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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 .."

School of Law 
Library 




-A?V WV^^;VsA^VSA?^ 



INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



HEARINGS 

BEFORE THE 

TEMPOEAEY NATIONAL ECONOMIC COMMITTEE 
CONGEESS OF THE UNITED STATES 

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 INVESTIGA- 
TION WITH RESPECT TO THE CONCENTRATION OF 
ECONOMIC POWER IN, AND FINANCIAL CONTROL 
OVER, PRODUCTION AND DISTRIBUTION 
OF GOODS AND SERVICES 



PART 31-A 



SUPPLEMENTAL DATA SUBMITTED TO THE 
TEMPORARY NATIONAL ECONOMIC COMMITTEE 



Printed for the use of the Temporary National Economic Committee 




UNITED STATES 
GOVERNMENT PRINTING OFFICE 
WASHINGTON : 1941 • 



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 

JAMES M. MEAD, Senator from New York 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General 

•HUGH COX, Special Assistant to the Attorney General 

Representing the Department of Justice 

SUMNER T. PIKE, Commissioner 
Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

*EWIN L. DAVIS, Chairman 
Representing the Federal Trade Commission 

ISADOR LUBIN, Commissioner of Labor Statistics 

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

Representing the Department of Labor 

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

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

Representing the Department of the Treasury 

WAYNE C. TAYLOR, Under Secretary of Commerce 

•M. JOSEPH MEEHAN, Chief Statistician, Bureau of Foreign and Domestic Commerce 

Representing the Department of Commerce 

LEON HENDERSON, Economic Coordinator 
DEWEY ANDERSON, Executive Secretary 
THEODORE J. KREPS, Economic Adviser 



' Alternates. 



REPRINTED 
BY 

WILLIAM S. HEIN & CO., INC. 

BUFFALO, N. Y. 
1968 



TABLE OF CONTENTS 



Page 
Foreword ._ j-.^-- -. v 

Exhibit No. 2243. Copy of lette^by Irving S. Olds, vice president. United 
States Steel Corporation, to Walter B. Wooden, Assistant Counsel, 
Federal Trade Commission, February 2, 1940 18011 

Exhibit No. 2243-1. Copy of price announcement on concrete bars, is- 
sued by Carnegie-Illinois Steel Corporation^June 4, 1936 18012 

Exhibit No. 2244. Copy of letter by W. B. Wooden, Assistant Counsel, 
Federal^ Ttade Commission, to Irving S. Olds, vice president, United 
States Steel Corporation, February 5, 1940 18014 

Exhibit No. 2245. Copy of letter by Irving S. Olds, vice president. United 
States Steel Corporation, to Walter B. Wooden, Assistant Uounsel, 
Federal Trade Commission, February 8, 1940 18014 

Exhibit No. 2246. Copy of price announcements by J. H. McKown, as- 
sistant vice president, Carnegie-Illihois Steel Corporation, to all managers 
of sales. May 26, 1936 ^... 18016 

Exhibit No. 2246-A. Copy of letter by J. H. McKown, assistant vice 

president, Carnegie-Illinois Steel Corporation, to all managers of sales. . 18018 

Exhibit No. 2247. Copy of letter by Benjamin F. Fairless. president, 
United States Steel Corporation, to Senator Joseph C. O'Mahoney, 
chairman of the Temporary National Economic Committee, February 
1, 1940 : 18019 

Exhibit No. 2248. Copy of letter by Walter B. Wooden, Assistant Coun- 
sel, Federal Trade Commission, to Senator Joseph C. O'Mahoney, 
Temporary National Economic Committee chairman, in reference to 
testimony of Benjamin F. Fairless, president. United States Steel Cor- 
poration, February 6, 1940 18021 

Exhibit No. 2249. Copy of letter by J. L. Perry, president, . Carnegie- 
Illinois Steel Corporation, December 14, 1939 18022 

Patents and the Patent System, by Senator William H. King 18025 

Exhibit No. 2813. Letter from National Association of Retail Druggists to 
Senator Joseph C. O'Mahoney, December 24, 1940; and statement of 
the National Association of Retail Druggists on the fair trade laws 18061 

Exhibit No. 2814. Reply to brief presented to the Temporary National 
Economic Committee by National Ass6ciation of Retail Druggists on 
resale price maintenance, by Bureau of Labor Statistics, United States 
Department of Labor, February 25, 1941.-.:.-.' 18066 

Table, "Federal undistributed profits and excess-profits taxes and credits, 
by size classes and industries, 1937, supplementing Monograph No. 9, 
"Taxation of Corporate Enterprise" by Clifford J. Hynning, Depart- 
ment of Commerce 18075 

Letter from the American Tariff League, to Dr. Dewey Anderson, execu- 
tive secretary. Temporary National Economic Committee, February 
20, 1941; and criticism of Monograph No. 10, "Industrial Concentra- 
tion and Tariffs" 1808^ 

Rejoinder by Clifford L. James to statement of the American Tariff 
League regarding Temporary National Economic Committee Mono- 
graph No. 10 18095 

History of the taxation of life-insurance companies under the Federal 
income, capital-stock, and excess-profits taxes, 1909-40, submitted by 
the Division of Tax Research, Department of the Treasury as supple- 
mental material to Monograph No. 28 . 18099 

Brief submitted to the Temporary National Economic Committee by the 
National Association of Retail Druggists in answer to memorandum for 
Thurman W. Arnold, Assistant Attorney General of the United States, 
recommending repeal of the Tydings-Miller amendment 18125 

in 



IV TABLE OF CONTENTS 

Page 

Letter from the Department of Justice to Dewey Anderson, executive 
secretary of the Temporary National Economic Committee, in reply to 
brief submitted by the National Association of Retail Druggists 18162 

Letter from the Brotherhood of Railroad Trainmen in reply to the state- 
ment of Thurman Arnold, Assistant Attorney General, United States 
Department of Justice, regarding restraints in trade with particular 
reference to labor unions 18168 

Letter from the American Federation of Labor in reply to statement of 
Thurman Arnold, Assistant Attorney General, United States Depart- 
ment of Justice, regarding restraints in trade with particular reference 
to labor unions 18173 

Rejoinder by Corwin D. Edwards, economic consultant. Department of 

Justice, to letter from the American Federation of Labor 18186 

A review by the Home Market Club of Monograph No. 10, "Industrial 
Concentration and Tariffs," by Clififord L. James, associate professor of 
economics, Ohio State University 18195 

Rejoinder by Clifford L. James and Edward C. Welsh to review by the 

Home Market Club 18208 

Statistics on the taxation of corporations, a listing of 682 returns, submitted 

by Clififord J. Hynning, Department of Commerce 18211 

Letter from the Metropolitan Life Insurance Co. criticizing Temporary 
National Economic Coirmittee Monograph No. 2, "Families and Their 
Life Insurance," by Donald H. Davenport, special economic consultant, 
and Gerhard A. Gesell, "Special counsel, Insurance Section, Securities 
and Exchange Commission 18443 

Rejoinder by Gerhard A. GeseU to letter from Metropolitan Life Insurance 

Co 18448 

Letter from Thurman Arnold, Assistant Attorney General, regarding Tem- 
porary National Economic Committee Monograph No. 43, "The Motion 
Picture Industry — A Pattern of Control," by Daniel Bertrand, W. Duane 
Evans, and E. L. Blanchard 18453 

Rejoinder by W. Duane Evans 18459 

Letter from the Association of American Railroads criticizing Temporary 
National Economic Committee Monograph No. 26, "Economic Power 
and Political Pressures," by Donald C. Blaisdell and Jane Greverus 18461 

Rejoinder by Donald C. Blaisdell to letter from the Association of American 

Railroads 18464 

Letter from Harriet Elliott, Consumer Commissioner, the Advisory Com- 
mission to the Council of National Defense, endorsing certain recom- 
mendations made to the Temporary National Economic Committee — 18467 

Letter from Conway P. Coe, Commissioner, United States Patent OfRce, 
commenting on the recommendations on patents submitted by Thurman 
Arnold, Assistant Attorney General, United States Department of 
Justice 18471 

Rejoinder by Thurman Arnold to letter from Conway P. Coe 18483 



FOREWORD 



According to a democratic procedure laid down by the Temporary National 
Economic Committee, part 31- A has been set aside for criticisms of monographs 
and hearing testimony. 

It was repeatedly announced by the chairman and the executive secretary of 
the Temporary National Economic Committee that criticism from responsible 
persons and business organizations was welcome. The understanding upon which 
such criticism would be received for the record is that it would be in writing and 
signed; that the witness or author of the docliment which formed the subject 
matter of the criticism would have full right of rejoinder which would be pub- 
lished immediately following the statement of criticism. 

Part 3 1- A was held open for the receipt of all such criticisms until March 29, 
1941, when, because of the necessity of getting the material to the Printer before 
the Temporary National Economic Committee went out of existence on April 3, 
the volume was closed. 

Dewey Anderson, 

Executive Secretary. 
Temporary National Economic Committee. 



CORRESPONDENCE 

BETWEEN THE UNITED STATES STEEL CORPORATION, 
THE FEDERAL TRADE COMMISSION, AND THE TEM- 
PORARY NATIONAL ECONOMIC COMMITTEE, IN CON- 
NECTION WITH THE T. N. E. C. HEARINGS CONDUCTED 
BY THE FEDERAL TRADE COMMISSION 
JANUARY 26-30, 1940 



(Hearings before the Temporary National Economic Committee, Part 27) 



18009 



SUPPLEMENTAL DATA 



Exhibit No. 2243 

COPY OF LETTER BY IRVING S. OLDS, VICE PRESIDENT, UNITED STATES 

STEEL CORPORATION 

United States Steel Corporation, 

71 Broadway, New York, February 2, 1940. 
Walter B. Wooden, Esq., 

Assistant Counsel, Federal Trade Commission, 

Washington, D. C. 

Dear Mr. Wooden: Enclosed is a photostatic copy of a price announcement 
on concrete bars issued by Carnegie-Illinois Steel Corporation under date of June 4, 
1936, which, I believe, is the announcement requested by you at the heariing before 
the Temporary National Economic Committee on Monday, January 29, 1940.' 
I have been unable to send this announcement earlier, as no copy thereof was avail- 
able in New York, and it was necessary to obtain one from Pittsburgh. 

I am informed that the provisions contained in this announcement regarding 
the place of delivery, which reads as follows: "Place of delivery is recognized to 
be the railroad freight station nearest the place where the material is to be used or 
stored for resale, except in the case of products sold for fabrication for an iden- 
tified structure when the place of delivery is the railroad freight station nearest to 
the place at which such structure is to be assembled or erected," is one of the stand- 
ard terms and conditions of sale, still printed on the reverse side of price an- 
nouncements for all products, and that such a provision does not mean that struc- 
tural material will only be sold by Carnegie-Illinois Steel Corporation delivered 
at the place of erection and will not be sold by it delivered at the shop of the' 
fabricator, as was provided in the following provision of Section 4 of Schedule E 
of the Code of Fair Competition for the Iron and Steel Industry, as approved on 
August 19, 1933: "and (b) in the case of plates, snapes, or bars intended for fab- 
rication for an identified structure, for the purpose of establishing the delivered 
price thereof, the place of delivery shall be deemed to be the freight station at or 
nearest to the place at which such structure is to be erected, and not the shop of 
the fabricator;". 

According to the testimony of Mr. Fairless on Saturday, January 27, 1940, the 
above quoted provision of the Code "was never effective, even during the Code" 2 
According to the testimony of Mr. Adams on Monday, January 29, 1940, "The 
practice today is to quote on the basis of the price at point of fabrication."* 

I am informed that, after the invalidation of the Code, while Carnegie-Illinois 
Steel Corporation continued to quote prices on structural material intended to 
be used for an identified structure delivered at the place of erection of such 
structure, many sales were made at a price delivered at the fabricator's shop, 
and that at the present time, although the general practice of Carnegie-Illinois 
Steel Corporation is to seel structural material delivered at the fabricator's shop, 
sales are still made from time to time at a price delivered at the point of erection. 
I am also informed that, in view of the above, it is impossible to name any date 
as the time of a definite change by Carnegie-IUinois Steel Corporation from one 
method to the other, but that the present general practice became more prevalent 
during 1938. 

May I ask that this letter be made a part of the record of the Temporary Na- 
tional Economic Committee? 
Very truly yours 

Irving S. Olds. 

ISO:MRW 

Enclosure 

1 Hearings, pt. 27, p. 14257. 
'Ibid., p. 14214. 
'Ibid., p. 14259. 

18011 



18012 OONCENTRATIQii OP ECONOMIC POWER 

Exhibit No. 2243-1 
Caknegib-Illinois Steel Cokporation 
tinitbd states steel cobporation sub8idiaht 
General Offices: Carnegie Building, Pittsburgh, Pa. 

June 4, 1936. 

price announcement to contractors and owners op construction projects 
on concrete bars new england 

Effective this date, and until further announcement, the following prices will 
apply on sales of concrete reinforcing bars for delivery and consumption in the 
United States: 

Price f.o.b. cars delivery point carload lots 





Concrete Bars 


Spirals 


Delivery Point 


New Billet 


Rail 


H' 


Larger 
than H' 


Porti'^i'i, i^« 


$2.49 
2.45 
2.46 
2.46 
2.43 
2.45 
2.47 
2.44 


$2.34 
2.30 
2.31 
2.31 
2.28 
2.30 
2.32 
2.29 


$4.14 
4.10 
4.11 
4.11 
4.08 
4.10 
4.12 
4.09 


$3.64 




3.60 


Concord, N.H 


3.61 


Boston, Mass . .... 


3.61 


torlngneld. Mass -. --. 


3.58 


Worcester, Mass 


3.60 


Providence, R. I .. - . -. 


3.62 


TTftrtfnrd, Conn 


3.59 







AH sales will be made subject to the Extras and to the Standard Terms and 
Conditions of Sale as covered in Pages 2, 3, and 4 of this Price Announcement. 

Prices and delivery at other points in the United States, and to Denver Recla- 
mation Bureau, T. V. A., IJ. S. Army, U. S. Navy and Panama Canal, will be 
quoted upon request. 

Carnegie-Illinois Steel Corporation, 
C. V. McKaig, 

Vice President & General Manager of Sales. 

CARNEGIE-ILLINOIS STEEL CORPORATION 

Extras, Standard Terms and Conditions of Sale Concrete Bars to Contractors or 
Owners of Construction Projects 

All orders and contracts will be subject to approval at seller's General Offices, 
Pittsburgh, Pa., or Chicago, 111. 

TERMS OF PAYMENT 

The terms of payment, unless otherwise hereinafter specified, are net cash within 
thirty (30) days, or a discount of one-half (J4) of one (1) pe];cent on the net value 
after deducting transportation charges for payment within ten (10) days, both 
from date of invoice. The discount which will be indicated on the invoice may 
be allowed on the basis of settlements twice a month as follows: 

(a) On all invoices for these products dated from the 1st to the 15th inclusive 
of any month, such discount may be allowed on payment of such invoices on or 
before the 25th of such month. 

(b) On all invoices for these products dated from the 16th to the end of any 
month, such discount may be allowed on payment of such invoices on or before 
the 10th of the next following month. 

On shipments' made by ocean or rail and ocean to the States of California, 
Oregon and Washington, terms of pavment are net cash within sixty (60) days, 
or a discount of one-half (J^) of one (l) per cent, for payment within forty (40) 
day? , both from date of invoice. 

On sales of these products to the United States Government, the above terms 
of net cash within tnirty (30) days, or a discount of one-half Otj) of one (1) per 



CONOBNTRATION OP ECONOMIC POWER 18013 

cent for payment in cash within ten (10) days, shall apply from date of receipt of 
material at destination rather than the date of invoice. 

Shipments and deliveries shall at all times be subject to the approval of Seller's 
Credit Department, and Seller may at any time decline to make any shipment or 
delivery except upon receipt of payment or upon terms and conditions or security 
satisfactory to such Department. 

PLACE OF DELIVEPY 

Place of delivery is recognized to be the railroad freight station nearest the 
place where the material is to be used or stored for resale, except in the case of 
products sold for fabrication for an identified structure when the place of delivery 
is the railroad freight station nearest to the place at which such structure is to 
be assembled or erected. Page 3 of 4. 

TRANSPORTATION BY TRUCK 

When transportation is effected by truck provided directly or indirectly by the 
byyer, an allownace will be made from the delivered price equal to 65 percent of 
the carload all rail published tariff freight rate including surcharge if any from 
shipping point to destination. 

DELIVERIES TO RAILROADS 

Prices which wiU be applicable on sales made to Railroads, Trustees or Agents 
thereof, will be quoted upon application. In sales of this character, however, 
the freight allowance shall not exceed the sum of the foreign line portion (if any) 
of the through published tariff freight rate and five (5) mills per ton per mile for 
the on-line movement from shipping point to destination. 

T-AND GRANT FREIGHT RATES 

In the case of sales made to the United States Government, or any department 
or division thereof, where shipment moves via aU-rail transportation on Govern- 
ment bills of lading, at land grant rates, title will be passed at the point of ship- 
ment, and the lowest all-rail published freight rate to destination will be allowed, 
plus an additional amount, if necessary, to equalize any greater benefits from land 
grant rates which would accrue to the Government from shipping point of any 
other bidder. 

EXTRAS 

To the foregoing, base prices are to be added the following extras: 

Size H-inch . $0.10 per 100 lbs. 

y2-inch 0.20 

?^-inch 0.40 

3<i-inch J 1.00 

Spiral extras for cold drawn wire add- ^ 0.50 

For spirals without spacers deduct 0.25 

QUANTITY EXTRAS 

Less than 15 tons but not less than 5 tons $0.15 per 100 lbs. 

Less than 5 tons but not less than 1 ton 0.25 " " " 

Less than 1 ton 0.50 " ." " 

BENDING EXTRAS 

Heavy bending $0.30 per 100 lbs. 

Light bending 0.80 " " '• " 

WEIGHT SPECIFICATIONS 

For weight tolerance more restrictive than the A. S. T. M. 

Tolerance $0.10 per 100 lbs. 

TRUCKING 

In Metropolitan New York, Philadelphia and Eastern Penn- 
sylvania.-, _. $0.10 per 100 lbs. 

All other points ._ 0.05 " " " 

Note. — Above cartage is in all cases in addition to published freight rate of 
switching charges. 



18014 



CONCENTRATION OF ECONOMIC POWER 

ENGINEERING 



Designing (Preparing designs and placing plans) $0.25 per 100 lbs. 

Design only (Preparing design without placing plans) 0.10 " " " 

Detailing and placing plans (from designs made by others) : 



Quantity- 




Max. 
Chge. 



Less than 100 tons 

100 tons to 199.99 tons 
200 tons to 499.99 tons 
500 tons to 999.99 tons 
Over 1,000 tons 



$250.00 
400.00 
750.00 

1,000.00 



GENERAL 



If any changes are made in prices and conditions as stated in this list, a supple- 
ment will be issued immediately setting forth such changes. 



Exhibit No. 2244 

COPY OF LETTER BY W. B. WOODEN, ASSISTANT COUNSEL, FEDERAL 
TRADE COMMISSION, TO IRVING S. OLDS, VICE PRESIDENT, UNITED 
STATES STEEL CORPORATION. 

February 5, 1940. 
Mr. Irving S. Olds, 

Vice President, United Stales Steel Corporation, 

71 Broadway, New York, New York. 
Dear Mr. Olds: Your letter of February 2nd and enclosure were received today, 
and I thank you for the information given. 

As a matter of further clarification, however, will you kindly state in what 
classes of products and cases the Carnegie-Illinois Steel Corporation quotes on 
structural material (including concrete bars) for use in identified structures 
f. o. b. place of erection, and in what classes of products and cases it quotes f. o. b. 
place of fabrication. 

Please state whether there was any formal action by the Code Authority which 
had the eff'ect of revoking Section 4 of Schedule E of the Code relative to quota- 
tions on material intended for fabrication for an identified structure. 

I shall be glad to ask that your letter and the reply to this one become a part 
of the record of the Temporary National Economic Committee, as it is important 
that the record be corrected and clarified in accordance with your supplementary 
statements. 

Yours very truly, 

W. B. Wooden, 
Assistant Chief Counsel. 
WBW: MJM 



Exhibit No. 2245 



COPY OF LETTER BY IRVING S. OLDS, VICE PRESIDENT, UNITED STATES 
STEEL CORPORATION, TO WALTER B. WOODEN, ASSISTANT COUN- 
SEL, FEDERAL TRADE COMMISSION. 

United States Steel Corporation 

71 broadway, new york 

February 8, 1940. 
Walter B. Wooden, Esq., 

Assistant Chief Counsel, Federal Trade Commission, 

Washington, D. C. 
Dear Mr. Wooden: Your letter of February 5, 1940, was received on Tuesday. 
In answer to the request contained in the "second paragraph thereof, I am 
informed that the present sales practices of Carnegie-Illinois Steel Corporation 
are as follows: 



CONCENTRATION OF ECONOMIC POWER 18015 

(a) Plates, Shapes and Bars for use as structural material are generally sold 
delivered at the point of fabrication. 

(6) Concrete reinforcing bars (which were sold delivered at the point of fab- 
rication during the N. R. A. Code period and were not covered by the provisions 
of Section 4 of Schedule E of the Code, approved on August 19, 1933, which pro- 
vided that sales should be made delivered at the point of erection rather than at 
the point of fabrication) are largely handled through jobbers and are usually sold 
delivered at the place of the jobber's warehouse. This product, however, when 
the purchaser so requests is very often sold delivered at the point of erection of 
the identified structure. 

In answer to the request contained in the third paragraph of your letter I am 
informed that there was no formal action by the Code Authority, which had 
the effect of revoking such Section 4 of Schedule E of the Code. 

In this connection I would like to correct an apparent misapprehension of the 
meaning of my letter of December 13,' 1939, addressed to Mr. James R. Brackett, 
Executive Secretary, Temporary National Economic Committee, in which I stated, 
following the language of Mr. Brackett's question: "I am informed that the offi- 
cials of United States Steel Corporation know of no amendments or modifications 
since June, 1935, of Commercial Resolutions and Regulations adopted during the 
N. R. A. Code period, or similar statements or announcements of commercial 
practice made since June, 1935." You have apparently interpreted this to mean 
that these Commercial Resolutions and Regulations continued in effect after 
June, 1935. These Commercial Resolutions and Regulations were, of course, 
invalidated along with the Code itself by the decision of the United States Supreme 
Court in the Schechter case in May, 1935, and I am informed that thereafter no 
authority existed in any body to adopt, amend, modify or revoke any such resolu- 
tions or regulations or any similar statements or announcements of commercial 
practice. 

I am informed that on June 3, 1935, the Board of Directors of the American 
Iron and Steel Institute adopted the following resolution, which was referred to in 
the hearings last month, and also by Mr. Burr at the hearing on March 6, 1939: 

"Whereas the Chairman of the National Industrial Recovery Board has 
issued a statement with regard to the decision of the United States Supreme Court 
in the Schechter Poultry Corporation case in which he expressed the hope 'that 
all employers heretofore operating under approved codes and all their employes 
will cooperate in maintaining those standards of fair competition in commercial and 
labor relations which have been written into the codes with practically universal 
sanction, and which represent a united effort to eliminate dishonest, fraudulent 
trade practices ancj unfair competition in overworking and underpaying labor.'; 

"Resolved that it is. hereby declared to be the sentiment of the Board of 
Directors of the American Iron and Steel Institute that the individual members of 
the Iron and Steel Industry, acting voluntarily, during the present uncertainty, 
maintain the present rates of pay and maximum hours of labor and the standards 
of fair competition which are set forth in the Steel Code, and that the members of 
• the Industry continue to protect the employe' rights of collective bargaining; and 

"Resolved that the Executive Secretary of the Institute be, and he hereby is, 
authorized and directed to send a copy of these resolutions to each member of the 
Industry." 

I am informed that, as stated in the language above quoted, this resolution was 
adopted as an expression of sentiment by the Board of Directors of the American 
Iron and Steel Institute in order to comply with the pubhcly expressed wishes of 
the Chairman of the National Industrial Recovery Board. I am further informed 
that the United States Steel Corporation and its subsidiaries never at any time 
considered that such resolution, or the ratifying resolution adopted by various 
members of the iron and steel industry on June 6, 1935, covered or called for any 
continuation of the above mentioned Commercial Resolutions and Regulations 
adopted during the N.R.A. Code period. 

As Mr. Burr, in his testimony before the Temporary National Economic Corh- 
mittee on March 6, 1939 (page 316 of Verbatim Record) ,2 referred to such ratifying 
resolution adopted by various members of the iron and steel industry bn June 6, 
1935, I should like to call to your attention the full text of such resolution as then ' 
sent to members of the steel industry by the American Iron. and Steel Institute. 
The full resolution reads: 

"Resolved, that the members of the Iron and Steel Industry in General 
Meeting assembled this sixth day of June, 1935, hereby unanimously ratify the 
resolution of the Board of Directors of American Iron and Steel Institute, adopted 
June 3, 1935, and each of us hereby declares that the Company which he represents 

' In file of Federal Trade Commission. 

' Hearings before the Temporary National Eeconomic Committee, Part 5, p. 1885. 



18016 CONCENTRATION OF ECONOMIC POWER 

ia in favor of supporting the position taken by such resolution and that it is the 
intention of such Company, acting individually and voluntarily, in so far as it 
may do so, during the present uncertainty to maintain the present rates of pay 
and maximum hours of labor and the standards of fair competition which are 
described in the Steel Code, and that such Company will continue to protect the 
employees' rights of collective bargaining." 

Referring to willingness on your part stated in the last paragraph of your letter 
of February 5th, I shall appreciate your asking that this letter and my earlier 
letter of February 2, 1940 to you be made a part of the record of the Temporary 
National Economic Committee. 
Very truly yours, 

[S] Irving S. Olds. 

ISO:MRW 



Exhibit No. 2246 

COPY OF PRICE ANNOUNCEMENTS BY J. H. MCKOWN, ASSISTANT VICE 
PRESIDENT, CARNEGIE-ILLINOIS STEEL CORPORATION, TO ALL MAN- 
AGERS OF SALES. 

Clement V. McKaig, Vice President and General Manager of Sales 
J. Halsey McKown, Assistant Vice President and Assistant General Manager of Sales 

Carnegie-Illinois Steel Corporation 

united states steel corporation subsidiary 

General offices: Carnegie Building, Pittsburgh, Pa. 

May 26, 1936. 
To all managers of sales: 
Subject: Third quarter prices 1936 

Supplementing our letter of May 23rd, we are sending you in, todaj^'s mail, a 
supply of two new Price Announcement forms — (1) Hot Rolled Carbon Steel — 
(2) Hot Rolled Alloy Steel — both of which have been designed to simplify the 
work of the District Office. 

We have arranged, and are enclosing for your convenience, a chart showing 
prices announced to date on various commodities. This will be supplemented 
from time to time as additional details are ascertained. 

The Price Announcement on Hot Rolled Alloy Steel Bars only covers such 
products as are specifically mentioned in our Standard Classification of Extras. 
In this respect, we ask that you confer regarding prices for Hot Rolled Alloy 
Small Shapes, Plates, and Structural Shapes. 

We also call your attention to the following changes in our Standard Classifi- 
cation of Extras for the Third Quarter, these in addition to the recently announced 
change in Size Extras on Hot Rolled Carbon Steel Blooms, Billets and Slabs, 
Forging Quality — those changes will be incorporated in the next revisions of the 
several extra cards involved: 

1. Hot Rolled Carbon Steel Bars — Automobile Bumper Steel Bars (Page 5): 

Revision: 

Front or Impact Bars — Special Sections. Extra for Section and Quality, 
in addition to regular extras for chemical specifications: 

Sections .156" thick and heavier .15c per lb. 

Sections under .156" to .125", inc .25c per lb. 

Sections under .125" ^ .35c per lb. 

Other Bumper Bars are subject to Automobile Spring Steel extras plus 
extras for chemical specifications. 

2. Hot Rolled Strip Steel— Cutting Extras (Page 6) : 

Revision: 

Specified lengths — ^42" or over. 

Over 24" to 42", exclusive. 
Over 12" to 24", inclusive. 
Hot Rolled Strip Steel — Quality and Workmanship Extras (Page 7) : 



CONCENTRATION OF ECONOMIC POWER 



18017 



Revision: 
Tack Plate Quality - - .30c per lb. 

3. Hot Rolled Sheets and Hot Rolled Annealed Sheets- -Processing Extras 
(Page 6): 

Revision ; 

Tack Plate Quality (In addition to size extras) .30c per lb. 

If any details given you thus far are not entirely clear, please do not hesitate to 
call upon us for further information. 
Very truly yours, 

J. H. McKowN, 
Assistant Vice President and 
Assistant General Manager of Sales. 



Delivery point prices 

[All prices are base per 100-lbs.] 

SHEETS 



Delivery Points 


o 

« 

d 

d 

3 

W 




0) 

.2 

u 

O 
O 


Z 6 

2 a 

a 


III 
o' o' 

w 


a 

OT 


m 

a, 
a 

ja 

OT 

a 

CO 
=3 
ty 

C3 

m 


a 

O 

O 

If 

o 

a 
o 
O 


Q. 


bu 

a 


< 


Pittsburgh, Pa 

Birmingham, Ala 


$1, 925 
*2. 075 
2.025 
2.025 
1.98 


$1. 925 
2.075 


$3. 475 


$1. 975 
2.125 


$2. 525 
2.675 


$1. 975 
2.125 


$1,975 
2.125 


Confer.. 
Confer.. 


$1. 825 


Confer.. 
Confer.. 


Confer 
Confer 


Buffalo, N. Y 












2.075 
2.03 
2.025 


Confer.. 
Confer.. 


1.825 
1.83 


Confer.. 




Chicago, 111.-.. -. 


1.98 


3.53 






2.08 


Confer.. 


Confer 












2.025 


3.575 










1.825 
















2.125 
2.03 








Gary, Ind 




1.98 
2.025 




2.08 


2.63 


2.08 


Confer.. 














1.825 
1.825 




















Confer.. 
Confer.. 
Confer.. 






Gulf Ports 


2.325 
2.475 


2. 325 
2.475 


3.875 
4.025 








2.375 
2.525 


Confer 






2.525 


3.175 




Confer.. 











♦Birmingham, Ala.: Standard Structural Shapes Only. 

Pacific Coast and Gulf Ports prices base plus Ocean Carrier long length and heavy lift extras per Freight 
Tariff No. 1-A in addition to standard extras. 

Minimum Carload: Chicago and Gary— 60,000 lb.— Finished— 30 Gross Tons— Semi-Finished. Other 
Points— 50,000 lb.— Finished— 25 Gross Tons— Semi-Finished. 

ALLOY STEEL 
[Billets, Slabs and Ingots— Prices Base per Gross Ton. All Others— Prices Base Per 100] 



Delivery Point 


Struct. 
Shapes 


Alloy 
Plates 


Alloy 
Bars 


Alloy Small 
Shapes 


Alloy Billets 
& Slabs 


Alloy Ingots 


Pittsburgh, Pa 


Confer 


Confer 


$2. 575 


Confer 


$51.50 O. T. 


$42.50 O. T. 






Bethlehem, Pa 


Confer 

Confer 

Confer 

Confer 


Confer 

Confer 

Confer..*. 
Confer 


2.575 
2.575 
2.575 
2.58 


Confer 

Confer 

Confer 

Confer 


51.50 
51.50 
51.50 
51.60 


42.50 


Buffalo, N. Y 


42.50 


Canton, Ohio ... 


42,50 




42.60 






Massillon, Ohio 


Confer 


Confer 


2.575 


Confer 


51.50 


42.50 



Minimum Carload: Chicago and Gary— 60,000 lb. Finished; 30 Gross Tons Semi-Finished. 
Points— 50,000 lb. Finished; 25 Gross Tons Semi-Finished. 



Other 



18018 



CONCENTRATION OF ECONOMIC POWER 



SEMIrFINISHED MATERIAL 
[All Prices Are Base per Gross Ton] 



Hot Rolled 



Delivery Point 



Blooms, 

Billets, 

Slabs, 

Rerolling 



Blooms, 
Billets, 
Slabs, 
Forging 



Ingots Forg- 
ing 



Sheet 
Bars 



Rods over 

15/32" to 

47/64", inc. 



Pittsburgh, Pa 

Anderson, Indiana 

Birmingham, Ala 

Buffalo, N. Y — 

Canton, Ohio 

Chicago, El 

Cleveland, Ohio _ . . 

Duluth, Minn. (Billets only) 

Galveston, Texas (Gulf Ports) 

Gary, Indiana j 

San Francisco, Cal. (Pacific Coast) . 

Sparrows Point, Md. 

Worcester, Mass ^ 

Youngstown, Ohio 



$30.60 



$37. 50 



Confer. 



$30. 50 



30.50 
30.50 



37.50 
37.50 



Confer. 
Confer. 



Confer 
Confer 
Confer 



30.60 
30.50 
32.50 



37.00 
37.50 
39.50 



Confer. 
Confer - 



30.50 
30.50 
30.60 
30.50 



Confer 
Confer 



Confer. 



37.50 



Confer. 



30.50 

"so.'so 



Confer 
Confer 



Confer 
Confer 



Minimum Carload: Chicago and Gary— 60,000 lb. Finished; 30 Gross Ton Semi-Finished. Other 
Points— 50,000 lb. Finished; 25 Gross Ton Semi-Finished. 
Cabnegie-Illinois Steel Corporation, 

General Sales Department. 



Exhibit No. 2246-A 



COPY OF LETTER BY J. H. MCKOWN, ASSISTANT VICE PRESIDENT, 
CARNEGIE-ILLINOIS STEEL CORPORATION, TO ALL MANAGERS OF 
SALES 

Carnegie-Illinois Steel Corporation 

UNITED states STEEL CORPORATION SUBSIDIARY 

General Offices: Carnegie Building 

Pittsburgh, Pa. 

June 6, 1936. 
Subject: Third Quarter Prices 1936. 
To: All Managers of Sales: 

Supplementing our letter of May 23rd covering price announcements, wish to 
advise you that there will be an advance of $2.00 per ton on Steel Axles for such 
business to be shipped during the third calendar quarter year ending September 
30, 1936, resulting in the following delivered prices: 

Pittsburgh 2.925c base 

Birmingham 2.925c base 

Chicago__. 2.93 c base 

These prices are subject to the Standard Classification of Extras covering Steel 
Axles as well as our Standard Terms and Conditions of Sale as provided for our 
other products. 

All inquiries should be submitted as heretofore. 
Very truly yours, 

(S) J. H. McKowN, 
Assistant Vice President 
and Assistant Gev^eral Manager of Sales. 



CONCENTRATION OF ECONOMIC POWER 18019 

Exhibit No. 2247 

COPY OF LETTER BY BENJAMIN F. FAIRLESS, PRESIDENT, UNITED STATES 
STEEL CORPORATION, TO SENATOR JOSEPH C. o'mAHONEY, CHAIRMAN 
OF THE TEMPORARY NATIONAL ECONOMIC COMMITTEE 

February 1, 1940. 
Hon. Joseph C. O'Mahoney, 

Chairman, Temporary National Economic Committee, 

United States Senate, Washington, D. C. 

Dear Senator O'Mahoney: My attention has just been called to certain 
statements made by Mr. Willis J. Ballinger, Director of Studies of the Federal 
Trade Commission, at the hearing before the Temporary National Economic 
Committee on January 30, 1940, in which Mr. Ballinger purported to summarize 
some of my testimony at previous hearings. I was not present at this hearing on 
January 30, 1940, as I had been informed by representatives of the Federal Trade 
Commission at the conclusion of the hearing on the preceding day that the Federal 
Trade Commission had no further questions to ask of Mr. Avery C. Adams and 
myself, and that we were excused from attending the hearing on January 30, 1940. 

As events beyond your control prevented you from attending any of the hearings 
at which I was a witness, I think it is proper for me to state to you that the sum- 
marization of my testimony so given by Mr. Ballinger is not accurate and gives 
a meaning entirely different from that conveyed by my complete testimony. I 
respectfully ask that before you and the other members of the Temporary National 
Economic Committee reach any conclusion, my entire testimony be considered, 
rather than any summarization thereof given by Mr. Ballinger or by any other 
representative of the Federal Trade Commission. 

As reported on page 395 of the Verbatim Record of the Proceedings on January 
.30, 1940, Mr. Ballinger stated: "Mr. Fairless admitted that when the basing- 
point system was followed that it eliminated price competition in the steel in- 
dustry. That was a very significant admission. * * *";' and then quoted a 
few excerpts from my testimony, apparently in an attempt to support his further 
statement (also reported on page 395) that "when the basing-point system was 
observed, Mr. Fairless clearly conceded that price competition was eliminated 
from the steel industry. * * * Now it becomes a question of how much the 
basing system is followed in the steel industry, and Mr. Fairless' whole defense 
was that this thing, the basing-point system, is sort of a shadowy thing that stands 
there and nobody takes advantage of it, they are always departing from it, and 
naturally that suggests why they have it in the first place * * * Apparently, 
as I get it, they did not defend the basing-point system. They said competition 
existed in the industry because of departures from it."^ 

Another statement by Mr. Ballinger to the same effect is reported in the first 
column on page 396 of the Verbatim Record of the Proceedings on January 30, 1940.* 

May I bring to your attention that Mr. Ballinger failed to cite the following 
portions of my testimony, which I think throw some additional light on the 
character of my testimony relative to the particular points he was disc\issing: 

(Extract from page 318 of Verbatim Record of Proceedings on January 26, 1940: 

"Mr. Wooden. Mr. Fairless in that connection, even when the basing-point 
system is working one hundred percent and producing an identical delivered 
price, your mill net realizations fluctuate even then, do they not? 

"Mr. Fairless. The basing-point system works one hundred percent every 
day, twenty-four hours of every day, but it doesn't result in uniform prices because 
that isn't the reason that the system is in vogue or practice." * 

(Extract from page 319 of Verbatim Record of Proceedings on January 26, 
1940:) 

"Mr. Fairless. I would like most emphatically, if I have that ability, to oiice 
and for all state our position in so far as the basing-point system is concerned. 
Our contention is that breaks in prices are not a breakdown to any degree of the 
so-called basing-point system. We contend that the basing-point system was 
in effect and worked just as well when sheets and other flat rolled products sold 
for eight dollars a ton under the market as it did when they sold definitely on the 
market. 

"There is no relationship, and to constantly be asking us the question about 
the breakdown of the basing-point system we don't believe is a fair presentation. 
Everybody, of course, is entitled to their own opinion of the basing-point system, 

' Hearings bofore the Temporarv National Economic Committee, Part 27, p. M316. 
2 Idem. 'Ibid.,- p. 14317. « Ibid., p. 14175. 

124491— 41— pt. 31-A 2 



18020 CONCENTRATION OF ECONOMIC POWER 

but we contend that the basing-point system is only a vehicle which we use to 
merchandise our products. We have told you we use it because we know of no 
better method to merchandise our product. There might be, and if out of these 
hearings could come that, we would be the first to welcome it. 

"Now so far as competition, the fact that you have basing points and that 
prices are qUoted as applying to those basing points for various products, and 
the fact that these prices are not maintained or are maintained or are reduced, 
so many dollars one time and more or less dollars at another time, is in no way in 
relationship to the basing-point system is our contention, and I would like to 
make that clear if I can." ^ 

(Extract from page 341 of Verbatim Record of Proceedings on January 27, 
1940:) 

"Mr. Wooden. Now I also recall that you testified yesterday afternoon that 
you agreed with Mr. Gregg, Vice-President of your company, when he testified 
that if the basing-point systems were fully operative there would be no competition 
in^rice. Is that correct? 

"Mr. Fairless. That is not correct. 

"Mr. Wooden. What is your position with reference to that?" 

:fc :{e 3|f :H % H( 4< 

"Mr. Fairless. My contention is that competition exists even although two or 
more companies arrive at the same price or have identical bids, providing, of 
course, that the conclusion is arrived at legally. It seems to me that when two 
or more companies are interested in getting a piece of business, tonnage, a contract, 
that has to do with steel, you immediately have competition. The fact that each 
of those companies has announced prices to the public certainly prevents them 
from charging any price that they might choose to charge." " 

(Extract from page 342 of Verbatim Record of Proceedings on January 27, 
1940:) 

"Mr. Fairless. What I did say, Mr. Chairman, was this, that if all steel com- 
panies — if all steel companies — had basing points and posted their base prices, 
which is to begin with a competitive situation, but if they did post their prices 
and they did quote in respect to steel tonnage in a territory, or any territory, 
and they used the nearest basing point and ajjplicd the base price that had been 
published by the company that governed or controlled that basing point, and 
added all the charges, extras and all the transportation charges, there would be 
obviously uniform prices arrived at, but that doesn't- mean that tliat would not 
still be a competitive price so far as competition is concerned, because the basis to 
begin with, the base price, was competitive, bound to be competitive." ' 

Various statements made by Mr. Ballinger and Mr. Wooden at the hearing on 
January 30, 1940 seem to me to convey the impression that the testimony of Mr. 
Adams and myself was contrary to and not in support of the pamphlet on the 
basing point practice; submitted to the Committee by United States Steel Cor- 
poration as Exhibit No. 1418. That is not correct, and I hope that you and each 
other member of the Committee will read this pamphlet in its entirety before 
reaching any conclusion. 

May I request that this letter be made a part of the record of the Temporary 
National Economic Committee? 
Respectfully yours, 

Benjamin F. Fairless, 

President. 

BFF:MRW 

Copy to: Mr. Willis J. Ballinger, Director of Studies, Federal Trade Com- 
mission, Washington, D. C. 

•Ibid., p. 11177. 
«Ibid., p. 14188. 
' Ibid., p. 14190. 



CONCENTRATION OP ECONOMIC POWER 18021 

Exhibit No. 2248 

copy of letter by walter b. wooden, assistant counsel, fed- 
ERAL TRADE COMMISSION, TO SENATOR JOSEPH C. o'mAHONEY, 
TNEC CHAIRMAN, IN REFERENCE TO TESTIMONY OF BENJAMIN F. 
FAIRLESS, PRESIDENT, UNITED STATES STEEL CORPORATION 

Federal Trade Commissi©n, 

Washington, February 6, 1940. 
Hon. Joseph C. O'Mahoney, 

Chairman, Temporary National Economic Committee, 

United States Senate, Washington, D. C. 
Dear Senator O'Mahoney: The letter of Mr. B. F. Fairless, president of the 
United States Steel Corporation, to you under date of February 1, 1940, has 
come to my attention through a copy which he sent to Mr. Ballinger. The state- 
ment is noted that various comments by Mr. Ballinger and me at the hearing of 
January 30 imply that Mr. Fairless' testimony was contrary to, and not in sup- 
port of, the Corporation's pamphlet submitted to the Committee as Exhibit 
1418. Such a conclusion is now challenged by the Corporation. 

There are other portions of Mr. Fairless' testimony to which attention should be 
called as well as those set forth in his letter. Taken collectively, they support 
the challenged conclusion. They also support the comments of Mr. Ballinger to 
which exception is specifically taken. 

The Corporation's letter quotes from Mr. Fairless' testimony on page 341 of 
the verbatim record that it was not correct to say that he had agreed with Mr. 
Gregg, a vice-president of the Corporation,' who had said that if the basing point 
system "were universally followed, there would be no competition in so far as 
one element of competition is concerned, namely, price." Yet Mr. Fairless had 
previously testified, as shown on page 317 of the verbatim record, as follows: 

"We will concede, if that is the point we are trying to make, that if base 
prices as announced were followed in every transaction, and that the nearest 
basing point to the consumer governed, and that the rail freight was added 
from that point, and the delivered price arrived at in that manner, there 
wouldn't be any competition in the Steel Industry. It would be a one price 
industry pure and simple." ^ 
Mr. Fairless had also testified that "As I read from the record, Mr. Gregg said 
substantially what I have just said." (Page 318 of verbatim record.) ^ 

By contrast with the foregoing, Mr. Fairless now quotes from his testimony 
on page 318 of the verbatim record, as follows: 

"The basing-point system works 100% every day, 24 hours of every day, 
but it doesn't result in uniform prices because that isn't the reason that the 
system is in vogue or practice." ^ 
Although Mr. Fairless made that claim, the Corporation, in its prepared statement 
to the CoEomittee, quoted from a report of the NRA that "the outstanding 
characteristic of the basing-point system is the fact that it puts rival producers 
on a footing of price equality with each other in all the consuming points over a 
wide area." (Exhibit 1418, page 37.) Mr. Fairless testified that this was "a 
true statement," although claiming at the same time that this did not preclude 
competition in such areas. (Page 318 of verbatim record.) * 

Taking these several quotations together, they amount to saying that if the 
basing-point sy.stem is working 100% there would be no price competition, but 
that ali/hough the system works 100%, 24 hours of every day, it docs not result 
in uniform prices. They amount to saying also that the system is not intended 
to produce uniform prices although that is its outstanding characteristic. 

Mr. Fairless' letter also cites his testimony on page 319 of the verbatim record 
to the effect that the fact that basing point prices "are not maintained, or are 
maintained, or are reduced so many dollars one time and more or less dollars at 
another time is in no way in relationship to the basing-point system." He 
testified that such "is our contention and I would like to make that clear if I can." 
He further testified that "our contention is that breaks in prices are not a break- 
down to any degree of the so-called basing-point system," and that "the basing- 
point system was in effect and worked just as well when sheets and other flat 
roUed products sold for $8 a ton under the market as it did when sold definitely 
on the market." " 



' Hearings before the Temporary National Economic Committee, part 27, p. 14188. 

'Ibid., p. 14172. Ubid., p. 14174. < Ibid., p. 14175. ' Ibid., p. 14174. « Ibid., p. 14177. 



18022 CONCENTRATION OF ECONOMIC TOWER 

Such contentions are equivalent to saying that the system whose outstanding 
characteristic is to put rival producers on a footing of price equality everywhere 
works just as well when steel products are sold far below tlie equal delivered prices 
which the system contemplates. They are the equivalent if'saying that while 
reductions below the market price of .the system have no relationship to the 
system itself, nevertheless, the system is in effect and works just as well when 
prices are being made below the market price reflected by the system. If, in 
fact, price reductions have "no relation to the system, it would follow that the 
system, as such, tends to maintain prices on a higher level. 

In the concluding parts of Mr. Fairless' letter, his testimony on pages 341 and 
342-of the verbatim record is cited,' to the effect that competition exists even where 
producers make identical bids and that as long as the base price is competitive the 
whole basing-point system is competitive, notwithstanding that it produces 
identical delivered prices. This position cannot be reconciled with Mr. Fairless' 
testimony on page 317 that if delivered prices were arrived at by adding rail freight 
from the governing basing point to the announced base price "there wouldn't be 
any competition in the Steel Industry." * Nevertheless, the positioti that the 
system is competitive is the main theme tflid thesis of the Corporation's pamphlets 
submitted to the Committee as Exhibits 1418 and 1410. 

Since you were not present when Mr. Fairless gave his testimony, it would be 
desirable, as he suggests, that his entire testimony be considered, and not only the 
portions which he and I have called to your attention. There is not the slightest 
objection to having Mr. Fairless' letter made a part of the record, as he requests, 
but may I not ask that this letter of comment be similarly received? 
Respectfully yours, 

Walter B. Wooden, 

Attorney. 

Copy to: Mr. Benjamin F. Fairless, President, United States Steel Corporation, 
New York, New York. 



P:xhibit No. 2249 

.COPY OF LETTER BY J. L. PERRY, PRESIDENT, CARNEGIE-ILLINOIS STEEL 

CORPORATION 

Carnegie-Illinois Steel Corporation 

UNITED states STEEL CORPORATION SUBSIDIARY 

General Offices: Carnegie Building, Pittsburgh, Pa. 

December 14, 1939. 
Mr. J. H. McKowN, 

Asst. Vice President, United States Steel Corporation of Delaware, Pittsburgh. 
Dear Sir: Referring to yours of December G, regarding the request received 
through Mr. Olds from Mr. James R. Brackctt, Executive Secretary of the 
Temporary National Economic Committee, for certain information you will recall 
that on December 11 we submitted our reply to Item 4. Attached is information 
covering replies to Items 2 and 3. 

Item 2a covers a list of principal rolled steel products and the basing points ap- 
plicable to each since June 1935. Item 2b covers tlie base prices at our basing 
points on each product, with the dates of changes at our basing points since June 
1, 1935. We have not included any statement as to the dates on which prices 
were announced at basing points other than our own as we have no accurate record 
of such dates, nor do we have a record as to who first aimounced or established 
prices at such basing points. We are able to furnish such information only with 
respect to our own basing points and would be obliged to refer to the trade journals 
for information as to basing points other than our owp. Item 2c includes copies 
of such printed price announcements as were issued since the inauguration of this 
practice in May, 1936. 

Items 3a and 3b include similar information on pig iron. It has not been our 
practice to issue printed price announcements on pig iron. 
Yours very truly, 

(s) J. L. Perry, 

President. 



' Ibid , pp. 14188-90. 
* Ibid., p. 14172. 



MEMORANDUM ON PATENTS 

SUBMITTED BY SENATOR WILLIAM H. KING, UTAH, 
AND ACCEPTED FOR PUBLICATION IN THE PROCEED- 
INGS OF THE COMMITTEE. IT IS UNDERSTOOD THAT 
THIS IS MATERIAL OF WHICH SENATOR KING IS THE 
AUTHOR AND FOR WHICH HE ASSUMES FULL RESPON- 
SIBILITY. IT DOES NOT EXPRESS NOR IS IT 
INTENDED TO EXPRESS THE VIEWS 
OF THE COMMITTEE 



18023 



PATENTS AND THE PATENT SYSTEM 

By William H. King 

Any study of patents and the patent system and their relation to 
national economic problems must be predicated on a knowledge of the 
theory of the patent grant, the historical and the practical reasons 
for a Government grant of a limited monopoly to inventors, the scope 
within which the patentee may legally make, use, or sell his inven- 
tion, or the product of his invention, and beyond which he cannot 
go, and the arguments for and against various changes which have been 
recommended to our patent laws. 

Under the common law there was no right to a monopoly in an in- 
vention — the inventor had an exclusive property right in his inven- 
tion only so long as he kept it a secret. If the secret became loiown, 
anyone who legitimately came into the possession of the invention 
could make use of it. Inventors were naturally very secretive about 
their inventions and guarded the secret with the greatest of care. 
Many of these secrets were never disclosed and died with the inventors. 
This system was productive of economic waste; and it was early 
recognized that to brmg about the disclosure of inventions useful to the 
public, it was necessary to grant to the inventor exclusive privileges 
for the protection of his invention. Grants of exclusive privileges for 
the protection of inventions were thus given by the sovereign in Eng- 
land and, although the common law was opposed to monopolies, these 
grants were recognized as beneficial monopolies since they brought 
about a disclosure of something new to the public in which everyone 
could share when the monopoly expired. 

The founders of our Government recognized it as good business to 
encourage a man or a group to expend time, energy, and money in 
research and experimentation to develop something new for the 
benefit of the public. And so to stiriiulate trade and industry in the 
new country, the framers of our Constitution laid the foundation for 
our patent system in article I, section 8, of the Constitution, which 
provides: 

The Congress shall have Power' * * * To Promote the Progress of Science 
and Usetul Arts, by securing for limited Times to Authors and Inventors the 
exclusive Right to their respective Writings and Discoveries; * * * 

In the Documents Illustrative of the Formation of the Union of the 
United States (1927) it is stated, on pages 666 and 667, that the pro- 
vision was proposed and agreed to without argument or amendment. 
And an examination of those documents will disclose the fact that this 
provision was one of the few provisions upon which there was unani- 
mous agreement. 

Prior to the American Revolution England's policy had been to use 
the Colonies as a source for raw materials to be shipped to England 
and manufactured there for the benefit of Enghsh capital and labor. 
Manufacture in the Colonies was discouraged by England as much 

18025 



18026 CONCENTRATION OF ECONOMIC POWER 

as possible, but despite this fact many of the Colonies had granted 
patent monopolies to inventors and had sought to encourage manu- 
facture of goods in America. This assertion by the Colonies of the 
right to encourage invention and manufacture in America was one 
of the factors which led to the American Revolution. (See Victor 
Selden Clarke, History of Manufacturing, vol. I.) 

Our early statesmen after the adoption of the Constitution also 
were not unaware of the importance new inventions and a patent 
system were to play in the growth of our country. George Wash- 
ington, in his inaugural address as first President, stated: 

The advancement of Agriculture, Commerce and Manufactures by all proper 
means will not, I trust, need recommendation, but I cannot forbear intimating 
to you the expediency of giving effectual encouragement as well to the introduc- 
tion of new and useful inventions from abroad as to the exertions of skill and 
genius in producing them at home, and of facilitating the intercourse between 
the distant parts of our country by a due attention to the post office and post 
roads. Nor am I less persuaded that you will agree with me in opinion that there 
is nothing which can better deserve your patronage than the promotion of science 
and literature. 

Pursuant to the provision for patents in article I, section 8, of the 
Constitution, Congress enacted legislation to provide for a limited 
patent monopoly for inventors. The first patent act is dated April 
10, 1790, and in accordance with this act, our patent system was 
organized. 

The effect of the law was immediate. In a letter from Jefferson 
to Benjamin Vaughan, dated June 17, 1790 — 2 months after the law 
went into effect — he stated that — 

An act of Congress authorizing the issue of patents for new discoveries has given 
a spring to invention beyond my conception. 

From the foregoing, then, it may be observed that — 

the right to patent is purely statutory, with full power in Congress to prescribe 
to whom and on what terms a patent shall issue, including the period for which 
it shall exist {Owen v. Heimann, 12 F. (2d) 173, 1926). 

The revised and annotated edition of the Constitution of the 
United States of America states that the legislation based on the 
constitutional provision for protection of patents — 

regards the right of property in the inventor as the medium of the public ad- 
vantage derived from his invention, so that in every grant of the limited monopoly 
two interests are involved — that of the public who are the grantors, and that of 
the patentee. 

There is a quite general, and equally erroneous, belief that the 
public has something taken away from it when a patentee is given a 
limited monopoly for his invention to use, vend, or license it exclu- 
sively. Such, of course, is not true. An invention which may be 
patented is something now which the public never had before, and in 
consideration of the inventor's disclosing his invention, the public 
grants him the exclusive right to use, vend, or license it for a limited 
time. Instead of an invention remaining a secret with the inventor, 
it becomes part of the common knowledge available for the benefit of 
society, and when the patent term has expired, everyone is free to 
enjoy the invention. As was stated in the case of Waterbury Buckle 
Co. V. Prentice Manufacturing Co., 294 Fed. 930: 

The inventor gets the privilege to exclude the public from its common law 
rights for a definite term. The public gets the advantage of a disclosure of some- 
thing new, which the inventor might otherwise have kept secret. 



% CONCENTRATION OF ECONOMIC POWER 18027 

Mr. Justice Clarke similarly stated in the case of Beidler v. United 
States, 253 U. S. 447, at page 453 that: 

The source of the power to grant patents, and the consideration for grant--"; 
them, is the advantage which the public will derive from them, especially ai or 
the expiration of the patent monopoly, when the discoveries embodied in them 
shall become a part of the public stock of knowledge. 

It is of prime importance that society should have the benefit of 
inventions at the earliest possible moment, and when inventors know 
that they will be adequately protected they will not hesitate to dis- 
close their inventions. A patent system based upon this concept 
would seem mutually satisfactory and beneficial to the inventor and 
to the public. And it is on such a concept that our patent system 
has been based. Yet there has been some dissatisfaction with the 
operation of our patent system. 

Charges have been made that patents which would foster the 
industry and economy of the Nation have been purchased by monopo- 
listic businesses in order to prevent the use of such inventions by 
competitors, and that those same monopolistic concerns maintain 
huge research departments for the discovery of new inventions, and 
that they suppress any invention which would require the scrapping 
of invested capital and the setting up of new machinery. 

It is charged that patentees may use their patent in a manner 
inimical to the interests of the public, through restrictions on use and 
sales, infringement suits, and other devices. 

It is claimed that patented inventions affecting certain industries are, 
by a system of patent pools and exclusive cross-licensing, made the 
instruments of monopolistic domination of such industries. 

Charges have even been made that the patent system has been the 
indirect cause of unemployment, as it has stimulated the invention 
of labor-saving devices and machines to the detriment of labor. 

Further, it has been contended that progress and research would 
continue even though there were no protection afforded by the 
patent laws. 

NONUSE OF INVENTIONS 

The rule would seem to be well-established today, then, that under 
the existing patent law the patentee has a right not to make, not to 
use, and not to vend his patented invention. Under the patent law 
he may suppress his invention for the full 17-year period. 

There is, however, a limitation on this right of the patentee not to 
make use of his patent. An agreement to suppress a patent to restrain 
trade is illegal. In 1909, in the case of Blount Mfg. Co. v. Yale <& 
Towne Co., 166 Fed. Rep. 555, 559, 560, it was held that an agreement 
to suppress a patent to restrain trade violated the antitrust law. The 
following quotation is taken from that decision: 

Granting that nonuse of an invention is fully within the right of the owner of 
a patent, it does not follow that he may by agreement bind himself to non-use, 
save in connection with an assignment of his letters patent. Ownership of a 
patent involves no obligation to use, nor does ownership of other property. Non- 
use ordinarily violates no law; but contracting with another, putting it in the 
power of another to compel one not to use is a contract in restraint of trade, 
designed for the purpose of suppressing competition. 

While a right not to make, use, or vend the patent exists, it is 
questionable whether the practice of suppressing patents exists to any 
great extent. A distinction, of course, must be drawn between mere 



18028 CONCENTRATION OF ECONOMIC POWER 

nonuse and deliberate suppression of inventions. There is a valid 
distinction between the two which must be recognized. 

In the hearings before the Committee on Patents, Subcommittee 
on Compulsory Licensing of Patents, House of Representatives, 
Seventy-fifth Congress, third session, many manufacturers and 
attorneys testified that it was necessary to spend many years in 
developing an invention before the product could be successfully put 
on the market. And it Wf^s necessary in many instances, they testified, 
to obtain a number of patents oil one basic invention and to spend 
years in the development of the idea before a marketable invention 
was produced. 

Some of the witnesses testified that in their belief the practice of 
shelving patents does exist in some degree, but expressed the belief 
that it was insignificant. None of the witnesses professed to be aware 
of definite instances of suppression of valuable patents. Substantial 
proof seenis to be lacking if there be such a practice. Most of the 
witnesses believed that a manufacturer cannot afford, having pur- 
chased or developed, a patent, to shelve it. There is always the 
incentive of the advantage in sales promotion in offering the public 
something new, the fear that if he does not market his invention that 
a similar product, not an infringement of his patent, may be secured 
by competing concerns and the market taken away from him. 

It is true that patents are often purchased by manufacturers 
before they have an opportunity to examine them thoroughly and 
ascertain their probable value, and they are then shelved either 
because the article patented cannot be perfected, or because the cost 
of its production is all out of proportion to what the purchasing 
public can afford to pay. The witnesses referred to above believed 
that the practice is more exaggerated than real and that the general 
welfare is not affected adversely. 

Rumors of widespread suppression of inventions are quite prevalent, 
but definite evidence thereof is quite lacking. There are many 
factors, other than suppression, which would prevent a patented 
invention from ever reaching the market. The 1937 report of the 
United States National Resources Committee on Technological 
Trends and National Policy, beginning on page 6, relates to this 
problem. It is pointed out in that report that while the death rate 
of inventions has never been calculated, it is very great. Reference 
is made to the telegraphone, an invention that recorded a conversation 
or music on a magnetized wire, which could be used over again after 
demagnetizing. Twenty-five years ago much was heard of this 
invention, yet today nothing is heard of it. A corporation was 
formed for the sale of these machines, stock in the corporation was 
sold generally to the public, and the machines were put into com- 
^^mercial use. 

The same is true of the teletypesetter, the report stated, and the 
making of sugar from sawdust, the making of paper from cornstalks, 
the regulation of clocks by radio waves, and thousands of similar 
announcements oi inventions and discoveries which have not been 
used enough to leave any significant social influence. 

The report stated that cotton-picking machines have been announced 
many times in the past 2 generations, and stated that it is a fact that 
900 patents have been granted on cotton-picking machines by the 
United States Patent Office. Reports of cures for cancer have been 



OONCENTRATIO^f OF ECONOMIC POWER 18029 

given out regularly in the past several years, but the death rate from 
cancer is about the same today as it was 20 years ago. The slow- 
development of television, and the cotton picker, the making of 
wool from cellulose and gasoline from coal, indicate the uncertainties 
of inventive processes. 

Technical faults, complexity in operation, the ready availability of 
substitutes which render very nearly the same service, the problem of 
repair service, the cost of production and the lack of demand, and 
existing capital equipment that would be scrapped if the invention 
were used are all factors which may influence the nonuse of a patented 
invention. And of coiu-se in some arts the rapid evolution of improve- 
ments obsoletes earlier inventions on which patents issue. 

One of the more frequent complaints against the patent system is 
that the patentee msLj use his patent in a manner inimical to the 
interests of the public through restrictions on use and sales, infringe- 
ment suits, and as an instrument to obtain a greater monopoly. There 
are certain limits to the scope of the patentee's rights, however, which 
must be recognized. The rights of the patentee and the limitations on 
those rights may be ascertained from the reports of decided cases. 

Restrictions Imposed by the Patentee in the Use of the 
Patented Article 

1. by leasing the patented machine upon condition 

The rule that a patentee may not lease his patented machine and 
require as a condition of the lease that the lessee must operate the 
machine only with supplies from the lessor, extends even to the case 
where the supplies have been patented to the lessor either separately 
or in combination with the patented machine. The object of section 
3 of the Clayton Act is to prohibit these tying clauses where the effect 
of the condition "may be" to lessen competition substantially or tend 
to create a monopoly. And this condition, precluding the use of 
suppUes of a competitor, falls within the condemnation of section 3 of 
the Clayton Act {International Business Machines Corp. v. U. S., 
298 U. S. 131 (1936)). 

2. RESTRICTIONS IMPOSED ON THE USE AFTER SALE 

By virtue of his patent grant may the patentee impose any restric- 
tions on the use of the patented article after he has parted with its 
ownership? The means by which the patentee attempts to restrict 
the use of the patented article to secure control of complementray 
goods is called a "tying clause." 

Prior to the passage of the Clayton Act in 1914 it was possible to sell 
or license patented articles with a tying clause requiring acquisition of 
such complementary goods from the patentee. The Clayton Act, 
however, prohibits this practice and this law has been applied by the 
Supreme Court in Motion Picture Patents Co. v. Universal Film Mfg. 
Co., 243 U. S. 502, in Carbice Corporation v. American Patents Cor- 
poration, 283 U. S. 27, and in Leitch Mjg. Co. v. Barber Co., 302 U. S. 
458. 

But in the case of General Talking Pictures Corporation v. Western 
Electric Co. et al., 304 U. S. 175, the right of the licensor to restrict the 
licensee as to the field in which the licensee could sell licensed goods 



18030 CONCENTRATION OF ECONOMIC POWER 

was upheld. On the ground that the point of law involved in this last 
suit presented a question of great public importance, the Department 
ot Justice filed a brief on behalf of the United States,- on rehearing, as 
a friend of the Court, asking the Supreme Court to rule that it is illegal 
for the owner of a patent to license the patented article with a restric- 
tion that it be used only in a prescribed field. The Supreme Court 
refused to so rule. 

3. ilESALE PRICE MAINTENANCE 

A patentee may want to restrict the use of his patented article by 
preventing the resale of the article below a certain price. The 
attempt to fix the resale price is generally known as "resale price 
maintenance." This must be distinguished from "price fixing," 
which term connotes a combination of competitors who agree illegally 
to sell their 'respective products at a specified price, there being no 
privity of ownership in the article, as in the case of resale price main- 
tenance. Resale price maintenance was recognized as a valid exercise 
of the patent monopoly in Victor Talking Machine Co. v. The Fair, 
123 Fed. 424, decided in 1903. A number of lower Federal courts 
preceding and subsequent to this decision upheld this right in the 
patentee. In 1913, however, the Supreme Court in the case of 
Bauer cfc Cie v. O'Donnell, 229 U. S. 1 (1913), declared an attempt to 
maintain resale prices by affixing a notice to the patented article 
is illegal. This was subsequently affirmed in Straus v. Victor, 243 
U. S. 490 and Boston Store v. American Graphophone Co., 246 U. S. 8. 

There is one method to avoid the rule of the foregoing cases, however, 
which has been considered and approved by the Supreme Court in 
U. S. V. General Electric Co., 272 U. S. 476, decided in 1926. The 
General Electric Co. marketed incandescent bulbs to distributors who 
were called agents, and who were instructed to sell the bulbs at fixed 
prices. The Supreme Court held this arrangement was legal — that it 
was an agency relationship irrespective of the fact that many of the 
risks incident to ownership were shifted' to the distributors by the 
General Electric Co. Under this decision the General Electric Co. 
may control prices of its own incandescent bulbs on the retention of 
ownership theory. 

There is nothing in the testimony presented to the Temporary 
National Economic Committee that indicates any licenses have been 
granted by any patent owner in which there was an unwarranted 
limitation in the license with respect to the price at which the licensed 
product may be sold. With the exception of Dr. Bush of the Carnegie 
Institution, all the witnesses stated that the licenses which they had 
granted or received contained no price restrictions. When asked 
(Record pt. 3, p. 891) to "explain a situation under which price 
control is a necessary requirement in introducing an idea into in- 
dustry," Dr. Bush replied: 

It is a part, of course, of the situation that I just mentioned, where the introduc- 
tion of an invention requires a large initial investment. The funds for that can 
be secured only if there will be a speculative profit, only if the individual who puts 
up the money can expect that if the gamble is successful he will reap considerable 
profits. Now that procedure of putting the thing into use can occur either by the 
new company itself manufacturing or licensing for manufacture. If it licenses a 
single company for manufacture, it can give an exclusive license and collect a 
royalty. However, suppose that it licenses two companies. In order that there 
shall be at the outset a complete control, it is necessary that price restriction also 



OO^XJENTRATION OF ECONOMIC POWER 18031 

be superimposed, otherwise competition will be produced between those units 
and the speculative profit which is necessary will not occur. The inclusive 
feature is necessary in order, in many cases, to bring the device into use, and 
there are circumstances, therefore, where price control is necessary in order to 
preserve the exclusive feature. 

It is believed that price restrictions in American patent licensing 
practice are the exception rather than the rule. In U. S. v. General 
Electric Co. above referred to, Chief Justice Taf t, delivering the opinion 
of the Court, stated: 

When the patentee licenses another to make and vend and retains the right to 
continue to make and vend on his own account, the price at which his licensee will 
sell will necessarily affect the price at which he can sell his own patented goods. 
It would seem entirely reasonable that he should say to the licensee, "Yes, you 
may make and sell articles under my patent but not so as to destroy the profit that 
I wish to obtain by making them and selling them myself." He does not thereby 
sell outright to the licensee the articles the latter may make and sell or vest 
absolute ownership in them. He restricts the property and interest the licensee 
has in the goods he makes and proposes to sell. 

* * * The owner of a patent article can, of course, charge such prices as he 
may choose, and the owner of a patent may assign it or sell the right to manu- 
facture and sell the article patented upon the condition that the assignee shall 
charge a certain amount for such article. 

This decision and the above-quoted statement of Dr. Bush bring out 
the real substance of price-control provisions in patent licenses, that is, 
that the owner of a patent has the right to sell his products at what- 
ever price he chooses so long as he does not otherwise violate the law. 
If it is in the public interest for such an owner to permit a second 
party to have access to the use of his patents and thus to compete 
with him, he should be permitted, in protection of his own property, to 
restrict such Hcensee as to the price at which he may sell his product in 
competition with the hcensor. If the right to thus protect himself is 
taken away from the owTier of the patent, may the patentee not 
decide that he will not license another? If so, the complete monopo- 
hstic use of the patent by the owner will thus be preserved. 

4. RESTRICTIONS IN RESPECT OF PRODUCTION 

With respect to production limitation, very much the same condi- 
tion may prevail. The owner of a patent, having the exclusive right 
to control production under it, may be willing to permit a competitor 
to produce under the patent with respect to a portion of the demand, 
if he can be assured, by a condition of the license, that his competitor 
will not overrun his own market and enter into destructive competi- 
tion with him. It seems reasonable to expect that prohibition against 
a provision of this character in a license would result in the long run in 
fewer licenses, and in the restriction of production under many 
patents to the owner or exclusive licensee. 

5. RESTRICTIONS IN RESPECT OF PURPOSE OR MANNER OF USE 

The subject of purpose or manner of use was not dealt with in the 
evidence before the Temporary National Economic Committee except 
for certain testimonv indicating that certain inventions may have wide 
use in'different unrelated field§. 

In the above-referred- to brief before the United States Supreme 
Court, in General Talking Pictures Corporation v. Western Electric Co., 
supra, the Department of Justice argued, unsuccessfully, that a 



18032 OONOENTRATION OF ECONOMIC POWER 

restriction as to use "escapes the oiHt of the rights of the inventor." 
The Court, speaking through Justice Brandeis, held that such restric- 
tion was "reasonably within the reward which the patentee by grant of 
the patent is entitled to secure." 

It certainly would appear to be m the public interest to encourage 
the holder of a patent, who may want to use it exclusively within a 
limited field, to permit others to use it in other fields upon such divi- 
sion of the entire field of the patented invention as the owner and the 
prospective users may be able to agree upon. For instance, if a 
manufacturer of woolens should procure a patented device which 
might be used for general weaving, he should be free to license its 
use to a linen manufacturer without giving that manufacturer a 
license to weave woolen goods. Such a license should not be treated 
as restraining competition because it would be addressed only to 
goods manufactured by the patented process and these lie withiu the 
field of. the monopoly granted by the patent itself. It is difficult to 
see how a denial of this right to license for limited use can result 
generally in unlimited licenses to others in all fields. All too fre- 
quently, on the contrary it is to be expected that it will result in 
restricting the use of the invention to the field occupied by the patent 
owner or exclusive licensee. If the patentee cannot control the field 
of use, probably he will find it more profitable to withhold entirely 
the use of his invention in byproduct fields rather than take the chance 
of unintended competition in his own chosen enterprise. 

6. RESTRICTIONS AS TO GEOGRAPHICAL AREA 

Limitation as to the geographical area within which an invention 
may be used by a patent licensee is of very similar character. Many 
inventions are of a character which, for financial or other reasons, do 
not lend themselves to national operation by the patent owners. It 
would appear to be in the public interest to have such patents used 
as broadly as possible and not to limit their use to the owner or ex- 
clusive licensee of the patent in his own locality, as would be the 
result if this recommendation were adopted. This is another in- 
stance in which limitation upon the right to license will mean limita- 
tion upon the broadest use of patents, and therefore an increase in the 
monopolistic aspect of the patent privilege. 

Infringement Suits and Threats of Infringement Suits 

Litigatibn over patent rights is a very expensive proposition, and 
charges have been made frequently, and there is much foundation for 
the charges, that some patentees will bring infringement suits against 
competitors, either to drive them from the business field or to exhaust 
their resources so that it is impossible for them to compete. 

That threats of infringement suits not made in good faith represent 
unfair competition has long been recognized by the courts. The 
Federal Trade Commission also has issued many cease-and-desist 
orders against such practices. 

There have been a number of recent cases involving infringement 
of patents wherein the infringing party has attempted to plead as a 
justification for the infringement the fact that the owner of the patent 
maintains a monopoly in violation of the anti-trust laws. Also 
suits have been brought to obtain a license to use a patent, the com- 



CONCENTRATION OF ECONOMIC POWER 18033 

{)lamant asking the court to order the defendant patentee to grant a 
icense because he maintains a monopoly through a system of patent 
pools and cross licenses. 

Patent Pools 

There is another aspect of the hcensing of patents which should be 
discussed. There is a prevalent belief that through a system of cross- 
licensing and patent pools "big business" has made patents instru- 
mentahties of the monopolistic domination of business. 

