 
cotton processors, 1.52 percent, with losses in some individual years. Tanning 
and leather companies sustained a loss, averaging for the period 1.89 annually, 
and chain tobacco stores a loss averaging 1.37 percent annually. 



Conditions in terminal grain markets.— Inquiry rmde into conditions of mer- 
chandising grain in the terminal markets showed that many of the practices which 
were the subject of criticism by the Commission in earlier investigations of 
terminal grain markets still existed. One of these is the control of railr,©ad-owned 
terminal elevators, leased by large merchandisers of grain at low rentals, giving 
the lessees an undue competitive advantage over other grain merchandisers in the 
purchase and handling of grain, with the result that such large merchandisers 
practically dominate both the cash and futures markets. 

Recommendations of the Commission 

In its conclusions and recommendations with respect to the grain trade, the 
report said that correction of conditions described therein could not be left to the 
trade itself, and that Federal legislation should be enacted providing, among other 
things: 

1. That all deliveries of grain on futures contracts shall be made from public 
warehouses : 

(a) Licensed by Federal authority; 

(b) Subject to Federal regulation; and 

(c) Not owned, operated, or controlled, directly or indirectly by any per- 
son, firm, or any other organization directly or indirectly dealing in grain. 

2. That all deliveries of grain on any futures contracts shall be subject to : 

(a) Federal grading and inspection ; and 

(b) Federal regulation of the delivery of grain on such contracts. 

In respect to cotton merchandismg, the report, after showing that cotton mer- 
chants and spinners generally regard the operations of the futures market under 
southern deliveries with satisfaction, recommended further study of the system of 
southern deliveries to ascertain whether legislation should be enacted providing 
for making the contract more merchantable. 

The report cited the unbalanced relations between industry and agriculture and 
suggested that making available to the public of reliable and adequate informa- 
tion concerning the large industrial corporations would constitute an important 
step toward correcting this condition. 

Concerning the value of cooperative associations, the report explained that 
although an exact measure of their value in dollars and cents would be difficult to 
obtain, the Commission desired to add to the vast body of opinion its own con- 
clusion that true cooperative associations have been of great value to the producers 
of farm products, and that such cooperatives have significantly increased the 
bargaining strength of producers and reduced the spread between producers 
and consumers' prices. 

The inquiry disclosed, in several of the industries, a high degree of monopolistic 
control, frequently due to methods contrary to the letter or spirit of the law. 
In this connection, the Commission, in its report, renewed its recommendation for 
amendment of section 7 of the Clayton Act, which now prohibits the acquisition 
by one corporation engaged in commerce of stock in a competing corporation so 
engaged where the effect may be to substantially lessen competition between such 



2392 CONCENTRATION OF ECONOMIC POWER 

corporations. The Commission recommended an amendment to prohibit acquisi- 
tion of assets, not only indirectly through use of stock unlawfully acquired, but also 
direct acquisition of assets independently of stock acquisition. Under a decision 
of the Supreme Court, the Commission cannot effect the separation of units 
acquired through purchase of capital stock if, following the stock acquisition, 
but prior to service of the Commission's formal complaint, assets of the companies 
whose stock has been acquired are merged. 

Additional recommendations were made by the Commission as a further check 
to monopolistic tendencies. 

Legal Studies of Tobacco and Potato Marketing 

Legal studies of the extent of possible concentration of control and of monopoly, 
and of any methods and devices used to gain such control, were made with regard 
to tobacco and potatoes. 



Tobacco. — The investigation failed to disclose that any one company had a 
monopoly in the manufacturing, processing, warehousing, distribution, or market- 
ing of leaf tobacco or tobacco products. Considerable concentration of control 
was found, however. Five buyers of leaf tobacco, two of which primarily represent 
English companies, generally purchased about 75 percent of the total domestic 
production and their purchases are largely concentrated in the auction belts. 
Three companies and, to a less extent, a fourth, substantially control the manu- 
facture of cigarettes of the most popular price class, and are also important factors 
in the manufacture of smoking and chewing tobacco. Three other companies 
control about 97 percent of the total snuff business. 

No substantial price fixing or price agreements in the marketing of leaf tobacco 
were found except in the minimum sale prices established for dealers in Connecti- 
cut shade-grown tobacco pursuant to an Agricultural Adjustment Administration 
marketing agreement. 

Information obtained during the inquiry indicated that competition in the 
cigarette industry might be increased by popular cigarettes selling in various 
price ranges and that new or more important competition in manufacturing 
would result in increased competition in the purchase of leaf tobacco. The 
opinion was expressed that the uniform internal-revenue tax of $3 per thousand on 
small cigarettes has tended to restrict the manufacture and sale of 10-cent cigarettes, 
the most active and substantial new competition that has manifested itself in the 
industry in many years. The Commission therefore recommended that Congress 
consider the advisability of levying a graduated tax on cigarettes in lieu of the 
present uniform tax. 



Potatoes. — Processing of potatoes is so limited in volume as to be of little con- 
sequence. No close approach to monopoly was found in their warehousing, dis- 
tribution, or marketing. Excessive production, financing charges, and local mar- 
keting fees are exacted in certain instances, but remedies are available to the 
majority of growers affected through production credit associations organized 
pursuant to the Farm Credit Act of 1933, and by collective action among producers. 



Fresh Fruits and Vegetables 

Reports to Congress Contain Commission's Recommendations. — Public Resolu- 
tion No. 61, amended by Public Resolution No. 112, (74th Cong., 2d sess.), 
approved June 20, 1936, authorized and directed the Commission to make further 
investigation with respect to agricultural income from table and juice grapes, 
fresh fruits and vegetables, and to make both interim and final reports. The 
interim report was submitted February 1, 1937, and printed as Senate Document 
No. 17 (75th Cong., 1st sess.), and the final report was submitted June 10, 1937. 

Under the resolution, the scope of this investigation was generally the same as 
that of agricultural income. 

Decline in farmers' gross income: The Commission's final report shows that the 
farmers' gross income from the production of fruits and vegetables declined in 
1932 to 51.84 percent of the 1929 gross income. This was the lowest point reached 
during the 7-year period, 1929 to 1935, inclusive. By 1935 it had recovered to 
70.02 percent of the 1929 level. The sales of no group of the reporting processors 



CONCENTRATION OF ECONOMIC POWER 2393 

and distributors of fruits and vegetables, either fresh or processed, fell during the 
7-year period to as low a percentage of its 1929 sales as did the farmers' gross 
income in relation to its 1929 level, nor failed to exceed the percentage of recovery 
reached by the gross income of the farmer. 1 

Monopoly and control: In the matter of monopoly and control, the inquiry on 
fruits and vegetables disclosed significant proportions of the national production 
of certain kinds of fruits and vegetables handled by only a few of the large cor- 
porations and cooperative associations, such as the California Fruit Growers' 
Exchange, Florida Citrus Exchange, Mutual Orange Distributors, and Lake 
Wales Citrus Growers' Association. The most important chain-store system in 
the distribution of fresh fruits and vegetables is The Great Atlantic & Pacific 
Tea Co. 

Distribution of the consumer's dollar: The distribution of the consumer's dollar 
paid for five fresh fruits and five fresh vegetables handled by chain grocery stores 
is shown in the report. The fruits are (1) table grapes, (2) Florida and California 
oranges, (3) Florida erapefruit, (4) Pacific Northwest apples, and (5) Georgia and 
Carolina peaches. The vegetables are (1) Maine, Virginia, Maryland, and Idaho 
potatoes, (2) Texas onions, (3) Texas and Florida cabbage, (4) Florida and Califor- 
nia tomatoes, and (5) Iceberg lettuce from the Pacific coast. Of the consumer's 
dollar paid for the five fresh fruits combined, for those markets and producing 
areas for which the information was obtained, the growers' proceeds were 29.4 
cents, distributors' gross margins were 35.33 cents, and transportation and all 
other costs, including packing and loading, absorbed the remainder of the dollar. 
The retail margin alone amounted to 31.14 cents and transportation costs, includ- 
ing icing and heating, to 20.21 cents. For the five fresh vegetables, growers' 
proceeds were 34.78 cents, distributors' margins, 32.10 cents, and transportation 
and all other costs, 33.12 cents. The retail margin alone was 27.26 cents and 
transportation was 22.82 cents. 

Rates of return on investment: For all groups of companies comprising the proc- 
essors and wholesale distributors, the rates of return on investment were lowest in 
1932, and for the groups comprising the chain-store distributors they were lowest 
in 1935. Relatively high rates of return, however, were earned by chain-store 
distributors. 

Producer cooperative groups: Producers' marketing cooperative associations 
are important in the distribution of some fresh fruits. In 1934 they marketed 
almost 62 percent of the total cranberry production of the United States, 57 per- 
cent of all citrus fruits, 28 percent of the dried prunes, 16 percent of the grapes, 
and 7.5 percent of the apples. For some vegetables the percentages are substan- 
tial and, for particular commercial producing areas for both fruits and vegetables, 
the proportions are large. Processing and bargaining cooperatives are of less 
importance in the fruit and vegetable industry. Marketing cooperatives were 
found to be most successful for products having relatively long marketing seasons, 
making possible the permanent employment of skilled marketing personnel, and 
for products, the commercial production of which is largely concentrated in, at 
most, a few highly specialized producing areas. 

Many aspects of the marketing of fresh fruits and vegetables are discussed in 
the report, including marketing by large organizations, production, financing, ship- 
ping by truck, character and adequacy of terminal market facilities, terminal- 
market inspection, terminal-market cartage, loss and damage claims, and sale of 
fruits at auction. 

Racketeering practices in terminal markets: The report shows that monopolistic 
and racketeering practices in the carting of fruits and vegetables exist in several 
of the larger terminal markets, particularly in New York, Philadelphia, and 
Chicago. An analysis of the facilities and conditions existing in a limited number 
of the larger terminal markets shows that, although many of the facilities have 
been modernized, there has been a marked lack of scientific planning. Many 
unfair practices have developed in the terminal inspection service in recent vears, 
particularly as it affects loss and damage claims. 

Large marketing organizations: Five concerns, other than cooperative associa- 
tions, distribute fresh fruits and vegetables on a national or very wide scale. 
Three of these, the Atlantic Commission Co., Wesco Foods Co., and Tri-Way 
Produce Co., are subsidiaries of chain grocery stores while the other two, American 
Fruit Growers, Inc., and Nash-Finch Co., are independently owned. The sub- 
sidiaries of the chain-store companies follow substantially identical methods in 

1 Sales of industrial concerns were compared with gross cash incomes of farmers because the net incomes of 
farmers from production of fruits and vegetables are not computed by the Department of Agriculture and 
therefore could not be compared with net operating profit of manufacturers, processors, and distributors. 



2394 CONCENTRATION OF ECONOMIC POWER 

the purchase of fruits and vegetables. They buy from growers and shippers as 
well as from terminal-market receivers and distribute some tonnage to the inde- 
pendent trade in addition to that sold to their parent companies. Prior to the 
passage of the Robinson-Patman Act in 1936, chain-buying subsidiaries custom- 
arily obtained a brokerage, or its equivalent in the form of a price reduction, from 
their principal shippers. This practice has been discontinued, but each of these 
companies, to a greater or lesser extent, receives discounts or price reductions in 
lieu of brokerage in purchases from principal shipping connections. 



Conclusions and Recommendations. — In the Commission's conclusions, it was 
set forth that certain practices in the carting of agricultural products in New 
York, Chicago, and Philadelphia amount to illegal agreements in restraint of 
trade and in violation of the antitrust acts; and that the activities of the agents 
of the teamsters' union in Chicago, Cleveland, and Philadelphia in interfering with 
outside trucks were in violation of the Federal Anti-Racketeering Act. As to 
these practices, the Commission has made its evidence available to the Depart- 
ment of Justice. 

The report recommended that the Perishable Agricultural Commodities Act 
be amended to authorize and direct the Secretary of Agriculture to make com- 
plete condition inspections for the purpose of determining the extent of damage 
and insofar as practicable the cause of such damage on all cars of the more perish- 
able commodities arriving in the principal terminal markets. 

It also recommended that the Interstate Commerce Commission be authorized 
and directed to require the claim division of the Association of American Rail- 
roads to furnish periodically, for the information of all inerested persons, certain 
data concerning tonnage or number of carloads of each kind of fresh fruits and 
vegetables and of melons delivered by each railroad to each of the principal ter- 
minal markets, and the average amount of claims paid by each of these railroads 
per carload of each of these perishable commodities delivered in the various ter- 
minal marketa. 

Amendment of the Interstate Commerce Act was also recommended to empower 
the Interstate Commerce Commission to prescribe certain rules and regulations 
governing the filing, investigation, and payment of all loss and damage claims in 
the shipment of perishable commodities. 

CHAIN STORES 

On May 12, 1928, the United States Senate, through Senate Resolution No. 224 
(70th Cong., 1st sess.), directed that the Federal Trade Commission — 

undertake an inquiry into the chain-store system of marketing and distribu- 
tion as conducted by manufacturing, wholesaling, retailing, or other types of 
chain stores and to ascertain and report to the Senate (1) the extent to which 
such consolidations have been effected in violation of the antitrust laws, if at 
all; (2) the extent to which consolidations or combinations of such organiza- 
tions are susceptible to regulation under the Federal Trade Commission Act 
or the antitrust laws, if at all; and (3) what legislation, if any, should be en- 
acted for the purpose of regulating and controlling chain-store distribution. 

In response to this resolution, a detailed investigation was made, which included 
the use of both questionnaires and field agents. The data procured in this man- 
ner was assembled and transmitted to the Senate in 33 factual reports, covering 
various phases of chain-store operation. All of these were printed as Senate docu- 
ments. The scope of the study is indicated by the following list of titles: 



.Senate 
Docu- 
ment 
No. 



Seventy-Second Congress, First Session: 

Cooperative Grocery Chains 

Wholesale Business of Retail Chains. 

Sources of Chain-Store Merchandise 

Scope of the Chain-Store Inquiry 

Chain-Store Leaders and Loss Leaders 

Cooperative Drug and Hardware Chains... 
Growth and Development of Chain Stores. 



CONCENTRATION OF ECONOMIC POWER 



2395 



Title 



Senate 
Docu- 
ment 
No. 



Seventy-Second Congress, Second Session: 

Chain-Store Private Brands 

Short Weighing and Over Weighing in Chain and Independent Grocery Stores 

Sizes of Stores of Retail Chains 

Quality of Canned Vegetables and Fruits (under Brands of Manufacturers, Chains, and 
other Distributors) - 

Gross Profit and Average Sale per Store of Retail Chains 

Seventy-Third Congress, First Session: 

Chain-Store Manufacturing. 

Sales, Costs, and Profits of Retail Chains 

Prices and Margins of Chain and Independent Distributors, Washington, D. C— Grocery. 

Prices and Margins of Chain and Independent Distributors, Memphis— Grocery „ 

Seventy-Third Congress Second Session: 

Prices and Margins of Chain and Independent Distributors, Detroit— Grocery 

Chain-Store Wages 

Chain-Store Advertising 

Chain-Store Price Policies ^ 

Special Discounts and Allowances to Chain and Independent Distributors— Tobacco Trade. 

Invested Capital and Rates of Return of Retail Chains 

Prices and Margins of Chain and Independent Distributors, Cincinnati— Grocery... 

Special Discounts and Allowances to Chain and Independent Distributors— Grocery Trade- 
Service Features in Chain Stores 

The Chain Store in the Small Town 

Special Discounts and Allowances to Chain and Independent Distributors— Drug Trade. 

Prices and Margins ol Chain and Independent Distributors, Cincinnati — Drug 

Prices and Margins of Chain and Independent Distributors, Detroit— Drugs .*. 

Prices and Margins of Chain and Independent Distributors, Memphis— Drugs 

Prices and Margins of Chain and Independent Distributors, Washmgton, D. C.— Drug.. 

Miscellaneous Financial Results of Retail Chains 

State Distribution of Chain StoTes 

Seventy-Fourth Congress, First Session: Final Report on the Chain Store Investigation 



On December 14, 1934, the Commission transmitted to the Senate its final 
report on the chain-store investigation, covering approximately 100 printed pages, 
in which it summarized the facts and presented its conclusions and recommenda- 
tions based upon the factual data obtained during the inquiry. 

The study indicated that the chief advantage enjoyed by the chain store was 
its lower selling prices to consumers. These were attributable to a variety of 
factors, chief among which were special discounts and allowances to chains, use 
of loss leader?, and, in some localities, the more extensive use of short and less 
extensive use of overweighting by chains as compared with independents. Among 
other factors contributing to lower prices by the chains were less service to cus- 
tomers, lower wages in some localities, elimination of wholesale selling expense, 
handling of private brands upon which there were wider profit margins, profits 
from wholesaling, ability to use newspaper advertising profitably, and the ad- 
vantage of being able to average the profit results obtained from stores in various 
localities. 

The Commission discussed, but did not recommend, certain proposals, including 
the graduated chain-store tax, exemption of cooperatives from the operation of 
the antitrust laws and from taxation, and the suggestion that manufacturers 
might be requested to file with the Commission special prices or discounts to 
chain stores. The Commission, in its final report on the Chain-Store Investiga- 
tion, made the following statement with regard to recommendations for legislation: 

"If the public policy thought to have been expressed in section 7 of the Clayton 
Act is to be revived and pursued to any real accomplishment, it is obvious that 
the act requires substantial amendment. The amendments indicated under the 
circumstances fall into two categories: First, such as would make section 7 
effective to the extent of its original intent; second, such as would extend it beyond 
its original intent in order to make it a more effective obstacle to the trend toward 
monopoly. If the first course be adopted, it could be accomplished by an amend- 
ment of section 1 1 authorizing the Commission to order the divestiture of physical 
assets acquired, as the result of an unlawful stock acquisition and regardless of 
whether complaint is filed before or after the assets are acquired. Such an amend- 
ment would restore to the section something of its supposed original intent and 
effectiveness and would but establish what a strong minority of the Supreme Court 
on several occasions have stated is already a correct interpretation of the law. 
The Commission recommends such amendment in the event its recommendation 
for amendment of section 7 is not acceptable. 
124491— 39— pt. 5a 7 



2396 CONCENTRATION OF ECONOMIC POWER 

"The fact that important consolidations of competing, corporations have been 
consummated through acquisition of physical properties rather than stock suggests 
the second type of amendment. To the extent that acquisition or consolidation 
of assets tends to create monopoly or substantially lessen competition it might 
logically be prohibited to the same extent that stock acquisitions and consolida- 
tions are prohibited and on the same grounds. 

"Section 7 now declares that stock acquisitions are unlawful — 
" 'where the effect of such acquisition may be to substantially lessen competition 
between the corporation whose stock is so acquired and the corporation making the 
acquisition, or to restrain such commerce in any section or community, or tend to 
create a monopoly of any line of commerce.' 

"A vital part of the section is in the words above italicized. As previously 
quoted from the opinion of one of the Federal Circuit Courts of Appeal, 
" 'if competing corporations may not consolidate, it naturally follows that it will 
be difficult for one corporation ever to monopolize an industry.' 

"Unless that portion of the section be made effective, the remaining effects 
prohibited may be interpreted as substantially equivalent to those forbidden by 
the Sherman Act, though the words 'may be' and 'tend to create' import a different 
.intention on the part of Congress which the courts have previously recognized. 
The theory that size and power alone do not constitute monopoly under the Sher- 
man Act seems bound, however, to affect interpretation of another statute aimed 
at tendency toward monopoly, on the legal doctrine of pari materia. 

"The Supreme Court seems to narrow construction of the word 'competition' 
between the acquiring and the acquired corporation. In International Shoe Co. v. 
Federal Trade Commission (280 U. S. 291) the court held that the competition 
between the corporations must be substantial and that the act deals only with 
such acquisitions as probably will result in lessening competition to a substantial 
degree. This last decision may possibly be interpreted to make the effect on com- 
petition in general the test and not the effect on competition between the two 
corporations. The court also, in its requirement of substantial competition, inci- 
dentally heldthat the competition must be actual as distinguished from potential. 
However, in Numerous other cases, construing laws against monopoly and restraint 
of trade, the courts have held potential competition a legitimate object of legisla- 
tive protection. (U. S. v. Patterson, 59 Fed. 280 at 283; U. S. v. Colgate & Co., 
250 U. S. 300 at 307; Aluminum Co. of America v. F. T. C, 284 Fed. 401 at 408; 
F. T. C. v. Klesner, 280 U. S. 19 at 28; F. T. C. v. Raladam Co., 283 U. S. 643 at 
649, and 651.) 

"We respectfully recommend amendments to sections 7 and 11 of the Clayton 
Act as follows: 

"1. That the first two paragraphs of section 7 be amended to read: 

" 'That no corporation engaged in commerce shall acquire, directly or indirectly, 
the whole, or a controlling interest in the voting stock or other share capital or the 
whole of, or a major part of the assets of another corporation engaged also in 
commerce and in competition with the acquiring corporation. 

" 'No corporation engaged in commerce shall acquire, directly or indirectly 
any part of the stock or other share capital or any part of the assets of another 
corporation engaged also in commerce where the effect of such acquisition may be 
to substantially lessen competition between the corporation whose stock or assets 
is so acquired and the corporation making the acquisition, or to restrain such 
commerce in any section or community or tend to create a monopoly of any line 
of commerce. 

" 'No corporation shall acquire, by merger, consolidation or otherwise, directly 
or indirectly, the whole of, or a controlling interest in the voting stock or other 
share capital, or the whole of, or a major part of the assets of two or more corpora- 
tions engaged also in commerce and in competition with each other. 

" 'That no corporation shall acquire, by merger, consolidation or otherwise, 
directly or indirectly, any part of the stock or other share capital or any part of 
the assets of two or more corporations engaged in commerce where the effect of 
such acquisition, or of the use of such stock by the voting or granting of proxies 
or otherwise, may be too substantially lessen competition between such corpora- 
tions, or any of them, whose stock or other share capital or assets is so acquired, 
or to restrain such commerce in any section or community or tend to create a 
monopoly of any line of commerce.' 

"2. That tnere be inserted as the fifth paragraph of section 7 the following: 

" 'After the issunce of a complaint charging a corporation with having violated 
the provisions of paragraphs 1, 2, 3, or 4 of this section, as amended, and prior to 
the dismissal of such complaint or the entry of an order as provided for in section 



CONCENTRATION OF ECONOMIC POWER 2397 

11 of this Act, no other corporation shall acquire from such corporation all or 
any part of the capital stock or assets charged in such complaint to have been 
acquired in violation of paragraphs 1, 2, 3, or 4 of this section as amended.' 

"3. That the second paragraph of section 11 be amended by inserting in the 
twenty-first line thereof after the word 'stock' the words 'or assets.' 

"In the discussion of the legal status of special prices to chain stores by manu- 
facturers (ch. IV, sec. 4) the uncertainties and difficulties of enforcing section 2 
of the Clayton Act were pointed out at some length. The conclusion was reached 
that most of those uncertainties and difficulties grew out of the various provisos 
which narrowed the scope of the original prohibition to an indeterminate degree. 
A simple solution for the uncertainties and difficulties of enforcement would be to 
prohibit unfair and unjust discrimination in price and leave it to the enforcement 
agency, subject to review by the courts, to apply that principle to particular casea 
and situations. The soundness of and extent to which the present provisos would 
constitute valid defenses would thus become a judicial and not a legislative 
matter. 

"The Commission therefore recommends that section 2 of the Clayton Act be 
amended to read as follows: 

** 'It shall -be unlawful for any person engaged in commerce, in any transaction 
in or affecting such commerce, either directly or indirectly, to discriminate unfairly 
or unjustly in price between different purchasers of commodities, which commod- 
ities are sold for use, consumption, or resale within the United States or any 
Territory thereof or the District of Columbia or any insular possession or other 
place under the jurisdiction of the United States.' 

"In the discussion of the legal status of special prices to chain stores by manu- 
facturers (ch. IV, sec. 4) it was also stated that unless the price discrimination 
permitted 'on account of quantity shall make 'only due allowance' therefor, 
section 2 of the Clayton Act may be readily evaded by making a small difference 
in quantity the occasion for a large difference in price. If the section is to have 
any vitality it must either be interpreted and enforced to that effect or it should 
be amended to that effect. 

"The Commission further recommends that at the end of section 11 a new 
paragraph be added to read as follows: 

" *If any clause, sentence, paragraph, or part of the amendments herein con- 
tained to sections 2, 7, or 11 of this Act shall, for any reason, be adjudged by any 
court of competent jurisdiction to be invalid, such judgment shall not affect, 
impair, or invalidate the remainder of said separate and several amendments to 
said sections, but shall be eonfined in its operation to the clause, sentence, para- 
graph, or part of said separate and several amendments to said sections directly 
involved in the controversy in which such judgment shall have been ren- 
dered.' 

"A recommendation for amendment of the Federal Trade Commission Act 
seems essential as shown by results of the chain-store investigation; namely, first, 
that the prohibition of unfair methods of competition in section 5 of the act be 
broadened so as to include unfair or deceptive acts and practices in interstate 
commerce, and, second, so that unfair methods, acts, and practices may be 
reached when they unfairly affect interstate commerce, regardless of whether the 
offender is engaged in commerce or the acts are done in the course of commerce. 

"Wherefore, we respectfully recommend that the first two paragraphs of sec- 
tion 5 of the Federal Trade Commission Act be amended so as to read as follows: 

" 'Unfair methods of competition in or affecting commerce and unfair or deceptive 
acts and practices in or affecting commerce are declared unlawful. 

" 'The Commission is empowered and directed to prevent persons, partnerships, 
or corporations, except banks and common carriers subject to the acts to regulate 
commerce, from using unfair methods of competition in or affecting commerce and 
unfair or deceptive acts and practices in or affecting commerce.' 

"The Commission is giving consideration to still other amendments of its 
organic act and of other statutory provisions committed to it for enforcement, but 
since these do not grow out of the chain-store investigation as such they are re- 
served for presentation in another connection." 

Amendments to section 2 of the Clayton Act and section 5 of the Federal Trade 
Commission Act have already covered, in large part, two of these recommen- 
dations. 

Copies of the Commission's reports on Chain Stores, consisting of five volumes, 
are transmitted as Exhibits F. T. C. 195-A to 195-E, inclusive. The conclusions 
and recommendations are contained in chapter VII of the final report which 
appears in volume V. 



2398 CONCENTRATION OF ECONOMIC POWER 

COMPETITION AND PROFITS IN BREAD AND FLOUR 

On February 16, 1924, the United States Senate approved a resolution (S. Re8. 
No. 163) directing the Federal Trade Commission to investigate the production, 
distribution, transportation, and sale of flour and bread, and to report costs and 
profits at each stage of the process of production and distribution, the extent and 
methods of price fixing, price maintenance, and price discrimination, the develop- 
ments in the direction of monopoly, and other evidence indicating restraints 
of trade. 

Preliminary reports in partial response to the resolution were submitted to the 
Senate on May 3, 1926, and on February 11, 1927, and the final report was sub- 
mitted on January 11, 1928. This was published as Senate Document 98 
(70th Cong., 1st sess.) and consists of approximately 500 printed pages. 

The three lines of inquiry pursued in the investigation related to the handling 
of wheat from producer to flour mill, flour milling, and bread baking. Schedules 
were used for obtaining information from country elevators on gross margins for 
handling wheat. Requests for information were also made to terminal elevator 
operators at Minneapolis, Kansas City, and St. Louis but, with the exception of 
three companies, they refused to comply with the requests. In developing 
information relating to the production and distribution of flour, costs and profits 
of milling companies were obtained by schedule or from the books of the companies 
by the Commission's accountants. Several of the largest milling companies 
either refused to cooperate or rendered very limited cooperation. The phase 
-of the inquiry which related to bread baking was conducted by means of schedules, 
personal interviews, correspondence, and by the examination of correspondence 
files of the baking associations and companies. Statistics and other data available 
jn the various Government agencies were also used. 

The study established that during the period from 1922 to 1924, consumers paid 
an average price of 8.549 cents for a pound of bread. This was divided as follows: 
To the farmer, 1.145 cents; to the miller, 0.406 of a cent; to the baker, 5.110 
cents; to the grocer, 1.279 cents; for transportation and handling of wheat and 
flour, 0.609 of a cent. 

It was found that, in 1925, 57 companies, including 3 chain-store systems, 
operating 278 plants, produced and sold more than 30 percent of the estimated 
total commercial production. 

The facts procured established that bakers in several localities, acting through 
established associations or through informal groups, entered into agreements to 
advance prices, or to terminate price wars. The practice of granting free goods 
which, in effect, constituted a price cut was also made the subject of attack by 
these organizations. 

Wholesale bakers earned comparatively high profits during the years 1920 to 
1925. The return on total baking investment, as shown on the companies' books 
or as reported to the Commission, was 14.9 percent before payment of Federal 
taxes. After revision of the investment figure by the Commission, the rate of 
return thereon averaged in excess of 25 percent. 