Here again a careful distinction should be drawn between rumors 
of abuses and proven abuses. Attention will be directed to the 
beneficial aspect of patent pools and cross-licensing agreements; and 
the evils said to accrue from the patent pool and cross-licensing agree- 
ments will be pointed out. 

In order to circumvent the existence of overlapping inventions and 
patent deadlocks, and to avoid ruinous htigation over infringement, 
many of the large industries have formed patent pool agreements. 
These pools may take a vaiiety of forms, the simplest type being an 
agreement between companies to permit the use of ail patents held 
by any of them. Other types are those achieved through merger, 
purchase of a competitor, patent pools formed through trade associa- 
tions, and the complex form of patent pool achieved by means of a 
holding company whose function is the holding and leasmg of patents. 

In the report of Charles A. "Welsh, Jr., economic adviser to the 
Committee on Patents, House of Representatives, based upon the 
investigation of patent pools and cross-licensing agreements conducted 
relative to H. R. 4523, Seventy-fourth Congress, 1935, the following 
statement was made: 

The extent of patent pools and cross-licensing agreements in American industry 
is very largely coordinate with the extent of mechanized industries in which 
patented inventions play a part or which are based on so-called basic patents, 
such as, for instance, the communication industries, or the electrical industries. 
In all of the following major industries which the committee has included within 
the scope of its activities some form of patent consolidation are in use in an 
attempt to circumvent the existence of patent deadlocks and overlapping inven- 
tions: Automobile, agriculture machinery, aviation, buildmg equipment and 
supplies, chemicaL«i communications, electrical-equipment ii^dustries, food indus- 
tries, glass, machinery and machine equipment, mining, munitions, oil, office 
equipment and machinery, paper, radio, railroad equipment, rubber, steel, 
scientific instruments, utilities. 

In each of these industries the particular type of patent consolidation adopted 
is designed to meet the needs of the individual type of production involved and 
the general market conditions characteristic of that particular industry, which 
indicates the flexibility of patent consolidation as an instrument 

In defense of patent pools the argument most frequently advanced 
is tliai under conditions of modern industry with its rapid develop- 
ment and constantly changing improvements it is impossible to con- 
duct manufacturing without infringing some patent Furthermorp, 
one compan}-^ may develop a patent but need rights to use patents 
owned by other companies tc perfect the mvention and place the 
finished commodity on the market. In the report of the Federal 
Trade Commission on the Radio Industry, pages 24 to 28, it is stated 
that Ma] E. R. Armstrong, radio inventor and adviser to the Radio 
Corporation of America, in his testimony before the Federal Trade 
Commission stated it would have been impossible tc manufacture 
any kind of workable apparatus without the licenses owned by com- 



18034 CONCENTRATION OP ECONOMIC POWER 

peting companies. Commander E. H. Lof tin, who had made a special 
study of cross-license agreements as they affected radio activities of 
the United States Government testified that without access to the 
patents of competing companies, radio apparatus could not have 
been developed by any one company. New patents are valuable in 
this field only when used in connection with other patents already 
developed. 

Litigation in patent infringement suits is a very expensive proposi- 
tion, and when patent pools are formed to avoid such litigation, and 
the antitrust laws are not violated thereby, such a course would seem 
to be wise. Typical of such a situation is the oil-cracking pool. 

The Standard Od Co. of Indiana, the Galena Signal Oil Co. of Texas, 
.and the Standard Oil Co. of New Jersey each developed methods of 
cracking gasoline, and they were involved in litigation when they came 
to an agreement whereby each company recognized the validity of the 
patents held by the other, and granted one another irrevocable and 
nonexclusive license to use its patents in its plants or those of sub- 
sidiary companies. They agreed to divide certain royalties equally, 
thus tending to discourage competition between the cross-licensees to 
a certain extent. This agreement was held legal in the case of Stand- 
ard Oil Co. V. U. S. (283 U. S. 163 (1931)), the Court concluding that 
since cracked gasoline was only 26 percent of all the gasoline produced, 
the pool could not possibly control prices. In this case the defendants 
contended that the pooling agreements assailed by the Government 
related solely to the issuance of licenses under their respective patents ; 
that the granting of such licenses, like the writing of insurance, is not 
interstate commerce ; and that the Sherman Act was therefore inappli- 
cable. If such contention had been upheld, of com'se, pooling agree- 
ments would not be within the purview of the antitrust laws. But 
Mr. Justice Brandeis stated in reference to the defendant's contention 
that: 

This contention is unsound. Any agreement between competitors may be 
illegal if part of a larger plan to control interstate markets. Alontague <& Co. v. 
Lowry, 193 U. S. 38; Shawnee Compress Co. v. Anderson, 209 U. S. 423. Such 
contracts must be scrutinized to ascertain whether the restraints imposed are 
reasonable under the circumstances, or whether their effect is to suppress or unduly 
restrict competition. Chicago Board of Trade v. U. S., 246 U. S. 231, 238; Para- 
mount Famous Lasky Corp. v. U. S., 282 U. S. 30, 43. 

The facts of the Standard Oil case, a portion of the opinion of which 
is quoted above, are valuable in that they illustrate the benefit of 
patent pools in reducing the danger of patent infringement suits, which 
are costly, benefit no one, and often block technical advancement. 
The opinion is also valuable in that the Supreme Court stated therein 
that patent pool agreements violate the antitrust laws when their 
effect is to suppress or unduly restrict competition. 

In the Standard Oil case the Government conceded that it was not 
illegal for the primary defendants to cross-license each other and the 
respective licensees; and that adequate consideration could be legally 
demanded for such licenses. But the Government contended that the 
insertion of certain additional provisions in the agreements rendered 
them illegal — that is, the inclusion of provisions for division of royalties 
constituted an unlawful combination under the Sherman Act because 
such evidenced an intent to obtain a monopoly. In reference to that 
argument the Court stated: 



CONCENTRATION OF FX'ONOMIC POWER 18035 

This contention is unsound. Such provisions for the division of royalties are 
not in themselves conclusive evidence of illegality. Where there are legitimately 
conflicting claims or threatened interferences, a settlement by agreement, rather 
than litigation, is not precluded by the Act. Compare Virtue v. Creamery Pack- 
age Co., 227 U. S. 8, 33. An interchange of patent rights and a division of royalties 
according to the value attributed by thejparties to their respective patent claims 
is frequently necessary if technical advancement is not to be blocked by threatened 
litigation. 

In general it may be stated that an attempt to secure control of 
markets by means of cross-license and pooling agreements is in viola- 
tion of the antitrust laws where its effect is to impede the channels of 
trade and to substantially lessen competition. The "rule of reason" 
has been followed by the Supreme Court in determining whether such 
agreements are in violation of the antitrust laws. 

There is considerable difference of opinion as to the effect of patent 
pools on the prices charged the consumer for patented commodities. 
Opponents of the patent pools contend that the high cost of royalties 
makes sales prices high. Those who favor patent pools contend that 
without patent agreements the cost of constant litigation would even- 
tually be borne by the consumer through higher prices for the com- 
modities. 

The automobile industry affords a good example for those who con- 
tend that patent pools are not only necessary but that they tend to 
reduce the prices of commodities. The National Automobile Chamber 
of Commerce was formed in 1914 by 136 automobile companies which 
contracted to exchange their patent rights. By these license agree- 
ments, beneficial patents have been open to all members of the associa- 
tion, and an improved automobile has been the result. And the price 
of automobiles has been steadily reduced — so much so that the auto- 
mobile today is considered a necessity rather than a luxury. There 
have been no infringement suits between the members of the associa- 
tion. 

There are conflicting views as to the validity and desirability of the 
patent pool in the airplane industry. In his testimony before the 
House of Representatives Committee on Patents, Seventy-fourth 
Congress, on H. R. 4523, a bill providing for the recordation of patent 
pooling agreements and contracts with the Commissioner of Patents, 
Brig. Gen. William Mitchell, who was in charge of aviation in 1915, 
served as commander of air forces of American Expeditionary Forces, 
and later was made Director of Military Aeronautics in this country, 
and Assistant Chief of the Air Service, testified that as a result of the 
patent pool in the airplane industry we have inferior planes, un- 
naturally high prices, and monopolistic domination of the market in 
that industry. 

On the other hand, however, there is the report of the Federal Avia- 
tion Commission of January 1936. The Commission was appointed 
by the President to examine our aviation operations, and it made the 
following statements with reference to the patent pool in the airplane 
industry: 

It has been alleged with great bitterness from time to time in testimony before 
us, as well as previously before many Congressional Committees and other bodies, 
that the Manufacturers Aircraft Association creates a trust or monopoly and that 
its effects are wholly evil and restrictive of invention. We are unable to discover 
any substantial foundation for such complaints, nor can we discover that those 
making them proceed from any very thorough knowledge of the nature of the 
cross-license agreement or the manner of its operation. So far from being a 

124491--41— pt. 31-A 3 



18036 CONCENTRATION OF ECONOMIC POWER 

monopoly, the Manufacturers Aircraft Association seems to be the very antithesis 
of monopoly. It seems to have been designed and in fact to operate to prevent 
any possibility that the holder of a patent might restrain the normal progress of 
development or the flow of commerce by the exploitation of his patent rights. 

Admittedly patent pools offer many opportunities for abuse; the 
alleged protection of patent rights may be made a cover for practices 
not related to patents. But any such plan is Ulegal under the Sherman 
Act, if part of a plan to control interstate markets unreasonably. The 
plan is iUegal if its effect is to suppress or unduly restrict competition. 
And the Supreme Court stated in the Standard Oil case that because 
of this danger the agreements should be scrutinized closely. 

The effect of the patent pool on the manufacturer not participating 
therein, and upon the individual inventor, afford equally difficult 
problems. 

Complaints are made that it is difficult for a new manufacturer to 
break into a field covered by the patent pool — that hcenses to u?*i 
patents will not be granted him, and that threats of infringement suits 
soon force such a venturesome businessman from the field. Of 
course, it is an inherent right in every patentee under the law to refuse 
to license his patent, and to sue for its infringement. Whether the 
refusal to license or the suit for infringement of a patent comes from 
an individual patentee, or from a group of patentees who have formed 
a patent pool, it is a right they have to refuse to hcense or to sue for 
infringement. 

Throughout the course of this discussion reference has been made 
to supposed defects in our patents system — defects which are said to 
make the patent an instrumentality in the monopoHstic domination of 
business, which enable the patentee or a purchaser of the patent to 
suppress the invention, or use the patent in a manner inimical to the 
interests of the public. Various remedies have been suggested to 
reheve against these supposed defects. Many changes have been 
recommended in the past. The most frequently recurring suggestions 
have been those for a law to provide for the compulsory licensing of 
patents, those to estabhsh a separate court of patent appeals, and 
those for the complete abohtion of the patent statutes. Other less 
substantive changes, such as improvement of interference proceedings, 
arguments for fewer and better patents, for the Government to bear 
the cost of patent htigation for indigent inventors, have been recom- 
mended from time to time. 

Compulsory Licenses 

The question of compulsory hcensing of patents is an extremely 
controversial one. A compulsory working provision to secure patent 
protection was first incorporated in the French patent law of 1791, 
and has been adopted in principle by practically all of the principal 
patent systems except that of the United States. (See A. J. Michel, 
Introduction to the Principal Patent Systems; Brooklyn, N. Y., 1936.) 

Various types of compulsory licensing bills have been recommended 
in Congress — bills providing for the compulsory hcensing of patents 
after 3 or 5 years exclusive use by the inventor, and biUs providing 
for the compulsory hcensing of patents in the event there has b^en no 
satisfactory working of the invention for a stated number of years. 
While such legislation has been proposed in Congress many times, it 
has always evoked a storm of protest from inventors, manufacturers, 



CONCENTRATION OF ECONOMIC POWER 18037 

lawyers, patent bar associations, and representatives of the Patent 
Office. And attempts to enact such legislation have always in the 
past been abandoned. 

Many hearings have been held by congressional committees to de- 
termine the advisability of such legislation — -hearings on the Oldfield 
bill of 1912, again on a similar Oldfield bill in 1914, the hearings on 
the Stanley bill in 1922, and the hearings on the McFarlane bill in 
March of 1938. At all of these hearings patentees, inventors, and 
manufacturers have been practically unanimously opposed to such 
legislation on the grounds that it would discourage invention, and 
that it would favor the large corporations over the smaller corpora- 
tions and individuals. Witnesses testified that it takes many years 
to perfect the invention even after the patent is granted — and before 
the issuance of the patent often years are spent in research and ex- 
perimentation to develop the idea. Often such research, experimen- 
tation and expense proves to be a waste as the invention is not worth 
while. To permit a corporation or an individual to obtain a com- 
pulsory license from the patentee, or his financial backer to whom he 
has assigned his patent, would be manifestly unfair the argument 
runs, since the person seeking the license does not share in the ex- 
pense of unsuccessful research and development. There is a belief 
that business would be reluctant to undertake the risk of promotion 
of new inventions if someone else could step in and share the profits 
if the idea were a success. One witness in the course of the hearings 
on the McFarlane bill stated he believed the compulsory license would 
penalize the successful inventor in the same way that the undistri- 
buted profits tax penalized the successful business, and the enactment 
of the McFarlane bill would have the same deleterious effect on many 
of our businesses that the undistributed-profits tax had. 

Hon. Thomas E. Robertson, former Commissioner of Patents, has 
expressed his opposition to all bills which would provide for com- 
pulsory licenses tor patents. The American Bar Association has gone 
on record as opposing compulsoiy licensing bills, and the American 
Patent Law Association has compiled a pamphlet containing their 
report in opposition to the McFarlane bill, together with excerpts 
from the record against previous proposals for compulsory licensing 
of patents. 

The Honorable Conway P. Coe, Commissioner of Patents, in his 
testimony before the House of Representatives Committee on Patents 
holding bearings on a bill providing for the recordation of patent 
pooling agreements and contracts with the Commissioner of Patents, 
in 1935, expressed his opposition to any bill which would require the 
compulsory working of patents. Commissioner Coe has also stated 
that when changes are made in foreign patent laws it is always iq. 
the direction of the American patent law. 

Mr. Lawrence Langner, member of the firm of Langner, Parry, 
Card & Langner, international patent lawyers, testified in 1935 and 
again in March 1938 before the House Committee on Patents in op- 
position to compulsory license laws, stating they had not worked suc- 
cessfully in other countries, and would be harmful in operation in this 
country. Mr. Langner stated that compulsory license laws had not 
uncovered any suppressed patents in other countries and stated that 
under the Canadian patent law which provided for compulsory -li- 
censes, only nine applications for compulsory licenses were decided 



18038 OONCENTRATION OF ECONOMIC POWER 

upon over an 11-year period froni 1925 to 1936, and that of these 
nine five were granted and four were refused. 

The Science AdvAisory Board's committee to study the patent sys- 
xem at the request of the Secretary of Commerce m 1935, recommended 
that no system of compulsory licensing be introduced at this time. 

There is an imposing array of arguments and authorities in opposi- 
tion to compulsory licensing of patents. Those listed above are just 
u few of the many. Whether there is a need for compulsory licensing, 
and whether compulsory licensing would relieve against the supposed 
defects suggested, is questionable. The consensus of opinion of those 
who would be affected by such legislation is that it would discourage 
nvention and new enterprise, and would favor the large corporation 
over the small corporation and the individual. 

It is my view that it would be unwise to compel the compulsory 
licensing of patents. 

PATENTS INCREASE EMPLOYMENT 

Occasionally one hears arguments in favor of the complete abolition 
of the patent statutes on the grounds that inventions result in unem- 
ployment. One need only to refer to the automobile industrj?-, tho 
motion-picture industry, the radio industry — praciicaily all mdustriesi 
n the United States where invention plays a part — to realize the fal- 
acy of this argument. Most inventions create new goods and new 
services for the public to enjoy. Very few inventions have as their 
primary purpose the displacement of labor. 

It hardly seems necessary at this late stage of the industrial history 
of America to submit arguments in support of inventions, but refer- 
ence might be made to an article written in 1932 by Joseph Y. Meigs, 
an attorney and a professor of science at the Massachusetts Institute 
of Technology. The article is entitled 'Panics, Prosperity, -^nd 
Patents," and appears in volume 66 of the United States Law Review, 
beginning on page 243. It states fairly the influence of patents and 
inventions on prosperity. 

The foUowing material is quoted from that article: 

Fifty-eight years ago this Spring, the depression of 1873 was in full swing. 
Thre^ hundred steel mills were cold. Insolvency was the order of (he day. 
Three million men were unemployed, of whom five hundred thousand had been 
engaged in railroad construction. The vision of a mighty empire bound together 
with bands of steel rails and covered with latticeworks of ixlroad ties haa been 
2-limpsed, but efforts .to realize it had gone ahead too fast; and, as is always true 
■vhen dreams fall short of realization, the reaction which followed was height- 
,med by deep despair and a gloomy sense of failure and of the futility of effort. 
Numerous railroads went into receivership. Thousands of commercial failures 
- tampeded the general rout of the army of business. The color of the picture 
vas just as black then as now. Nevertheless a period of great prosperity was in 
The making. 

A number of new inventions were being brewed in the kettles and vats of 
American and foreign genius and from these vessels there was soon to pour forth 
a flood of new business life and activity. Notable among these and at an advanced 
commercial stage in the spring of 1874, was the Bessemer- Kelly process of making 
steel which during the preceding twenty years had passed through its period of 
"ajestation" and was now fully perfected. The process constituted an epoch- 
n\aking pioneer invention. It comprised blowing air through molten pig iron, 
thereby oxidizing impurities and permitting the manufacture of steel in large 
quantities at a greatly reduced cost. The first American steel rails had been rolled 
in Chicago in 1865. 



CONCENTRATION OF ECONOMIC POWER 18039 

The industrial development of the Bessemer process, far from being destroyed 
by the 1873 crash, played a prominent part in reviving trade. The cheap steel 
provided by the Bessemer process pointed the way out of the depths. Rail- 
■■oads already built had to be made over with steel instead of iron, and Bessemer 
teel began to be produced in large quantities for rails and locomotives. In 
he twenty years following the 1873 crash over 100,000 miles of steel railroad 
were built, mostly, if not all, with Bessemer steel. In the same period, American 
inventive genius produced other inventions of vital importance, including Bell's 
telephone (1876), Edison's phonograph (1878), Hyath's reinforced concrete 
(1878), Edison's electric lamp (1880), and many others. Westinghouse had 
been granted a patent for his air brake in 1869. 

From 1874 to 1892 there was a steady and rapid increase in invention and 
business activity. The national wealth increased roughly 100 percent during 
that period, that is, from about $35 billion in 1873 to about $70 Pillion in 1892. 
A substantial portion of this increase was embodied in the application ol the 
inventions referred to and others not mentioned. There cannot be much doubt 
of the influence of invention upon the period of prosperity following the 1873 
crash. The telephone, of course, became a necessity as soon as its technical 
;aid commercial success was fully achieved. The public always buys, uses, or 
invests in a real necessity. The rapid growth of the telephone business in this 
period is testimony of the part it played in doubling the national wealth during 
the 1873-1893 period. 

The scene shifts. It is early spring in 1921, forty-eight years later. This 
time the whole world has been through the artificial expansion and orgy of spend- 
ing incident to a war carried out on a gigantic scale and the deflation of the post- 
war period of prosperity is ahead. The cumulative inventions of Marconi, 
De Forest, Alexanderson, Fessenden and others had shown that human voices 
could readily be transmitted through the ether. Amateurs had begun to build 
^adio sets. The idea was so inspiring that the building of home-made radio 
sets had become a national hobby,*but it was somewhat difficult to get the parts. 
Hoarding had been elected President in the fall of 1920 and the Westinghouse 
Company broadcast from Pittsburgh the inaugural ceremonies in March, 1921. 
The success of that broadcast seemed to mark the starting point of a great public 
Interest in radio broadcasting and reception. In the fall of 1921, station KDKA 
-vas established in Pittsburgh; soon other broadcasting stations were equipped. 
Orders began to pour into' electrical compa.nies for accessories with which to 
juild radio receiving sets. Vacuum tubes could not be made fast enough. 
By the fall of 1924 a new industry, radio, had been born. Business was again 
on the upgrade, the long upgrade that led to the greatest era of prosperity that 
ohe world ever saw — culminating in the crash of 1929. 

We are now in the throes of that crash and the present depression seems to 
imprison business behind impenetrable walls of resistance to recovery. Markets 
are glutted with familiar things. On the one hand, strong boxes and savings 
banks are flooded with money. On the other, there are idle plants, large stocks 
jf unsold goods. The best salesruen in the world are doing their utmost to bring 
the money to the commodities and the commodities to the money, and effect 
an exchange and movement of both, with relatively little success. 

There is no single, simple answer to this stalemate, but new ideas, new products, 
new processes,, new industries, in a word, inventions — these things have played 
a vital part in previous periods similar to the present one — have been one of the 
forces in boosting us out of previous "sloughs of despond" — and will do the same 
now. * * * 

It is therefore, the joint effect of invention and our patent system (coupled of 
course with capital) that has caused the United States to advance its material 
welfare so rapidly. Without invention the patent laws would have nothing on 
which to operate. Without sound patent law, inventions, no matter how import- 
ant, would not attract the capital necessary to develop and commercialize the 
invention. Only those who have been "through the mill" realize the time, effort 
and money it is necessary to expend upon an invention to nurture an<^ develop 
it from its birth until it blooms forth as a going business. The development of 
an invention is a business speculation and frequently a technical or scientific 
speculation as well. Anywhere from. $5, 000 to $5,000,000 may be required. The 
time involved is still more indefinite. In chemical research it has been said on 
good authority that a period of about 14 years usually elapses between the first 
experiments and the first dividends of a business founded on the result of the 
research, assuming it to be successful. 



18040 OONOENTRATION OF ECONOMIC POWER 

Who would be willing to devote large sums of money and a substantial portion 
of his span of life to the development of an invention having a purely commercial 
aspect, if at the end of that time he knew that anyone could step in and use the 
fruits of his labor and industry without paying any consideration. Such a state 
of affairs would concededly be so unjust, so inequitable, that it fairly could be 
characterized as monstrous. It is just that which the patent laws are intended 
to prevent. Centers of research actively devoted to purely altruistic ends are, of 
course, not within the purview of the present discussion. 

The fact appears to be that most of the machinery in use today is 
not so much labor-saving as labor-creating or labor-serving. It 
enables men to work at tasks that never would have been attempted 
otherwise, and since modern machinery appeared many great indus- 
tries have sprung into existence that never could have existed without 
machinery. The relation of the effect of machinery on employment is 
thus stated by the Ford Motor Co. in 1935: ^ 

For some years the Ford Motor Company could only rely on its own experience 
in judging the effect of machinery on employment. One year when the Company 
spent four million dollars for machinery, its employees increased by 20,000 men, 
and the pay roll by 48 million dollars. Another year when the Company spent 
nine million dollars for machinery, its employees increased by 40,000 men, and its 
pay roll by 88 million dollars. In another year when the Company invested 10 
million dollars in machinery, employment increased by 37,000 men, and the pay 
roll by 76 million dollars. That w^s the invariable experience — the more machin- 
ery, the more men. 

R. A. Millikan, Nobel prize winner, in a paper delivered in 1934 
said:^ 

But now comes the question upon which the public mind has become much con- 
fused because of men who do more talking as I think than they do thinking. 
These men say "science is responsible for unemployment and therefore for the 
depression. Science through labor-saving devices is all the time destroying jobs 
by means of which men live." The answer to this charge is that it is true, but 
like most delusions it is only half the truth and therefore fundamentally false. 
The other half is that every labor-saving device creates in general as many, often- 
times more, jobs than it destroys and the new jobs are in general better for the 
individual affected, and much better for society as a whole than the old ones. 
Labor-saving devices do not in general destroy the jobs that demand intelligence. 
They cannot do it. The heavy, grinding, routine, deadening jobs are the ones 
that machinery destroys. In a word, the world's drudgery that used to be done 
by human slaves is now done by soulless, feelingless iron slaves, and the human 
is freed for the more interesting jobs of building, running and keeping in order the 
machines of his creation, or of rendering the public service which the existence of 
these machines has made necessary. Even if these occupations do not employ 
all the displaced labor the rest of it ministers to the educational wants that society 
can now embark upon because of its increased economical well being. 

Taking the long range view, not the short range one, I have no hesitation whatever 
in saying that there is no such thing as technological unemployment. By what 
authority do I say that? By the authority of the official census of the United 
States. This lists every decade the percentage of the population "gainfully 
employed." This was 34% in 1880 and almost exactly 40% in 1930 — a depres- 
sion year — and it has shown a steady increase decade by decade, save for a negligi- 
ble drop from 1920 — when war conditions were still on — to 1930. In other words 
in this precise period in which science has been applied most rapidly to industry 
the percentage of our population living by means of jobs has continually increased. 

Karl T. Compton, chairman, American Institute of Physics; presi- 
dent, Massachusetts Institute of Technology; chairman of the Science 
Advisory Board, in a paper delivered in 1934 said:^ 

' "Machines anfl Jobs," Radio Broadcast, December 1, 1935. 

2 At a joint meeting of the American Institute of Physics and New York Electrical Society on February 
22, 1934. 

» At a joint meeting of the American Institute of Physics anri New York Electrical Society on February 
22, 1934. 



CONCENTRATION OF ECONOMIC POWER 18041 

The idea that Science and Invention take away jobs, or in general are at the 
root of our economic and social ills, is contrary to fact. 

******* 
They [New York Electrical Society and the American Institute of Physics 1 do not, 
of course, hold that scientific and technical advances have not brought difficulties, 
like social growing pains. But they strive to prevent us from killing the goose 
that lays the golden eggs, just because some of these eggs happen to be tarnished. 
,They would advocate careful attention to polishing the eggs, and encouraging the 
Igoose to lay more of them. In other words, they advocate intelligent and effective 
attention to remedy such social and ecnomic difficulties as have accompanied the 
advance of science, and at the same time they advocate the further advancement 
of science and its applications for human welfare just as vigorously as possible. 
They do this because the effects of science on human welfare are preponderantly 
good and beneficial. 

******* 

We will immediately admit that technological advances frequently result in 
labor-saving devices which throw large numbers of men and women out of work. 
This is distinctly unfortunate. Its evil effects can be mitigated by wise handling 
of these new devices; as, for example, the American Telephone and Telegraph 
Company has handled its introduction of automatic switching so as not to throw 
employes out of work. 

But the other side of the picture is immensely more significant in that the major 
result of science is the creation of entirely new industries which cater to new 
human desires, and which not only create a multitude of new jobs but which 
increase the per capita productiveness of men so as, first, to permit of an increasing 
population which is not limited by starvation and misery and, second, to reduce 
the hours necessary for men to labor to produce their necessities, and in this way 
to give them their opportunity to appreciate and experience some of the better 
opportunities of living which formerly were available only to those of wealth or 
of politically favored position. 

Justin W. Macklin, First Assistant Commissioner Unitea States 
Patent Office, has an article in Nation's Business for January 1940 in 
which he concludes — and I understand that he has investigated the 
subject for 20 years — that the machine creates instead of destroys 
jobs; and quotes the United States census figures to show the increa.^e 
in percentage of those gainfully employed and particularly in manu- 
facturing. He discusses the situation in many industries, always 
reaching the same result. 

The telephone figures are impressive as they show that whereas di?l 
telephones in the Bell system increased from 2.7 percent, in 1921 to 
about 32 percent in 1930, telephone calls per month more than doubled 
in the same years, and telephone operators increased from 190,000 in 
1920 to almost 249,000 in 1930. Telegraph and telephone linesmen, 
almost doubled in the same period and Mr. Macklin says that the 
Bell officials state that their employees had increased by almost the 
same ratio since the 1930 census. 

In the steel industry the continuous mill for producing steel sheets 
and strips was introduced less than 12 years ago and was bitterly 
attacked by the critics of technology. It appeared that a crew of 
6 men could turn out 446 tons of tin plate in an 8-hour day. A crew 
of 5 men on the old style hand mills turned out 10 tons in 8 hours. 
Twenty-six of these machines appeared to have eliminated 85,000 
jobs; and yet the editor of Iron Age stated on January 15, 1939, in an 
article in the Detroit Sunday Times: 

At the time of the introduction of this phenomenal machine (the continuous 
mill) the usual predictions were made as to the number of workmen it would 
displace. Yet in the past ten years, employment in companies which operated 
continuous mills increased 28%. If we trace the effect of employment in the 
company and town where the continuous mill was first introduced, we get some 



18042 CONCENTRATION OF ECONOMIC POWMl 

interesting results. We find that the population, employment and wages have 
more than doubled in that short time. 

The figures showed that because of the development of the con- 
tinuous mill and other technological practices the use of steel in the 
United States increased from 2,600 pounds a person in 1900 to 16,800 
pounds in 1935; and that employment in the steel industry has risen 
from approximately 150,000 60 years ago to approximately 500,000 
today. It would appear that the- men displaced by the continuous 
mills had not been discharged, but were absorbed in other phases of 
steel manufacture, along with additional help made necessary by 
the increased production that the continuous mills made possible. 

In February and March 1936 hearings were held before a Sub- 
mittee of the Committee on Labor on House Resolution 49 dealing 
with an investigation of unemployment caused by labor-saving devices 
iri industry, Hon. John Lesinski presiding. The following is quoted 
from the testimony of Mr. A. F. Hinrichs, Acting Commissioner, 
Bureau of Labor Statistics, Department of Labor (pp. 71, 72):. 

Mr. Lesinski. In speaking of policy here is a question: Wo have had others 
testify that many favor curbing machinery, either by taxation or suppression of 
patents, or some other legal measures. Others contend that we ought not to do 
it, that it would be futile, and that we should develop ways and devise means, 
legal and lawful means, to force machinery to work not only for those who operate 
it and own it, but also for those whom it displaces. Which of these two methods 
would you favor, curbing machinery by taxation or suppression of patents, or 
finding or devising methods to force it to work for those it displaces? Some calS 
it communism, by the way. I wonder if it is communism or just common sense. 
What do you think? 

Mr. Hinrichs. Mr. Chairman, it is a mistake to treat the machine as an 
enemy. To do so is to give the machine a personality it does not possess. Some 
machines can only be put to socially harmful uses; for example, the gun, Big 
Bertha. Some devices may be used either to help or hurt man, as the ariplane 
in peace or war. But in general the machine represents man's conquest over 
nature. It is our only way of saving labor and of raising the material level of 
living. There is nothing good for a man's soul or body in staggering under a 
300-pound load that can be handled by a crane. Why should children starve in 
the face of the low yields of primitive plowing, when tractors make deep plowing 
possible? It is certainly desirable to escape to higher levels of living through the 
use of cheap books. I'm not willing to give up the radio nor to discourage science 
from devising new instruments of enriching life in the future. There is nothing 
fine in degrading man to the levels of the overworked beast of burden, nor in 
halting his further conquest over nature. Taxes on machinery or suppression 
of patents would tend to halt the advance. 

The fault is not with the machine nor with the men who perfect machines. The 
fault is that we have not learned to avail ourselves fully of the opportunities 
that only the machine makes possible, though it must be noted that substantial 
progress was made in the last 150 years in raising the l^vel of living. Short- 
comings in the use of the machine represent shortcomings of social and economic 
organization. 

From a purely temporary and short-run point of view there are two schools of 
thought. As a theoretical proposition it is conceivable that mechanical progress 
may take place so rapidly as to result in a falling standard of living. I regard 
that as a hypothetical situation and introduce it merely as a necessary qualifi- 
cation to my generalized answer to your question. 

As a matter of personal opinion I believe that one of the most pressing prob- 
lems facing our leadership is to assure itself that there be established conditions 
that guarantee, as well as may be, that the machine may be used so that we may 
fully exploit its possibilities and so that its benefits will accrue to all +he people. 
The benefits that accrue from improvements in production ordinarily ilbw to one 
group; the costs are borne by those whose skills are made obso'^^te or who lose 
employment. We should expect to make provision for those to whom the ma- 
l<;hine brings the costs. Preferably such provision would be made by opening 
new opportunities for the employment of the labor released or by efficiently 



CONCENTRATION OF ECONOMIC POWER 1804S 

utilizing the leisure made possible. At the very least there should be adequate 
financial provision for those displaced until they can be employed. 

I take it that devising means to this end is the function of the Congress, an'- 
that you do not want the research agency that is furnishing the facts on the 
extent and character of technological development to be biased by commitment 
to the specific means to be employed. 

Mr. Lesinski. Thank you. Your answer, notwithstanding its unbiased gen- 
eralities, is quite clear, sensible, and harmonizes with my views 

Many studies appear to support the conslusions that generally the 
eflfects of technological developments upon employment are that jobs 
increase faster than population and that employment is nearest norma' 
in most highly mechanized industries. That growing occupatioii, 
added more new workers than those lost in vanishing occupations 
That the great majority of all machines invented are labor-serving 
rather than labor-saving; and that workers are in greatest demand 
where most machines are installed. That machinery has raised the 
earning power of labor, and that high standards of living are attain- 
able only through increased production by the use of machinery. 

The conclusion has been reached by those who refute tlie conten 
tion that teclmology is responsible for the unemployment problem, 
that unemployment will not be cured by prohibiting or impairing the 
functioning of the machine. It can, however, be cured by research 
and invention supporting new industries and ventures and encourag- 
ing the flow of capital into new and untried fields. 

Mr. Macklin in his paper above referred to stated (with respect to 
the period between 1900 and 1930): 

Those three decades saw the United States become the greatest manufacturing, 
country in the world, and the most prosperous. This prosperity can be traced 
directly to the introduction of the so-called labor saving machine. It created 
millions of new jobs, developed numerous new industries, raised wages, and gave 
us a living standard that makes the average salaried American a millionaire by 
comparison with workers in many foreign nations. 

But the technological advancement that brought this prosperity could not 
hav,e been achieved but for the United States Patent Ofhce. Few persons realize 
that our patent system, even more than the machine, is chiefly responsible for the 
tremendous growth of wealth in this country. Without the patent system, and 
the protection and cooperation that it affords, few capitalists would have dared 
to invest their money in the manufacture of the countless products that have built 
our wealth. Our patent system, while open to improvement, is stili the finest in 
the world. That is why America leads the world in the development of industrial 
inventions. 

In a letter to Dr. C. F. Kettering on November 9, 1936, Presidenc 
Roosevelt said: 

In bringing to the Nation's notice the long duration and fine fruits of our patent 
system and its promise for the future you and your committee are rendering an 
extremely valuable service. 

and in a letter of the same date to the Secretary of Commerce, Hon. 
Daniel C. Roper, President Roosevelt said: 

For myself, I am convinced that the genius which the American Patent System 
has evoked and rewarded will prove equal to the solution of these social and 
economic problems. 

There is hearty agreement in this conviction. Our patent system 
has brought us a long way and solved many problems. It muso 
n^t be impaired or destroyed by unfounded criticism but should be 
supported and strengthened as it is capable of solving our current 
problems if we use it wisely and well. 



18044 CONCENTRATION OF ECONOMIC POWER 

Patents Stimulate Research 

From some of the testimony which has thus far been adduced at 
the hearings before the Temporary National Economic Committee, 
and from some of the questions asked the witnesses by the Depart- 
ment of Justice officials, it is possible that certain erroneous impres- 
sions might be created in the minds of those who will be called upon 
to study possible recommended changes in or repeal of the patent 
laws. 

Witnesses testifying for the automobile industry were asked the 
following questions, among others: 

(1) Do you feel that the grant of the patent monopoly operates 
more to protect the company which takes out the patent than it does 
to stimulate invention per se? 

(2) Would your company continue its research work and the 
development of new products if the patent statutes were repealed? 

The answers, in general, to both questions were in the affirmative. 
The impression might thus be created that the patent laws have served 
their usefulness, and now no longer achieve what they were enacted 
to achieve — i. e., the promotion of the progress of science and the 
useful arts — and that also progress and research would continue even 
though there were no protection afforded by the patent laws. Noth- 
ing is further from the truth. 

In the first place it should be remembered that all of the witnesses 
expressed their belief that the patent laws have served and will 
continue to serve a useful and necessary purpose in the American 
economy. And in the second place it should also be remembered that 
the witnesses represented large corporations, with an invested capital 
reaching into the n^illions of dollars, and thus could speak only for 
such corporations ith assets and invested capital of millions of dollars 
when they stated that, they would continue their research and prog- 
ress even though the patent laws were repealed. 

It requires no stretch of the im.agination to agree that such corpo- 
rations could and would continue their research, for they would have 
to do so in a highly competitive market or else lose their business to a 
more progressive competitor. On the other hand, consider the in- 
ventor who is starting up a new business founded on his invention; an 
inventor who has spent possibly years in research, and has borrowed 
money from his friends and mortgaged his house to finance a new busi- 
ness venture. Would he be likely to develop his idea if the protection 
of the patent laws were denied him? Could he interest businessmen 
in joining him in developing a new market and investing money in an 
enterprise speculative at best, if the protection of the patent laws were 
denied them? It would require a stretch of the imagination beyond 
the bounds of reason to think that they would. And it is these small 
inventors, small businesses founded on the protection of the patent 
laws, that represent the great majority of businesses dependent on the 
patent laws. The views of those people and those businesses are cer- 
tainly entitled to consideration when we consider the possibility of 
repeal of, or major change in, the patent laws. . Representative opin- 
ions with respect to the views and needs of these people and these 
businesses may be taken from reports of hearings which have been held 
before on revision of the patent laws. 



OONCJENTRATION OF EOONOMIC POWER 18045 

Similar statements may be found in other hearings which have been 
held on bills.proposing change in our patent laws. Qi more recent date 
were the March 1938 hearings on a bill to provide for compulsory 
licenses for patents, which was introduced by former Representative 
McFarlane, of Texas. Representative statements from businessmen, 
patent lawyers, and inventors may be found in those hearings. 

The small businessmen and inventors who testified at those hearings 
stated that the exclusive patent monopoly is absolutely necessary to 
the continued successful existence of small businesses founded and 
developed on inventions, to the future development of such businesses. 
And these witnesses in general testified that if the exclusive patent 
monopoly is taken away, research and development, so far as they were 
concerned, would of economic necessity be curtailed and eliminated. 

It should be remembered that even the large corporations find the 
patent protection useful and necessary, and their representatives be- 
lieve that the patent laws have proved beneficial and are still neces- 
sary. As for the small manufacturers, the patent-lav/ protection is 
essential to their continued economic life. These matters should be 
kept in mind in weighing the testimony before the Temporary National 
Economic Committee. 

Proposed Legislation 

There are pending certain .hills for change in the patent laws which 
have the approval of the Patent Office and other substantial endorse- 
ment and wliich should receive consideration. 

H. R. 8441 amends R. S. 4898 (35 U. S. C. 47) to provide that the 
recordation in the Patent Office of assignments of applications for 
patent shall be constructive notice. Hearings have been had on the 
bill and it has been approved by the American Bar Association and 
other patent law associations. 

H. R. 8442 arid substitute H. R. 9616 amend R. S. 4886 (35 U. S. C. 
31) to prohibit reliance on acts done abroad, other than the filing of 
an application for patent in a foreign country under R. S. 4887, in 
establishing a date of invention abroad. This amendment of the 
statute arises as a result of the interpretation of R. S. 4886 by the 
Supreme Court m Electric Storage Battery Co. v. Shimadzu et al. (306 
U. S. 5). This bill has been approved by the American Bar Asso- 
ciation and other patent law associations at hearings held on this bill. 

H. R. 8444 authorizes divisional applications and reissue appUca- 
tions to be filed by the assignee of the entire right, title, and interest 
to the patent under certain conditions. Hearings were had on this 
bill ancl it has been approved by the American Bar Association and 
other patent law associations. , 

H. R. 9384 repeals the disclaimer statutes and provides in effect 
that the patent is still valid though containing claims adjudicated to 
to be invalid. This bill has received the approval of the National 
Advisory Counsel of the Committee on Patents, the American Bar 
Association and others at hearings had on this bill. 

H. R. 9386 amends R. S. 4888 (35 U. S. C. 33^ to validate joint 
patents when less than the total number of parties applicant were the 
true inventors; also R. S. 4892 (35 U. S. C. 35) provides for a pinglo 
signature to the application for patent provided the signature be ap- 
pended to the oath; and R. S. 4895 (35 U. S.^^. 44) authorizes & 



18046 CONCENTRATION OF ECONOMIC POWER 

divisional application to be made by the assignee of the entire interest 
in the parent application of patent. At hearings held on this bill it 
was approved by the National Advisory Counsel of the Committee 
on Patents, the American Bar Association, and others. 

Proposed Court of Patent Appeals 

The next major recommendation for change in our patent laws has 
been for the creation of a separate court of patent appeals. In general 
this change is favored by those who oppose compulsory licensing bills. 
There has been agitation for such a court for a long time. The pro- 
posal was firbb considered by the American Bar Association in 1898. 
A bill was proposed in 1903 providing for a chief justice and six asso- 
ciate judges, selected from the circuit and district courts, the chief 
justice to be appointed for hfe and the associate judges for 6 years. 

The Oldfield Committee of 1912 recommended the creation of such 
a court on page 23 of its report, stating that: 

The present system under which it is possible that diametrically opposite 
decisions may be given by the courts of appeal in different circuits, so that the 
ultimate decision of rights can be determined only after years of litigation, and 
the allowance of a writ of certiorari to the Supreme Court of the United States 
presents further opportunity for oppression by the wealthy and powerful 
combination. 

In 1917 the National Research Council appointed a committee to 
study the patent situation, and this committee recommended the 
creation of a court of patent appeals. A bill was thereafter intro- 
duced in Congress, embodying the same features as the 1903 bill. 
The House of Representatives Committee on Patents held hearings 
on this bill in 1919 (called the Nolan hearings), and the committee 
refused the bill. There was opposition to the bill on the grounds 
that it would take some of the best judges from the circuit and dis- 
trict courts and confine their activities to the patent field only, and 
also that judges would not be willing to break up their homes and 
associations for a short term of 6 years. Some witnesses represent- 
ing the patent bar, inventors and manufacturers favored the bill. 

President Taft's Committee on Economy and Efficiency, which 
made a study of the Patent Office, were in favor of creating a court of 
patent appeals. (See House Documents, vol. 103, No. 1110, 62d 
Cong., 3d sess., 1912-13). 

The Committee of Patent Law Revision of the American Bar As- 
sociation at the annual meetijig in 1931 went on record as favoring a 
separate court of patent appeals. 

The Science Advisory Board Committee which studied the Rela- 
tion of the Patent System to the Stimulation of New Industries made 
the following statement in its report: 

A great deal of delay and confusion results from our present system of litiga- 
tion of patents. The patents suits on a single important patent may cost several 
hundred thousand dollars. Such a burden confronting a young and struggling 
new industry often results in its thorough discouragement. It is possible under 
the present system for very many years to elapse between the initiation of pro- 
ceedings and their final disposition, and industry in the meantime falters. It is 
possible for suits to be brought simultaneously on the same patent in several 
district courts. Moreover, on their appeal to the circuit courts of appeals, it is 
sometimes the case that conflicting decisions are given in different circuits. The 
result of this entire situation is a serious burden on growing industry, and on this 
point there is the strongest feeling among users of the system of a need for simpli- 
fication. 



CONCENTRATION OF ECONOMIC POWER 18047 

The committee therefore recommended that a smgle court for 
patent appeals be estabUshed, in order to have hanfiony and accuracy 
in judicial interpretation of patent questions, by confining the appel- 
late jurisdiction in civil patent causes to one court, composed of per- 
manent judges having the necessary scientific or technical background. 
The committee felt that the court should be located in Washington, 
D. C; and should hold terms at least once each year in each judicial 
circuit unless there was no necessity therefor. 

The Honorable Conway P. Coe, Commissioner of Patents, in his 
testimony before the House of Representatives Patent Committee 
holding hearings in 1935 on the pooling of patents stated that he 
favored the creation of a single court of patent appeals with ambula- 
tory powers, and also equipped with selected, trained, scientific ad- 
visors in order to assist the court in the handling of the technical part 
of the patent cases. 

F. L. Vaughan, in his book Economics of Our Patent System, 
recommends the adoption of a single court of patent appeals, and 
states on page 231 of his book: 

The argument for a patent court, which will reconcile the differences between 
the nine circuit courts of appeal is irrefutable. The Supreme Court, with an 
ever increasing number of cases before it, cannot be expected to review the patent 
decisions of the lower courts as it once did. Therefore, it seems that another 
court — one that is superior to the nine circuit courts of appeal — must be created. 
It would remove the conflicts now existing between the circuit courts of appeal. 

In all of the hearings previously referred to there were witnesses 
who were opposed to this proposal. The opposition to the creation of 
such a court was based primarily on the grounds that the judges 
might get too technical and narrow; the creation of such a court 
could not stop repeated litigation over the same patent; a single court 
could not adequately handle the amount of patent cases disposed of 
by the circuit courts of appeal; the removal of hearings on patent 
appeals from the 10 circuits to Washington would work a hardship 
upon litigants and latvyers and increase the cost of litigation. 

Of more recent interest, there was testimony before the Temporary 
National Economic Committee which favored the creation of a sepa- 
rate court of patent appeals, and in its preliminary report the Tem- 
porary National Economic Committee recommended that such a 
court be created. A bill was introduced in Congress on July 11, 
1939, by Senator Bone, and the Senate Committee on Patents reported 
favorably on this bill. That bill (S. 2687) is now pending m the 
Senate. 

Because of the conflict on this question, and because the proposition 
to create a new court is one of importance, I have given considerable 
attention and study to this question and have hac^ considerable cor- 
respondence with patent lawyers, inventors, and those interested in 
the patent law. I have examined many articles and publications 
dealing with this proposal, and after giving full consideration to the 
matter I have reached the conclusion that the so-called Bone bill, or 
other measm-es seeking to create a separate court for patent appeals, 
should not be enacted into law. 

During the Seventy-fifth Congress the Conmiittee on Patents of 
the Senate reported a similar bill providing for a separate court of 
appeals for patent litigation. I was opposed to the bill at that time 
and on the floor of the Senate I objected to its consideration. The 
additional research and study I have devoted to this question since 



18048 CONCENTRATION OF ECONOMIC POWER 

that time, has convinced me that my opposition to this proposal is 
based on sound reasons. 

Before discussing in any detail the various reasons urged in the 
report of the Senate Committee on Patents in support of the Bone 
bill I want to allude briefly to the fact that I have received letters 
and complaints from members of the patent bar that notice of the 
hearings held on this bill by the Senate Committee on Patents was 
not adequate. I am told that notice was given only 1 day in advance 
of the hearings, and consequently responsible members of the patent 
bar who otherwise would have appeared and testified in opposition 
to the bill, were not able to be present. It seems to me that the 
proposition to create a new court is of so much importance that it 
should receive the most careful consideration, and the arguments pro 
and con should be made available to all members of Congress. Suf- 
fice it to say that the hearings held on this bUl (S. 2687) by the Senate 
Committee on Patents do not adequately portray, in my opinion, 
the great opposition to this proposal that exists among the members 
of the patent bar, inventors, and manufacturers. 

I desire to refer briefly to reasons urged in support of this bill in 
the report of the Senate Committee on Patents, and to indicate 
briefly why, in my opinion, the proposed bill will not solve the prob- 
lems said to exist by the committee report, nor would it be any 
improvement over the present system. I shall indicate reasons why 
I beheve no great need exists for such a court, and further, certain 
specific objections which might be urged in opposition to the creation 
of a specialized tribunal to deal with only one of the many branches 
of our Federal law. 

Briefly, the report of the Committee on Patents states that the 
various circuit courts of appeals vary greatly in the treatment of 
patents; that the various circuit courts are guilty of inconsistent 
rulings in patent matters, and "a patentee is not assured of universal 
recognition of his patent, nor is the public assured of universal in- 
validity of the patent, in the case of one held invalid, until after 
numerous suits in various jurisdictions." I shall indicate later why 
the proposed court, if created, cannot solve this problem, and further, 
that if the problem is considered to be a serious one, there is an easier, 
simpler, and less costly solution. 

It is further stated in the committee report that the same patent 
may be the subject of suit in several jurisdictions, and the result 
often is disagreement among the appellate courts as to the facts and 
the interpretation of the law. • It is not stated how often this situation 
arises, and I shall indicate later that the situation is quite different 
from that portrayed in the report. 

The committee report finally states that it often requires years of 
litigation in the various circuit courts to obtain anything approaching 
a final result, and this works a hardship on patentees and users. 
Here again" I think the true situation is somewhat exaggerated, as I 
propose later to show. 

The report also lists a niunber of organizations, associations, and 
agencies wliich approve of the bill. I indicated earlier that I have 
received many protests from lawyers and associations to the effect 
that if notice of the hearings had been adequate they would have 
expressed their opposition to this bill. I think I can say without fear 
of successful contradiction that the great majority of parent lawyers, 



oom:entration of economic power 18049 

patent bar associations, and students of the problem, are opposed to 
this bill. I shall later indicate some of the associations and organiza- 
tions which have advised me of their opposition to the bill. 

Considering the first contention of the Committee on Patents, 
namely, that there is great variation in the treatment of patents by 
the several circuit courts, and that there are many inconsistent rulings, 
-it might be well first to point out a fact wliich is familiar to all persons 
with legal experience: Courts of appeals are bound by the record of 
the court below, and many of the alleged conflicting decisions prob- 
ably could be traced directly to the fact that new evidence was pro- 
duced in a second trial which was not available to the court in a prior 
suit. There is no way by which this situation could be remedied 
even by the creation of a separate court of patent appeals. 

It should also be pomted out that even where the several circuit 
courts have differed in their statements of the patent law, and sta- 
tistics indicate that this is not often, the conflicts are settled by the 
Supreme Court without any great delay. Patent law is no different 
from other Federal statutor}^ law which has Nation-wide application, 
and which is subject to some variation of interpretation in the different 
circuit courts. I see no reason for assuming that patent law requires 
a more immediate uniformity of interpretati .. than do the other 
divisions of the Federal law. 

With respect to the statement that because of inconsistent rulings 
in patent matters by the various circuit courts, a patentee is not 
assured of universal recognition of his patent, I think it is sufficient 
to state that this problem would not be solved by the creation of a 
single court of appeals for patent litigation. A decree in a patent 
suit operates in personam only, and not in rem. A decree in one suit 
in favor of the plaintiff would not be binding on a new and subsequent 
defendant. That defendant would be entitled to his day in court, 
and the right to show either that his own. patent does not infringe or 
else that the plaintiff's patent is invalid. The prior suit would not 
be binding on him, nor should it be, for he might have new and addi- 
tional evidence which properly should be brought to the court's 
attention. - To preclude him the right to do so would be contrary 
to established concepts of justice and to the common law. Serious 
fundamental objections could be urged against this bill if by virtue 
of it defendants would be deprived of their day in court. And if 
they would not be so deprived then the creation of the proposed court 
would not solve the problem which the Committee on Patents alleges 
to exist. 

The report states further that the pubUc is not assured of universal 
invalidity of the patent, in the case of one held invalid, until after 
numerous suits in various jurisdictions. If examination should show 
that this problem is a serious one, and the research I have been able 
to make has not convinced me that such is the case, then there is an 
easier, a simpler, and a cheaper solution to it than the creation of a 
single court of patent appeals. I refer to the proposal that the law be 
amended to provide that where a plaintiff has unsuccessfully prose- 
cuted one suit and his patent has been declared invalid that he shall 
thereafter be barred from prosecuting additional suits based on the 
same patent in different jurisdictions. There would be nothing novel 
or unusual about such a provision as this; it would very definitely 
solve the problem which the report of the Committee on Patents 



18050 CONCENTRATION OF ECONOMIC POWER 

refers to, and it would work no extreme hardship, for the patentee 
will have already had his day in court. Needless to state, there 
would be no expense to the Government if this amendment should 
be adopted as compared with the $300,000 a year which it is estimated 
a single court of patent appeals would cost the Government. I 
should hasten to state that I am not now advocating the adoption 
of the possible amendment I have referred to. As stated, I am not 
satisfied from the studies I have made that this is a serious matter 
which needs correction; but if facts can be presented which indicate 
the necessity of remedying the situation, then I submit that an 
amendment similar to the one which I have suggested would be more 
appropriate than the creation of a single court of patent appeals. 

The report of th^ Committee on Patents states that the same patent 
may be the subject of suit in several jurisdictions and the result 
often is disagreement among the appellate courts as to the facts and 
the interpretation of the law. I believe, however, that the situation 
is not so serious as indicated by the report. 

What is meant by the Committee on Patents in its statement that 
there "often is disagreement among the appellate courts? " "Often" 
is a relative term; to some of us it might mean "many"; to others, 
willing to inquire, the statement actually means that there have been 
some cases — not many, but some — where there have been conflicting 
decisions between different circuits involving the same patent.- 
But this does not mean that the situation is a serious one. Far from 
it, as certain pertinent figures will indicate. 

It is interesting to note from the figures presented to the Temporary 
National Economic Committee by Conway P. Coe, Commissioner of 
Patents, that in the 4 fiscal years 1935 to 1938 inclusive there have 
been a total of 3,954 suits involving patents, concluded in the district 
courts. For the same period there have been a total of 538 suits 
involving patents concluded in the circuit courts of appeal. These 
figures indicate that appj .. :': itely 87 or 88 percent of the patent 
litigation ends in the district courts and thus would not be affected 
by the supposed benefits which we are told would result from the 
creation of a single court of patent appeals. 

In other words, it is proposed that there should be a specialized 
technical tribunal instead of the regularly constituted courts of general 
jurisdiction to deal with this 12 percent of the patent cases which 
find their way to the courts of Uppeal. When one considers that over 
2,000,000 patents have been issued by the Patent Offi.ce ; that approxi- 
mately 50,000 new patents are issued each year, and that there are 
outstanding at one time approximately 750,000 patents, we can 
appreciate the relatively insignificant number of cases which go to the 
courts of appeal and which would be affected by the creation of this 
proposed court of appeal. 

I appreciate that these figures I have cited are only a partial answer 
to the contention made in the report, that the same patent may be 
the subject of sait in the several jurisdictions and the result often is 
disagreement among the appellate courts as to the facts and the 
interpretation of the law. 

Dealing more specifically with this contention, I invite attention to 
a fact with which all lawyers are familiar. It is the practice of the 
Supreme Court to grant a petition for certiorari whenever there is an 
actual conflict between decisions in difl'erent courts of appeal with 



CONCENTRATION OF ECONOMIC POWER 18051 

regard to the same patent. (And, as a matter of fact, the Supreme 
Court recently held that where it is improbable that a conflict of 
decision respecting the validity of a patent will arise in different 
circuits, because of the concentration in one circuit of the industry in 
which the patented devices are used, there is reason for granting cer- 
tiorari to review a decision in that circuit sustaining the patent. 
.Schriber-Schroth Co. v. Cleveland Trust Co. et ai, 305 tj. S. 47.) If 
there were many cases where the same patent was the subject of suit 
in several jurisdictions, and there was disagreement among the appel- 
late courts as to the facts and the interpretation of the law, then one 
might logically expect that a great number of cases involving such a 
conflict have been decided by the Supreme Court, since it is the prac- 
tice of the Supreme Court to grant certiorari where there is this 
conflict. Yet a study of the decisions of the Supreme Court indicates 
that there have been very few of such cases; sufficiently few to indicate 
that this is not a serious problem. 

A study of the decisions of the Supreme Court indicates that between 
1S91 and January 1, 1938, only 38 patent cases were taken up because 
of a diversity of opinion as to the validity or infringement of the 
same patent. In other words, over a period of 46 j'-ears, there have 
been only 38 cases where the diversity of opinion upon the patent was 
such that the case reached the Supreme Court. This is a total of less 
than one case a year for 46 years. These figures certainly do not 
indicate that the Government would be justified in spending perhaps 
more than $300,000 or more each year for the maintenance of a separate 
court of patent appeals. 

With further reference to this contention that the same patent may 
be the subject of suit in several jurisdictions, and the result often is 
disagreement among the appellate courts as to the facts and the inter- 
pretation of the law, and therefore we should pass this bill to create a 
separate court of patent appeals, I should like to quote from the 
December 1919 report of a committee of the Chicago Patent Law 
Association, which report, is quoted with approval in the 1939 report 
of the legislative committee of the Chicago Patent Law Association 
on this bill. Referring to the above contention, which was urged in 
1919, the report states: 

There is no such anomaly. The hardships complained of (so far as they are real) 
existed in quite as aggravated form when all i)atent cases went by appeal directly 
to a single court — the Su])reme Court of the United States. These hardships 
would not be either prevented or mitigated by conferring on the proposed court 
the jurisdiction now exercised by our several United States courts of app il. 
Most federal laws apply alike to the entire country, and few of them escape being 
differently interpreted and differently applied by the different judges and juries 
administering them; there is liable to be quite as much conflict in the courts of 
appeal when applying other federal laws, and it is generally rather more difficult to 
remedy the conflicting decisions by writ of certiorari. Nor would such conflict 
as is due to the personal equation, in differently applying the same law to sub- 
stantially the same evidence, be generally corrected by having a single court of 
appeals. 

* * * * * ■ * * 

The judgment of a court of appeals in a patent case does not operate in rem 
but only in personam. It is just as conclusive between the parties and their privies 
in every other circuit as in the curuit where it is rendered. It is not conclusive 
between strangers either within the circuit or elsewhere. Precisely the same 
would be true of a judgment of the proposed court, and was true of decisions of 
the Supreme Court when all patent cases went there by appeal or writ 
of error. * * * 

124491— 41— pt. 31-A 4 



18052 OONOENTRATION OF ECONOMIC POWER 

Every new defendant has the right to contest a patent that has been sustained 
oy the court of last resort, even though it be the Supreme Court of the United 
States, if he was not party or privy to such judgment; and every owner of a patent 
which has been held invalid, or not to have the scope asserted for it, has the right 
to contest the same question of validity and scope against another defendant in 
the same jurisdiction or else\vhere. By new evidence, or by directing attention 
to an aspect of the law before overlooked, or by arguments which correct misap- 
prehensio to which the former judgment was due, he may obtain a judgment, 
within the same jurisdiction or in a different jurisdiction, directly contrary to that 
which remains binding in the former case. 

The report of the Senate Committee on Patents states furthei that 
it often requires years of litigation in the various circuit and district 
courts to obtain anything approaching a final result, and the time and 
cost of litigating questions of validity and infringement of patents 
often results in the inability of a patentee or the users to obtain 
determination as to their rights. 

This is merely a continuation of arguments which I have previously 
noted and discussed. Little more need be said with respect to this 
contention. It is difficult to state how often this situation complained 
of in the report might arise. That the situation is greatly exaggerated 
I have no doubt. But that there are some such cases, just as there 
are in other branches of the Federal law, such as taxation and bank- 
ruptcy, no one would question. In what manner a single court of 
patent appeals would solve this problem and prevent further litigation 
involving the same patent has not been, satisfactorily explained. The 
truth of the matter is that the mere establishment of a single court 
logically would have no effect on the number of suits filed en the 
same patent. 

Even if a patent had been sustained by a single court, the patent 
owner would have to bring a new suit against any new defendant who 
would not recognize his patent. The proposed court would not 
prevent such new suit, for the new defendant would have a right to 
urge that he is not infringing, and that he has evidence to show that 
the patent is not a valid one. And similarly if the patent had been 
held not infringed in the earlier case the plaintiff would still have the 
right to bring a new suit against a new defendant. There have been, 
in the past, prolonged series of litigations upon the same patent within 
a single circuit. And the fact that the appeals would go to the same 
court under this bill does not necessarily mean that litigants would 
reach the conclusion that the same court would arrive at the same 
decision in a second suit. The Supreme Court has recently reversed 
itself on the validity of a patent when it considei;ed the patent in a 
second suit — new evidence being adduced at the second trial {Smith v. 
Hall, 301 U. S. 216 (1937)) . The same situation could arise under ^he 
single court, and there is thus no assurance that the mere adoption 
of this proposal would be successful in eliminating protracted litigation 
involving the same patent. 

The possibility of repeated litigation involving the same patent 
could be substantially cm-tailed only by a statute making the first 
decision as to the validity of a patent thereafter binding upon the 
world, . and no one, I believe, would support such a proposal, for 
it would violate the established principle of the commoTi law U\at 
every defendant is entitled to have his day in court and to submit 
his own evidence and arguments in his defense. Furthermore, any 
such law would constitute a great inducement to patent owners to 
bring suits which would not be adequately defended, either because 



CONCENTRATION OF ECONOMIC POWER 18053 

of inability of the particular defendant to present the best defense, or 
because of actual collusion between the plaintiff and the defendant. 
Such a rule as this, therefore, would not be a desirable one. 

I can conceive of situations where litigation might be less expensive 
as the result of the creation of such a single court of patent appeals, 
but I can also conceive of situations where the litigation would be 
more expensive to litigants because of such a court. The bill provides 
that the single court may hold sessions in the several judicial circuits. 
There is no mandatory requirement that the court shall be ambulatory, 
and the likelihood is that the court would choose not to travel, and 
litigants and their attorneys would be required to travel to Washington 
to prosecute an appeal. This would be necessary unless litigants 
were able and willing to bear the burden of delay required for the 
court to make a visit to the particular circuit. I am not satisfied, 
not are the persons who have corresponded with me in connection 
with this matter, that the proposed court would reduce the cost of 
litigation ; there is a very definite fear that the costs of litigation would 
be increased considerably and unreasonably should such a court be 
created. 

The Committee on Patents has listed in its report a number of per- 
sons, agencies, organizations, and associations which favor this pro- 
posal. It is interesting to note the statement in the report to the 
effect that: 

While there have been a few who objected to the bill or to various provisions of 
it, the sentiment expressed at the hearing and in letters and reports is overwhelm- 
ingly in favor of the single court for patent appeals. 

At the opening of my remarks I referred briefly to the fact that I 
have received numerous complaints that the hearings on this bill, and 
the notice of hearings, were inadequate. I have felt that the proposi- 
tion to create a new court is of so much importance that it should 
receive the careful investigation and study not only of Members of 
Congress, but of members of the bar in general. In the course of the 
past year, as previously indicated, I have received many letters from 
members of the patent bar, some of them in favor of this proposal, 
but the overwhelming majority were in opposition to this proposal. 
The correspondence and information I have received indicates that 
the proposal to create a single court of patent appeals has been 
opposed in principle by the American Bar Association, the New York 
Patent Law Association, the Association of the Bar of the City of 
New York, the Boston Patent Law Association, the Cleveland Patent 
Law Association, the Michigan Patent Law Association, the Illinois 
State Bar Association, the Chicago Patent Law Association, the Mil- 
waukee Patent Law Association, and the San Francisco Patent Law 
Association. I have no doubt that the opposition to this bill would 
be even greater and more general should further hearings on the 
proposal be held. 

In my opinion, the proponents of this measure fail to make a case 
for the creation of the single court. The evidence indicates that no 
gieat evils exist under the present system, and the arguments in favor 
ci the bill fail to show that the situations, which are regarded as objec- 
tionable, would be solved by the creation of this proposed court. I 
have indicated that I regard the alleged deficiencies of the present 
system as minor ones, and that further these alleged deficiencies would 
not be solved by the creation of the proposed court. 



18054 CONCENTIiATION OF ECONO.MIC POWER 

Since the evidence indicates that there is httle need for a change in 
the matter of patent appeals, and since the proponents of this measure 
have failed to show that the change proposed would- be better than 
the present system, it may be surplusage for me to point out certain 
specific objections to the proposal which, in my opinion, make it seem 
unwise for Congress to pass this bill. Nevertheless, I believe I should 
submit my view, that this proposed legislation is not only unnecessary, 
but it is unwarranted, unwanted, and unwise. There are certain 
inherent objections to the creation of such a specialized court as this 
which have been urged before, but which will bear repeating. 

Patent law differs from other branches of the Federal law only in 
respect of the scientific principles which must be presented and dis- 
cussed as a part of every case. In the same way, however, criminal 
law, mining law, admiralty law, and tax law may be distinguished from 
other branches of legal science. Yet all cases — at law or in equity — 
must be decided on the basis of established rules, which are the 
product of accumulated experience and wisdom, and which all judges 
hearing appeals must apply in law suits, whether they be in patent, 
mining, admiralty, or tax law. Each of these classes of cases has 
special rules applicable to them, which any competent judge can and 
must grasp and apply to the facts contained in the record which 
is before him. This is a judicial function, and not the function of a 
scientist or an engineer. 

The question involved here is not merely the creation of a new and 
additional court. The implications go far beyond that. There is a 
fundamental question involved in this proposal which deserves serious 
consideration. Is it desirable to emasculate our judicial system by 
segregating separate kinds of litigation? Is it desirable to have ap- 
peals determined by specialized tribunals, which, having lost their 
contact with the general law, tend by the very nature of things to 
become more narrow in their outlook? Nor is this question limited to 
patent law alone, for the same arguments which would j ustify a separate 
court of appeals for patent cases would a,pply equally well to other 
branches of the law. Certainly the bill proposes an undesirable 
departure from our present judicial system. 

I am inclined to agree with Judge Augustus N. Hand, who is 
reported to have remarked at a dinner at the New York Patent Law 
Association in December 1936, that: 

On the whole, it seems to me that there is no esoteric mystery about patentsr 
that the questions, except in some extraordinarily difficult cases, do not widely 
differ from other issues of fact which judges have to dispose of. * * * 

I believe that a good lawyer, and a good judge, with no precon- 
ceived scientific prejudices, who carefully considers the facts, may be 
trusted to make proper decisions in patent cases. And conversely, 
I think that technical judges might have preconceived scientific or 
technical prejudices which would detract from their ability as fair 
and impartial judges. Certainly their technical luiowledge would 
avail them little in cases involving a dift'erent fi'eld of science than that 
in which they are trained. And no court could have enough special- 
ists to be expert over the wide range of patentable subject matter. 

Thus the Chicago Patent Law Association stated in its report in 
opposition to this bill: 

Patent litigation involves in its manj^ ramifications chemistry, physics, me- 
chanics, electricity, metallurgy, and other arts. Because of this wide diversifica- 



CONCENTRATION OF ECONOMIC POWER 18055 

tion of patentable subject-matter, the Patent OfRce is divided into a large number 
of divisions, each division consisting of specialists in a particular art. The 
personnel of a Single Court of Appeals could not be composed of specialists in all 
of these arts. Such a Court would have to be educated in the same manner as 
the judges of the Courts of Appeals of the several Circuits. 

I have no doubt that such a court, no matter how laudable the inten- 
tions of those who favor it now, would eventually degenerate into an 
exalted bureau of the Patent Office, and, as I previously indicated, 
such a court, separated from the broadening influence of the general 
law, would become ingrown with specialized practices and bureau- 
cratic methods. 

Judge Learned Hand, when appearing in 1919 before the House 
Patent Committee on H. R. 5011, 5012, and 7010, said (p. 119) : 

I think a judge should not be a specialist and if this were the creation of a special 
court to which judges were assigned who would never do anything else, I should 
not think it was a good bill. I thirxk that is particularly true in patents, as 
gentlemen of the patent bar have often told me, and it quite accords with such 
experiences as I have had myself, that for a judge to do nothing but patent work 
permanently gets him into a narrow and- somewhat bureaucratic attitude. He 
should keep alive to the general «.spects of the law; if he does not, he forgets that 
patent law is law at all. 

The Chicago Patent Law Association, in connection with this par- 
ticular phase of the problem, has this to say: 

Such a Court, would, because of its restricted jurisdiction, lose the unquestion- 
able advantage of contact with a wide variety of cases in other branches of the 
law. It is this contact with various cases and legal disputes which develops a 
balance in judgment which cannot be acquired in any other way. It is this 
rounding out of experience and judgment of our Federal Courts, which have, 
to a very large measure, developed the legaf principles which constitute the very 
foundation of our judicial system. To divorce judges who are to hear patent 
appeals from this important contact with disputes and contests in other branches 
of the law, would unquestionably result ultimately in the production of judges of 
limited vision and narrowed judgment. Such a Court would very likely become 
supertechnical to a high degree and would not understand and properly apply the 
equitable principles which have become a fundamental of the application of the 
patent laws. Such a court, very likely specializing in merely one branch of law, 
would become bureaucratic in its methods with highly specialized practices, and, 
in effect, would be merely a specialized Patent Office Tribunal which would not 
have the benefit of the consideration of the application of legal principles in the 
various walks of life. Therefore, such a Court in its consideration of patent 
matters very likely would not appreciate and apply the broad legal principles 
established by the present practice, but, on the contrary, would very likely become 
highly technical and in a large measure, confine its consideration to the narrow, 
technical phases of the case. 

In concluding my observations on this proposal, I should like to 
quote two paragraphs from chapter 14 of Mr. H. A. Toulmin, Jr.'s 
fine book entitled "Patents and the Public Interest." With respect 
to this proposal to create a separate court of appeals for patent litiga- 
tion, Mr. Toulmin remarks that — 

There are two kinds of reform and two kinds of reformers who are attempting 
to reorganize or abolish the patent system. The first class comprises those who 
believe that only a central government at Washington with its system of federal 
bureaus and a single court or system of courts at Washington can possibly be 
trusted to run the Nation, including the patent system. 

This group distrusts local self-government and the wisdom of the people. In 
this group are included such reformers as those who would place a federal control 
upon business by the licensing of corporations from Washington, taking this 
right away from the states. In this group are those who would have a single 
Court of Appeals for deciding patent cases. There are also those who would 
take away from the Courts of Appeal in each locality where local self-government 
and local conditions can be examined by the court the right of citizens within the 



18056 CONCENTRATION OF ECONOMIC POWER 

jurisdiction of that court convenient to them to have their interests tried. By 
some mysterious alchemy the advocates of a single Court of Patent Appeals as- 
sume correctness and finality of decision in-slich a court at Washington, while 
assuming that the same kind of men who have sat on great 'Courts of Appeal 
throughout the Nation have been unable to secure the same results throughout 
our Nation's history. 

******* 
The second class of reformers are those who are against the patent system in its 
entirety because it is a part of the capital system. To them all property should 
be communal and administered by the government, for which a central Court of 
Appeals at Washington is but a name for a principle. "The State is All" is their 
slogan, but democracy means that the individual is supreme, except as his in- 
terests necessitate cooperation with his fellow men. 

There is a careful and able analysis of the patent system and the 
proposed single court of patent appeals contained in Mr. Toulmin's 
book, and I commend it to those who are interested in preserving our 
patent system with all its advantages and its many benefits. 

In conclusion I should like to reiterate that it would be unwise to 
create such a court if there is no need for it. The expense alone 
would be prohibitive. In my opinion the proponents of this measure 
have not supported the thesis that evils exist under the present system 
requiring the creation of another judicial tribunal. The facts as pre- 
sented to me indicate rather clearl}'- that the alleged deficiencies are 
not so serious as some would have us believe, and further that the crea- 
tion of a single court would not solve the problems and deficiencies 
which are alleged to exist in the present system of patent appeals. 
Finally, as indicated, there are certain inherent objections to the 
creation of specialized tribunals of the type contemplated by the 
measure now beiug considered. 

This proposal to create a separate coiu-t of patent appeals has been 
considered and rejected by many previous Congresses. It is my 
earnest hope that this measure which has been so repeatedly and con- 
sistently condemned as unneeded, unwarranted, and unwise, may be 
finally and unequivocally rejected. In my opinion, the patent system 
with aU of its many benefits will best be served by the rejection of this 
proposal. 

Recommendations of the Temporary National Economic 
Committee in its Preliminary Report 

In summing up the preliminary recommendations of the Depart- 
ment of Justice to the Temporary National Economic Committee, 
and adopted by the committee in its preliminary report, George E. 
Folk in the October 1939 issue of N. A. M. Law Digest said: 

1. They would destroy in part the patent right itself instead of preventing 
misuse of it. 

2. They would make unlawful, rights recognized since the beginning of our 
patent system as "reasonably within the reward which the patentee by the grant 
of the patent is entitled to secure." 

3. They indicate a disturbing lack of understanding of the nature, purpose 
and effect of patents. They assume that the right to license a patent in certain 
ways, not in violation of anti-trust laws, is inherently unjust and oppressive, 
and undertake to destroy it. 

4. They in effect, depict a license as an agreement created by the patentee 
which pervenis the licensee from doing something which he might otherwise do. 
Whereas the license premits the licensee to do something which he otherwise could 
not do. A license is always a relaxation or removal of restrictions created by 
the patent. 



OON€'BNTRATION OF ECONOMIC POAVER 18057 

5. They appear to proceed upon the assumption that there is an essential con- 
flict between the patent monopoly and the American tradition and law against 
monopolies. Such assumption is not true. 

6. They discriminate against patent property; whereas the patent owner should 
be on a parity with all other property owners so far as control of his own specific 
piece of property is concerned. The relation of the patentee's conduct to the 
anti-trust laws should be tested by the same standards that apply to the holders 
of other kinds of property. That is, does the exercise of his control fall within 
the recognized rights of ownership or outside of it? 

7. They would make illegal certain transactions with lespect to patented prod- 
ucts which are and would remain legal if the products are unpatented. This on 
its face is unwarranted. 

8. They would impair, seriously, property rights of owneis in existing patents 
through curtailment of the existing right to license such patents. There are more 
than 700,000 unexpired patents now outstanding, owned by many thousands of 
individuals and corporations, which would be affected. 

9. If agreements in restraint of trade result from the misuse of patent property 
the anti-trust laws are adequate to deal with them in the same way that they deal 
with misuses of other property rights. 

10. No evidence was produced that would indicate the necessity or desirability 
of the proposed restrictions, or that the proposed changes were sound or advan- 
tageous. 

11. There was no evidence showing that conditional licenses are undesirable 
or that the public interest would be better served if the recommended restrictions 
on the granting of licenses were adopted. 

12. There was no evidence either warranting the recommendations or indicating 
the practices attempted to be prevented were bad practices. 

13. There was no evidence to show that conditional licenses are undesirable 
or beyond the logical scope of the patent monopoly. Since harmfulness of such 
licenses was not shown, legislation prohibiting them should not liglitly be recom- 
mended. 

14. The penalty of forfeiture of the patent property to the United States in 
the event of violation would be unreasonable in that there would be no oppor- 
tunity to adjust the penalty to the violation. In some instances forfeiture might 
result in no substantial penalty at all because the patent might have no substantial 
value, while in other instances a technical violation might cause an unconscionable 
loss. 

Conclusion 

In the course of this discussion an effort has been made to point 
out the theory of patents, the rights given to the patentee by the 
patent grant, and the Kmitations on those rights, the various changes 
v^rhich have been recommended to our patent laws, and the arguments 
for and against those changes. In conclusion it might be stated that 
over the entrani^e to the Patent Office is inscribed a statement of 
Abraham Lincoln's to the effect that: "The patent system added the 
fuel of interest to the fu-e of genius." Those associated with the 
patent system and the patent laws, and those who have made a 
study of the patent system are inclined to believe that the statement 
is as true today as it was in Lincoln's time. While there have been 
instances in the past where patents have been used to foster monop- 
olies, the antitrust laws have been successfully invoked a number of 
times to put an end to this practice. While certain procedural 
changes and improvements may be necessary, the fundamentals of 
the patent system are just as necessary today as they ever were. 
Much of the great progress we have made as a nation we owe to our 
patent system and to the inventors, and much of that great progress 
wp may expect in the future will also be the result of our patent system. 



EXHIBIT NO. 2813 

LETTER AND STATEMENT FROM THE NATIONAL 
ASSOCIATION OF RETAIL DRUGGISTS 



EXHIBIT NO. 2814 

REPLY BY BUREAU OF LABOR STATISTICS, UNITED 
STATES DEPARTMENT OF LABOR 

(Received in evidence at Public Session February 26, 1941. 
See Final Report and Recommendations of the Temporary 
National Economic Committee, S. Doc. 35, 77th Cong., 1st 
sess., pp. 537-538) 



18059 



Exhibit No. 2813 
National Association of Retail Druggists 

Association offlcers: S. J. Watkins, President, Dora, Alabama; Edgar S. Bellis, 1st. Vice-President, 116 
Pondfleld Road, Bronxville, N. Y.; A. R. Qranito, 2nd. Vice-President, 95 Main Street, Hackensacls 
N. J.; Jolin H. Paprocki, 3rd Vice-President, 3001 West Cermak Road, CJiicago, 111.; O. O. Older, 4th 
Vice-President, P. O. Box 327, Charleston, West Virginia; Joseph A. Pons, 5th. Vice-President, 630 North 
Taylor Avenue, St. Louis, Mo.; John W. Dargavel, Secretary, 205 West Wacker Drive, Chicago, 111.; 
Clem A. Czerwinski, Treasurer, 3279 No. Holton Street, Milwaukee, Wis. 

Executive Committee: George H. Prates, Ch&irman, Suite 809, Flood Bldg., San Francisco, Cal.; Hugh P 
Beirne, 615 Howard Avenue, New Haven, Conn.; J. Otto Kohl, McMicken Avenue & Mohawk, Cin- 
cinnati, Ohio; Frank W. Moudry, Fifth and St. Peter Sts., St. Paul, Minn.; William McConaghy, 3800 
Brighton Road, Pittsburgh, Pa.; John B. Tripeny, 241 South Center Street, Casper, Wyo. 

Rowland Jones, Jr., Washington Representative, 1163 National Press Building, 

District 7495 

washington bulletin 

December 24, 1940. 
Hon. Joseph C. O'Mahoney, 

United States Senator, Senate Office Building, Washington, D. C. 

Dear Senator O'Mahoney: As was indicated to you at the time of our con- 
ference which was attended by Dr. E. F. Kelly, Secretary of the American Pharma- 
ceutical Association, the membership of that body, and the membership of the 
N. A. R. D. represented by the writer, have been greatly disturbed about the veiled 
attacks which have been made and are still being made against the Fair Trade acts 
which are now on the statute books of forty-four states. 

We are familiar v/ith the fact that the monographs, which are being issued 
under the authority of the Temporary National Economic Committee, are the 
sole and undivided responsibility of the authors thereof and that their publication 
by the Committee in no way signifies or implies assent to, or approval of, any 
of the- facts, opinions, or recommendations, nor acceptance thereof in whole or 
in part by the members of the Temporary National Economic Committee, indi- 
vidually or collectively. 

At first blush it would appear that this restriction of responsibility would be 
effective to prevent public acceptance of these monographs as official publications 
representing the point of view of the Temporary National Economic Committee 
and that of the Federal agencies involved. We regret that this restriction has 
not prevented the use of these monographs in a manner which conveys to the 
casual reader the distinct impression that they are official pronouncements 
reflecting a policy of your Committee and the Federal Government. 

While we condemn such deceptive use of these monographs, we do not minimize 
their eff'ect and we must point out that for all practical purposes they contain 
thinly veiled attacks upon a segment of the approved public policy of the great 
majority of th^ States of the Union on the subject of resale price maintenance as 
embodied in the Fair Trade acts. 

We seriously question the right of any Federal agency to seek to undermine 
and destroy a public policy adopted by the sovereign states of the Union. A 
contii^uation of such policy of veiled and insidious attack under present circum- 
stances and considering the well-known powers of unchecked propaganda, con- 
stitutes a threat to the constitutional right of the states to legislate for themselves 
in their own sphere of action outlined by the Constitution. Given ample funds and. 
unchecked by Congress, Federal agencies have it in their power to shape and in' 
some cases dictate the , legislative policy of the states which they have no power 
or right to do by direct action. 

For these reasons and by your express leave, we respectfully submit the at- 
tached informative statements in the hope that they will be helpful to you. 

Our final and most serious observation in this matter is that it is our belief 
that the Temporary National Economic Committee in its final report should 
refrain from any derogatory expressions directed to the Fair Trade acts in the 
absence of adequate public hearings before the Committee in which all pertinent 

18061 



18062 CONCENTRATION OF ECONOMIC POWER 

facts could be adduced. In the absence of such an opportunity we question the 
right of the Temporary National Tilcononiic Committee to further extend or give 
dignity to the biased and unwarranted attacks upon the Fair Trade laws such 
as are contained in certain of the monographs submitted to the Committee. 
Respectfully, 

The National Association of Retail Druggists, 
Rowland Jones, Jr., Washington Representative. 



Statement of the National Association of Retail Druggists on the Fair 

Trade Laws 

the history" of the~fair~trade acts 

Any chronological narrative concerning the Fair Trade Acts must necessarily 
begin with the decision of the Supreme Court of the United States in 1911 in 
the now famous "Dr. Miles" case, in which the Court held a manufacturer of a 
branded or trademarked product was prohibited under the Sherman Act from 
entering. into contracts with his retail distributors providing for a minimum price 
below whicli his product could not be sold, holding such contracts to be in restraint 
of trade in the meaning of the Sherman Act. 

It should be pointed out that such contracts up to this time had been lawful 
in the United States and such contracts remain lawful today in practically all of 
the civilized countiies of the world as they were in 1911. 

This decision, which is more di.stinguished for its dictum than for its reasoning, 
ushered in a period of jungle warfare in retail competition which grew progres- 
sivel,y worse as time went on. As early as 1915 the Congress was asked to 
legislate on the problem in a bill introduced by Senator Stephens. A short time 
later similar legislation was introduced by Senator Capper and former Repre- 
sentative Clyde Kelly of Pennsylvania. This legislation, which came to be 
known as the Capper-Kelly Bill, was kicked around in Congress until it was 
finally passed in 1929 by the Lower House ;iiter the addition of amendments which 
destroyed its effectiveness. 

After this effort of more than a decade, the proponents of the Fair Trade 
principle come to the conclusion that no Federal remedy could be had for their 
problem and turned their attention to a different method. 

The first Fair Trade bill was introduced in the California Legislature in 1931, 
and this bill was changed by perfecting amendments in 1933. The legislation 
immediately demonstrated that it was effective in an important measure to 
meet the evil it was designed to correct. The states of New York, Illinois, New 
Jersey, and others followed the lead of California until 1936 when the Supreme 
Court of the United States in an unanimous opinion uplield the constitutionality 
of the California and Illinois Acts, which had previously received the stamp of 
approved from the Supreme Courts of thftse states. 

The Court in its decision stated that the Illinois Act imposing an obligation 
on non-contracting dealers "does not deal with the restriction upon the sale 
of the commodity qiia commodity, but with that restriction because the com- 
inodity is identified by the trade-mark, brand or name of the producer or owner. • 
The essence of the statutory violation then consists not in the bare disposition 
of the commodity but in the forbidden use of the trade-mark, brand or name in 
accomplishing such disposition. The primary aim of the law is to protect the 
property— namely, the good-will — of the producer, which he still owns. The 
price restriction is adopted as an appropriate means to that perfectly legitimate 
end and not as an end itself." ' 

Thp victorj' of this legislation before the bar of the Supreme Court of the United 
States was the signal for the beginning of a parade of states adopting similar 
laws, until in this year of 1941 we find forty-four states of the Union with Fair 
Trade laws on their statute books. These laws have received the approval of 
the highest courts in every state in whiph they have been attacked, including 
California, New York, Illinois, Maryland, New Jersey, Pennsylvania, Wisconsin, 
North Carolina, Florida, South Dakota, South Carolina, and others. 

In 1937 the Congress enacted the Tydings-Miller Act which provided for the 
amending of Section 1 of the Sherman Antitrust Act to provide "that nothing 
herein contained shall render illegal contracts or agreements prescribing minimum 
prices for resale of a commodity which bears, or the label or container of which 

» 299 us 183 (1936). 



CONCENTRATION OF ECONOMIC POWER 18068 

bearp^the trade-mark, brand, or name of the producer or distributor of such 
commodity and which is in free and open competition with commodities of the 
same general class produced or distributed by others, if contracts or agreements 
of that description are lawful as applied to intrastate transactions under any 
statute, law or public policy now or hereafter in effect in any state. * * * " ^ 

By this enactment the Congress removed all doubt as to the legality of minimum 
resale price contracts operating across state lines where the state in which the 
contract is to be executed has adopted a Fair Trade Act. The Congress by itt: 
action recognized the right of the several states to declare their own public policy 
in regard to this legislation without Federal restriction or interference. 

Today only four states, namely, Texas, Missouri, Delaware and Vermont, have 
failed to enact a Fair Trade law. In Delaware and Texas the legislation received 
the approval of the legislatures but was vetoed by the Governors. In all the 
forty-eight states only the legislatures of Missouri and Vermont have failed to 
approve this legislation. 

The legislation has been further recognized by the Cornmittee on Uniform State 
Laws at its meeting in Philadelphia in 1940. 

Seldom in the history of this country has a legislative principle received in so 
short a time the almost unanimous legislative ahd judicial approval that has been 
accorded the Fair Trade Acts. 

LEGISLATIVE PURPOSE AND STATUTORY LIMITATIONS 

The purpose of the Fair Trade Acts is simple. They do nothing more than to 
provide a constitutional remedy against the recognized evils of predatory price- 
cutting and loss-leader selling. The title of the Model Act reads as follows: 

"An Act to protect trade-mark owners, producers, distributors, and the 
general public against injurious and uneconomic practices in the distribution 
of competitive commodities bearing a distinguishing trade-mark, brand, or 
name, through the use of voluntary contracts establishing minimum resale 
prices and providing for refusal to sell unless such minimum resale prices are 
observed." 

From an examination of the language of the Model Act, hereto appended, it will 
be seen that Section 6 is the heart of the law. It reads as follows: 

"Willfully and knowingly advertising, offering for sale or selling any 
commodity at less than the price stipulated in any contract entered into 
pursuant to the provisions of this act, whether the person so advertising, 
offering for sale or selling is or is not a party to such contract, is unfair 
competition and is actionable at the suit of any person damaged therebJ^" 

Thus it will be seen that the remedies under the act are purely civil in their 
nature. The Act contains no penalty of any kind. The privilege conferred by 
the Act is purely voluntary in that a trade-mark owner, producer or distributor 
may or may not avail himself of the privilege as he sees fit. The determination 
of the language of minimum resale price contracts together with the minimum 
price provisions is entirely the responsibility of the party who offers the contract. 

The limitations on activity under the Fair Trade Acts are ample and com- 
prehensive. Section 7 of the Model Act reads as follows: 

"This Act shall not apply to any contract or agreement between or among 
producers or distributors or between or among wholesalers or between or 
among retailers as to sale or resale prices." 

With the exception of the right of contract in this specified field every other 
protection of the antitrust act is left intact. By far the most important limita- 
tion and public protection embodied in this legislation is the fact that any product 
or commodity to be eligible for coverage under a Fair Trade contract must be 
in "free and open competition with commodities of the same general class pro- 
duced or distributed by others . . .". In this provision we find the preserva- 
tion of competition in all of its important aspects and it, is submitted that in all 
classes of products and commodities the way is left completely - clear to allow 
free and unrestricted price competition if th6 trade-mark owner so elects. In 
support of this contention it should be noted that in every class of products 
and commodities a large number of important producers have seen fit not to avail 
themselves of the contract rights as to minimum prices granted by the legislotion. 
We have already seen the operation of the provision that a product to be eligible 

» 60 Stat. 693 (1937). 15 USC 1. 



18064 CONCENTRATION OF ECONOMIC POWER 

for a Fair Trade contract must be in free and open competition with products 
of the same general class produced by others. The now famous Ethyl Gasoline 
case, recently decided, made it clear that a product not in free and open competi- 
tion with products of the same general class produced by others could not be 
placed under Fair Trade contracts. 

The basic principles of the Fair Trade Acts were conceived and born in the 
minds of small competitors in retail distribution in their search for a remedy 
against the vicious and monopolistic unfair trade practices embodied in predatory 
price-cutting and loss-leader selling of well-known branded commodities moving 
in the domestic markets of the United States. 

THE BASIC PHILOSOPHY OF THE FAIR TRADE ACTS 

Recognizing that predatory price-cutting and loss-leader selling of well-known 
products and commodities bearing the trade-mark, brand or name of the pro- 
ducer or distributor is an evil productive of monopoly, it is submitted that the 
Fair Trade laws of the forty-four states supported by the Tydings-Miller Act 
are the only constitutional means so far devised to prevent these vicious prac- 
tices. To mitigate the harmful effects upon the weaker elements in retail com- 
petition, forty-four states have adopted the principles of this legislation as a 
part of their public policy on commerce of this character. That they have 
a right to do this cannot be doubted and the picture is made even more clear 
when we point out that the states adopted this public policy after the failure 
of many years of effort in an attempt to convince the Federal Government that it 
should legislate in this field. No less a legal light than the former Supreme Court 
Justice Oliver Wendell Holmes, in the Dr. Miles case, denounced price-cutting 
as "the practice of knaves who' resort to it, not for the purpose of benefitting the 
consumer but for their own selfish and ulterior purposes." 

We note also what former Supreme Court Justice Brandeis had to say in 
referring to loss-leaders: 

"If a dealer is selling unknown goods or goods under his own name, he 
alone should set the price; but when a dealer has to use somebody else's 
name or brand in order to sell goods, then the owner of that name or brand 
has an interest which should be respected. The transaction is essentially 
one between the two principals — the maker and the user. All_ others are 
middlemen or agents; for the product is not readily sold until it has been 
bought by the consumer. 

"Why should one middleman have the power to depreciate in the public 
mind the value of the maker's brand and render it unprofitable not only for 
the maker but for other middlemen? Why should one middleman be al- 
lowed to indulge in a practice of price-cutting, which tends to drive the 
maker's goods out of the market and in the end interfere with people getting 
the goods at aU? 

"When a trade-marked article is advertised to be sold at less than the 
standard price, it is generally done to attract persons to a particular store 
by the offer of an obviously extraordinary bargain. It is a bait — called by 
the dealers a 'leader'^ But the cut-price article would more appropriately 
be termed a 'mis-leader' ; -because ordinarily the very purpose of the cut. 
price is to create a false impression. 

"The dealer who sells the Dollar Ingersoll watch for sixty-seven cents 
necessarily loses money in that particular transaction. He has no desire 
to sell any article on which he must lose money. He advertises the sale 
partly to attract customers to his store; but mainly to create in the minds 
of those customers the false impression that other articles in which he deals 
and which are not of a standard or known value will be sold upon like 
favorable terms. 

"A single prominent price-cutter can ruin a market for both the producer 
and the regular retailer. And the loss to the retailer is serious. 

"On the other hand, the consumer's gain from price-cutting is only sporadic 
and temporary. The few who buy a standard article for less than its value 
do benefit — unless they have, at the same time, been misled into buying some 
other article at more than its value. But the public generally is the loser; 
and the losses are oft^n permanent. If the price-cutting is not stayed, and 
the manufacturer reduces the price to his regular customers in order to 
enable them to retain their market, he is tempted to deteriorate the article 
in order to preserve his own profits. If the manufacturer cannot or will not 
reduce his price to the dealer, the consumer suffers at least the inconvenience 
of not bein. nble to buy the article." 



CONCENTRATION OF ECONOMIC POWER 18065 

In the appended exhibits will be found further statements on this subject by 
men prominent in public life. 

It may well be that the nation-wide system of Fair Trade Acts is not the perfect 
remedy for the evils they are designed to mitigate, but as we have said it is the 
only effective, constitutional method that has yet been devised. With this in 
mind, it is incumbent upon the agencies of the Federal Government that look 
with disfavor upon the Fair Trade laws, to come forward with an alternative 
method to meet the problem which forty-four states have deemed worthy of 
serious attention. The federal agency which offers destructive criticism only 
renders a disservice to the states. 



COMMENTS ON TWO T. N. B. C. MONOGRAPHS 

On Monograph No. 1, entitled "Price Behavior and Business Policy" written 
by Saul Nelson and Walter G. Keim, under the supervision of Professor Edward 
S. Mason of Harvard University, the following observations are made: 

(1) The data made available in Monograph No. 1 is not sufficiently compre- 
hensive to justify such a publication and is not in keeping with the evident pur- 
pose of PubHc Resolution No. 113. The authors of the publication recognize the 
situation as expressed in the following language on page 355: 

"The information for this analysis comes from the Retail Price Division 
of the Bureau of Labor Statistics which has collected retail price data for 
certain drugs, toiletries, and sundries for many years. For most of the 
individual items discussed here quotations have been obtained in recent 
years from over 130 stores located in 32 cities scattered throughout the United 
States; 5 quotations are obtained from New York City and Chicago and 4 
from each of the remaining cities. This coverage is clearly too small to be 
adequately representative of the approximately 57,000 drug stores in the 
United States. This is particularly true with regard to independent stores, 
since convenience of collection made it desirable to concentrate on outlets 
of at least moderate size, located centrally or near good transportation facil- 
ities, largely to the exclusion of very small stores and of stores located in 
rural or outlying areas. The group of reporting chain stores is probably more 
representative, especially because, quotations from one outlet of a chain 
frequently hold true for other outlets of the same chain in the same general 
locality. To some extent, moreover, the wide geographic distribution com- 
pensates for the small number of reporting stores in any given city." 

A real study of all phases of retail prices in the drug trade is highly desirable 
because it is only in the light of such a comprehensive survey that retail price 
behavior in the drug trade can be appraised. 

(2) The limited character of the "information for this analysis" does not justify 
conclusions and inferences of the type quoted below and which reflect unfavorably 
upon existing legislation and upon those who distribute the products referred to: 

(a) " Because of the difficulty encountered by the average consumer in com- 
paring the merits of rival drugs and toiletries, competition between manufac- 
turers has centered largely upon advertising, trade-marks, and attractive 
packaging. At the same time, it is to the manufacturer's advantage to do 
all that he can to enlist the active sales cooperation of the retailer in push- 
ing his particular product. As a result many manufacturers have adopted 
the policy of guaranteeing attractive margins to wholesalers and to retailers 
by fixing minimum resale prices for their products under the provisions of 
state resale price-maintenance statutes (the so-called fair-trade laws). 

"Where resale prices have not been fixed in this manner, there is usually 
a very wide variation between the prices charged the consumer by different 
druggists for the same product. Aggressive price cutting by some retailers 
apparently has had a tendency to cause retail and wholesale prices to decline 
over a period of years. The wide spread between the prices charged by the 
manufacturer of these products and the cost of their ingredients makes such 
progressive reductions possible. 

"Where minimum resale prices have been legally established, the prices 
charged by different retailers fail into a much narrower range and in some 
cases may approach complete uniformity. The absence of aggressive price 
cutting may also make it unnecessary for the manufacturer to readjust his 
prices to progressively lower levels." 



18066 OONOENTRATION OP ECONOMIC POWER 

(b) "Between November 1934 and January 1936 there were indications 
that the sequence of changes which had occurred between 1929 and 1934 
might be repeated. The number of quotations at full list declined, those at 
the usual cut price of 12 cents increased rapidly, and an appreciable number 
of stores charged a 'deep cut' price of 10 cents or even 8 cents. 

"In the absence of resale price maintenance, it is entirely possible that 
this would have led eventually to a new reduction at wholesale prices and a 
further drop at retail. From the point of view of the manufacturer such a 
change might well hav-j been feasible because the cost of the ingredients 
of this pharmaceutical, as in the case of most widely advertised proprietary 
medicines, is quite small in relation to its wholesale price. 

"However, resale price maintenance was held constitutional by the United 
States Supreme Court during December 1936 and minimum price contracts' 
for this product are now in effect in 44 States. As a result, sales below 
the' 12-cent minimum became less frequent after 1936 and have now been 
completely discontinued by retailers reporting to the Bureau of Labor 
Statistics, including even those located in areas in which price maintenance 
legislation is not in effect. The most common price at the present time is 
the minimum price and the number of quotations at the full list price has 
continued to decline. In this last respect, however, it is questionable whether 
the establishment of the legal minimum of 12 cents did more than confirm 
a trend which has been evident since 1934. The evidence available is insuffi- 
cient to indicate whether the establishment of a legal minimum either 
retarded or accelerated this trend; it did, however, set a limit beyond which 
it cannot go, and possibly obviated the need for a periodic readjustment of 
the wholesale level to compensate for the progressive breakdown of the retail 
price structure." 

On Monograph No. 16, entitled "Anti-Trust in Action", written by Professor 
Walton Hamilton of Yale University Law School, and Irene Till, Social Science 
Analyst of the T. N. E. C, we note on page 11, in commenting upon the Tydings- 
Miller Amendment to the Sherman Antitrust Act, in a footnote, the following 
statement: "This proviso easing the way for a- manufacturer who would price- 
fix a trade-marked good can hardly be referred to as a deliberate act of legis- 
lation since it was sneaked through as a rider to an appropriation bill." 

In this case the language is intemperate in the extreme, and the statement 
as a whole is not in accordance with the facts. The Tydings Miller act received 
the overwhelming approval of the Judiciary Committees of the House of Repre- 
sentatives and the Senate of the United States. It was approved by the House 
of Representatives as a separate piece of legislation by an overwhelming vote 
and when it was reported to the Senate calendar with a favorable report by 
the Senate Judiciary Committee, it was the subject of a one-man filibuster 
against it on the part of Senator William H. King, of Utah. As a last resort, 
and after exiiausting all other means to secure consideration by the Senate, 
, Senator Tydings attached the bill as a rider to a piece of District of Columbia 
legislation. This action was approved by the Senate of the United States. It 
was given further stamp of approval by the Conference on the District of Co- 
lumbia bill between the two Houses of Congress and was signed by the President. 
The use of the term "sneaked through" gives a wholly false impression to the 
casual reader of the monograph. It is submitted that this method of defeating 
a filibuster is a long-recognized practice in the Congress. It cannot be said on 
any basis of fact that the Congress of the United States did not approve the 
Tydings-Miller Act in an above-board fashion. 



Exhibit 2814 



U. S. Bureau of Labor Statistics, 

February 25, 1941. 

REPLY to brief PRESENTED TO THE T. N. E. C. BY NATIONAL ASSOCIATION OF RETAIL 
DRUGGISTS ON RESALE PRICE MAINTENANCE 

The National Association of Retail Druggists has presented a brief to the Tem- 
porary National Economic Committee in which it critizes certain statements 
made in Monograph Number 1, Price Behavior and Business Policy, which was 
prepared by the Bureau of Labor Statistics. In a letter to Chairman O'Mahoney 
introducing this brief, it is stated that "the membership of the N. A. R. D. . . . 



OONCENTRATION OF ECONOMIC POWER 18067 

have been greatly disturbed about the veiled attacks which have been and are 
still being made against the Fair Trade acts which are now on the statute books 
of forty-four states." The letter continues: 

"While we condemn such deceptive use of these monographs, we do not 
minimize .their effect and we must point out that for all practical purposes 
they contain thinly veiled attacks upon a segment of the approved pubhc 
policy of the great majority of the States of the Union on the subject of resale 
price maintenance as embodied in the Fair Trade acts." 

In reply, the Bureau of Labor Statistics desires m emphasize the fact that 
Monograph No. 1 was concerned with resale price maintenance legislation only 
incidentally. The primary purpose of the monograph vas to present for the use 
;f the Temporary National Economic Committee -^ factual analysis of the 
problems of commodity price behavior. This was in strict compliance with the 
oxpiicit request contained in the letter from the President to the Congress recom- 
mending the establishment of the Committee and indicatmg the fields upon wiiich 
information was most needed. 

In the course c." the analysis, it became abundantly clear that prices in retail 
markets were as important a iield of study as wholesale Drices. Prices ?harged 
the ultimate consumer have long been a special conct:rn of the Department of 
Labor. Consequently several sections of the monogi ;pn were devoted *.o an 
analysis of retail markets and to the problems of wholesale and retail distribution. 

In any study of retail prices, of course, restrictions which have been imposed 
by law upon the freedom of retailers to reduce prices ^^od^d not be neglected. In 
the drug and cosmetic field, in particular, xhe oehavior of retail prices cannot 
be discussed except in terms of the resale ;?rice mai-ifenance laws, and jonse- 
quently these laws fell appropriately within the scope '. i rhe monograph. 

In appraising these laws, as in all other respects, it snould be again emphasized 
that the approach of this monograph is economic and not legal. It is concerned 
with examining what resale price maintenance legislation "as meant to the con- 
sumer and how it has affected the price system generally, , acher than witn ; ederal 
or state laws as such. For this reason the conclusions which were reached were 
not presented in the form of definite legislative recommendations. On the other 
hand, the evidence is more than sufficient to iustify the inference that resale price 
maintenance has raised prices in many mstances and has interfered with price 
flexibility. On this point Commissioner Lubin's letter transmitting this mono- 
graph to the Committee was not veiled but unequivocal: 

"This report indicates that there are certain important rigidities m retail 
prices, which prevent chem from being reduced ireely, and to which this 
Committee may well direct its attention. I refer to the so-called fair-trade 
laws which have been enacted by 44 States and to the Miller-Tydings Enabling 
Act which legalizes resale price maintenance contracts in interstate com- 
merce." 

The brief presented by the National Association of Retail DrJuggists offers no 
reason for changing this unqualified appraisal. In fact there is no single specific 
factual conclusion reached by the monograph which is directly disproved or even 
questioned. 

In its attack upon the monograph, the brief first quotes a paragraph which 
describes the nature of the price information regularly compiled by the Retail 
Price Division of the Bureau of Labor Statistics. This quoted paragraph was 
inserted for the express provision of carefully qualifying the scope of the data. 
It indicates the care which was taken to insure presenting a balanced, unbiased 
picture. 

The brief then quotes two passages from the monograph and argues that the 
data presented are too limited to warrant drawing conclusions "which reflect 
unfavorably upon existing legislation and upon those who distribute the products 
referred to." 

It is difficult for an unbiased observer to find any implication in the statement 
quoted which in any way reflects unfavorably upon the retail merchant who iS 
exercising rights which have been conferred upon him by law. Unfortunately 
the brief of the Association fails to point out the specific conclusions or inferences 
to which objection is raised. Consequently it may be well to recapitulate the 
main points in the passages quoted with which the N. A. R. D. takes issue: 

1. "Because of the difficulty encountered by the average consumer in com- 
paring the merits of rival drugs and toiletries, competition between manu- 

124491^41 — pt. 31-A 5 



18068 OONOENTRATION OF ECONOMIC POWER 

facturers has centered largely upon advertising, trade marks and attractive 



This merely states what is common knowledge among all informed observers. 
The Standard Statistics Company, for example, reports as a matter of course in 
a financial analysis of this industry, that advertising outlays of proprietary drug 
producers "are the largest single cost item, normally accounting for from 25 to 35 
percent of the average proprietary company's sales dollar." i As regards cos- 
metics the same source observed, "the cosmetic industry is largely dependent upon 
advertising and promotion policies for sales maintenance" and while no specific 
estimate of adverrising costs in relation to sales is given, it seems logical to assume 
that the ratio would be at least as high as that for proprietary drugs. Total 
advertising expenditures for 1939 in newspapers, farm magazines, other maga- 
zines and radio networks for medicinal and toilet preparations was almost 70 
million dollars in 1939, materially exceeding the amount expended by the auto- 
motive industry, and second only to the 91 million dollars expended by the very 
much larger grocery industry .^ It can hardly be contended that routine informa- 
tion of the financial community is news unfit to print in an analysis of consumer 
problems. 

2. The next quotation from the monograph with which the National Association 
of Retail Druggists takes issue is as follows: 

"At the same time, it is to the manufacturer's advantage to do all that he 
can to enlist the active sales cooperation of the retailer in pushing his particu- 
lar product. As a result many manufacturers have adopted the policy of 
guaranteeing attractive margins to wholesalers and to retailers by fixing 
minimum resale prices for their products under the provisions of state 
resale price-maintenance statutes (the so-called fair-trade laws.)" 

These statements, too, seem self-evident. RetaU druggist trade associations 
have been foremost in seeking to convince manufacturers of the need to seek 
retailers' sales cooperation actively. Many retailers have brought concentrated 
pressure upon the manufacturers who were slow to recognize their dependence 
upon the retailers' goodwill. Evidence as to the character and effects of this pres- 
sure is presented on pages 88 and 89 of the monograph. It is difficult to see how 
the National Association of Retail Druggists can take exception to statements 
which incorporate their own approach to manufacturers on the question of resale 
price maintenance. The secretary of the association which has submitted this 
brief offered the following advice to druggists in the official publication of the 
association: 

"The manufacturers of this country should realize that they must pay a 
reasonable cost for the distribution of their products and they should adjust 
their price structures so that they will provide a fair margin of profit (for 
retailers). You will find many fair-trade manufacturers who are merely 
giving lip service, as they have done in former years; but you should not have 
any difficulty in picking them out. I believe that you should accord manu- 
facturers cooperation in keeping with their sincerity and cooperation with 
you." * 

3. The brief next quotes statements in the monograph to the effect that in the 
absence of resale price maintenance there is often a wide variation in prices 
charged by different druggists for the same product and that when minimum 
resale prices have been legally established the prices charged bj^ different retailers 
fall into a much narrower range, and in some cases may approach complete uni- 
formity. But this merely states the obvious. Naturally, there is more variation 
in price when no minimum is set than after a minimum lias been established. In 
fact, the direct and immediate purpose of establishing minimum resale prices is 
to eliminate extreme variation. 

4. Nor can any valid objection be made to the statement that "the wide spread 
between the price charged by the manufacturer of these products and the cost of 
their ingredients makes such progressive (price) reductions possible." That there 
is an extremely wide spread between the ingredient cost and wholesale and retail 
prices for proprietary drugs and cosmetics is amply demonstrated in the tables on 

1 standard Trade and Securities, Basic Survey, Part I, "Medicines, Drugs, etc." January 24, 1940, Vol. 95, 
No. 7, Section 3. 

2 Estimate of the Topics Publishing Company, compiled from Publishing Information Bureau and 
Media Records. 

3 National Association of Reiail Druggists Journal, October 6, 1938. 



CONCENTRATION OF ECONOMIC POWER 18069 

pages 81 to 83 of the monograph. These tables, all quoting independent sources, 
show the aggregate cost of an ounce of eleven typical drugs sold at wholesale under 
their proprietary names was $28.95, whereas the same drugs may be purchased 
under their standard chemical names for only $4.59. These tables also indicate 
that the retail price of many leading cosmetics is 8 or more times the retail cost 
of their ingredients. Certainly this would suggest that "progressive price reduc- 
tions" for these commodities are readily possible. 

Again it should be emphasized that retailers, who are simply abiding by the 
provisions of the law, are in no way to blame for these wide spreads. The point 
is that resale price maintenance, by preventing price competition at retail, pro- 
tects the manufacturer from the sort of pressure that can most effectively bring 
prices more in line with production costs. 

5. Another quotation from the monograph reproduced in the brief consists of 
a description of the price trend for a nationally advertised brand of analgesic 
tablets between 1929 and 1939. This description is based upon an analysis of 
Bureau of Labor Statistics retail price data and does, therefore, depend upon the 
representative character of those data. The prices used were reported from 
stores all over the United States, and the uniformity of trends in all States and 
all regions is very striking. The stores were selected by the Bureau for the 
purpose of compiling data regarding the cost of living of wage earners and 
lower-salaried workers and not for the direct purpose of analyzing the efiFects 
of resale price maintenance. For this very reason, the statistics present'^d are 
of considerably more value than if they represented a survey made for the 
specific purpose of proving a definite thesis. 

Studies made by Dr. Ewalt T. Grether of the University of California, by 
Edgar H. Gault of the University of Michigan, and by many other independent 
authorities aU show that resale price maintenance has raised prices substantially 
in many stores. It may suffice, however, merely to quote from the druggists 
themselves, who, while publicly proclaiming that price maintenance has not 
raised prices, nevertheless do not hesitate to applaud the price increases which 
have been achieved in statements designed exclusively for their own membership. 
For example: 

"A comparison of the prices 20 items, selected at random from advertise- 
ments in Texas riewspapers, has been publicized by the Louisiana State Phar- 
maceutical Association to its membership. It was brought out that fair trade 
is bringing the Louisiana druggist an average of 16.3 cents per item more 
than the Texas retailer gets for his merchandise." * 

In view of the fqct that all the statements made in the monograph can thus be 
amply supported not only on the basis of statistical data in the monograph, but 
also with ample testimony from other sources including the drug industry itself, 
there remains no reason for retracting or modifying in any particular any of the 
conclusions reached. However, since the brief raises certain general issues, some 
concerning economic policy, it may be well to go further and to examine other 
staternents made in the brief in the light of known available facts. 

(a) It is asserted that the privilege conferred by the Act is "purely voluntary 
in that a trade-mark owner, producer or distributor may or may not avail himself 
of the privilege as he sees fit. The determination of the language of minimum 
resale price contracts together with the minimum price provision is entirely the 
responsibility of the party who offers the contract." There is nothing voluntary 
about the laws as they apply to the individual retailer; he must observe the 
prices set by the manufacturer whethet- he likes them or not, and whether he, 
individually, has signed the contract or not. Nor is the manufacturer in any 
real sense a free agent in deciding whether or not to avail himself of the privilege 
afforded by the laws. The monograph itself calls attention to the situation in thd 
following quotation from an article in Printer's Ink in which the sales manager 
of a drug manufacturer explains to a critic why manufacturers issue price mainte- 
nance contracts: 

"If he has followed the history of the fair-trade movement he should know 
that the laws were forced through by independent retailers; that very few 
manufacturers have taken an active part in obtaining passage. He should 
know, also, that in the drug and cosmetic fields many manufacturers are 
being compelled to operate under these laws against their wishes and better 
judgment. Pressure is being brought to bear through the retailers' associa- 
tions and their fair-trade committees. 



< Drug Topics, September 11, 1939. 



18070 OONOENTRATION OF ECONOMIC POWER 

"Manufacturers who do not file minimum prices are having their troubles 
with independent outlets in some States. Those manufacturers, such as our- 
selves, who have filed prices have had to set higher minimums than they 
desired in some instances. The committees are not permitted, supposedly, 
by law to dictate what the minimum prices shall be but they are doing 
just that by refusing to approve contracts containing prices which do not 
give the retailer what they consider to be a fair-profit margin. In most 
cases the committees are insisting on a mark-up of at least 20 percent and 
usually 33}^ percent." ^ 

Again, the magazine, Advertising and Selling of August 26, 1937, in an article 
entitled "Price Maintenance Goes National" makes the following statement: 

"Star chamber proceedings frequently occur in negotiations between State 
fair-trade committees and producers. Boycotts, both potential and actual, 
are the tools employed by the retailers to bring the manufacturers in line. 
In CaUfornia one producer (Pepsodent Co.) received such a powerful boy- 
cott on his product after he canceled his fair-trade contract that he found 
it politic not only to domicile in the State and issue another contract, but 
to give to the National Association of Retail Druggists a $25,000 check to 
add to its fair-trade kitty * * *." 

These are not isolated instances. An examination of the trade press over the 
past few years reveals many ofher examples of the way in which manufacturers 
are being coerced into the issuance of "voluntary" contracts or into stipulating 
minimum resale prices which organized retailers consider satisfactory. 

(b) The brief contends, nevertheless, that the "limits on activity under the 
Fair Trade Acts are ample and comprehensive" because the Acts prohibit hori- 
.^ontal agreements as to prices between manufacturers or between wholesalers 
or retailers. In fact, there is no need for wholesalers or retailers to agree among 
themselves about prices since the law itself imposes upon them the duty of observ- 
ing the prices stipulated in the manufacturers' contracts. To prohibit distributors 
from doing what they are required by law to do is pointless. 

Nor does the provision that manufacturers may not agree among themselves 
appear much more effective. An examination of the price contracts in force 
in most States reveals a high degree of uniformity in the minimum prices set 
by competing manufacturers for similar products. This is only natural, since 
most manufacturers negotiate with the state "Fair Trade Committees" before 
issuing price maintenance contracts, and since these committees are likely to 
recommend identical mark-ups and minimum prices for products of the same 
class. In some cases, moreover, manufacturers may refuse to stipulate minimum 
prices for their products unless they are assured that rival manufacturers will 
do likewise. In effect, therefore, the local Fair Trade Committee becomes a 
sort of intermediary between competing manufacturers, and the law, while 
prohibiting direct collusion between manufacturers, leaves the way open for 
equally effective agreements through the mediation of the Fair Trade Com- 
iiittees. 

(c) The brief stresses the fact that the acts are limited to commodities which 
are "in free and open competition with commodities of the same general class 
produced and distributed by others." It has been frqeuently argued by pro- 
ponents of resale price maintenance that this clause safeguards competition 
among manufacturers and that the establishment of inordinately high resale 
prices by any manufacturers will be prevented because of the availability of 
similar products manufactured by others. This completely overlooks the fact 
that competition between trade-marked commodities such as drugs and cosmetics, 
with whose content and intrinsic value the average consumer is unfamiliar, 
cannot in its nature be effective as a means of keeping prices down. 

For example, the minimum price for a leading brand of aspirin is set by 
contract at 59 cents per 100 tablets, whereas competing brands packaged by well- 
known reputable manufacturers regularly sell for anywhere from 19 to 39 cents 
a hundred and may on occasion be obtained* for as little as 8 cents a hundred. 
If horizontal competition of this kind were in fact effective, it is clear that such 
extreme price differentials could not be maintained. Tlie comparison between the 
prices of standard drugs sold under their proprietary names and under their 
chemical designations which has been referred to earlier, also illustrates the 
futility of this sort of horizontal competition as a safeguard to the consumer. 

» Monograph 1, pp. 88-89. 



CONCENTRATION OF ECONOMIC POWER 18071 

This point is further emphasized by the lengthy quotation from the American 
Druggist, a recognized organ of the drug trade, which is quoted on pages 381 
to 382 of the monograph. In effect this editorial urges druggists to avoid offer- 
ing consumers satisfactory substitutes for expensive advertised brands. Once 
druggists have been guaranteed large marii-ups by manufacturers of widely 
advertised brands, it is to their interest to prevent the prices of those brands 
from being depressed by equally satisfactory but less widely advertised sub- 
stitutes. The facts speak for themselves: the very wide margins which exist 
today between the prices of widely advertised drugs and cosmetics and their 
costs of production is a clear indication that horizontal competition between 
manufacturers of articles of this kind cannot in its nature be effective in keeping 
prices down. 

(d) In it.s treatment of the basic economic problems involved in resale price 
maintenance, the brief submitted by the National Association of Retail Druggists 
is not complete. Thus, this section of the brief begins with the following 
statement: 

"The purpose of the Fair Trade Acts is simple. They do nothing more 
than to provide a constitutional remedy against the recognized evils of 
predatory price cutting and loss leader selling." 

Despite the fact that the stated purpose of the Fair Trade Acts may have been 
to provide "a consitutional remedy against predatory price cutting and loss 
leader selling," the fact is that, in reality, they grant a completely unregulated 
license to manufacturers to fix the resale prices of their products at any level 
they wish. Once a manufacturer has signed a contract under the Fair Trade 
Laws with any single retailer within a State, its provisions automatically become 
binding upon all other retailers. 

Finally, the brief concludes with the following statement: 

"It may well be that the nation-wide system of Fair Trade Acts is not the 
perfect remedy for the evils they are designed to mitigate, but as we have said 
it is the only effective, constitutional method that has yet been devised. 
With this in mind, it is incumbent upon the agencies of the Federal Govern- 
ment who look with disfavor upon the Fair Trade laws, to come forward 
with an alternative method to meet the problem which forty-four States 
have deemed worthy of serious attention. The federal agency which offers 
destructive criticism only renders a disservice to the states." 

This contention is, to say the least, somewhat surprising. Monograph No. 1 
is, as has been said, purely an economic study and it did not presume to recom- 
mend legislative policy. The monograph was concerned with the economic effects 
of price behavior and of business price policy. In the course of this appraisal 
it necessarily considered the economic consequences and implications of laws 
which limit the freedom of price competition. Moreover, the alleged evils at 
which resale price maintenance is directed are far from patent; there is no clear 
evidence that loss leader selling or predatory price cutting are either widespread 
enough or serious enough to require special legislation for its prevention. 

In view of the specific nature of the challenge contained in the brief, however, 
it may be pointed out that a completely unregulated license to fix resale prices 
is a somewhat drastic remedy for sporadic cases of loss leader selling or "preda- 
tory price cutting." Surely the constitution offers other possibilities for dealing 
with these problems — if they are indeed serious enough to require specific remedies.. 

If it is really desired merely to prevent predatory price cutting of the loss- 
leader type, it would seem entirely feasible to devise a law for that precise pur- 
pose, as for example by directly prohibiting sales below invoice cost with the 
intent or effect of injuring competition. It should also be entirely possible to, 
amend the non-signer clause in the present act by allowing any retailer not a 
party to the contract to defend himself against the charge of unfair competition 
by proving that the price he charged is in fact above his invoice cost. These 
suggestions— they are not recommendations— assume, of course, that the purpose 
of resale price maintenance is the ostensible one stated in the brief — to prevent 
"predatory price cutting and loss leader selling." 



TABLE SUPPLEMENTING TNEC MONOGRAPH No. 9, 
"TAXATION OF CORPORATE ENTERPRISE" 
BY CLIFFORD J. HYNNING, DEPART- 
MENT OF COMMERCE 



18073 



The following table was omitted from Monograph 9, "Taxation 
of Corporate Enterprise," by Clifford J. Hynning, Department of 
Commerce. It serves as the basis for Charts XIX and XXI. 



Federal Undistributed Profits and Excess-Profits Taxes and Credits, by Size Classes 

and Industries, 1937 



Size classes based on total assets (in 
thousands) 



Manufacturing: 

Under $50. 

$50-$100 

$100-$250 

$25O-$50O 

$500-$!, 000 

$l,000-$5,000 

$5,000-$10,000 

$10,000-$50,000... 
$50,000-$100.000. . 

Over $100,000 

Food: 

Under $50 

$50-$100 

$100-$250 — 

$250-$500 

$500-$1,000 

$1,000-$5,000 

$5,000-$10,000 

$10,000-$50,000. . . 
$50,000-$100,000. . 

Over $100,000 

Beverages: 

Under $50._ 

$50-$100.— 

$100-$250 

$250-$500 

$50O-$1.000 

$1,000-$5,000 

$5,000-$10,000... 
$10,000-$50,000. . 
$50,000-$100,000. 
Over $100,000... 
Tobacco! 

Under $50.- 

$5O-$100 

$100-$250 

$25O-$500 

$500-$1,000- 

$1,000-15,000 

$5,000-$10,000. . . 
$10,000-$50,000.. 
$50,000-$100,000. 
Over $100,000... 
Textiles: 

Under $50 

$50-$100- - 

$100-$250 

$25O-$500... 

$50O-$l,000 

$1,000-$5,000 

$S,000-$10,000-.. 
$10,000-$50,000-. 
$50,000-$100,000. 
Over $100,000... 



Surtax on undis- 
tributed profits 
as percentage of 



Corporate 
profits 



Seo footnotes at end of table. 



3.0 
3.0 
3.2 
3.3 
3.5 
3.3 
3.1 
2.1 
1.1 
1.5 

3.0 
3.2 
2.7 
2.8 
2.8 
2.6 
2.5 



Taxable 

net 
income ' 



Cash div- 
idends 
paid out 
as per- 
centage of 
corporate 
profits 



Excess-profits taxes 
percentage of 



(') 



1.2 
1.9 
2.7 
2.0 
3.7 
4.2 
7.5 
4.3 
1.0 



1.6 
2.9 
1.3 
1.6 
2.8 
3.4 
4.5 
2.4 



4.1 
3.5 
3.1 
3.5 
3.2 
3.3 
2.9 
2.0 



3.4 
3.4 
3.7 
3.8 
4.2 
3.9 
3.7 
2.5 
1.3 
1.7 

3.4 
3.6 
3.1 
3.3 
3.2 
3.1 
2.9 
1.0 
.2 
.1 

1.3 
2.1 
3.1 
2.4 
4.4 
4.9 
8.9 
5.1 
1.2 



1.8 
3.3 
1.4 
1.9 
3.2 
4.1 
5.2 
2.6 



4.7 
4.3 
3.5 
4.1 
3.7 
3.8 
3.4 
2.4 



54.8 
57.6 
61.3 
61.7 
59.9 
60.9 
63.1 
70.8 
79.4 
77.9 

55.5 
57.4 
64.9 
67.3 
66.2 
72.3 
65.0 
91.3 
89.9 
103.3 

72.4 
69.6 
66.4 
68.3 
59.1 
53.1 
40.2 
63.1 
71.8 



Corporate 
profits 



82.0 
51.4 
84.6 
66.5 
67.5 
70.4 
69.5 
75.4 



34.3 

48.8 
58.5 
65.8 
05.8 
66.4 
70.2 
81.9 



1.8 
1.7 
1.4 
1.2 



.7 
.5 
.2 
.2 

1.8 
1.1 
.8 

.7 
.4 



« 



Taxable 

net 
income ' 



1.8 
1.7 
1.4 
1.2 
.9 



.5 
.2 
.2 

1.8 
1.1 
.9 



(?) 



Total tax 
as per- 
centage 
of cor- 
porate 
profits * 



1.3 
1.4 
1.3 

.9 

.3 

.5 

.4 
1.0 

.04 



2.7 
.4 
.3 



1.3 
1.4 
1.3 



.5 
1.1 
.04 



2.9 
.4 
.4 



1.2 
1. 1 
1.1 
1.2 



18075 



18076 



OONOENTRATION OF ECiONOMIC POWER 



Federal Undistributed Profits and Excess-Profits Taxes and Credits, by Size Classes 
and Industries, 1937 — Continued 



Size classes based on total assets (in 
thousands) 



Corporate 
profits 



Surtax on undis- 
tributed profits 
as percentage of 



Taxable 

net 
income 



Cash divi- 
dends 
paid out 
as per- 
centage of 
corporate 
profits 



Corporate 
profits 



Excess-profits taxes 
percentage of 



Taxable 

net 
income 



Clothing: 

Under $50 

$50-$100- 

$100-$250 .- 

$250-$500- 

$500-$1,000 - 

$l,(X)0-$5,000 

$5,00(>-$10,000.... 

$10,000-$50,000.., 

$50,000-$100,000.. 

Over $100,000.... 
Leather: 

Under $50 

$50-$100. 

$100-$250. 

$250-$500 

$50O-$l,000. 

$I,00O-$5,000 

$5,00O-$10,000-.. 

$10,00O-$50,000- . 

$50,000-$100,000.. 

Over $100,000... 
Bubber: 

Under $50 

$50-$100 

$100-$250 

$25O-$500. 

$500-$1,000 

$1,000- $5,000 

$5,000-$10,000..- 

$10,000-$50,000-. 

$50,000-$100,000. , 

Over $100,000... 
Forest Products: 

Under $50- 

$50-$i00 

$10a-$25O 

$250-$500.- 

$500-$1.000 

$l,000-$5,000 

$5.0pO-$10,000... 

$10,000-$50,000... 

$50,000-$100,000. 

Over $100,000... 
Taper: 

Under $50 

$50-$100 

$100-$250. 

$a50-$500- 

$500-$1,000. 

$1,000-$5,000 

$5,000-$10,000... 

$10,000-$50,000.. 

$50,000-$100.000. 

Over $100,000... 
rrintinc: 

Under $50 

$50-$ 100 

$100-$250 

$250-$500 

. $500-$1,000 

$l,00O-$5.0(H) 

$5.00()-$1(),0()0... 

$10,00(l-$5«.000.. 

$50,(HIO-$100.000_ 

Over $100,000... 



4. 
3. 
3. 
3. 
2. 
2. 

(')■ 



(?) 



4.5 
4.1 
3.7 
4.1 
3.3 
3.4 
.5 



37.5 
47.2 
58.6 
67.8 
72.4 
66.2 
90.3 
102.6 



(») 



1.- 
1.3 
.8 
.3 
.2 



4.2 
4.3 
4.5 
2.9 
3.5 
2.5 
2.1 
.2 



43.- 
50.5 
58.6 
71.3 
67.7 
80.1 
79.8 
121.5 



4.9 
■ 2.7 
3.4 
4.3 
5.8 
4.2 
6.4 
3.8 



39.0 
58.3 
57.6 
58.8 
61.7 
58.7 
58.9 
65.9 



3.8 
3.1 
3.4 
2.6 
2.7 
2.3 
5.2 
1.8 



49.4 
52.6 
62,6 
67.1 
66.4 
71.5 
62.4 
56.3 



4.2 
3.5 
4.- 
5.- 
4.2 
4.5 
2.4 
2.9 
3.0 
1.1 

3.5 
3.- 
3.1 
3.4 
3.3 
3.2 
2.2 
3.3 



46.2 
54.1 
54.3 
64.0 
57.5 
56.4 
64.8 
67.7 
65.8 
94.9 

53.0 
62.6 
65.1 
65. 1 
68.4 
64.7 
70.1 
65.2 
96.9 
77.8 



1.2 
1.3 
1.1 

.8 
.5 
.1 



3.0 
1.0 
.3 
1.0 
1.3 
.5 
.3 



2.3 

2.2 

1.5 

1.4 

1.3 

.9 

.2 

.2 



1.2 
.6 
.8 
.7 
.9 
.6 
.4 
.3 
.3 



1.4 
.7 
.7 
.6 
.3 
.2 
.2 
.2 



(') 



1.1 
1.3 
.8 
.3 
.3 



1.2 
1.3 
1.1 

.8 
,5 
.2 



3.4 
1.2 
.4 
1.2 
1.5 



2.6 
2.5 
1.8 
1.9 
1.5 
1.1 
.2 
.3 



1.4 

.7 
.9 
.8 
1.1 
.7 
.5 
.4 
.4 



SiH' footnotes at end of table. 



CONCENTRATION OF ECONOMIC POWER 



18077 



Federal Lindisiributed Profits and Excess-Profits Taxes and Credits, by Size Classes 
and Industries, 1937 — 'Continued 



Size classes based on total assets (in 


Surtax on undis- 
tributed profits 
as percentage of 


Cash divi- 
dends 
paid out 
as per- 
centage of 
corporate 
profits 


Excess-profits taxes 
percentage of 


Total tax 
as per- 
centage 


thousands) 


Corporate 
profits 


Taxable 

net 
Income 


Corporate 
profits 


Taxable 

net 
Income 


of cor- 
porate 
profits 


Chemicals: 

Under $50 


3.0 
2.5 
2.6 
2.3 
2.9 
1.8 
1.6 
1.0 
1.7 
1.0 

2.5 
1.7 
3.1 
2.4 
2.1 
3.5 
.6 
1.7 
1.4 
1.1 

3.3 
2.5 
2.7 
3.2 
3.0 
2.6 
2.8 
1.3 
.0 
1.8 

3.2 
3.6 
3.7 
3.9 
4.4 
4.0 
3.9 
2.4 
1.8 
2.2 

2.6 
1.5 
3.8 
5.4 
3.0 
3.1 
3.1 
3.2 
.4 
1.8 

3.6 
3.1 
3.1 
3.2 
3.6 
3.4 
2.3 
2.6 
1.3 
1.8 


3.3 
2.9 
3.- 
2.7 
3,- 
2.1 
1.9 
1.2 
2.- 
1.1 

2.8 
2.- 
3.6 
2.8 
2.6 
4.1 
.8 
2.- 
1.6 
1.2 

3.8 
2.8 
3.1 
3.7 
3.6 
3.- 
3.3 
1.6 
1.0 
2.2 

3.6 
4.1 
4.3 
4.6 
5.3 
4.8 
4.3 
3.- 
2.1 
2.6 

2.8 
1.7 
4.4 
6.3 
3.6 
3.7 
3.8 
3.8 
.5 
2.1 

3.9 
3.6 
3.6 
3.7 
4.1 
4.- 
2.7 
3.- 
1.6 
2.1 


57.8 

63.6 

68.5 

69.7 

67.7 

74.6 

73.1" 

78.8 

69.1 

77.3 

67.0 
75.1 
77.5 
59.0 
57.7 
3-7 
90. b- 
86.^ 
103.8 
92.9 

64.4 
61.8 
62.3 
59.3 
69.3 
66.0 
65.1 
74.2 
74.9 
66.9 

67.2 
63.0 
67.2 
65.7 
61.4 
53.4 
68.4 
64.7 
66.8 
69.4 

66.6 
66.9 
68.1 
48.8 
55.1 
61.1 
61.9 
56.7 
82.9 
67.9 

46.6 
54.1 
59.3 
62.9 
63.1 
62.0 
68.6 
69.8 
76.1 
74.1 


1.5 
1.5 
1.2 
.6 
.6 
.3 
.6 
.1 


1.6 
1.6 
1.2 
.6 
.6 
.4 
.6 
.2 


14.1 


$50-$100 -- 


14.6 


$lf^$25p 


15.4 


$25O-$500 -.- 


16.6 


$500-$1,000 - 


16.8 


$1,000-$5,000 


16.6 


$5,000-110,000 - 


16.4 


$10,000-$50,000 


14.3 


■ $50 000-$100,000 


14.4 


Over $100,000 


1.7 
3.4 
1.1 
.6 
.6 
.6 
1.1 
.3 
4.6 

2.4 
1.4 
1.2 
1.1 
1.2 
.8 
.2 
.3 


(») 

1.7 
3.4 
1.1 
.6 
.6 
.7 
1.2 
.3 
2.0 
.2 

2.4 
1.6 
1.2 
1.1 
1.2 
.8 
.2 
.3 


11.2 


Petroleum: 

Under $50 


13.2 


$50-$100 -- 


15.8 


$100-$250 - 


16.8 


$250-$500 --- 


16.6 


$500-$1,000 


16.6 


$l,0OO-$5,000 --- 


17.8 


$5,000-$10,000 


16.4 


$10,000-$50,000 


16.9 


$50,000-$100,000 


143 


Over $100,000 


10.4 


Stone, Clay, and Glass: 

Under$50 


14.9 


$50-$100 


14.1 


$100-$250 - 


16.3 




16.5 


$500-$1,000 - 


17.4 




17.0 


$5,000-$10,000 


10.6 


$10,000-$50,000 -- 


1&0 


$50 000-$100 000 




Over $100,000 , -- 


.- - 
.9 

2.5 
2.3 
2.0 
1.7 
1.4 
1.3 
1.0 
.9 
.2 
.A 

1.8 
1.3 
1.9 
.7 
.6 
.6 
2.4 
.1 
.6 


1.0 

2.6 
2.3 
2.0 
1.8 
1.6 
1.4 
1.1 
1.0 
.2 
.6 

2.0 
1.4 
2.2 
.8 
.0 
.6 
3.0 
.1 
.7 




MetSs: 

Under $50 


16.8 


$60-$100 


16.5 


$100-$250 - 


17.2 


$25O-$500 


18w2 


$500-$1,000 


19.2 


$l,00O-$6,000 


19.2 


$5,000-$10,000 


18.6 


$10,00O-$50,000 - 


17.1 


$50,000-$100,000 


1«.0 


Over $100,000 


16.7 


Motor Vehicles: 

Under $50 


14.7 


$50-$100 --- 


14.3 


$100-$250 


17.4 


$250-$500 


19.2 


$600-$l 000 


17.2 




17.8 


$5,000-$10,000 


19.8 




17.7 


$50,000-$100,000 


12.9 


Over $100 000 


15.2 


Trade: 

Under $50 


1.7 
1.3 
1.2 
1.0 
.6 
.7 
.4 
.4 
(») 
(') 


1.9 
1.5 
1.3 
1.1 
.7 
.8 
.6 
.6 
(•) - 
(•) 


14.3 


$50-$100 


14.6 


$100-$2S0 


16.^ 


$25O-$500 - 


16.9 


$500-$1,000 


16.7 


$1,000-$6,000 - 


17.5 


$5,000-$10,000 - 

$10,000-$50,000 


16.2 
16^6 


$50,000-$100,006 


14.1 


Over $100,000 . 


14.6 


See footnotes at end of table. 





18078 



OONOENTRATION OF ECONOMIC POWER 



Federal Undistributed Profits and Excess-Profits 'Taxes and Credits, by Size Classes 
and Industries, 1937 — Continued 



Size classes based on total assets (in 
thousands) 



Surtax on undis- 
tributed profits 
as percentage of 



Corporate 
profits 



Taxable 

net 
income 



Cash div- 
idends 
paid out 
as per- 
centage of 
corporate 
profits 



Excess-profits taxes 
percentage of 



Corporate 
profits 



Taxable 

net 
income 



Service: 

Under $50 

$50-$100 -- 

$100-$250 

$250-500-.- 

$500-$l,000- 

$l,0OO-$5,0OO 

$5,000-$10,000... 
$10,000-$50,000.. 
$50,000-$100,000- 
Over $100,000... 

Construction: 

Under $50 

$50-$100 

$10a-$250 

$250-$500 .- 

$500-$l,000 - 

$l,000-$5,000 

$5,000-$10,000... 
$10,000-$50,000.. 
$5O,O0O-$100,0O0. 
Over $100,000... 

Public Utilities: 

Under $50 

$50-$100-- 

$10O-$250 

$25O-$500 

$50O-$l,000 

$1,000-$5,000 

$5,000-$10,000-.. 
$10,000-$50,000. . 
$50,000-$100,000. 
Over $100,000... 

Finance: 

Under $50 

$50-$100 

$10O-$250 

$25&-$500 

$500-$1,000- 

$l,000-$5,000 

$5,000-$10,000... 
$10,00O-$50,000.. 
$50,000-$IOO,000. 
Over $100,000... 



Total: 

Under $60 

$S0-$100 

$100-$250 

$250-$500 

$600-$1,000 

$1,000-$5,000-... 
$5,000-$10,000... 
$10,000-$50,000. . 
$.')0,000-$100,000. 
Over $100,000... 



2.9 
3.3 
3.3 
4.- 
3.5 
3.2 
3.5 
2.2 



60.1 
61.1 
64.6 
63.7 
65.2 
65.2 
81.2 
78.2 
83.4 



(') 



1.6 
1.1 



4.2 
4.- 
3.7 
5.2 
4.4 
3.5 
1.1 
7.0 
7.6 



43.3 
58.6 
60.0 
56.0 
66.8 
65.4 
67.4 
34.7 
42.0 



2.7 
2.7 
1.9 
2.5 
1.3 
1.3 
.5 



1.3 



3.2 

3.3 

3.5 

2. -8 

2.6 

1.8 

1.5 

.8 

.5 

.4 

2.1 
2.6 
1.9 
1.7 
1.5 
1.- 
1.2 
1.- 
1.- 
1.6 



58.1 
69.8 
64.6 
67.7 
69.2 
76.4 
79.3 
82.6 
89.5 
95.6 

86.2 
70.9 
75.9 
73. 5 
72.8 
73.0 
69.6 
66.6 
80.8 
77.1 



1.8 
1.5 

.8 



3.2 
3.3 
3.3 
3.4 
3.5 
3.2 
2.7 
1.9 
1.1 
1.4 



69.9 
60.4 
64.6 
65.3 
64.8 
65.9 
67.9 
72.6 
81.8 
81.7 



1.7 
1.4 
1.2 
1.0 
.7 
.7 
.5 
.4 
.1 
.1 



w 



1.6 
1.1 
1.0 
.8 
.7 
.5 
.4 



3.0 
3.2 
2.3 

2.9 
1.5 
1.5 
.6 



2.0 
1.8 
.9 
1.0 
.8 
.7 
.4 
.2 
.2 
f3) 

1.4 
.9 
.9 
.5 
.5 
.4 
.2 
.2 
.1 
.1 



1.7 
1.5 
1.2 
1.1 



< Taxable income consists of compiled net profits less (a) all interest received on governmental obligations 
and (6) the amounts of the normal and excess-profits taxes. 

• Taxable income consists of compiled net profits less (a) wholly tax-exempt interest and (6) 85% of divi- 
dends received. 
» Less than 0:05%. 

< Includes norma! corporate income tax, excess-profits tax", and surtax on undistributed profits. 

Source; Computed (rem the Sourcebook of the Stati^^tical Section of the Bureau of Internal Revenue. 



LETTER FROM THE AMERICAN TARIFF LEAGUE 

WITH CRITICISM OF TNEC MONOGRAPH NO. 10, 
"INDUSTRIAL CONCENTRATION AND TARIFFS"' BY 
CLIFFORD L. JAMES, ASSOCIATE PROFESSOR OF ECO- 
NOMICS, OHIO STATE UNIVERSITY, AND REPLY TO 
CRITICISM BY DR. JAMES 



180Y9 



The American Tariff League 

Incorporated July 13, 1885 

19 West 44th Street, New York 

Officer of the Secretary, 

February 20, 1911. 
Ur. Dewey Anderson, 

Executive Secretary, Temvorary National Economic Committee, 
Federal Trade Building, Washington, D. C. 

My Dear Dr. Anderson: Enclosed you v/ill find a copy of the statement we 
wish to file with the Tsmpcrary National Economic Committee with reference 
to Monograph Number IG entitled "Industrial Concentration and Tariffs.'"' We 
respectfully request tliat this statement be published in the volume which we 
understand is being heJd open for commentaries on the publications and proceed- 
ings relating- to the Committee's activities. 

As stated in previous correspondence, the purpose of this statement which we 
are filing is to set forth as briefly as possible the basis for our charge that the nar- 
row limitations of the evidence presented and the complete absence of any expla- 
nation as to the bases for the conclusions drawn render the bulk of the report 
practically meaningless. We also believe that the form in which some of the ma- 
tei-ial is presented will result in serious misinterpretation through the failure on 
the part of the lay reader to have observed the limitations admitted by the authors. 

We appreciate that the report was prepared and published for the use of the 
Committee and does not in any way imply that the}'^ have approved of it in whole 
or in part. We are equally aware of the fact that the monographs prepared and 
published for the use of the Committee have received wide distribution and that 
they enjoy a very considerable prestige. We know that several of the monographs 
have contributed materially to the understanding of contemporary economic 
problems and we have abundant evidence that they are extensively used and 
quoted. 

It is because of the wide acceptance and use of these monographs that we have 
entered our criticism of Monograph Number 10. We fully appreciate the difl5- 
culties under which the authors of this monograph have labored. This does not 
alter the fact that we believe that the technical difficulties were of sufficient mag- 
nitude as to render this monograph thoroughly unreliable as source material for 
the determination of public policy. 
Very truly yours, 

(Signed) Walter R. Peabody Secretary. 

WRP:W. 

CRITICISM OF MONOGRAPH NO. 10, "INDUSTRIAL 
CONCENTRATION AND TARIFFS" 

Statement op Purpose 

The purpose of this paper is to explain the bases for our strong objections to 
Monograph #10, "Industrial Concentration and Tariffs," prepared and printed 
for the use of the Temporary National Economic Committee. We believe that 
the extremely narrow limitations of the evidence presented and the complete 
ubsence of any explanation as to the bases for the conclusions drawn render the 
bulk of the report practically meaningless. We also believe that the form in 
which some of the material is presented will result in serious misinterpretation 
through failure on the part of the lay reader to have observed the limitations 
admitted by the authors. 

Brief Summary of the Stuoy 

The major part of the report is concerned with "a statistical analysis of the 
relationship between tariffs and monopolistic elements in dbfflsstic industries." 
4 sample of 1,807 census products (accounting for approximately half of total 

18081 



18082 CONCENTRATION OF ECONOMrO POWER 

manufacturing production) is examined in terms of degree of industrial concen- 
tration and restrictive effect of tarififs. Findings are summarized in Chapter I 
and summary tables are reproduced in Appendix I. No detailed schedule of 
these products is given. 

Products accounting for 34% of the total value of the sample are found to be 
characterized by a high degree of industrial concentration (i. e., 4 companies 
produce 75% or more of the 'total). The bulk of the report is concerned with 
these high-concentration products. 317 such products or groups of products are 
listed. Schedules of information for each of these products appear as Appendix 
II and account for 220 of the 320 pages of the report. Findings in respect to 
these producvs are summarized in Chapter II with particular reference to the 
probable eflfee '; of tarifif changes on imports and domestic prices. 

There are, in addition, "historical surveys of a few industries which showed a 
high degree of industrial concentration." The three industries surveyed in 
separate chapters are the gypsum industry, the flat glass industry, and the borates 
industry. There is also a chapter on the softwood lumber industry and the trade 
agreements. Finally,' there is a chapter oa consumers' cost from import restric- 
tions which examines the cost to the consumer of the tariff on two products — ■ 
sugar and rayon. 

Points to be Covered 

" Our crlti is)ii8 are presented under three main headings. The first will deal 
with the inadequacies of the technique employed in making the survey of industrial 
concentratio. and the effect of tariff changes. The second part relates to the 
implicationo if some of the general statements appearing in the report. The 
third part is 4 brief criticism of the technique employed in estimating consumers' 
cost from import restrictions. In addition, there is a short appendix containing 
excerpts from a few of the communications received by the American Tariff 
League concerning the Monograph. 

PART I. CRITICISM OF CERTAIN BASIC ASPECTS OF THE STUDY OF INDUSTRIAL CON- 
CENTRATION AND THE PROBABLE EFFECT OF TARIFF CHANGES 

As noted above, the major part of Monograph #10 is concerned with "a statis- 
tical analysis of the relationship between tariffs and monopolistic elements in 
domestic industries." 

The treatment accorded the large sample of 1,807 products is brief and unsup- 
ported by any detailed schedules of information. The products themselves are 
not listed and while the summary tables purport to show the "restrictive effect 
of tariffs" under three subheadings, "insignificant, moderate, and substantial," 
there is not one word of explanation as to how and on what evidence the classifi- 
cation of any product was made. 

A more detailed examination is accorded 317 census products with a high degree 
of industrial concentration. This material is summarized in Chapter II and the 
so-called schedule of essential information is presented in Appendix II. The 
basis for the plan of investigation and the form of the schedules of information 
is described in the Monograph as follows: 

"For each product, or closely related products, of the special study a brief 
schedule of essential information was prepared. First, it contained a short 
statement with regard to the description and use of the product. Second, 
in a tabular form the status of the industry in 1937 wus presented, namely, 
the total number of companies and plants, the total value of domestic pro- 
duction and the percent supplied by the four largest companies, and the 
tariff status of the product (free, ad valorem rate, or equivalent ad valorem 
rate). Third, the recent tariff treatment of the product beginning with the 
act of 1913 was indicated. Fourth, if the duties were specific or partly so, 
an average ad valorem equivalent was calculated whenever possible for the 
years 1934-38, inclusive. Fifth, domestic production, imports, and exports 
on a value basis for the years 1935 and 1937 were indicated. Sixth, 'a brief 
statement was included of the factors which probably accounted for the industrial 
concentration and of the probable changes in imports and domestic prices which 
would Jollow a substantial reduction or removal of duties." ' [Italics ours.] 

' Monograph No. 10, page 6. The introductory clause of this quotation carried the following footnote: 
"Since many industries and companies produce a great variety of products and since the census data are 
for individual products, the study was confined largely to a product basis. Some times were grouped which 
explains in part the wide difference between the number of products in the 75-coneentration group (840) 
and the number in the special study (317) and the smaller difference between the values of the two groups." 



CONCENTRATION OF ECONOMIC POWER 18083 

The "probable changes" in Domestic Prices. 

The whole study hinges on the findings set forth under the sixth item above. 
For each of the 317 items in the appendix there appears a brief statement, ranging 
in length from four to occasionally nine or ten lines, which constitutes, in the 
words of the authors, a summary "of the factors which probably accounted for 
the industrial concentration and of the probable changes in imports and domestic 
, prices which would follow a substantial reduction or removal of duties." [Italics 
•ours.] There are several sound reasons for questioning the adequacy and accu- 
'racy of these summary statements. It is hard to see how they can be interpreted 
as anything more than the unsupported opinions of the authors of the Mono- 
graph. The basis for this blunt and severe criticism follows: 

(1) Conclusions are reached as to probable price reactions following reductions 
in duty, but there is no evidence submitted anywhere in the study of the price 
behavior of the products which are analyzed. ^ 

(2) There is no evidence ,of any study of the import prices of the. commodities 
which would compete with the domestic articles. 

(3) Nowhere in the Monograph is there any reference to other sources of 
information that may have been consulted," whether these sources be public docu- 
ments that could be checked or private sources, the competency of whose infor- 
mation could at least be appraised. 

(4) There is not even a statement or discussion of the type of evidence that 
was examined by the authors or the premises on which they proceeded to their 
conclusions. 

The "probable changes" in Imports. 