Because of the numerous consolidations which had taken place in the baking 
industry and the advantages allegedly flowing from them, a comparison was 
undertaken of the costs of single-plant and multiple-plant units. This phase of 
the study established that in various size groups the costs for the large plants were 
appreciably lower than for the small plants. It was definitely shown, however, 
that this difference was not attributable entirely to size, since very low cost 
plants were found in each of the size groups, and a number of small plants showed 
as low costs as the largest. 

With regard to the flour-milling industry, it was shown that, although abundant 
potential competition existed, frequent efforts were made to restiet same by 
attempts to limit production, by exchange of information on selling prices, by 
attempts to establish definite differentials applicable to different size packages or 
containers, by agreements or cooperation regarding the forward delivery of flour 
and carrying charges, and by otherwise attempting to regulate the terms and 
conditions governing the sale of flour. 

A copy of the Commission's report is attached hereto as- Exhibit F. T. C. 196. 
It contains no recommendations for legislation; nor is there any chapter or section 
devoted to general conclusions other than those which appear in the letter of sub- 
mittal at pages xxm to xxix, inclusive. 



CONCENTRATION OP ECONOMIC POWER 2399 

COOPERATIVE MARKETING 

On March 17, 1925, the United States Senate, through Resolution No. 34 
(69th Cong., special session of the Senate), directed that the Federal Trade Com- 
mission investigate the growth and importance of cooperative associations, their 
costs of marketing and distribution as compared with costs of other types of dis- 
tributors, and any interference with the formation or operation of cooperatives by 
trade associations, or others, which might be in violation of the antitrust laws. 
The preamble of the resolution indicated that same was concerned principally 
with the marketing of farm products. Investigation was confined primarily to 
agricultural cooperatives. 

From the records of the Department of Agriculture, Bureau of Internal Revenue, 
and State reports, names were procured of cooperative and other agricultural 
associations to which a preliminary schedule was sent. The first schedule, calling 
for general information with regard to organization, capitalization, sales, member- 
ship, financing, marketing, etc., was sent to 13,500 groups. Responses were 
received from 5,761. Of this number, approximately 4,000 were usable. Three 
hundred and twenty-five of the more important associations, including the large- 
scale federated and centralized cooperative associations, exchanges, and selling 
agencies, were then contacted by the Commission's representatives and detailed 
data procured concerning their operations. A second schedule was sent out to 
more than 3,900 associations and cooperative groups, and replies to same were 
received from about 1,550. The data procured in the manner indicated formed 
the basis for the study. The report itself consisted of two parts. Part I covered 
the growth and importance of cooperative associations, and part II contained a 
comparison of costs, prices, and practices of cooperatives and competitors. 
Consideration was given to cooperatives engaged in the marketing of dairy 
products, grain, livestock, cotton, fruit, tobacco, wool, poultry and eggs, nuts, 
rice, and vegetables. 

It was found that although the cooperative movement had started in this 
country about 1841, it had remained pretty much local in character until the end 
of the nineteenth century, when it underwent considerable development and 
broadening on the Pacific coast. It did not attain any appreciable importance 
in other sections of the country until after the World War. Consequently, at 
the time the study was made, the groups other than those on the Pacific coast 
were comparatively new, and it was difficult to reach definite conclusions con- 
cerning their actual or potential accomplishments. It was found that, in general, 
the California groups had been successful in their operations; that in other parts 
of the country varying degrees of success had been enjoyed by cooperatives 
engaged in the handling of grain, wool, livestock, and tobacco. In those indus- 
tries where the employment of cooperative methods was warranted, it was found 
that the success or failure of the cooperative depended largely upon its ability 
to attract competent management and the soundness of its finances. 

Some evidence was found of opposition to cooperatives by private interests 
whose business was being affected by their development. These were not, how- 
ever, of a very serious nature, and it appeared that the existing antitrust laws and 
the Federal Trade Commission Act afforded ample protection against practices 
of that nature. In the final analysis, credit appeared to be the primary problem 
both for the cooperatives and for the farmers whose products they sold. Lack 
of production credit forced the farmers to market at harvest time, thereby ma- 
terially lessening the effectiveness of the cooperatives in their attempts to develop 
orderly marketing. 

The phase of the study which dealt with comparative costs of cooperatives and 
their competitors proved to be extremely difficult, largely because of the problems 
involved in obtaining comparable data. An attempt was made, however, to cover 
10 commodities handled by important associations. Even in these the results 
were not entirely satisfactory, due to variations in the services rendered with 
regard to grading, standardization, etc., and to the further fact that the advent 
of a cooperative frequently causes a decided improvement in the treatment of 
producers by non-cooperatives. The entire study indicated that the outstand- 
ing weakness in the cooperative movement was the lack of adequate permanent 
and temporary capital. The opinion was further expressed that some means 
should be provided whereby cooperatives could procure necessary loans at reason- 
able interest rates. 

The Commission's report was submitted to the Senate on April 30, 1928, and 
was published as Senate Document No. 95 (70th Cong., 1st sess.). It consisted 
of 721 printed pages. A copy of same is attached hereto as Exhibit F T C. 197. 



2400 CONCENTRATION OF ECONOMIC POWER 

HOUSE FURNISHINGS INDUSTRIES 

The United States Senate, on January 4, 1922, directed the Federal Trade Com- 
mission to investigate and report on the causes of factory, wholesale and retail 
?rice conditions in the principal branches of the house furnishing goods industry, 
articular attention was to be given to unfair practices, trade restraints, combina- 
tion's, etc. The inquiry covered the years 1920, 1921, and, in part, 1922, and 
included three major industry groups — household furniture, household stoves, 
and kitchen furnishings and domestic appliances. 



Household furniture. — The first of the reports submitted to the Senate was on 
Household Furniture. It consisted of nearly 500 printed pages and went forward 
to the Senate on January 17, 1923. With regard to this phase of the inquiry, 
insofar as it was practicable, every manufacturer and wholesaler, and a large 
number of retailers were given an opportunity to report the financial results of 
their operations and to furnish data pertaining to their organization and method of 
doing business. The report on margins, expenses, profits, and return on invest- 
ment was based on returns from 299 manufacturers, 22 wholesalers, and 560 
retailers. Information was obtained by the use of schedules and directly from 
the books of the various companies by the Commission's accountants. Sched- 
ules calling for financial statements, organization, and methods of selling went to 
758 furniture manufacturers, 447 wholesalers, and 2,775 retailers. A schedule 
calling for information regarding costs, freight, discounts, and selling prices went 
to 1,200 wholesalers and retailers of 250 selected items manufactured by 31 
concerns. 

The report on Household Furniture, which made up volume I of the general 
report, consisted of two parts. Part I dealt with Prices and Profits of Manufac- 
turers and Dealers; and part II related to Competitive Conditions in the industry. 
The Commission's findings as to part I were summed up as follows: 

(1) Wholesale prices of household furniture in 1920 reached a higher peak 
than most commodities and subsequently declined more gradually and with- 
out approaching so near the pre-war level. . 

(2) Furniture manufacturers, however, reduced their prices more in abso- 
lute amount than the decline in the prices of raw materials, relatively more 
than wages, and both absolutely and relatively more than they reduced their 
total cost. 

(3) Retailers also reduced prices, and by the early part of 1922 probably 
in as great proportion as the manuafcturers, but reluctant to cut prices on 
large stocks of high-priced furniture their price reductions lagged about a 
half year behind. 

(4) Representative data for 299 furniture manufacturers and 424 special- 
ized retailers gave average rates of profit on investment in 1920 of 28.2 per 
cent for manufacturers and 22 percent for retailers; and in 1921, 8.4 percent 
for both manufacturers and retailers. 

(5) Out of the consumer's dollar the net profit for the dealer in 1920 
averaged 13 cents; in 1921, 7 cents; for the manufacturer it averaged 8 cents 
in 1920 and 4 cents in 1921. 

(6) Most retailing of furniture in 1920 and 1921 was on the installment 
plan and installment prices averaged probably at least 16 percent above 
cash prices. Installment stores generally had higher operating expenses 
but made considerably higher profits on the investment than those doing 
primarily a cash business. 

The findings as to part II, regarding Competitive Conditions, were: 

(1) The principal manufacturers' associations, whose members produce 
the bulk of the country's furniture, have restricted competition by means 
of resolutions tending to concerted price policy, by price comparison meetings, 
and by the adoption of minimum "selling values" (prices). 

(2) Leading furniture manufacturers' associations have jointly employed 
an expert to price articles of furniture for their members on a theoretical cost 
basis which tended to uniformity of prices. 

(3) Various retail organizations have frequently interfered with the sale 
of furniture by manufacturers to consumers and to so-called illegitimate 
dealers by means of concerted complaints of members to offending manu- 
facturers and by the publication of the "Buyers' Guide" and "Tattle Tales." 



CONCENTRATION OF ECONOMIC POWER 2401 

(4) In the autumn of 1920 the leading manufacturers' associations, follow- 
ing a conference with the organized retailers who insisted that they should 
have time to dispose of their high-priced stocks, advised their members to 
defer making reductions in factory prices. 

(5) Although a movement for "truth in furniture" has recently been 
started, which includes many manufacturers and dealers, furniture, both 
as to materials and workmanship, is often misrepresented in a manner to 
deceive the public. 

A copy of the report on Household Furniture is attached hereto as Exhibit 
F. T. C. 198-A. 



Household Stoves. — The second of the house-furnishings industries reported on 
was stoves and ranges for household use. This study, in general, followed the 
same outline as volume I, the first section being devoted to manufacturers', whole- 
salers', and retailers' prices and the investment profits and other operating results 
of stove manufacturers, while the second section dealt with competitive conditions 
in the stove-manufacturing industry. Financial reports were obtained from 78 
stove manufacturers, and price data from 75 manufacturers. The financial 
reports obtained from wholesalers and retailers were not used because of the 
variety of items other than stoves handled by them. However, selling price and 
purchase-cost quotations secured from 15 wholesalers and 260 retailers were used. 

With regard to prices, it was shown that manufacturers' prices increased about 
140 percent from January 1916 to January 1920. During 1921 prices increased to 
figures about 176 percent above the pre-war level, but dropped off to 120 percent 
above that level by December of 1922. This was approximately double the 
increase in general commodity prices. The fluctuation in retail prices was not as 
great on either the upward or downward movement. Prices in October 1922 were 
only 11 percent below the peak prices of 1920. 

During 1920 the profits of 78 stove manufacturers averaged 16.9 percent on 
investment. In 1921, profits dropped to 1.1 percent, due to reduced volume with- 
out corresponding reductions in costs. The profit experiences of individual pro- 
ducers varied widely during 1920. These ranged from a loss of 14.7 percent to a 
profit of 67 percent; and in 1921, from a loss of 32. 4. percent to a profit of 45.8 
percent. Retailers' mark-up during 1920 averaged 42.8 percent; and in 1921, 
39.6 percent. The mark-up of individual retailers in a group of 260 used in making 
up this average ranged from 30 to 54 percent. 

It was found that there existed in this industry one national and numerous 
local associations, and that certain of the activities of some of these associations 
were evidently in restraint of trade. Price lists were exchanged and notification 
of price changes sent out either directly or through the various associations. Price 
cutters were criticized and often urged to increase their prices. The matter 
of prices was a live subject at many of the association meetings, and evidence was 
found of informal understandings as to common price policies. It was also noted 
that, general price movements immediately followed association meetings. This 
was true both during the upward swing of 1920 and the downward price move- 
movements of 1921 and 1922. In the latter period it appeared that efforts were 
made at the association meetings to prevent drastic price cuts and to keep the 
downward price movement as orderly as possible in the fact of depressed business 
conditions. 

On the basis of the information developed, the consumer's dollar spent for 
stoves during the years 1920 and 1921 was divided as follows: 





1920 


1921 




23.8 
35.8 
7.5 
2.9 

30.0 


23.4 




43.8 








3.4 











The report on Household Stoves, consisting of nearly 200 printed pages, was 
transmitted to the Senate on October 1, 1923. A copy of same is attached hereto 
as Exhibit F. T. C. 198-B. 



2402 CONCENTRATION OF ECONOMIC POWER 

Kitchen Furnishings and Domestic Appliances. — The third subdivision of the 
housefurnishings-industries study covered kitchen furnishings and domestic 
appliances. Particular attention was given to competitive conditions in the 
washing-machine, vacuum-cleaner, refrigerator, sewing-machine, broom and 
brush, and aluminum industries, and also the retail hardward dealers' associa- 
tions. The Commission's agents held interviews with officials of the associations 
and a large number of manufacturers, and examined the correspondence and 
records of these companies and groups. Information was also procured through 
the medium of questionnaires. Considerable study was made of the patent 
situation, particularly with regard to pooling of patents in the washing-machine, 
vacuum-cleaner, and sewing-machine industries. Data were procured with regard 
to the selling prices of manufacturers, wholesalers, and retailers, and the purchase 
cost of wholesalers and retailers. In connection with this phase of the study, 
approximately 700 schedules were sent to manufacturers and about 2,500 to 
wholesale and retail dealers. Usable reports were procured from 165 manu- 
facturers, 86 wholesalers, and 503 retailers. Information was obtained from 
manufacturers concerning balance sheets, profit-and-loss statements, and related 
data for 1921 and 1922, and same was used for determining investment income 
and rate of profit for those years. Usable reports of this nature were received 
from 138 manufacturers of various articles of kitchenware and domestic appliances. 

The basic vacuum-cleaner patent, known as the Kenney patent, was issued in 
1907. During its existence an agreement between the owners and their licensees 
prevented the granting of additional licenses without the consent of three-quarters 
of the licensees. Upon the expiration of the patent, in 1924, efforts were made 
to pool the patents in this industry, but these attempts were abandoned when the 
attorneys advised that same were probably illegal. In the washing-machine 
industry it was found that a complete and comprehensive system of patent 
pooling existed. However, the basic patent expired in 1921 and, while there were 
numerous threats of infringement suits subsequent thereto, there appear to have 
been no suits actually instituted. A comparison of profits in these 2 industries 
shows that, in 1920, 11 vacuum-cleaner manufacturers received an average return 
on investment of 36.2 percent as compared with a return of 22 percent for 35 
washing-machine manufacturers, and that in 1921 the vacuum-cleaner producers 
obtained a return of 20. 6 percent, while the washing-machine manufacturers 
were incurring a loss of approximately one-half of 1 percent. 

With regard to refrigerators, definite evidence was procured of price fixing 
through the National Refrigerator Manufacturers Association. It was indicated 
that steps along this line were taken as early as 1918 and continued down to 1920, 
when an expert was employed to coordinate and direct the price activities of the 
industry. The books of i7 of the more important refrigerator manufacturers 
showed earnings on the averaged investment in 1920 of 15.2 percent and, in 1921, 
of 4.1 percent. 