As noted above, for each product of the special study the Monograph included 
a statement as to the "* * * probable changes in imports and domestic prices 
which would follow a substantial reduction or removal of duties." 

The previous criticisms of the failure to introduce evidence or to explain the 
basis for the authors' conclusions as to "probable changes in prices" apply equally 
to their speculations as to "probable changes in imports." 

There is no discussion of the kind of evidence that was deemed important. 

There is no statement of the nature of the unreported material that was 
examined. 

The only information relating to the existence of foreign sources of supply that 
appears in the Monograph is a record of import figures for 1935 and 1937 for some 
of the products covered in the special study. No figures are available for a large 
number of the items. It is highly questionable whether some of the figures 
reported are for a class and kind of merchandise that is comparable with the 
census classification used. Such import figures as are given are value figures 
unsupported by any information concerning the quantity imported or thq country 
or countries from which they come. 

' The following Quotation from "The Structure of the American Economy— Part I"— published by the 
National Resources Committee in June, 1939, indicated the significance of price behavior analysis: 

"Depression Sensitivity and tariffs. — One more factor needs to be considered, the possible effect of tariffs 
upon price sensitivity. • • <• From this chart it is clear that there is no general relation between iusensi- 
tivity to depression and amount of tariff. ^ * * If anything, ohe sensitive items appear to have some- 
what more tariff protection than the insensitive items. This does not mean that the tariff does not con- 
tribute to the insensitivity of certain items but it does mean that the tariff is not a major explanation of 
price insensitivity. How account for the differential sensitivity of prices to depression? 

"• • * Because of the effect of this differential sensitivity in disorganizing economic activity, it is 
important to discover, if possible, what forces lie back of it. To find price iusensitivity associated with one 
set of factors and sensitivity associated with another set does not give an adequate explanation of what 
brings about this differential sensitivity. It is stiirnecessarytoseek explanations of this behavior. • » » 

"Attempts to answer this question have, up to the present, produced divergent explanations and tht 
question is still moot. Yet the accumulating evidence appears to point to administrative controls as the 
dominant explanation. • » » There is an increasing literature discussing the theoretical possibility 
that, when the number of independent and competing producers supplying a particular market is relatively 
small, administrative controls over price may be exercised without any collusion between separate enter- 
prises and without a single producer dominating the market. • » • 

"Relation of monopoly profits. — Before proceeding to examine the evidence of administrative controls, it 
is necessary to give clear warning against confusing the presence of administrative controls over price with 
the presence of monopoly profits. In a particular case the administrative control over price may be suffi- 
cient to allow monopoly profits to be made. But in innumerable cases where there is some measure of 
administrative control over prices, there is not the opportunity to make monopoly profits. • • • simi 
larly , in manufacturing industries a large number of products are sold at a listed or posted price less standard 
discounts and the price is altered oceasionally by altering the discounts or by revising the listed or posted 
price. Yet in a large number of these cases of administrative control over price, probably in the bulk of 
tliem, there is no problem of monopoly profits. In many cases of administered prices the enterprises an: 
actually operating at a loss Thus it must be clear that administrative control over prices does not neces- 
sarily involve monopoly profits. Kather, monopoly profits can arise only in the more extreme cases of 
administrative control or under special conditions. * * *"— National Resources Committee: The Struc- 
ture of the American Economy— Part I. Basic Characteristics, pp. 138-14C. 

124491 — 41 — pt. 31-A 6 



18084 (X)NCENTRATION OF ECONOMIC POWEB 

There is no indication of the degree of industrial concentration of foreign 
production of the products that the authors expect would be imported in greater 
quantities if duties were lowered. There is no examination of the "probability" 
that if the United States were to be dependent on foreign sources of supply the 
import prices of certain items would be higher than they are now. Granted that 
this would not result in many instances, the fact there is a limited market in the 
United States for many of the" products covered by the special study ^ suggests that 
the foreign markets may also be limited and foreign production highly concen- 
trated. 

It is unnecessary to proceed with a further detailing of objections to this part 
of the study. EVen if the authors had been given the facilities and time to make 
the sort of study that would be free from the criticisma that properly apply to 
such a restricted study, it is hard to see how in view of the war the findings <;ould 
be of more than academic interest. The study was undertaken before the occu- 
pation of Norway, the Netherlands, Belgium and France. No one today can 
?redict what the political and economic set up of Europe will be after the war. 
'he only safe prediction in this direction iS; that conditions will be vastly different 
from what we have known before. Increased industrial concentration abroad 
new areas of production, and a long period of political management of exports are 
certainly distinct possibilities. 

Industrial Concentration as a Measure of Monopolistic Elements. 

In both the summary and the special study the Monograph uses industrial 
c<mcentration as an indicator of monopolistic elements in an industry. 

The authors of the Monograph have themselves pointed out several serious 
weaknesses in this approach. On the first page of the rep>ort they say: 

"A few producers, however, may supply nearly all of a given product, but 
the monopolistic element involved may have little practical significance. 
The size of plant for efficient operation probably is so large relative to the 
demand for some products that only a few producers can profitably operate. 
In some cases side-line production by a few plants may supply adequately 
a given market." 

There is also a highly significant footnote on page 6 describing some of the 
technical weaknesses of using the data as they have. The note follows in full: 

"As repeatedly pointed out by the Department of Commerce, these per- 
centages of concentration have certain obvious imperfections as indexes of 
concentration. Experience has proved that in some industries census coverage 
of companies is not complete. In most instances this is probably not serious, 
but in a few cases it may yield an index of apparent concentration greater 
than actual. In numerous cases the census of classification is too narrow to 
provide significant figures on industrial concentration since the product classified 
separately may actually compete with a number of products in other classifica- 
tions. It also fails to give an adequate picture of the competition that may 
exist in industries like the rubber tire industry where despite concentration of 
production competition at times has been intense. Studies of an industry in 
its entirety such as those given in subsequent chapters are needed in order to 
supplement the comparison by products. Obviously in group figures on 
concentration such as those given in chapters I and II and Appendix I below 
the percentages of concentration given may tend to be too high. On the 
other hand, the measure is by companies and hence faild to show concentration 
of control by trade associations, interlocking management or 'gentlemen's 
agreements.' The measure like the underlying statistics is national. Yet 
for quite a large number of products the competitive market area is much 
smaller. Here the significant point would be the concentration in each area. 
The measure applied throws the product into one of three groups according 
to whether the percentage of production by value of the four largest com- 
panies amounted to 75-1-; 50 to 74; or 49 or less. Obv^iously this classifica- 
tion is arbitrary. The choice of different figures might have produced a 
different picture, at least in its details, though preliminary tests indicate 
that the major results are identical with those found in this study." 
We have italicized three statements in the footnote quoted to show how the 
use of census materials of industrial concentration as an indicator of monopoly 
may result in serious error. On the other hand, subsequent statements indicate 

' Domestic Droduction for 69 of the 317 classifications used in the special study was reported as under 
<f2,000,000 In 1937. For 148 of the 317 groups domestic production was less than $5,000,000. 



OON<?B(NTRATION OF BOONOMIC POWER 18085 

that monopolistic elements may exist even in the absence of industrial concen- 
tration. 

Apparently the authors feel that the inclusion of classifications that are open to 
criticism is compensated for by the omission of other items. This interpretation 
is substantiated by their own statement appearing on page 10, near the end of the 
introductory chapter, which reads as follows: "The above estimates are, of course, 
subject to error for specific products, but the errors may be offsetting." 

Even if this assumption were tenable in respect to the summary conclusions 
drawn from the large sample of 1,807 products, it cannot apply to the individual 
treatment accorded the special study of 317 items. 

In the special study, which as previously noted accounts for the bulk of the 
Monograph, census data on industrial concentration is given for each of the 317 
identified groups of products. For each of these products the authors state their 
conclusions as to the probable changes in imports and domestic prices which would 
follow a substantial reduction or removal of duty. 

In this part of the study, the technical limitations of the census data are ignored 
There is no indication as to whether the census data is incomplete; there is no 
indication as to whether the classification is too narrow; there is no indication as 
to the intensity of competition that may exist. While it may well have been 
impossible to determine the cases where the census data are incomplete, it is hard 
to account for the omission of any discussion of the other two points. We do 
lot see how the conclusions can be defended unless the authors are sufficiently 
iamiliar with conditions in the industry to be able to state whether or not the 
products are competitive with products in another classification or whether or not 
there is considerable intensity of price competition within the industrial group 
itself. If the authors can answer these questions, it is hardly defensible for the 
material to be presented in the form in which it appears.* 

It may be that in our efforts to make our criticisms brief and concise We have 
not elaborated sufficiently on the above statements. We hope that the exposi- 
tion is sufficient to explain and justify our charge that, in addition to the criticisms 
advanced earlier in this paper, the material in Appendix II is doubly vulnerable. 
By the authors' own statements, the technique of using census figures of industrial 
concentration is likely to result in errors if other pertinent information is not 
appraised. Since these other pertinent factors are not considered, it stands to 
reason that there are many erroneous conclusions among the specific cases 
presented. 

The form of presentation of material in Appendix II makes it almost inevitable 
that the conclusions stated will be used uncritically by many readers and that 
serious consequences may result through the failure of the lay reader to appreciate 
the narrow limits within which the analysis has been made and the inevitable 
errors in the conclusions which must exist in individual cases because of these 
narrow limits. 

PART II. CRITICISM OF CERTAIN GENERAL ASPECTS OF THE STUDT AND THE 
IMPLICATIONS OP SOME OF THE GENERAL STATEMENTS AND CONCLUSIONS 

It is difficult in commenting on a report such as Monograph # 10 to refrain 
from entering into a general discussion of several aspects of the tariff problem. 
The implications of ocrt?tin statements in the introductory chapter to the Mono- 
graph suggest that i,he authors' point of view is pretty much that of the so-called 
classical school of ecuiiomics. Obviously, to embark on an extended critical 
appraisal of th's school of thought would result in tremendously extending the 
scoi>e of this paper and in carrying our eomments beyond a specific criticism of 
the Monograph materials. We shall confine our comnisnts to a brief statement 
;of three or four points of particular importance to any practical consideration of 
the subject. These can be treated under two main divisions. 

The first division emphasizes the narrowness of the study and its inadequacies 
if the conclusions were to be treated seriously in respect to many of the indivklual-, 
conimodities identified in the Monograph. Foremost among the questions that 
arise in this connection is that of what would happen to the domestic industry 
in the event the authors' conjectures as to imports and prices are correct. Are we 
to assume that these industries can survive the impact of increased importations 
:ind lower prices? Are we to assume that the country would be better off without 
the 'ndustry, whatever the cost of liquidation may be? Nowhere in the Mono- 

' For example, In the schedule of informatloc for tires and inner tubes on page 186 there is no indication 
that "competition at times has been intense" as was noted in their footnote to an earlier summary chapter 
which we have quoted above. 



18086 CONCENTRATION OF ECONOMIC POWER 

graph is there any consideration given to these questions. It is not necessary to 
hazard a guess as to how the authors may feel about this issue to reahze that as a 
practical consideration the effect of increased 'importations and lower prices will 
vary from one industry to another. Undoubtedly there are products which could 
successfully compete against increased importations and meet lower prices without 
seriously impairing the ability of the domestic industry to pay prevailing wages 
and continue profitably in production, but it is equally true that included in the 
list are the products of many industries which could not survive ^he impact of 
increased foreign competition and maintain production levels, wage scales, etc., 
with any profits to themselves. 

If we are supposed to accept the position that if an industry is. unable to make 
this adjustment successfully it would then be desirable for the United States to 
abandon production in favor of some foreign source of supply, we are then con- 
fronted with some of the broader questions of policy, any consideration of which 
should be related to the realities of the world in which we are living rather than 
to any concepts as to what might be a desirable economic structure in an ideal 
world. It will suffice to raise only two questions to illustrate this point. The 
doctrine of comparative advantage is that it would be desirable for each area to 
produce that for which it is relatively best fitted and to permit free exchange of 
goods sa produced. It is reasonable to suppose in the world constituted as it is 
today, that if we should give up production of certain products that they will 
actually be available to us in the future on more advantageous terms than we could 
supply them within our own borders? The world faces possibilities of political 
realignments and many changes 'of an economic character in its industrial and 
commercial organization. Irrespective of the policy that may be pursued by the 
United States in the post-war period, there will be a marked degree of political 
management of exports. To the extent that we follow a policy which permits of 
dependence on foreign sources of supply we assume great risks of becoming the 
victim of marketing procedures far more serious and costly in their effects on our 
national economy than any cost that we now bear through the failure to enforce 
eflfectively our domestic laws on domestic companies in any instances of unreason- 
able restraint of trade. 

It is in order also to call attention to a developing realization that as a practical 
matter there is a pronounced tendency toward increased diversification of 
production in many areas throughout the world. The acute distress resulting 
from the present war on both belligerents and non-belligerents is daily increasing 
the behef of influential peoples that a diversified economy is far more desirable 
than a specialized one. The following significant statement of Under Secretary 
of State Welles in a recent address over a coast-to-coast network suffices to 
emphasize this point: 

"While the exchange of raw materials for manufactured products used 
to be considered the perfect illustration of liberal trade doctrine based upon 
inherent advantage, most of us will agree that scientific developments and 
technological advantages have changed this situation. It is no longer true 
in the case of several of the other American republics that, even if all trade 
barriers were removed, it would be to their advantage to concentrate their 
activities solely on the production and export of a limited number of raw 
materials. On the contrary, the economy of the future, if that economy is. 
to be the reflection of the progress of which the New World is theoretically 
capable, will represent in every quarter of this continent a much higher degree 
of diversified local production, both of raw materials and of manufactured 
articles. This development should not result in a decrease in the volume of 
inter- American trade; it would, however, represent a change in the character 
of that trade. And by vastly increasing the diversity of human opportunity 
in this part of the world, it will insure a richer, fuller life to millions of people 
in the Americas whose choice of occupation is now either extremely limited 
or even, in times of economic depression, non-existent." ^ 

It has not been our intention in the above discussion to suggest that it was the 
responsibility of the authors to recognize and treat wit^ all these matters. We do 
feel that the failure of the study to give any consideration to the probable effects 
on individual industries of lowering duties to increase importations and reduce 
prices is sufficient to render the conclusions in respect to individual products 
utterly valueless when the time comes to act upon whatever policy is adopted 
for the nation. 



5 Department of State Bulletin, October 26, 1940, page 344. 



CJONCENTRATION OF ECONOMIC POWER 18087 

PART III. CRITICISM OF THE TECHNIQUE EMPLOYED IN ESTIMATING CONSUMERS* 
COST RESULTING FROM IMPORT RESTRICTIONS 

In his letter of transmittal the Economic Advisor states that Chapter VII (Con- 
sumers' Cost From Import Restrictions) "opens up a question far exceeding the 
scope of this Monograph, a question of the gravest importance well deserving 
full time and attention by the research staff of the Tariff Commission." 

In their summary to this chapter, the authors state: "In view of the many in- 
tangible and immeasurable factors in market situations, it is exceedingly difficult 
to translate into dollar values the cost of import restrictions to consumers. 
Because of these obstacles to exact calculations, only two products were examined 
for consumer cost estimates. Even though these product, namely sugar and 
rayon, were relatively quite suitable for such calculations, it was found to be 
impossible to make highly exact estimates." ^ 

Detailed comment on the two calculations is unnecessary. It will be a sufficient 
commentary on the inadequateness of the procedure to treat briefly one or two 
points under each survey. 

Sugar. 

Sugar is one of the two products for which the authors calculate the con- 
sumers' cost from import restrictions. It is a unique example, since both imports 
of foreign sugar and sales of domestic sugar (continental and offshore) have been 
subject to quantitative restriction since June, 1934. (At the time the quota was 
imposed, the duty on sugar was reduced. The duty on Cuban sugar was further 
reduced in September, 1934 under the Cuban Agreement.) Thus, in the case of 
sugar, the authors are concerned with two types of import restrictions, tariffs 
and quotas. They find that before the imposition of quotas the cost to the 
consumer from duty restrictions on sugar was measured largely by the amount 
of the Cuban preferential duty, but that under the quota system there is not 
necessarily such a relationship since the price, at least so far as the supply is 
concerned, is determined by the amount of sugar allowed on the market under 
the quota restrictions. 

The authors' calculations show that over an eight-year period, the tariff and 
quota on sugar cost the American consumer on the average, 274 million dollars 
per year.^ But in Appendix II (on page 102), the authors state: "Removal of the 
quota and duties on sugar would increase substantially the imports of both raw and 
refined sugar, would eliminate a large part of the domestic production of beet sugar 
and of the continental production of cane sugar, and would appreciably lower the 
price, probably by an amount greater than the present duty on Cuban sugar." 
[Italics ours.] 

Thus, whether the annual cost of the sugar tariff and quota is 274 miUion 
dollars or a much smaller amount, ora greater amount, it can be eliminated not by 
reducing the profits of sugar producers but by eliminating a large part of the 
domestic industry itself. In other words, if this cost is to be^ eliminated, existing 
sugar lands must be abandoned or converted to new crops with possible compli- 
cations of existing agricultural problems; new employment must be found for 
present sugar workers; existing refineries must be scrapped and the United 
States must become entirely dependent on foreign sources or insular possessions 
for an essential part of its diet. 

There is a further implication. Sugar legislation has favored Cuban growers 
among foreign producers. Not only does Cuban sugar pay a lower duty than other 
foreign sugars, but the quota provisions allot to Cuba a substantial part of our 
domestic sugar consumption. This has meant in recent years that Cuban 
sugar has enjoyed a better price in the United States market than in other markets. 
Thus part oNihe cost of the sugar tariff and quota has gone toward financing a very 
tangible good-neighbor policy. Elimination of the sugar duty and quota would of 
course mean that Cuban sugars had no preferential advantage over other foreign 
sugars. If the authors are correct in their surmise that the United States price 
would be lower, "probably by an amount greater than the present duty on Cuban 

• Monograph No. 10, page 89. 

' Since there are substantial customs revenues from the tariff on sugar, the authors find that the cost to the 
consumer as a taxpayer is somewhat less. On page 82, they state: "For the 8 years examined total consumers' 
cost amounted to $2,189,062,203. The average annual cost was $273,632,775. The average annual cost for the 
three pre-quota years was $272,472,349; for the 5 years of the quota system, $274,329,031. Since the net cus- 
toms revenues were larger during the pre-quota period, the average annual cost to consumers as taxpayers 
was less in that period, namely, $178,921,349 as compared with $215,983,150 in the five quota years." 



18088 CONCENTRATION OF BCONOMIO POWER 

sugqir," we would have to find other means of financing our good-neighbor policy 
if we wish to maintain it.' 

Rayon. 

The calculations of the consumere' costs of the duty on rayon demonstrate the 
insuperable difficulties of making any such calculation for most products. The 
authors' procedure is to calculate the price differential between a pound of imported 
rayon yarn and a pound of domestic rayon yarn. This diflferential is taken as the 
additional cost to the consumer on each pound of yarn because of the tarifif. It is 
multiplied by total domestic production of rayon to discover the total annual cost 
to the consumer. Using this method, the authors venture the guess that the tariff 
on rayon yarn may have imposed an additional cost on the consuiher in 1937 and 
1938 of roughly $110,000,000 to $140,000,000. 

Any such method assumes an identical quality of both imported product and 
domestic product. Or, as the authors themselves put it in the introduction to this 
Chapter, "Unless they are homogeneous or nearly so,, the price differential loses 
its significance aa a measure of consumers' cost." (Page 79.) Calculations were 
based on the comparatively smaU imports in 1937 and 1938 of which Japanese 
rayon constituted 23% of the total in 1937 and 39% in 1938. According to the 
authors, this Japanese rayon (which plays such an impojtant part in the calcula- 
tions) "is inferior in quality to the domestic. It is made from a bleached sulphite 
wood pulp of paper grade whereas the pulp used by the domestic rayon industiy 
is said to be a special rayon grade having an alpha content averaging over 91 per- 
cent. High alpha ratios make for a whiter- and stronger yarn. So far as is 
publicly known, the domestic industry uses no paper grades of wood pulp whatso- 
ever." (Page 88.) Any calculation based on price differentials between products 
of such different qualities is meaningless, and it is not understandable why the 
authors, who avoided calculations for other products because of "almost insuper- 
able difficulties" should have permitted such a calculation to be published even 
with reservations.' 

Aside from difference in quality, there is another characteristic of rayon which 
makes any such calculation extremely difficult, and misleading. The rayon 
industry is a comparatively new industry both in the United States and in foreign 
countries. Quality of product has been greatly improved and there has been a 
great expansion in world consumption. With such frequent changes both in 
quality and volume of use, price differentials for any single year have less signifi- 
cance than differentials of price of the product of a long-established industry. 
This is apparent when the price pattern of domestic rayon is examined. The 
New York wholesale price of 1 50 denier first-quality rayon averaged $2.00 per lb. 
n 1925, $1.06 per lb. in 1930, $0.57 per lb. in 1935, and $0.53 per lb. in 1940. 

General. 

Because of the many technicalities involved, no, satisfactory estimate of the cost 
to the consumer- of our tariff has ever been made. When the Tariff Commission 
was called upon by congressional resolution to calculate "the effect of the tariff 
'on consumer expenditures' for commodities produced by such corporations 
[those having net incomes in excess of $1,000,000] 'as compared With revenue 
derived by the United States Treasury therefrom,' " the Tariff Commission gave 
the following reasons, among others, for their failure to supply the requested 
information: 

' There is of course the possibility that the lower price received by Cuban producers might be oflset by an 
increased volume of shipments of Cuban sugar to the United States. In this connection, the authors state 
on page 86 of the Monograph: "A considerable portion, moreover, of the supply now produced in protected 
United States areas would not be available without restrictions on imports. How much of this reduction 
in supply from protected areas could be furnished by low-cost production in nonprotected areas is not ex- 
actly taiown. Many of the cane-producing regions, such as Cuba, probably could meet the demand without 
incurring any substantial increase? in costs." 

' Even if the imported and domestic product had been of the same quality, there would still be criticism of 
the technique of calculating consumer cost on the basis of the differential between estimated landed cost of 
imports and the domestic list price. Since Japanese rayon constituted a substantial part of the total rayon 
yam imports the depreciation of the yen unduly depresses the apparent average invoice price of imported 
yarn. Furthermore, in order to calculate landed cost the authors were forced to estimate the cost of freight, 
Insurance and importers' marfc-up for the imported yam (10% was idded to the invoice price). Pre- 
sumably no allowance is made in this estimate for delivery from the port of entry to the weaving mill. On 
the other hand, not only does the domestic list price include delivery to the weaving mill, but it is frequently 
higher than the actual sales price of domestic yam. As shown by testimony in the Federal Trade Commis- 
sion investigation of the rayon industry in 1937, the list prices quoted by the rayon producers represent a 
price ceiling with actual sale prices of rayon yams taking place at this level or below. In several instances 
and at diflerent times, as shown by this Trade Commission study, first-quality j'am was sold as much as 
15 or 20 percent below existing list price. The problems created by such marketing situations are recognized 
by the authors in their statement on page 2 of the Monograph: "In many marketing situations, however, 
the difference between posted or nominal prices and actual prices including all the variable terms of a trans- 
action is extremely difBcult to ascertain." 



OONOBNTRATION OF ECONOMIC POWER 



18089 



«(* * * -pjjg fg^ articles covered by the resolution for which reliable 
domestic and foreign prices may be obtained present special difficulties both 
as to the comparability of the domestic and foreign products and as to the 
factors affecting prices. 

"In the second place, even where accurate price comparisons are prac- 
ticable, the factors affecting prices here and abroad are 30 numerous and so 
fluctuating that the degree of effectiveness of tariff duties, as far as it can be 
estimated at all, can be estimated only roughly and then only after long 
study It would be impracticable in any reasonable time to make any worth- 
while estimates as to the effectiveness of the tariff on articles covered by the 
resolution, even if the entire staff of the Commission should concentrate 
upon this one task." ^° 

Furthermore, even if such costs could be stated, they would have little meaning 
unless interpreted in conjunction with possible alternate costs or compensating 
social, economic or strategic gains. This is true whether one is attempting an 
evaluation of the cost of a law regulating imports or the cost of laws regulating 
domestic working conditions and pay agricultural production or the conditions 
and technique of distribution. 
Submitted by — 

The American Tariff League. 
19 West 44th St., New York, N. Y. 



Appendix 

Our own comments have been confined to a general but comprehensive criticism 
of the study. We have attempted to set forth as briefly as possible the reasoiui 
why a study conducted within such narrow Umits is necessarily meaningless and 
in specific cases highly misleading. 

The American Tariff League is not in a position to make authoritative item- 
by-item criticisms of the individual product studies. We are therefore presenting, 
with the permission of the writers, material excerpted from among the communi- 
cations received in the office of the American Tariff League. They are typical 
of the criticisms of individuals in a position to speak for their own industries. 
In several instances they offer specific illustrations of the points made in the 
body of the paper. 

BOOK PAPER (containing GR0\UND WOOD) 
(Page 152) 
The only correct data under this heading in the T. N. E. C. Monograph are: 

1. Description and use. 

3. Recent Tariff History. 

4. Average Ad Valorem Equivalent. 

The true data for 1937, compared with the published figures are given below: 



- 


Total No. 
Companies 


Total 
Plants 


Percent of 
Domestic 
Production 
by 4 Larg- 
est Com- 
panies 


Value of 
Product 


Monograph text .- . 


11 
24 


14 
30 


96 
72.7 


$15, 000, 000 


Trae Facts - 


$30,000,000 







The above data are only for the mills included in the reports to the Groundwood 
Paper Manufacturers' Association, in which in 1937 twenty-four companies pro- 
duced 445,432 tons, and the four largest producers 324,044. 

Any implication in the Monograph that there is monopolistic tendency is 
wrong for two reasons: First, the figures themselves are erroneous, and, second, 
even more important, a failure to realize the true competitive field. 

i" 0. 8. Tariff Commission "Sales and Income of Certain Manufacturing Companies and Rates of Duty 
and Other Information With Respect to Their Products. 1936." 



18090 CONCENTRATION OF ECONOMIC POWER 

The first error is shown by the corrected figures given above. The competi- 
tive field is not confined to groundwood papers, but all Book Paper, or at least all 
uncoated Book Paper. The Groundwood Book Papers are in constant competi- 
tion Vith the free sheet (all chemical pulp) papers, and vice versa. Also, outside 
of the Groundwood field, there is a large production of Book Papers containing 
groundwood, as well as the free sheet papers, none of which are included in the 
445,432 tons of product given above. When this entire field of competition is 
included, the facts are that there are 82 companies in the field, and the four 
largest producers of strictly Groundwood Content Book Papers produced only 
20.5 per cent of the total output. The Monograph states that the concentration 
is explained by side line production by large mills principally engaged in Book 
Paper manufacture. The facts are quite the contrary. Of the four largest 
producers of Groundwood Content Book Paper, only one makes free sheet Book 
Paper in any significant amount. In the case of that one, its production of 
Groundwood Paper is so large that it can in no wise be considered a side-line 
production but rather is its principal output. 

The figures given are those reported to the Groundwood Paper Manufacturers 
Association and the Book Paper Manufacturers Association. These are not 100 
per cent of the domestic production, but the largest producers are included. If 
non-reporting mills were included, the proportion of the total output by the 
four largest producers would be still lower than the percentage shown. 

LEATHEHBOARD 

(Page 150) 

According to the T. N. E. C. Monograph, "Leatherboard is a solid board made 
from scrap leather and may or may not contain manila, jute, or paper clippings. 
It is used for shoe counters and boxes and in the manufacture of slippers." 

The data on leatherboard in the T. N. E. C. Monograph must refer to a product 
entirely different from leather fibre, or to leather fibre plus other materials.. In 
either event the impression given of an industry largely controlled by a limited 
number of companies, and therefore monopolistic in tendency is seriously in 
error. 

The term leatherboard originated in the 1880's to describe anything which 
acted as a substitute for leather, irrespective of any leather content. A great 
many materials which are now known by other names were described as leather- 
board when first put upon the market. The result has been great confusion since 
many of these materials are no longer known as leatherboard in their trade but 
still come under that term in the Census, in railroad freight tariffs, in ocean freight 
tariffs or in customs schedules. Leather fibre is now used to identify board con- 
taining leather in order to distinguish it from other materials. It should be 
noted that leather fibre does actually contain a large proportion of animal fibre, 
something which is not true of any other boards. 

Having the above in mind it is entirely possible that the T. N. E. C. report 
referred to something entirely different from leather fibre or that it referred to 
leather fibre and one or more other materials. It could not have been intended 
to refer to leather fibre only. Thus, leather fibre is not used for shoe counters 
nor for shoe boxes (nor for box toes if that is what they mean by the word boxes) . 
If used in the manufacture of slippers it is used in negligible quantity. 

The figures on domestic production also indicate that the term leatherboard as 
used in the Monograph does not refer to the true leather fibre. 



CIGARETTE PAPER 

(Page 151) 

An assumption that the domestic production of cigarette paper is so concen- 
trated in a small number of mills that a reduction of the present duty rate would 
tend to lower prices and end a tendency toward American monopoly is entirely 
disproved by the facts. 

1. Monopolistic tendency, if any (prior to the European war) was on the part of 
French mills, largely controlled or financed by four principal American consumers, 
and these French mills provided 75 per cent of the American requirements. 

2. A reduction of the duty rate from 60 to 45 per cent effective June 15, 1936 
resulted in an increase of only 5.7 per cent in imports, and this percentage would 
normally be due to the better level of general business in 1937 as compared with 
1935. 



CONCENTRATION OF ECONOMIC POWER 



18091 



3. The only price reduction was due, after this duty reduction, to the deprecia- 
tion of the French franc, and to a lower price abroad. 

4. The reduction of duty, while not changing the competitive status, saved the 
cigarette paper consumers 15 per cent duty charges on their imports of $3,874,925 
of this paper, or $600,000 which otherwise would have been paid into the revenues 
of the United States Government. 

5. "Concentration" is not the proper word for the condition existing in the 
American cigarette paper industry. The proper word is "restriction" for the 
operations of the monopolistic French mills made it impossible for domestic 
producers to market their product except lo independent cigarette manufacturers, 
even with the dutv rate of 60 per cent formerly in effect. 

An entirely false implication is contained in the final paragraph of the Mono- 
graph's discussion of this subject. The Monograph states that a new domestic 
mill has increased domestic capacity to an estimated 75 per cent of consumption. 
This new mill was erected solely because of the impending war in Europe. Until 
this mill was established, the domestic industry had not for many years past been 
permitted to supply more than 25 per cent of the domestic requirements, the 
balance all coming from French mills. When war in Europe was seen to be 
impending, the American consumers, fearing inability to continue purchases 
abroad financed the building of this mill for their own requirements, and not 
primarily for the general market. The blockade of France has practically elimi- 
nated all French shipments of cigarette paper. Inasmuch as France can produce 
this paper at a far lower cost than the domestic mills, there is no assurance that 
domestic production would be continued by the newly built mills if the French 
mills are again permitted to ship their product to this market. 

"§bNTAINER BOARD (OTHEB THAN LINERS, CHIP OR STRAw)" 
(Page 149) 

According to the T. N. E. C. report, "Container paperboard is a homogeneous 
or solid board of various thicknesses with a machine finish. It is used for corru- 
gating or for making light containers." 

Production of container board is reported by the Census of Manufactures 
according to the following six classes: 
Census Class 

Container Boards: 

Liners Production, 1937 

Kraft $45,678,709 

Jute --- 43,207,483 

Other 6, 739, 921 

Chip (plain and test) 18, 457, 834 

Straw (for corrugated-container use) 16, 895, 781 

Other container boards 3, 423, 586 

The last of these census classes "other container boards" is the item under 
discussion and the only container board listed in Appendix II of the T. N. E. C. 
report. Included in this miscellaneous class are chestnut board, which is used 
as a corrugating medium and some items of inanila fiber which are not used in 
container manufacture. 

Chestnut board is one of 7 grades of board used as a corrugating medium (the 
fluted member of a corrugated board) and represents the utilization of a waste 
material which otherwise would be destroyed. 

During 1937 the following tonnage of corrugating material was made from the 
material listed: 



Kind 


Com- 
panies 


Plants 


Tons 


Total 


Straw 


19 
10 
5 
11 
1 
1 
3 


28 
12 
5 

18 
1 
1 
3 


404, 496 
148, 361 
90,318 
60,693 
26,280 
6,926 
500 


54.8 


Kraft --- - 


20.1 




12.3 


Waste Paper Stock ' - 


8.2 




3.6 




.9 


Sulphite (Est.) 1 


.1 






Total 


46 


68 


735, 087 


100.0 







18092 CONCENTRATION OF ECONOMIC POWER 

In the Census of Manufactures, straw, board is separately reported, Kraft 
corrugating material is included under "liners — Kraft" and corrugating material 
made from waste paper stock is included under "chip." 

The corrugating material made from any one of the seven different raw stocks 
listed is adapted to the fabricating of corrugating board except that one grade 
may possess certain characteristics more advantageous for the use to which the 
board is to be put than another. All grades compete in the open market. 
One fabricator may use one of several grades in his work. 

There were no imports of this material during 1937. 

Furthermore, chestnut board is made also for use as a liner and in 1937 there 
was produced 25,114 tons of chestnut liners which was sold in competition with 
other liner boards. 

Since there are but 5 companies making chestnet board, it is apparent that the 
census bureau has included 7 other companies using manila fiber that are entirely 
foreign to container-board manufacture and therefore the 91% shown for the 4 
largest companies is meaningless. 

wool/ TEXTILE PRODTTCTS 

Memorandum in re Monograph No. 10 of the T. N. E. C. on Industriar Concen- 
tration and Tariffs, in respect to that part of the Monograph pertaining to 
Wool Textile Products, pages 134, 135, 136. 

Woolen and Worsted Fabrics (page 134). 

The tabulation appearing at the bottom of page 134 under the heading of 
"Woolen and Worsted Fabrics" is grossly incorrect. It purports to cover the 
operations of from three to sixteen plants engaged in the production of the follow- 
ing enumerated articles: 

A. Woolen and worsted fabrics for — 

(a) Men's Suits 

(b) Men's Overcoats 

(c) Men's Topcoats 

(d) Women's Coats 

(e) Women's Suits 

(f) Women's Dresses 

B. Interlinings without horsehair. 

If we understand the table correctly, it also indicated that "3 to 16" plants 
studies inciude the four miUs in the industry producing the largest volume of 
each of these separately classified products. In none of the classifications given, 
with the possible exception of "interlinings without horsehair", do any four 
concerns in the industry account for 77% of the total production, let alone 100% 
apparently assigned as the figure for one or more classifications. 

The total value of the products enumerated is given as $40,574,089, whereas 
the figure given in the 1937 Census of Manufactures is approximate j' ten times 
this amount. Since the percentages showing concentration were undoubtedly 
derived from these incorrect figures on the value of the products studied, these 
percentages too must be incorrect. If figures covering the entire industry were 
used, it is doubtful if they would show a degree of concentration of much if any 
more than half of that indicated in this table, with the possible exception of inter- 
linings without horsehair. This last is a relatively unimportant product and 
figures which would enable one to check this item are not at present available. 

An illustration showing that these percentage figures, even if correct, may be 
misleading because the many variations in the allocations of machinery to specific 
products according to the demand, is found in the production of covert cloth. 
A few years ago substantially all of the covert cloth was produced by a single mill. 
Since that time, however, this fabric has gained public favor with the result that 
a number of mills are now competing for this business. This is substantially 
the case with every product which the industry makes. Practically every mill 
in the country is a potential producer of any wool fabric, and as soon as the 
market widens or the price margin becomes attractive, other mills enter those fields 
which previously have been confined to & relatively small number. 

Another illustration is given by the manufacture of fabrics for the. Army 
When the Army consisted of a force of 275,000 men, the production of army 
cloths was confined to a handful of mills. However, as a result of the recently 
enlarged demand, there were 77 bidders on the invitations opened by the Quarter- 
master in December. 



OONCBNTRATION OF ECONOMIC POWER 



18093 



A tabulation of those making certain products at any one time, even if correct, 
is a much less accurate measure of the degree of concentration in the industry 
than a census of looms operated by the leading producers. 

The following table gives a classification of looms subject to the Wool Textile 
Code as of January 26, 1935. The picture has not changed greatly since then. 

Classification of firms according to loom equipment subject to the Wool Textile Code, 

January 26, 1935 





Number of Firms 


Loomsinthousands ' 


% of Total Looms 


Loom Equipment 


Class 


Cumula- 
tive 


Class 


Cumula- 
tive 


Class 


Cumula- 
tive 


1,000 or more 


7 

9 

6 

4 

9 

65 

123 

. Ill 

58 

31 


7 

16 
21 
25 

34 
99 
222 
333 
391 
422 


•17.4 
6.1 
2.2 
1.4 
2.1 
8.4 
8.5 
4.4 
1.1 
.2 


17.4 
23.5 
25.7 
27; 1 
29.2 
37.6 
46.1 
50.5 
51.6 
51.8 


34% 
12 

4 

3 

4 
16 
16 

9 

2 


34% 


600 to 999 


46 


400 to 499 


50 


300 to 399 


53 


200 to 299 


57 


100 to 199 _... 


73 


50to99 


89 


25 to 49 


98 


11 to 24 


100 


10 or less _ 


100 








Total - 


422 


422 


51.8 


51 8 


100% 


100% 








(493 mills) 







1 Looms of 50" or less reed space counted at H loom. 

While this table does indicate a concentration of productive capacitj', it is 
much less than the 77 to 100% figure suggested in the Monograph. Regardless 
of what the correct ratios may be, we would question their use as an "indicator of 
monopolistic elements" in the manufacture of the products of the wool textile 
industry. One need go no further than a cursory examination of the profit and 
loss record of the industry to be convinced that monopolistic elements are almost 
completely lacking regardless of the fact that there is a degree of ownership 
concentration. 

******* 

.The explanation that "specialization and side-line production apparently 
account for the concentration" in these products is a meaningless dismissal of a 
complicated if not baffling question. The statement that "imports consist 
mainly of fine woolens and worsteds" is a repitition of an erroneous impression 
which is widespread but at variance with the facts. During 1939 imports of 
woven fabrics wholly or in chief value of wool and hair and weighing over four 
ounces per square yard under the lowest value bracket (not over $1.25 per pound) 
amounted to almost half the total imports, while those under the highest value 
bracket (oyer $2 per pound) amounted to only slightly over 15%. The following 
table shows the importations during the last five years for which figures are 
available, separated into the different value brackets. 

Imports into United States for consumption of woven fabrics weighing over four 
ounces per square yard {excluding pile fabrics and woven fills) wholly or in chief 
value of wool or hair 

[In thousands of square yards] 





Value per Pound (Foreign) 


Year 


Value per Pound (Foreign) 


Year 


Not Over 
$1.25 


Over $1.25 
but not 
over $2 


Over $2 


Total 


Not Over 
$1.25 


Over $1.25 
but not 
over $2 


Over $2 


Total 


1935.. 
1936. 
1937.. 


2,089 41% 
2,977 42% 
3,515 37% 


1,443 28% 
1,880 26% 
3,003 32% 


1,532 31% 
2,291 32% 
2,853 31% 


5,064 
7,148 
9,371 


1938.. 
1939.. 


2,253 38% 
5,490 48% 


2,295 39% 
4.063 36% 


1,363 23% 
1,793 16% 


5,911 
11,346 



18094 CONCENTRATION OF ECONOMIC POWER 

This table clearly indicates what a large p>ercentage of the goods imported 
are of medium and low grades which compete actively with domestic products. 

The statement that "A substantial reduction in the duty, including the duty on 
raw wool, would increase imports greatly and would lower pfices appreciably," 
is a mere statement of opinion without substantiation of any kind. The effect 
of a reduction in duty would depend very largely upon how the duty was reduced. 
If the duty on raw wool were reduced and there were a corresponding reduction 
in the compensatory rate on fabrics, there is no question that prices would be 
lowered. The cost to the domestic manufacturer of his raw material would be 
reduced if the tariff on raw wool were lowered, and he would be able to produce 
fabrics which could be sold at a lesser cost than is the case at present. Such a 
reduction, hdwever, would have no appreciable effect upon the quantity of 
imports. A reduction in the tariff on raw wool and a corresponding reduction 
in the cost to the domestic manufacturer of his raw material would leave the 
domestic manufacturer in the same competitive position as respects the foreign 
manufacturer as he is at present, and other things being equal, such a change in 
duty would have no effect upon imports. 

A reduction in the ad valorem duty would unquestionably increase imports 
in the first instance. It is to be doubted, however, if there would be any per- 
manent increase in imports as a result of such a reduction. A reduction in the 
ad valorem rate would mean that foreign fabrics could be landed here at a lower 
figure, but the domestic mills would not stand idly by and lose the American 
market without a struggle. The domestic manufacturer would have to find 
some way of reducing his own costs to meet this intensified competition. While 
profits are not sufficiently large to enable domestic manufacturers to meet such 
competition out of their present profits, they would endeavor to meet it by reduc- 
ing their costs or by paying less for their raw material. It is doubtful whether 
labor costs could be substantially lowered. Probably in the end the reduction 
would be brought about through paying a lesser price to our domestic wool growers. 
The domestic wool growers have no market other than the wool textile industry 
of this country, and if the wool textile industry were to lose a certain portion of 
its business to imported fabrics, they would be unable to use domestic wool at 
as high a price as would be the case otherwise. When a reduction had been 
accomplished, either at the expense of the domestic wool growers or textile labor 
or both, importations would again be decreased so that we would be back where 
we started, except that we would be operating on a lower price level. While 
such a lower price level might be desirable from some standpoints, it would not 
seem that there is any reason for suggesting that either textile laboror the domestic 
wool growers should make any such contribution to a reduction in prices. It 
seems to us that the statement that a reduction in duty would increase imports 
greatly and would lower prices appreciably is very unintelligent, looks only at 
the near term result, and rather assumes that you can eat your cake and have it too. 

2. Billiard Cloths (page 135). 

Our comments on the statements covering the production of billiard cloths are 
similar to those which we have made on the subject of concentration in the woolen 
and worsted fabric field referred to above. While apparently only three firms 
reported making billiard cloth in 1937, there are at least six other firms who make 
billiard cloth on occasion. The material used as undercollar cloth is very similar, 
to billiard cloth, although of a somewhat inferior quality. Any widening of the 
market for billiard cloths immediately brings into the market those firms who 
already manufacture undercollar cloth on a large scale. There are a number of 
concerns making undercollar cloth, and practically every woolen mill could make 
this cloth if occasion arose, and most of the woolen mills could produce a satis- 
factory billiard cloth if there were a demand for it or if the price margin became 
large enough to be attractive. The remarks made above apropos of the result of a 
reduction in duty on woolen and worsted fabrics are likewise applicable in some 
degree to billiard cloths. 

3. Auto Cloths with Pile (page 136). 

Although there is no reason to question the figures 6n auto cloths with pile, we 
do take the same exception to the remarks in the Monograph under "Industrial 
Concentration and Tariff Policy" as we made in respect to the statements on 
woolen and worsted fabrics covered above. 

On page 16 of the Monograph it is stated that "removal or substantial reduction 
of duties would probably assist in offsetting monopolistic elements in domestic 
industries producing, among other items, auto cloths with pile." Nowhere have 
we been able to find how it was determined that monopolistic elements were pre- 



CONCENTRATION OF ECONOMIC POWER 18095 

sent in the domestic industry, unless it were the finding that the four largest com- 
panies produce an estimated 90% of the total production. By the authors' own 
admissions concentration of production in a limited number of firms alone is no 
evidence. Also we are unable to find any basis whatever for the statement that a 
reduction of duty would increase imports and assist in offsetting "monopolistic 
elements," whatever they are. A fact which the writers of the Monograph appear 
to have overlooked completely is that these auto cloths with pile must constantly 
compete with auto cloths without pile, which are produced in about equal volume. 
Because of the time element involved, it is impracticable for automobile manu- 
facturers to use imported fabrics to any large extent and accordingly a reduction in 
the ad valorem duty would probably have little or no effect either upon prices or 
upon volume of imports. A reduction in the duty on raw wool would have an 
effect upon the price of auto cloths because the domestic manufacturer would then 
start with a lower raw material co.sl., but it would have no effect upon the amount 
of material imported. It is perhaps interesting to recall that some years ago one 
of the largest automobile manufacturers in this country equipped a factory and 
produced his own automobile upholstery cloths. He soon abandoned it, finding 
that he could secure the automobile fabrics from integrated mills, making other 
products as well as auto cloths, considerably cheaper than he could make them 
himself. 

Rejoinder bt Clifford L. James to Statement of the American Tariff 
League, re T. N. E. C. Monograph No. 10, Industrial Concentration 
AND Tariffs 

This monograph is an introductory exploration of the relationship between 
industrial concentration and tariffs in order to determine the probable effectiveness 
of tariff-reductions as an aid in the preservation of competition. It is incomplete 
and tentative, that is, only one part of a large sample of industrial products is 
analyzed in detail and the analysis applies to conditions approximating those of 
1937. The study indicates clearly the difficulties involved in this type of investi- 
gation, the need for a coordinated policy in the use of tariffs and in the efforts to 
preserve competition, and consequently, the desirability of making periodically a 
complete and exhaustive investigation of the problem. 

The foregoing explanation, which is also clearly set forth in the monograph 
(pages 7 to 11) answers many of the objections stated by the American Tariff 
League. With reference to the large sample of 1807 products, for example, the 
League states that "no detailed schedule of these products is given." The state- 
ment is only partially correct. Products in the low and intermediate concentra- 
tion group of the large sample were examined with regard to their tariff status and 
the probable restrictive effects of tariffs, but this information for each product 
was not published separately because of its length. These two groups, moreover, 
were not examined with regard to possible monopolistic elements. About 90 
percent, however, of the products in the high concentration group (p. 6) was 
studied carefully and separate schedules of information are published in Appen- 
dix II. If the American Tariff League implies that a detailed study should be 
made of the other two groups,, as well as of a much larger sample, there is no point 
of disagreement. 

The objections to the analysis of the high concentration group of products, 
which constitutes the major portion of the monograph, indicate a careless reading 
of the monograph. They seem to arise from two sources, namely, a failure to note 
fully the evidence presented and a failure to remember that the monograph lays 
no claim to finality with regard to the products analyzed. The League states, 
for example, that "the whole study hinges on the findings set forth under the sixth 
item" of the schedules of information. It is correct to say that this item is pivotal, 
but it summarizes in part the rest of the schedule and in part contains any addi- 
tional information of significance for the problem of probable effects of tariffs and 
of the probable existence of monopolistic elements in domestic industries. Items 
one and six indicate the difference between the domestic and imported products 
when the difference seemed to be important. Items two and six indicate the 
probable existence of monopolistic elements in the domestic industries. The 
ratio of companies to plants in item two is important, as well as the index of 
concentration (p. 1). Items three, four, five, and six indicate the probable effects 
of tariffs. If the duty on a given product was raised substantially since 1913 
(item three), that change is partial evidence of restriction of imports. The height 
of duties in terms of an ad valorem rate and especially the comparison of domestic 
production, imports, and exports (items four and five) furnish important evidence 
for an estimate of the effects of tariffs. 



18096 CONCENTRATION OF ECONOMIC POWER 

The estimates of the restrictive effects of tariffs and the competitive situations 
are referred to by the League as the "unsupported opinions of the authors." 
The estimates are clearly presented as tentative judgments derived from the avail- 
able evidence which did not mclude extensive field-investigations of companies, 
plants, and products. Such investigations, as the League implies, would be 
indispensable for a final decision with regard to policy at any given time. The 
available evidence, however, which was used and most of which appears in the 
monograph cannot be dismissed as "unsupported opinions." The staff of the 
T. N. E. C. had the cooperation of other governmental agencies in the preparation 
of the monograph. Many of the products included in the study (p. 11) had 
already been carefully examined in the development of the trade agreements. In 
addition to th6 basic information contained in the schedules, more detailed points 
of importance for several products are given in Chapter II; namely, for corn- 
starch, rayon yarn, sodium bicarbonate, coal,- tar products, rubber thread, agri- 
cultural implements, electrical equipment, and slide fasteners. Approximately 
twelve products, grouped as three industries, are analyzed historically on an 
industry basis in Chapters Til, IV, and V. When the available evidence seemed 
to be insufficient to warrant reasonable estimates for certain products, no analysis 
was attempted and the lack of data was explained (pages 6, 17, 18, 19 and 21) 
Although these points are carefully set forth, the American Tariff League asserts 
that "the technical limitations of the census data are ignored." 

A few comments on the objections to the analysis of certain products will suffice 
to show that they are largely irrelevant and insignificant. The League cites, 
for example, the failure to repeat a reference in a footnote with regard to compe- 
tition (rubber tires and tubes, p 6) in the schedule of information for that product 
(p. 186). The schedule of information, however, sho:Vs that the product is on an 
export-basis and that the duty is not restrictive. Furthermore, the product is not 
classified in the group characterized by restrictive tariffs and monopolistic elements 
(p. 20) which is the significant point of the analysis. 

The analysis of book paper (containing ground wood), (p. 152), leather board 
(p. 150), and container board (p. 149) is objected to because of alleged, faulty 
census data and because of "any implication" of a "monopolistic tendency." 
The census data may be faulty, or the apparent discrepancy between census data 
and the data submitted by the League may be due to differences in the classifica- 
tion of products. Only a special investigation can satisfactorily settle that issue. 
Any objection, however, to the analysis of the competitive situation for these 
products seems to be irrelevant since the objectors should have observed that 
these products are not classified in the group characterized by monopolistic ele- 
ments (p. 17). On the other hand, cigarette paper is classified in that group 
(p. 17) and a substantial reduction of the duty is recorded as a probable offset to 
"minor monopolistic elements" in the domestic industry (pages 151 and 17). 

In this instance the criticisms submitted by the League miss one important 
consideration, namely, that under conditions approximating those of 1937 a very 
low duty on cigarette paper would improve the alternatives of the smaller inde- 
pendent cigarette companies in buying their paper. Although the duty was 
60 per cent ad valorem, from 1922 to 1936, the large cigarette companies were not 
dependent on the few domestic producers of paper because of their financial and 
contractual relations with foreign paper mills and because of the higher price at 
which their cigarettes were sold. The smaller independent cigarette companies 
were probably excluded from foreign sources of supply by the lack of quantity- 
discounts, the duty, and the higher ratio of paper-cost to the selling price of their 
cigarettes. 

Approximately the same comments apply to the criticisms submitted by the 
League with regard to a few textile products. Although the census data and the 
census classification of products may be questioned, the analysis of these products, 
as judged by the criticisms, was carefully made. For example, certain woolen 
and worsted fabrics, billiard cloths, and auto cloths (with pile) are included, on the 
basis of census data, in the high-concentration group. The schedules of informa- 
tion for the first two products (pages 134-36) indicate that the high concentration 
of output in a few firms had little, if any, monopolistiG significance, that is, other 
firms were equipped to produce these products, but did not do so in 1937. These 
two products are not included in the group characterized by monopolistic ele- 
meiits (p. 16), and consequently, the criticism of implying monopolistic conditions 
is not relevant for these two products. The third product, auto cloths (with pile) , 
is included in the group for which "removal or substantial reduction of duties 
would probably assist in offsetting monopolistic elements in domestic industries." 
It is included because of multiple-plant ownership, the very high percentage of 



CONCENTRATION OF ECONOMIC POWER 18097 

output supplied by the four largest companies, the use of special looms and 
spinning machines, contractual selling practices, and the height of the duty (pages 
16 and 136). 

Other criticisms presented by the American Tariff League, especially those 
applicable to Chapter VII, Consumers' Cost From Import Restrictions, could be 
answered largely by quotations from the monograph. The reader is invited to do 
his own checking and to formulate his own judgments. Many economic processes 
are not amenable to exact analysis, and consequently, the evaluation of evidence 
is frequently a difficult task. The hope is expressed here that the statement of the 
American Tariff League and this rejoinder will contribute to a careful reading and 
interpretation of the tentative findings presented in Monograph No. 10. 



HISTORY OF THE TAXATION OF LIFE INSURANCE COMPANIES 
UNDER THE FEDERAL INCOME, CAPITAL STOCK, AND EXCESS 
PROFITS TAXES, 1909-1940 

(Submitted by the Division of Tax Research, Department of the Treasury, as 
supplemental material to Monograph No. 28, "The Study of Legal Reserve 
Life Insurance Companies") 

(Written by Willard C. Mills, Associate Economic Analyst, Division of Tax Re- 
search, Department of the Treasury. Valuable criticisms were supplied by 
Walter W. Mahon, in the oflBce of the Chief Counsel, Bureau of Internal 
Revenue) 



18099 



124491 — 41 — pt. 31-A- 



TABLE OF CONTENTS 

Page 

Taxation of life insurance companies under the income tax 18103 

A. General statement : 18103 

B. Gross income and deductions, 190&-1920 18103 

1. Gross income 18103 

a. General statement 18103 

b. Dividends of mutual and participating life in- 

surance companies 18104 

(1) The nature of the dividends declared 

by mutual and participating life in- 
surance companies 18104 

(2) The controversy with respect to divi- 

dends applied to the payment of re- 
newal premiums, to shorten the pre- 
mium-paying or endowment period, 
or to purchase paid-up additions or 
annuities 18104 

(3) The exclusion provided in the 1913 

and later acts 18105 

c. Other problems relating to gross income 18106 

2. Deductions 18106 

a. Genesal statement 18106 

b. The first principal problem — the meaning of the 

term "dividends" as used in the deduction 
allowed for sums other than dividends paid 
on policy and annuity contracts 18106 

c. The second principal problem — the deduction 

allowed for net additions to reserves required 

by law.- 18107 

C. Gross income and deductions, 1921-1940 18107 

1. Gross income 18107 

a. General statement - 18107 

b. Rental value of space occupied, 1921-1931 18107 

c. Purchase by insurance company as mortgagee- 

vendor at foreclosure sale 18107 

2. Deductions ^ 18108 

a. General statement 18108 

b. Reserve fund earning allowance 18108 

c. Investment expenses 18110 

d. Two percent of reserves held for deferred divi- 

dend payments 18111 

e. Taxes, expenses, depreciation, and obsolescence 

with respect to real estate 18111 

(1) Taxes and other expenses .. 18111 

(2) Depreciation and obsolescence 18112 

f. Interest paid on indebtedness 18112 

D. The definition of the term "reserve" 181 Ifi c 

E. Rates of tax 18114 

F. Foreign companies 18115 

G. Exempt companies 18116 

1. Fraternal beneficiary societies 18116 

2. Benevolent life insurance associations of a purely local 

character 18117 

3. Voluntary employees' beneficiary associations 18117 

4. Voluntary Federal government employees' beneficiary 

associations 18118 

H. Consolidated returns 18118 

1. Domestic companies 18118 

2. Foreign companies ^ 18119 

18101 



18102 CONCENTRATION OF ECONOMIC POWER 

Page 
II. Taxation of life insurance companies under the capital stock tax 18119 

A. General statement 18119 

B. The tax base 18120 

1. Stock companies 18120 

2. Mutual companies 18121 

Til. Taxation of life insurance companies under the excess profits tax 18122 

A. General statement 18122 

B. The determination of invested capital . 18123 

1. Stock companies 18123 

2. Mutual companies - 18123 

a. General statement 18123 

b. The controversy with respect to the legal re- 

serve . . 18123 



I. Taxation of Life Insurance Companies Under the 
Income Tax 

A. general statement 

Under the Corporation Excise Tax Act of 1909 the broad outlines of corporate 
income taxation were set forth, a tax being imposed upon "every corporation, 
joint stock company or association, organized for profit and having a capital 
stock represented by shares, and every insurance company * * *."' The 
general basis of the tax for insurance companies as well as for other corporations 
was "* * * entire net income * * * from all sources." ^ Fraternal 
beneficiary societies were exempt from the tax.' 

Under the Revenue Acts of 1913, 1916, 1917, and 1918, insurance companies 
continued to be t&xed on their entire net income from all sources.* The general 
plan of taxing the incomes of life insurance companies set forth under the 1909 
act continued to be applied, net premium income being included in gross income, 
and claims paid under policy contracts being allowed as a deduction. 

The treatment of life insurance companies under the income tax was radically 
changed under the Revenue Act of 1921. Under that and subsequent acts life 
insurance companies have been taxed, not on their net income from whatever 
source derived, but on the basis of their investment income from interest, divi- 
dends, and rents. Under this revised method of taxing life insurance companies 
only deductions properly related to investment income are allowed. Thus, 
since enactment of the Revenue Act of 1921, premium receipts are not included 
in gross income and claims paid under policy contracts are not allowable as a 
deduction. 

Under the 1921 and subsequent acts, life insurance companies have been defined 
as insurance companies "engaged in the business of issuing life insurance and 
annuity contracts (including contracts of combined life, health, and accident 
insurance), the reserve funds of which held for the fulfilment of such contracts 
comprise more than 50 pef centum of its total reserve funds." * This definition 
has proven unsatisfactory in that business organizations not in reality life insur- 
ance companies could under a literal interpretation of the statute qualify as such 
by writing one life* insurance contract. Mortuary companies have been able to 
secure classification as life insurance companies by doing some of their business 
on an insurance basis.' 

B. GROSS income AND DEDUCTIONS, 1909-1920 

.1. Gros8 income. 

a. General statement. — During the period 1909-1920 the gross income of We 
insurance companies, like the gross income of other domesti*' taxpayers, consisted 
of their total revenue from the operation of the business and of their income from 
from all other sources within the taxable year.' With respect to premium income, 
however, only net premium income (gross premium income less returned premiums 
on pohcies cancelled and premiums on policies not taken) was to be included in 
life insurance company gross income.* 

< Tariff Act of August 6, 1909, section 38. 
» Ibid. 
« Ibid. 

* Tarlfl Act of 1913, section II B [1]; Revenue Act of 1916, section 10; Revenue Act of 1917, section 120G 
(1); Revenue Act of 1918, sections 213 and 233 (a) (1). 

« Revenue Acts of 1921, 1924. and 1926, section 242; Revenue Acts of 1928, 1932, 1934, 1936, and 1938, 
section 201 (a); I. R. C, section 210 (a). 

* Luaiire Burial A asociaiion Co., 36 BTA 621 (1937); afflnned 102 Fed. (2d) 89 (1939); Mpmo. BTA- 
United Burial and In». Co., and Brown SerMce Funeral Co., Inc., Prentice-Hall (1939) 6.654. 

' Regulations 31, Article 2; Regulations 33, Article 97; Regulations 33 (revised). Article 239; Regulation: 
45, Article 548. This general statement mu.''t be qualified, of course, by the exemption provided, a'' in the 
case of other corporations, for interest received on obligations of the United States or of the Stales and iheis 
political subdivisions. (Regulations 33 (revised). Article 239). Further, as in the case "of other corponiions, 
dividends received from corporations subject to the tax were exempt from the tax under the IQOC and ISlS 
acts. 

« Regulations 33, Article 101; Regulations 33 (revised), Article .239; Regulations 45, Article 548. 

18103 



18104 CONCENTRATION OF ECONOMIC POWER 

To determine a controversy that arose under the Corporation Excise Tax Act 
of 1909 with regard to the tax status of that portion of net premium income re- 
turned to policyholders in the form of dividends, the act of 1913 and subsequent 
acts provided that life insurance companies could exclude from gross income that 
portion of any actual premium received, paid back, or credited to a policyholder, 
or treated as an abatement of his premium." 

b. Dividends of mviual and participating life insurance companies. — The major 
problem in the determination of life insurance company gross income during the 
period 1909-1920 was the determination of whether or not that portion of the net 
premium income returned to policyholders as dividends was to be excluded from 
gross income. The insurance companies contended that such dividends repre- 
sented merely the return of an overcharge and that therefore that part of the 
premium returned to a policyholder as a dividend should not be taxable as income 
to the insurance company. 

(1) The nature of the dividends declared by mutual and participating life 
insurance companies: The nature of the dividends declared by mutual and par- 
ticipating life insurance companies was considered by the Commissioner of Inter- 
nal Revenue in 1911.'" The Commissioner, by way of dicta, stated the opinion 
that such dividends represented something more than the mere return of an over- 
charge and that they were in fact distributions of surplus derived not only from 
overcharges but from aU sources." 

In 1913, Congressman Cordell Hull, then a member of the Ways and Means 
Committee, made the following statement with respect to the problem raised by 
the dividends declared by mutual and participating life insurance companies: 

"* * * the accumulations of these companies which arise from savings 
in expenses, savings in mortahty, savings from lapses and surrenders, and 
profits from excess interest earnings, when considered in the aggregate, are 
clearly of such a character as to merit the payment of the proposed tax 
* * * If the companies would keep the question of premium assessments 
and overcharges strictly within a category to themselves and not mix and 
confuse them with the profits derived from the sources enumerated, it would 
be possible to deal with the one without affecting the other * * *."'2 

The difficulty, then, in determining a proper method of treating these dividends 
under the income tax arose because of their dual nature and because the 1909 
act did not recognize this duality, no distinction in tax treatment being made 
under that act between dividends representing returns of overcharges and divi- 
dends paid out of income realized from sources other than overcharges. Insofar 
as the dividends consisted of a return of an overcharge it was apparently Mr. Hull's 
opinion that the premium income so returned ought not to be taxed as income to 
the insurance companies. On the otheir hand, it was apparently the consensus 
that, to the extent that these dividends represented distributions of income 
reahzed from sources other than overcharges, they ought not to be either excluded 
or deducted from the taxable income of the insurance companies. 

(2) The controversy with respect to dividends applied to the payment of 
renewal premiums, to shorten the premium-paying or endowment period, or to 
purchase paid-up additions or annuities: The insurance companies contended that 
under the 1909 act dividends paid to policyholders but by the direction of the 
policyholders applied to the payment of renewal premiums, to shorten the endow- 
ment or premium-paying period, or to purchase paid-up additions or annuities 
did not constitute income received by the company in the year so appUed, and 
were therefore not to be included in determining the company's income for the 
year of such application. The Commissioner decided that dividends which are 
at the direction of the policyholder transferred back to the company to be so 
applied constituted new taxable income received by the company, in the year of 
such application, even though the physical possession of these dividends had been 
received by the company in a prior year and had remained in the company during 
the year of such application." Thus decision of the Commissioner was not sus- 
tained by the courts." 

• Tariff Act of 1913, section II O (b); Revenue Act of 1916, section 12 (a) Second; Revenue Act of 1918, 
section 233 (a) (1). 

" Treasury Decision 1743, Treasury Decisiom under Internal Reventu Laws of the United States, v. 14 (1911), 
p. 134. 

«i Id. at 136. 137. 

"50 Cong. Rec. 514 (1913). 

" Treasury Decision 1743, Treasury J^ecisions under Internal Revenue Laws of the United States, Volume 
IV (1911), pp. 137-139. 

'« Mutual Benefit Life Ins. Co. v. Herald, 198 Fed. 199 (D. O.N. J. 1912), aflarmed 201 Fed. 918; certiorari 
denied, 231 U. 8. 765; Conn. General Life Ins. Co. v. Eoion, 218 Fed. 188 (D. C. Conn. 1914); Conn. Mutual 
Life Ins. Co. v. Eaton, 218 Fed. 206 (D. C. Conn. 1914); and Fink v. NorthwesUrn Mutual Life Ins. Co., 267 
:^eb. 968 (1920). 



CONCENTRATION OF ECONOMIC POWER 18105 

The Commissioner's decision was based upon the legal fact that when a dividend 
is declared, the title to the ratable share is vested in the policyholder, the company 
thereafter being a mere custodian of the dividend, authorized to act only as an 
agent of the policyholder in determining its disposition. Reasoning on the basis 
of this shift of legal title to the policyholder it follows that when a policyholder 
directs the company to apply the dividend to lessen future premium payments, 
or to shorten the premium payment period, or to purchase additional insurance, 
or to accelerate the maturity of an endowment policy, this amounts to a receipt 
lof income by the insurance company even though the actual possession of the 
dividend has remained with the company. 

The courts chose to disregard the fact that at the time a dividend was declared 
legal title to the ratable shares therein vested in the policyholders and sustained 
the contention of the insurance companies by reasoning (1) that the amount of 
the dividend had been taxed as premium income at the time it was received as 
an overcharge in the form of a premium, (2) that the possession of the dividends 
applied to pay renewal premiums (or in the other ways above discussed) remained 
in the insurance company, (3) that the application of such dividends to pay 
renewal premiums (or in the other ways above discussed) amounted simply to a 
bookkeeping transfer from one account to anothfer, and, therefore, that the 
application of dividends to pay renewal premiums (or in the other ways above 
discussed) was not a receipt of income by the insurance company in the year 
of such application taxable under the 1909 act." 

(3) The exclusion provided in the 1913 and later acts: In an attempt to solve 
the problem that had arisen under the 1909 act with respect to dividened issued 
by mutual and participating life insurance companies, an exclusion from gross 
income was provided in the 1913 act of that "* * * portion of any actual 
premium received * * * paid back or credited to [a] policyholder, or treated 
as an abatement of [his] premium." >* The wording employed in his exclusion 
provision was not given specific administrative definition until the issuance of 
Regulations 45 in 1919, six years later." 

The administrative practice adopted with respect to the exclusion provision 
was to require dividends paid within a given year to be included so long as they 
were not in excess of the actual premium due from the individual policyholder. '^ 
For example, if a policyholder's annual premium payment was $200 and in a 
given year he received a dividend of $300 and directed that it be applied toward 
payment of the renewal premium for that year, the policyholder paying no cash, 
then only $200 of the dividend could be excluded. 

In Penn Mutual Life Insurance Co. v. Lederer,^^ Mr. Justice Brandeis, speaking 
for the court in its affirmance of the administrative interpretation of the exclusion 
provision, wrote as follows: 

"The principle applied is that of basing the taxation on receipts of net 
premiums, instead of on gross premiums. The amount equal to the aggregate 
of certain dividends is excluded, although they are dividends, because by 
reason of their application the net premiurh receipts * * * are to that 
extent less" (p. 530). 

"Dividends may be made, and by many of the companies have been made 
largely, by way of abating or reducing the amount of the renewal premium. 
Where the dividend is so made the actual premium receipt of the year is 
obviously only the reduced amount. But, as a matter of bookkeeping, the 
premium is entered at the full rate and the abatement (that is, the amount 
by which it was reduced) is entered as a credit * * *. Where the 
the premium was left unchanged, but was paid in part by a credit or cash 
derived from the dividend * * * Congress doubtless used the words 
'shall not include' as applied * * * to these credits * * * " (pp. 
527-528). 

1! See cases cited in note 14. 

'« Tariff Act of Oct. 3, 1913. section II O (b). 

" Regulations 45, Article £49. This article interprets the language of section 233 (a) (1) of the Revenue 
Act of 1918, which language is essentially the same as that quoted from the 1913 act. "Paid back" was 
defined to mean "paid in cash"; "credited to" was defined as "held to the credit of, including dividends 
applied to renewal premiums, to purchase additional paid-up insurance or annuities, or to shorten the 
endowment or premium-paying period, but not to include dividends provisionally ascertained and appor- 
tioned upon deferred dividend policies"; and "treated as va abatement of premium" was defined to mean 
"of the premium for the taxable year." In Penn Mutual life Insurance Company v. Lederer, 252 U. S. 523 
(1920), the court interpreted the language of the exclusion piovision of 1913 act in a manner consistent with 
the definitions supplied by Article 649 of Regulations 45 with respect to the exclasion provision contained 
in the 1918 act. 

" Regulations 33 (revised), Article 241; Bulletin "H", Income Tax Rulings Peculiar to Life Insurance 
Companies, Article 6. 

"252U. 8.523(1920). 



18106 CONCENTRATION OF ECONOMIC POWER 

In theory, under the exclusion provision, it was not the dividend which was 
excluded from life insurance company gross income, but rather that portion of 
the premium which was paid by applicatioil of the dividend. 

c. Other problems relating to gross income. — Since a net addition to reserve funds 
within the taxable year was deductible, a net decrease in the reserve funds required 
by law was held to be taxable income to the extent that the amount of the decrease 
was released for the general use of the company.^ In contrast to the treatment 
of applied dividends as dictated by court decision under the 1909 act and by the 
exclusion provision contained in later acts, surrender values apphed in any manner 
and consideration for supplementary contracts were included in gross income even 
though applied surrender values and consideration for supplementary contracts 
were no more cash income received by the insurance company within the year of 
application of the surrender values (or within the year in which the supplementary 
contract was entered into) than were dividends applied to purchase additional 
insurance, to pay renewal premiums, or to shorten the premium-paying period.*' 

2. Deductions. 

a. General statement. — During the period 1909-1920, life insurance companies 
were entitled to the same deductions from gross income as other corporations," 
and, iu addition, were allowed to deduct (1) the net addition made within the 
taxable year to reserve funds required by law,^ and (2) sums other than dividends 
paid within the taxable year on policy and annuity contracts.'* 

Two principal problems arose with regard to the deductions allowed life insur- 
ance companies during the period 1909-1920. The first principal problem, closely 
related to the controversy, already noted, as to whether or not dividends declared 
by mutual and participating life insurance companies were to be excluded from 

Eoss income,** was the controversy as to whether such dividends were to be al- 
wed as a deduction. The second principal problem, and a much more difficult 
one, was the determination of what "reserves" constituted the basis for the de- 
duction allowed for "net additions to reserves required by law." 

b. The first princival problem — the meaning of the term "divideruis" as used in 
the deduction allowed for sums other than dividends paid on policy and annuity 
contracts. — The Corporation Excise Tax Act of 1909 specifically provided that 
only "sums other than dividends" could be deducted with respect to the deduction 
allowed for payments on policy and annuity contracts.** 

The mutual and participating companies contended that the so-called dividends 
declared by such companies were not dividends in the commercial sense, but 
were simply refunds to the policyholder of a portion of the overcharge collected 
from the policyholder, which overcharge was held by the insurance companies in 
trust, being returned annually or at stated periods to the policyholder, and, 
therefore, that such "dividends" were not what Congress meant by the term 
"dividends" in providing that only "sums other than dividends" were to be 
deductible.*^ 

The Treasury Department refused to grant the contention of the mutual 
and participating companies, holding that the dividends excepted from the 
deduction were intended by Congress to be the so-called dividends annually 
disbursed by the companies.** 

»o Law Opinion 1032, C. B. 2, p. 216 (1920); Maryland CasuaUy Co. v. U. S., 251 U. S. 342 (1920). For a 
discussion of the deduction allowed (or net aidditions to reserve funds, see p. 18107. 

•' Regulations 33, Article 101; Regulations 33 (revised), Article 241; Bulletin "H", Income Tax Rulings 
Peculiar to Life Insurance Companies, Article 2. 

•« Special provisions were made witii regard to the deductions allowed life insurance companies for depre- 
ciation and losses. In lieu of a deduction for depreciation of furniture and fixtures, life insurance companies 
were permitted to deduct the actual cost of repairs, renewals, an 'I replacements, provided that in the case of 
an original investment the cost thereof should be charged •■. i nital account. (Regulations 33 (revised). 
Article 240; and Mutual Berufit Life Insurance Co. v. Herold, 1«8 Fed. 199 (D. C. N. J. 1912)). Life insur- 
ance companies were allowed to include in the deduction for losses actually sustained (and not compen- 
sated for by insurance) losses by defalcation, and premium notes voided by lapse (provided such notes had 
been included in gross income for tax purposes). (Regulations 33 (revised), Article 240.) 

'' For definition of the term "reserve funds required by law" see pp. 18112-4. 

" Regulations 46, Article 568. See also. Tariff Act of Aug. 5, 1909, section 38; Tarifl Act of October 3, 1913, 
section II a (b); Revenue Act of 1916, section 12 (a) (2) (c); and Revenue Act of 1918, section 234 (a) (10). 
Under the deduction allowed for sums other than dividends paid on policy and annuity contracts, life in- 
surance companies could deduct all death, disability, or other policy claims (other than dividends) paid 
within the year, matured endowments, annuities, pajonents on installment policies, surrender values, and 
all claims actually paid under the term of policy contracts. (Regulations 33 (revised), Article 240.) 