It was found that in the sewing-machine industry one company, Singer Manu- 
facturing Company, in 1921 produced approximately 72 percent of the total 
domestic production. The Singer company acquired this dominant position dur- 
ing the operation of the patent pool in this industry, which was prior to 1S77, 
and subsequently strengthened its position by acquiring its largest competitor. 
At the time of the study, there were 7 so-called independent companies, none of 
which was equipped to manufacture a complete machine. Despite this fact, they 
appear to have been successful in furnishing substantial competition for the 
dominant company. With regard to prices, it was found that the retail prices of 
sewing machines in August 1920 were approximately 86 percent higher than in 
1914, and that by January 1921 they had dropped to a point about 63 percent 
higher than the 1914 price. The average retail mark-up on sewing machines was 
high as compared with other housefurnishings, but there were wide variations 
among different makes. In January 1920, these ranged from a low of 29.3 per- 
cent to a high of 88.9 percent. The average, however, was 80.7 percent. The 
rate of return on investment was not very high. As figured for four companies, 
including the Singer, it amounted to 14 percent in 1920 on an averaged investment 
of $53,000,000, and 4.6 percent in 1921 on an averaged investment of $61,000,000. 

The study made included a survey of finance companies, particularly with 
regard to financing the purchases of domestic appliances, such as washing ma- 
chines, sewing machines, vacuum cleaners, and refrigerators. The operations of 
these companies were treated from the viewpoint of (1) the effect of the installment 

Eolicy upon the price to the consumer, and (2) the gross rate of profit to the 
nance company. In connection with 16 specimen contracts studied in the' 



CONCENTRATION OF ECONOMIC POWER 2403 

course of the investigation, it was learned that interest deducted by the finance 
companies on their average investment in the contracts for the period of time 
involved amounted to a gross rate of return ranging from about 21 to 29 percent, 
depending upon the terms of the contract. 

Statistics of the Aluminum Wares Association indicated that 85 percent of the 
total production of aluminum cooking utensils was in the hands of 11 concerns. 
Financial reports and other data were procured by the Commission from those con- 
cerns. During 1921 their total investment was $19,400,000 and their total sales 
were $22,600,000. The Aluminum Company of America, which had a monopoly 
in the production of aluminum, held over 30 percent of the outstanding common 
stock of the Aluminum Goods Manufacturing Company, the largest producer of 
cooking utensils. Particular attention was given to the trade practices of the 
Aluminum Goods Manufacturing Company, especially its policy with regard to 
prices, special discounts, full-line forcing, exclusive dealing, resale-price mainte- 
nance, etc. 

The Commission reported that, on the basis of the facts developed by it, the 
Aluminum Company of America appeared to have been in repeated violation of the 
consent decree of 1912, especially with respect to delaying shipments of material, 
furnishing known defective material, discriminating in prices of crude or semi- 
finished aluminum, and hindering competitors from enlarging their business opera- 
tions. The Commission further reported that the original decree was obviously 
insufficient to restore competitive conditions in harmony with the antitrust laws, 
especially with regard to the monopolization of high-grade bauxite land. 

On October 6, 1924, the Commission transmitted to the Senate its report on 
Kitchen Furnishings and Domestic Appliances, consisting of 345 printed pages. 
It was designated as volume III of the report on the House Furnishings Industry 
and concluded the studies of that industry. A copy of the report is attached 
hereto as Exhibit F. T. C. 198-C. 

MILK AND MILK PRODUCTS 

On June 15, 1934, the Commission was directed, through House Concurrent 
Resolution No. 32 (73 Cong., 2d sess.), to investigate and report on conditions 
in the sale and distribution of milk and other dairy products within the territorial 
limits of the United States. In response to this resolution, investigations were 
made in several of the more important milksheds throughout the eastern and 
midwestern sections of the country. These, for the most part, consisted of inter- 
views with the officials of the farmers' cooperative organizations, the dealers' 
associations, and the larger distributors. The Commission's representatives ex- 
amined the correspondence files and records of the various organizations and com- 
panies. A great many interviews were also held with farmers in the areas cov- 
ered. Public hearings were conducted at Hartford, Conn., and Philadelphia, 
Pa., at which the producers and representatives of both the producer cooperatives 
and distributors were heard. A study was made of the State laws and regulations 
governing inspection of dairy farms and milk plants, and the weighing and testing 
of milk. The Commission's accountants, auditors, and economists analyzed the 
operating results of the principal distributors in certain selected areas. Particular 
attention was given to practices or policies which might substantially lessen compe- 
tition or tend to create a monopoly, or which might otherwise be considered as 
placing a restraint upon trade or commerce in the sale or distribution of milk and 
other dairy products. 

The first report transmitted to the Congress in response to the above resolution 
went forward on April 5, 1935. It covered the Connecticut and Philadelphia 
milksheds and was printed as House Document No. 152 (74th Cong., 1st sess.). 
It contained more than 100 printed pages. A copy is attached hereto as Exhibit 
F. T. C. 199- A. On January 8, 1936, a second report on the Connecticut and 
Philadelphia milksheds was transmitted to the Congress. This contained material 
not fully discussed in the previous report. It dealt with such matters as the de- 
termination of prices to milk producers, investments, costs and net profits of milk 
distributors, delivery costs, etc. This report, consisting of 125 printed pages, was 
published as House Document No. 387 (74th Cong., 2d sess.). A copy of same 
is attached hereto as Exhibit F. T. C. 199-B. 

On April 15, 1936, a report on the Chicago sales area, consisting of approxi- 
mately 100 printed pages, was sent to Congress and was published as House 
Document No. 451 (74th Cong., 2d sess.). A copy of the report is attached hereto 
as Exhibit F. T. C. 199-C. 



2404 CONCENTRATION OF ECONOMIC POWER 

On June 4, 1936, a report on the Boston, Baltimore, Cincinnati, and St. Louis 
milksheds was transmitted to the Congress. It consisted of 243 printed pages 
and was published as House Document No. 501 (74th Cong., 2d sess.). A copy 
of same is attached hereto as Exhibit F. T. C. 199-D. 

On June 15, 1936, the Commission reported to the Congress on the Minneapolis- 
St. Paul area. This report contained 71 printed pages and was published as 
House Document No. 506 (74th Cong., 2d sess.). A copy is attached hereto as 
Exhibit F. T. C. 199-E. 

On January 5, 1937, the Commission reported to the Congress on the operations 
of large dairy famers' cooperative organizations in the New York milk-sales area, 
and the operations of Nation-wide processors and distributors of milk and milk 
products with headquarters in New York City. This report contained 138 printed 
pages and was published as House Document No. 95 (75th Congress, 1st sess.). 
A copy of same is attached hereto as Exhibit F. T. C. 199-F. 

On January 5, 1937, the Commission also transmitted to the Congress a report 
entitled "Summary Report on Conditions With Respect to the Sale and Distribu- 
tion of Milk and Dairy Products." It contained a resume" of the material pre- 
sented in the previous reports, together with the Commission's conclusions and 
recommendations. This summary consisted of 39 printed pages and was published 
as House Document No. 94 (75th Cong., 1st sess.). A copy of same is attached 
hereto as Exhibit F. T. C. 199-G. 

As a result of the survey made with respect to the sale and distribution of milk 
and milk products, the Commission recommended, among other things, that dairy 
farmers organize cooperative associations on a nonprofit basis to market their 
milk and milk products, that each member have an equal voice in the management 
of cooperative organizations, that voting by proxy be eliminated, that cooperatives 
acquire plants and engage in the processing of milk when satisfactory markets 
for same are not available, and that arrangements be made between cooperatives 
in different areas for intermarketing among them to prevent the creation of sur- 
pluses in local areas and the attendant depressing of prices. Recommendations 
were also made with regard to contracts, auditing of distributors' books, reports 
to appropriate State and Federal agencies, and other similar details in connection 
with the operation of cooperatives. The Commission directed attention to the 
fact that the large milk-distributing companies had attained their size through 
acquisitions and consolidations of established business concerns, many of which 
had formerly been competitors. It explained that, where assets were acquired 
originally or where capital stock was acquired and used to complete a transfer of 
the assets before corrective action could be taken under section 7 of the Clayton 
Act, it was powerless to proceed; and stated that conditions in the milk industry 
emphasized the necessity of amending section 7 of the Clayton Act in accordance 
with the Commission's previous recommendations on the subject. 

The final recommendation of the Commission was that a Federal authority be 
created to confer with the State authorities, with a view to bringing about uni- 
formity of State laws relating to the production, sale, and distribution of milk and 
other dairy products. 

OPEN-PRICE TRADE ASSOCIATIONS 

On March 17, 1925, the United States Senate directed the Federal Trade Com- 
mission, through Senate Resolution No. 28 (69th Cong., special session of the 
Senate), to investigate and report to it with regard to open-price trade associa- 
tions. Specific information was requested concerning the number and identity 
of such associations, their importance in the industry, the number of their mem- 
bers, the effect of their activities with regard to uniform price increases and the 
maintenance of uniform prices among their members to wholesalers "or retailers, 
and the effects of their activities with respect to alleged violations of the anti- 
trust laws. 

In order to comply with the broad request of the Senate, it was necessary to 
extend this investigation to include not only open-price associations but trade 
associations generally, since it was found that the open-price activities frequently 
represented one of several functions exercised by the association. A total of 
1,103 associations were included in the survey, although many of these were 
found to be professional groups or were engaged in activities not coming within 
the broad general scope of the inquiry. Questionnaires were sent out to the 
associations and, in general, those failing to reply were contacted by field agentsr 

On February 13, 1929, the Federal Trade Commission filed its report with the 
United States Senate. This was subsequently printed as Senate Document 226 



CONCENTRATION OF ECONOMIC POWER 2405 

(70th Cong., 2d sess.) and consisted of over 500 printed pages. A copy of same 
is attached hereto as Exhibit F. T. C. 200. 

The Commission did not propose any changes in the antitrust laws, but did 
suggest the clarification or extension of same, in order that provision might be 
made for the registration of all trade associations and the filing by them of brief 
reports covering their activities. The principal recommendations made were 
that the Census Bureau be given power to compel the return of statistical data 
needed from all manufacturers and dealers, and that a licensing system for trade 
associations be established. The conclusions and recommendations of the Com- 
mission are contained in chapter IX of the report, pages 343 to 373, inclusive. 

PACKER CONSENT DECREE 

On December 8, 1924, the United States Senate, in Senate Resolution No. 278, 
requested the Federal Trade Commission to report concisely to it at the earliest 
possible time all information in its possession, or readily securable, concerning the 
history and status of the consent decree entered into in the Supreme Court of the 
District of Columbia on February 27, 1920, in the case of the United States v. 
Swift & Co. et al., which is commonly known as the Packer Consent Decree. The 
Senate further requested to be advised concerning the hearings, litigation, and 
other action growing out of the decree and the respective effects that might be 
expected if the consent decree was enforced, was modified as proposed, or was 
annulled, together with its recommendations on the public policies involved. 

In addition to summarizing the data then in its possession, the Commission 
requested the submission of current data by the large meat packers, the two 
wholesale grocers' organizations, and other interested parties. Information was 
also obtained from the Department of Agriculture. 

On February 20, 1925, the Federal Trade Commission filed its report with the 
Senate, and same was published as Senate Document 219 (68th Cong., 2d sess.). 
In it the Commission reiterated, in substance, recommendations contained in its 
previous reports on the meat-packing industry made in 1918 and 1919. It was 
urged that steps be taken by the courts, or the Congress, to separate the packers 
from their ownership of stockyards and to separate the Big Five packers from their 
control of the meat and refrigerator cars. It was further recommended that 
stockyards, as well as refrigerator cars, be declared public utilities and their 
operation subjected to the regulation of the Interstate Commerce Commission. 

A copy of the report, consisting of 44 printed pages, is attached hereto as 
Exhibit F. T. C. 201. The conclusions and recommendations appear therein at 
pages 29 to 34, inclusive. 

PETROLEUM INDUSTRY — PRICES,' PROFITS, AND COMPETITION 

On June 3, 1926, the United States Senate, in Senate Resolution No. 31 (69tb 
Cong., 1st sess.), directed that the Federal Trade Commission investigate and 
report to the Senate concerning increases in the prices of petroleum products, 
whether price fluctuations were the result of agreements or understandings among 
the oil companies, and the profits of the principal companies engaged in producing, 
marketing, and refining petroleum products. 

In conducting the inquiry, the Commission used questionnaires, or schedules, 
and also had field agents conduct necessary investigational work throughout the 
industry. Information concerning the methods of determining and announcing 
prices, methods of handling local competition, and general sales policy was pro- 
cured through interviews with officials of the companies and by examination of 
their correspondence files. The minutes of the annual meetings and of the 
meetings of the boards of directors were examined to ascertain the facts concern- 
ing the ownership of each of the companies and the manner in which the stock 
was voted, that is, by stockholders or by proxy. The various companies were 
required to submit on forms furnished by the Commission, information relative 
to the identity of their 50 largest stockholders. Brokers and trustees who came 
within this group were asked to identify the persons having the beneficial interest 
in the stocks held by them. 

Data were procured concerning the ownership of oil lands, prices of crude oil, 
and prices of gasoline at the various stages of distribution. Personal contact 
was had with a representative number of wholesalers and retailers with respect 
to local competitive practices. Information concerning investments and profits 
was obtained on report forms sent out by the Commission. These went to 750 
producers, 180 marketers, and 185 refiners. Data relative to the profits of inter- 



2406 CONCENTRATION OF ECONOMIC POWER 

state pipe lines were taken from the public records of investment and income 
filed by these companies with the Interstate Commerce Commission. 

On December 12, 1927, the Commission transmitted to the Senate its report 
on Prices, Profits, and Competition in the Petroleum Industry. It was published 
as Senate Document No. 61 (70th Cong., 1st sess.). A copy of the report, con- 
sisting of 360 printed pages, is attached hereto as Exhibit F. T. C. 202. 

The report reviewed briefly the changes that had occurred in the petroleum 
industry during the 20 years prior to 1927. At the beginning of that period 
domination was in the hands of one company which was controlled by a small 
group of men. At the close of the period, due in part to the decree of 1911, the 
competitive picture was greatly changed. The Standard companies then had 
about 45 percent of the output of refined products as compared with 80 percent 
at the beginning of the period. It was found that there were 11 companies each 
of which used more than 2 percent of the total crude refined in the United States; 
5 of these companies resulted from the dissolution of the old Standard combina- 
tion, and 6 were independents. The latter group took approximately 25 percent 
of the total production, while the former took nearly 42 percent. 

Between 1920 and 1927, interstate pipe-line mileage increased from 49,000 to 
75,000 miles. These formerly were controlled by the Standard interests. In 
1914 the United States Supreme Court upheld the law declaring them common 
carriers, but high minimum quantity requirements made it difficult, if not im- 
possible, for the independent companies to use them. In 1916 the Federal Trade 
Commission, in a report, recommended that these minimums be drastically re- 
duced. In 1922 the Interstate Commerce Commission reduced the minimums 
from 100,000 to 10,000 barrels. Subsequent voluntary reductions extended the 
use of pipe lines, but the Commission found that still greater equality of oppor- 
tunity in this regard appeared desirable. 

It was learned that unity of control through community of interest no longer 
existed among the several Standard companies. Reports on nearly 10,000 large 
stockholders in the various companies showed that their holdings indicated no 
especial significance with respect to control. 

At the time the investigation was made it was found that the Standard mar- 
keting companies, in general, confined their tank-wagon sales to retailers and 
their filling-station business to the separate territories assigned to them before 
the combination was dissolved. Even at that date, however, there was evidence 
that some of the Standard companies were extending their filling-station business 
into the territory of other Standard companies and also were selling to jobbers in 
tank-car quantities without regard to territory. 

With regard to the prices of crude petroleum, the inquiry tended to establish 
that price movements for longer periods were substantially controlled by supply 
and demand conditions, but that this was not necessarily true for shorter periods, 
because of the influence exercised by a few larger companies and the apparent 
lack of competition among them. 

No evidence was found of agreements or understandings among the large com- 
panies to manipulate prices on refined products. In general, the various Stand- 
ard companies announced the prices, and these were followed by their com- 
petitors. Changes in tank-wagon market prices were announced to competitors 
usually for a day in advance through "Piatt's Oilgram" service, ticker service, 
or by telephone. It was not found that price changes were simultaneous for the 
different Standard companies. All companies, at times, indulged in the practice 
of granting discounts and concessions from regular prices to various customers. 
This was a part of the sporadic local or temporary price competition that occurred 
in the struggle for volume which was going on constantly between the independent 
marketers and the Standard companies. 

Other factors which were found to have a bearing upon competition in the in- 
dustry were the efforts among jobbers' associations to keep their members from 
cutting tank-wagon and filling-station prices announced by the Standard com- 
panies, control exercised through licenses granted under the cracking process 
patents, restriction of production of crude oil through concerted action of pro- 
ducers or with the aid of public authorities, and mergers or consolidations which 
produced integrated units. 

Returns received by the Commission indicated that, despite the increased 
competition, the rate of profit in all branches of the industry had also increased. 
For the years 1923, 1924, 1925, and the first half of 1926 the rate of profit on invest- 
ment, based on the companies' own figures, ranged from an average of 2.5 percent 
in 1923, a year of depression in the industry, to 14.7 percent in the first half of 
1926 for all crude-oil-producing companies reporting; and from 5.1 to 11.3 percent 



CONCENTRATION OF ECONOMIC POWER 2407 

for the refining companies. Profits of the interstate pipe-line companies exceeded 
17 percent in each of the years from 1921 to 1926, and averaged 20.3 percent. 

In its report the Commission called attention to the growing movement to 
obtain some sort of production control in order to conserve crude oil, an important 
natural resource. It refrained from making recommendations on the subject, 
however, because of the fact tl at it was then receiving consideration by the Federal 
Oil Conservation Board. 

PREMIUM PRICES ON ANTHRACITE 

In 1916 and 1917 the Federal Trade Commission inquired into the problem of 
premium prices on anthracite coal. Its activities in this regard aided in reducing 
speculation and panic demand. In 1923 the United States Coal Commission 
undertook a similar study, which was carried forward by the Federal Trade 
Commission after the work of the Coal Commission terminated in September of 
that year. The results of this study were submitted to the Congress on July 6, 
1935. In printed form, this report covers approximately 100 pages. 

The Commission directed attention to the fact that for the period from 1914 to 
1923 more than 70 percent of the anthracite coal was produced by eight large 
companies, all of which were owned bj 7 , or closely affiliated with, the railroads. 
The remaining 30 percent was produced by more than 100 independent companies, 
that is, companies not affiliated with railroads. Ir addition to the factual data 
submitted, consideration was also given to the activities of the Department of 
Justice in its efforts to disintegrate the anthracite combination, and suggestions 
were made regarding measures for preventing the recurrence of the high prices 
which had formerly prevailed. It was pointed out that, because of previously 
existing monopolistic control, there had not been an adequate increase of mining 
capacity, with the result that temporary or apparent shortage caused high pre- 
mium prices at the mines and encourated the taking of excessive profits by both 
wholesalers and retailers. It was found that in times of such shortage wide 
variations in prices occurred-, accompanied by speculation in coal which further 
enhanced the price. 

Among the constructive measures suggested by the Commission were price 
reductions during the slack buying seasons in the spring and summer, development 
of more accurate statistics covering demand, a more rational buying program for 
municipalities and public agencies, enlargement of mine capacity, and an increase 
in the storage equipment of both producers and distributors. The Commission 
also urged that current data on production, prices, costs, and profits in the coal 
industry be secured and published by some Federal agency. 

A copy of the Commission's report is attached hereto as Exhibit F. T. C. 203. 
Its conclusions and recommendations are contained in chapter III, pages 53 to 57, 
inclusive. A summary of the report appears at pages ix to xx, inclusive. 

PRICE BASES INQUIRY 

On July 27, 1927, the Federal Trade Commission, acting pursuant to section 6 
of its organic act, approved a resolution directing that an investigation be under- 
taken and report made upon the various methods of differentiating prices with 
respect to location, as for example, the basing-point method, the factory-base 
method, and the delivered-price method. 

Questionnaires were sent to several thousand manufacturers and several hun- 
dred trade associations. The information obtained in this manner formed the 
basis for a survey of industry as a whole in respect to selling methods, and per- 
mitted a selection of the industries whose selling methods warranted more inten- 
sive study. 



Portland Cement. — In the manner indicated, Portland cement was selected 
for study, since it appeared to represent one of the best illustrations of the working 
of the multiple basing-point system. The principal sources of information were 
cement manufacturers and dealers, State highway commissions, Government 
agencies, and trade associations. Information was obtained from the mills by 
means of correspondence and interviews with their officials. Questionnaire 
letters were senf to the mills on the subject of mill-price data. A check was also 
made among the dealers in 27 cities and detailed information procured from their 
invoices with respect to date, price, quantity, point of origin, freight charges, and 
cash, dealer, and special discounts. Other sources of information relative to 



2408 CONCENTRATION OF ECONOMIC POWER 

rates, historical data, etc., were the Interstate Commerce Commission, Bureau of 
Railway Economics, and the Department of Justice. 

It was found that cement manufacturers sell their product on a multiple basing- 
point system. In order to arrive at an identical delivered price, it is only neces- 
sary to know the base price and the rail freight rate. The latter were compiled 
cooperatively and furnished to the manufacturers. Base prices were easily 
ascertained and generally known. Approximately 85 mills were located at basing 
points, and about 80 were non-basing-point mills. Although these mills are 
scattered generally throughout the United States, being located in 32 of the 48 
States, it was learned that the individual plants frequently shipped great distances. 
In 1927-28 the weighted average freight rate paid per barrel was 38 cents, or 
about 22 percent of the average mill price. In some instances, however, the freight 
represented more than 50 percent of the mill price. 

Investigation tended to show that under the basing-point system there was a 
wide divergence of net prices received by the mills. In 13 of 21 cities, where 
invoices were examined, delivered prices of all manufacturers were identical. In 
no city was there less than 81 percent of identity. At the same time, the degree 
of uniformity on mill net realizations was comparatively low. 

During the period under consideration, delivered prices were inflexible. At 
Baltimore the formula price was maintained throughout 1927. In Washington, 
Wilmington, Philadelphia, and New York there was but one price change during 
that year. In a 32-month period, 1927-29, there were only 2 price changes in 
Minneapolis and 4 in Cleveland. These were typical of the price situation 
throughout the country. Base prices for 22 mills in the important Lehigh Valley 
producing area remained at a dead level from January 1927 to November 1930, 
except for about 1 month during 1929. The situation with regard to two other 
important producing areas, Hudson Valley and Buffington, Ind., was quite similar. 
The mills at Birmingham showed a rather consistently declining price curve from 
January 1927 to August 1929. In November 1929, however, these mills made 
effective a single increase of 50 cents per barrel. 

Among the factors contributing to imperfect competition were the effective 
use made of price leadership, concentration of production in the hands of a few 
companies, particularly in certain sections of the United States, stringent retali- 
atory methods used against price cutters, collecting and disseminating operating 
information, compiling and distributing freight rates, and checking up violations 
of the industry's code of commercial practices. With regard to the freight-rate 
books, it was learned that these were not merely for the calculation of freight bills 
but contained a conversion table which made it certain that if the formula were 
followed, the prices of all producers at any given point would be identical. The 
per barrel rate shown by the conversion table was often not the actual freight 
rate. 

The mill whose base price plus freight made the Chicago delivered price in 
1927 was located near that city. It produced about 9,000,000 barrels of cement, 
and Chicago consumed about 3,800,000 barrels. Less than one-third of the 
consumption was supplied by the local mill, the remainder of its production being 
3hipped to outside territories, much of it long distances with resultant reductions 
^n mill net realizations. As a result of this condition, its average mill net for the 
^ear on all sales was 22J/ 2 cents per barrel less than its net on Chicago sales. Had 
Chicago been able to purchase at the average net price obtained by this mill, it 
;vould have effected a saving during 1927 of more than $800,000. 

The basing-point system used by the cement industry has encouraged cross 
muling with resultant aggregate increases in freight. On the basis of available 
lata, the Commission estimated that in 1927 there was an average unnecessary 
burden per barrel of 24.3 cents which, applied to the entire production of that 
year, made a total of about $42,000,000. It was not. suggested that this total 
cost burden would be eliminated by competitive mill net prices, but the belief was 
expressed that a substantial portion of the amount represented a loss both to 
consumers and to society generally. 

The Commission's report on the Basing-Point Formula and Cement Prices, 
consisting of more than 200 printed pages, was transmitted to the Congress on 
March 26, 1932. A copy of same is attached hereto as Exhibit F. T. C. 204- A. 



Range Boilers. — The range-boiler industry was selected for study in connection 
■with the Price Bases Inquiry largely because it represented, in a heavy commodity 
industry, both a modified zone-price system and a uniform delivered price system. 
Data were obtained chiefly from manufacturers' price schedules issued to the trade 



CONCENTRATION OF ECONOMIC POWER 2409 

and from manufacturers' invoices, approximately 3,000 of which were examined 
in the offices of the manufacturers by the Commission's agents. Information was 
also procured through interviews with officials of the manufacturing companies 
and through correspondence. The files of the manufacturers were examined 
particularly with regard to the granting of special discounts, or otherwise departing 
from published prices. Material concerning production trends was obtained 
from the Bureau of the Census. 

The study was nearly completed by July 1933, but lack of funds and urgency of 
other work caused a temporary suspension. Subsequent adoption of a code of fair 
competition in April 1934 caused further delay, with the result that the report was 
not completed until 1936. A sufficient check was made, however, to establish 
that the industry was still operating under the zone-price formula. 

From the organization of the Range Boiler Exchange in 1914 there was marked 
uniformity among manufacturers with regard to published delivered prices, terms 
of sale, freight allowances, etc. During the brief existence of the exchange, the 
country was divided into price zones which, with some slight changes, still existed 
when the study was made. 

For zone A, comprising all States east of the Mississippi River, the price was 
f. o. b. plant, full freight allowed. There were three gateway points to the zones 
west of the Mississippi — Davenport, Iowa, St. Louis, Mo., and Memphis, Tenn. 
The price for rail shipments in zones other than zone A was the delivered price in 
zone A plus rail freight from the gateway point freightwise nearest to the point of 
destination. Other methods of calculation were used for boat-and-rail shipments 
and for less-than-carload shipments. These variations did not, however, alter 
the fact that delivered prices for destinations west of the Mississippi River were 
quoted by application of the basing-point principle. Each manufacturer published, 
from time to time, schedules showing delivered prices for zone A and freight 
allowances to destinations in other zones. 

Of the 12 price periods studied, it was found that the 4 largest manufacturers 
.of the most popular type boiler quoted substantially identical prices during 7 of 
the periods and prices that appeared to be competitive during 5 of the periods. 
The periods were of unequal length, 1 of the uniform price intervals lasting for 
almost 3 years, or approximately one-half of the entire time under study. During 
the time that uniform prices prevailed, the granting of special secret discounts 
resulted in variations from the published prices. Toward the end of the period 
under study there was a marked decrease in the granting of these discounts, so 
that, during the last interval considered, 85 percent of the shipments were made 
at the published delivered price. The elimination of special discounts- was ac- 
companied by. greater uniformity of published prices and a marked decrease in 
the number of price changes. This occurred in the face of a declining demand 
which, under price competition, would have tended to lower prices. 

Data procured established that under the system in vogue in this industry a 
large part of the production was shipped into territory where other plants had an 
advantage in freight costs. This is the same cross hauling, or cross freighting, 
found so prevalent in the cement industry. One of the five plants under study 
made more than 90 percent of its shipments into such territory. With two others, 
approximately 60 percent of their shipments were of this nature. In 1929 a plant 
in Chattanooga made only 3.28 percent of its shipments to points in Tennessee, 
while 28.10 percent went to points in Illinois. At the same time, the Illinois 
shipments of a plant located in Chicago were only about one-third those of the 
Chattanooga plant, although its total shipments exceeded those of the latter 
company. Another example of the cross haul was found in the fact that the 
Chattanooga plant sold more boilers in Pennsylvania than it did in Tennessee, 
while at the same time the Pennsylvania company sold more Doilers in Tennessee 
than did the Chattanooga company. 

On March 30, 1936, the Commission's report, consisting of 143 typewritten 
pages, was transmitted to the Congress. A copy of same is attached hereto as 
Exhibit F. T. C. 204-B. 

UTILITY CORPORATIONS 

On February 15, 1928, the United States Senate, through Senate Resolution' 
No. 83 (70th Cong., 1st sess.), d'rected the Federal Trade Commission to conduct 
an inquiry into and to report on the growth of capital assets and liabilities of 
public-utility corporations, both operating and holding companies, doing an 
interstate Or international business; the facts concerning the issuance of securities; 
the- extent to which holding companies owned or controlled engineering, con- 
struction, or management companies; and complete details concerning the 



2410 CONCENTRATION OF ECONOMIC POWER 

Operation of holding companies, together with a recommendation as to the legis- 
lation, if any, which should be enacted by Congress to correct existing abuses. 
In the second part of the resolution, the Commission was directed to investigate 
and report concerning the propaganda or publicity activities of public utilities, 
particularly with regard to efforts to influence public opinion concerning municipal 
or public ownership, or to influence elections of President, Vice President, and 
Members of the United States Senate. 