" See pp. 18107-8. 

«• Tariff Act of August 5, 1909, section 38. 

" Treasury Decision 1743, Treasury Decisions under Internal Revenue Laws of the U. S., v. U (1911). 

« Ibid. 



CONCENTRATION OF ECONOMIC POWER 18107 

c. The second principal problem— the deduction allowed for net additions to reserves 
required by lav -Durmg the period 1909-1920, life insurance companies v/ere 
allowed to deduct the net addition, if any, made within the year to reserve fi'nds 
required by law.^" A company was permitted to deduct the highest net addition 
to reserves required by any State in which the company did business.'" 

The chief difficult} with respect to this deduction was the determination of 
what Congress meant by the term "reserve". In general, it may be said that in 
order to classify as eligible for the deduction, a reserve had to be (1) of such char- 
.acter as to be commonly recognized as a reserve in insurance parlance, and .2) 
required by law. 3' This general restriction was not sufficiently definite to 
eliminate controversy as to the meaning of the term "reserve". Questions arose 
as to whether or not Congress intended to include within the meaning of t ne 
statute reserves held for supplementary contracts not involving life contingenci 'h, 
reserves held to meet liabilities on cancelled policies, reserves for unpaid loss'^s, 
reserves to meet liabilities on matured coupons, reserves maintained for anticipat,.;;! 
excessive mortality losses, reserves for possible losses in reserves invested, and 
the extra reserve for total and permanent disability benefits and for accidental 
death benefits. Since the history of the controversy over the term "reserv. " 
is confined neither to the period 1909-1920 nor to the period 1921-1940, ixv.d 
because of its importance, it is separately set forth under section I-D at pagos, 
18112-4. 

C. GROSS INCOME AND DEDUCTIONS, 1921-1940 

1. Gross income. 

a. General statement. — In the case of a life insurance company, gross inco; : vj 
under the Revenue Act of 1921 and subsequent acts means the gross amount of 
income received during the taxable year from interest, dividends, and rents- 
Tax-exempt interest, excluded from the gross income of other types of corpora- 
tions, must be included in gross income and may then be claimed as a deduction 
Gains realized from the sale of assets are not to be included in gross income.^* 

b. Rental value of space occupied, 1921-1931. — Under the Revenue Acts of 1921 ■ 
1928, the rental value of space occupied by a company had to be included in gro^s 
income if the company wished to claim a deduction for taxes and other exj>ens cs 
paid during the year on real estate owned and occupied in whole or in part by the 
company. Such rental value was to be not less than a sum which in addition ^ .. 
any rents received from other tenants would provide a net income (after deducting 
taxes, depreciation, and all other expenses) at the rate of 4 percent per annum of 
the book value at the end of the taxable year of the real estate so owned <r cc- 
cupied.3* The Board held this requirement that the rental value of the .ipace 
occupied by the company be included in g'ross income to be a direct tax on proner'.y 
levied without apportionment and therefore unconstitutional.^* Although the 
Supreme Court later reversed the decision of the Board as to the constitutionaliiy 
of the requirement that the rental value of the space occupied was to beincladed 
in gross income,'^ the Congress, in the Revenue Act of 1932, had eliminate' i the 
requirement.'^ 

c. Purchase by insurance company as mortgagee-vendor at foreclosure sale. — 
Since capital gains are in general excluded from gross income of life insurance 
companies the Board held that a life insurance company which forecloses a mort- 

» See statutory references cited in note 24. 

"Treasury Decision 1727, Treasury Decisions under Internal Revenue Laws of the U. S., v. 14 (1911). 

" An exception was made to the first reQuircment in the case of assessment companies by virtue of whicl) 
they were permitted to deduct sums actually deposited with ter itorial ofTicers, pursuant to law, as add.tions 
to guaranty or reserve funds. (See statutory references citec. in note 24). The second requirement was 
relaxed in the case of insurance companies Issuing combined life, health and accident policies on the w ekly 
payment plan, continuing for life and not subject to cancellation, to the extent that a reserve was nefi.ssary 
to provide against the companies' obligations on the maturity of such policies. (Revenue Act of 1918, sec- 
tion 234 (a) (ID.) For an insurance company to successfully claim a deduction under the provision nhiting 
to combined life, health, and accident policies introduced under the 1918 act, the company had to show 
that the amounts claimed were in fact required for the protection of the policyholders. (Mammoth Life 
and Accident Insurance Co., fi BTA 869 (1927).) A further relaxation of this second requirement wa.s made 
necessary by a decision that the phrase "required by law" included the rules and regulations of State Insur- 
ance Departments when promulgated in the exercise of appropriate power conferred by statute. {Mitryland 
Casualty Co. v. V. S., 251 U. S. 342 (1920).) 

" Revenue Acts of 1921-I92G, section 244 (a); Revenue Acts of 1928-1938, section 202 (a); Internal R< /enu'. 
Code (1939), section 202 (a) 

" Regulations 02, 6.5, and 69, Article 661; Regulations 74 and 77, Article 951; Regulations 80, 94, an 1 lOi, 
Article 201 (b)-I; Regulations 103, section 19-201 (b)-l. 

X Revenue Acts of 1921-1926, section 245 (b); Revenue Act of 1928, section 203 (b). 

35 Independent Life hisiirance Co., 17 BTA 757 (1929). 

3« Ilelvering v. Independent Life Ins. Co., 292 IT. S. 371 (1934). 

" Senate Report 665, 72d Cong., 1st sess., p. 30; Revenue Act of 1932, section 203 (b). 



18108 CONCENTRATION OF ECONOMIC POWER 

gage upon which both principal and interest are due and unpaid, and buys in the 
mortgaged property at the foreclosure sale for the face value of the mortgage 
receives no taxable income from such a transaction, even though the actual value 
of the property is greater than the face value of the mortgage.^* Where the bid 
price at foreclosure sale includes the accrued but unpaid interest, such interest is 
to be included in gross income-^' But where the property is voluntarily transferred 
in consideration of the cancellation of the mortgage indebtedness including ac- 
crued interest, such interest is not includible in gross income unless the value of 
the property equals or exceeds the mortgage loan, plus accrued interest, plus 
cost of the transfer.*" 

2. Deductions. 

a. General statement. — Under the Revenue Act of 1921 and subsequent asts the 
following deductions have been allowed life insurance companies: 

(1) tax-exempt interest, 

(2) a reserve fund earning allowance, 

(3) investment expenses, 

(4) two percent of reserves held for deferred dividend payments, 

(5) taxes, expenses, depreciation, and obsolescence with respect to real estate 

owned by the company, 

(6) interest paid on indebtedness, 

(7) dividends received from domestic corporations, 

(8) net losses, and 

(9) specific credits. 

The deductions for dividends received, net losses (the net loss carry-over) , and 
specific credits have been the same as the corresponding deductions allowed other 
types of corporations under the general provisions of the revenue acts. Tax- 
exempt interest excluded from the gross income of other types of corporations is 
deductible from gross income in the case of life insurance companies. 

An analysis of the deductions peculiarly applicable to life insurance companies 
and of the deduction for interest paid as allowed in the case of life insurance 
companies follows. 

b. Reserve fund earning allowance. — In line with the taxation of life insurance 
companies only on their investment income from interest, dividends, and rents, 
a reserve fund earning allowance has been allowed as a deduction during the 
period 1921-1940 in lieu of the deduction formerly allowed during the period 
1909-1920 for "net additions to reserves required by law." The theory under- 
lying this deduction is (1) that insurance companies, in setting the premium rates, 
take account of the probable income that they will derive from investment of 
the premiums thereby setting lower premium rates than they would otherwise 
do if such income were not taken into account; (2) that if a tax were to be placed 
on that part of income required to be added to the reserves set aside to meet 
contingent liabilities on insurance contracts, the reserves built up by the com- 
panies would be insufficient to meet their obligations on outstanding policies when 
such obligations came due; and, (3) that if such income were taxed, insurance 
companies would have to charge higher premium rates on contracts entered into 
following the adoption of a tax on such -income. 

The Revenue Acts of 1921-1928 provided that deduction could be taken of — 

"* * * an amount equal to the excess, if any, over the deduction for 
tax-exempt interest, of 4 percent of the mean of the reserve funds required 
by law held at the beginning and the end of the taxable year, plus (in the 
case of life insurance companies issuing policies covering life, health and 
accident insurance combined in one policy issued on the weekly premium 
payment plan, continuing for life and not subject to cancellation) 4 percent 
of the mean of such reserve funds (not required by law) held at the beginning 
and end of the taxable year, as the Commissioner finds to be necessary for 
the protection of the holders of such policies only." " 

The attempt to decrease the 4 percent reserve fund earning allowance deduc- 
tion by the amount of the tax-exempt interest received was declared to be con- 
stitutionally invalid.*^ In conformity with this decision of the Supreme Court, 

" John Hancock AfiUual Life Ins. Co., 10 BTA 736 (1928). 

«• Midland Mutual Life Ins. Co. v. Ilelvering, 300 U. S. 216 (1937); rehearing denied, 300 U. S. 688. See also 
Missouri .^tiite Life Ins. Co. v. Covtmissioner, 78 Fed. (2d) 728 (1935). 
m Manhattan Mutnnl Life Ins. Co., 37 BTA 1041. 

*' Revenue Acts of 1921-192R. section 24.1 (a) (2); Revenue Act of 1928, section 203 (a) (2). 
«> National Life Ins. Co., v. U. S., 277 U. S. 508 (1928). 



CONCENTRATION OF ECONOMIC POWER 18109 

the Revenue Acts of 1921-1928 were retroactively amended to allow a full deduc- 
tion of 4 percent of the mean of the reserve fund without any abatement on account 
of tax-exempt interest." 

Under the Revenue Act of 1932 and subsequent acts the reserve fund earning 
allowance deduction has been revised to provide that deduction may be taken 
of — 

"* * * an amount equal to 4 percent of the mean of the reserve funds 
required by law held at the beginning and the end of the taxable year, except 
that in the case of any such reserve fund which is computed at a lower inter- 
est assumption rate, the rate of 3% percent shall be substituted for 4 percent. 
Life insurance companies issuing policies covering life, health and acv-deni 
insurance combined in one policy * * ♦ ghall be allowed, in addition 
to the above, a deduction of 3^ percent of the mean of such reserve funds 
(not required by law) held at the beginning and the end of the taxable 
year * * *." ** 

In general it may be said that under present law the reserve contemplated is a 
sum of money which, with accretions from interest, is reserved as a fund with 
which to mature or liquidate future unaccrued and contingent claims." Only 
reserves which are peculiar to life insurance companies and which are dependent 
upon interest earnings for their maintenance are eUgible." The history of the 
controversy as to the meaning of t.he term "reserve" as employed in the statute 
is set forth in section I-D at pages 18112-4. 

The reserve fund upon which the percentage deduction is to be computed is 
the fund required by statute or by the rules and regulations of the State Insurance 
Department promulgated in the exercise of a power conferred by statute.*' 
Although a company is entitled to make use of the highest aggregate reserve 
called for by any State in which it transacts business, it is entitled to a deduction 
only on the basis of the reseryes it actually holds, as shown by its annual state- 
ment.** 

In States requiring that th^ custody of reserve funds be in the hands of a State 
official, an actual addition to a reserve fund must be made before the addition 
will be considered part of the reserve for Federal tax purposes." Since most 
States do not require that the custody of reserve funds be in the hands of a State 
official, the above statement does not represent *he general rule. In most States 
the Insurance Departments examine the companies' balance sheets and make a 
physical inspection of the assets to determine if they are sufficient in amount to 
meet the statutory requirements. The Bureau then accepts the bookkeeping 
entries as checked by the State Insurance Departments as representing the 
amount of the reserve upon which the deduction is based. 

Where domestic companies write foreign business, the companies' obligations 
being to pay in a foreign currency and the assets held in reserve to meet the con- 
tingent liabilities on such business being payable to the companies in such foreign 
currency, a pecuhar problem of fluctuation of the value of the reserves in terms of 
the dollar arises, since the State Insurance Departments require that the value of 
the assets held in the legal reserves be shown at their dollar value on the books of 
the companies. For example, if a domestic company under the circumstances 
outlined above holds in reserve at the beginning of a tax year English assets valued 
at £100,000 or $400,000, and at the end of the tax year the value of the assets 
remains £100,000 but in terms of the dollar has shrunk to $350,000 simply because 
of a depreciation of the pound in terms of the dollar, then the question arises, may 
the company, with respect to this part pf its business, claim a reserve fund earning 
allowance on the basis of a $400,000 reserve or must the company reduce its 
reserve to the mean of $400,000 and $350,000, that is, $375,000? Under the cir- 
cumstances outlined above it has been held that fluctuations in the value of the. 

" Treasury Decision 4231, C. B. vn-2, p. 299 (1928). 

** Revenue Acts of 1932-1938, section 203 (a) (2); I. R. C, section 203 (a) (2). 

" Regulations 86, 94, and 101, Article 203 (a) (2)-l; Regulations 103, section 19.203 (a) (2)-l. 

<• Regulations 62, 65, and 69, Article 681; Regulations 74 and 77, Article 971; Regulations 86, M, and Ifiil, 
Article 203 (a) (2)-l; Regulations 103, section 19.203 (a) (2)-l. 

<' Ibid. In the case of assessment insurance companies, however, the "reserve funds required by law" 
include sums actually deposited by any insurance company or association with State or territorial officers 
pursuant to law as piarantee or reserve funds, and any funds maintained under the character or articles 
of incorporation exclusively for the payment of claims arising under certificates of membership or policies 
issued upon the assessment plan and not subject to any other use. (Revenue Acts of 1921-1926, section 
244 (b); Revenue Acts of 1928-1938, section 202 'b). 

<» Regulations 62, 65. and 69, Article 681; Regulations 86, 04, and 101, Article 203 (a) (2)-l; Regolatlons, 
103, section 19.203 (a) (2)-l. 

<• Pilot Life Insurance Co. v. Commissioner, 30 Fed. (2d) 1019 (1929); Western Surety Co. v. Committioneri 
38Fed. (2d) 1022(1930). 



18110 CONCENTRATION OF ECONOMIC POWER 

reserve due solely to changes in the value of foreign currency in terms of the dollar 
are not to be taken into account for Federal tax purposes.^" 

The statutory language, calling for a deduction of 4 percent of "the mean of the 
reserve funds * * * held at the beginning and end of the taxable year * * *" 
has raised an administrative problem with respect to part-year returns. In 
instances where a company goes out of business in the midst of a tax year, the 
amount upon which the deduction is based is deemed by the Bureau, in its inter- 
pretation of the language of the statute, to be the difference between the reserves 
at the beginning of the year and zero, divided by two. This rule of thumb is 
followed regardless of the number of months constituting the fraction of the year 
during which the company was in business, and has been sustained by the courts.^^ 

0. Investment expenses. — The Revenue Act of 1921 and subsequent acts have 
provided a deduction for — 

«'* * * investment expenses paid during the taxable year: Provided, th&t 
if anj^ general expenses are in part assigned to or included in the investment 
expenses, the total deduction under this paragraph shall not exceed H of 1 
percent of the book value of the mean of the invested assets held at the begin- 
ning and the end of the taxable year."*^ 

As a general rule, amounts spent in connection with the realization of invest- 
ment income are deductible as investment expenses. ^^ By administrative prac- 
tice the deduction is limited to amounts spent collecting or supervising the collec- 
tion of income from interest, dividends, and rents. Thus, cost of investing and 
reinvesting are not investment expenses within the meaning of the statute. For 
example, commissions paid to real estate agents for services in selling real estate 
previously acquired by default are not deductible.^* It has been held, perhaps 
erroneously, that depreciation on a building erected on leased ground is an allow- 
able investment expense deduction.'^ 

It was early held that a salary paid solely for the handling of investments is a 
deductible investment expense.*^ The validity of this early decision is at present 
in doubt. The life insurance companies have contended that where an officer 
spends part of his time handling investment and there has been an ascertainment in 
advance of the pa^^ment of his salary as to the y»roportion to be borne by the 
investment department, that the proportion so determined is an investment 
expense not subject to the limitation with respect to the assignment of general 
expenses to investment expenses." In the Volunteer State Life and the Svji Life 
cases the Board of Tax Appeals and the Court of Claims sustained the companies, 
contention. But in the New World. Life case the Court of Claims reconsidered 
and overruled its earlier decision in this respect. The Supreme Court has refused 
to review the Court of Claims decision in this respect.^" It would seem, tlierefore, 
that at the present time that part of officers' salaries paid for handling investments 
is not deductible as an investment expense free from the limitation with respect to 
the assignment of general expenses to the investment expense account. 

As for the limitation in cases where a portion of general expenses is included in 
the investment expenses, the maximum allowance of % of 1 percent of the book 
value of the invested assets is not granted unless it is shown to the satisfaction of 
the Commissioner that such allowance is justified.^'* "Invested assets" are those 
which are owned and used, and to the extent used, have the purpose of producing 
taxable income.*" 



M New York Life Tnn. Co., 24 BTA i217 (1931); sustained in Commissioner v. New York Life Ins. Co., 65 
Fed. (2d) 347 (193S); certiorari denied, 290 U.'S. 682. 

" The Western and Southern Life Insurance Co. v. Huue, #4512 at Law, U. S. District Court, Southern 
District of Ohio, Western Division. (August 14, 1939); Great Southern Life Ins. Co. v. Comndmioner, 89 
Fed. (2d) 54 (1937), certiorari domed 302 U. S 698. 

82 Revenue Acts of 1921-1926, section 245 (a) 6; Revenue Acts of 1928, 1934, section 203 (a) 5; Revenue Act 
of 1936 and 1938, section 203 (a) 4. 

»3 General Counsels Memorandum 4336, C. B. XI-1, p. 329 (1932). 

M Union Central Life Ins. Co v. Commissioner 89 Fed. (2d) 969 (1937). 

»5 General Counsel's Memorandum 4336, C. B. XI-1, p. 329 (1932). 

M Office Decision 1580, C. B. II-l, p. 164 (1923) 

»' Volunteer State Lift Ins Co. 27 BTA 1149 (1933); Sun Life 'Ins. Co. v. U. S., 12 F. Supp. 45 (Ct. CI. 1935); 
New World Life Ins. Co. v. U. S ,26 F. Supp 444 (Ct CI 1939). 

'8 The Supreme Court granted the taxpayer's petition for a writ of certiorari on May 20, 1940, but limited 
the review to an issue other than that here under discussion. 

J» Regulations 62, 65, and 69, Article 683; Regulations 74 and 77, Article 973; Regulations 86, Article 203 (a) 
(5)-l; Regulations 94 and 101. Article 203 (a) (4)-l; and Regulations 103, section 19.203 (a) (4)-l. 

M Regulations 86, Article 203 (a) (5)-l. 



CONCENTRATION OF ECONOMIC POWER 18111 

d. Two percent of reserves held for deferred dividend payments. — The 1921 and 
subsequent acts provide that life insurance companies may deduct — 

"* * * an amount equal to 2 percent of any sums held at the end of the 
tajwable year as a reserve for dividends (other than dividends payable during 
the year following the taxable year) the payment of which is deferred for a 
period of not less than 5 years from the date of the policy contract." " 

The reserve for deferred dividends upon which this deduction is based includes 
amounts set apart, apportioned, provisionally ascertained, calculated, declared, 
or held awaiting apportionment upon deferred dividend policies.*^ Deferred 
dividend policies differ from ordinary life policies calling for an annual dividend 
only in that the deferred dividend policy contains a special provision allowing the 
policyholder to elect not to take his dividends annually, but to pool such dividends 
with the dividends of other persons in his class, under an agreement that after a 
certain period of accumulation the survivors will take all. The deduction is based 
on the theory that the company is hardly more than a stakeholder of accumulations 
to the pooled fund. The company is more than a stakeholder, however, to the 
extent that (1) it has complete control over the investment of the fund during the 
accumulation period and (2) it takes the fund in the event that there are no sur- 
vivors at the terniination of the accumulation period. 

The deferred dividend policy introduces a gambling element into the insurance 
contract. The policyholder, in effect, wagers (1) that he will be able to make the 
required annual contributions to the fund throughout the accumulation period, 
and (2) that he will be a survivor. The Federal tax law countenances this practice 
in that it permits an earning allowance deduction on reserves held for deferred 
dividend payments. 

Survivorship investment fund policies differ from deferred dividend policies in 
that, in the survivorship investment fund policy, the policyholder agrees to pay 
annually in addition to the premium due on ordinary insurance, an additional 
amount to be pooled and investad by the company for an agreed period, the 
surviving policyholders to take all. The Supreme Court has held that the com- 
panies may not claim a deduction for investment income credited to the survivor- 
ship investment fund under either the reserve fund earning allowance or the 2 
percent earning allowance on reserves held for deferred dividend payments." 

e. Taxes, expenses, depreciation, and obsolescence with respect to real estate. — (1) 
Taxes and other expenses: The Revenue Act of 1921 and subsequent acts provide 
that — 

"Taxes and other expenses paid during the taxable year exclusively upon 
or with respect to the real estate owned by the company, not including taxes 
assessed against local benefits of a kind tending to increase the value of the 
property assessed, and not including any amount paid out for new buildings, 
or for permanent improvements or betterments made to increase the value 
of any property" 

may be deducted by life insurance companies." 

Under the acts of 1921-1928, deduction for taxes and other expenses paid on 
real estate owned and occupied in whole or in part by the company could be taken 
only if there was included in gross income the rental value of the space occupied.** 
As hereinbefore noted, the Board of Tax Appeals held this limitation upon the 
deduction for taxes and other expenses paid on real estate owned or occupied to 
be unconstitutional. A different type of limitation has been placed upon the 
deduction by the Revenue Act of 193^2 and subsequent acts, as follows: 

"The deduction * * * shall be limited to an amount which bears the 
same ratio to such deduction (computed without regard to this subsection) 
as the rental value of the space not so occupied bears to the rental value oi 
the entire property." *' 

State capital stock taxes are not deductible,*^ nor are State taxes on premiums.* 

•' Revenue Acts of 1921-1926, section 245 (a) 4. Revenue Acts of 1928-1934, section 203 (a) 4; Bevenoe Acta 
of 1936-1938, section 203 (a) (3). 

»2 Regulations 62, 65, and 69, Article 682; Regulations 74-77, Article 972. 

«3 Helvering v. Illinoia Life Ins. Co., 299 U. S. 88 (1936). 

8< Revenue Acts of 1921, 1924 and 1926. section 245 (a) (6); Revenue Acts of 1928, f932, and 1934, section 
203 (a) (6); Revenue Acts of 1936 and 1938, section 203 (a) (5); I. R. C, section 203 (a) (6). 

«5 Revenue Acts of 1921, 1924, and 1926, section 245 (b); Revenue Act of 1928, section 203 (b). For a dis- 
cussion of the requirement that the rental value of space occupied be included in gross income, see section 
I-C-l-b, page 15. 

»« Revenue Acts of 1932, 1934, 1936, and 1938, section 203 (b); I. R. C, section 203 (b). 

" Standard Life Ins. Co., 13 BTA 13 (1928). 

«s Office Decision 2416, C. B. VII-1, p. 131 (1928). 



18112 CONCENTRATION OF ECONOMIC POWER 

The deduction for taxes and other expenses, being limited to such costs with 
respect to real estate owned by the company, has raised only narrow factual 
issues.^' 

(2) Depreciation and obsolescence: The deduction for depreciation and for 
obsolescence is in substance the same as that allowed other taxpayers except that 
under the Revenue Acts of 1921-1928 it was made conditional upon the inclusion 
in gross income of the rental value of space occupied.'" Under the Revenue Act 
of 1932 and subsequent acts the depreciation and obsolescence deduction is 
subject to the proportional limitation applicable to the deduction for taxes and 
expenses paid on real estate.^' 

A life insurance company is not entitled to deduct depreciation on all furniture 
and fixtures but only on such as are used in connection with its investment busi- 
nessJ^ 

f. Interest -paid on indebtedness. — The Revenue Act of 1921 and subsequent acts 
have provided a deduction for interest paid identical with that allowed other 
corporations, as follows: 

"All interest paid or accrued within the taxable year on its indebtedness, 
except on indebtedness incurred or continued to purchase or carry obligations 
or securities (other than obligations of the United States issued after Septem- 
ber 24, 1917, and originally subscribed for by the taxpayer) the interest upon 
which is wholly exempt from taxation under this title." '' 

As a general rule interest on dividends held on deposit and surrendered during 
the taxable year is deductible. '< However, interest paid on deferred dividends 
distributed during the taxable year to holders of this type of insurance is not 
deductible, inasmuch as there is no legal obligation to pay such interest. ''' Such 
payments constitute additional dividends rather than interest on indebtedness. 

Interest paid or accrued to holders of coupons attached to guaranteed premium 
reduction policies is deductible when such coupons have been left with the com- 
pany to accumulate at interest, or when interest paid on such coupons has been 
applied to current or future premiums, or when such interest has actually been 
paid out in cash.'^ Similarly, where a life insurance company pays interest on the 
proceeds of life insurance policies left with it pursuant to the provisions of sup- 
plementary contracts not involving life contingencies, or similar contracts, the 
interest so paid is deductible, except that deduction is not allowed under the 
interest paid deduction to the extent that the company has deducted such interest 
under the reserve fund earning allowance deduction. '^ 

The discount allowed by life insurance companies on premiums paid in advance 
does not represent interest paid on indebtedness within the meaning of the statute. ''^ 

. D. THE DEFINITION OF THE TERM "rESERVE" 

During the period 1909-1920 a deduction was allowed for "net additions to 
reserves required by law". During the period 1921-1940, a reserve fund earning 

«' Taxes and expenses on a building owned by a life insurance company and erected on leased ground are 
not deductible as taxes and expenses, but are deductible as investment expenses. (General Counsel's 
Memorandum 4336, C. B. XI-1, p. 329 (1932). The unamortized portion of broker's commissions paid in 
1927 for securing a ten-year lease of real estate owned by the company, the lease having been terminated by 
court order in 1928, was not deductible for 1928 either as expenses paid nor as an allowance for exhaustion 
or obsolescence, nor as a loss. (Helvering v. Manhattan Life Ins. Co., 71 Fed. (2d) 292 (1934)). 

" Revenue Acts of 1921, 1924, and 1926, section 245 (b); Revenue Act of 1928, section 203 (b). For a dis- 
cussion of the requirement that the rental value of space occupied be included in gross income, see section 
I-C-l-b. page 18107. 

" Revenue Acts of 1932, 1934, 1936, and 1938, section 203 (b); I. R. C, section 203 (b). The limitation 
applicable to the deduction for taxes and expenses paid on real estate under the 1932 and subsequent acts 
is set forth on page 18111. 

'» Rockford Life Ins. Co. v. Commissioner, 292 U. S. 382 (1934); Helvering v. Manhattan Life Ins. Co., 71 Fed. 
(2) 292 (1934). 

" Revenue Acts of 1921, 1924, and 1926, section 245 (a) 8; Revenue Acts of 1928, 1932, 1934, section 203 (a) 
(8); Revenue Acts of 1936 and 1938, section 203 (a) (7). I. R. C, section 203 (a) (7). 

'< Regulations 62, 65, and 69, Article 685; Regulations 74 and 77, Article 975; Regulations 86, Article 203 (a) 
(8)-l; Regulations 94 and 101, Article 203 (7)-l; Regulations 103, section 19.203 (7)-l. 

'» Lafayette Life Ins. Co., 26 BTA 946 (1932); Missouri State Life Ins. Co. v, Helvering, 78 Fed. (2d) 778 
(1934). But see Commissioner v. Lafayette Life Ins. Co., 67 Fed. (2d) 209 (1933). 

" Office Decision 2717, C. B. XII-2, p. 94 (1933). Under the early decisions holding that reserves held to 
meet liabilities on matured coupons were "reserves required by law" within the meaning of the statute, 
interest paid on account of coupons was held not to be deductible as interest paid on indebtedness. (Reserve 
Loan Life Ins. Co., 18 BTA 359 (1929)). The overruling cf these early decisions in Helvering v. Inter-Moun- 
tain Life Ins. Co., 294 U. S. 686 (1935), sustained the Bureau's contention that such reserves were not reserves 
required by law within the meaning of the statute. The Inter-Mountain decision also sustained the Bu- 
reau's theory that matured coupons represented accrued liabilities and that interest paid thereon was deduc- 
tible £is interest paid on indebtedness. 

" Regulations 94 and 101, Article 203 (a) (7)-l; Regulations 103, section 19.203 (a) (7)-l. For a discussion 
of the reserve fund earning allowance deduction, see section I-C-2-b, pp. 18108-10. 

".Qeneral.Counsel's Memorandum 20200, C. B. 1938-1, p. 206. 



CONCENTRATION OF ECONOMIC POWER 18113 

allowance has been allowed as a deduction. The definition of the term "reserve" 
has constituted perhaps the most important single problem with respect to the 
taxation of life insurance companies. 

An early decision under the 1909 act held that the reserve held to meet lia- 
bilities on supplementary contracts not involving life contingencies was a "life 
insurance reserve fund" within the meaning of the statute." The Bureau adopted 
this conclusion and inserted it in the regulations.^" 

' The term "reserve funds" as it appeared in the 1909 and 1913 acts was defined 
iy the Supreme Court of the United States as follows: 

"The term 'reserve' or 'reserves' has a special meaning in the law of in- 
surance. While its scope varies under different laws, in general it means 
a sum of money variously computed or estimated, which with accretions from 
interest, is set aside, 'reserve', as a fund with which to mature or liquidate, 
either by payment or reinsurance with other companies, future unaccrued and 
contingent claims, and claims accrued, hut contingent and indefinite as to amount 
and time of payment." ** [Italics supplied.] 

The language italicized seemed to sustain the ruling, adopted in view of the 
Mutual Benefit Life case, that the reserve for supplementary contracts not involv- 
ing life contingencies was a life insurance reserve fund the net additions to which 
could be deducted. As a result of this decision broad administrative application 
was given to this proposition. ^2 

First doubts as to the validity of the proposition were raised by the Circuit 
Court for the Seventh Circuit when it held that the reserves for supplementary 
contracts and for liabilities on cancalled policies were not reserve funds within 
the requirements of the Wisconsin statute.^ The Bureau regarded this decision 
as having been dictated by the Wisconsin statute, and did not give it general 
applicability. However, in the next case to reach the Supreme Court which 
had to do with the question of what reserves were "life insurance reserves'', the 
court held that a reserve for unpaid losses was not a reserve fund within the mean- 
ing of the Federal income tax law.** In so doing the court in effect changed the 
definition of "reserve" to exclude claims accrued, but contingent and indefinite 
as to amount and time of payments. This decision was regarded by the Bureau 
as limiting the term "reserve fund" as used in the taxing statutes to reserves 
held to meet contingent liabilities on outstanding policies only. No longer was 
the term "reserve fund" deemed to include reserves held to pay matured liabilities 
or for a contingent or unincurred liability not directly growing out of an insurance 
risk. Following up its decision in the Boston Insurance Company case, the court 
held that (1) reserves held to meet liabilities on unreported policy losses and (2) 
the estimated value of future premiums waived in case of total or permanent 
disability were not reserves within the meaning of the 1913 act.*^ 

Following its decision in the Boston Insurance Company case, in which it removed 
reserves held for matured or accrued liabilities from within the meaning of the 
statutory term "reserve", the Supreme Court held that reserves held against 
liabilities on matured coupons were not reserves within the meaning of the tax 
law.** The importance of this decision lies in the fact that one of the reasons 

'» Mutual Benefit Lift Ins. Co. v. Herold, 198 Fed. 199 (1912). 

»o Regulations 33, Article 147 (d); Regulations 33 (revised) Article 240; Regulations 45, Article 569. 

9> Maryland Casualty Co. v. U. S., 251 U. S. 342 (1920). 

8» See Office Decision 427, C. B. 2, p. 216 (1920) and Law Opinion 1032, C. B. 2, p. 216 (1920). 

M Fink V. Northwestern Mutual Life Ins. Co., 267 Fed. 968 (1920). 

«* U. S. V. Boston Ins. Co., 269 U. S. 197 (1925). In addition to its direct effect upon the Maryland Casualty 
case and the regulations issued following the earlier decision, the decision in the Boston Ins. Co. case required 
the reversal of Law Opinion 799, which had held that reserves maintained to liquidate coupons left with 
the company to accumulate at interest were reserves within the meaning of the statute, and of that part 
of Solicitor's Opinion 40 holding that reserves for deferred dividends were within the meaning of the statute. 
Solicitor's Recommendation 9610, C. B. V-2, p. 189 (1926) reversed Law Opinion 799 and General Counsel's 
Memorandum 5782, C. B. VIII-1, p. 269 (1929) ov?rruled Solicitor's Opinion 40 to the extent necessary. 
The validity of the reversal of Solicitor's Opinion 40 was upheld by the Court of Claims in Minnesota Mutual 
■Life Ins. Co. v. U. S., 66 Ct. CI. 481, the Supreme Court denying the taxpayer's petition for a writ of certio- 
rari, 279 U. S. 586. Regulations 62, 65, and 69 were amended to conform to the court's modified definition 
of the term "reserve". (See Treasury Decision 4615. C. B. XIV-2, p. 310 (19.35), modifying Article 685.) 

«« New York Life Ins. Co. v. Edwards. 271 U. S. 109 (1926). The case also held that reserves for annuities 
payable to superannuated soliciting agents were not reserves within the meaning of the 1913 act. 

«• Helvering v. Inter -Mountain Life Ins. Co., 294 U. S. 686 (1935). This decision sustained Mass. Mut. 
Life Ins. Co. v. U. S., 56 Fed. (2d) 897 (1932) and Continental Assurance Co. v. U. S., 8 F. Supp. 474 (Ct. 
CI. 1934). This decision overruled Standard Life Ins. Co., 13 BTA 13 (192s); Reserve Loan Life Ins. Co., 
18 BTA 359 (1929); Commissioner v. Standard Life Ins. Co., 47 Fed. (2d) 218 (1931); Commissioner v. Western 
Union Life Ins. Co., 61 Fed. (2d) 207 (1932); and Missouri State Life Ins. Co., 29 BTA 401 (1933), 78 Fed. 
(2d) 778 (1934). 



18114 CONCENTRATION OF ECONOMIC POWER 

assigned for holding such reserves ineligible was that they were not held to meet 
liabilities on life insurance risks.^'' In a later case this dictum was repeated, 
reserves in respect of contingent liabilities on survivorship investment funds 
being deemed outside the scope of the statutory term "reserve" because such 
such reserves had no relation to life insurance risks.^^ 

Following the Illinois Life decision the Bureau decided to test the strength of 
the dicta that only reserves having a relation to life insurance risks were within 
the meaning of the term "reserve". The item selected for litigation was the 
"extra reserve for total and permament disability benefits and for additional 
accidental death benefits included in life policies". *»] The Bureau contends that 
this is a casualty reserve having no connection with tlie reserve held to meet 
contingent liabilities on life insurance contracts. The companies contend, on 
the other hand, that this is a reserve held to meet contingent liabilities incidental 
to life insurance contracts. The Court of Claims sustained the contention of the 
Bureau, and the Supreme Court denied the taxpayer's petition for a writ of cer- 
tiorari.*" The Board of Tax Appeals and the Circuit Courts, however, have 
ruled against the Bufeau." Because of the conflict between the decisions of the 
lower courts, the Supreme Court, on the petition of the New World Life Insurance 
Company to reconsider the denial of a writ of certiorari, granted a rehearing on 
the petition for a writ, and granted the writ subsequent to the decision of the 
Circuit Court in the Pan-American case. The Supreme Court has not as yet 
decided this question as to whether the "extra reserve for total and permament 
disability benefits and for additional accidental death benefits included in life 
policies" is or is not a life insurance reserve within the meaning of the statute. 

By regulation, certain specific balance sheet items have been held not to be with- 
in the -Cleaning of the statutory term "reserve".'^ The Board of Tax Appeals 
has to some extent restricted the definition of "reserve" by holding that the 
statutory term does not include the guarantee capital of a life insurance company 
deposited with a State Insurance Department,'^ and that it does not include a 
contingency reserve for anticipated excessive mortality losses and possible losses 
in reserves invested.** 

E. RATES OF TAX 

The rates of tax applicable to the net income of life insurance companies have 
been the same as the rates applicable to the net income of other corporations 
under the Revenue Acts of 1909-1924, 1928-1934, and 1939, apphcable to the 
periods 1909-1924, 1928-1935, and 1940. Under the Revenue Act of 1926 and 
the Revenue Acts of 1936 and 1938 apphcable to the periods 1925-1927 and 
1936-1939, the rates of tax on insurance companies have differed from the rates of 
tax applicable to ordinary corporations. A tabular summary of the rates of tax 
on life insurance companies and on ordinary corporations is given below. 

Under the Revenue Act' of 1936, life insurance companies were taxed at a flat 
rate rather than under the graduated normal tax rates imposed on ordinary 
corporations. Life insurance companies were not subject to the undistributed 
profits tax imposed on ordinary corporations under the 1936 and 1938 acts. 

n Id. at 690. 

M Helvering v. Illinois Life Im. Co., 299 U. S. 88 (193f.). 

'» Annual Statement of Life Insurance Companies, item V-8. 

•« New World Life Im. Co. v. U. S., 88 Ct. CI. 405 (1939): certiorari denied, 308 U. S. 612. Re-hearing 
granted, previous order vacated, and certiorari granted May 20, 1940. 

•1 Commitsioner v. Pan-American Life Ins. Co., Ill Fed. (2d) 366 (April 20, 1940); Monarch Life Ins. Co. 
38 BTA 716 (1938); appeal pending before, the Circuit Court of Appeals for ^he First Circuit; and Oregon 
MuttLol Life Ins. Co., 39 BTA 1239 (1939); afTirmed CCA-9; #9318, June 11. 1940 (not yet officially reported). 

•• The reserve upon which the deduction is based has been held not to include the following: 

1. Reserves to provide for the ordinary running expenses of the business, such as taxes, salaries, rein- 

surance and unpaid brokerage; 

2. The reserve or not value of risks reissued in other solvent companies to the extent of the reinsurance; 

3. Reserves for premiums paid in advance; 

4. Annual and deferred dividends; 
6. Accured unsettled policy claims; 

6. Losses incurred but unreported; 

7. Liability on supplementary contracts not involving life contingencies; 

8. Estimated valu' of future premiums which have been waived on policies after proof of total and per- 

mament disability. 
(Regulations 86, 94, and 101, Article 203 (a) (2)-l; Regulations 103, section 19.203 (a) (2)-l.) 
" Kaskaskia Life Ins. Co., 22 BTA 210 (1931). 
M OUi Line Life Ins. Co., 31 BTA 758 (1934). 



CONCENTRATION OF PXONOMIC POWER 



18115 



Rales of tax on domestic life insurance companies and on ordinary corporations, 

1909-1940 ' 

RATES APPLICABLE TO LIFE INSURANCE COMPANIES SAME AS RATES APPLICABLE 
TO ORDINARY CORPORATIONS 





Rates of tax on- 


Revenue act and year 


Life insur- 
ance com- 
panies 


Ordinary 
corpora- 
tions 


Corporation Excise Tax Act of 1909: 1909-February 28, 1913_ 

Act of 1913: March 1, 1913-1915 _. 


1.0% 
1.0 
2.0 
6.0 

12.0 
10.0 
12.5 
12.5 

12.0 

11.0 

12.0 

/ 13.75 

13.75 

U8.0 


1.0% 
1.0 


Revenue Act of 1916: 1916 


2.0 


Revenue Act of 1917: 1917 


6.0 


Revenue Act of 1918: 

1918 - 


12.0 


1919-1920 


10.0 


Revenue Act of 1921: 1921-1923 _ 


12.5 


Revenue Act of 1924: 1924 

Revenue Act of 1928: 

1928 


12.5 
12.0 


1929 - .- --- 


11.0 


1930-1931 . .. . 


12.0 


Revenue Act of 1932: 1932-1933_ _._ . 


13.75 


Revenue Act of 1934: 1934-1935 .__ , 


13.75 


Revenue Act of 1939: 1940 


»18.0 







RATES APPLICABLE TO LIFE INSURANCE COMPANIES DIFFERENT THAN RATES 
APPLICABLE TO ORDINARY CORPORATIONS 



Revenue Act of 1926: 
1925 


12. 5% 
12.5 
15.0 
16.5 


13.0% 
13.5 


1920-1927 - _ 


Revenue Act of 1936; 1936-1937 . 


3 8.0-15.0 


Revenue Act of 1938: 1938-1939 


« 19.0 







' Intercorporate dividends received were taxable in full under the 1913 and 1916 acts at the rate of 1 and 2 
percent, respectively, and were taxed under the 1917 act as follows: 

Year dividend income earned: Rate 

March 1, 1913-1915 _ 1.0% 

1916-1917 2.0 

Under the 1918 and subsequent acts intercorporate dividends received from domestic corporations were 
exempt from tax except that since the 1936 act 15 percent of such dividends were included in taxable income . 
The exemption did not apply under the 1918 act or the 1932 and subsequent acts to dividends received from 
tax-exempt rorporations. 

' A scale of lower graduated rates ranging from 12.5 to 16 percent is provided for companies with net 
incomes of $25,000 or less. 

3 The normal tax rates shown ranged from 8 percent on the first $2,000 of normal tax net income to 15 per- 
cent on normal tax net income in excess of .$40,000. In addition, a surtar on undistributed profits ranging from 
7 to 27 percent was imposed on ordinary corporations, but not upon insurance companies. 

* The rate shown is the rate applicable to corjwrations with net incomes over $25,000 before allowance of 
the 2.5 percent credit for dividends paid. A scale of lower graduated rates, ranging from 12.5 to 16 percent 
was provided for ordinary corporations with net income of $25,000 or less but not for life insurance companies . 

F. FOREIGN COMPANIES 

During the period 1909-1920, foreign life insurance companies were subject to 
the provisions applicable generally to foreign corporations, that is, they were taxa- 
ble upon net income arising from business transacted and capital invested within 
the United States. Foreign life insurance companies were allowed to exclude 
from gross income that portion of premiums received which in the taxable year 
had been paid back or credited to policyholders or treated as an abatement of 
premiums. They were allowed the same deductions granted other foreign cor- 
porations, and in addition, were allowed to deduct (1) the net addition, if any, 
required by law to be made within the year to reserve funds and (2) sums other 
than dividends paid within the year on policy and annuity contracts. The rates 
applicable to taxable net income were the same for all corporations, domestic 
and foreign. 

The Revenue Acts of 1921-1939 provide that "in the case of a foreign life 
insurance company the amount of its net income for any taxable year from 
sources within the United States shall be the same proportion of its net income for 



124491 — 41— pt. 31-A 8 



18116 CONCENTRATION OF ECONOMIC POWER 

the taxable year from sources within and without the United States which the 
reserve funds required by law and held by it at the end of the taxable year upon 
business transacted within the United States is of the reserve funds held by it at 
the end of the taxable year upon all business transacted." "^ 

Any branch or agency of a foreign insurance company which transacts business 
in the United States or in' any United States territory is deemed to be transacting 
business within the United States, and all of the business transacted by such 
branch or agency is deemed to be business transacted within the United States.*^ 

A foreign life insurance company which does not transact business within the 
United States and which holds no reserve fund upon business transacted within 
the United States, but which derives income from sources within the United States, 
is subject to taxation upon the income derived from sources within, the United 
Statjes.*' Under the Revenue Acts of 1921-1934, the United States income of 
such foreign life insurance companies was subject to the tax imposed on life 
insurance companies, but under the Revenue Acts of 1936-1939 the income of 
such foreign life insurance companies has been subjected to the taxes imposed 
upon other foreign corporations. ^^ Under these last three revenue acts, therefore, 
foreign life insurance companies with no United States insurance business, but 
deriving income from sources within the United States, have been and are taxed 
at a rate of 15 percent, except that in the case of dividend income the rate has 
been 10 percent. »" In the case of corporations organized under the laws of a con- 
tiguous country the rate of 10 percent on dividend income may be reduced by 
treaty to a rate of not less than 5 percent.'"" 

G. EXEMPT COMPANIES 

1. Fraternal beneficiary societies. 

Fraternal beneficiary societies, orders, or associations operating under the lodge 
system, or for the exclusive benefit of the members of a fraternity itself operating 
under the lodge system, and providing for the payment of life, sick, accident, and 
other benefits to the members of such societies, orders, associations, and depend- 
ents of such members are exempt."" 

A society or association "operating under the lodge system" was at first con- 
sidered to be one organized under a charter, with properly appointed or elected 
officers, with an adopted ritual or ceremonial, holding meetings at stated intervals, 
and supported by fees, dues, or assessments, but under the 1921 and subsequent 
acts has been regarded as a society or association "carrying on its activities under 
a form of organization that comprises local branches, chartered by a parent organ- 
ization and largely self-governing, called lodges, chapters, or the like".'''^ 

A "fraternal beneficiary society" was at first defined >°^ as a society whose mem- 
bers have adopted the same or a very similar calling, avocation, or profession, or 
who are working in unison to accomplish some worthy object, and who for that 
reason have bound themselves together as e-j association or society to aid and 
assist one another and to promote the ■"ori' n cause. The absence of profit in 
the operation of such an association wab n> semed to be the test of the classi- 
fication, but rather the presence of a fraten.^l side or object which the society in 
some manner promoted. A mutual insurariv e company, in order to qualify for 
exemption as a fraternal beneficiary association, had to be primarily fraternal 
under this early ruling. 

It was later held "" that a fraternal beneficiary society, order, or association 
is exempt if it can be shown that (1) it is operated under the lodge system or for 

" Revenue Acts of 1921 ,1924, and 1926, section 245 (c) ; Revenue Acts of 1928, 1932, and 1934, section 203 (c) . 
The Revenue Acts of 1936 and 1938 employed the same formula as above given to determine the tax base of 
foreign life insurance companies, but substituted "normal-tax net income" for "net income" in the 1936 
act and "special class net income" for "net income" in the 1938 act. The 1939 act employs the above given 
formula, but reverts to "normal-tax net income." 

. •« Regulations 62, 65, and 69, Article 687; Regulations 74 and 77, Article 977; Regulations 86, Article 203 
(c)-l. 

" Regulations 62, 65, and 69, Article 687; Regulations 74 and 77, Article 977; Regulations 86, Article 203 
(c)-l; Revenue Acts of 1936 and 1938, section 201 (b) (3); I. R. C. section 201 (b) (3); Revenue Act of 1939, 
section 203. 

•8 Ibid. 

•» Revenue Acts of 1936 and 1038, section 231 (a) (1); I. R. C, section 231 (a) (1); Revenue Act of 1939, 
section 203. 

'«• Revenue Acts of 1936 and 1938, section 231 (a); I. R. C, section 231 (a) (1). 

i<» Tariff Act of 1909. section 38; Tariff Act of Oct. 3, 1913, section II-Q (a); Revenue Act of 1916, section 
11 (a) Third; Revenue Acts of 1918, 1921, 1924, and 1926, section 231 (3); Revenue Acts of 1928 and 1932, 
section 103 (3); Revenue Acts of 1934. 1936, and 19.38. section 101 (3); 1. R. C, (1939); section 101 (3). 

'w Regulations 62, 65, and 69, Article 514; Regulations 74 and 77, Article 524; Regulations 86, 94, and 101, 
Article 101 (3)-l; Regulations 103, section 19.101 (3)-l. 

>"» Office Decision 690, C. B. 3. p. 236 (1920). 

IM Office Decision 1516, C. B. 1-2, p. 180 (1922). 



CONCENTRATION OF ECONOMIC POWER 18117 

the exclusive benefits of the members of any society so operated and (2) it has an 
established system for the payment to its members or their dependents of Hfe, 
sick, accident, or other benefits. Under this later ruling it is not necessary that 
the fraternal feature of the organization should predominate; it is sufficient if 
both the fraternal and the benefit features are present. 

In the case of an incorporated society operating under the lodge system through- 
out the United States, whose charter provided for the union of eligible members 
into a grand fraternal beneficial, educational, and patriotic society, levying assess- 
ments upon its members to provide for the payment of sick and death benefits, 
for disability relief in case of accident, and for promoting their social, moral, 
education, and patriotic advancement, but also deriving income from subscrip- 
tions to a daily and a weekly newspaper which it published as well as from job 
printing and other sources, none of the income of the society inuring to the benefit 
of any pri . :i,te stockholder or individual, it was held that, although this society 
had fraternal and beneficial features, it was chiefly a .patriotic organization, inter- 
ested in the general welfare of its members and that its powers were so extensive 
as to make it inehgible for the exemption provided for fraternal beneficiary 
societies."** 

2. Benevolent life insurance associations of a purely local character. 

Prior to enactment of the Revenue Act of 1924, benevolent life insurance com- 
panies of a purely local character were not specifically exempted under the Federal 
income tax statutes. '"o Under the 1924 and subsequent acts, such associations 
have been exempted, provided that 85 percent or more of the income of such as 
association consists of amounts collected from members for the sole purpose of 
meeting losses and expenses.*"^ 

If a benevolent life insurance association issues policies for stipulated cash 
premiums, or if it requires advance deposits to cover the cost of the insurance 
and maintains investments from which more than 15 percent of its income is 
derived, it is not entitled to exemption. An organization may, however, be en- 
titled to exemption even though it makes advance assessments for the sole purpose 
of meeting future losses and expenses provided that the balance of such assess- 
ments remaining on hand at the end of the year is retained to meet losses and 
expenses. '°* 

An organization of a purely local character is deemed to be one whose business 
activities are confined to a particular community, place, or district, irrespective, 
however, of political subdivisions. An organization whose activities are limited 
only by the boundaries of a State is not deemed to be of a purely local character.*"^ 

3. Voluntary employees' beneficiary associations. 

Under the 1928 and subsequent acts, voluntary employees' beneficiary asso- 
ciations providing for the payment of life, sick, accident, or other benefits to the 
membera or their dependents have been exempt, provided that (1) no part of 
their net earnings inures to the benefit of any private shareholder or individual, 
and (2) 85 percent or more of the income consists of amounts collected from 
members for the sole purpose of making such payments and meeting expenses."" 

Under the acts prior to the Revenue Act of 1924 employees' associations or- 
ganized to establish and maintain funds for sick, accident, or death benefits to 
members had been held not to be exempt.'" Under the 1924 act, the first ruling 
with respect to such companies was that they were not exempt under that act."^ 
Following the insertion into the law of the statutory provision exempting such 
companies in the Revenue Act of 1928, the Bureau ruled that such companies 
were exempt under the 1924 act as well."^ 

103 Office Decision 508, C. B. 2. p. 207 (1920). 

'I" Such companies were not exempt, prior to 1924, under the provision exempting "Farmers' or other 
mutual hail, cyclone, or fire insurance company, mutual dith or irrigation company, mutual or cooperative 
telephone company, or like organi :atiori of a purely local character." Bankers' and Planters' Mutual Insur- 
ance Association v. Walker, 279 Fed. 53 (1922); Swedish Missim Friends' Aid Association, 12 BTA 1152 (1928); 
and Shelby County Mutual Relief Association v. Schwaner, 21 Fed. (2d) 252 (D. C. 111. 1927). 

'»' Revenue Acts of 1924 and 1926, section 231 (10); Revenue Acts of 1928 and 1932, section 103 (10); Revenue 
Acts of 1934, 1930, and 1938, section 101 (10); I. R. C. (1939), section 101 (10). 

io« Regulations 65 and 69, Article 521; Regulations 74 and 77, Article 531; Regulations 86, 94, and 101, 
Article 101 (lO)-l; Regulations 103, section 19.101 (lO)-l. 

i»» Ibid. 

"» Revenue Acts of 1928 and 1932, section 103 (16); Revenue Acts of 1934, 1936, and 1938, section 101 (16); 
I. R. C. (1939) section 101 (16). 

"' Philadelphia and Reading Relief Association, 4 BTA 713 (1926); Atlantic Coast Line R. R. Co. v. U. S., 
71 Ct. CI. 380 (1930); Employees' benefit Association of American Steel Foundries, 14 BTA 1166 (1929). 

'" I. T. 2117, C. B. III-2, p. 229 (1924). 

I" I. T. 2425, C. B. VII-2, p. 153 (1928). 



18118 CONCENTRATION OF ECONOMIC POWER 

4. Voluntary Federal government employees' beneficiary associations. 

The Revenue Act of 1939 added voluntary Federal government employees' 
beneficiary associations to tht^ list of exempt life insurance companies."^ Exemp- 
tion is limited to those companies no part of the net earnings of which inure to 
the benefit of any private shareholder or individual."* 

H. CONSOLIDATED RETURNS 

1. Domestic companies. 

Prior to the enactment of the Revenue Act of 1918, no mention of consolidated 
returns was made in the" income tax statutes. The Revenue Act of 1918 made 
it mandatory that affiliated groups of domestic corporations file consolidated 
returns. "» Life insurance comoanies were not specifically exempted from this 
requirement."' 

For the years 1922-1928, affiliated groups of domestic corporations were granted 
the privilege of filing either separate returns for each corporation or a consoli- 
dated return for. the group."* Although life insurance companies were not spe- 
cifically mentioned in the provisions of law relating to consolidated returns, it 
was apparently the practice during the period 1921-1924 for life insurance com- 
panies to be included in affiliated groups along with ordinary corporations filing 
consolidated returns. During the years 1921-1924 the question of whether or 
not life insurance companies could be so included along with ordinary corpora- 
tions was not of particular importance, since the rates of tax on both insurance 
companies and ordinary corporations were the same. With the introduction of 
a rate differential in favor of life insurance companies in 1925, however, the 
question became oi prime importance, because of the difficulty involved in 
determining what portion of the net income of the affiliated group was to be 
taxed at the lower rate applicable to life insurance companies. The Commis- 
sioner at first sanctioned the practice of including life insurance companies in 
affiliated groups along with ordinary corporations, as is evidenced by the ruling 
that — 

"where a tax is assessed upon the basis of. a consolidated return, and one of 
the affiliated companies, on the basis of a separate return, would be entitled 
to the lower rate of tax allowed domestic insurance companies * * * no 
part of the consolidated net income will be taxable at such lower rate un- 
less the group of affiliated corporations as a whole can qualify as a domestic 
insurance company." "° 

This ruling was subsequently revoked by a later ruling that insurance companies 
were not to be included in an affiliated group along with ordinary corporations 
filing a consolidated return. '^o The Revenue Act of 1928 introduced the statu- 
tory provision, applicable prospectively only, -that for 1929 and subsequent 
years — 

"an insurance company * * * shall not be included in the same con- 
solidated return with [an ordinary] corporation." i^i 

The Revenue Act of 1932 carried the prohibition further"by providing that — 

"life insurance companies may not file consolidated returns with fnsurance 
companies other than life or mutual." '^2 

Not until 1933 was a decision finally made that, for the entire period since the 
introduction of the optional provision for the year 1922, life insurance companies 
could not be included along with ordinary corporations in an affiliated group 
filing a consolidated return. '^3 

Throughout this period affiliated groups of insurance companies were given 
the option of filing consolidated returns. Prior to 1932, affiliated life and non- 
life insurance companies could file a consolidated return. ^^4 Under the Revenue 
Act of 1932 aflfiliated life insurance companies could file a consolidated return, 

in Revenue Act of 1939, section 217. 
115 Ibid. 

"8 Revenue Act of 1918, section 240. 
"Mbid. 

"» Revenue Acts of 1921, 1924, and 1926, section 240. 
"» Office Decision 2355, C. B. VI-1. p. 98 (1927). 

>2« General Counsel's Memorandum 5G09, C. B. VlII-l, p. 186 (1928); Office Decision 2448, C. B. VIII-1, 
p. 188(1928). 

121 Revenue Act of 1928, section 141 (e). 

122 Revenue Act of 1932, section 141 (e). 

123 National Life Ins. Co. v. U. S.. 4 Fed. Supp. 1000 (1933). 
•2< Regulations 74, Article 713. 



CONCENTRATION OF ECONOMIC POWER 18119 

but life insurance companies were not to be included in affiliations along with 
non-life insurance companies or with ordinary corporations filing consolidated 
returns. '25 

Under the Revenue Act of 1934 and subsequent acts the privilege of filing con- 
solidated returns for 1934 and subsequent years has been -confined to railroad 
carriers and to holding companies whose assets consist principally of stock in 
railroad carrier corporations. '^6 

2. Foreign companies. 

Even under the mandatory provision of the Revenue Act of 1918, applicable 
through 1920, calling for consolidated returns from affiliated groups, the man- 
date was restricted to affiliated groups of domestic corporations. '^7 Domestic 
corporations, including life insurance companies, were not permitted to include 
the net income of an affiliated foreign corporation in a consolidated return. '^s 

Under the optional provision concerning consolidated returns introduced by 
the 1921 act, as under the 1918 act, the definition of affiliation was confined to 
domestic corporations. This restriction continued until the Revenue Act of 
1928.i=» Under the 1928 and 1932 acts a special provision was introduced to 
allow the inclusion of certain Canadian and Mexican corporations in affiliated 
groups filing consolidated returns, as follows: 

"In the case of a domestic corporation owning or controlling, directly or 
indirectly, 100 per centum of the capital stock (exclusive of directors' qual- 
ifying shares) of a corporation organized under the laws of a contig\ious 
foreign country and maintained solely for the purpose of complying with 
the laws of such country ivS to title and operation, f nroperty, such foreign 
corporation may, at the option of the domestic coi^oration, be treated for 
the purpose of this title as a domestic corporation." '3" 

This privilege of including certain Canadian and Mexican companies in the affi- 
liated group was apparently available to insurance companies as well as to other 
types of corporations until 1934, when the privilege of filing consolidated returns 
was limited to railroad corporations, as hereinbefore noted. 

II. Taxation of Life Insurance Companies Under the Capital Stock Tax 

A. GENERAL STATEMENT 

A tax on the privilege of carrying on or doing business by corporations, joint- 
stock companies or associations, or insurance companies, measured by the fair 
average value of the taxpayer's capital stock during the preceding year (including 
surplus and undivided profits) was introduced under the Revenue Act of 1916 
and was in effect during the period 1917-1921. '3' In the case of a domestic life 
insurance company, deposits and reserve funds required by law or contract to be 
maintained or held for the protection of or payment to or apportionment among 
policyholders were not to be included in determining the value of the capital 
stock. '32 The measure of the tax in the case of a foreign corporation was the 
capital actually invested in the transaction of its business in the United States, 
except that in the case of a foreign life insurance company such deposits or reserve 
funds as it was required by law or contract to maintain or hold in the United States 
for the protection of or payment to or apportionment among policyholders did 
not have to be included. "^ 

An exemption of $99,000 from the value of the capital stock was allowed in the 
case of domestic corporations^ and, in the case of foreign corporations, an exemp- 
tion was allowed equal to such proportion of $99,000 as the amount of capital 
invested in the transaction of business in the United States bore to the total amount 
of capital invested.'^^ Under the 1918 act this exemption was reduced from 
$99,000 to $5,000, and was restricted to domestic taxpayers. '^^ 

'" Revenue Act of 1932, section 141 (e). 

'2« Revenue Acts of 1934, 1936, and 1938, section 141 (d) (3); I. R. C. section 141 (d) (3). 

n' Revenue Act of 1918, section 240. 

'" Regulations 45, Article 636. 

i2» Revenue Acts of 1921, 1924, and 1926, section 240. 

130 Revenue Acts of 1928 and 1932, section 141 (h). 

!3i Revenue Act of 1916, section 407. 

'J2 Ibid. 

133 Ibid. 

i3< Ibid. 

ii» Revenue Act of 1918, sections 1000 (a) (1) and (2). 



18120 CONCENTRATION OF ECONOMIC POWER 

The rate of tax under the Revenue Act of 1916 and that act as amended by the 
Revenue Act of 1917 was 50 cents per $1,000. The rate under the Revenue Act 
of 1918 was $1.00 per $1,000."8 

Fraternal beneficiary societies exempt under the income tax were also exempt 
under the capital stock tax.'" 

Under the Revenue Acts of 1921 and 1924 life insurance companies were ex- 
empted from the capital stock tax.'^s This tax was repealed for all corporations 
by the 1926 act."» 

Under the National Industrial Recovery Act of June 16, 1933, a capital stock 
tax was reintroduced, this tax having been continued in effect under subsequent 
revenue acts.'*" Life insurance companies are exempt from this present capital 
stock tax.'" 

B. THE TAX BASE 

Whether an insurance company was to be classed as a stock or mutual company 
depended upon the ultimate control of the affairs of the company — -if the policy- 
holders were in control, it was deemed a mutual company; if the stockholders 
were in control, it was a stock company. "^ 

In Equitable Life Assurance Society of the U. S. v. Bowers,^*^ the plaintiff was a 
stock company under New York law. However, all of its stock except a very small 
amount had been acquired by the company and was held in trust for the benefit 
of the policyholders. The question was whether the Equitable was a stock com- 
pany subject to tax under the Revenue Act of 1918 only on the net worth of the 
stock,'" or whether it was a mutual company taxable on its much larger net worth 
to its policyholders."^ The Circuit Court for the Second Circuit, speaking through 
Justice Learned Hand, held that, although the company was a stock company 
under the New York law creating and regulating it, it was a mutual company for 
purposes of the Federal income tax.'" 

1. Stock companies. 

Under the Revenue Act of 1916, stock life insurance companies, that is, insur- 
ance companies organized for profit having capital stock represented by shares, 
were subject to the capital stock tax along with other types of corporations, except 
that, as hereinbefore noted, deposits and reserve funds required by law or contract 
to be maintained for the protection of policyholders were not to be included in the 
determination of the value of the capital stock for tax purposes.'*^ 

Under the Revenue Act of 1918, it was provided by regulation that insurance 
companies having capital stock were taxable like other corporations, whether 
foreign or domestic, and that, in addition to the exclusion of the legal reserve 
funds allowed under the 1916 act, reserves which represented actually accrued 
liabilities (credits to which were deducted from gross income as ordinary and 
necessary business expenses) were to be omitted.'^* The tax was computed by 
deducting from the total book value of the assets the amount of the actual liabili- 
ties and legal reserves, unless there was indication that the book value was sub- 
stantially different from fair market value, in which case adjustment could be made 
to take into account market value of the shares and net earnings of the company.'" 
It was further provided that if the fair average value of the capital stock vvas esti- 

"36 Revenue Act of 1916, section 407; Revenue Act of 1918, sections 1000 (a) and (c) . 

1" Revenue Act of 1916, section 407; Revenue Act of 1918, section 1000 (c). For a discussion of the inter- 
pretation accorded the term "fraternal beneficiary society", see section I-Q-1, pages 18116-7. A voluntary 
unincorporated association of employees formed for the purpose of relieving sick and aged members and the 
dependents of deceased members was deemed to be an insurance company subject to the capital stock tax, 
whether the fund for such purpose was created wholly by membership dues or partly by contributions from 
the employer (Regulations 50, Article 23) . 

'38 Revenue Act of 1921, section 1000 (b); Revenue Act of 1924, section 700 (b). 

i3« Revenue Act of 1926, section 1200. 

'" N. I. R. A., section 215; Revenue Act of 1934, section 701; Revenue Act of 1936, section 401; I. R. C, 
sections 1200-1207. 

HI Ibid. 

1" Solicitor's Opinion 101, C. B. I-l, p. 452 (1922). 

'" 87 Fed. (2d) 687 (1937). 

I" Revenue Act of 1918, section 1000 (b). 

'" Revenue Act of 1918, section 1000 (c). 

"« 87 Fed. (2d) 6S7 (1937), at 690. The decision carries some interesting dicta. Judge Hand felt called 
upon to write as follows, at pages 689-690: 

"It is true that nobody has been able to find any reason for the distinction made between stock companies 
and mutual, probably none was really intended • * *. But it is not a reason for perverting the natural 
meaning of the words that we cannot fathom why they were used at all, or that we may suspect that they never 
would have been, had they been understood." Italics supplied, 

"' Regulations 38, Article 1; Regulations 38 (revised). Article 3 and 8. 

'« Regulations 50, Article 41. 

"' Regulations 50 (revised), Article 41 (Treasury Decision 2979). 



CONCENTRATION OF ECONOMIC POWER 18121 

mated from the market price of the shares of stock of the company, no deduction 
for deposits or reserves was proper from the total value so established. '^o 

2. Mutual companies. 

At first mutual life insurance companies were by regulation exempted from the 
capital stock tax for the reason that, in the absence of capital stock, there was no 
basis in the law upon which the tax could be computed for such companies. i*' 
However, in 1918, the regulations issued under the 1916 act were revised to include 
mutual life insurance companies as taxpayers, the capital stock of mutual insur- 
ance companies being deemed to be "any capital or surplus or Contingent reserves 
invested in real estate and other assets or maintained for the general use of the 
business."'" Legal reserve funds were to be excluded, as in the case of stock life 
insurance companies. '^^ 

Under the Revenue Act of 1918 it was by statute specifically provided that — 

"The t,axe"s imposed * * * shall apply to mutual insurance companies, 
and in the case of every such domestic company the tax shall be equivalent 
to $1 for each $1,000 of the excess over $5,000 of tlie sum of its surplus or 
contingent reserves maintained for the general use of the business and any 
reserves the net additions to which are included in net income under the 
[income tax], as of the close of the preceding accounting period * * * 
Provided, That in the case of a foreign mutual insurance company the tax 
shall be equivalent to $1 for each $1,000 of the same proportion of the sum 
of such surplus and reserves, which the reserve fund upon business transacted 
within the United States is of the total reserve upon all business transacted, 
as of the close of the preceding accounting period * * *." '^^ 

Mutual insurance companies in computing their capital stock tax bases were 
allowed to deduct from total assets the following: (1) debt liabilities, (2) the legal 
reserves, and (3) such percentage of the amount of shrinkage from the total value 
of the assets to the market value of the assets as the amount of the assets m 
excess of the legal reserves bore to the total assets. '^^ 

It will be noted that although stock life insurance companies were allowed to 
exclude "such deposits and reserve funds as they were required by law or contract 
to maintain or hold for the protection of or payment to or apportionment among 
policyholders," '^* mutual companies were not accorded the benefit of this blanket 
exclusion, being required to include in the computation of the tax base — 

"* * * a,ny reserves the net additions to which are included in net 
income under the [income tax]." '" 

This dififerentiation in the treatment accorded stock and mutual life insurance 
companies worked a hardship upon such mutual life insurance companies with 
large deferred dividend reserves, because such reserves, under the sections of the 
law above noted, had to be included in the capital stock tax base of mutual insur- 
ance companies, but did not have to be included in the capital stock tax base of 
stock life insurance companies.''* The basis for this distinction was that, in 
the case of a stock company, the law attempted to subject to capital stock tax 
the net worth of the proprietary interest of the stockholders, whereas, in the case of a 
mutual company, the attempt was to tax the "proprietary" interest of the policy- 
holders. 

In taxing mutual life insurance companies upon the net worth of the proprietary 
interest of the policyholders. Congress apparently chose to regard the interest of 
the policyholders in the legal reserve as "contractual" rather than "proprietary", 
since the interest of the policyholders in the legal reserve was exempted from the 
tax. The net worth of the legal reserve thus escaped the capital stock tax both 
in the case of stock and mutual companies. 

'M Regulations 50, Article 41. 
'»" Regulations 38, Article 2 (b). 

152 Regulations 38 (revised), Article 3. 

153 Ibid. 

m Revenue Act of 1918. section 1000 (c). 

'55 Law Opinion 1078, C. B. I-l, p. 457 (1922). "Total assets" meant all the admitted assets of the com- 
pany, whether ledger or nonledger, at the value reported to and accepted by the State insurance, depart- 
ment. 

i5« Revenue Act of 1918, section 1000 (b). 

157 Revenue Act of 1918, section 1000 (c). 

158 Solicitor's Opinion 101, C. B. I-l, p. 452 (1922). Although deferred dividend reserves had to be in- 
cluded in computing the capital stock tax base, dividends declared unconditionally due, and payable at 
the close of the given accounting period were deductible. (Law Opinion, 1078, C. B. I-l, p. 457 (1922)). 



18122 CONCENTRATION OP ECONOMIC POWER 

III. Taxation of Life Insurance Companies Under the Excesj^-Profits Tax 

A. GENERAL STATEMENT 

Life insurance companies were subject to the taxes on excess profits imposed 
under the Revenue Acts of 1917, 1918, and 1921.159 The Revenue Act of 1921 
provided that the excess-profits tax was to be continued only for the year 1921. '^ 

Life insurance companies are not subject to the present excess profits tax 
first imposed in 1933 under the National Industrial Recovery Act and thereafter 
continued in effect under later revenue acts.'^' 

For the year 1917 the excess profits tax on corporations including life insurance 
companies ranged from 20 percent on that part of net income not in excess of 15 
percent of invested capital to 60 percent of that part of net income in excess of 
33 percent of such capital. '^^ A specific exemption of $3,000 was allowed domestic 
corporations, and, in addition, a further exemption based on the "pre-war" 
earnings (as defined in the act) of the taxpayer was allowed. '^3 This latter exemp- 
tion was not to be less than 7 percent nor more than 9 percent of the invested 
capital. 1^^ Both domestic and foreign corporations were allowed the benefit 
of this latter exemption. '^^ Both exemptions were deductible only from the first 
tax bracket.'*'*' Income derived from the business of life, health, and accident 
insurance combined in one policy issued on the weekly premium payment plan 
was exempt. '0' 

Under the Revenue Act of 1918 the rates of the excess profits tax on corpora- 
tions, including life insurance companies, for the year 1918 were raised to 30 
percent on that part of net income not in excess of 20 percent of invested capital, 
and to 65 percent on that part of net income in excess of 20 percent of invested 
capital.'^* In addition, under the war profits tax a rate of 100 percent was 
imposed upon the sum, if any, by which 80 percent of the net income in excess 
of the war profits credit (as defined in the act) exceeded the amount of the tax 
imposed under the 30 and 65 percent rates. '^^ jn no case, however, were the 
excess and war profits taxes to exceed 30 percent of that part of net income not in 
excess of $20,000 plus 80 percent of that part of net income in excess of $20,000.'™ 
As under the 1917 act a specific exemption of $3,000 was allowed domestic cor- 
porations under the 1918 act, but the additional exemption allowed both domestic 
and foreign corporations under the excess profits tax was no longer made to depend 
on "pre-war" earnings, being fixed at 8 percent of the invested capital for the 
taxable year.'^' As under the 1917 act the exemptions were deductible only from 
the first tax bracket. "^ 

Under the 1918 act, the rates of excess profits tax for the years 1919-1921 were 
lowered to 20 percent of that part of net incoine not in excess of 20 percent of 
inves ed capital and to 40 percent of that part of net income in excess of 20 
percent of invested capital. '"^ The specific exemption and the additional exemp- 
tion of 8 percent of invested capital remained as for the year 1918.'^^ 

No special provision was made for foreign insurance companies. Under the 
Revenue Act of 1917 foreign corporations, including foreign insurance companies, 
were taxed on the basis of their net incomes from sources within the United States, 
the invested capital of such corporations being deemed to be that proportion of the 
entire invested capital which net income from sources within the United States 
bore to entire net income.'" Under the 1918 act a new method of determining 
the excess profits tax due from foreign corporations was introduced, the tax being 
an amount bearing the same ratio to the net income of the taxpayer for the tax- 
able year (in excess of the specific exemption of $3,000), as the average tax of 
representative corporations engaged in a like or similar trade bore to their average 

159 Revenue Act of 1917, section 200; Revenue Acts of 1918 and 1921, section 304 (a). 
leo Revenue Act of 1921. section 301 (a). 

i«i N. I. R. A., section 216; Revenue Act of 1934, sections 702 and 701 (c) (2); Revenue Act of 1935, section 
106 and 105 (c) (2i; I. R. C, sections 600 and 1201 (a) (2). 
'62 Revenue Act of l'>17, section 201. 
183 Revenue Act of 1917, sections 203 (a) and 203 (c). 
i«< Revenue Act of 1917, section 203 (a). 
i«s Revenue Act of 1917, sections 203 (a) and 203 fc). 
166 Revenue Act of 1917, section 201. 
19' Revenue Act of 1917, section 201 (c). 
i«8 Revenue Act of 1918, section 301 (a). 
"8» Ibid. 