A statistical schedule, consisting of 225 printed pages, was prepared and sub- 
mitted to the companies from which the information was desired. Many of the 
companies filed reports in accordance with these schedules, but most of them 
were lost in the fire which destroyed the Commission's Washington office in 
August 1930. For the most part, then, the data used were obtained through 
direct examination by the Commission's accountants, auditors, and other repre- 
sentatives, of the corporate records of the utility companies, including contracts, 
correspondence, corporation minutes, stock-transfer books, accounting records 
including vouchers, etc. Engineering examinations were also made among the 
mor« important groups for the purpose of securing information concerning 
physical condition and managerial efficiency. Data were also procured from 
State public service commissions and other State agencies, from Federal income- 
tax returns, from the Federal Power Commission, and from proceedings before 
public-service authorities and the courts. 

Upon completing the examination of a company's records, the Commission's 
examiner who conducted the examination prepared a report covering the material 
procured. Conferences were then held with representatives of the company 
involved, for the purpose of eliminating any possible fact errors. The report, 
together with pertinent exhibits was then formally put into the record at a public 
hearing. The examiner who prepared the report testified in explanation and 
interpretation of the report, and, on some important financial transactions, com- 
pany employees conversant with them were also called to testify, and the com- 
pany involved was permitted to be represented by counsel and had the privilege 
of cross-examining the Commission's representatives and other witnesses. The 
opportunity was also given to the companies to introduce any pertinent testimony 
or evidence which they desired to present. The accuracy of the examiner's reports 
was seldom challenged, and in only a few instances did the companies offer any 
evidence controverting the contents of the examiner's report or his conclusions. 

In accordance with the terms of the Senate resolution, the Commission filed 
monthly interim reports except during the summer months. A total of 84 such 
reports and 7 accompanying volumes of exhibits were filed, together with 11 
special reports designated as follows: 69-A, 71-A, 71-B, 72-A, 73-A, 77-A, 81-A, 
84-A, 84-C, and 84-D, some of which are hereinafter explained. All were printed 
as Senate Document No. 92 (70th Cong., 1st sess.), and each was further identified 
by a part number. 

Propaganda. — The material contained in parts 1 to 20 (with the 7 exhibit 
volumes), which dealt with publicity and propaganda activities and expenditures 
therefor by the various associations of the electric power and gas industries, was 
summed up in part 71-A, which was submitted to the Senate on December 12, 
1934. A copy of same, consisting of 486 printed pages, is attached hereto as 
Exhibit F. T. C. 205-A. Material relative to publicity and propaganda activities 
by ^utilities groups and companies carried on outside of, and in addition to their 
participation in and contribution to the activities of the various associations was 
summed up in part 81-A, together with an index to the record on company pub- 
licity and propaganda. This was submitted to the Senate on November 14, 1935. 
A copy of the report, consisting of 570 printed pages, is attached hereto as Exhibit 
F. T. C. 205-B. 

Volume 71-A consisted of two parts. Part I states the ultimate objective or 
purpose of these activities, the methods used in obtaining such objective or pur- 

f»ose, the persons or agencies employed, together with a statement as to how they 
unctioned and were financed. Part II is a brief of facts setting forth examples of 
the activities engaged in. The Commission's representatives examined the files of 
numerous associations and committees and procured voluminous pertinent data. 
From this material, representative illustrations were taken, and these were com- 

Jilemented with charts, consolidated tables, and appendixes. All the relevant 
acts are from testimony and records of the associations, agencies, persons, and 
concerns of the electric and gas utility industries themselves. The statements and 
conclusions, therefore, are the declarations and admissions of these associations 



CONCENTRATION OF ECONOMIC POWER 2411 

and the persons connected with them, or are based on such declarations ar 
missions. 

The investigation established that since 1919 the electric and gas utilities r. ?&• 
engaged in the greatest peacetime propaganda campaign ever conducted by 
private interests in this country. In addition to using their own agencies, they 
enlisted outside organizations and personnel in active, and often secre' ^d in 
their efforts to disparage all forms of public ownership of utilities. All cities 

in this regard were carefully considered and planned by responsible heads of the 
industries and their associations and responsible committees. Such propaganda 
activities were carried on chiefly through the National Electric Light Association, 
the national association of the electric-light industry, comprising in membership 
over 90 percent of the industry, and by the American Gas Association, the na- 
tional association of the gas industry, which comprised over 90 percent of that 
industry. State or regional associations were organized to carry out locally the 
work nationally planned. "State committees" or "bureaus on public-utility 
information" were also set up, which were devoted solely to propaganda, and at 
one time there were 28 of these covering 36 of the more populous States. State 
directors of these committees were selected for their ability to contact press 
associations and newspapermen and educators, because it wiis the declared opinion 
of the utilities that these represented the 2 greatest public opinion forming agen- 
cies of the present and future generations. 

In the press, the material ran the gamut from harmless and often needless 
advertising to "canned editorials" furnished to thousands of newspapers through- 
out the United States, especially the smaller local weeklies. In the schools the 
material furnished began with a picture book for kindergarten and included 
insertion of desired material and the elimination of undesired material in books 
intended as text and research books. Their' efforts were thus not confined to 
affirmative propaganda but included efforts to block full and fair expression of 
opposition views, especially in books intended for school and research use. 

In addition to general press publicity, the utilities carried on propaganda 
through a number of subsidized publicity agencies and, in some instances, news- 
papers, or a controlling interest therein, were acquired. The National Electric 
Light Association formed various committees for contacting and cooperating 
with other industries and with many associations. In this manner, agencies such 
as the United States Chamber of Commerce, Kiwanis, Rotarv, Lions Club, 
women's clubs, etc.', were utilized to aid the utility program. Repeated attacks 
were made upon every outstanding public project, whether existing or contem- 
plated, as for example, the Ontario Hydroelectric System, Muscle Shoals, and 
Boulder Dam. 

As indicated by the sales of their security issues, in the period from 1923 to 
1929, the utilities, by such propaganda, built up a belief by the general public in 
the soundness and value of all security issues of privately owned utilities. May 
we insert the remark that the assertion of soundness, and that one reason for such 
soundness was alleged complete and sufficient regulation by the States, was made 
in a printed brief submitted to the Senate Committee on Interstate Commerce 
when they were considering the resolution for the investigation. This brief of 
261 pages was signed by 92 law firms or their representatives from all parts of 
the United States. It was in support of the contention of the utilities that the 
proposed investigation was unnecessary (Ex. 924). Billions of dollars of nominal 
value of securities were issued, often with little or no regard for the underlying 
soundness of, or necessity for, such issues. The years of propaganda activity 
undoubtedly proved a powerful aid in having made the general public utility 
conscious. Boastfully Mr. Aylesworth, then the managing director of N. E. L. A., 
set forth as a reason why such a Nation-wide and expensive propaganda program 
should be pushed that the "publh pays," that is, that the rate-paying public 
paid the bill. To measure accurately what the investing public lost in these- 
issues is impossible, due to other factors, including the depression, and to the 
further fact that no one has ever assembled the varying prices and amounts paid 
for said security issues, but the amount of loss caused, in whole or in part, by 
such extensive and reckless issues vvai very great indeed, certainly running into 
the hundreds of millions. 

Part 81-A dealt with the propaganda and publicity activities of 16 groups and 
their companies carried on outside of, and in addition to, their participation in 
and contribution to the activities of the various associations reported on in 
part 71- A. Part 81-A also contained suine association propaganda materia] 
uncovered subsequent to the transmission of 71-A. 

124491— 39— pt. 5a 8 



2412 CONCENTRATION OF ECONOMIC POWER 

It was found that most of the propaganda carried on by the holding-company 
groups or local operating companies was in harmony with and in pursuance of, 
the plans made and carried on by the various associations and committees of the 
electric and gas industries. Some groups had quite complete intrasystem propa- 
ganda organizations, similar in general character and functioning to the associa- 
tions of the industries. The associations furnished material either vehmtarily 
or upon solicitation of the companies, and the latter usually distributed same 
locally. This scheme, whereby the associations produced the propaganda and 
the groups or individual companies distributed it, was very effective and in 
general use throughout the United States. 

Schedules and exhibits were included in the report which showed the amounts 
expended by the various companies for advertising; their contributions to other 
trade associations; fees, retainers and other payments to attorneys, to educa- 
tional institutions and to professors and teachers, and contributions to the Na- 
tional Committees of the two major parties which were made by persons con- 
nected with these companies. 

Holding and Operating Companies of Electric and Gas Utilities. — On January 
28, 1935, the Commission submitted to the Senate chapters XII and XIII of a 
summary report with recommendations, on Holding and Operating Companies of 
Electric and Gas Utilities, consisting of 218 printed pages. This report was 
published as Senate . Document No. 92 (pt. 73-A; 70th Cong., 1st sess.). A 
copy of same is attached hereto as Exhibit F. T. C. 205-C. This report, together 
with parts 69-A and 81-B, covered a survey of State laws and regulations, cer- 
tain pertinent legal studies, the present extent of Federal regulation and the need 
of Federal legislation, together with conclusions and recommendations. 

The exhaustive study made by the Commission established that no substantial 
progress was being made by the States generally toward effective regulation of 
holding companies. In a few States efforts were made, but generally the situation 
remained as it was 25 years earlier. The power of the States in regulating holding 
companies was handicapped by nonresidence, the interstate character of their 
business, and other causes. Then, too, certain of the States granted roving 
charters with practically unlimited power, thereby leaving the States in general 
quite helpless. 

The holding company, as such, performs no producing function. In the utility 
field it has not, therefore, been subject to regulation as such. Charters were 
granted to operating utilities to perform general public-utility service, but as a 
result of holding-company control and management, many operating companies 
contracted away the real performance of their principal charter functions to 
the holding company or to other companies designated by it, thus ousting practi- 
cally all State jurisdiction over business. The opinion was expressed that appro- 
priate Federal legislation would remedy this situation. The Commission further 
stated that there appeared to be three methods which seemed to commend 
themselves for the exercise of Federal jurisdiction, namely, (1) the taxation method 
(2) direct statutory inhibitions, and (3) a compulsory Federal licensing act, 
coupled with a permissive Federal incorporation act. These methods are ex- 
plained in detail at pages 67 to 75, inclusive, of part 73-A. 

On June 17, 1935, the Commission submitted to the Senate chapters I to XI 
(preceding 73-A already referred to), and being a review of the record with regard 
to the economic, financial, and corporate phases of holding and operating com- 
panies of electric and gas utilities. This report, which is devoted to the electric 
u1 lity group and some manufactured gas utility groups, consisted of 882 printed 
p^ges and was published as Senate Document No. 92 (pt. 72-A; 70th Cong. 1st 
sess.). A cop^v of same is attached hereto as Exhibit F. T. C. 205-D. 

During the expansion period of electric-utility service, beginning about 1905-10 
and especially in the period after the World War up to 1930, when war-profit money 
was seeking an outlet, and utilities seemed to offer an especially inviting and 
lucrative field, with their mere sporadic and ineffective State regulation, the 
public-utility holding company became an active and dominant influence in 
development, although there continued to be numbers of small inde- 
pendent companies. The functions, variously and in varying degrees, performed 
many holding comp u ies, which were asserted as 
advantages for this type of structure were: Obtaining funds from investors which 
probably could not be obtained by small independent companies; supplying the 
iges of large-scale production, skilled management, and expert engineering; 
tiding and improving service with attendant inert-uses in consumption 



CONCENTRATION OF ECONOMIC POWER 2413 

and decreases in production costs, which made lower rates possible, although ac- 
companying unsound financial practices often constituted aids to maintaining 
rather than reducing rates. Even when some or all the economies claimed were 
in fact brought about, no substantial rate reductions to the public occurred. The 
usual result was a- siphoning off of the earnings so resulting into the holding- 
company coffers. 

Among the evils of the holding-company management were: Pyramiding, 
attended with the issuance of highly speculative securities, enabling a few men 
to gain practical control of vast utility enterprises with a minimum of invest- 
ment; the exaction of various kinds of excessive fees from controlled operating 
companies; inflation of capital structures accompanied by pressure to obtain 
earnings on inflated values at the expense of the rate-paying public; objection- 
able, misleading and nonrevealing accounting practices; maintaining fictitious 
prices on their stocks through manipulations of the market; retaining excessive 
funds collected from operating companies as purportedly required for Federal 
income taxes; and impressing their activities with an interstate character for the 
purpose of escaping and avoiding whatever state regulation existed or war 
attempted (See 69-A, p. 79.) 



Financial and Accounting Practices. — The assets of large utility systems which 
were built up through acquisitions of independent operating companies, and 
their subsequent unification through consolidation and merger and related 
construction, reflected large amounts by which they were written up in value in 
one way or another in the process. Write-ups, improperly capitalized intangibles, 
and inflation in the fixed assets of all of the holding, subholding, and operating 
companies examined, were found to aggregate approximately $1,500,000,000 at 
the final dates of examination. 

A large part of the write-ups reflected the capitalization of the additional earn- 
ing power which was presumed and anticipated through the consolidation and 
merger of acquired independent operating companies by whatever economies 
might be effected and to any future economic growth in the community or terri- ' 
tory served. Often, this reflected nothing more than the optimistic judgment of 
the promoters or the result of a so-called "horseback appraisal," i. e., a superficial 
inspection of the properties by their engineering staffs. 

The merged or consolidated company was required to issue, directly or in- 
directly, its common stock or other securities to the controlling interests in ex- 
change and consideration for the assets of the constituent companies at their in- 
creased values. The sale to the public of the nonvoting stocks and long-term debt 
so issued by the new company permitted those in control to reduce their invest- 
ment, and in some instances to recover all of it, and in extreme cases more than all 
of it, and still to exercise the same degree of control over the properties through the 
retention of the new company's voting common stock which emanated from the 
write-up, and cost the controlling interests little or nothing. 

In some instances utility operating companies employed appraisals and re- 
valuations as a basis of writing up the values of capital assets. As contrasted with 
the more common forms of write-ups encountered as referred to above, the write- 
ups based on appraisal, which in many cases resulted from State regulatory com- 
mission orders in connection with rates and other matters, were credited, for the 
most part, to capital surplus or retirement reserve. 

Numerous appraisals made of the properties in the Associated Gas & Electric 
Co. system resulted in appreciation of fixed assets of approximately $83,000,000. 
Those appraisals were made by E. J. Cheney, who was supposedly an independent 
appraisal engineer. It was developed that Cheney had been operating in the 
interest and under the control of H. C. Hopson, vice president of Associated Gas & 
Electric Company, and could not be considered as having an independent profes- 
sional status. There were other similar cases. 

Other forms of write-ups reflected the capitalization of large profits taken by 
holding companies in the performance of construction work for their operating 
subsidiaries, the capitalization of stock and bond discounts incurred in connec- 
tion with security issues, and the appreciation of capital assets through failure to 
remove the value of property retired from service. 

In a part of the subsidiaries of one large holding-companv- system which was in 
receivership, the accountants discovered- that t er $18,000,000 of worn-out and 
abandoned property was carried in the property account. 

In connection with mergers and consolidations the investigation developed 
instances of reorganizations, of which it appeared that the principal purpose 
was to avoid the payment of Federal income taxes. These instances involved 



2414 CONCENTRATION OF ECONOMIC POWER 

United Gas Improvement Company. Associated Gas & Electric Company, 
certain h ill ' li . Halsey, Stuart & Company, American Superpower 
Corpo - the United Corporation. These companies entered into 

complh in1 Sj'stem transactions in securities involving large sums 

in > bi« I • In pa - in< ni of taxes on the profits were avoided. 

Certai i holding-company groups carried on a process of actively buying its 
own ec-i itii on i , gai -■•■'. exchanges, while they were being sold to the 
public through other channels. During the 3 years and 9 months from April 21, 
1927, to December 31, 1930, one holding-company group sold 41,388,512 shares 
of its common no-par stock to the public for $1,146,518,779.19. During the same 
period its purchasers of this stock on the exchanges amounted to 34,057,929 shares 
at an expenditure of $965,710,037.65. That is, in order to make a net issue of 
less than 5,650,000 shares this company effected sales more than 7 times as great 
and purchased simultaneously a volume nearly 6 times as great. Company 
purchases constituted a large proportion of the total transactions on the New York 
Curb Exchange, for example, from April through mid-October 1929 company 
purchases ranged from 51.6 to 99.6 percent of the total sales on the curb and 
averaged 72.9 percent for the 6j£-month period. This buying demand furnished 
by the company and the general pu'b 1, >, plus the influence of the speculative 
demand for utility stocks, led to an inc. ase in the closing curb price from $28% 
per share on .June 9, 1924, to $46^ July 19, to $52 September 2, and $68 on 
October 15, 1929. Then followed the crash. 

Pyramiding of holding companies, subholding companies, sub-subholding 
companies upon the operating company was found to be carried to a very atten- 
uated pinnacle. In one holding-company group there were 10 companies in 1 
line of c mtrol from the top to the bottom of the pyramid. In the lnsull system, 
in which all of the holding and subholding companies became bankrupt or went 
into receivership, there was a pyramid of 8 companies. Through the device 
of a pyramid of holding companies the controlling interests were able to control 
;t va I chain of operating companies with a minimum of investment. For example 
in the lnsull 8-tier pyramid $] of investment by the Insulls controlled S2,000 
in the West Florida Power Co. \ common capital structure consis ed of 50 
percent of 5-percent bonds, 25 percent of nonvoting 6-percent preferred stock 
and 25 percenl of common stock for the operating company, and 50 percent of 
, oting pri ferr d I m I. and 50 percent of common stock for each holding and 
subholding companj in the pyramid. In prosperous times, when the operating 
tnad< i. . ent on its total investment in a 6-company pyramid having 
ips, the irnings available for the first holding company would be 25 
, i . . u the c mmon stock and on the apex company 295 percent, but earnings 

■ i , • ., on the operating company's total investment would leave only 5 

,or its common stock, only 1 percent for the common stock of the first 
iany and nothing for the 4 other holding companies in the pyramid. 
The earning statements of a number of companies contained many fictitious 
items of income. For example, preparatory to its refinancing in 1929, Middle 
West Utilities Co., the principal lnsull holding company, began paying dividends 
on its common stock in 1925. From 1922 to 1928, inclusive, Middle West annual 
reports showed $16,876,673 of income available for common-stock dividends. 
During the same period it included in its income $16,781,100 of fictitious income 
ns profit on sales and exchanges of securities among companies in the Middle 
West system and from revaluations of securities and properties owned. 'Cash 
ting to $8,843,709 were paid from 1925 to 192S. It is evident, 
therefore, that, if amounts claimed as profit on sales, exchanges, and revaluations 
of securities and properties were illusory, there was little or no income available 
for dividends ■ stock and such dividends were paid out of capital. 

I this dividend record the company could not have sold common stock 
to the public, 

The undistributed earnings of prosperous subsidiaries were often included in 
nies, although such subsidiaries had not declared 
,-i lei ■ oui I irnings nor set up any obligation on their books to pay 
' ' ling i • npany. This practice was wholly indefensible, both 
cr o r corn ■ t expression of business transactions, and resulted 
,-: > 'a*ements for individual companies in the holding- 

pan,; system in - !u was improper!} duplicated in the accounts. 



CONCENTRATION OF ECONOMIC POWER 2415 

being at one and the same time recorded in the books of the subsidiary and the 
holding company. The earnings so taken up by the hloding company were 
considered as valid assets but in some cases they were never realized due to 
receiverships. 

The investigation disclosed that a substantial source of net income to many 
holding companies, either directly or indirectly, was the fees collected from 
affiliated operating companies for financial, management, and engineering services. 
In many cases, the actual services rendered under the service contracts were ques- 
tionable and the fees collected were high and frequently extremely high in relation 
to cost. For example, the Associated Gas & Electric System, in a little more 
than 5 years, had a net income of over $6,500,000 for management and construc- 
tion service alone, or 193 percent net profit on service cost and, in addition, had 
servicing income on merchandising, purchasing, and other services. Byllesby 
Engineering & Management Corporation, servicing the Standard Gas & Electric 
group, had a total net income, for a period of 11 years, of over $17,000,000 derived 
almost wholly from servicing. Nearly all of this amount was distributed in 
dividends to its one stockholder, Standard Gas & Electric Company. 

In Senate Document 213 (69th Cong., 2d sess.), which is a report by the 
Federal Trade Commission on Control of Power Companies, the Commission 
reported on page 75 as follows: 

"The Electric Bond & Share Co. states that the general service fee just about 
covers the cost of the service." 

Referring to engineering: 

"The fee, the company asserted, consists of the total of the costs thus recorded." 

As to construction-: 

"The company states that the fees just about cover the expense of the con- 
struction companies." 

It summarized the matter as follows: 

"From the foregoing account it will be seen that the Electric Bond and Share 
Co. regards this service staff as an auxiliary organization that does not directly 
produce for the company more than a nominal profit." 

However, following court action and two decisions to overcome refusal of the 
company to give access to its records in the utility investigation, the examination 
disclosed that the profits were far from merely nominal. In most instances they 
ran over 100 percent — in one instance 269 percent — and they aggregated millions. 
These profits were after most liberal salaries had been allowed as the major items 
of expense (Ex. 5602, pt. 62:330-332-34). 

During a period of 5 years, Columbia Engineering & Management Corporation 
collected fees from the affiliated Columbia Gas & Electric group for engineering 
and management services, amounting to nearly $15,500,000, on which it incurred 
expenses of slightly over $7,500,000, realizing a net profit on cost of servicing of 
106 percent. 

W. S. Barstow & Company, Inc., and its subsidiary, W. S. Barstow Manage- 
ment Association, both servicing organizations for affiliated companies, had a 
combined net income for a period of 3 years and 9 months of $4,400,000, or 321 
percent on expenses. Of this total net income, $2,122,000 was distributed to 15 
officers and employees as so-called "extra compensation," and in addition, 1 of 
the 15 received $650,000 under an income-sharing contract, the latter individual 
receiving almost one-fourth of the total net income under these 2 forms of extra 
distribution. 

Service fees were collected from operating subsidiaries for many services such 
as accounting, advertising, engineering and construction, legal, merchandising, 
financing, purchasing, and general management. 

It is generally conceded that this inquiry contributed materially to the passage 
of the Securities Act of 1933, the Securities and Exchange Act of 1934, the Holding 
Company Act, and the Federal Power Act of 1935, and the Natural Gas Act of 
1938; and also that, as a result of the disclosure of exorbitant rate bases and rates, 
the whole utility rate structure was permanently lowered to the extent of many 
millions of dollars per annum 



Nataral-Gas-Producing, Pipe-Line, and Utility Industries— On December 31, 
1935, the Commission submitted to the Senate its final report covering economic, 
corporate, operating, and financial phases of the natural-gas-producing, pipe-line, 
a7if? utility industries, with conclusions and recommendations. It consisted of 
6'7 printed pages and was published as Senate Doci N T o. 92 (pt. S4-A; 



2416 CONCENTRATION OF ECONOMIC POWER 

70th Cong., 1st sess.). A copy of the report is attached hereto as Exhibit F. T. C. 
205-E. 

The report dealt with a number of evils that had been found in the natural-gas 
and natural-gas pipe-line industry, the correction or prevention of winch would, 
in many instances, require extension of regulatory authority over the industry. 
Among these were: 

(1) A great waste of natural gas in production. 

(2) Excessive cost of natural-gas production through extravagant compe- 

tition in drilling wells. 

(3) Unregulated monopolistic control of certain natural-gas production 

areas. 

(4) Unregulated control of pipe-line transmission and of wholesale distri- 

bution. 

(5) Discrimination in some instances in field purchases of natural gas, and 

refusals to purchase from independent producers. 

(6) Unregulated competition in building natural-gas pipe lines to markets. 

(7) Costly struggles between rival natural-gas interests to conquer or 

defend territories of distribution. 

(8) Excessive and inequitable variations in city gas rates for natural gas 

among different localities. 

(9) Pyramiding investments in natural-gas enterprises through holding 

companies, with attendant evils. 

(10) Excessive profits in many natural-gas sales between affiliated companies. 

(11) Inflation of assets and stock watering of certain natural-gas companies. 

(12) Misrepresentation of financial condition, investment, earnings, etc., of 

some natural-gas operating and holding companies. 

(13) Reckless financing and stock manipulation by certain natural-gas 

holding companies. 

(14) Exploiting subsidiary natural-gas companies through fees for construc- 

tion, management, promotion, etc. 

(15) Exaction of excessive bonuses or commissions py investment bankers in 

connection with financial transactions with natural-gas companies 
in certain instances. 

(16) Exaction of excessive fees and bonuses or commissions by officials of 

certain companies in connection with sales and construction of 
properties. 

In order to correct these existing evils, the Commission, in 1935, among other 
recommendations, suggested (1) measures for real conservation and use, including 
equitable ratable taking, or otherwise protecting all interests in a common reser- 
voir. But such laws must be carefully drafted so as not to result merely in the 
lengthening and strengthening of the hold of the larger and dominant interests, 
and the detriment and elimination of the very numerous smaller projects. The 
Commission specifically warned against the danger that laws enacted in the name 
of conservation might prove to be the means of lengthening and strengthening the 
control of the dominant companies and groups, and for that reason divorcement 
of certain functions within companies and groups in each industry deserves serious 
consideration as affording a most likely effective rernedy; (2) that a Federal regu- 
latory law be enacted applicable to interstate natural gas pipe lines which trans- 
port gas for ultimate sale to and use by the public, regulating rates for carriage or 
city gate rates at the end of such transportation; also regulating security issues, 
accounts, beginning and abandonment of operations, and intercorporate relations 
of companies owning or controlling gas pipe lines; retail rates for gas transported 
and delivered in interstate commerce to be federally regulated only where they are 
not regulated by the State in which the gas is distributed to the public; (3) that 
a Federal agency be empowered, insofar as may be lawfully done, to order all 
reasonable extensions of service to communities desiring natural gas which can 
be supplied by companies which transport gas for public consumption, without 
undue disturbance of existing service requirements; (4) that there be a divorcement 
of gas and electrical utilities because of the fact that they are increasingly competi- 
tive, and in many communities are the two chief sources of power and' light, and 
further because three of the four dominant interests in natural gas and gas pipe 
lines also are in the electrical-utility field; and (5) that Federal and State legisla- 
tion be adopted which shall restrict banks to investment in, and shall forbid their 
control and management of, utilities. 

In substance, numbers (2) (3) were incorporated in the Natural Gas Act of 1938. 



CONCENTRATION OF ECONOMIC POWER 2417 

Federal Incorporation or Licensing of Corporations. — In conjunction with its 
investigation of utility Corporations, the Commission caused a compilation to 
be made of proposals and views for and against Federal incorporation or licensing 
of corporations. This report was divided into two major parts, one covering the 
period prior to the enactment of the Federal Trade Commission Act and the 
Clayton Act in 1914 and the other including the material subsequent to that 
date. The topics covered included official and personal expressions and views, 
proposed legislation, party platforms, viewpoints with regard to constitutional 
amendments, and the attitude of the press. In this same volume a compilation 
was also made of State constitutional, statutory, and case law concerning corpora- 
tions, with particular attention to public-utility holding and operating companies. 
These several studies were transmitted to the Senate on September 21, 1934, and 
were printed as Senate Document No. 92 (pt. 69-A). A copy of same, consisting 
of 6 IS printed pages, is transmitted herewith as Exhibit F. T. C. 205-F. 

Part S4-D is a comprehensive general index of parts 21 to 84-C, inclusive. 
Parts 71-B and 81-A (pp. 259-570) are indexes to the propaganda. 

In closing, it seems proper to remind the Committee that not all of the groups 
and companies either in the electric or gas and gas-pipe-line industries were ex- 
amined. The funds, personnel, and time allotted did not permit. Nor is it 
claimed that all unsound issues were discovered and reported. Therefore, the 
aggregates are to that extent less than the actual totals for the entire industries. 
As to some of those that were examined, complete records could not be obtained 
bo that full disclosure has not been made. In at least one instance desired books 
and records v/ere said to be in Canada. 