1" Revenue Act of 1918, section 302. 
I'l Revenue Act of 1918, section 312. 
1" Revenue Act of 1918, section 301 (a). 
173 Revenue Act of 1918, section 301 (b). 
1" Revenue Act of 1918, section 312. 
1" Revenue Act of 1917, sections 200 and 207 (b). 



CONCENTRATION OF ECONOMIC POWER 18123 

net income (in excess of the $3,000 specific exemption) for such year."" The 
foreign corporation was compared with domestic corporations w^hich were simi- 
larlj^ circumstanced with respect to gross income, net income, profits per unit of 
business transacted, and capital employed.'" 

Fraternal beneficiary societies exempt under the income tax were also exempt 
under the excess profits tax."* Under the 1917 act insurance companies whose 
incomes were derived exclusively from the business of life, health, and accident 
insurance combined in one policy issued on the weekly premium plan were ex- 
empt,''* but such companies were taxable under the 1918 act.'*" 

B. THE DETERMINATION OF INVESTED CAPITAL 

1. Stock companies. 

The invested capital of a stock insurance company was deemed to consist of its 
capital stock, paid in or earned surplus and undivided profits as of the beginning 
of the taxable year.'" Invested capital was not to include stocks and bonds 
(other than obligations of the United States) or other assets the income from which 
was not subject to the excess profits tax.'*^ Nor was invested capital to include 
"money or other property borrowed", which term was defined to include not only 
cash or other borrowed property which could be identified as such but also current 
liabilities and temporary indebtedness of all kinds, and any permanent indebted- 
ness upon which the taxpa3'er was entitled to an interest deduction in computing 
net income's^ The legal reserve funds of stock companies were not to be in- 
cluded in invested capital.'** Stock insurance companies were subject to the 
rules applicable to corporations in general with regard to the adjustments to be 
made in determining the value of invested capital. '^^ 

2. Mutual companies. 

a. General statement. — The invested capital of a mutual insurance companj- was 
deemed to consist of the sum of (1) any surplus or contingent reserves maintained 
for the general use of the business plus (2) any legal reserves the net additions to 
which were included in net income subject to tax. '89 As in the case of stock in- 
surance companies and corporations in general, invested capital was not to include 
tax-free assets other than obligations of the United States. '8' 

b. The controversy with respect to the legal reserve: The problem of the legal 
reserve was whether such reserve was an asset to be included in mutual life 
insurance company invested capital or a debt liability not to be included in such 
invested capital.'^' The mutual insurance companies contended that title to the 
legal reserve was in the insurance companies, that payments by policyholders 
into the reserve were analagous to payments for stock made by a stockholder 
in a joint-stock company, that until the maturity of a policy the policj'-holder 
is simply a member of the corporation with no present enforceable right against 
the assets, and tliai therefore it was the intention of Congress, in the absence of 
express stipulation to the contrary that the legal reserve fund was to be regarded 
as an asset to be included iri invested capital. 's* The Bureau, on the other hand, 
contended that, because of the fact that at the maturity of a policy the policy- 
holder would have an enforceable claim against the reserve set up to mature 
the policy, the legal reserve was not analogous to the capital stock of a joint-stock 
company, but was rather a debt liability not to be included in the computation of 
invested capital."" 

The Revenue Act of 1917 did not specify whether or not the legal reserves of 
mutual life insurance companies were to be included in invested capital, but by 
regulation it was provided that onlj^ legal reserves the net additions to which 
were included in net income were to be included in the computation of invested 

i'« Revenue Act of 1918, sections 327 and 328. 

'" Revenue Act of 1918, section 328. 

'" Revenue Act of 1917, section 2(J1 fbl; Revenue Act of 1918, section 304 (a). 

1" Revenue Act of 1917, section 201 (c). 

"'» Revenue Act of 1918, section 304. 

IS' Regulations 41, Article 6,'i (b). 

"2 Regulations 41, Article 44. 

'*3 Regulations 41, .\rticle 44. 

'M Office Decision 2423, C-B Vri-2, p. 320 (1928). 

195 Regulations 41, Article 65 (b). 

i«8 Regulations 41, Article 65 (a). 

'■*' Regulations 41, Article 44. 

18S Duffy v. Mutual Benefit Life Ins. Co.. 272 U. S. 613 (1926). 

1" Duffp V. Mutual Benefit Life Ins. Co., 272 U. S. 613, 618-619 (1926). 

"0 Duffy V. Mutual Benefit Life Ins. Co., 272 U. S. 613, 618 (1926). 



18124 CONCENTRATION OF ECONOMIC POWER 

capital."" This meant that the true legal reserve fund, tl \t is, the aggregate of 
the reserves built up to mature each policy, was not to be included in invested 
capital. In 1923, the Committee on Appeals and Review, in holding that, 
under the Revenue Act of 1917, the legal reserve fund of a mutual life insurance 
company, the net additions to which were deductible from gross income under 
the income tax, was not to be included in invested capital, sustained the Bureau 
in its contention that the legal reserve fund was to be properly regarded as a debt 
liability rather than as a contributed asset."^ But later, in 1926, the Supreme 
Court decided that under the Revenue Act of 1917 a mutual life insurance com- 
pany was entitled to include its legal reserve fund in its invested capital. '"^ 

Under the Revenue Act of 1918, it was at first by regulation provided that 
the reserve funds of mutual and stock insurance companies, the net additions 
to which were deductible from gross income under the income tax, were not to be 
included in the computation of invested capital.'" This regulatory provision 
was amended in 1921 to allow the inclusion of reserve funds in invested capital 
to insurance companies other than life."^ Later, in 1927, after the decision of the 
Court in the Mutual Benefit Life case, the allowance was extended to mutual 
life insurance companies.'*" Still later it was decided that stock life insurance 
companies were also privileged to include their legal reserves in invested capital.'*' 

The net result of the Mutual Benefit and the Atlantic Life cases was to allow ail 
life insurance companies to include in invested capital the value of their legal 
reserves, thus minimizmg excess profits tax liability. When it is remembered 
•that under the capital stock tax Congress declared that the value of their legal 
reserves was not to be regarded for tax purposes as part of the net worth of life 
insurance companies, the anomaly, so favorable to the life insurance companies, 
becomes clear. On the one hand, the legal reserve was not regarded as part of 
the net worth of the insurance companies, thus minimizing capital stock tax 
liability. On the other hand, the legal reserve was regarded as part of the invested 
capital of insurance companies, thus minimizing excess profits tax liability. The 
anomaly is this: that which Congress had declared not to be a part of the net 
worth of certain companies for tax purposes was regarded by the courts as part 
of the invested capital of such companies for tax purposes. It is difficult to 
understand how that which had been deemed not to be part of net worth could 
be regarded as part of invested capital. 

WCM:eb. 

6/24/40. 

'" Regulations 41, Article 65 Ca). 

i»2 Appeals anil Review Recommendation 3202, C. B. II-2, p. 275 (1923). 

"3 Duffy V Mutual Benefit Life Ins. Co., '272 U. S. bl3 (1926). 

.1" Regulations 45, Article 870. 

i»« Treasury Decision ;^153, C. B. 4, p. 398 fl921): Regulations 62, Article 869. 

>M Treasury Decision 4053, C. B. VI-2. p. 292 (1927). 

•»' Moncure v. Atlantic Life Ins. Co., 44 Fed. (2d) 167 (1930). 



BRIEF SUBMITTED TO THE TEMPORARY NATIONAL 

ECONOMIC COMMITTEE BY THE NATIONAL 

ASSOCIATION OF RETAIL DRUGGISTS 

IN ANSWER TO MEMORANDUM FOR THURMAN W. 
ARNOLD, ASSISTANT ATTORNEY GENERAL OF THE 
UNITED STATES, RECOMMENDING REPEAL OF THE 
TYDINGS-MILLER AMENDMENT; ALSO MR. ARNOLD'S 
REJOINDER 



18125 



STATE FAIR TRADE LAWS AND THE FAIR TRADE ENABLING ACT 

AN ANBWEB TO THE BRIEF PRESENTED BY THURMAN W. ARNOLD, ASSISTANT 
ATTORNEY GENERAL OF THE UNITED STATES, RECOMMENDING REPEAL OF THE 
TYDINGS-MILLER AMENDMENT ' 

Submitted to the Temporary National Economic Committee by the National 
Association of Retail Druggists, 205 West Wacker Drive, Chicago, 111. 

INTRODUCTION 

On Feburary 12, 1941, the Honorable Thurman W. Arnold, Assistant Attorney 
General of the United States, asked the Temporary National Economic Com- 
mittee to recommend repeal of the Fair Trade Enabling Act embodied in the 
Tydings-Miller amendment, and filed with the committee a brief supported by 
a memorandum by Corwin, D. Edwards, economic consultant to the Antitrust 
Division of the Department of Justice, and certain other appended material. 

In answer to said brief and memorandum, it is submitted that — 

1. Fair Trade laws were enacted after full and open hearings by the legis- 
latures of 44 states and approved by their Governors; and the Tydings-Miller 
Amendment was adopted by the Congress with practical unanimity after lengthy 
and exhaustive consideration. 

2. The state Fair Trade laws, including the so-called "non-signer clause" 
thereof, are in harmony with the common law and constitute no departure from 
well established legal principles. 

3. The right of the states to govern their internal aflfairs, including their intra- 
state commerce, without interference from the Federal government, is inherent 
in our constitutional system. 

4. The principle of the Fair Trade laws is economically sound and the results 
of their application have justified their enactment. . 

The foregoing theses are developed in the following brief, which we offer in 
support of our opposition to the repeal of the Fair Trade Enabling Act. 

Respectfully submitted. 

The National Association of Retail Druggists, 
John W. Dargavel, Executive Secretary. 

1. Fair Trade laws were enacted after full and open hearings by the legislatures of 
44 states and approved by their Governors; arid the Tydings-Miller Amendmerit 
was adopted by the Congress with practical unanimity after lengthy and exhaustive 
consideration. 
A. In order to understand the practical unanimity with which legislative bodies 
have approved the Fair Trade principle, it is necessary to know something 
of the history of former attempts to protect resale prices against the dep- 
redations of unethical distributors. 
The aim of the existing forty-four state Fair Trade acts is to protect a pro- 
ducer or vendor against price-cutting by enabling him to stipulate with his 
vendee what the minimum resale price of the goods shall be. These apply only 
to articles of commerce bearing the trade-mark, brand, or name of the producer, 
and then only when such articles are in free and open competition with other 
similar merchandise. The limitation to goods identified by trade-mark, brand, 
or name is important because, although such goods constitute only a small part 
of goods in commerce, it is that part on which consumers may compare retail 
prices on identical merchandise and which therefore can be used effectively as 
loss-leaders by predatory distributors seeking to deceive the public. 

The problem has been to determine at what point, as a matter of public policy, 
the line should be drawn between resale price maintenance for the legitimate 
and proper protection of the producer, the distributor, and the whole public, 
and price-fixing per se, to be condemned as a restraint of trade and an interfer- 

> See Final Report and Recommendations of the Temporary National Economic Committee, S. Doc. 
35, 77th Cong., 1st sess., Exhibit 2793, p. 232. 

18127 



18128 CONCENTRATION OF ECONOMIC POWER 

ence with normal and fair competition. That line has been drawn in the declara- 
tion of public policy embodied in the forty-four state Fair Trade acts. 

Almost since the beginning of commerce in its simplest form, the sale of goods 
from the producer directly to the user, there have been discussions of restraints 
of trade. At first each community was an isolated section, necessarily dependent 
on its own resources. Hence, for apparent economic reasons, the lawmakers and 
courts disapproved any act or contract which interfered with a producer's means 
of livelihood on the one hand, or on the other hand unduly deprived the public 
in any manner of the products or skill which should be available to it.^ 

With better roads and communication systems, commerce between the hitherto 
isolated communities began to develop and it was no longer necessary to guard 
the public so zealously against monopolies or excessive prices of their local pro- 
ducers. People and goods began to be available from other communities and the 
local producers were kept in check by the new competition. It began to be 
recognized that even a contract with a clause which laid some restraint upon 
trade might be valid and acceptable "in cases where the special matter appears 
so as to make it a reasonable and useful contract." It was said that — 

"In all restraints of trade> where nothing more appears, the law presumes 
them bad; but if the circumstances are set forth, * * * ^nd if upon them 
it appears to be a just and honest contract, it ought to be maintained." 2 

As time went by and commerce and industry developed, with more and more 
interchange between communities and geographical sections, the English courts 
continued to consider the propriety of each contract brought before them on the 
basis of the special circumstances surrounding it. As late as 1894, a broader 
standard was adopted for the determination upon the facts of the reasonableness 
of a specific contract.' 

It is notable that the leading cases in the United States on the question of 
restraint of trade, through price maintenance and otherwise, have generally been 
decided upon legal technicalities without the court even having before it any real 
factual information from which the true effect on trade and the economic welfare 
of the public could be determined. Yet the public today has as much interest 
as the public of any earlier period in employment problems as affected by unreason- 
able price-cutting, the availability of quality merchandise, and the prevention of 
monopolistic control. It is possible that if our courts could have had before them 
as much detailed information as the English courts had even in the earlier days, 
the restrictive decisions on price-maintenance cases would not have been rendered. 

The earliest American cases which allowed resale price maintenance were 
patent cases. The theory behind them was that it was a part of the patentee's 
lawful monopoly to control (by proper procedure) the conditions of resale of 
his patented article by the distributor to the ultimate user.* Even after there 
had been decisions forbidding resale price maintenance contracts on other goods, 
the new rulings were still thought to have no bearing upon the monopoly of a 
patentee and his consequent right to prescribe resale conditions.'' This theory 
of the patentee's rights was upheld until 1917.* And even in 1918 Mr. Justice 
Brandeis urged, in a concurring opinion, that the right of a producer to fix resale 
prices was an economic question depending upon the relevant facts, rather than 
upon any established legal principle.'' 

This right of a patentee to fix resale prices was extended and repeatedly recog- 
nized and protected by the Federal courts upon the ground of direct analogy, 
between the rights and monopolies of patent and trade secret articles.* But 
the rule as to trade secret articles was overthrown by a decision of Judge Lurton : « 

"The mere fact that one article or class of articles is made under an unknown 
and private formula and another class is not, is an undeniable fact which may 
serve for some purposes to differentiate them. But that single fact does not afford 
an economic reason, and still less a legal reason, for saying that it operates to ex- 
empt such articles from rules against unlawful restraint of trade." 

> Ollphant, in Cases on Trade Regulation, discusses the early English statutes and cases. 

« Mitchel V. Reynolds, 1 P. Wms. 181, 197 (1711) cited by Mr. Justice Hughes in Miles v. Park, 220 U. S. 
373. 

3 Nordenfelt v. Alalim-Nordenfelt Guns & Ammunition Co., App. Cas. 535 (1894). 

*Heaton-PeninsulaT Button- Fastener Co. v. Eureka Specialty Co., 77 Fed. 288 (1896); Henry v. A. B. Dick 
Co., 224 U. S. 1; Bement v. National Harrow Co., 186 U. S. 70. 

» Edison v. Smith Mercantile Co., 188 Fed. 92,'); Automatic Pencil Sharpener Co. v. Goldsmith, 190 Fed. 205. 

• Motion Picture Patents v. Universal Film Co., 243 U. S. 502, which expressly overruled Henry v. A. B. 
Dick, 224 U. S. 1. 

' Boston Store v. American Oraphophone Co., 246 U. S. 8. 

8 Dr. Miles Medical Co. v. Goldthwaite, 133 Fed. 794; Same v. Jaynes, 149 Fed. 838; Same v. Piatt, 142 Fed. 
606; Wells & Richardson v. Abraham, 146 Fed. 190; Jayne t. Loder, 149 Fed. 21; In re Park, 138 Fed. 421; 
Hartman v. Piatt, 142 Fed. 606. 

« Miles V. Park (C. C. A. 6), 164 Fed. 803, 806. 



CONCENTRATION OF ECONOMIC POWER 18129 

This decision was followed shortly by, and was accepted by the United States 
Supreme Court in the first leading case on the subject of price maintenance — Dr. 
Miles V. Park (220 U. S. 373.) 

Prior to this decision, producers had looked upon the use of resale price main- 
tenance as their right. The most common device for effectuating it was by written 
contract with the distributor whereby he agreed not to resell the article below a 
stipulated price. The Miles Company required every wholesaler and retailer 
selling its products to sign agreements to sell the goods at prices specified by the 
company. The defendant in this suit was a wholesaler who induced other whole- 
salers to sell ot it at prices violating the agreement, and who in turn sold the 
goods to retailers at cut prices. The Court held that the contracts were void as 
a restraint on the alienation of title to property owned by the dealers, and as a 
restraint on competition, and for both reasons against the public interest. Mr. 
Justice Hughes held (p. 409) : 

"The complainant having sold its product at prices satisfactory to itself, the 
public is entitled to whatever advantage may be derived from competition in the 
subsequent traffic." 

It is important to observe, however, that this case was decided without proof 
or consideration of the economic factors which might have supported the plan. 
While the decision purported to rest upon protection of the public interest, no 
facts had been produced to show what the actual effect of such a plan upon the 
public welfare was. 

Yet the Miles decision did not go so far as to condemn all contracts which act 
in restraint of trade. Indeed, it was expressly pointed out (406) : 

"To sustain the restraint, it must be found to be reasonable both with respect 
to the pubhc and to the parties and that it is limited to what is fairly necessary, 
in the circumstances of the particular case, for the protection of the covenantee. 
Otherwise restraints of trade are void as against public policy," "• 

Neither in this nor in succeeding cases has resale price maintenance been held 
illegal -per se. So, for instance, in Federal Trade Commission v. Beech-Nut Pack- 
ing Co. (257 U. S. 441), though the Court enjoined certain specified practices of 
the Beech-Nut Company, it at the same time declared that the order of the Com- 
mission forbidding any form of price maintenance was too broad. In Cream of 
Wheat Co. v. Federal Trade Commission (14 Fed. (2d) 40, 48 (C. C. A. 8)), the 
Court directed a proviso to the Commission's order to specify what the company 
might lawfully do to correct its resale price policy. 

Wherever injunctions against resale price policies have been granted, they have 
been aimed at the methods which have been used to achieve the desired result, 
and the Court has not hesitated to approve resale price policies where the methods 
used were acceptable to it. 

The result of the Miles decision was that producers began to cast about for new 
and legal methods of maintaining retail prices at the desired level. The first of 
these new methods which went before and was approved by the Supreme Court was 
that set forth in U. S. v. Colgate & Co., 250 U. S. 300. The manufacturer gave 
notice to the retailer that the goods were not to be sold below a "suggested" retail 
price, and supplemented this notice by a policy of refusing to sell to retailers who 
did not adhere to the suggested price. The Supreme Court held that no contract 
for price maintenance had been made; that a trader or manufacturer had a right to 
exercise his discretion as to the parties with whom he would deal; and that he 
might announce in advance the circumstances under which he would refuse to sell. 

This ruling has been followed in subse,quent cases, such as Harriet Hubbard Ayer 
v. Federal Trade Commission (15 Fed. (2d) 274) and Shakespeare v. Federal Trade 
Commission (50 Fed. (2d) 758). 

Another method which has been pronounced legal by the Supreme Court is that 
adopted by the General Electric Co., very fuUy set out and discussed in United 
States V. General Electric Co. (272 U. S. 476). This company appointed over 21,000 
dealer "agents" throughout the country, to whom the goods were shipped on 
consignment, title to remain in the manufacturer untU sale at a specified price. 
The Court held (488) : 

"The owner of an article, patented or otherwise, is not violating the conunon 
law, or the Antitrust law, by seeking to dispose of his article directly to the con- 
sumer and fixing the price by which his agents transfer the title from him directly 
to such consumer." 

Thus there were two ways by which, with the full approval of the law and the 
courts, a producer could control the price at which his merchandise was sold to the 

10 Citing end quoting Oibbs v. Battimore Qua Co. (130 U. S. 409), and NordenfeU v. Maxim-Nordenfelt 
1904 (A. C. 565). 



18130 CONCENTRATION OF ECONOMIC POWER 

public. Yet rnany manufacturers who would have liked to achieve such results 
were either unwilling or financially unable to adopt either of these methods. The 
refusal-to-sell policy was a precarious one, because if it were carried out to the 
extent of affording real protection against price-cutters, the manufacturer might 
find that through the very willingness of his distributors to cooperate with him a 
combination had developed which was an illegal restraint of trade." It may often 
be an ineffective policy because, despite the refusal of a producer or his regular 
distributors to sell to the price-cutter, the latter invariably, often deviously, 
manages to get the goods. 

If the manufacturer wished to turn to the agency plan to control retail prices, 
he was faced with another, and in many instances an almost insuperable, diflBculty. 
He had to deal directly with retailers under contracts which were necessarily 
involved if they were complete.'^ He had to set up and carry the financial burden 
of a whole private system of distribution. He could not avail himself of the 
existing established channels. The average manufacturer could not afford to set 
up a nation-wide system of his own, or to carry it on with the requisite investment 
of capital, the additional burden of records and checking up, and the continuous 
close contact with his dealers which must foUow the adoption of such a system. 

B. The states undertook to legalize minimum-price maintenance after other 
efforts to solve the problem of predatory price-cutting had been proved 
impracticable. 

After the decision in the Dr. Miles case (164 Fed. 803, 806), efforts extending 
over many years were made in the Congress of the United States to secure legis- 
lative approval of a measure to legalize by statute resale price maintenance 
contracts. The Stephens bill and the Capper-Kelly bill were notable examples of 
this effort. The legislation in varying forms was before the Congress almost 
continuously from 1916 until 1930, but the Congress in effect said that the problem 
was one for the individual states to determine. With that in view, the first Fair 
Trade bill was introduced and passed in California in 1931. It was amended in 
1933 by the addition of the now-famous Section l}^, which read as follows: - 

"Wilfully and knowingly advertising, offering for sale or selling any commodity 
at less than the price stipulated in any contract entered into pursuant to the pro- 
visions of * * * this act, whether the person so advertising, offering for sale 
or selling is or is not a party to such contract, is unfair competition and is action- 
able at the suit of any person damaged thereby." / 

The law in California gave great promise as an effectual means of reaching the 
evils of predatory price-cutting and loss-leader selling and the consequent injury 
to producers, distributors and the general public. The state of Oregon passed a 
similar act in 1933, and the states of New Jersey, Washington, Wisconsin, New 
York, Maryland, Pennsylvania, Iowa, and Illinois enacted similar laws in 1935. 
In 1936 Rhode Island, Virginia, Ohio and Louisiana joined the ranks of Fair Trade 
states. 

In December, 1936, the Supreme Court of the United States, in a unanimous 
opinion delivered by Mr. Justice Sutherland, upheld the constitutionality of the 
Illinois and California acts which had previously received the stamp of approval 
of the highest courts of those states. i^ In 1937 the following states adopted the 
legislation: Tennessee, Arizona, Montana, New Mexico, Kansas, Georgia, Nevada, 
Colorado, North Carolina, Minnesota, Kentucky, Nebraska, South Carolina, 
Wyoming, Idaho, Utah, West Virginia, South Dakota, Florida, Indiana, Arkansas, 
Connecticut, Maine, Oklahoma, New Hampshire, Massachusetts and Michigan. 
These were followed in 1938 by Mississippi, and in 1939 by Alabama." Only 
four states, Delaware, Missouri, Texas and Vermont, have failed to place the 
legislation on their statute books. In Texas and Delaware it has received the 
approval of the legislatures but has been vetoed by the Governors. 

In addition to this phenomenal legislative approval, the record of Court deci- 
sions upholding the validity of Fair Trade laws has been no less impressive. The 
legislation has been upheld by the highest courts of the following states^*: Cali- 
fornia, Oregon, New Jersey, Wisconsin, New York, Maryland, Pennsylvania, 
Iowa, Illinois, North Carolina, South Carolina, South Dakota, Connecticut and 
Michigan. In Florida the original law was declared unconstitutional because of a 
defect in the title, but the law was re-enacted at the next ensuing session of the 
legislature and has not again been contested. 

" As in Toledo Pipe- Threading Co. v. Federal Trade Commission (11 Fed. (2d) 337). 
" Consider the many ramifications of the contract In General Electric case, 272 U. S. 476. 
'3 299U. S. 183(1936). 

'* See Appendix for chronological list of state Fair Trade law enactment, pp. 18154-6. 
i» See Appendix for chronological list of approving judicial decisions, pp. 18X54-5. 



CONCENTRATION OF ECONOMIC POWER 18131 

It is of the utmost significance that no state Fair Trade law has ever been 
repealed, and it is of interest to note that many states since the original passage 
of the act have seen fit to add strengthening and clarifying amendments. In 
1933 this was done by California; in 1935 by Oregon and Wisconsin; in 1937 by 
California, Oregon, New Jersey, Washington and Maryland; in 1938 by New 
Jersey, New York, Rhode Island and Virginia; in 1939 by South Dakota, Maine 
and Massachusetts; in 19-10 by New York, Rhode Island and Virginia. 

In the 75th and 76th Congresses bills to repeal the National Fair Trade Enabling 
Act were introduced in the House and Senate, but failed of consideration by the 
Committees to which they were referred. At the time of this writing repeal bills 
for the Enabling Act have not been introduced in the present Congress, and no 
bills to repeal Fair Trade laws have thus far been introduced in the state legisla- 
tures meeting in 1941. 

C. The charge that the methods by which the Fair Trade statutes were enacted 
were improper, and that these measures were not considered adequately 
by the legislatures, is not supported by the facts. 
The language hereafter italicized consists of quotations from Mr. Edwards' 

memorandum, and the statements following the italicized quotations are presented 

in refutation thereof. 

(1) "The passage of resale price legislation has become a classic example of thf 
use of misrepresentation by a pressi^re group." 

The charge of misrepresentation is not in accordance with the facts. As has 
been stated previously, loss-leader selling and predatory price-cutting of trade- 
marked and branded articles of commerce has been a serious problem facing small 
business competitors for at least thirty years. Until 1911, the resale price main- 
tenance contracts in the United States, now authoiized by the forty-four state 
Fair Trade Acts, and made practical and effectual by the Miller-Tydings National 
Fair Trade Enabling Act, were not questioned as to legality. The Dr. Miles 
decision in 1911 (164 Fed. 803), in the absence of statute, denominated such 
contracts as unlawful restraints of trade. From that time until 1930, continuous 
efforts were made to secure Federal Legislative approval of such contracts. As a 
result of the failure of the national government to meet the evil of lo.ss-leader 
selling and predatory pi ice-cutting, small businessmen in retail distribution, 
through their lawful organizations, took their problem to the legislatures of their 
several states. In these legislatures the design of the proposed laws was made 
plain beyond the peradventure of a doubt, and that design was to provide a civil 
remedy through which manufacturers and distributors could prevent these unfair 
trade practices, which were growing more serious as time went on. As has been 
pointed out, California was the first state to recognize the evil and provide the 
remedy proposed. Following California, one by one the states adopted the same 
remedy with the result that a legislative record has been set in the length of time 
in which a legislative principle was almost universally adopted by the state 
legislatures with corresponding unanimous approval of the courts in the states 
where the law has been adjudicated, and by the United States Supreme Court 
itself. Section 1V4 of the California act was added by amendment in 1933 to the 
act of 1931, when the original act had proven ineflFective to meet the evils. The 
language was plain. The state legislatures generally were advised of the meaning 
of the section, and it was obvious to them, as it should be obvious to all, that the 
contractual remedy was of no value without the amendatory section. 

To say that this section was secured in forty-four states by misrepresentation 
is to attack the ability and the intelligence of the members of the legislatures of 
forty-four states, of tlie legislator-sponsors, and of the Gove>"nors of the sovereign 
states who signed these measures. 

Further, when the Tydings- Miller Act was before the Congress, the language 
and the effect of the state Fair Trade acts was niade plain before the Judiciary 
Committees of the Soiate and the House of Representatives. Reference to the 
hearings before those bodies will prove the point. It is almost facetious to 
charge that these committees, composed largely of able and experienced lawyers, 
could have been deceived as to the languat^e, the meaning, and the effect of the 
state laws which the pending bill proposed to effectuate by the removal of the 
federal ban against resale j^rice maintenance contracts in interstate commerce, 
the same contracts that were perfectly legal under these state acts in intrastate 
operation. 

(2) "The so-called 'fair trade' laws which legalized resale '/.rice legislation in the 
states were drafted and urged by lobbyists for organized retail druggists and were 
enacted with practically no support from any other source." 

124401-r-41 — pt. ;U-A 9 



18132 CONCENTRATION OF ECONOMIC POWER 

If individual independent retailers working in and through their lawfully 
organized and lawfully operating trade associations to secure relief from unfair 
trade practices that were threatening to destroy their very existence, makes 
theni lobbyists, they will be proud to bear that appellation. As the term is used 
in Mr. Edwards' memorandum, the implication is that the lobbyists were pro- 
fessional operators employed by organized retailers; but the fact is that in all 
cases the active proponents of the state Fair Trade laws in the various legislatures 
were individual retailers and officers of their trade associations who, in the majority 
of cases, were individual retailers in their own right. In their activity in behalf 
of these laws they did no more than exercise their right of petition guaranteed 
by the Constitution. Such activity has not yet become a crime or a misdemeanor 
or even a discreditable practice in any sense under our system of government. 

As to the charge that there was little or no support from other groups than 
retail druggists, again the facts are at variance with Mr. Edwards' statement. 
Reference to the numerous affidavits filed with this brief and digested in Ap- 
pendix C hereof, covering the legislative history of Fair Trade in the various 
states, will disclose that many other groups were active as proponents of the 
legislation. Organizations of retail grocers, retail hardware dealers, retail book 
dealers, retail jewelers, retail automotive supply dealers, retail gasoline, dealers, 
and other organized groups and individuals in these categories were active sup- 
porters of this legislation. 

(3) "A systematic effort loas made to prevent -puhlic hearings and to secure the 
enactment 0/ the bill without -public debate. This effort was successful. There was 
a public hearing on the bill in only three states out of the first thirty-two in which it 
was passed, and in one of these the hearing followed the passage." 

This statement is denied in its entirety. It is a serious misstatement of fact, 
and the evidence to disprove it is voluminous. Reference to the aforementioned 
affidavits and statements will amply refute it. The first 32 states to pass the 
Fair Trade act, listed in chronological order of passage, were: 

California Virginia North Carolina 

Oregon Ohio Minnesota 

New Jersey Louisiana Kentucky 

Washington Tennessee Nebraska 

Wisconsin Arizona South Carolina 

New York Montana Wyoming 

Maryland New Mexico Idaho 

Pennsylvania Kansas Utah 

Iowa Georgia West Virginia 

Illinois Nevada South Dakota 

Rhode Island Colorado 

It will be seen from sworn statements abstracted in Appendix C that public 
hearings were held in the following, among the first 32 states to enast Fair Trade 
statutes: 

California Kansas Utah 

Oregon Georgia West Virginia 

Washington Colorado South Dakota 

Wisconsin North Carolina Nebraska 

Virginia Minnesota Maryland 

Ohio Wyoming New York 

In some of these states public hearings were held in both branches of the legis- 
lature. In New York and Maryland, public hearings were also held after the 
passage of the act by the legislatures, by the Governors of those states, where full 
opportunity was accorded to all interested parties to appear and state their 
approval or objections to the measure. 

While the time allowed in which to prepare this brief is not sufficient to collect 
full information on the facts in each one of the first thirty-two states approving 
this law, ample evidence is here adduced to prove the statement false, and it is 
our belief that in the balance of the first thirty-two states approving the legislation, 
public hearings were also held. 

In Appendix C will also be found abstracts of sworn statements proving that 
the following additional states held public hearings during the pendency of their 
Fair Trade acts: 

Florida Maine Michigan 

Connecticut Oklahoma Mississippi 

North Dakota Massachusetts Alabama 



CONCENTRATION OF ECONOMIC POWER 18133 

(4) "Meanwhile, every effort was made to throttle public discussion and to intimidate 
business opposition." 

This statement is also denied in its entirety, and again attention is called to the 
fact that Mr. Edwards produced no evidence with which to substantiate it. 

If time permitted and it were possible to bring all of the facts within the confines 
of this brief, it would be shown beyond a doubt that the public press in every state, 
during the pendency of the Fair Trade acts, carried ample publicity in regard to 
the legislation. It is also a fact that in the main, the newspapers of the country 
opposed the legislation, no doubt for reasons sufficient into themselves. In 
addition, the opponents of the measure, particularly large department store 
interests, flooded women's clubs, citizens' and taxpayers' organizations, and groups 
of all kinds with voluminous propaganda attacking the legislation from every 
conceivable angle. 

We submit th^at under our traditions of free speech and free press, it is an 
absolute impossibility to throttle public discussion on any issue of interest to the 
people; and indeed, the history of this country shows that individuals and groups 
who have attempted to throttle public discussion on any issue have failed 
miserably. 

The charge is made that efforts were made to intimidate business men who 
opposed these laws, and again no evidence is presented by Mr. Edwards to 
support this charge. Only the government an huge combinations of capital are 
capable of intimidating business men in their opposition to any proposal. The 
fact that the Fair Trade laws were conceived and born in the minds of small 
business men makes the charge of business intimidation unworthy of serious 
notice. 

(5) "The state laws give to a manufacturer and a retailer the right to coerce the 
retailer's competitors by fixing the resale price of these competitors against their will." 

This charge is not only a misstatement of fact, but it is a misstatement of law 
as we shall show later on. 

In the Fair Trade acts, loss-leader selling of goods covered by Fair Trade 
contracts sanctioned by state Fair Trade acts, is denominated as unfair trade 
practice by the state legislative bodies. Instead of a criminal penalty for non- 
observance of Fair Trade contract prices, the law provides only for a civil suit to 
enjoin the unfair trade practice of loss-leader selling and predatory price-cutting. 
The remedy of civil action for damages and injunction is provided to protect the 
contract rights of the producer and distributor who are parties to minimum 
resale price contracts. Contract rights have always been sacred under the 
American system and the provision for and the utilization of lawful remedies 
against those who would destroy those rights cannot in reason be denominated as 
coercion. The prevention of a tortious act resulting in damage by means provided 
in a statute, is not coercion. 

Another misstatement of fact in this sentence is in the use of the term "fixing 
the resale price of these competitors against their will." The state Fair Trade 
acts provide only for minimum resale prices, constituting a "floor" below which 
the predatory price-cutter and loss-leader seller may not go. The fallacy of the 
charge that this legislation is price-fixing is disproved in another part of this 
brief. 

II. The state Fair Trade laws, including the so-called "non-signer clause" thereof, 
are in harmony with the common law and constitute no departure from well 
established legal principles. 

A. Mr. Edwards says in his memorandum accompanying the Assistant Attorney- 
General's brief: 

"The state (Fair Trade) laws were described as though they consisted merely 
in grants of authority for manufacturer and retailer to agree upon the resale 
price of branded boods. Actually, there is not a one of the state statutes whicn 
is limited to such a grant. A statute of that kind was tried in California and 
proved to be a miserable failure because many retailers would not sign such con- 
tracts. All of the state laws now provide that when a manufacturer and a retailer 
sign a resale price contract all other retailers who have notice of the contract 
price must refrain from selling below that price. In other words, these state 
laws give to a manufacturer and a retailer the right to coerce the retailer's com- 
petitors by fixing the resale price of these competitors against their will. 

******* 

"The Senate reports and the very text of the amendment demonstrate that 
those who amended the Sherman Act had been misinformed about the status of 
non-signers under the state laws. The amendment explicitly prohibits agree- 
ments between retailers to fix minimum resale prices. Yet in practical effect 



18134 CONCENTRATION OF ECONOMIC POWER 

such agreements would not be as severe a restraint upon competition as a grant 
of power to a single retailer to make an agreement with a manufacturer which 
then becomes V)inding upon all other retailers. 

"If this committee had been informed that the state laws require every retailer 
to maintain the same price upon a commodity covered by a contract, it could not 
in candor have described these laws as merely permissive nor have emphasized 
the point that horizontal agreements among retailers were not authorized.'' 

The section of the Fair Trade Acts which Mr. Edwards condemns and which, 
significantly, he fails to quote, reads as follows: 

"Wilfully and knowingly advertising, offering for sale or selling any commodity 
at less than the price stipulated in any contract entered into pursuant to the pro- 
visions of * * * this act, whether the person so advertising, offering for sale 
or selling is or is not a party to such contract, is unfair competition and is action- 
able at the suit of any person damaged thereby." 

It may be doubted if Mr. Edwards has taken the trouble to read this section; 
certainly he is either unwilling or unable to understand it. It is implied that the 
rule of law here announced is new and unusual. The fact is that for centuries it 
has been a principle of the common law that kno.wingly and wilfully to do an act 
which results in damage is actionable at the suit''V)f the person injured (Keeble v. 
Hickeringill (1688-1710) 11 Modern 74, 3 Salkeld 9; Carrington v. Taylor (1809) 
11 East 571, TarUon v. M'Gawley (1793) Peake 205). This is also the modern 
law. See American Law Inslitvfe's Restatement of Torts, par. 766. 

When the language of this section is analyzed, it is clear that it is no more than 
an accurate restatement of the universally accepted rule of law that a malicious 
act resulting in damage is civilly actionable. It provides: (a) Wilfully and know- 
ingly, (i. e., maliciously), (b) advertising, offering for sale or selling, (c) any com- 
modity (i. e., an article bearing the trade-mark, brand, or name of the producer 
and which is in fair and open competition with other commodities of the same 
general class produced by others), (d) at less than the price stipulated in any 
contract under the Act (i. e., at less than established prices), (e) by anyone, a 
party to such contract or not, (f) is unfair comoetition, (g) and is actionable at 
the suit of any person damaged thereby. 

That is to say, that anyone suffering legal damage from malicious price cutting 
may sue. This has nothing to do with price-fixing. It defines injurious price- 
cutting, when done maliciously, as actionable unfair competition. 

B. This section simply describes certain injvirious acts as "unfair competition." 

In order to see this section in proper perspective in this aspect of the discussion, 
it is desirable briefly to trace the history of the idea of unfair competition from 
the first use of the phrase. 

Long ago the question of imfair competition arose in connection with the unau- 
thorized use of trade marks. The injury resulting from the imitation of a trader's 
identifying mark was the sale of a competitor's goods as those of the original user, 
thereby interfering with his trade expectancy or good will by depriving him of 
customers by misrepresentation. The notion of property in trade marks was thus 
developed and for a while it served well enough, but it was very soon perceived 
that a trader's customers might be diverted by the imitation of elements which 
were not trade marks and in which property rights could not be maintained, such 
as simulation of packages, the misuse of personal names, descriptive words, and 
the like. The result was the same misrepresentation and the same interference 
with trade expectancy. At first the courts had difficulty in adjusting themselves 
to the situation. Law writers did not know where to classify these cases. Digest 
compilers put them under an added paragraph heading "Cases analogous to trade 
mark cases." A chapter similarly entitled was tacked on to text-books. Mr. 
Browne in the first edition of his book on Trade Marks (Boston, Little, Brown & 
Co., 1873) had a chapter (XII) "Rights analogous to those of Trade Marks." 
The phrase unfair competition was not used. In the second edition (1885) the 
same chapter heading is used but the phrase "unfair competition" appears in the 
index, and in Section 43 it is said: 

"Unfair competition in Business. — In examining cases classified in digests and 
books of reports as those of trade-marks, the reader is sometimes puzzled. In 
the absence of the slightest evidence thai technical trade-marks have been in- 
fringed, courts of equity have granted full and complete redress for an improper 
use of labels, wrappers, bill-heads, signs, or other things that are essentially publici 
juris. The difficulty is, that wrong names are used. French-speaking nations 
have a standard name for this kind of wrong. The term used is concurrence deloyale 



CONCENTRATION OF ECONOMIC POWER 18135 

This term may fairly be Anglicized as a dishonest, treacherous, perfidious rivalry 
in trade. In the German Imperial Court of Colmar, in 1873, the court said that 
current jurisprudence understands by concurrence deloy ale .all manoeuvres that 
cause prejudice to the name of a property, to the renown of a merchandise, or in 
lessening the custom due to rivals in business. The euphemism employed as a 
head to this section will answer the present purpose." 

The phrase unfair competition soon became applied exclusively to cases in- 
volving passing off, and the law itself was in danger of being crystallized by the 
supposed limitations of the term. Happily, unfair competition soon became ap- 
plied to conduct which did not involve passing off and was extended to include 
misappropriation as well as misrepresentation," and in general to conduct which 
artificially and injuriously interferes with the normal course of trade. {Inter- 
national News Service v. Associated Press, 248 U. S. 215, 240.) Thus disparage- 
ment, '^ molestation, '8 inducing breach of contract,'* commercial bribery,^" mis- 
leading advertising,^" false trade descriptions, ^o misrepresentation of business 
status, '' use of lotteries as a sales stimulant, ^^ all illustrate only a few instances 
which show how the phrase unfair competition or unfair methods of competition 
has expanded from its small beginnings to its present scope. ^3 Indeed the French, 
to'whom we owe the phrase unfair competition, recognize, injurious price Cutting 
as a variety of itj" and the Supreme Court has spoken of "unfair methods of 
competition such as local price cutting." 

The applicability of this development to the present discussion is, we think, 
obvious. The section of the Fair Trade acts here under discussion in reality has 
nothing to do with price fixing. It makes actionable, injurious price cutting. In 
this case it is the price-cutting dealer who fixes the price of the trade-marked 
goods in the market in which he operates, because with respect to indentified 
merchandise, the lowest price is the market price. Thus it is the price cutter 
who is claiming the right to fix the price at which trade-marked goods shall be 
sold in his community. 

Mr. Justice Pitney said in International A^ews Service v. Associated Press, 248 
U. S. 215, 236: 

"Obviously, the question of what is unfair competition in business must be 
determined with particular reference to the character and circumstances of the 
business. The c|uestion here is not so much the rights of either party as against 
the public but their rights as between themselves." 

C. Price cutting as a variety of unfair competition is probably actionable at 
common law. 2" Certainly a state can make it so by statute. 

By such statutes as this, the state merely opens its courts to the injured party 
by giving him an opportunity to recover such damages as he can prove that he 
suffered from an injurious act. No penalty is provided; nothing is forbidden; a 
civil suit is authorized, no more. 

No one is deprived of a right merely because he is made liable to a civil suit to 
redress wrongs he may commit. It has been held repeatedly that states without 
depriving anyone of his constitutional rights, may create a civil liability where 
none existed before, take away defenses, and in general /nay determine for them- 
selves what shall he actionable. 

In St. Lovis and S. F. Railway v. Mathews, 165 U. S. 1, 27, the court said: 

■'The statute is not a penal one, imposing punishment for a violation of law; 
but it is purel}' remedial, making the party, doing a lawful act for its own profit, 

'« International Kncs Service v. Associated Press, 248 T'. S. ai."), 24!, 242; SchecMer v. United States, 295 
U. 3. 49.^, .'•>32. 

" Smith, Disparagement of Property, 1913, 13 Col. Law Rev. 13; Tound, Kquitable Relief Against Def- 
amation, 1916, 29 Harvard Law Review, 540, 068. 

" F.venson v. Spaulding, 150 Fed. 517. 

" Sayre. Inducing Breach of Contract, 1923, 30 Harvard Law Review fi03; Carpenter, Interference with^ 
Contract Relations, 41 Harvard Law Review 728. 

2" Federal Trade Commission v. Winsted Hosiery Co., 258 U. S. 483; Federal Trade Commission v. Algoma 
Lumber Co., SOI U S. fi7, 

" Federal Trade Commissim v. J^oyal Milling •'^o., 288 U S. 212. 

» Federal Trade Commission v. Keppel <t /iro.. 291 U. S. 304. 

'3 See article "Unfair Competition" by Milton Handler, 21 Iowa Law Review 17.S, January, 193ri. 

" See Pouillet, Traite des Marques de Fahriquc, Par. 1221: 

"No doubt that on principle, and in the absence of an agreement to the contrary, a retailer has the right 
to sell at a price that suits him, even at i lo.ss, articles which lie buys for his trade. That is one of the evi- 
dent consequences of the principle of freedom of trade. Neverthele.ss, the rule is far (rom being without 
exceptions "^ale at a cut price may take plac-e under such conditions, with so evident an intention to 
depreciate <he merchandise, that 't becomes an act of unfair competition." 

»5 Standard Oil Co. v. U. S.. 221 XL S. 1, 43. 

" Tuttte V. Buck, 107 Minn. 105, 119 N. W. 94fi; Hoggs v. Duncan Shell Furniture Co., 163 Iowa 10«, 143 
N. W. 483; Dunshee v. Standard Oil Co., 152 Iowa 618, aff'd. 165 Iowa 625, 132 N. VV. 371. 



18136 - CONCENTRATION OF ECONOMIC POWER 

liable in damages to the innocent party injured thereby, and giving to that party 
the whole damages, measured by the injury suffered." 

In Chicago and Alton Railroad Co. v. Tranbarger, 238 U. S. 67, 76, which involved 
a Missouri statute compelling surface water outlets, Mr. Justice Pitney said: 

"The previous immunity from responsibility for such injury was nothing more 
than a general rule of law, which was not in terms or by necessary intendment 
imported into the contract. For just as no person has a vested right in any general 
rule of law or policy or legislation entitling him to insist that it shall remain un- 
changed for his benefit * * * so an immunity from a change of the general 
rules of law will not ordinarily be implied as an unexpressed term of an express 
contract * * *. 

"But a more satisfactory answer to the argument under the contract clause, 
and one which at the same time refutes the contention of plaintiff in .error under 
the due process clause, is that the statute in question was passed under the police 
power of the State for the general benefit of the community at large and for the 
purpose of preventing unnecessary and wide-spread injury to property." 

In George v. Board of Revenue, 207 Ala. 227, 92 South. 269, before the enactment 
of the statute in issue, the common law required that stock be "fenced out, not 
in." (Clear Creek Lumber Co. v. Gossom, 151 Ala. 450, 44 South. 404.) The 
stock law later required owners of cattle to fence them in or be liable for damages 
they caused. The Court in this case said: 

"The decisions are to the effect that, should he exercise the right and permit 
his cattle to run at large, he nevertheless subjects himself to liability should they 
wander into a stock law district and commit depredations upon property of resi- 
dents of such district." 

Statutes making the seller of liquor liable civilly for aU damages done by the 
purchaser are valid. In Bertholf v. O'Reilly, 74 N. Y. 509, 513, the Court said: 

"The question we are now to determine is whether the legislature has the power 
to create a cause of action for damages, in favor of a person injured in person or 
property by the act of an intoxicated person * * *." 

This opinion contains a full and valuable discussion of police power and con- 
cludes that the legislation in question is but an extension by the legislature of 
the principle expressed in the maxim "sic utere tuo, etc." to cases to which it had 
not before been applied and that "the propriety of such an application is a legisla- 
tive and not a judicial question." A similar case is Eiger v. Garrity, 246 U. S. 97. 

A statute making one who excavates more than twelve feet, liable for damages 
to adjoining property, is constitutional. Tillson v. Consumers' Power Co., 269 
Mich. 53, 256 N. W. 801. 

In Kimmish v. Ball, 129 U. S. 217, 222, the court said: 

"The case is, therefore, reduced to this, whether the State may not provide 
that whoever permits diseased cattle in his possession to run at large within its 
limits shall be liable for any damages caused by the spread of the disease occa- 
sioned thereby; and upon that we do not entertain the slighest doubt." 

In M. K. T. Railroad Co. v. Haber, 169 U. S 613, 625, there was under considera- 
tion a Kansas statute giving a right of action for damages caused anyone by 
another's transportation of diseased animals. This court upheld the statute 
saying: 

"It did nothing more than declare as a rule of civil liability in Kansas, that any- 
one driving, shipping or transporting * * * cattle liable to impart (disease) 
* * * should be responsible in damages to any persons injured thereby." 

There is no doubt that the legtslature of a state may create causes of action 
and the right to recover damages for acts which theretofore were not actionable. 
This statement is such a truism that to cite examples of bulk sales laws, auto- 
mobile speed limits, death actions, and the like, seems superfluous. Indeed, the 
legislature may and often does subject persons to liability without fault. A few 
examples are workmen's compensation laws, New York Central Railroad v. White, 
243 U. S. 188; the liability of railroads for fires caused by locomotives and for 
injuries to passengers, Chicago Railroad Co. v. Zernecke, 183 U. S. 582; of the driver 
of animals for injury to the highway, Jones v." Brim, 165 U. S. 180; of damage to 
municipalities done by mobs, Chicago v. Sturges, 222 U. S. 313; ^^ of the owner of 
an automobile for injury caused by the automobile when driven by a third person. 

The question is whether, under the economic situation existing in the several 
states which have Fair Trade laws, the states have a right, with respect to trans- 

" See Note on mob liability statutes 13 A. L. R. 754. See also 12 C. J. 1241 et seq. under heading "creation 
and enlargement of liability." See an article by Elmer Smead in 21 Cornell Quarterly 276 on "sic utere tuo, 
etc." as a basis of state police power. Many cases of statutory liability — absolute and regardless of fault are 
collected in a Note 53 A. L. R. 875. 



CONCENTRATION OF ECONOMIC POWER 18137 

actions entirely within their borders, to define acts which are unfair in fact to be 
unfair competition in law and to give access to their local courts to persons who 
may be damaged by them. 

In Liberty Warehouse Co. v. Burley Tobacco Growers' Co-operative Marketing 
Association, 276 U. S. 71, the Bingham Act of the Kentucky legislature penalized 
anyone who knowingly induced a member of a co-operative marketing asso- 
ciation to violate his contracts. It was argued that this provision was uncon- 
stitutional. Mr. Justice Reynolds said (91): 

"Counsel maintain that the Bingham Act takes from the Warehouse Com- 
pany the right to carry on business in the usual way by accepting and selling 
the tobacco of those who voluntarily seek its services and thus unduly abridges - 
its liberty. Undoubtedly the statute does prohibit and penalize iction rot 
theretofore so restricted and to that extent inte -I'erf ■ ''ith freedom. But this 
is done to protect cj^rtain contracts which the "cgiciiat ir deemed of great impor- 
tance to the p' ')lic and peculiarly subject to Invasinv. We need not determine 
whether the liberty protected by the Constitution i- •' des the right to induce a 
breach of contract between others for the aggrandiz inent of the intermeddler to 
violate the nice sense of right which honorable traders ought to observe." 

D. This section does no more than to make a wilful act civilly actionable by a 
person injured thereby. 

As the Supreme Court of California suggested, this section is not solely a price- 
regulating statute. The Court observed: 

"The statute, in other words, does not merely prohibit price-cutting in order to 
regulate prices, but prohibits price-cutting in an attempt to protect the validly 
acquired rights of others." 

Analysis of the language will show the correctness of the court's conclusion. 

"Wilfully and knowingly" is a term well understood. These words have been 
defined to mean, for a bad purpose, without justifiable excuse. (Potter v. United 
States, 155 U. S. 438, 446; Spurr v. United States, 174 U. S. 728, 734; Felton v. 
United States, 96 U. S.'699, 702). 

The language "* * * at less than the price stipulated in any contract 
entered into pursuant to the provisions of section 1 of this act" may be para- 
phrased: "* * * at less than established prices" or "in violation of a lawful 
contract." Whether a person "is or is not a party to such contract" seems to 
be the language objected to. 

A party to a contract, of course, is liable if he breaks it. No question is raised 
except as to the liability of one who is not a party. The vice is asserted to result 
from the two words "is not" and it is claimed that these bind a man to observe a 
contract he did not make and, thus, interferes with his right of free bargaining or 
making any contract he pleases. ^^ 

But the definition of a non-contracting party's liability is plain enough when 
the language of the acts is considered in its legal meaning. He is a person who, 
knowing of a lawful contract, purposely interferes with its operation. This the 
act calls "unfair competition" which is an epithet to characterize the preceding 
language (Hum v. Oursler, 289 U. S. 238, 246). ± k". unfair competition is made 
"actionable at the suit of any person damaged thereby." "Actionable" means 
ground for legal proceedings. "Damage" means "the compensation which the 
law will award for any injury done." (Scott v. Donald, 165 U. S. 58, 86.) Hence, 
"person damaged" means one hurt by a legal injury. 

Therefore, to paraphrase the section, it would read: 

"To advertise, offer for sale or sell any commodity identified by a trade-mark, 
brand or name at less than the established price therefor when done for a bad 
purpose and without justifiable excuse is ground for a civil suit in the courts of 
this state by any person who can show that he has suffered legal injury therefrom." 

The question in this aspect resolves itself thus, and we should suppose that no 
one Would seriously dispute the validity of such an act. It will be observed that 

" In Chicago, Burlington and Quincy Railroad Company v. McGuire, 219 U. S. 549, Mr. Justice Hughes 
said (564k 

"The fir.'t ground of attack i.s that the statute violates the Fourteenth Amendment by reason of the 
restraint it lays upon liberty of contract. This section of the Code of Iowa (Sec. 2071), as oricinally enacted, 
imposed liability upon railroad corporations for injuries to employees, although caused by the negligence or 
mismanaceinent of fellow-servants. And it was held by this court that it was clearly within the competency 
of the legislature to proscribe this measure of responsibility. Minneapolii & St. Lovis Railway Co. v. 
Herrick, 127 U. S. 210, following Missouri Railway Co. v. Mack y, 127 U. S. 205." 

Page 507: 

"But it was recognized in the cases cited, as in many others, that freedom of contract is a qualified and not 
an absolute right. There is no absolute freedom to do as one wills or to contract as one chooses." 

See also FrUbiey. United States, 157 U. S. 160, 165, 166. 



18138 CONCKNTRATION OF ECONt)MlC TOWEIl 

nothing is prohibited. There is no penalty. There is no criminal liability. 
The act here assailed does no more than define a civil liability and provides that 
suit may be brought to recover, if one can show a legal injury, for acts which 
many courts, on common law principles, have long regarded as wrongful. The 
defendant is not deprived of any defense.^'^ As the Supreme Court said in the 
Arizona Employers' Liability Cases, 250 U. S 400, 426: 

"And it amounts to a contradiction of terms to say that in submitting a con- 
troversy between litigants to the established courts, there to be tried according to 
long-established modes and with a constitutional jury to determine he issues of 
fact and assess compensatory damages, there is a denial of 'due process of law.' " 

Moreover, it is significant that the normal, and perhaps the only practical, 
remedy available for the enforcement of a Fair Trade act is injunctive relief. 
This being an equitable remedy, a court of equity is vested with the broad and dis- 
cretionary powers which characterize equity jurisdiction. The court, thus, is 
always at liberty to deny relief where particular circumstances make it inequitable 
to grant it. 

E. Common Law Analogies. 

(1) This section is an application of principles to those which underlie the 
doctrine of equitablo servitudes. 

Independently of any statute, the imposing ot restrictions upon property by 
contract between buyer and seller, binding upon subsequent, non-contractine; 
purchasers, is not a concept new to the law. For many years, courts of equity 
have been enforcing, against non-contracting parties, covenants made with respect 
to real property. (Talk v. Moxhay, 2 Ph. 774 (1848).) 

Other early English decisions suggest that the courts were conscious of the pos- 
sibility of extending the doctrine to chattels. Thus, in De Matlos v. Gibson, 
2 Ph. 774 (1848), holding that the charterer of a ship might .specifically enforce his 
rights against a mortgagee who had notice of the charter, Lord Justice Knight 
Bruce observed: 

"Reason and justice seem to prescribe that, at least, as a general lule, where a 
man, by gift or purchase, acquires property from another, with knowledge of a 
previous contract, lawfully and for valuable consideration made by him with a 
third person, to use and employ the property for a particular purpose in a specified 
manner, the acquirer shall not, to the material damage of the third person, in 
opposition to the contract and inconsistently with it, use and employ the property 
in a manner not allowable to the giver or seller. This rule, applicable alike in 
general as I conceive to movable and immovable property, and recognized and 
adopted, as I apprehend, by the English law, may, like other general rules, be 
liable to exceptions arising from special circumstances; but I see at present no 
room for any exception i n the instance before us." ^^ 

The situation in this case is very close to the one which came before the Supreme 
Court in Bovrjois v. Katzel, 260 V. S. 689, There plaintiff was the assignee for 
the United States of the good will and trade-marks of a French manufacturer of 
face powder and with slight modifications was using the marks and labels thus 
acquired in the United States, applying them to goods made in France and packed 
there. The defendant purchased goods of the original French manufacturer 
under the original trade-mark, which it was conceded, the original manufacturer 
had retained for France. Defendant sold the original in this country in com- 
petition with the plaintiff. Plaintiff sought an injunction. Defendant argued 
that the goods .she was selling were the genuine goods, lawfully acquired and that 
there was nothing unlawful in w:i3i : - was doing. 

Mr. Justice Holmes said (691. 

"If for the purpose of evaduv t^ e effect of the transfer, it (the French manu- 
facturer) had arranged with the defendant that she should sell with the old label, 
we suppose that no one would doubt that the contrivance must fail. There is no 
such conspiracy here, but, apart from the opening of a door to one, the vendors 
could not convey their goods free from the restriction to which the vendors were 
subject. Ownership of the goods does not carry the right to sell them with a 

»» Hygrndr P'orisinn Co. v. Sherman. 26fi U, S 497, .SOI . OmaechevaTria v. Idaho. 246 U. S. 343. 348 
"In Hfrrf.'rmnn v, Soaete (leneraU d' Fleet ri'-ite, 1*) Ch. D. 246, 252 (1881). holding that the Rrantor of a 
patent was piiiitlcrt to an accounting against the grantees' assignee, where the latter knew the terms of the 
grant. Sir (Icnrcc Jr.ssel remarked: 

"The pariie'iinti'nded'cortain liabilities to attach to the patent itself * * It is quite plain that nobody 
couid take the piili-nt with notice of that arrangement, and sjiy we will keep all the profits and will i^ot be 
liable to account • • * It is a part of the barcain that the patent shall be worked in a particular way 
and the profits <lisposcd of in a particular way, and no one taking with notice of that bargain can avoid 
theUability." 



CONCENTRATION OF ECONOMIC POWER 18139 

specific mark. It does not necessarily carry the right to sell them at all in a 
given place." 

This aj^jiroach to the question finds additional support in Billerman v. Louisville 
and Nashville Railroad Company, 207 U. S. 205, which held that the non-transfer- 
ability and forfeiture clauses in a railroad ticket are binding not only upon the 
original purchaser but also upon any person who may acquire the ticket. Mr. 
Justice White said (221): 

"That the complainant had the lawful right to sell non-transferable tickets of 
the character alleged in the bill at reduced rates we think is not open to contro- 
versy, and that the condition of non-tran'-ferability and forfeiture embodied in 
such tickets was not only binding upon the original purchaser but upon anyone 
who acquired such a ticket and attempted to use the same in violation qf its terms 
is also settled. Mosher v. Railroad Co., 127 U. S. 390. See also, Boylan v. Hot 
Springs Co., 132 U. S. 146. 

******* 

"Any third person acquiring a non-transferable reduced rate railroad ticket 
from the original purchaser, being therefore bound by the clause forbidding trans- 
fer, and the ticket in the hands of all such persons being subject to forfeiture on 
an attempt being made to use the same for passage, it may well be questioned 
whether the purchaser of such ticket acquired anything more than a limited and 
qualified ownership thereof, and whether the carrier did not, for the purpose of 
enforcing the forfeiture, retain a subordinate interest in the ticket amounting to 
a right of property therein, which a court of equity would protect. Board of Trade 
V. Christie Grain & Stock Co., 198 U. S. 236, and authorities there cited. See also, 
Sperry & Hutchinson Co. v. Mechanics' Clothing Co., 128 Fed. Rep. 800." 

The power of courts of equity to impose equitable servitudes on chattels is 
examined at some length in an able article by Professor Zechariah Chafee, Jr., 
published in Volume XLI, Harvard Law Review, page 945 (June, 1928) entitled 
"Equitable Servitudes on Chattels." Professor Chafee points out that restraints 
on the alienation of land, binding upon sub-purchasers, are common, and that 
similar restraints as to chattels are not entirely without precedent but, on the 
contrary, are quite within the powers of courts of equity, should practical consid- 
erations require their assertion. He concludes: 

"On general principles equitable servitudes on chattels seem a reasonable and 
flexible device, which the courts might use when desirable." (p. 1007.) 

It is significant that Professor Chafee is discussing equitable servitudes on 
chattels as creatures of courts of equity, una.ssisted by statutes. He considers the 
problem from the historical standpoint, and believes that courts of equity have 
the necessary power if they choose to use it. A forleriori, statutes may prescribe 
its use. 

Courts of equity may have hesitated to enforce similar restrictions .upon the 
alienation of personal property. But a legislature is net precluded from deter- 
mining that, as to a certain class of personal property, conditions create an eco- 
nomic reason for permitting such restrictions. Where a legislature does so, it 
would seem the assertion that such statute is unprecedented ignores completely 
the historical antecedents and common law analogies for such a remedy. 

Mf. Edwards looks upon the idea of compelling respect for the terms of a con- 
tract made by other parties as something wholly new. Yet that is exactly what 
is done every time a court of equity enforces an equitable servitude against a 
sub-vendee of property. 

Many decisions uphold statutes which restrict the right to contract and the 
right of free alienation, even though such statutes were not in line with the historic 
antecedents and common law analogies pointed out by Professor Chafee. The 
statutes in such cases for that reason went far beyond the Fair Trade acts for 
they introduced entirely now social experiments and were often diametrically 
opposed to the prior common law. 

(2) The doctrine of tortious interference with contract n-lations provides a 
further common law analogy. 

The common law has dealt with various phases of the prolMcm of protecting 
contractual relationships against breaches and interference caused bv the other- 
wise legal acts of third persons. Lumley v. Gye, 2 EI. & HI. 21() (18r)3), led the 
way for the establishment in nearly all connnon law jurisdictions, of tlie principle 
that the lawwiUnot permit a ])er.^()n wilfully to induce another tol)reachacontract. 
The leading cases on the subject arc collected in: Carpenter, Intcrfereiire with 
Contract Relations, 41 Harvard Law Review 728 (1928), and Savre, Inducing 
Breach of Contract, 36 Harvard Law lieview 663 (1923). In Angle v. Chicago, 



18140 CONCENTRATION OF ECONOMIC POWER 

St. Paul, Minne olis and Omaha Railway Company, 151 U. S. 1, the Supreme 
Court applied ai 1 approved the common law doctrine. 

The California Supreme Court recognized, in passing upon Section 1)^ of the 
California Fair Trade Act, this common law analogy, saying: 

"The common law, tvithout statutory authorization, long recognized that 
unjustifiable interference with contract rights of others constituted a tort. * * * 
The statute here involved, in a .large measure, merely extends that common law 
doctrine to the transactions enumerated in the statute." 

III. The right of the states to govern their internal affairs, including their intrastate 
commerce, without interference from the Federal government, is inherent in 
our constitutional system. 

A. Fair Trade contracts, inasmuch as they establish minimum prices on goods 

to be sold at retail within a state, aie contracts in intrastate commerce and 
therefore are not properly within the jurisdiction of the Federal government. 

We are not offering this thesis as a statement of law, but we submit it as a 
principle which is consonent with basic constitutional theory; and we believe that 
it expresses the position the Congress should take in the formulation of national 
policy. Unfortunately, the simple statement in the Constitution relative to 
interstate commerce has been tortured beyond its original meaning; but the undue 
extension of Federal power in the past does not bind the Congress in the deter- 
mination of present and future policy. 

Attempts to bring intrastate commerce which may affect interstate commerce, 
even remotely, under the control of the Federal government has injected doubt 
and uncertainty into the law and"has created a no-man's-land in which the courts 
themselves find difficulty in determining where the boundaries lie. Indeed, the 
formulas for establishing those boundaries for different purposes are often in- 
consistent with each other; the courts having found it necessary to stretch the 
rule adopted in some cases, in order to arrive at decisions which shall be just in 
cases presenting a different set of facts. 

The Congress, in passing the Tydings-Miller Act, recognized that the assump- 
tion by the Federal government of authority to control intrastate commerce in 
Fair Traded gpods when the parties to the Fair Trade contracts happened to 
reside in different states, constituted an improper interference with intrastate 
commerce. It cut through the labyrinth of administrative acts and judicial 
decisions in which, through the years, the interstate commerce clause had been 
distorted; and rendered inoperative a strained definition of interstate commerce 
in cases involving the lawful establishment of minimum prices under state statutes. 
Your committee is now asked to recommend to Congress that it reverse its present 
wise policy of non-interference with contracts dealing with intrastate transactions. 

B. Our contention that Fair Trade contracts are in fact intrastate even though the 

parties thereto reside in different states, rests on the fact that such con- 
tracts deal exclusively with prices to be charged for goods in retail sales, 
after they have come to rest within the state. 
The residence of the parties should not in itself determine whether a contract 
is in interstate commerce; the situs of the subject matter should be more control- 
ling. When, for instance, an Illinois manufacturer ships goods into Minnesota 
to a Rtinncsota merchant, the sale of the goods crossing state boundaries is inter- 
state commerce; but the resale of the goods after they have come to rest in Minne- 
sota, by the Minnesota merchant to his Minnesota customers, is an intrastate 
transaction; and a contract between the Illinois manufacturer and the Minnesota 
merchant relative to the terms on which the goods shall be sold at retail in Minne- 
sota, is a contract relating to intrastate commerce and as such should not be 
subject to Federal interference. 

It is not our contention that the above paragraph sets forth the distinction 
between interstate and intrastate commerce made by the courts and followed by 
the administrative departments of the government. It is offered as a statement of 
the distinction which properly can be made in the determination of legislative 
policy, and as a statement of what the Congress intended the law to be when it 
enacted the Fair Trade Enabling Act, insofar as transactions in Fair Trade 
merchandise are concerned; and it cannot be said that the Congress was not 
acting within its proper discretion when it chose to modify the effect given to its 
previous enactments (the Sherman Act and amendatory and supplementary laws) 
by judicial interpretation and administrative policy. The Congress merely with- 
drew from a field of regulation into which it had been projected, and relinquished 
that field to the states. 



CONCENTRATION OF ECONOMIC POWER 18141 

C. The courts themselves have recently indicated a determination to limit 

Federal interference with intrastate commerce. 

In the case Of Federal Trade Commission v. Bunte Brothers, Inc., in a decision 
rendered on February 17, 1941, the Supreme Court of the United States rejected 
the Commission's plea that it may "proscribe unfair methods used in intrastate 
commerce when these result in a handicap to interstate competitors," and held 
that "there is the widest difference in practical operation between the control over 
local traffic intimately connected with interstate traffic and the regulatory author- 
ity here asserted." 

In this case Bunte Brothers, candy manufacturers in Illinois, sold chance assort- 
ments of candy, confining its sales thereof to intrastate transactions. The Com- 
mission claimed that the sales nevertheless affected interstate commerce because 
it hurt the business of out-of-state competitors who could not lawfully ship similar 
assortments into the state. The Court said: "The construction * * * urged 
by the Commission would give a Federal agency pervasive control over myriads 
of local businesses in matters heretofore traditionally left to local custom or local 
law * * * to read 'unfair methods of competition ih (interstate) commerce' 
as .though it meant 'unfair methods of competition in any way affecting interstate 
commerce' requires, in view of all the relative considerations, much clearer mani- 
festation of intention than Congress has furnished." 

D. Repeal of the Tydings-Miller law would have the effect of re-establishing a 

state trade-barrier which that law removed. 

A reading of Madison's Journal and The Federalist shows clearly that the pur- 
pose of writing the interstate cominerce clause into the Constitution was to 
prevent the states from erecting barriers against each others' commerce. There 
is no intimation of intention that the Congress should regulate intrastate trade, 
but that it should have the power to insure the free flow of goods among the states. 

A repeal of the Fair Trade Enabling Act would defeat that purpose by impeding 
the flow, into any Fair Trade staje, of branded merchandise made outside that 
state. It would result in discrimination against outside manufacturers and in 
favor of manufacturers within the state, for the reason that the former would be 
denied the privilege accorded to the latter by the state Fair Trade law, of obtaining 
retailer acceptance for their products by protecting them against predatory price- 
cutting. 

A vast majority of retail distributors would put their sales emphasis on goods 
made within the state, and little or no sales effort behind unprotected goods made 
outside. The result would be that there would be created a powerful trade 
barrier against the outside manufacturer. The Congress removed such a barrier 
when it passed the Tydings-Miller law, and the repeal thereof would restore it and 
would thereby have a result contrary to the purpose of the framers of the 
Constitution. 

E. Repeal of the Tydings-Miller law would give advantage to large manufacturers 

over small manufacturers selling in interstate commerce, and would tend to 
give large manufacturers a monopoly in the business of making and selling 
nationally branded goods. 
The larger manufacturers operating in interstate commerce would not be 
greatly affected by repeal, for they have the means to establish corporate subsi- 
diaries in the different Fair Trade states and thereby avoid the ban against Fair 
Trade agreements in interstate commerce which the opponents of the Fair Trade 
Enabling Act seek. Small manufacturers, on the other hand, would find it too 
expensive and burdensome to establish such subsidiaries, and therefore would be 
compelled to restrict price-maintenance of their products to the state in which they 
carried on their manufacturing operations. The result would be to tend to drive 
them out of interstate commerce and to force them to restrict their distribution' 
to their own states, thereby, surrendering much of their business to their far-flung 
competitors. Such a result would defeat the very purpose for which the Tem- 
porary National Economic Committee was created and give great impetus to the 
concentration of economic control. 

F. No doubt as to the wisdom of minimum price maintenance would justify 

Federal nullification of state Fair Trade laws. 
The states are sovereign bodies, supreme within their own jurisdiction, and any 
effort to degrade them into Federal municipalities should be vigorously resisted. 
They are laboratories in which social and economic experiments may safely be 
caried out, and where principles may be proved in practice before they are adopted 
elsewhere. This is one of the merits of the Federal system. 



18142 CONCENTRATION OF ECONOMIC POWER 

In order that the states may fulfill this purpose, there should be no frivolous 
interference with these experiments by the Federal government. Unless the 
rights and interests of the people of the whole country are seriously affected, the 
attitude of Congress should be one of sympathetic interest. The Congress mani- 
fested such an interest when it passed the Tydings-Miller law. 

It is not within the province of any Federal bureau, nor even of the courts, to 
say whether, in seeking to solve their economic problems, the States have adopted 
the best methods that might be devised. The direction of the effort is for the 
state legislatures to determine. In Joseph Triner Corporation v. Carl W. McNeil, 
363 111. 559, the Court said: 

"It is wholly immaterial whether the individual members of this Court agree 
with the economic and social philosophy upon which the Fair Trade Act is estab- 
lished, and no duty rests upon us to pass upon the wisdom of the economic public 
policy which it declares. That function is wholly legislative. It is not a judicial 
function to lecture either the public or business. Neither is it within the province 
of the Court to philosophize concerning economic conditions. In passing, how- 
ever, we cannot help but note that many of the present legislative enactments, 
such as the Fair Trade acts of New York, California and Illinois, are resultants 
brought about because of the failure of the public, and particularly the business 
public, to observe those ethical principles which lie at the very foundation of fair 
dealing and business honesty. The shady efforts made by some to obtain an 
unfair advantage over others are not compatible with good citizenship nor -in 
keeping with the best traditions of the law merchant as known at the common 
law. If public opinion cannot check these practices, then business can expect 
legislatures to attempt to remedy them." 

In Nebbia v. Neiv York, 291 U. S. 502, at page 537 the Supreme Court of the 
United States, speaking through Mr. Justice Roberts, presented the same thought: 

"But there can be no doubt that upon proper occasion and by appropriate 
measures the state may regulate a business in any of its aspects, including the 
prices to be charged for the products or commodities it sells. 