INDEX 

PART I 

Companies 

Page 

American Crayon Company et al., Docket 2967 (school supplies, chalk, 

crayons) .__ 2335 

American Flange and Manufacturing Company, Inc., Docket 5391 (con- 
tainers, metal — closure parts) 2356 

American Sheet and Tin Plate Company et al., Docket 2741 (tin plate).. 2315 
Boston Sportswear Company et al., Docket 2755 (clothing, sportswear, 

flannel skirts) 2316 

Building Material Dealers Alliance et al., Docket 2191 (building materials 

and building supplies) 2331 

Butterick Publishing Company et al., Docket 2171 (magazines) 2309 

California Lumbermen's Council, etc., Docket 2898 (lumber and building 

materials) 2343 

California Packing Corporation et al., Docket 2786 (canned and dried 

foods) 2325 

California Rice Industry, etc., Docket 3090 (rice) 2340 

Cap Association of the United States, Inc., Docket 2530 (clothing, caps).. 2324 
Carter Carburetor Corporation, Docket 3279 (automobile carburetors and 

carburetor parts) 2353 

Christmas Club, Docket 3050 (passbooks, account books, etc.) 2328 

Columbia Alkali Corporation et al., Docket 3519 (calcium chloride) 2352 

Conde Nast Publications, Inc., Docket 2399 (clothing, women's garments) . 2316 
Covered Button and Buckle Creators, Inc., Docket 3186 (covered buttons 

and buckles) «. 2327 

Edes Manufacturing Company' et al., Docket 2660 (zinc and copper 

plates) .;. 2313 

Fall River Wholesale Grocers' Association et al., Docket 2677 (groceries).. 2317 

Florida Building Material Institute, Inc., Docket 2857 (building supplies) . . 2348 
Food Dish Associates of America et al., Docket 3397 (paper, pulp, and 

wooden dishes) 2349 

General Electric Company et al., Docket 2941 (turbine generators) 2321 

Golf Ball Manufacturers' Association et al., Docket 3161 (golf balls) 2335 

Gooderham & Worts, Ltd. et al., Docket 2989 (alcoholic beverages) 2337 

Goodyear Tire and Rubber Company, Docket 2116 (rubber tires).. 2311 

Hiram Walker, Inc. et al., Docket 2991 (alcoholic beverages) 2337 

Hollywood Hat Company, Inc., Docket 3020 (clothing, hats) 2327 

I. T. S. Company, The, and National Federation of Master Shoe Rebuilders 

et al., Docket 2,802 (rubber heels and soles) 2321 

Joseph Weidenhoff, Inc., Docket 2675 (automobile-testing devices) 2334 

Kimball, A. Co., et al., Docket 2329 (pin tickets). 2318 

Letellier-Phillips Paper Co., Inc., Docket 3434 (waste paper, rags, and 

other waste material) 2350 

Linen Supply Assn. of the District of Columbia et al., Docket 2256 (linen 

coats, towels, and aprons) 2310 

Lock Joint Pipe Company et al., Docket 3127 (concrete pipe) 2346 

Machine Tool Distributors, etc., Docket 1882 (machine tools, heavy 

machinery) 2308 

Mathieson Alkali Works, Inc., et al., Docket 3317 ("liquid" chlorine) 2349 

Mechanical Manufacturing Company, etc., Docket 1727 (draft gears and 

other railway equipment) 2308 

Menasha Wooden Ware Corporation et al., Docket 2650 ("butter tubs) 2324 

Mercerizers Association of America, et al., Docket 1755 (mercerized-cotton 

yarns) 2306 

Metal Window Institute, et al., Docket 2978 (metal windows) 2329 

i 



II INDEX 

Paee 

Millinery Quality Guild, Inc., et al., Docket 2812 (women's hats). _. 2322 

National Biscuit Company, Docket 3607 (bakery and packaged food prod- 
ucts — Biscuits) _ 2355 

National Distillers Products Corporation, et al., Docket 2992 (alcoholic 

be verages) _ 2337 

National Electrical Manufacturers Association, et al., Docket 2565 (power 

cable and rubber-covered building wire) 2319 

New York Sheet Metal Roofing and Air-Conditioning Contractors' Associa- 
tion, etc., et al., Docket 2931 (hot-air furnaces) 2328 

New York State Wholesale Confectionery Associations, Inc., et al., Docket 

2613 (confectionery) . 2314 

Penick & Ford, Ltd., et al., Docket 1580 (food, canned syrups, and 

molasses) 2305 

Pittsburgh Plate Glass Co., et al., Docket 3154 (window glass) 2330 

Pittsburgh Plate Glass Company, et al., Docket 3491 (glass) 2351 

Pyrotechnic Industries, Inc., Docket 3309 (fireworks) 2342 

Retail Furniture Dealers Association of St. Louis, et al., Docket 2757 

(furniture) 2320 

Rowe Manufacturing Company, et al., Docket 3544 (corn cribs and silos) __ 2353 

Schenley Distillers Corporation, et al., Docket 2990 (alocholic beverages).. 2337 

Seagram-Distillers Corporation, Docket 2988 (alocholic beverages) 2337 

Shelton Tubular Rivet Company, et al., Docket 3107 (industrial rivets).. 2342 

Soft-Lite Lens Company, Inc., Docket 2717 (optical lenses) 2336 

Tarpon Springs Sponge Exchange, Inc., et al., Docket 3024 (sponges) 2333 

United Fence Manufacturers Association, Docket 3305 (snow fence) 2345 

Viscose Company, et al., Docket 2161 (rayon yarn) 2326 

Washington Sea Food Dealers Association, et al., Docket 2189 (sea food). 2309 
Water Works Valve and Hydrant Group Df The Valve and Fittings 
Institute, The, et al., Docket 2958 (water-gate valves, hydrants, and 

fittings) 2323 

Waugh Equipment Company, Docket 1779 (draft gears) 2307 

Pending complaints 2358 

Commodities 

Alcoholic beverages (Seagram-Distillers Corporation, Gooderham & 
Worts, Ltd., et al., Schenley Distillers Corporation, et al., Hiram 
Walker, Inc., et al., National Distillers Products Corporation, et al., 

Dockets Nos. 2988, 2989, 2990, 2991, 2992) 2337 

Automobile carburetors and carburetor parts (Carter Carburetor Cor- 
poration, Docket No. 3279) , 2353 

Automobile-testing devices (Joseph Weidenhoff, Inc., Docket No. 2675) .. 2334 
Bakery and packaged food products- — biscuits (National Biscuit Company, 

Docket No. 3607) 2355 

Building materials and building supplies (Building Material Dealers Alli- 
ance, et al., Docket 2191) 2331 

Building supplies (Florida Building Material Institute, Inc., etc., Docket 

2857) : 2348 

Butter tubs (Menasha Wooden Ware Corporation, et al., Docket 2650) __ 2324 

Calcium chloride (Columbia Alkali Corporation, et al., Docket 3519) 2352 

Canned and dried foods (California Packing Corporation, et al., Docket 

2786) 2325 

Clothing: 

Caps (Cap Association of the United States, Inc., Docket 2530) 2324 

Covered buttons and buckles (Covered Button and Buckle Creators, 

Inc., etc., et al., Docket 3186) 2327 

Hats (Hollywood Hat Company, Inc., Docket 3020) 2327 

Mercerized-cotton yarns (Mercerizers Association of America, et al., 

Docket 1755) 2306 

Sportswear, flannel skirts (Boston Sportswear Company, et al., 

Docket 2755) 2316 

Women's garments (Conde Nast Publications, Inc., Docket 2399) 2316 

Women's hats (Millinery Quality Guild, Inc., et al., Docket 2812) ... 2322 

Concrete pipe (Lock Joint Pipe Company, et al., Docket 3127) _ — 2346 

Confectionery (New York State Wholesale Confectionery Associations, 
, Inc., et al., Docket 2613) 2314 






INDEX III 

Page 
Containers, metal — Closure parts (American Flange and Manufacturing 

Company, Inc., Docket 3391) 2356 

Corn cribs and silos (Rowe Manufacturing Company, et al:, Docket 3544). 2353 

Draft gears (Waugh Equipment Company, etc., Docket 1779) 2307 

Draft gears and other railway equipment (Mechanical Manufacturing 

Company, etc., Docket 1727). 2308 

Fireworks (Pyrotechnic Industries, Inc., Docket 3309) 2342 

Food, canned syrups and molasses (Penick & Ford, Ltd., etc., Docket 1580). 2305 
Furniture (Retail Furniture Dealers Association of St. Louis, et al., Docket 

2757) : 2320 

Glass (Pittsburgh Plate Glass Company, et al., Docket 3491) I 2351 

Golf balls (Golf Ball Manufacturers' Association, et al., Docket 3161) 2335 

Groceries (Fall River Wholesale Grocers' Association, et al., Docket 2677). 2317 
Hot-air furnaces (New York Sheet Metal Roofing and Air-Conditioning 

Contractors' Association, et al., Docket 2931) 2328 

Industrial rivets (Shelton Tubular Rivet Company, et al., Docket 3107).. 2342 
Linen coats, towels, and aprons (Linen Supply Association of the District 

of Columbia, et al., Docket 2256) 2310 

Liquid chlorine (Mathieson Alkali Works, Inc., et al., Docket 3317) 2349 

Lumber and building materials (California Lumbermen's Council, etc., 

Docket 2898) 2343 

Machine tools, heavy machinery (Machine Tool Distributors, etc., Docket 

1882) 2308 

Magazines (Butterick Publishing Company, et al., Docket 2171) 2309 

Metal windows (Metal Window Institute, et al., Docket 2978) 2329 

Optical lenses (Soft-Lite Lens Company, Inc., Docket 2717) 2336 

Paper, pulp, and wooden dishes (Food Dish Associates of America, et al., 

Docket 3397) 2349 

Passbooks, account books, etc. (Christmas Club, Docket 3050) 2328 

Pin tickets (A. Kimball Co., et al., Docket 2329) 2318 

Power cable and rubber-covered building wire (National Electrical Manu- 
facturers Association, et al., Docket 2565) , 2319 

Ravon yarn (Viscose Company, et al., Docket 2161) 2326 

Rice (California Rice Industry, etc., Docket 3090) 2340 

Rubber heels and soles (The I. T. S. Companv and National Federation of 

Master Shoe Rebuilders, et al., Docket 2802) 2321 

Rubber tires (Goodyear Tire and Rubber Company, Docket 2116) 2311 

School supplies, chalk, cravons (American Crayon Company, et al., Docket 

2967) __■ , 2335 

Sea food (Washington Sea Food Dealers Association, et al., Docket 2189) __ 2309 

Snow fence (United Fence Manufacturers Association, Docket 3305) 2345 

Sponges (Tarpon Springs Sponge Exchange, Inc., et al., Docket 3024) 2333 

Tin plate (American Sheet and Tin Plate Company, et al., Docket 2741).. 2315 

Turbine generators (General Electric Company, et al., Docket 2941), 2321 

Waste paper, raes, and other waste materials (Letellier- Phillips Paper Co., 

Inc., Docket 3434) 2350 

Water-gate valves, hydrants, and fittings (The Water Works Valve and 

Hydrant Group of The Valve and Fittings Institute, et al., Docket 

2958) 2323 

Window glass (Pittsburgh Plate Glass Co., et al., Docket 3154) 2330 

Zinc and copper plates (Edes Manufacturing Company, et al., Docket 

•2660) 2313 

Pending complaints 2358 

PART II-A 

Introductory 2361 

Allied Chemical and Dye Corporation 2367 

Aluminum Company of America 2363 

Arrow-Hart & Hegeman, Inc 2369 

Bordens Farm Products Company, Inc 2363 

Borg- Warner Corporation 237 1 

Charles Freshman Company, Inc 2371 

Consolidated Cigar Corporation 2368 

Continental Basing Corporation i „ 2368 

Continental Steel Corporation.. 2370 



IV INDEX 

Page 

Crown Overall Manufacturing Company 2370 

Crown Zellerbach Corporation 2371 

Fisk Rubber Company : - - - 2367 

Hayes Wheel Company 2367 

Illinois Glass Company - 2366 

International Shoe Company — 2366 

Laird & Company 2371 

McKesson & Robbins, Inc _ 2370 

Meat Packing Industry . -- — 2363 

Midland Steel Products Co __ 2367 

Motor Wheel Corporation - — 2367 

National Pastry Products Corporation 2371 

Philip Morris Consolidated, Inc _ 2370 

Purity Bakeries Corporation - _ _ 2370 

Schenley Distillers Corporation .1 , — . 2372 

Standard Oil Co. of New Jersey 2366 

Standard Oil Co. of New York 2362 

Sterling Products, Inc — ! 2371 

Temple Anthracite Coal Company , 2370 

Tobacco Products Corporation — 2362 

Vanadium-Alloys Steel Company.. ». . 2370 

Van Kennel Revolving Door Company 2371 

V. Vi vaudou, Inc 2368 

Wickwire-Spencer Steel Corporation 2368 

Conclusion __ 2372 

PART II-B 

Introductory 2373 

Number and extent of acquisitions and consolidations 2373 

Important industries in which acquisitions and mergers have been taken 
place (itemized below) : 

Automotive . 2374 

Bakery and food products 2376 

Building materials. .J — 2375 

Copper 2374 

Distilled spirits .._.: 2376 

Electric household appliances ...: 2374 

Explosives . 2374 

Fruit auction 2376 

Fuel and ice. _ 2376 

Glass - 2375 

Industrial chemicals industry — 2375 

Motion picture 2375 

Oxygen and acetylene gas 2375 

Petroleum 2374 

Railway equipment- 2374 

Steel...... — 2373 

Tobacco 2376 

Miscellaneous — — 2376 

Substantive restrictions of section 7 by legislative intent: 

American Cyanamid Company 2377 

Distillers Corporation-Seagrams, Ltd 2379 

Drug, Inc : , - 2379 

Fox Film Corporation _* _ j 2378 

Gair, Robert, Company, Inc_„ — 2377 

Owens-Illinois Glass Company.. 2378 

Republic Steel Corporation __ 2378 

Thompson Products, Inc 2378 

Standard Oil Company (Indiana) - 2377 

United States Gypsum Company — — , 2377 

Restrictions of section 7 due to court decisions: 

Allegheny Steel Company 2383 

Alva Carpet and Rug Company 2384 

Anchor Cap Corporation 238 1 . 

Arrow-Hart & Heeeman 2383 

Borg- Warner Corporation 2383 



INDEX V 

Restrictions of section 7 due to court decision — Continued. Paee 

Consolidated Biscuit Company 2383 

Consolidated Oil Corporation 2381 

Corning Glass Works 2384 

General American Transportation Corporation 2382 

Goodyear Tire & Rubber Company i 2381 

Ground Gripper Shoe Company, Inc 2381 

Individual Drinking Cup Company, Inc 2383 

Inland Steel Company 2380 

International Shoe Company 2379 

Leslie-California Salt Company 2383 

Minneapolis-Honeywell Regulator Company 2380 

National Gypsum Company 2382 

Phelps Dodge Corporation 2382 

Swift Case 2382 

Thatcher Case 2382 

Three Rivers Glass Company 2385 

Vortex Cup Company 2383 

Cases referred to the Department of Justice for consideration under the 
provisions of the Sherman Act: 

DiGiorgio Fruit Corporation 2384 

Outboard Motors Corporation 2385 

Owens-Illinois Glass Company 2384 

For material contained in Part III, see Table of Contents. 



BOSTON PUBLIC LIBRARY 



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