"So far as the requirement of due process is concerned, and in the absence of 
other constitutional restriction, a state is free to adopt whatever economic policy 
may reasonably be deemed to promote public welfare, and to enforce that policy 
by legislation adapted to its purpose. The courts are without authority either to 
declare such policy, or, when it is declared by the legislature, to override it. If 
the laws passed are seen to have a reasonable relation to a proper legislative 
purpose, and are neither arbitrary nor discriminatory, the requirements of the 
due process of law are satisfied, and judicial determination to that effect renders a 
Court functus officio. Whether the free operation of the normal laws of competi- 
tion is a wise and wholesome rule of trade and commerce is an economic question 
which this court need not consider or determine. And it is equally clear that if a 
legislative body be to curb unrestrained and harmful competition by measures 
which are not arbitrary or discriminatory it does not lie with the courts to deter- 
mine that the rule is unwise. With the wisdom of the policy adopted, wii.h the 
adequacy or practicability of the law enacted to forward it, the courts are both 
incompetent and unauthorized to deal. The course of decisions in this court 
exhibits a firm adherence to these principles. Times without number we have 
said that the legislature is primarily the judge of the .necessity of such an enact- 
ment, that every possible presumption is in favor of its validity, and that though 
the court may hold views inconsistent with the wisdom of the law, it may not be 
annulled unless palpably in excess of legislative power. 

"The law-making bodies in the p'ast endeavored to promote free competition by 
laws aimed at trusts and monopolies. The consequent interference with private 
property and freedom of contract has not availed with the courts to set these 
enactments aside as denying due process. Where the public interest was deemed 
to require the fixing of minimum prices, that expedient has been sustained. If 
the law-making body within its sphere of government concludes that the condi- 
tions or practices in an industry make unrestricted competition an inadequate 
safeguard of the consumer's interests, produce waste harmful to the public, 
threaten ultimately to cut off the supply of a commodity needed by the public, or 
portend the destruction of the industry itself, appropriate statutes passed in an 
honest effort to correct "the threatened consequences may not be set aside because 
the regulation adopted fixes prices reasonably deemed by the legislature to be 
fair to those engaged in the industry and to the consuming public." 

Forty-four state legislatures and both Houses of the Congress have considered, 
weighed and analyzed the social, economic and legal implications of the Fair 
Trade laws, and those measures have survived the scrutiny of the Supreme Courts 
of fourteen states and of the Supreme Court of the United States; and before 



CONCENTRATION OF ECONOMIC POWER l8l4^ 

questioning the wisdom and need of these measures or asking to have them nulli- 
fied by repeal of the Fair Trade Enabling Act, one must come prepared to over- 
come a tremendous burden of proof in their favor. 

It is proper for this Committee to consider to what extent the Sherman law and 
other anti-trust laws, intended for the prevention of monopoly, may be used 
instead for the protection of monopoly and the discomfiture of small business men 
banded together in self-defense against their powerful competitors. A few men 
using the corporate device may establish prices in ten thousand stores with impun- 
ity; they may set prices below cost in order to drive their small competitors out 
ef business and thereby obtain a monopoly. But if those small competitors, or 
even any two of them, in self-defense, act in concert to influence, in any way, the 
prices in their stores, they incur the risk of criminal penalties. This we believe 
to be the core of the monopoly problem to which this Committee must address 
itself if it shall fulfill its intended function. 

The monopoly picture has changed since the Sherman Act was passed, and the 
laws of the land should be brought into harmony with present economic realities. 
Only thereby can a truly competitive economic system be saved.- 

The states have gone so far as they could within the limits of their power to . n 
correct the situation. The least the Federal government can do, is to refrain 
from placing any impediment in their way. 

IV. The principle of Fair Trade laws is economically sound, and the results of their 
application have justified their enactment. 

A. The Federal government has itself accepted and applied the principle of mini- 

mum-price maintenance in many fields: 

(1) In the field of Labor, by fixing minimum wages and maximum hours. 

(2) In the field of Agriculture, by making loans on basic crops, in excessof their 
current market values; such loans, being made without recourse, make the estab- " 
lished loan values the minimum prices for all cooperating fdrmers. 

(3) In the Guffey Coal Act, whi^h provides for the establishment of minimum 
prices for various kinds and grades of coal. . 

(4) In the Interstate Commerce Act, and in amendatory and supplementary 
acts, the Federal government has gone even farther, in establishing rates for trans- 
portation which are both minimum and maximum. 

B. Loss-leader selling, which the Fair Trade laws are designed to curb, is an 

economic evil. 

(1) It tends to divert business from local conimunities, and from states, to a 
relatively few centers of distribution, and, pro tanto, to create monopolies in dis- - 
tribution. Such di'^ersion may be from entire regions of the country to strategic- 
ally located mail-order houses, or from the outlying communities of a city to a few - 
stores in the downtown trading area. In either event the trend is economically 
unsound. 

Mail-order houses and merchandising chains can draw trade by using the loss- 
leader technique, because they have the facilities for advertising loss-leaders 
effectively by issuing millions of catalogs and by using large space in t/ie metro-, 
politan newspapers. 

Small merchants cannot issue catalogs or use the newspapers cooperatively; 
for if they did, they would be charged with having entered into horizontal agree- 
ments in determining the prices to be advertised. They cannot use advertising 
space individually; for a merchant operating in a small trade area cannot afford 
to pay for circulation which covers a whole city or even an entire state. 

Hence the loss-leader technique is one which can be used to advantage onlj by 
the great distributors, and its employment by them leads to a concentration of 
business. 

It is a poor answer to say that the number of small merchants is nevertheless 
showing a modest increase; for the true measure is not the number of iiidividuals 
engaged in business, but the proportion of the total volume which small merchants 
do. Business statistics show that while the larger units are reporting sales 
increases running up to more than 20% a year, the volumes of small eaterprises 
are showing only slight increases, or even losses. 

Also, changes of ownership of small businesses must be considered in connection 
with increases in the number of small entrepreneurs. The fact that individuals 
are willing to take over businesses in which others have failed, or even to start 
new enterprises, does not prove that a business is sound and prosperous. On the 
contrary, frequent changes of ownership show that the impact of predatory price 
competition is disastrous to small businesses. 



CONCE>' 



18144 



CONCENTRATION OF ECONOMIC POWER 



(2) Gross margins established under Fair Trade contracts are generally lower 
than the average operation costs in stores of optimum efficiency, and hence cannot 
be regarded as unfair to the consumer. 

The brief filed with the Temporary National Economic Committee by the Assist- 
ant Attorney General Thurman Arnold seems to be based on the assumption that 
Fair Trade agreements are desired by independent merchants to force chain 
stores to increase their prices beyond those which the chains require to cover their 
operation costs. In An Appraisal of Fair Trade and Unfair Practices Acts, a 
statement made by Mr. Corwin D. Edwards before the American Economic 
Association and appended to his brief and made a part thereof, he said: 

"Both the minimum price laws and the resale contract laws express the resist- 
ance of established distributors to change. Economists have often pointed out 
that progress in distribution has not kept pace with manufacturing and that costs 
of distribution should come down. New types of distributive enterprise which 
offer promise of such a development are the targets of this restrictive legislation. 
Thus these laws are the distributional prototypes of the earlier statutes by which 
a handicraft society sought to limit or prevent the growth of modern manufacture. 
Public bodies have no doubt been more receptive to such legislation because some 
of the new distributional forms are large enterprises, which, it is thought, may 
become monopolistic." 

It is a clear ^ference from this statement that Mr. Edwards believes that the 
large distributors, the catalog houses and the chains, have a lower cost of opera- 
tion than small retailers. It is no part of this brief to disprove that inference. 
For the present purpose, let us accept it. 

But if these great distributors represent the most efficient instruments of dis- 
tribution, it follows that Fair Trade margins which no more than cover their 
actual distribution costs, cannot be deemed to be unfair to the consumer, but, 
on the contrary, are fair and necessary margins. 

It becomes pertinent then, to ascertain what the distribution costs of these 
purportedly most efficient distributors, are. 

The Bureau of Business Research of the Graduate School of Business Adminis- 
tration of Harvard University found in a survey of department stores doing 38% 
of the department-store business in the country, that their cost of operation was 
37.4%. 

The Federal Trade Commission, in its report on the Operating Costs of Chain 
Stores, disclosed that the costs of operating different classifications of chain stores 
were as follows: 



Drugs 33. 03% 

Furniture 39. 69% 

Men's shoes 31. 16% 

Women's shoes... 31. 34% 

Milhnery 44. 06% 

Confectionery 44. 26% 

Musical instruments 34. 06% 

Men's ready-to-wear 32. 26% 

Men's furnishings 37. 75% 

Hats and caps 42. 20% 



Women's ready-to-wear 30. 81% 

Hardware 26. 21% 

Dry Goods 24.34% 

Tobacco 27. 07% 

Variety (unlimited) 29. 29% 

Variety ($5 hmit) 27. 41 % 

Variety ($1 limit) 25.86% 

Groceries 18. 66% 

Meats 20. 34% 

Groceries and meats 16. 15% 



These are the operation costs of the large distributors, which, according to the 
opponents of Fair Trade laws and the Fair Trade Enabling Act, are the most 
efficient in their respective fields. . In order to prove their case, those who wish 
to repeal those laws must show that, not in exceptional cases, but in general, 
Fair Trade contracts now in force protect margins that are more than adequate 
to cover these operation costs. This they have not attempted to do, and in our 
opinion, cannot do. 

We may add that it is our opinion that if the gross margins afforded by Fair 
Trade prices on drugs and drug supplies should ever equal the 33.03% which the 
Federal Trade Commission tells us is the average operation cost of the drug 
chains, the independent retail druggists of the- United States would be well satis- 
fied. Such margins would not yield a net profit unless they could be earned by 
greater efficiency than the big distributors have, but they would give the small 
distributors protection against the use of cut prices on desired brands as a means 
of cajoling the consumer and thereby aggrandizing trade not earned by giving, 
generally, either better values or superior service. 

It is our recommendation that if the Committee desires to make any findings 
relative to the Fair Trade Enabling Act, it should first make a thorough inquiry 
to determine what the gross margins are, unde? eixisting contracts; and not rely 



CONCENTRATION OF ECONOMICJ- POWER 18145 

on exceptional instances alleged — but not specifically cited — in the brief to which 
we have herein referred. 

(3) Prices of Fair-Traded brands have not increased over those generally pre- 
vailing previously, but, on the contrary, have decreased. 

The only comprehensive survey of the effect of Fair Trade on the prices paid 
by consumers for drugs and drug store merchandise was made by Prof. H. J. 
Ostlund, of the School of Business of the University of Minnesota. The fact that 
the Druggists' Research Bureau sponsored his survey in no way vitiates his report, 
•for the specific data upon which his conclusions are based are set forth in the 
report, and these cannot be challenged without attacking the academic integrity 
of the authority who assembled them. 

This survey, covering all the 42 states which had had Fair Trade laws long 
enough to make price comparisons possible, required two years to make and was 
therefore very thorough. It showed that, over the country as a whote, the Fair 
Trade prices, instead of being higher, were actually 0.9% lower ttian those which 
had prevailed before the Fair Trade laws went into effect. Prices were lower in 
the states where 70% of the people live; they were slightly higher in the states 
where 30% of the people reside. But in the latter category of states, the price 
increases were felt only by those who lived in great metropolitan centers 
where national brands had been used most extensively as loss-leaders. 

Of the 42 states surveyed, only 8 showed an increase, and in two of them the 
increase was only one-tenth of one per cent. In all except one or two' instances, 
the increase even in those 8 states was limited to the larger cities and the larger 
dollar- volume stores. In other words, even where the state average showed an 
increase, only a comparatively few people in the state— those patronizing ciit- 
rate stores — felt price increases. Other thousands of people, living in the smaller 
communities, or in the larger cities but buying at stores not offering advertised 
brands as "bait," enjoyed savings effected by the stabilization which Fair -Trade 
brought in the drug market. 

The charge that Fair Trade laws are price-fixing laws was fully answered by 
the finding that even after Fair Trade went into effect, prices for articles made 
to sell for $1 "list" ranged from 83.6 cents to 98.1 cents. Also, it is interesting 
to note that while most chain-store indices showed an increase, there were de- 
creases in chain-store averages in two states, showing that Fair Trade margins 
were lower than those which the chain stores in those states deemed adequate. 

A copy of the complete report has been filed with the Committee, and a state- 
by-state summary is appended hereto. 

(4) Loss-leaders, where permitted, do not represent savings to the consumer. 
If all goods sold in a store which employs the loss-leader technique were offered 

at comparable prices, no cut-price store could remain in business. The losses on 
loss-leaders must be made up on other goods. Loss-leaders are a very expensive 
form of sales promotion, and the cost must, of necessity, be reflected in the over-all 
cost of operation. 

Loss-leader selling, therefore, is a device by which the customer is induced by 
the saving effected on a few featured items, to pay for the great majority of his 
requirements more than he would otherwise be obliged to pay. Instead of re- 
ducing the cost of living, loss-leaders increase it by raising average distribution 
margins. 

If the public generally knew this, the problem would solve itself and Fair 
Trade laws would not be needed. But the public doesn't know it, because its 
knowledge of values and judgment of merchandise bought outside the range of 
known brands are necessarily limited; only experts can recognize the differences, 
and they can disJe^ver them only by making expensive surveys which the individual 
consumer cannot undertake. 

Not even the government has attempted to make such a survey; hence the 
conclusion must rest on logical reasoning — but on reasoning as definite and certain 
as a demonstration in Euclid. Losses sustained in selling a few things for less than 
cost (including the over-all cost of operation) must be made up by requiring the 
consumer to pay for the major part of his purchases more than he would otherwise 
have to pay. ^ 

But although comprehensive proof is lacking, there is factual evidence to prove 
the conclusion in notable instances which have unquestionable probative value. 

One of the most conspicuous critics of Fair Trade laws and the Fair Trade 
Enabling Act is R. H. Macy & Company of New York. Smith W. Brookhart, 
then a Senator from Iowa, presented a record of purchases made by custom 
agents at the direction of Secretary of the Treasury Mellon under a resolution 
of the Senate adopted when a certain tariff bill was under consideration. The 
Senator wanted- to know the effect of thfe tariff on retail prices of imported mer- 



18146 



CONCENTRATION OF ECONOMIC POWER 



chandise. The record of purchases which Senator Brookhart placed in the 
Congressional Record is as follows : 



Article 



Where purchased 



Landed 
Cost 



Retail 
Price 



%of 
Price 
to cost 



Pie Plate. 



Olass lamp dome 

Glass lamp chimney. . 

Salad set 

Marcel iron... 

Sauce pot 

Dinner set (100-piece) . 

Dinner plate 

Aluminum teaspoon.. 

Sewing basket 

Scrub cloth-. 

Castile soap 

Steamer rug 

Bridge set 

' Barometer 

Apollinaris water 

Beaded trimming 



R. p. Macy & 
Co., New York. 

do.. _. 

do 

do 

do 

do._ 

do 

do 

do 

do 

do 

do 

do 

do.... 

do.. 

do 

Namm Store, 
Brooklyn. 



$0. 103 

.458 
.0641 

1.64 
.1251 
.40 
35.30 
.327 
.0059 

2.01 
.0666 
.92 

6.32 

2.92 

1.40 
.1194 
. 082 



$0.29 

1.74 

.23 

4.75 

1.39 

1.24 

134.00 

.98 

.04 

7.54 

.26 

2.34 

14.89 

6.94 

7.94 

.39 

.25 



181 

280 
258 
189 
1,012 
210 
279 
199 
580 
274 
290 
150 
136 
138 
467 
227 
204 



Senator Brookhart's comment is germane to the question under consideration: 

"Mr. President, the products listed in the foregoing table are all nameless, 
unidentified, imported goods. They are some of the articles used by such stores 
as Macy & Company of New York for the purpose of extorting from the unsuspec- 
ting public excessive profits to make up for American-made, trade-mark goods 
advertised to the public as 'bargain bait' on the sale of which the profits are small, 
if any at all." 

In considering that type of predatory price-competition which is represented 
by loss-leader merchandising, it is interesting to note what Prof. Seligman, an 
economist of acknowledged standing, says in his Price Cutting and Price Main- 
tenance, commencing on page 267: 

"Having thus cleared the ground for the conception of true competition and for 
the benefits which accrue from the competitive process, we are now prepared to 
consider the concept of pseudo-competition. 

"Pseudo-competition, as distinct from real competition, partakes of the charac- 
teristics either of the brute struggle or of the sporting rivalry. So-called cut- 
throat competition is not true competition; it is brute competition. In the first 
place, the avowed object of cut-throat competition is to cut the throat of the 
competitor. True competition permits the competitor still to compete and to do 
his best, for who knows when the temporarily unsuccessful competitor may not 
through a turn of fortune, a new invention, or any other conjuncture of events, 
become the successful competitor? Cut-throat competition is designed, on the 
other hand, to remove the rival entirely from the arena in-order that the suc- 
cessful competitor may remain in control. Cut-throat competition results in 
monopoly. [The italics are our own.] The temporary benefit to the consumer 
from the reduction in price will in the end be more than outweighed by the evils 
of monopoly. Cut-throat competition, therefore, is pseudo-competition, not 
real competition." 

On page 276 the author continues: 

"We conclude accordingly that, apart from the particular form it may assume, 
the general principle of resale price maintenance is legitimate; the type of price- 
cutting which we have studied in this volume is a form of unfair competition; 
price maintenance is a step toward fair competition. It is economically defensible, 
and therefore ethically desirable. The adoption of resale price maintenance as a 
general principle will mean, on the whole, a step forward in American business 
life." 

(5) Brand competition affords the consumer complete protection against 
excessive Fair Trade minimums. 

The potency of private-brand competition is so great that the Assistant Attorney 
General dwells upon it in his brief, asserting that the chains will use private brands 
to the independents' disadvantage. It is significant in this connection, that the 
independents apparently do not fear any such disadvantage, probably because 
there are innumerable private brands available for their use in meeting the chains' 
private brand competition. 



CONCENTUATION OF ECONOMIC POWER 18147 

The important thing in the Assistant Attorney General's brief in this con- 
nection is that he recognizes the potency of private-brand competition. It is 
always present, and it operates as an effective brake on the price policies of 
national advertisers. Any national-brand manufacturer whose prices get out of 
line loses business, not in a single community but throughout the nation. He 
risks his large investment in the good will he has created. 

The same thing is true of the price relationships of competing national brands. 
•Each manufacturer must hold his prices down to those of other national brands 
jn order to stay competitive. The new manufacturer-manufacturer price com- 
petition is much more beneficial to the great body of consumers than-'.the retailer- 
retailer competition which prevails in non-Fair Trade markets; for the latter 
type of competition brings prices down only for those consumers who buy in highly 
competitive trade areas, which are scattered and restricted, while the benefits of 
manufacturers' competition with each other extends to every consumer in the land. 

(6) Prices in a privately operated economy are necessarily fixed b>' somebody, 
hence the charge that Fair Trade statutes permit private price-fixrng loses its 
point. 

The only alternative to private establishment of prices is government price- 
fixing, which involves a radical reorganization of the nation's economy along 
lines which have found acceptance in some European countries. 

We cannot endorse the statement in the introduction to the Assistant Attorney 
General's brief, that "no ordinary social or economic legislation, or even emer- 
gency legislation, can be expected to work in an economy where t*ie private 
seizure [the italics are ours] of arbitrary industrial power over production and 
distribution is permitted." 

In the first place, we deny that private pricing of merchandise is a seizure of 
economic power. Our system rests upon the principle that the citizen has, of 
right, such powers as the government has not taken from him. Among those 
powers is that of pricing. Under the common law that power extends even to 
pricing by concerted action of competitors, and that right is recognized in England 
today except in so far as it may have been modified recently by emergency war 
regulations. 

In the United States the right of pricing as it existed under the common law 
has been modified by the Sherman Act and its amendments; but only to the extent 
that there must be no horizontal concert of action. 

In a free economy prices are necessarily determined by private agencies. In 
an auction sale, the buyers determine them; but in the ordinary course of com- 
merce prices are fixed by some seller, whether manufacturer or distributor, or by 
an agreement between a manufacturer and his distributor. 

The manufacturer best knows the ingredients and value of his product; he can 
best determine at which price the product will move into consumption; he has 
an investment in good will which he cannot aft^o.rd to leave to the untender mercy 
of predatory distributors whose inte;est in his product is limited to the use to 
which it may be put in selling other merchandise. The manufacturer therefore 
should have a voice in determining the minimum price at which his branded 
goods should be offered in the market. That is the essence of Fair Trade. 

The Fair Trade issue simmers down to this: Is the great body of consumers 
(not isolated groups or individuals among them, but all of them) better served 
when resale prices are determined for the whole country by manufacturers who 
must meet competition everywhere, or by individual retailers who are confronted 
only by the necessity of meeting competitive conditions in their respective com- 
munities, being otherwise limited only by "what the market will bear"? 

(7) Price-pressure under the impact of below-cost selling is unsound and against 
public policy. 

It is conceded that price reductions brought about by increased efficiency are 
economically desirable; but no such claim can be made for price reductions forced 
by distributors who sell below cost. Such reductions result in (a) deception of 
the consumer if the loss is made up on other goods; or (b) bankruptcy for the dis- 
tributor if the loss cannot be so recovered, with consequent economic dislocation; 
or (c) curtailment of quality or quantity to meet a lower i)rice; or (d) efforts by 
the producer to make the product for the reduced price by further mechanization 
or by reducing wages, lengthening hours or sj)eeding up work; or (e) a combination 
of two or more of these evils. 

We challenge the conception that prices as counted in dollars and cents are 
paramount, and off"er the thesis that the interests of men as earners and pro- 
ducers transcend in permanent importance their interests as buyers of merchan-' 
dise. Goods sold below the reasonable cost of making and distributing them are 
not bargains; they are an extravagance the nation can ill afford. 
124491— 41— pt. 31- A 10 



18148 CONCENTRATION OF ECONOMIC POWER 

Appendix A 

A STATE-BY-STATE ANALYSIS OF THE DRUGGISTS' RESEARCH BXJREATj's FINDINGS 
REGARDING THE EFFE^CT OF FAIR TRADE LAWS ON THE CONSUMER >PRICSS OF 
FIFTY LEADING DRUG STORE ITEMS 

(Compiled from "Fair Trade and the Retail Drug Store", 1940) 

4S Fair Trade States. 

On average, prices decreased 1%. Reports received from 23.4% of all drug 
stores in the forty-two states, representing 20.4% of independents and 66.6% of 
chains. Each $1 at retail list sold at 87.9c before Fair Trade; at 87.0c in 1939— tt 
decrease of 0.9c. 

Savings on $1 list were 3.9c in towns under 10,000; 1.5c in towns of 10,000 to 
100,000; in towns of 100,000 to 1,000,000 there was a price increase of 0.6c; 
and in towns of 1,000,000 and over, prices advanced 2.5c. Population figures 
indicate that approximately 70% of the people in the 42 states live in the first 
two city-size group classifications. 

Disregarding city size, independent stores doing less than $10,000 sales an- 
nually showed a decrease of 2.5c per $1 list; $10,000 to $20,000, a decrease of 3.4c; 
$20,000 to $30,000, a decrease of 3.5c; $30,000 to $50,000, a decrease of 3.3c; 
$50,000 and over, a decrease of 0.4c. Chains showed increase of 4.9c. 

Arkansas. 

Law enacted in February, 1937; on average, prices declined 2.7%. Reports 
received from 104 drug stores, representing 14% of independents and 100% of 
chains. Each $1 at retail list sold at 97.7c before Fair Trade; at 95.1c in 1939 
a decrease of 2.6c. 

Savings on $1 list were 2.3c in towns under 10,000; 3.2c in towns of more than 
lOjOOO population. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed little change of prices; larger stores showed decreases, those with sales 
over $50,000 showing the maximum decrease of 6.4c. Chains showed an increase 
of 6.9c. 

Colorado. 

Law enacted in March, 1937; on average, prices increased 0.3%. Reports 
received from 146 drug stores, representing 22% of independents and 56% of 
chains. Each $1 at retail list sold at 87.2c before Fair Trade; at 87.5c in 1939 — an 
increase of 0.3c. 

Savings on $1 list were 3.3c in towns under 10,000; 0.9c in towns of 10,000 
to 100,000; in Denver, the only city of more than 100,000, there was an ijicrease 
of 3.0c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a reduction of 1.3c per $1 list; $10,000 to $20,000, a decrease of 3.8c; 
$20,000 to $30,000, a decrease of 2.9c; $30,000 to $50,000, a decrease of 2.7c; 
$50,000 and over, an increase of 4.9c. Chains showed an increase of 4.0c. 

Connecticut. 

Law enacted in June, 1937; on average, prices declined 1.5%. Reports re- 
ceived from 200 drug stores, representing 22% of independents and 81% of chains. 
Each $1 at retail list sold at 86.2c before Fair Trade; at 84.9c in 1939 — a reduction 
of 1.3c. 

Savings on $1 list were 5.3c in towns under 10,000; there was an increase of 
0.1& in towns of 10,000 to 100,000; in towns of 100,000 or more there was an 
increase of 0.6c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 3.6c per $1 list; $10,000 to $20,000, a decrease of 4.0c; 
$20,000 to $30,000, a reduction of 3.9c; $30,000 to $50,000, a reduction of 2,6c; 
$50,000 and over, a decrease of 2.0c. Chains showed an increase of 7.2c. 

Florida. 

Law enacted in June, 1937; on average, prices decreased 1.6%. Reports 
received from 182 drug stores, represeHtHig 1-6%- of -independents and 72% of 
chains. Each $1 at retail list sold at 90.8 before Fair Trade; at 89.4c in 
1939 — a decrease of 1.4c. 

Savings on $1 list were 2.0c in towns under 10,000; 1.5c in towns of 10,000 to 
100,000; in cities of more than 100,000 there was a reduction of 0.8c. 



CONCENTRATION OF ECONOMIC POWER 18149 

Disregarding city size, independent stores doing less than $10,000 sales an- 
nually showed a reduction of 1.3c per $1 list; $10,000 to $20,000, a decrease of 
4.4c; $20,000 and over, smaller decreases. Chains showed an increase of 6.9c. 

Georgia. 

Law enacted in March, 1937; on average, prices decreased 2.9%. Reports 
received from 179 drug stores, representing 12% of independents and 72% of 
chains. Each $1 at retail list sold at 92.9c before Fair Trade; at 90.2c in 1939 — a 
decrease of 2.7c. 

Savings on $1 list were 3.9c in towns under 10,000; 3.1c in towns of 10,000 to 
100,000; in Atlanta, only city of more than 100,000, there was a reduction in the 
average price of 0.7c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 3.0c per $1 list; $10,000 to $20,000, a decrease of 4.4c; 
$20,000 to $30,000, a reduction of 5.6c; $30,000 to $50,000, a decrease of 3.9c; 
$50,000 and over, a decrease of 3.6c. Chains showed an increase of 5.5c. 

Illinois. 

Law enacted in July, 1935; on average, prices decreased 1.1%. Reports 
received from 883 drug stores, representing 19% of independents and 78% of 
chains. Each $1 at retail list sold at 87.3c before Fair Trade; at 86.4c in 1939 — 
a decrease of 0.9c. 

Savings on $1 list were 4.4c in towns under 10,000; 2.1c in towns of 10,000 to 
100,000; 1.1c in Peoria, only city in the 'group of 100,000 to 1,000,000; in [Chicago, 
with a population exceeding 3,000,000, there was an increase of 0.2c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 3.8c per $1 list; $10,000 to $20,000, a decrease of 4.5c; 
$20,000 to $30,000, a reduction of 4.8c; $30,000 to $50,000^ a decrease of 4.2c; 
$50,000 and over, a decrease of 2.3c. Chains showed an increase of 3.7c.i 

Indiana. 

Law enacted in February, 1937; on average, prices decreased 1.9%. Reports 
received from 475 drug stores, representing 26% of independents and 88% of 
chains. Each $1 at retail list sold at 88.0c before Fair Trade; at 86.3c in 1939 — 
a decrease of 1.7c. 

Savings on $1 list were 4.2c in towns under 10,000; 1.7c in towns of 10,000 
to 100,000; 0.2c in towns of more than 100,000. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 2.6c per $1 list; $10,000 to $20,000, a decrease of 5.0c; 
$20,000 to $50,000, slight decreases; $50,000 and over, a decrease of 0.9c. Chains 
showed an increase of 1.8c. 

Iowa. 

Law enacted in May, 1935; on average, prices decreased 4.6%. Reports 
received from 332 drug stores, representing 24% of independents and 61% of 
chains. Each $1 at retail list sold at 94.6c before Fair Trade; at 90.2c in 1939 — 
a decrease of 4.4c. 

Savings on $1 list were 5.1c in towns under 10,000; 4.5c in towns of 10,000 to 
100,000; 1.6c in Des Moines, only city over 100,000. 

Disregarding city size, independent stores doing less- than $10,000 sales annually 
showed a decrease of 4.2c per $1 list; $10,000 to $20,000 a decrease of 5.6c; $20,000 
to $30,000, a decrease of 7.3c; $30,000 to $50,000 a decrease of 7.4c; $50,000 and 
over, a decrease of 6.4c. Chains showed an increase of 5.0c. 

Kansas 

Law enacted in March, 1937; on average, prices decreased 2.6%. Reports 
received from 288 drug stores, representing 25% of independents and 44% of 
chains. Each $1 at retail list sold at 93.5c before Fair Trade; at 91.1c in 1939 — 
a decrease of 2.4c. 

Savings on $1 list were 3.5c in towns under 10,000; 3.4c in towns of 10,000 
to 100,000; there was an increase of 1.5c in Kansas City representing the 100,000 
to 1,000,000 group. 

Disregarding city gize, independent stores doing less than $10,000 sales annually 
showed a decrease of 3.0c per $1 list; $10,000 to $20,000, a decrease of 3.4c; 
$20,000 to $30,000, a decrease of 4.5c; $30,000 to $50,000, a decrease of 3.4c; 
$50^00 and over, a decrease of 6.5c. Chains showed an increase of 4.7c. 



18150 CONCENTRATION OF ECONOMIC POWER 

Kentucky. 

Law enacted in January,. 1937; on average, prices decreased 2.2%. Reports 
received from 215 drug stores, representing 23% of independents and 72% of 
chains. Each $1 at retail list sold at 91.4c before Fair TVade; at 89.4c in 1939 — 
a decrease of 2.0c. 

Savings on $1 list w^ere 2.7c in towns under 10,000; 3.2c in towns of 10,000 
to 100,000; in Louisville (100,000 to 1,000,000 group) there was a decrease of 0.1c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.1c per $1 Mst; $10,000 to $20,000, a decrease of 2.9c; 
$20,000 to $30,000, a decrease of 3.8c; $30,000 to $50,000, a decrease of 3.4c; 
$50,000 and gver, a decrease of 3.5c. Chains showed an increase of 5.5c. 

Louisiana. 

Law enacted in July, 1936; on average, prices decreased 0.6%. Reports 
received from 104 drug stores, representing 9% of independents and 51 % of chains. 
Each $1 at retail list sold at 91.5c before Fair Trade; at 91.0c in 1939 — a decrease 
of 0.5c. 

Savings on $1 list were 1.8c in towns under 10,000; there was an increase of 1.8c 
in towns of 10,000 to 100,000; in New Orleans (100,000 to 1,000,000 group) 
the average price was 0.8c lower. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.2c per $1 list; $10,000 to $20,000, a decrease of 0.9c; 
$20,000 to $30,000, a decrease of 1.6c; $30,000 to $50,000, a decrease of 2.6c; 
$50,000 and over, an increase of 3.7c. Chains showed an increase of 1.8c. 

Maine. 

Law enacted in April, 1937, on average, prices decreased 4.4%. Reports 
received from 114 drug stores, representing 30% of all drug stores in the state. 
Each $1 at retail list sold at 93.8c before Fair Trade; at 89.7c in 1939— a reduction 
of 4.1c. 

Savings on $1 list were 5.6c in towns under 10,000; 2.0c in towns of 10,000 
and over. 

Disregarding city size, independent stores doing less than $10,000 sales an- 
nually showed a decrease of 4.0c per $1 list; $10,000 to ?'20,000, a decrease of 
4.5c; $20,000 to $30,000, a decrease of 6.6c; $30,000 to " -0,000, a decrease of 
6.1c; $50,000 and over, a decrease of 1.0c. Chain fign'ss are not reported. 

Maryland. 

Law enacted in May, 1935; on average, prices increased 0.7%. Reports re- 
ceived from 171 drug stores, representing 19% of independents and 74%, of chains. 
Each $1 at retail list sold at 84.3c before Fair Trade; at 84.9c in 1939 — an increase 
of 0.6c. 

Savings on $1 list were 1.3c in towns under -10,000; 0.3c in towns of 10,000 
to 100,000; in Baltimore (100,000 to 1,000,000 group) there was an increase of 1.2c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 0.4c per $1 list; a decrease of 3.9c; in-between groups pro- 
portionately; $50,000 and over, an increase of 1.5c. Chains showed an increase 
of 4.6c. 

Massachusetts. 

Law enacted in May, 1937; on average, prices declined 1.2%. Reports received 
from 436 drug stores, representing 20% of independents and 50% of chains. 
Each $1 at retail list sold at 86.2c before Fair Trade; at 85.2c in 1939 — a reduction 
of 1.0c. 

Savings on $1 list were 6.2c in towns under lCf,000; 0.8c in towns of 10,000 to 
100,000; in towns of more than 100,000 there was no appreciable change. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a reduction of 3.9c per $1 list; larger store-size groups showed consecutively 
smaller reductions, and in the group of $50,000 and over, there was an increase of 
0.9c. Chains showed an increa.so of 5.0c. 

Michigan. 

Law enacted in May, 1937; on average, prices decreased 0.5%. Reports 
received from 581 drug stores, representing 21% of independents and 62% of 
chains. Each $1 at retail list sold at 87.4c before Fair Trade; at 87.0c in 1939 — 
a decrease of 0.4c. 

Savings on $1 list were 3.3c in towns under 10,000; 1.2c in towns of 10,000 to 
100,000; an increase of 0.7c in towui- of 100,000 to 1,000,000; in Detroit (more 
than 1,000,000) there was an increase of 1.4c. 



CONCENTRATION OF ECONOMIC POWER 18151 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 4.1c per $1 list; $10,000 to $20,000, a decrease of 3.8c; 
$20,000 to $30,000, a decrease of 3.1c; $30,000 to $50,000, a decrease of 2.8c; 
$50,000 and over, a decrease of 0.9c. Chains showed an increase of 5.7c. 

Alinnesota. 

Law enacted in March, 1937; on average, prices declined 2.9%. Reports 
received from 318 drug stores,' representing 27% of independents and 53% of 
chains. Each $1 at retail list sold at 89.7c before Fair Trade; at 87.1c in 1939 — 
a decrease of 2.6c. 

Savings on $1 list were 7.1c in towns under 10,000; 5.3c in towns of 10,000 to 
100,000; in towns of more than 100,000, there was an increase of 0.6c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 5.5c per $1 list; $10,000 to $20,000, a decrease of 5.1c; 
$20,000 to $30,000, a decrease of 5.3c; $30,000 to. $50,000, a decrease of 4.8c; 
$50,000 and over, a decrease of 3.1,c. Chains showed an increase of 5.6c. 

Mississippi. 

Law enacted in April, 1938; on average, prices decreased 1.5%. Reports 
received from 80 drug stores, representing 13% of all drug stores in the state. 
Each $1 at retail list sold at 99.7c before Fair Trade; at 98.1c in 1939 — a reduction 
of 1.6c. 

Savings on $1 list were 0.7c in towns under 10,000; 3.0c in towns of 10,000 
and over. 

Disregarding citv size, independent stores doing less than $10,000 sales annually 
showed a reduction of 0.4c per $1 list; $10,000 to $20,000, a decrease of 1.0c; 
$20,000 to $30,000, a decrease of 2.1c; $30,000 to $50,000, a decrease of 2.2c; 
$50,000 and over, a decrease of 2.9c. Chains showed an increase of 2.3c. 

Montana, Wyoming and Idaho. 

Laws enacted in 1937; on average, prices in the three states decreased 4.5%. 
Reports received from 149 drug stores, representing 24% of independents and 
80% of chains. Each $1 at retail list sold at 94.8c before Fair Trade; at 90.5c in 
1939 — a decrease of 4.3c. 

Savings on $1 list were 4.7c in towns under 10,000; 3.2 in towns of 10,000 
and over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.3c per $1 list; $10,000 to $20,000, a decrease of 4.6c; 
$20,000 to $30,000, a decrease of 5.2c; $30,000 to $50,000, a decrease of 6.2c; 
$50,000 and over, a decrease of 4.5c. Chains showed an increase of 5.2c. 

Nebraska. 

Law enacted in April, 1937; on average, prices decreased 5.2%. Reports 
received from 201 drug stores, representing 24% of independents and 73% of 
chains. Eacij $1 at retail list sold at 95.8c before Fair Trade; at 90.9c in 1939 — ^a 
decrease of 4.9c. 

Savings on $1 list were 4.8c in towns under 10,000; 6.6c in towns of 10,000 to 
100,000; in Omaha (100,000 to 1,000,000 group) savings were 3.9c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 2.5c per $1 list; $10,000 to $20,000, a decrease of 4.1c; 
$20,000 to $30,000, a decrease of ,7.1c; $30,000 to $50,000, a decrease of 7.2c; 
$50,000 and over, a decrease of 5.7c. Chains showed an increase of 2.9c. 

New Hampshire. 

Law enacted in August, 1937; on average, prices declined 6.3%. Reports 
received from 45 drug stores, representing 19% of all drug stores in the state. 
Each $1 at retail list sold at 93.7c before Fair Trade; at 87.8c in 1939— a reduction 
of 5.9c. 

Savings on $1 list were 5.6c in towns under 10,000; 6.2c in town of 10,000 and 
over. 

Disregarding city size, independent stores doing less than $10,000 sales annuallv 
showed a decrease of 7.7c per $1 list; $10,000 to $20,000, a decrease of 8.1c; 
$20,000 to $30,000, a decrea.se of 3.7c; $30,000 to $50,000, a decrease of 5.7c; 
$50,000 and over, a decrease of 6.2c. Chains showed a decrease of 2.8c. 

New Jersey. 

Law enacted in February, 1935; on average, prices increased 4.3%. Reports 
received from 392 drug stores, representing 20% of independents and 48% of 
chains. Each $1 at retail list sold at 80.2c before Fair Trade; at 83.6c in 1939— an 
increase of 3.4c. 



18152 CONCENTRATION OF ECONOMIC POWER 

Savings on $1 list were 0.3c in towns under 10,000; prices increased 2.9c in 
towns of 10,000 to 100,000; and increased 6.4c in towns of 100,000 and over. 

Disregarding city size, independent storesxioing less than $10,000 sales annually 
showed a decrease of 2.6c per $1 list; $10,000 to $20,000, a decrease of 0.8c; 
$20,000 to $30,000, an increase of 2.4c; $30,000 to $50,000, an increase of 1.5c; 
$50,000 and over, an increase of 8.6c. Chains showed an increase of 9.3c. 

New Mexico, Ltah, Arizona and Nevada. 

Laws enacted in 1937; on average, prices decreased 3.2%. Reports received 
from 119 drug stores, representing 19% of independents and 47% of chains. Each 
$1 at retail hst sold at 93.9c before Fair Trade; at 90.9c in 1939— a decrease of 3.0c. 

Savings on-$l list were 2.4c in towns under 10,000; 5.0c in towns of 10,000 to 
100,000; in Salt Lake City (100,000 to 1,000,000 group) there was a reduction 
of 0.8 c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.4c per $1 list; $10,000 to $20,000, a decrease of 3.2c; 
$20,000 to $30,000, a decrease of 3.3c; $30,000 to $50,000 a decrease of 3.9c; 
$50,000 and over, a decrease of 7.8c. Chains showed an increase of 3.9c. 

New York. 

Law enacted in May, 1935; on average, prices inoreased 2.2%. Reports 
received from 1,446 drug stores, representing 19% of independents and 61% of 
chains. Each $1 at retail list sold at 82.1c before Fair Trade; at 83.9c in 1939 — 
an increase of 1.8c. 

Savings on $1 list were 4.5c in towns under 10,000; prices increased 0.2c in 
towns of 10,000 to 100,000; and increased 0.1c in towns of 100,000 to 1,000,000; 
in New York, the average price was up 4.1c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed an increase of 0.1c per $1 list; $10,000 to $20,000, a decrease of 0.3c; 
$20,000 to $30,000, a decrease of 0.2c; $30,000 to $50,000, an increase of 1.1c; 
$50,000 and over, an increase of 2.9c. Chains showed an increase of 5.5c. 

North Carolina. 

Law enacted in March, 1937; on average, prices decreased 5.6%. Reports 
received from 114 drug stores, representing 12% of independents and 65% of 
chains. Each $1 at retail list sold at 94.8c before Fair Trade; at 89.5c in 1939 — a 
decrease of 5.3c. 

Savings on $1 list were 5.0c in towns under 10,000; 5.5c in towns of 10,000 and 
over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed no change; $10,000 to $20,000, a decrease of 4.8c per $1 list; $20,000 to 
$30,000, a decrease of 7.1c; $30,000 to $50,000, a decrease of 7.7c; $50,000 and 
over, a decrease of 5.9c. Chains showed an increase of 1.4c. 

North Dakota and South Dakota. 

Xaws enacted in 1937; on average, prices decreased 5.7%. Reports received 
from 148 drug stores, representing 24% of all drug stores in the two states. Each 
$1 at retail list sold at 97.7c before Fair Trade; at 92.2c in 1939 — a decrease 
of 5.5c. 

-Savings on $1 list were 4.7c in towns under 10,000; 7.4c in towns of 10,000 
and over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.8c per $1 list; $10,000 to $20,000, a decrease of 3.9%; 
$20,000 to $30,000, a decrease of 7.3c: $30,000 to $50,000, a decrease of 7.9c; 
$50,000 and over, a decrease of 7.4c. Chains showed an increase of 3.9c. 

Ohio. 

Law enacted in April, 1936; on average, prices increased 0.1%. Reports 
received from 952 drug stores, representing 26% of independents and 88% of 
chains. Each $1 at retail list sold at 85.1c before Fair Trade; at 85.2c in 1939 — 
an increase of 0.1c. 

Savings on $1 list were 4.1c in towns under 10,000; in towns of 10,000 to 100,000 
prices were 0.2c higher, and in towns of 100,000 or more, prices advanced 1.3c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 4.1c per $1 list; $10,000 to $20,000, a decrease of 4.2c; 
$20,000 to $30,000, a decrease of 3.9c; $30,000 to $50,000, a decrease of 2.9c; 
$50,000 and over, an increase of 0.5c. Chains showed an increase of 5.3c. 



CONCENTRATION OF ECONOMIC POWER 18153 

Oklahoma. 

Law enacted in April, 1937; on average, prices decreased 1.2%. Reports 
received from 199 drug etorcs, representing 15% of independents and 68% of 
chains. Each $1 at retail list sold at 93.3c before Fair Trade; at 92.2c in 1939 — 
a decrease of 1.1c. 

Savings on $1 list were 2.8 in towns, under 10,000; 0.4c in towns of 10,000 to 
100,000; prices increased 0.7c in towns of 100,000 and over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.0c per $1 list; $10,000 to $20,000, a decrease of 3.1c; $20,000 
•to $30,000, a decrease of 3.4c; $30,000 to $50,000, a decrease of 2.6c; $50,000 and 
over, a decrease of 0.5c. Chains showed an increase of 3.3c. 

Oregon. 

Law enacted in March, 1935; on average, prices increased 2.8%. Reports 
received from 164 drug stores, representing 27% of independents and 73% of 
chains. Each $1 at retail list sold at 84.2c before Fair Trade; at 80. 6c in 1939 — 
an increase of 2.4c. 

Savings on $1 list were 5.7c in towns under 10,000; prices were up 2.4c in towns 
of 10,000 to 100,000; in Portland (100,000 to 1,000,000 group) there was an 
increase of 6.7c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 4.4c per $1 list; $10,000 to $20,000, a decrease of 6 8c- 
$20,000 to $30,000, a decrease of 3.6c; $30,000 and over, a decrease of 2.2c. 
Chains showed an increase of 13.5c. 

Pennsylvania. 

Law enacted in June, 1935; on average, prices changed very little (increased 
0.1%). Reports received from 989 drug stores, representing 20 % of independents 
and 64% of chains. Each $1 at retail list sold at 84.1c before Fair Trade; at 
84.2c in 1939 — an increase of 0.1c. 

Savings on $1 list were 3.4c in towns under 10,000; 0.4c in towns of 10 000 to 
100,000; in towns of 100,000 to 1,000,000 there was an increase of 0.3c; and in 
Philadelphia (more than 1,000,000) an increase of 3.3c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 3.3c per $1 list; $10,000 to $20,000, a decrease of 2 9c- 
$20,000 to $30,000, a decrease of 2.1c; $30,000 to $50,000, a decrease of 2.2c; 
$50,000 and over, an increase of 1.9c. Chains showed an increase of 5.3c. 

Rhode Island. 

Law enacted in May, 1936; on average, prices increased 2.1%. Reports 
received from 63 drug stores, representing 15% of independents and '78% of 
chains. Each $1 at retail list sold at 82.9c before Fair Trade; at 84.6c in 1939 — 
an increase of 1.7c. 

Savings on $1 list were 6.4c in towns under 10,000; in towns of 10,000 to 100,000 
there was an increase of 0.5c; in Providence, there was an increase of 3.7c. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 4.3c per $1 list; $10,000 to $20,000, a decrease of 2 8c- 
$20,000 to $30,000, a decrease of 0.7c; $30,000 to $50,000, a decrease of 0.5c; 
$50,000 and over, an increase of 2.6c. Chains showed an increase of 10.2c. 

South Carolina. 

Law enacted in April, 1937; on average, prices decreased 5.0%. Reports 
received from 83 drug stores, representing 16% of all drug stores in the State. 
Each $1 at retail list sold at 95.0c before Fair Trade; at 90.2c in 1939 — a decrease 
of 4.8c. 

Savings on $1 list were 5.0c in towns under 10,000; 4.5c in towns of 10,000 or 
more. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.5c per $1 list; $10,000 to $20,000, a decrease of 4 6c- 
$20,000 to $30,000, a decrease of 9.5c- $30,000 to $50,000, a decrease of 4.3c; 
$50,000 and over, a decrease of 4.5c. Chains showed an increase of 4.8c. 

Tennessee. 

Law enacted in February, 1937; on average, prices decreased 1.8%. Reports 
received from 205 drug stores, representing 19% of independents and 64% of 
chains. Each $1 at retail list sold at 92.9c before Fair Trade; at 91.2c in 1939 — 
a decrease of 1.7c. 



18154 



CONCENTRATION OF ECONOMIC POWER 



Savings on $1 list were 2.7c in towns under 10,000; 2.3c in towns of 10,000 to 
100,000; 1.0c in towns of 10,000 and over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.3c per $1 list; $10,000 to $20,000, a decrease of 2.9c; 
$20,000 to $30,000, a decrease of 3.4c; $30,000 to $50,000, a decrease of 5.6c; 
$50,000 and over, an increase of 0.4c. Chains showed an increase of 4.3c. 

Virginia. 

Law enacted in March, 1936; on average, prices decreased 2.4%. Reports 
received from 186 drug stores, representing 22% of independents and 67% of 
chains. Each $1 at retail list sold at 90.3c before Fair Trade; at 88.1c in 1939— 
a decrease of 2.2c. 

Savings on $1 list were 3.4c in towns under 10,000; 1.1c in towns of 10,000 to 
100,000; 1.7c in towns of 100,000 and over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 1.8c per $1 list; $10,000 to $20,000, a decrease of 4.1c; 
$20,000 to $30,000, a decrease of 3.9c; $30,000 to $50,000, a decrease of 4.9c; 
$50,000 and over, a decrease of 0.9c. Chains showed an increase of 1.9c. 

Washington. 

Law enacted in March, 1935; on average, prices decreased 3.2%. Reports 
received from 189 drug stores, representing 22% of independents and 14% of 
chains. Each $1 at retail list sold at 90.8c before Fair Trade, at 87.9c in 1939 — 
a decrease of 2.9c. 

Savings on $1 list were 5.5c in towns under 10,000; 2.0c in towns of 10,000 to 
lOO.OCO; 2.1c in towns of 100,000 and over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 4.0c per $1 list; $10,000 to $20,000, a decrease of 4.1c; 
$20,000 to $30,000, a decrease of. 4. 6c; $30,000 to $50,000, a decrease of 5.6c; 
$50,000 and over, a decrease of 1.2c. Claims showed a decrease of 0.2c. 

West Virginia. 

Law enacted in May, 1937; on average, prices decreased 3.9%. Reports re- 
ceived from 102 drug stores, representing 20% of independents and 75% of chains. 
Each $1 at retail list sold at 92.0c before Fair Trade; at 88.5c in 1939^ — a reduction 
of 3.5c. 

Savings on $1 list were 4.2c in towns under 10,000; 3.0c in towns of 10,000 and 
over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 4.7c per $1 list; $10,000 to $20,000, a decrease of 4.0c; 
$20,000 to $30,000, a decrease of 4.1c; $30,000 to $50,000, a decrease of 3.3c; 
$50,000 and over, a decrease of 6.3c. Chains showed an increase of 2.3c. 

Wisconsin. 

Law enacted in May, 1935; on average, prices decreased 4.3%. Reports 
received from 338 drug stores, representing 24% of independents and 61% of 
chains. Each $1 at retail list sold at 91.9c before Fair Trade; at 88.0c in 1939 — 
a decrease of 3.9c. 

Savings on $1 list were 5.8c in towns under 10,000; 3.6c in towns of 10,000 to 
100,000; 2.6c in towns of 100,000 and over. 

Disregarding city size, independent stores doing less than $10,000 sales annually 
showed a decrease of 5.5c per $1 list; $10,000 ih $20,000, a decrease of 6.8c; 
$20,000 to $30,000, a decrease of 5.9c; $30,000 to $50,000, a decrease of 5.7c; 
$50,000 and over, a decrease of 4.7c. Chains Showed an increase of 2.8c. 



Appendix B 
Legislative and judicial history of State fair trade acts 




California.-. 

Oregon 

New Jersey. 
Washington 
Wisconsin.. 
New York. . 



Aug. 14,1931 
June 7, 1933 
Mar. 12, 1935 
Mar. 25, 1935 
May 2, 1935 
May 17,1935 



Aug. 21, 1933; Aug. 2^1937 

June 12, 1935; June 7, 1U37 

Dec. 20, 1937; May 14, 1938 

June 11, 1937 

Sept. 19, 1935 — 

Feb. 10, 1938; Mar. 19, 1940; Apr. 13, 1940 



1936— Upheld. 
1939- Upheld. 
1937— Upheld. 

1937— Upheld. 
1939— Upheld. 



CONCKNTIIATION t)F ECONO.MIC I'OWEU 18155 

Legislative and judicial history of State fair trade ac<s— Continued 



State 



Effective Date 

Fair Trade 

Law 



Date Amended 



State Supreme 
Court Deci- 
sions 



Maryland. 

Pennsylvania.-,. 

Iowa.. 

Illinois 

•Rhode Island... 

Virginia 

Ohio 

Louisiana 

Tennessee 

Arizona. 

Montana. 

New Mexico 

Kansas 

Georgia.. 

Nevada.. 

Colorado 

North Carolina. 

Minnesota 

Kentucky 

Nebraska 

South Carolina., 

Wyoming 

Idaho. 

Utah 

West Virginia... 
South Dakota.. 

Florida. 

Indiana 

Arkansas 

Connecticut 

North Dakota.. 

Maine 

Oklahoma 

New Hampshire 
Massachusetts.. 

Michigan .. 

Mississippi 

Alabama 



June 
June 
July 
July 
May 
June 
July 
July 
Feb. 
Feb. 
Feb. 
Mar. 
•Mar. 
Mar. 
Mar. 
Mar. 
Mar. 
Mar. 
Apr. 
Apr. 
Apr. 
May 
May 
May 
May 
June 
June 
June 
June 
July 
July 
July 
Aug. 
Aug. 
Aug. 
Oct. 
Apr. 
Feb. 



193.5 
1935 
1935 
1935 
1930 
1936 
1936 
1936 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1937 
1938 
1939 



June 1, 1937. 



Apr. 22, 1938; Apr. 7, 1940.. 
June 21, 1938; June 28, 1940. 



1939— Upheld. 
1938— Upheld. 
1940— Upheld. 
1936— Upheld. 



July 1, 1939... 
May 30, 1939. 



July 20, 1939 - 

Aug". Y6Vi939;" Sept."24; Y939. 



1939— Upheld. 
1939— Upheld. 

1941— Upheld. 
1937— Upheld. 

1941— Upheld. 



Appendix C 

a synopsis of affidavits and other statements filed with the temporary 
national economic committee, showing that the fair trade statutes 
were passed by the various state legislatures after full open hearings 
thereon and extended consideration and debate 

California. 

Affidavit of Roy S. Warnack and Frank E. Mortenson: "That the California 
legislature holds a bifurcated session, meeting for a SO day period for the purpose 
of organization, preliminary work and the introduction of bills; then takes a con- 
stitutional recess of 30 days after which it reconvenes. That all bills are printed 
and accessible to the public for study. That all committee meetings of the 
California legislature are public hearings in that any citizen has access to these 
hearings and the privilege of speaking for or against pending legislation. That 
all scheduled committee meetings are publicized in the daily and weekly histories 
cf the legislature and placed on bulletins in the Capitol Building * * * 

"That a lengthy hearing was had on the bill in a crowded chamber and that 
representatives of retail drug, retail meat dealers, retail grocers and retail hard- 
ware dealers trade associations appeared before committee as proponents of the 
bill. That bill was voted out with 'do pass' recommendation and passed the 
assembly without a dissenting vote." 

The affidavit goes on to say that it went through the "orderly process of legis- 
lation" in the Senate and passed that body unanimously, and that "the regular 
and orderly method of the legislation caused it to be pending for almost the 
whole session." 

Oregon. 

Letter from Jack Lynch (who offers to put his communication into affidavit 
form) : "Notices of public hearings on our three Fair Trade bills were posted in 



18156 CONCENTRATION OF ECONOMIC POWER 

the House of Representatives and the Senate and were announced in the press 
throughout the state in advance of the hearings. Representatives of the following 
organizations or groups appeared at the hearings in opposition to the passage of 
our Fair Trade bills: (a) representatives of Fred Meyer, Inc., Portland, Oregon, 
a so-called pineboard store chain, which operates several units in Oregon, (b) 
representatives of Meier & Frank Department Store, Portland, Oregon, (c) 
representatives of a so-called consumers' organization known as the 'Oregon State 
Consumers Council', (d) several representatives who allegedly represented retail 
establishments who purportedly were opposed to our Fair Trade bills. Official 
representation of the following trade groups appeared at an open hearing held in 
the House of Representatives prior to the enactment of our 1933 Fair Trade 
bill: (16 associations listed). 

"It is estimated that more than 1,000 individuals from all walks of life from 
various parts of the state attended the above open hearing, and there was virtually 
a full attendance of representatives and senators. The hearing lasted approxi- 
mately three hours and everyone present was given an opportunity to not only 
be heard but to propound questions." 

The bill passed the House by a vote of 43 to 14, and the Senate by a vote of 27 
to 3. "In spite of the above vote, Governor Julius Meier, who was then president 
and one of the principal stockholders of Meier & Frank Department Store, Port- 
land, Oregon, vetoed the bill which was subsequently passed over his veto, as 
follows: (38 to 17 in the House, 25 to 5 in the Senate)." 

Washington. 

Letter from H. E. Henderson: "At the 1935 session (a Fair Trade bill) was 
introduced * * * gent to the Committee on Commerce and Manufacturing. 
Public hearings were held on this measure * * * "phe 1935 law was an 
emergency measure, was for a two year period, and took effect immediately. 

"The 1937 Fair Trade Act was introduced in the Senate * * * jt was 
referred to the Committee on Commerce and Manufacturing, whose chairman was 
W. C. Dawson. Public hearings were held in that committee and arguments 
were presented for and against the measure. Two amendments were added to 
the bill in committee and the bill passed in the Senate by a vote of 36 yeas, and 
5 nays. The bill received a vote of 81 yeas, and 3 nays in the House of Repre- 
sentatives * * *. In the House, when the bill came up for final passage, 
there were lengthy debates for and against its passage." 

Letter from Carlton Sears, Secretary of the State Board of Pharmacy: "I 
attended the hearing held in the committee on the Fair Trade Act * * *. 
Many different groups appeared for and against the measure, and careful con- 
sideration was given by the committee as to the merits of their arguments." 

Letter from the Honorable W. C. Dawson, Chairman of the Senate Committee 
on Commerce and Manufacturing: "No permanent records are kept on commit- 
tee hearings or meetings. To the best of my knowledge and recollection, hear- 
ings were held on this bill (the Fair Trade bill) each time it was received in my 
committee." Senator Dawson then cites three times when Fair Trade bills 
were considered by his committee and states that on February 1, 1937, the bill 
was reported with amendments "after hearing and joint meeting with House 
Committee." 

Wisconsin. 

A certificate by the Honorable Fred R. Zimmerman, Secretary of State, embody- 
ing a transcript of the legislative record of committee action on the Fair Trade 
bill, shows that committee hearings were held in both the Assembly and the 
Senate; that the Assembly Committee on Commerce and Manufacture held a 
hearing on the bill, amended it, and thereupon unanimously recommended its 
passage, all members being present; that the Senate Committee on State and 
Local Government held a public hearing on the bill; that representatives of Ed. 
Schuster & Company, Milwaukee department store, and the Wisconsin Daily 
Newspaper League appeared in opposition to the bill; that the Committee unani- 
mously recommended its passage, all members of the Committee being present. 

Virginia. 

Affidavit of A. L. I. Winne: "The Virginia Fair Trade Act was first enacted in 
1936 * * *. The act was amended and re-enacted (in 1938). On each of 
the occasions when this measure was up for consideration, there was newspaper 
publicity and an ample opportunity for any interested persons to appear in sup- 
port of, or opposition to, the measures. On both occasions there were several 
hearings in House committees and in Senate committees * * *. On the 



CONCENTRATION OF ECONOMIC POWER 18157 

occasion of the original enactment, a considerable amount of publicity was given 
to the matter prior to the meeting of the General Assembly in January, 1936. 
When the Assembly met in Richmond at that time, the bill was introduced and 
proceeded in an orderly manner through committees where public hearings were 
held * * * Xhe bill passed both branches by a large majority of votes. 
Again in 1938, when the bill was amended, it proceeded in much the same 
manner * * * and being subject, as I recall it, to two or three public 
hearings * * *. In this state no effort was made to railroad this measure 
in either instance. It was given plenty of publicity, and there was plenty of 
opportunity for opposition to have a voice, but very little opposition appeared. 
I recall one rather caustic piece of literature that was circulated and placed in the 
hands of legislators, signed by some sort of fictitious consumers' league * * * 
Nobody at the hearings assumed responsibility for its circulation * * * 
One small chain store group offered open opposition to the passage of the bill in 
the first instance but withdrew its opposition * * *." 

Ohio. 

Affidavit of Victor L. Keys: "(The House) Judiciary Committee held three 
public hearings on said bill * * *. At said hearings there were present repre- 
senatatives and members (of various associations enumerated) and members of 
the public * * * the only opposition appearing at said hearings was the Lane 
Drug Company of Toledo, Ohio, operating a chain of retail drug stores * * * 
the bill was passed by the House of Representatives, the vote being ayes 90, 
nays 12 * * * (The Senate) Welfare Committee held two public hearings 
on said bill, at which were present representatives of the various associations 
hereinabove mentioned as well as representatives of the Lane Drug Company in 
opposition to said bill, and members of the public * * * said bill was passed 
by the Senate, the vote being ayes 29, nays none * * * during the pendency 
■of said bill in the Ohio General Assembly, publicity was giv6n the measure by 
means of numerous articles in newspapers of general circulation throughout the 
State of Ohio * * *." 

Kansas. 

Affidavit of the Honorable Thale P. Skovgard, State Senator: "A public hearing 
was held before the Federal and State Affairs Commiti;ee in the Senate and before 
the Judiciary Committee of the House of Representatives. Due notice was given 
of both hearings." 

The vote in the Senate on final passage was unanimous, and in the House the 
bill was passed by a vote of 103 to 5, Senator Skovgard states. 

"Both the Democratic and Republican platforms carried planks covering the 
principle involved in Fair Trade." 

Georgia. 

Affidavit of the Honorable Paul L. Lindsay, former State Senator: "I sponsored 
it (the Fair Trade bill) through the Senate and was glad to see it pass and become 
a law. Learning of reports that there were irregularities about the passage of said 
bill and no sufficient opportunity was given the opponents of the bill, I feel glad to 
say that I know of no such acts but, on the other hand, the bill was regularly 
introduced and committee hearings had as usual in such matters." 

Affidavit of the Honorable Roy V. Harris, former Speaker of the House of Repre- 
sentatives : "Current reports would indicate that an attempt was made to 'throttle' 
any and all opposition by refusal of 'opeti committee hearings'. Such reports have 
no foundation whatever, as the opportunity was given to anyone desiring to express 
opposition in open hearings." 

Colorado. 

Letter from Ira L. Quiat, Attorney at Law, Denver, Colorado: "I am reliably 
informed that the chairman of this committee (the House Committee on Mer- 
cantile and Manufacturing Interests) called an open meeting for the purpose of 
considering this bill. The public was invited. Proponents for the bill appeared 
and those opposed were also heard * * * 55 members of the House voted in 
favor of it, one voted against it * * * 27 senators voted in favor of it, 2 
senators voted against it * * *." 

North Carolina. 

Affidavit of Frederick O. Bowman: "A public hearing was arranged for and held 
in the Law Library of the State Supreme Court Building (before the House Judi- 
ciary Committee), which committee after hearing arguments in behalf of the bill 
with no opposition being registered, voted unanimously to report the bill favor- 



18158 COXCEXTItATlON OF ECONOMIC POWER 

ably * * * (The Senate Judiciary) Committee likewise arranged and held 
a public hearing, after which this committee gave the bill a unanimous favorable 
report." 

Letter from W. J. Smith: "Widespread publicity was given the legislation 
by the daily papers of the State before the hearing (by the House Judiciary 
Committee) was held * * * t^^. public hearing was held as scheduled and 
the legislation freely debated in both the House and Senate * * * -pj^g 
North Carolina Fair Trade Act passed the Senate by a three-to-one vote and 
passed the House of Representatives unanimously." 

Minnesota. 

Affidavit of Jesse B. Slocumb: "There were several public hearings held in the 
Senate General Legi-slative Committee * * * a. public hearing was held 
(before the House Committee on Commerce, Manufacturing and Retail Trade) 
to discuss (two Fair Trade bills) by both proponents and opponents of the bills. 
Those who spoke in favor of the bills were: (lists 10 representatives of retail trade 
associations.) Opponents of the bill were: (lists attorneys and repre.sentatives 
of chain stores, two big department stores, the Minneapolis Merchants Associa- 
tion and Consumers League of Hennepin County.)" 

A^ebraska. 

Certificate of Hugo F. Srb, Clerk of the Legislature: "Those appearing in favor 
of the bill were Senator Diers, Mr. Copaul, Mr. Harley. Those oj^posing the 
bill were Mr. Zomlick, Mr. C. D. Amnion *• * *. Those in favor of the bill 
explained its provisions, the way it would work, and the reason for its introduction. 
Those opposed thought that this bill would not cure the present business evils. 
In fact, the cure would be worse than the trouble in years to come." 

Wyoming. 

Affidavit of John B. Tripeny: "A one-day public hearing on the Fair Trade bill 
was held in the Gladstone Hotel, Casper, Wyoming, in February, 1937." 

Utah. 

Affidavit of J. H. McGibbeny, Trade Practice Compliance Director for the 
Utali Recovery Administration, a State governmental body cooperating with the 
National Recovery Administration: "This affiant was instructed by the Utah 
Recovery Administration (in January, 1937) to draft and assist in the enactment 
of bills containing the legal and salient features of those Codes of Fair Competition 
|)romulgatcd by the said Utah Recovery Admiinstration. 

"That in accordance with the instructio!) of tlie said Utah Recovery Adminis- 
tration, this affiant did cause to be prepared House Bill No. 4, the so-called Fair 
Trade Act * * * That on or al)out February 1, 1937, this affiant appeared 
before the House Judiciarr Committee at a pu1)lic hearing in the Utah State 
Capitol as a proponent of the aforesaid House Bill No. 4. That notice of said 
j)ublic hearing had duly appeared in the local newspapers and had been posted 
on the calendar of the House of Representatives. That at said public hearing, a 
full and complete opportunity was afforded both opponents and proponents of 
the aforesaid House Bill No. 4 to submit testimony in connection with the con- 
sideration of the merits of said bill. That on or about the 2.5th day of February, 
A. D. 1937, this affiant appeared at a public hearing of the Utah Senate Judiciary- 
Committee at the Newhouse Hotel, Salt Lake City, Utah, at which a further 
opportunity v.as afforded the public to appear for or against the aforesaid House 
Bill No. 4. That said public hearing was duly and fully advertised and was 
attended by approximately three hunclred persons." 

The bill was i)assed in tlie House by a vote of 47 yeas, 1 nay; and in the Senate 
by a vote of IG yeas and 1 nay. 

West Virginia. 

Affidavit of J. Lester Hayman: "No formal requests being made, formal 
hearings were not held, as is the usual procedure; but the proposed legislation was 
openly discussed in committees, such discussions beipg open to the public, and 
various interested groups appealed before the committees including representa- 
tives of the grocery, pharmacy, iiardware and clothing interests * * *. xhe 
consuming public was informed concerning the provisions of the bill through edito- 
rials in various newspapers which for the most part were in opposition to the 
bill * * * The bill was thoroughly discussed on the floor * * * and 
was pasised by the House of Delegates * * * with a vote of 70 to 14." 

The bill passed the Senate by a vote of 26 to 1 "after adequate consideration." 



CONCENTRATION OF ECONOMIC POWER 18159 

South Dakota. 

Affidavit of the Honorable K. J. Morgan, State Senator: "(The) Judiciary 
Committee (of the Senate) gave (the Fair Trade bill) i)ublic hearings and due 
consideration at regular hearings of the said committee, held upon due notice in 
accordance with rules and regulations * * * all of which hearings were open 
to the public and held in the court room of the Supreme Court of the State of South 
Dakota; that after discussion of the said * * * bill on several and diverse 
occasions and having given the same due study and debate, the same was reported 
out of said committee * * * by a unanimous vote thereof * * * with 
the recommendation * * * that the said bill 'do pass' * * *_ Several of 
his brother Senators discussed upon the floor the merits and demerits of the bill." 
The bill was passed in the Senate by a unanimous vote. 

Affida' it of Earl Erlandson: "Hearing (on the Fair Trade bill) was had in the 
regular committee room as used by the State Affairs Committee (of the House of 
Representatives), and upon due and public notice of the chairman * * * 
that (the bill) would be given public hearings * * * Said Committee on 
State Affairs, by its chairman, C. T. Bates, and after public hearings held before 
the said committee and with the approval and consent of the said committee 
* * * reported the said Senate bill * * * with its recommendation that 
said bill 'do pass'." The bill thereafter passed the House by a vote of yeas 92, 
nays 6. 

Florida. 

Affidavit of R. Q. Richards: "The Florida Fair Trade Act * * * was 
passed after open and complete debate at public hearings. The vote in the 
House of Representatives * * * was 62 in favor of, and 28 opposed * * * 
in the Senate * * * being unanimously in favor * * *." 

Telegram from the Honorable Spessard L. Holland, Governor of Florida: 
"Public hearings largely attended were held during both the 1937 session of the 
Florida legislature which passed the Florida P'air Trade Act and the 1939 session 
which amended the ac+ " 

Connecticut 

Affidavit of Hugh P. Beirne. Secretary of the Connecticut Board of Pharmacy 
Commissioners: "A public hearing, with eight hundred persons in attendance, was 
held at the State Capitol in Hartford, on March 22nd, 1937. The lower house of 
the legislature passed this bill, 146 to 91, on May 5th, 1937 * * * From the 
date of the introduction of this legislation in February until its effective date, the 
press of the state gave the public wide coverage of publicity." 

North Dakota. 

Affidavit of Dan W. Hall: "That legislative committees did conduct public 
hearings and did give both the proponents and any opponents full opportunity to 
be heard before the said act was passed. That information to the public pertain- 
ing to the introduction and passage of this act was carried by newspaper publica- 
tions and by radio throughout the State of North Dakota." 

Maine. 

Affidavit of the Honorable Phideleni S. Demers, Member of the Legislation: 
"In 1937, I was a member of the Maine state legislature which enacted the Fair 
Trade law so-called. That a public hearing was held on the bill, that the hearing 
'Aas adverti-sed in at least two Maine daily newspapers and that the hearing was 
\vel] attended * * *. That there was at least one editorial in the Portland 
Press Herald in opposition to the bill." 

Affidavit of George O. Tuttle: "I * * * attended the hearing (on the 
Fair Trade bill) at the State House, which was advertised according to the Orders 
of the Legislature in all the leading daily newspapers in the state as was the custom 
that the hearing was well attended * * *; that there was nothing clandestine 
in the preparation or presentation of this bill,, * * * that there was nothing 
in any of the proceedings irregular and every-thing had the general approval of 
the committee and the legislature." 

Oklahoma. 

Affidavit of Thomas Roach: "The Senate Committee hield a public hearing on 
the bill, at which a number of people were heard, both for and against the bill. 
The principal opponents at that time, and later, were representatives of the State 
Press Association. It was allowed to die on the calendar It was again intro- 
duced (two years later) in the Sixteenth Legislature as Senate Bill #45, and a 



18160 CONCENTRATION OF ECONOMIC POWER 

public hearing was held by the Senate * * * at which both sides were heard. 
This hearing was well advertised, and drew a considerable number of people 
* * * the Oklahoma Press Association did oppose it at the hearing. The bill 
was favorably reported by the Senate Committee, and was discussed on the floor 
of the Senate some two weeks later * * *. At no time was there any dis- 
position or desire on the part of those proposing this legislation to hurry it through 
the law-making bodies, and the fact that the session of the legislature which made 
a law had it under consideration from the 25th of January until the 22nd of April, 
certainly shows that its enactment was not rushed in any way." 

Affidavit of Hon. Elbert R. Weaver, Member of the Oklahoma Legislature: 
"After two public hearings the bill reached the Senate Calendar with a do pass 
recommendation. Due to the organized opposition of the state press association, 
it failed to pass. The bill was again introduced in the 16th session * * * 
and again a public hearing was held on the measure * * * The state press 
association fought it bitterly * * *_ xhe chief opponents of the measure 
were the large metropolitan papers * * * publicity was wide as to the 
effects of the measure but it passed the Senate with a majority of 34 votes of the 
44 members which cons itute the Senate. It went to the House of Representa- 
tives where it received a majority vote of 79 to 19. The Honorable E. W. Mar- 
land, being governor of Oklahoma at that time, ordered his legal adviser. Judge 
T. B. Lunsford to make an extensive study of the effects of the measure and during 
that time the principal opposition was the metropolitan press who urged a veto." 

Massachusetts. 

Affidavit of Samuel Silverman: "A public hearing was held in the legislature 
on these bills and many persons were heard pro and con * * * (-^at the bill 
was opposed in public hearing by representatives of the department stores group 
who were heard at length and who quoted from the statements made by Q. Forrest 
Walker, economist of the Macy Stores of New York; that after a hearing lasting 
for several hours, a recess study of the bill was recommended by the legislative 
committee, but instead the bill was adopted by both the House of Representatives 
and the Senate, and approved by the Governor after receiving communication 
from the Department Stores Association opposing the same; that the Governor 
of the Commonwealth, Honorable Charles F. Hurley, notified the several peti- 
tioners that he was glad to approve the bill as he b lieved it to be in the best in- 
terests not only of the retail merchants of the state, but of the buying public as 
well * * * that no attempt has been made in this Commonwealth to repeal 
or in any way interfere with the Fair Trade law of this state; that the original 
legislation and the amendments received newspaper publicity both as to hearing 
and as to result, and that during the pendency of these bills which were on the 
legislative calendar for over three months, various newspaper publications through- 
out the Commonwealth were made and editorial comments, both pro and con 
were made by the public press." 

Michigan. 

Affidavit of Otis F. Cook: "Two hearings were conducted on the measure at 
which were represented many different lines of retail industry as well as farmer 
cooperative groups. There was no opposition to the bill expressed at these 
hearings, however the farmer cooperative groups did offer an amendment to the 
bill which was adopted by the Committee * * *. The bill was passed by 
the unanimous vote of the House of Representatives * * *. The bill was 
referred to the State Affairs Committee of the Senate and there it was * * * 
again subject to two hearings * * * During the passage of this bill, 103 
days elapsed and the public press of the st^te, as well as other reporting agencies 
carried full particulars regarding the provisions of the bill * * *. Not one 
dissenting vote was cast on the measure in either the House of Representatives 
or the Senate." 

Alississippi. 

Affidavit of S. B. Key: "A public hearing was had * * * This bill was 
before the Senate and House two months and fourteen days * * * and met 
defeat on one occasion. Considerable publicity was given on this measure." 

Alabama. 

Affidavit of Thelma Morris Coburn: "An open hearing before the House 
Judiciary Committee was held on January 26 affording proponents and oppo- 
nents an opportunity to express their views on the bill * * *. On February 
9 an open hearing on the proposed bill was held by the Senate Judiciary Com- 



CONCENTRATION OF ECONOMIC POWER 18161 

mittee affording proponents and opponents an 0])portuni1y to (express their view 
on the bill." 

Maryland. 

Affidavit of Simon Solomon: "(In 1935 the first Maryland Fair Trade bill) 
was referred to the Committee en Judiciary of the House of Delegates, which 
held full hearings on the bill; that at said hearings the following groups were heard 
in support of the bill: the retail grocers' association, retail confectioners', retail 
tobacco association, and the Maryland Pharmaceutical Association. A repre- 
sentative of the Retail Hardware Association was unable to appear, but this 
group was also in favor of the bill. 

"Several persons claiming to represent consumers were heard in opposition to 
the bill; that after said hearing the bill was favorably reported by the Committee 
and passed the House of Delegates without a dissenting vote. * * * 

"(The Senate Committee on Judicial Proccedmgs) also held a hearing on the 
bill * * *. The bill was favorably reported by said committee and passed 
the Senate * * * by a vote of 22 to 4. 

"That a hearing was held on the bill by the Governor, who signed it * * * 
that during the pendency of the bill in the legislature, it w^as given full publicity 
in the daily press. 

"(The bill for the Fair Trade Act of 1937, repealing and re-enacting the 1935 
law) was referred to the Committee on Judiciary of the House of Delegates, 
which. after a hearing reported it favorably; that it was passed by the House of 
Delegates * * * without a dissenting vote; that in the State Senate it was 
referred to the Committee on Judicial Proceedings, who reported it favorably 
* * *; that the bill passed the Senate without a dissenting vote * * *. 

"In the session of the General Assembly of 1939, a bill * * * was intro- 
duced * * * to repeal the Fair Trade Act * * *; that the said repealer 
was referred to the Committee on Judiciary of the House of Delegates but said 
committee took no action thereon and the bill died in committee; that since the 
introduction of the first bill at the 1935 session of the General Assembly, there 
has been wide discussion of the legislation both in the daily press and elsewhere, 
both favorable and unfavorable, and the merits of the legislation were fully and 
fairly debated in the legislature before the legislation was enacted. 

"In 1938, just prior to the opening of the 1939 session of the Maryland legis- 
lature, there was an attempt by a consumers' group among which there were 
several representatives of the government, who claimed however that they were 
not acting in an official capacity, to induce the members of the legislature from 
Montgomery County to introduce a bill to repeal the Maryland Fair Trade Act. 
Fortunately, a hearnig was held before an influential civic organization of Mont- 
gomery which was composed of outstanding men in the community. Both sides 
presented their arguments which consumed about four hours, with the result 
that the matter was evidently dropped as no effort was made by the representa- 
tives of Montgomery County to repeal the act. 

"As mentioned previously, in 1939 a bill was introduced bj' a member of the 
House of Delegates at the request of a consumers' organization to repeal the 
Maryland Fair Trade Act. A hearing was held before the Committee on Ju- 
diciary, and approximately two hundred and fifty persons were present. For 
the opponents, in addition to counsel, about seven speakers, including representa- 
tives of labor, farm groups and others, pleaded for the repeal of the act. Speakers 
for the proponents were representatives of the grocers', tobacco, hardware, con- 
fectioners' and druggists' associations. The Committee on Judiciary of the 
House of Delegates failed to bring out a report. * * * 

"The Maryland public has certainly been kept well informed, as this was an 
outstanding issue of the recent Tydings-Lewis senatorial campaign. The Mary- 
land Fair Trade Act and the Tydings- Miller Enabling Act both were bitterly 
attacked over the radio and the newspapers by Mr. Lewis and his supporters. 
In spite of this. Senator Tydings was re-elected by the largest majority ever 
given to any candidate in Maryland. 

"In conclusion, I defy anybody to prove that lobbyists were employed by the 
retail druggists or any other organization to have this legislation enacted in 
Maryland, or that one red cent was spent either directly or indirectly for this 
purpose." 



18162 CONCENTRATION OF ECONOMIC POWER 

letter from the department of justice in reply to brief submitted by 
the national association op retail druggists 

Department of Justice, 
Washington, D. C, March 8, 1941. 
Mr. Dewey Anderson, 

Executive Secretary, Temporary National Economic Committee, 

Washington, D. C. 
Dear Mr. Anderson: The Department has been asked to comment upon the 
brief submitted to the Temporary National Economic Committee by the National 
Association of Retail Druggists in answer to our recommendation that the Miller- 
Tydings Act be repealed. 

The memorandum in support of our recommendation was based upon both 
legal and economic considerations. Its principal points were as follows: 

1 . Collusion among competing retailers in violation of the antitrust laws has been 
an indispensable part of the movement for resale price maintenance to such an extent 
that if we had men and money available to prosecute such activities systematically 
most existing systems of resale price contracts would be subject to prosecution. 

2. The machinery of resale price contracts affords an easy means by which 
manufacturers may unite in horizontal price fixing conspiracies by making 
identical contracts with retailers. 

3. The power given by law to coerce non-signers to abide by the terms of resale 
price contracts destroys competition among retailers as effectively as would an 
unlawful conspiracy. 

4. Drugs under resale price contract have risen sharply in price in the large 
centers of population and have fallen slightly elsewhere. The literature of the 
drug trade indicates an intention to drive all contract prices higher. 

5. Competition among distributors on a basis of efficiency is impossible in the 
sale of commodities covered by these contracts. 

6. Although resale price legislation was presented to the public as a defense of 
the small retailer against the chains and to the courts as a protection of the manu- 
facturers' good will, the legislation actually has served the interests of the chains 
and has had their support; and the so-called protections have been imposed upon 
many manufacturers by the pre.ssure of retailers. 

7. Private pressure groups used misrepresentation and intimidation of news- 
papers in their efforts to win support for resale price maintenance laws, and 
suceeded in getting these laws enacted without adequate consideration. 

The reply brief of the National Association of Retail Druggists is a formal state- 
ment from the official repre.sentatives of the group which has been the principal 
support of resale price laws. This brief contains internal evidence that it was 
prepared with effort and care. Presumably this document offers a rejoinder to 
every point upon which its authors thought an effective reply could be made. It 
is, therefore, particularly significant that a large part of our memorandum has 
evoked no reply. The nature of the reply on each point will be discussed below. 

1 and 2. The a.ssociation's brief makes no mention of the charge that unlawful 
collusion has been typical in the development of resale price contracts. The 
pa.ssage which comes nearest to dealing with this point is introduced by the 
statement, "Prices in a privately operated economy are necessarily fixed by some- 
body, hence the charge that fair trade statutes permit private price fixing loses 
its point." The discussion which follows this statement, hov/ever, 'leals with the 
fixation of the resale prices of various druggists by the same manufacturer, and 
hence is not pertinent to the charge of unlawful collusion among manufacturers 
and among retailers which is contained in our memorandum. 

Assuming that there can be no collusion among manufacturers, the association 
offers competition between brands as an adequate protection for the consumer. 
Monograph No. 1, prepared by the Department of Labor, shows the inadequacy 
of mterbrand competition to give the consumer a reasonable price upon certain 
drug items. 

Moreover, as a practical matter it is usually impossible for a manufacturer to 
issue resale price contracts unless he has either a substantial monopoly, a brand so 
strong as to be removed from effective competition, or a collusive agrf foment with 
his competitors. The following statement by a manufacturer of certain school 
supplies summarizes the situation: 

«'* * * \-s/(, vvoukl welcome the opportunity to apply quantity resale prices 
on all the items of both loose leaf, and blank book lines as we have done in Cali- 
fornia but at *he moment this .seems impossible unless the other competing manu- 
facturers adopt similar policies. Until such time, therefore, as this is done we can 
only embrace the opportunities which the law gives us to the extent of covering 



CONCENTRATION OF ECONOMIC POWER 18163 

those non-competing items in onr line wliich would not be seriously affected by 
tiie foot loose and faTicy free prices of competing items of the other maimfacturers." 

3. A large part of the association's brief consists in a legal argum(>nt designed 
to show that the non-signer clause in state laws, which prever\ts retailers who 
are not parties to resale price contracts from selling merchandise below the price 
named in such contracts, is consistent with the principles of the common law.' 
In connection with this argument the brief asserts that we have misstated the 
character of the state legislation by describing this clause as a means of fixing 
the resale prices of competitors against their will. Our alleged misrepresentation 
consisted in describing the effect of the state laws as coercion of non-signers, in- 
stead of spelling out the fact that this coercion is accomplished by granting per- 
sons allegedly injured the right to sue or enjoin any person who inflicts the so- 
called injury by selling his own goods at his own prices. The association is inter- 
ested in the technical legal path by which the result is obtained. We are inter- 
ested in the fact, not disputed in the association's reply, that competing retailers 
are bound against their will not to sell their own merchandise at prices lower than 
two private citizens may choose to establish by private contract. That retail 
competition is thereby destroyed is recognized in the association's brief itself in 
the statement: "The new manufacturer-manufacturer price competition is much 
more beneficial to the great body of consumers than the retailer-retailer competi- 
tion which prevails in non-fair trade markets." 

4. The association's rejoinder to our statements about the effect of re-sale price 
contracts upon prices consists in a summary of a study made by a professor at 
the University of Minnesota under the auspices of the association itself. This 
study was preceded, and to some extent was accompanied, by comments in the 
drug journals which indicated to the drug trade generally that the interests of 
the trade would be served by a demonstration that drug prices had not risen. 
The questions of accuracy and emphasis which are raised by an investigation 
made with information voluntarily supplied under such auspices are serious; and 
they are not adequately dealt with by the association's comment that the professor 
who was in charge is a man of personal integrity. 

Our conclusions about drug prices were based upon a series of studies, some of 
them by independent scholars who had no interests at stake, and one by the 
Department of Labor under the auspices of the Temporary National Economic 
Committee itself. In view of the fact that the persuasiveness of each study is 
limited either by its scope or by the auspices under which it was conducted, we 
confined our conclusions to those which appear to be supported by all of the 
studies, including that upon which the association relies. We supolemented our 
statement, however, by summarizing the evidence in drug journals and in state- 
ments of responsible officials of the National Retail Druggists Association that 
the present level of prices is not regarded by the drug trade as satisfactory, but 
merely as a step in a gradual price increase. 

5. The association's brief makes substantially no comment concerning our 
statement that resale price contracts have the effect of preventing competition 
on the basis of efficiency. Its rejoinder is limited to the contention that gross 
margins under these contracts are generally lower than average operating costs 
in the most efficient stores. In support of this proposition the association presents 
average chain store operating costs as reported by the Federal Trade Commission 
investigation made between 1930 and 1934. Our memorandum pointed out that 
the general use of resale price contracts must necessarily raise costs in drug stores 
by making their competitive success depend upon expensive sales techniques 
rather than upon low prices; that during the depression certain sorts of independent 
stores developed techniques for distributing packaged drugs at lower prices and 
presumably at lower costs than chain stores; and that the drug;;ists intend to 
obtain larger margins and higher contract prices upon drugs as rapidly as possible. 
The relation between present prices and past average operating costs in chain 

' The association's contt-ntion as to Uw common law is that a non-signer who sells a trade-marked com- 
modity he owns at a price satisfactory to himself is inflicting the same kind of injury upon a signer as is 
any third party who inflicts injury by iUtempting to induce a breach of contract; and that the power to 
bind one s competitors by the terms of a contract they have not sisjne.j is analagous to the power to impose 
upon the use of a commodity conditions which apply not only to the buyer but also to anyone who sub- 
sequently purchases from hira. Both analogies are weak. The sale by a merchant of a commodity at a 
price which he hims-If has determined to t>c fair is not the kind of intentional or malicious act which the 
common law commonly regarded as tortious. m'\ tnc citations in the association's memoranda fail to sup- 
port a contr^iry view. The secon<i analogy ignores the fact that, generally spe:iking, the common law has 
frowned upon restrictions upon the alienation of chattels. Only in exceptional circumstances are such 
restrictions permitted. But all of this is beside the real point at issue, which is not a legal technicality 
but a public policy. 

124491 — 41 — pt. 31-A 11 



18164 CONCENTRATION OF E(]ONOMIC POWER 

stores has little relevance to a statute which tends to raise both costs and prices 
and to destroy concerns with costs lower than those mentioned. 

Moreover, an argument based upon averages necessarily ignores the fact that 
the faster moving lines of packaged drugs can be distributed profitably at much 
less than average cost and that some of these products are now being sold at 
contract prices which guarantee a markup far above the average. The public 
must be interested, not only in the preservation of efficiency and of low-cost 
distribution among drug stores in general, but also in the distribution of each 
important drug product as efficiently and with as low a cost as possible. 

The last page of the association's memorandum concedes "that price reductions 
brought about by increased efficiency are economically desirable." It offers no 
suggestion as to how increased efficiency on the part of any retail druggist can 
be passed on to the consumer upon any product which is subject to a resale price 
established in a contract with some other druggist. However, the brief's conces- 
sion about efficiency probably was not intended to carry much emphasis. When 
not engaged in public controversy, the spokesmen of the drug industry speak 
differently about this matter. An appendix to our memorandum quotes the 
chairman of the druggists' National Advisory Fair Trade Committee to the effect 
that the resale price laws "to a great extent eliminate price competition between 
retailers, where there is no economic or logical justification for it" and quotes the 
vice president of E. R. Squibb & Sons as saying, "If some large retailer or whole- 
saler is more efficient than his smaller competitors — ^as he claims he is — then he 
should certainly be able to operate even more successfully on a basis of parity 
in price, and not set up a hue and cry for advantage over his smaller competitors." 

6. The association's brief contains no denial of our statement that resale price 
laws were supported by the chains and have proved in practice serviceable to the 
chains. The statements which come nearest to a discussion of this matter are 
that loss leaders can be used effectively by chains and mail order houses but not 
by independent merchants and that the laws are designed to protect independents 
against loss leaders. The Department of Labor has already pointed out in reply 
to another memorandum by this association that resale price laws are not designed 
to attack loss leader selling. A statute which permits a private contract to set 
a floor for prices at any level satisfactory to the contracting parties can scarcely 
be justified on the theory that it is necessary to prevent the sale of the commodity 
at a very low level. The loss leader issue might be appropriately discussed in 
connection with a statute directed against sales below cost, but it is not appropri- 
ately discussed here. 

Our statement that the effort to pass resale price legislation involved misrepre- 
sentation and coercion was supported by instances of attempted intimidation of 
three newspapers and a magazine and by a description of various activities under- 
taken by pressure groups. Our statement that efforts were made to intimidate 
manufacturers into supporting this legislation and issuing contracts under it 
was illustrated by the notorious Pepsodent case, by a boycott of a branded 
aspirin, by pressure brought to bear upon liquor manufacturers, and by various 
passages from trade journals in the drug industry and elsewhere. The associa- 
tion's rejoinder as to attempts to throttle public discussion and to intimidate 
business enterprises is a blank denial, accompanied with an assertion that we 
offered no evidence. 

Our statement that consistent efforts were made to misrepresent the character 
of proposed resale price legislation was based upon several points: 1. This legis- 
lation was presented as an attack upon loss leaders, although it actually prevents 
profitable sales if they are below contract prices. 2. It was urged on the ground 
that the existence of the small retailer was at stake whereas the number of inde- 
pendent retailers was increasing. 3. It was described as a measure directed against 
the chain stores and not as one having chain store support. 4. Systematic efforts 
were made to divert attention from the coercive features of the legislation and 
to describe the state laws as though they merely sanctioned voluntary contracts. 
5. Efforts were made to disguise the fact that this legislation had few backers 
outside the drug trade. Our statement that the resale price laws received inade- 
quate consideration was supported by the facts that an error which converted 
one of the most important substantive provisions into nonsense was incorporated 
in the statutes of eleven states before it was caught and corrected and that another 
error, less serious, was incorporated in the laws of seventeen states; by the fact 
that the Judiciary Committee of the House of Representatives described the state 
laws in its report upon the Miller-Tydings Bill in language which omitted the 
coercive features of these laws; and by the statement that only three out of the 
first 32 states to pass resale price laws held public hearings upon them. The 



CONCENTRATION OF ECONOMIC POWER 18165 

association's brief ignores most of these points. However, the association presents 
an array of affidavits designed to show that there were public hearings in a 
considerable number of states and that representatives of retail groups other than 
organized druggists supported the bill. Our statement that hearings were held 
in only three out of the first 32 states was based upon uncontradicted testimony 
before a Congressional Committee during consideration of the District of Columbia 
resale price bill, which was reprinted in a statement of minority views prepared in 
that committee and was not contradicted, so far as we are aware, at a subsequent 
hearing nor in subsequent reports. Although the affidavits submitted by the 
association are based upon a very generous interpretation of the term "hearing," 
and include instances which are obviously open to question,^ it appears clear that 
hearings were held more frequently than is asserted in the testimony upon which 
we relied. We are glad to correct our statement in this respect. 

The comments indicating public statements in support of resale price laws by 
certain other retail organizations are consistent with the statement in our memo- 
randum that efforts were made to prevent the bill from appearing to be a druggists' 
measure. The brief does not seriously attempt to contradict the frequently 
repeated statements by officials of the association which submitted it that the 
impetus for the resale price laws came from organized druggists. 

In addition to the matters discussed above, the association's brief insists thai, 
questions of resale price maintenance are essentially intrastate even though th*- 
may be technically in interstate commerce. This argument appears to rest m 
part on the premise, suggested but never clearly stated by the Association, that 
the Supreme Court of the United States has erroneously interpreted the com- 
merce clause of the Constitution so as to include matters within its scope which, 
in fact, are intrastate in character. Extended comment on this assumption is 
unnecessary. The argument also rests in part on assertions that the final sale 
which the laws control is in each case made locally in some State. The final use 
or disposition of any commodity which moves across a State line is always ac- 
complished in some particular locality. If the Association's contention in this 
respect is sound, there can be no such thing as an interstate sale, and Federal 
jurisdiction must necessarily be confined to the physical movement of goods 
across State lines and to commerce in the Territories and the District of Colum- 
bia. From an economic point of view this contention is absolutely without sub- 
stance. So far as its legal aspects are concerned, the argument proceeds in 
defiance of fifty years of constitutional history. 

The Association's entire argument on this point ignores the real issue. We 
suggested that the Miller-Tydings Amendment be repealed not in any desire to 
interfere with the internal affairs of the States, but because it is our view that 
Congress under the Constitution has the power to determine what economic 
practices shall prevail in interstate commerce. In making that determination 
in each instance. Congress must necessarily use its own judgment as to the social 
benefits of particular economic policy. In any case in which it passes a law, 
such as the Miller-Tydings Amendment, which permits the policies of the several 
States to extend to transactions in interstate commerce, we assume that it is not 
only proper but necessary for Congress to consider the character and consequence 
of the substantive State legislation which is thereby given Federal effect. By 
raising the cry of States' rights the Association is introducing a false issue into 
the discussion and is obviously seeking to supply whatever defects its arguments 
may have from an economic point of view by the invocation of local sentiments 
which have no real relevance. 

In summary, the points upon which we based our recommendation have 
scarcely been questioned by the National Retail Druggists' Association. We 
renew our recommendation that the Miller-Tydings Amendment be repealed. 
Very truly yours, 

(Signed) Thurman Arnold, 

Assislani Attorney General. 

> The statement concerning Colorado, for example, indicates that the oflBcial journals are silent as to any 
hearings, Lut that the writer is "reliably informed" that the chairman of one of the committees called an 
open meeting. The statement concerning West Virginia says that there was no hearing but>that the bill 
was "openly discussed" in the committees. The statements concerning North Dakota and Mississippi 
likewise indicate that there is no official record of a public hearing, but each asserts that the writer appeared 
before one. The statement concerning Wyoming says that a one-day hearing was held at a hotel in Cfasper, 
but contains no indication of how it happened that the hearing was not held at the capital, Cheyenne. The 
North Carolina hearing was held five days after the introduction of the bill, and, as might have been expected 
with such a time interval, opposition did not appear. No attempt has been made at a complete analysis 
of the affidavits and statements. 



LETTER FROM THE BROTHERHOOD OF RAILROAD 

TRAINMEN 

IN REPLY TO STATI;MENT OF THURMAN ARNOLD, 
ASSISTANT ATTORNEY GENERAL, UNITED STATES 
DEPARTMENT OF JUSTICE, REGARDING RESTRAINTS 
IN TRADE, WITH PARTICULAR REFERENCE TO LABOR 
UNIONS. (FINAL REPORT AND RECOMMENDATIONS 
OF THE TEMPORARY NATIONAL ECONOMIC COMMIT- 
TEE, S. DOC. 35, 77th CONG., Ist SESS., PP. 164-181.) 



18167 



grand lodge 

Brotherhood op Railroad Trainmen 

General Offices, Cleveland, Ohio 

February 18, 1941. 
Mr. Dewey Anderson, 

Executive Secretary, Temporary National Economic Committee, 

281 Apex Building, Washington, D. C. 
Dear Mr. Anderson: I am in receipt of your letter of February 13th, 
enclosing a statement of Mr. Thurman W. Arnold on the application of the anti- 
trust laws to labor unions, which was made before the Temporary National Eco- 
nomic Committee. In response to your kind invitation, I offer the following 
brief comments. 

Discussing "types of labor restraints which the department does not consider 
to be exempt from the Sherman Act under decision in the Hutcheson case", Mr. 
Arnold cites the so-called "make work system" — that is, the practice whereby 
unions allegedly "require the hiring of unnecessary labor" — and says: 

"No conceivable economic justification for it comes to our minds." 

That sentence contains the clue to Mr. Arnold's whole philosophy governing the 
enforcement of the antitrust laws, particularly as regards labor. 

Mr. Arnold desires to eliminate certain labor practices, because, in his opinion, 
they are evil per se and, furthermore, come within the scope of activities banned 
by the antitrust laws. In his opinion, a jurisdictional dispute was in this cate- 
gory, but, much to his chagrin, the Supreme Court ruled otherwise. Ominously 
enough, however, Mr. Arnold's spanking at the hands of the judiciary has cau.sed 
him to issue a defiant ultimatum that prosecutions will be pressed against labor 
organizations engaged in certain other activities which he believes are economically 
unjustifiable. There lies the rub. 

Is it not a perversion of our form of government for an employe of the executive 
branch to assume the prerogatives of Congress and, by strained interpretation of 
the statutes, in effect legislate on complex, social and economic problems? Ob- 
viously, in fixing standards, opinions may vary as to the degree of evil' inherent 
in any situation; that is the reason why we rely upon the collective judgment of 
our duly elected representatives in Congress. 

While the Brotherhood of Railroad Trainmen is not involved in any of the 
antitrust suits prosecuted by the Department of Justice, we fear that our activities 
relating to the promotion of safe working conditions, through legislation requiring 
railroads to employ full crews and limiting the length of trains — objectives 
which are labeled "make work legislation" by Wall Street propagandists — might 
cause Mr. Arnold to hail us into court to answer for our "Sins". Our fears are 
justifiable, because we have no assurance that his economic philosophy is not 
wholly "out of joint". 

To permit an individual to exercise his caprice in the matter of applying the 
antitrust laws to labor situations not contemplated by legislators is to pave the 
way toward dictatorship. If Mr. Arnold sincerely believes that certain practices 
of labor unions should be modified or eliminated, let nim seek membership in 
Congress, or at least promote his program via the legislative channels of govern- . 
ment, rather than attempt to gain his ends through judicial interpretation. 

Organized labor seeks no special favors from society. Unionism is democracy. 
Its faults can be corrected through democratic means. If any of its practices 
cannot be justified economically, then the remedy lies in the processes of collective 
bargaining, not in criminal pro.secutions instituted by the Department of Justice. 

With best wishes, I am 
Sincerely yours, 

(Signed) A. F. Whitney, President. 

18169 



LETTER FROM THE AMERICAN FEDERATION OF LABOR 

IN REPLY TO STATEMENT OF THURMAN ARNOLD, 
ASSISTANT ATTORNEY GENERAL, UNITED STATES 
DEPARTMENT OF JUSTICE, REGARDING RESTRAINTS 
IN TRADE, WITH PARTICULAR REFERENCE TO LABOR 
UNIONS. (FINAL REPORT AND RECOMMENDATIONS 
OF THE TEMPORARY NATIONAL ECONOMIC COM- 
MITTEE, S. DOC. 35, 77th CONG., 1st SESS., 'PP. 164-181.) 
ALSO REJOINDER BY CORWIN D. EDWARDS, ECONOMIC 
CONSULTANT, DEPARTMENT OF JUSTICE 



18171 



American Federation of Labor, 
Washington, D. C, February 19, 194i- 
Mr. Dewey Anderson, 

Executive Secretary, Temporary National Economic Committee, 

281 Apex Building, Washington, D. C. 
Dear Mr. Anderson: I thank you kindly for your letter of the 13th wherein 
in you bring to my attention the statement of Mr. Thurman Arnold made to the 
Temporary National Economic Committee last Thursday. 

The Executive Council of the American Federation of Labor in session now at 
Miami have before them Mr. Arnold's statement and took official action on the 
same. 

Enclosed herewith please find copy of the reply to Mr. Arnold's statement by the 
Executive Council of the American Federation of Labor adopted February 19, 
1941. 

Enclosed herewith is the report of the Executive Council to the convention of the 
American Federation of Labor held in New Orleans last November. This report 
will be found in the boimd proceedings of the convention on pages 143 to 153; 
also recommendations of the Resolutions Committee on this report made to the 
New Orleans convention and which appears in the bound proceedings of the con- 
vention on pages 555 to 558. As you will observe, the recommendations were 
unanimously adopted. 

I desire that you will incorporate the report and recommendations as part of the 
reply to Mr. Arnold's statement. . 
Sincerely yours, 

(Signed) Wm. Green, 
(Typed) William Green, 



President. 
American Federation op Labor. 



WG.M. 

Enc. 



analysis of thurman Arnold's statement made before t. n. e. c. on February 

13TH, 1941 

The American Federation of Labor has received the statement of Mr. Thurman 
Arnold and unqualifiedly condemns it as subtle propaganda for the promotion of 
anti-labor legislation based upon distortions of facts and law. Its conclusions 
are false and unfounded and are aimed at the destruction of free labor although 
engaged in lawful pursuits. 

Mr. Arnold's statement reflects his determined effort to resist the clear mandate 
of the Supreme Court as expressed in the Hutcheson decision. Although he 
admits that the decision "casts doubt upon the applicability of the anti-trust 
laws" to labor union activities which the Anti-Trust Division condemned at the 
outset of its campaign against labor, the mam thesis of his statement is chat the 
decision leaves mtact the entire prior proclaimed program of the Anti-Trust 
Division except that small portion which is directed specifically to prosecutions of 
jurisdictional disputes. This is iccomplished, as will be shown, by a mangled 
interpretation of the Court's decision. ■ 

In a few introductory remarks Mr. Arnold reiterates his friendliness to organized 
labor, asserts his opinion that "labor unions with the guaranteed right of collective 
bargainmg are essential to the working nf our modern industrial economy," 
and his belief that "a strong labor movement is necessary to maintain social 
justice." 

Thereafter be lists the character of cases which according to standards set by 
himself constitute a criminal code: 

1. Cases in which a labor union alone or in combination with other groups 
has imposed and maintained artificially fixed prices to consumers. 

2. Cases where labor either alone or m combination with other groups lias 
attempted to keep more efficient methods or techniques out of the marked. 

18173 



18174 CONCENTRATION OP ECONOMIC POWER 

3. Cases where labor either alone or with other groups has restrained 
trade for the purpose of completely excluding from a particular locality ma- 
terials made elsewhere. 

4. Cases where labor organizations have restrained trade for the purpose 
of destroying an established and legitimate system of collective bargaming. 

He argues that these are unreasonable activities because they have "no connection 
with wages, hours, health, safety, or the right of collective bargaining", and makes 
the amazing statement that he has heard no one "assert that any of the ab(;vo 
named activities of labor unions have any economic justification or any long 
run advantage to labor as a whole." 

There follows a discussion of the Hutcheson decision, which is concluded by an 
attempt to justify the bringing of the initial prosecution on the basis of the 
dissent of two Justices of the Supreme Court. His concluding observation is 
most revealing. He says. "This decision rests solely on an interpretation of the 
policy of Congress. It does not appear to settle the economic or social proljlems 
raised by the jurisdictional strike". The implication is clear that the Anti-Trust 
Division conceives it to be its duty to settle the economic or social problems thus 
usurping the power expressly conferred on Congress by the Constitution. This 
bold implication becomes stronger upon an analysis of the remainder of the 
statement. 

In discussing what he understands to be the limitations which the Hutcheson 
decision "puts on the anti-trust enforcement with respect to restraints * * * 
by a labor organization", Mr. Arnold refers to (1) the compulsion to dismiss the 
indictment against the Longshoremen and Teamsters in New York, and (2), the 
distress to the CIO Construction Workers Union in St. Louis because of a boycott 
imposed by the American Federation of Labor Building Trades Council, and 
concludes that the power given labor organizations as a result of the decision 
"leads inevitably to labor dictatorship." 

He discussed the New York indictment so as to put the Longshoremens and 
Teamsters unions in a most unfavorable light. After painting as black a picture 
as possible, he states that the "situation is put beyond the reach of any law by the 
Hutcheson case." In truth, if the facts were half as bad as he set them forth to 
be, there are man}' laws other than the Sherman Act that are apphcable and 
provide remedies. Labor spokesmen who have criticized the recent policy of 
the Anti-Trust Division have never urged that labor organizations or officials who 
commit offenses are beyond the pale of the law. They have merely objected to 
the perversion of a particular law, namely, the Sherman Act, whose proved past 
distortion has served as a vicious anti-labor weapon. Labor's objections have 
been fully sustained by Congressional enactments and the recent decision of the 
highest court in the land. 

Three reasons are set forth explaining why the power granted labor unions as a 
result of the decision "leads inevitably to labor dictatorship." First, i.-; the 
wholly illogical reason that "if the employees in a plant want a small union they 
cannot have it." This is manifestly without foundation in fact. Without 
remarking the apparent concern on the part of Mr. Arnold for inside or company 
unions, it is clear that there is nothing in the Hutcheson case which takes from 
employes their right to join any union, be it small or large. 

The second reason given by Mr Arnold is set forth as follows '. 

"The right of workers in any particular plant to a union of their own choice — 
a right guaranteed by the National Labor Relations Act — is impaired or 
destroyed. No matter how enthusiastic the workers may be for a par- 
ticular union, that union cannot prevail against one which is larger, possesses 
more powerful economic alliances, and is prepared to make rutliless use of its 
economic power." 

This assumes, what cannot conceivably be proved, that every Union which is 
engaged in a jurisdictional dispute "is prepared to make ruthless use of ii^ eco- 
nomic power." Nor does this asserted reason appear to be consistent with the 
previously announced espousal of "a strong labor movement." Mr. Arnold's 
thesis simply means that there must not be large, strong labor unions regardless of 
the large number of craftsmen or workers engaged in a particular craft or employ- 
ment who have organized under one International. 
The third asserted reason reads as follows: 

"Once a union is forced on the employes in a particular plant by the 
victor of a jurisdictional controversy, they«have no power of effective protest 



CONCENTRATION OP ECONOMIC POWER 18176 

against arbitrary dues, unfavorable wage contracts, or arbitrary leadership, 
since they .will not be permitted to join another union." 

In this connection Mr. Arnold refers to a recent controversy between ii.fj 
Musicians Union and the Artists Guild. We shall discuss that specific case later. 
But Mr. Arnold's theory is no more than the usual reactionary condemnation of 
the closed shop. But the statement is worth further discussion, because it fully 
reveals the confused thinking of its author. 

One of the main reasons why organized labor insists upon the right to "destroy 
an established system of collective bargaining" is precisely because it can thereby 
retain "the power of effective protest against arbitrary- dues, unfavorable wage 
contracts, or arbitrary leadership." Mr. Arnold here shows the utter weakness of 
his entire approach to the problem. Under his theory all jurisdictional disputes 
must be condemned as violations of law. Once the employer recognizes or deals 
with a particular union, other unions are to be foreclosed from exercising economic 
and social pressure against that bargaining relationship. It does not matter to 
Mr. Arnold that the bargaining union has negotiated an unfavorable wage con- 
tract or imposes arbitrary dues or arbitrary leadership. The dissatisfied workers 
miist not leave the recognized union, they must not protest, they must not strike. 
If they do they are to be criminally punished. 

It is worthy of note that Mr. Arnold devotes almost half of his statement to a 
discussion of the Hutcheson decision and its implications in terms of social iu jus- 
tice and economic waste, despite his observations that "it is not our function to 
criticize the majority in the Hutcheson case." While the court interprets the law 
Mr. Arnold tirades against it because of their refusal to accept his social and 
economic theories. 

More important, however, is his discussion of the types of labor restraints which 
he claims are not expressly decided by the Hutcheson case and which he holds are 
still subject to prosecution. Here is evident a belabored attempt to misread the 
Supreme Court's decision and a zealous effort to pursue his ill conceived policy" 
against labor. 

He lists six such restraints: 

1. The strike of one union against another union certified by the NLRB 
to be the 011I3' legitimate collective bargaining agency with whom the employer 
can deal. 

2. Strike to erect a tariff wall around a locality. 

3. The exclusion of efficient methods or prefabricated materials from 
building construction. 

4. The refusal of unions to allow small independent firms to remain in 
business. 

5. The activities of unions in imposing and maintaining artificially fixed 
I)rices to consumers. 

6. The make work system. 

It is readily observed by comparing this list with the list .set iforth at the opening' 
of his statement, that all of these restraints come within the categories of re- 
straints originally announced by the Anti-Trust Division as violations of the law. 

The Anti-Trust Division obviously does not intend to be restricted by the 
Supreme Court of the United States. It proposes to go on prosecuting labor 
unions even though the Supreme Court has rejected the grounds on which the 
prosecutions are instituted. 

The first type of restraint — ^namely,- the strike of one union against another 
union certified by the NLRB to be the only legitimate collective bargaining agency 
with whom the employer can deal — ^is clearly within the same legal principles 
apj)licable to the jurisdictional disi)iito involved in the Hutcheson case. Ther^ 
is, from the point of view of the Sherman Law, no difference between a certifica- 
tion by the Labor Board than a contract with a rival union such as was involved 
in the Hutcheson case. A union certified by the National Labor Relations Board 
may certainly be guilty of negotiating an unfavorable wage contract or impositig 
arbitrary dues or arbitrary leadership. Moreover, many company unions cannot 
be proved under the limited scope of the Wagner Act to be company dominated, 
yet a group of workers may want a bona fide union to represent them. Unless 
bona fide minority groujis have the right to announce their grievances to the 
world and win over the majority of the employees by peaceful persuasion and 
the like, th(!n the cause of organized labor will be dealt a severe and unwarranted 
blow. In fact, the U. S. Supreme Court has hold that minority groups cannot 
be denied the right to strike and picket, because such rights are constitutionally 



18176 CONCENTRATION OF ECONOMIC POWER 

guaranteed. Before the Hutcheson decision the Anti-Trust Division made no 
distinction in principle between jurisdictional disputes and efforts to dislodge 
certified unions. This separation and tortured refinement is a manifest attempt 
to evade the Hutcheson decision. 

In declaring illegal "a strilce to erect a tariff wall around a locality". Mr. Arnold 
is merely using colorful and appealing language to obscure his real aim. His 
illustrations prove that he considers it to be unlawful for labor unions to seek as 
much work as possible for their members. Surely it cannot be denied that efforts 
on the part of a labor union to increase the amount of work for its own members 
have a direct connection with wages. If the work is not obtained, then of course 
its members get no wages at all. It is indeed a unique proposition of labor econom- 
ics that local trade unions situation is completely without merit, as will soon be 
shown. 

The third restraint — namely, the exclusion of efficient methods or prefabricated 
materials from building construction — also seeks to prevent union resistance to 
situations which directly jeopardize the existence of the union and the welfare of 
its membership. "Prefabricated housing or cheaper materials" are frequently 
the product of non-union labor with low wage standards and sweatshop working 
conditions. The phrase "efficient methods" would certainly include devices 
like the speed-up. Surely unions may, in the language of Mr. Justice Brandeis 
"join in refusfrig to expend their labor upon articles whose very production con- 
stitutes an attack upon their standard of living." Are unions to stand by and do 
nothing to resist the further swelling of the ranks of the unemj)loyed? Is the 
frightful human cost of technological advances to be borne solely by the working 
people? Does the Anti-Trust Division think that courts are the proper agencies 
to determine what is an eflicient method? 

Labor unions do not as a rule arbitrarily resist efforts by management to intro- 
duce necessary changes when management, in making the change, carefully con- 
siders the effect upon workers — -their requirements and standards necessary for 
decent living. But management does not always do this. It is clear that neither 
the Department of Justice, nor the courts, nor management, are the proper judges 
of whether union action in resisting inroads upon their living standards is arbi- 
trary. 

Here too, as we shall soon show, the recent Supreme Court decision is deter- 
minative. 

The fourth restraint — -namely, the refusal of unions to allow small independent 
firms to remain in business — -if also couched in language calculated to obscure. 
Standing unexplained, the statement means nothing. But tlie illustrations used 
reveal the true objective. It is the view of the Department of Justice that labor 
unions violate the law when they seek to eliminate or regulate such competitive 
threats as the "independent contractor" or the so-called "vendor system". All 
know that the vendor system has been greatly increased by many employers in 
recent years to accomplish two basic ends, (1) the breaking down of standards 
established by the effective collective bargaining of organized labor, and (2) to 
evade employer taxes and liability under Workmen's Compensation laws, the 
Social Security law, and the like. It is a rehabilitation of the sweatshop methods. 
These so-called independent contractors or vendors are in truth employees, and 
certainly competitors of employees. His profits are really wages. He is suject 
to the control and management of the employer. He succeeds only because he 
works longer hours and for less wages than the union employee. 

In discussing this restraint Mr, Arnold expressly refers to the Milk Drivers 
situation in Chicago which has been the subject of two recent decisions. Although 
it is true that, as Mr. Arnold states, "the Supreme Court in Milk Wagon Drivers 
Union vs. Lake Valley Farm Products Company did not attempt to decide whether 
this was a violation of the Sherman Act or not," it is also true that in that deci- 
sion Justive Black, writing for a unanimous court, made the following significant 
comment: 

"* * * with the spread of this new competitive system the business of 
the dairies employing union milk wagon" drivers decreased. Many of the 
union drivers lost their jobs and were dependent upon the union's relief 
funds and upon public relief agencies for their support." 

And again, and even more pertinently, in view of Mr. Arnold's comments, the 
court said: 

'To say, as the Circuit Court of Appeals did, that the conflict here is not a 
good faith labor issue, and that therefore there is no "labor dispute" is to 
ignore the statutory definition of the terrn; to say, further, that the con- 



CONCENTRATION OF ECONOMIC POWER 18177 

ditioned abandonment of the vendor system, under the circumstances, was 
in issue unrelated to labor's efforts to improve working conditions, is to shut 
one's eyes to the every day elements of industrial strife." [Emphasis supplied.] 

There can be no doubt in any disinterested mind as to the Supreme Court's view 
on this type of labor activity. Certainly it is no crime for organized workers to 
seek by peaceful means to eliminate this system which destroyed their very right 
to live. 

The fifth restraint — namely, the activities of unions in imposing and maintain- 
ing artifically fixed prices to consumers — is, as stated, virtually meaningless. It 
assumes an artifiically fixed price to begin with. The crux of the problem is, 
when are prices artificially fixed? Would it, for example, be an unreasonable 
restraint of trade for unions to enforce a price so as to maintain a living wage by 
cutting out sweatshop competition? Organized labor does not seek to impose 
artifically fixed prices on consumers. But in the Apex Case the U. S. Supreme 
Court has expressly legalized Labor's right to combine and even restrain competi- 
tion for the purpose of increasing wages, shortening hours or improving working 
conditions. Quoting the court, it said, "In order to render a labor combination 
effective it must eliminate the competition from non-union made goods; an 
elimination of price competition based on differences in labor standards is the 
objective of any national labor organization." 

The sixth restraint^namely, the make work system — -is similar to most of the 
preceding restraints. As elaborated by Mr. Arnold, it is a restatement of his 
original intention to outlaw "the hiring of unnecessary labor." This is obviously 
fraught with danger to working people. Employers will claim that a few extra 
hours of work by a smaller number of employees renders useless and unnecessary 
a greater number of employees. Speed-up systems make "useless" the employ- 
ment of larger numbers Of employees. The Anti-Trust Division's attempted re- 
striction is patently open to abuse. Like to many of the other restraints which 
the Anti-Trust Division feels still free to prosecute this union activity is clearly 
permissible under the doctrine of the Hutcheson case. 

The basic holding of the Hutcheson case is that the Norris-LaGuardia Act 
gives full meaning to the original language and philosophy of the Clayton Act. 
That act was premised on the underlying conclusions that certain specified labor 
activities, regardless of their purpose, do not violate any law of the United States. 
This philosophy was the culmination of years of what amounted literally to 
persecutions of labor unions by courts that converted their own prejudices into 
rules of law. Different judges held different purposes or objectives of labor union 
activity to be lawful or unlawful, according to their own private economic bias 
and prediliction. All this was clearly expressed by Justice Brandeis in his famous 
dissent in the Duplex- Deering case. He said: 

"* * * It was objected that, due largely to environment, the social 
and economic ideas of judges. Which thus became translated into law, were 
prejudicial to a position of equality between workingmen and employer; 
that due to this dependence upon the individual opinion of judges great 
confusion existed as to what purposes were lawful and what unlawful; 
and that in any event Congress, not the judges, was the body which should 
declare what public policy in regard to the industrial struggle demands. 

"By 1914 the ideas of the advocates of legislation had fairly crystallized 
upon the manner in which the inequality and uncertainty of the law should be 
removed. It was to be done by expressly legalizing certain acts regardless 
of the efforts produced by them upon other persons. 

"The resulting law set out certain acts which had previously been held 
unlawful, whenever courts had disapproved of the ends for which they were 
performed; it then declared that, when these acts were committed in the 
course of an industrial dispute, they should not be held to violate any law 
of the United States." 

The Court, in the Hutcheson case, expressly adopted that philosophy in the 
following language: 

"* * * So long as a union acts in its self-interest and does not combine 
with non-labor groups, the licit and the illicit under Section 20 are not to be 
distinguished by any judgment regarding the wisdom or unicisdom, the 
tightness or wrongness, the selfishness or unselfishness of the end of ichich 
the particular union activities are the means * * *." 



18178 CONCENTRATION OF ECONOMIC POWER 

Can it be f .lously asserted that when a labor union seeks to maintain for its 
employees all the work available, or when it resists the introduction of cheaper 
materials and machinery which would displace employees, or when it attempts to 
eliminate the competition of independent contractors or vendors, or when it 
attempts to keep as many of its members on given jobs as it can — that under 
these circumstances a labor union is not acting "in its self-interest"? And if it is 
acting in its self interest — as most certainly it is— then regardless of whether the 
Anti-Trust Division considers the end of its activities wise or unwise, right or 
wrong, selfish or unselfish, the union may under the express language of the Clayton 
Act, as now interpreted by the Hutcheson case, engage in strikes, picketing, 
lawful assembly, persuasion, boycotts, and the like. 

We return at this point to Mr. Arnold's nasty insinuation about the musicians' 
case. He neither states the facts accurately, nor are his conclusions fair or proper. 
The truth is that the American Federation of Musicians was in controversy with 
another union affiliated with the American Federation of Labor over a demand 
made by the Musicians Union that musicians join the union which the American 
Federation of Labor ^ad conferred jurisdiction. 

A musical artist is a musician and as such he is eligible to membership in the 
American Federation of Musicians which has complete jurisdiction over every 
class of musicians. All Mr. Heifitz was asked to do was to become a member of 
the union which had jurisdiction over musicians. He could do so or not as he 
pleased. It was Mr. Heifitz's right not to join the Musicians' Union if he did not 
want to, but by the same test of rights, it was the Musician's Union's right to 
inform all employers of musicians who had contracts with the American Federa- 
tion of Musicians to employ only its members; that unless they did so its members 
could not work with non-union musicians. Mr. Heifitz, who had joined another 
union, (the Artists Guild) the members of which include singers, choristers and 
entertainers in night clubs, was not prevented from remaining a member of this 
union. Mr. Heifitz was not suppressed, or threatened to be suppressed, from 
appearing on the radio or from broadcasting, etc. No member of the Artists 
Guild has ever been so suppressed by the American Federation of Musicians. 
All the American Federation of Musicians has said is that its members cannot 
work with musicians who are not members of its union, but who are elegible to 
become so. 

The issue in no manner involved the restraint of trade, and it is inconceivable 
how any unbiased person can bring it within the scope of the Anti-Trust laws. 
However, the most conclusive rejection of Mr. Arnold's interpretation of this 
case is the decision of the Court of Appeals in New York which upheld the con- 
tentions of the American Federation of Musicians. Your Committee is respect- 
fully referred to this decision. 

Mr. Arnold's statement concludes with the comment that he has no definite 
recommendation for legislation to make at the time because "other departments 
are primarily involved in the question of labor policy". It is, we think, unfortu- 
nate that Mr. Arnold did not apparently solicit the advice of those departments 
"primarily involved in the question of labor policy" before he launched his 
unprecedented campaign. The Congress which makes our labor policy, as well 
as all other policies, expressly affirmed the right of labor unions to pursue by 
peaceful means their self-interest as late as 1935 when it declared in Section 

,en of Ihf Wagner Act that employees shall have the right "to engage in con- 
CfTtt'.I <i,v.i,l, ;'■• " _ * * * mutual aid or protection", and this Mr. Arnold 
not only seeks to deny, but ccc^r'Tos it to be a crime. The American Federation 
of Labor will continue to resist this pci version of the Anti-Trust laws by the 
Anti-Trust Division of the Department of Justice with all the power and resources 
at its command. 



Report of the Executive Council to the Sixtieth'Annual Convention of 
THE American Federation of Labor, New Orleans, Louisiana, November 
18-29, 1940 

LABOR AND THE ANTITRUST DRIVE 

One of the unpleasant but most necessary tasks facing us is to report fully to 
organized labor concerning the stubborn, capricious and irresponsible drive against 
Labor and unionism now beirig conducted by an agency of the Federal Government. 

Professor Thiirman Arnold, Assistant Attorney General in charge of the Anti- 
trust Division of the Department of Justice since 193.S, has begun to wa^e the most 
complete and concent rated legal warfare against Labor ever attempted by a 
government agency in .\nierica. Unless adequate measures are taken to cope with 



CONCENTRATION OF ECONOMIC POWER 18179 

this eccentric display of dangerous power, we may stand to lose the precious 
gains of sixty years of struggle for industrial democracy at a time when we could 
believe that government had accepted the active organization of labor as a vital 
and necessary component of our industrial life. 

This attack upon organized labor is being conducted under an administration 
which has sought to implement and make inviolate Labor's basic right to collective 
action for mutual aid and protection. Yet Mr. Arnold and the Antitrust Division, 
the creatures of the same administration, have been authorized and equipped to 
'.make deadly war against those very rights. The weapon Mr. Arnold has taken 
up to cut his way to fame and glory is pointed at the very heart of the right of 
self-organization and collective action for mutual aid and protection. 

This weapon is the Sherman Antitrust Law. In order to appraise the full 
significance of Mr. Arnold's campaign it is necessary to review briefly the law 
under wliich he is proceeding, in the light of tlie major judicial and legislative 
devclopmonts since the time of its enactment. 

Thr Sherninn Act. — The Sherman Antitrust Law was enacted in 1890. The 
Civil War had ended only a quarter century before. In the years of reconstruction, 
industrial America was growing at a feverish pace. Unchecked and untram- 
meled, the power of giant corporate capital over every phase of life was becoming 
more oppressive to free enterprise with every year. The malignant growth of 
monopolistic control of capital was eating into the healthy tissues of our body 
economic. To prevent a transition from human slavery to economic slavery, to 
limit corporate control and minimize its threat to political democracy, the Sher- 
man Antitrust Law was enacted by Congress. 

The passage of the Sherman Act was the result of a fierce legislative battle in 
which no parliamentary weapon was spared to obstruct its enactment. The 
familiar provisions of the Act as finally adopted were brief, broad and general. 
"The Act declared to be illegal, every contract, combination and conspiracy, in the 
form of a trust or otherwise, in restraint of trade or commerce among the several 
states. The act made each violation of this provision a misdemeanor punishable 
by fine, imprisonment, or both, and provided that each person participating in 
the acts forbidden by the statute is equally guilty. In addition to criminal 
penalties, the government was given power to institute civil proceedings, without 
penalty. The Act also made it possible for any person damaged by a violation 
of its provisions to sue for restitution in a district court and receive three times 
the damage sustained, plus costs for attorney's fees. 

The law, designed to curb monopolies, was certainly not intended to apply 
to labor organizations or to their activities. When the question of its applicability 
to Labor arose in the congressional debate, Senator Sherman, author of the Act, 
denied such intent and offered an amendment specifically excluding "any arrange- 
ments, agreements, or combinations between laborers, made with the view of 
lessening the number of hours of their labor or of increasing their wages," and 
also excluding farmers. An additional amendment offered by Senator Aldrich 
and, like the Sherman amendment, adopted without a roll call, specifically ex- 
cluded "combinations or associations made with a view or which tend to increase 
the earnings of persons engaged in any useful employment." 

These amendments having beeji approved bj' the Senate, the only device 
available to the opposition was that of adding what is known as "encumbering 
amendments." Amid laughter and joking the Senate also passed amendments 
to prevent gambling in stocks, cotton prints, steel rails, salt, boots and shoes, 
lead, woolen goods, and liquor. When all this was done it was admitted by 
Senator Gorman and others that the bill had been so amended as to make it 
inoperative— "worse than a sham and a delusion." Senator Sherman said that 
the clear purpose of these amendments was to bring the whole I 'ill into contempt 
and to defeat it. All of the amendments, therefore, including the labor amend- 
ments, were subsequently stricken out and the Sherman Act was passed Witliout 
them. 

The Antitrust Law and the Courts — Even in the midst of tlie tangled legislative 
history of the law one finds no specific evidence of congressional intent to apply 
it to unions. However, some of the earliest prosecutorins unde the Act were of 
labor organizations. The question of the application of the Act to organized 
labor came before the Supreme Court in Loawe v. Lauior, the famous Danbury 
Hatters case. The United Hatters Union of the American Federation of Labor 
was engaged in a strike anri a boycott against a factory in Danbury, Connecticut, 
which was one of the twrive not yet unionized. The employer brought action 
under the Sherman Act for an injunction and for triple damages. In its memor- 
able decision, the Suprenie Court held that although the Sherman Act "had its 

124491— 41— pt. 31-A ^2 



18180 CONCENTRATION OF ECONOMIC POWER 

origin in the violations of massed capital," since it covered any combination in 
restraint of interstate commerce, it applied to labor organizations as well. Triple 
damages v^^ere assessed against the union and the workers were threatened with 
dispossession and ruin. This decision galvanized the entire labor movement 
which, as one man, came to the support of the Hatters Union. 

The fight was on in the courts and Labor's Bill of Grievances was taking 
shape. Application of the Sherman Act to the use of "unfair lists" in the Buck 
Stove cases made the need for legislative remedy all the more urgent. Under the 
leadership of President Gompers Labor demanded amendment of the Sherman 
Act. 

In October 1914 the Clayton Act was passed. Section 6 of the Act stated 
in clear and definite language that nothing contained in the antitrust laws shall be 
construed to forbid the existence and operation of labor and agricultural organi- 
zations "instituted for the purposes of mutual help." Section 20 of the Act laid 
down the first statutory prohibition against the use of injunction in labor disputes, 
and asserted Labor's right to strike and to picket peacefully. 

With the passage of the Clayton Act the intent of Congress to exclude unions 
from the application of antitrust laws was now clearly spelled out. But the new 
law was barely enterfH upo;! the statute books when prosecution of organized 
labor under the antiti .^t laus was resumed. The procedure was usually to sue a 
labor union for triple damages or to enjoin a labor organization from engaging in 
normal activilies. 

In the Hitchman Coal case, decided in 1917, the Supreme Court held the Sher- 
man Act to be applicable to a union operating intrastate and the union to be an 
unlawful Conspiracy. This case, in which Justices Brandeis, Holmes, and Clarke 
strongly dissented, would have dealt a death blow to unions were it not the 
Clayton Act. In 1921, in the case of Duplex Printing Company v. Deering, the 
Machinists struck at the Duplex plant and called upon other unions for support 
and for a boycott of Duplex presses. The unions engaged in a sympathetic 
strike were held by the Supreme Court to be strangers to the controversy and in 
refusing to handle "scab" material to be violating the Sherman Act. 

The majority of the Supreme Court overruled the prohibition of Section 20 of 
the Clayton Act against issuance of an injunction in any case involving a labor 
dispute between an employer and employes by holding that workers involved in 
the boycott had no relation of employment to the firm. Justice Brandeis, dis- 
senting with Justices Holmes and Clarke, supported the view that those engaged 
in the boycott had a common interest and therefore could rightfully refuse "to 
expend their labor upon articles whose very production constitutes an attack 
upon their standard of living and the institution they are convinced supports it." 
This decision, the most important since the Danbury Hatters case, made it clear 
that the legal status of the union activities under the Sherman Act as interpreted 
by the judiciary had not been changed by the Clayton Act amendments. 

Next in importance were the Coronndo cases which constituted the most 
extensive litigation in a labor case under the Sherman Act. In these cases 
the court, relying upon the terminology of the Sherman Act, reached the con- 
clusion that a trade union, an unincorporated association, may be sued for 
damages and that interference with production within a state was a violation 
of the Sherman Act if the intent was to restrain commerce. This principle 
was far reaching significance to Labor, for any strike which prevented the com- 
petition of non-union goods with union products in the interstate market would, 
under this rule, be a violation of the Sherman Act. 

As late as 1927 in the Bedford Cut Stone case the Supreme Court reiterated 
its stand taken in the Duplex case. In a powerful dissent by Justice Brandeis, 
again joined by Justices Holmes and Clarke, the minority of the Supreme Court 
proclaimed to the nation that to deny workers the right "to cooperate in simply 
refraining from work, when that course is the only means of self-protection 
against a combination of powerful employers," is to impose upon free labor 
"involuntary servitude." 

These restrictive and reactionary decisions raised a tide of public protest 
which not only suspended the application of antitrust laws to Labor for a long 
time, but also gave support to further legislative remedies. The Norris-LaGuardia 
Act of 1932 was the first in a series of basic congressional enactments which flatly 
rejected the narrow and tenuous interpretations of a reactionary judiciary cur- 
tailing Lal)or's basic rights. The public policy of the Norris-LaGuardia Act 
stated it to be necessary that the worker have full freedom of association, self- 
organization, and choice of representatives and "that he shall be free from the 
interference, rcstrixint or coercion of employers of labor * * * Jn self- 
organization or in other concerted activities for the purpose of collective bargaining 



CONCENTRATION OF ECONOMIC POWER 18181 

or other mutual aid or protection." The Act prohibited the use of the injunction 
against specific acts normally incidental to labor disputes, or against urging or 
inducing such acts, short of fraud or violence. The "yellow-dog" contract, 
enshrined and sanctified by the coal cases, was outlawed by the Act. In addition 
the Norris-LaGuardia Act declared that injunctions may not be based on any 
alleged conspiracy or unlawful agreement by reason of concerted action to gain 
the ends or to do the acts it specifically legalized. Thus the law laid down by 
the Supreme Court in the Danhury Halters case and in the Duplex case was con- 
clusively repudiated by Congress. 

The full validity of this enactment was finally accepted by the Supreme Court 
in the case of Senn v.- Tile Layers Union, a key case ably presented to the Court 
by the American Federation of Labor's General Counsel. In this case the court 
not only denied injunction against picketing to compel an employer to enter into 
a contract with a union, even though none of the employes was a member of 
such a union, but also stated that "There is nothing in the Federal Constitution 
which forbids unions from competing with non-union concerns for customers by 
means of p' -keting as freely as one merchant competes with another by means 
of advertisements in the press, by circulars, or by his window display. * * * 
One has no constitutional right to a 'remedy' against the lawful conduct of 
another." 

In addition to the Norris-LaGuardia Act now tested in the courts, the National 
Labor Relations Act which reaffirmed the right "to engage in concerted activities, 
for the purpose of collective bargaining or other mutual aid or protection" has 
established a final bulwark against the possibility of a resurrection of the provisions 
of the Sherman Act in application to Labor even by the Supreme Court. Numer- 
ous decisions of the Supreme Court fully sustaining its policy and provisions are 
simply not compatible with the letter and the spirit of the Danhury Hatters, the 
Duplex, or the Bedford Cut Stone cases, yet it is to these cases that Thurman Arnold 
still appeals in seeking justification for his program. 

In the most recent and the most conclusive ruling of the Supreme Court, in the 
Apex case, the Supreme Court specifically addressed itself to the question of the 
application of the Sherman Antitrust Act to Labor. Briefly, the court held that 
only such union activities as come within the old common-law doctrine of restraint 
of trade are made illegal by the Sherman Act. Very few, if any, union activities 
come within this common law doctrine. To come within the scope of this doctrine 
of restraint of trade it is necessary that unions themselves engage in some form of 
competitive business enterprise, pursuant to which the union seeks to obtain 
market control of a commodity. Labor is not a commodity. It is clear, there- 
fore, that under this restricted application of the Sherman Antitrust Act the 
ordinary and basic activities of labor unions cannot be held unlawful. In the 
Apex decision the Supreme Court established an obstacle which Thurman Arnold 
will find it difficult to overcome in his campaign against unions. 

But the campaign still goes on with the full ammunition of the Antitrust Division 
of the Department of Justice still firing ceaselessly at Labor's basic right of self- 
organization for mutual aid and protection. 

The Arnold Drive. — Thus far no irreparable harm has been done to unions as the 
result of the Arnold drive. In spite of vast arrays of legal talent, ingenious briefs 
and enormous sums of taxpayers' money all directed at effectively reducing the 
status nd rights of union members, Mr. Arnold has achieved less success in his 
persecution of unions than he has in personal notoriety. A major portion of Mr. 
Arnold's time and eff'ort, as well as of public funds at his disposal, has been de- 
voted to a lavish publicity campaign designed to damage the prestige of organized 
labor and to bring odium upon labor unions. Speeches, releass, interviews, 
newspaper and magazine articles have been pouring in a steady stream from the 
desks of Mr. Arnold's Antitrust Division to bring the labor cause in disrepute 
if not by persuasion, at least by the sheer force of repetition. 

By August 1, 1940, the Antitrust Division of the Department of Justice listed 
116 actions it initiated under the antitrust laws between March 1938 and August 
1940. These actions take the form of indictments, complaints, motions for 
injunctions, etc. Some have been settled by consent decrees; three have gone 
through trial; others are awaiting further disposition or further action. Of the 
116 cases, 53 involve unions or union members or both. Twenty-one of these 
actions have been disposed of. In 13, consent decrees were entered. Three 
defendant parties pleaded nolo contendere. One pleaded guilty. In one case 
there was a verdict in favor of the Government; and in another a resounding vic- 
tory for labor. In one case the Government withdrew the indictment, sub- 
sequently presenting a new one. One case is awaiting Supreme Court action. 



18182 CONCENTRATION OF ECONOMIC POWER 

The remaining 32 have not been disposed of: 8 are awaillng trial; pleadings are in 
process in the remaining 24, some for injunctions, some for various technical 
motions, and in a large number demurrersjiave been entered by the defendant 
parties. 

Only three out of the 53 cases had reached the verdict stage by August 1. 
One of these, as has been noted, is before the Supreme Court. This is the case of 
U. S. V. William L. Hutcheson et al., in which the defendant union moved for 
dismissal, the contention of- the defendant union was upheld and the indictment 
was dismissed by the U. S. District Court.- This case may turn out to be a test 
for Mr. Arnold in his willingness. to fly in the face of protection granted Labor by 
the Norris-LaGuardia Act. 

In one case a decision was entered against a local union. The third is the 
famous Washington, D. C, case in which Mr. Arnold attempted to eradicate a 
jurisdictional problem through the agency of the antitrust laws. On May (>, 
1940, the court directed a verdict in favor of the Teamsters' Union. 

In his drive Thurman Arnold has chosen to challenge the entire legislative and 
judicial development of recent years. To be sure he had indicated that he will 
not question Labor's right to collective bargaining as long as that right is strictly 
limited to the determination of wages and hours. But it is very evident indeed 
that he does not choose to accept broader and equally important aspects of mutual 
aid and protection for workers indispensable to effective collective bargaining. 

The criterion relied upon for action by Mr. Arnold is that he will prosecute 
unions only when they are engaged in "unreasonable restraints." Not the Con- 
gress, not even the courts, but Mr. Arnold himself is the sole judge of what con- 
stitutes an unreasonable restraint. The judgment he has rendered to date is 
summed up in his letter of November 20, 1939, to the Central Labor Union of 
Indianapolis: 

The types of unreasonable restraint against which we have recently pro- 
ceeded or are now proceeding illustrate concretely the practices which in our 
opinion are unquestionable violations of the Sherman Act, supported by no* 
responsible judicial authority whatever. 

Briefly these are: 

1. Unreasonable restraints designed to prevent the use of cheaper material, improved 
equipment, or more efficient methods. 

2. Unreasonable restraints designed to compel the hiring of useless and unnecessary 
labor. 

3. Unreasonable restraints designed to enforce systems of graft and extortion. 

4. Unreasonable restraints designed to enforce illegally fixed prices. 

5. Unreasonable restraints resulting from jurisdictional strikes. 

These, then, are the actions for which unions are to be prosecuted by Mr. 
Arnold. What constitutes an "unreasonable restraint" in each case Mr. Arnold 
leaves it to Mr. Arnold to determine. In doing so he reserves to himself an 
enormous area of unrestricted power — sufficient to shape the future of the whole 
economic growth of our nation. Let us consider briefly what the wielding of this 
power by Mr. Arnold or his successor would mean to organized labor. 

The first type of concerted effort subject to prosecution under the Sherman 
Act is that aimed "to prevent the use of cheaper materials, improved equipments, 
or more efficient methods." ' It is hardly necessary to state that organized labor- 
stands for any improvement in equipment and methods when such improvement 
is safe and genuine and not mere fiction to disguise speedup and exploitation and 
when industry and the country can be protected against the sheer shock of mass 
technological unemploj'ment. 

These are the problems of industrial evaluation. "The are not," as Brandeis 
said in the Duplex dissent, "for judges to determine and certainly not for prosecu- 
tors to decide." They are properly the subject for negotiation and collective 
bargaining where both sides have the opportunity to present the facts and work 
out policies to mitigate whatever harm may exist in industrial change. But 
to Mr. Arnold it is clear that such negotiation, such concerted effort for mutual 
aid and protection, constitutes a conspiracy in restraint of trade and, the Congress 
and the courts to the contrary notwithstanding, a flagra,nt violation of the anti- 
trust laws. Mr. Arnold's example of the use of cheaper material and improved 
equipment is "factory-glazed windows" or "factory-painted kitchen cabinets." 
We can ask with Henry Epstein, Solicitor General of New York: "Is it the purpose 
of the law or the courts to determine from what method best results will accrue to 
society? Is this not the very field of economic combat into which with the ab- 
sence of violence, deceit or misrepresentation, the courts should not tread without 



CONCENTRATION OF ECONOMIC POWER 18183 

legislative or constitutional mandate?" And again: "Is this within the omnis- 
cience of an administrative official? Will prosecutor now supplant the courts and 
become a new legislative authority? Having had judicial legislation, are we 
now to have administrative legislation?" 

In Mr. Arnold's second type of union action subject to prosecution, one which 
is "designed to compel the hiring of useless and unnecessary labor," Mr. Arnold 
is again fully prepared to determine what constitutes useless and vmnecessary 
labor. This means that one of the most complex problems, and the most crucial 
to our economy, a problem which must be dealt with in a setting of vast unem- 
ployment afflicting a major portion of our entire population, is no longer a proper 
matter for negotiation between labor and management. This also means that 
when such bargaining occurs between labor and employers and even when it takes 
the form of written contracts, such bargaining is to be dealt with by the Govern- 
ment as a plain conspiracy in restraint of trade, subject to criminal prosecution 
under the Sherman Act. Labor's struggle to supply greater spread of employ- 
ment, the struggle which, in the classic dictum of the New York Court of Appeals, 
barring "violence, deceit or misrepresentation," the courts must leave to the field 
of economic conflict, has now been outlawed. 

The question Mr. Arnold attempts to deal with is not whether a conflict or 
agreement between groups should afford to the public protection against egregious 
injustice. Under the frame of our laws any damaged persons are entitled to and 
have full recourse to remedies. But Mr. Arnold is determined to remain blind 
to the fact that not only the Congress but also the Supreme Court (in the Apex 
case) pointed out what such remedies are and clearly showed that these remedies 
cannot properly be sought through the application of the antitrust statutes to 
collective bargaining for mutual protection. 

Mr. Arnold's confusion is so bast that, while he sanctions collective bargaining 
for the limitation of hours and at the same time reserves to himself the right to 
determine the usefulness and the necessity of labor to be emfjloyed, he fails to 
perceive that such determination can properly be made only by the process of 
collective bargaining itself. Thus when Mr. Arnold assumes responsibility for 
determining usefiilness of labor, he does so in contradiction of even his own 
restricted interpretation of what the collective bargaining process must embrace. 

In his tliird category Mr. Arnold makes punishable under the Sherman Act the 
labor organizations which are parties to enforcing graft -and extortion. As 
Solicitor General Epstein has pointed out: "It is a sad day when prosecution 
cannot stop this by meafts of criminal and penal statutes. Is the prosecution of 
Capone on income tax violation to excuse the failure of enforcement of criminal 
laws more directly applicable? Of of Fritz Kuhn. for petty larceny to cover the 
failure to prosecute a multitude of offenses against civil rights?" 

We in the American Federation of Labor are over four million strong. In 
any such vast aggregation of individuals — and our organization will compare 
favorably with any organization of the same size — there will be a small percent- 
age of lawbreakers and wrongdoers. Within or outside our ranks lawbreakers 
and wrongdoers should be strictly and relentlessly prosecuted without regard to 
class or economic group to which they may belong. This is the way Labor under- 
stands the equality of justice under the laws; this is the way the Constitution 
defines and determines justice; this is the way the American people understand 
justice, and the way in which they want it to be dealt. 

The need for remedy is adequately met by the criminal statutes dealing with 
extortion and criminal conspiracy. Is the Assistant Attorney General of the 
Department of Justice making a public assertion that our criminal statutes are 
unenforceable? If he is not, then let him refrain from pleading that the Sherman 
Act is the sole means of dealing with these unlawful acts. 

All this is also true of Mr. Arnold's fourth category, that of price-fixing agree- 
ments. The evil can be reached and full remedy found without applying the 
Sherman Act to Labor. Labor clearly recognizes that the antitrust laws are 
directly aimed at conspiracies to raise or fix prices, and that individuals found to, 
be so conspiring are guilty of violating these laws. It is a wholly different matter, 
however, to charge that labor unions acting as unions in the pursuit of their basic 
purpose of collective bargaining for mutual aid and protection are engaged in such 
conspiracies. Labor stands just as firmly against violations within the true and 
established scope of the law as we stand against the misuse of these statutes to 
limit and curtail collective bargaining. 

Arnold's final category concerning jurisdictional disputes is probably the most 
absurd of all. "The antitrust laws should not be used as an instrument to police 
strikes or adjudicate labor controversies," Mr. Edward H. Miller of Arnold's 



18184 CONCENTRATION OF ECONOMIC POWER 

staff wrote. Mr. Justice Brandeis had tenaciously held to this point of view 
over the years of the anti-Labor decisions. The Supreme Court now agrees with 
Mr. Miller and Mr. Justice Brandeis. A Federal judge who ordered a directed 
verdict in favor of the Teamsters' Union in the Washington, D. C, case agreed 
with Mr. Justice Brandeis, the present Supreme Court and Mr. Miller. Mr. 
Arnold, however, does not seem to agree with this doctrine. Even after the 
District case, Mr. Arnold keeps on repeating that he will continue his efforts in 
this field. We must redouble our efforts to see that he shall not succeed in this 
perversion of the statutes with its enormous danger to Labor. 

In Arnold's short spaij of months he has instituted more labor proceedings 
than had come before the Supreme Court in the fifty years of the life of the 
Sherman Actl We now have a Supreme Court that has seen more clearly than 
any of its predecessors the place of the laboring man and the labor movement 
and their just setting in the American scheme. We must bear in mind that the 
Norris-LaGuardia Act quite specifically undid much of the harm of prior decisions. 
This Act has now been firmly fortified by the Supreme Court. The present court 
has upheld, and undoubtedly will continue to uphold, reasonableness of collective 
bargaining over conditions of employment in spite of Mr. Arnold, and will con- 
tinue to uphold reasonableness of Labor's means and acts of mutual aid and pro- 
tection to the laboring man, his family and his unions. 

Under the force of recent Supreme Court decisions and precedents such as that 
set by the outcome of the Teamsters' controversy in the District, Mr. Arnold's 
anti-union drive has bogged down considerably. But the pending cases must still 
be fought in the courts, and the work of clarification of the issues and protest 
must continue unremitted. 

It is the firm purpose of the American Federation of Labor to meet the trend to 
government control of the collective bargaining process through the use of anti- 
trust litigation, and to build a strong and lasting foundation for a free and unin- 
terrupted exercise of the rights gained by organized labor through generations of 
struggle, the rights without which economic democracy in America cannot survive. 



Report of the Committee on Resolutions, and Action of the Convention 

LABOR and the ANTI-TRUST DRIVE 

(Executive Council's Report, Page 143) 

Your committee jointly considered that portion of the Executive Council's 
report under the above caption and Resolution No. 129, which is as foUows: 

Demanding Legislation to Protect Labor Organizations From Application of Anti- 
Trust Laws 

Resolution No. 129 — By Delegate Louis P. Marciante, New Jersey State Federa- 
tion of Labor 

Whereas, During the past year, the U. S. Department of Justice, .through 
Assistant Attorney General Thurman Arnold, has taken upon itself the criminal, 
prosecution of many labor unions and their officers under the Sherman and Clay- 
ton Anti-Trust Laws, from the provisions of which, for many years, organized 
labor has deemed itself exempt; and 

Whereas, The Department of Justice has taken unto itself the power of declar- 
ing what activities of labor are "reasonable" and which are "unreasonable re- 
straints of trade", and thus has arrogated unto itself the powers of legislation, and 
has caused great confusion, dissatisfaction and misunderstanding among the 
ranks of labor; now Therefore be it 

Resolved, That the Federation goes on record as demanding the immediate 
passage of Congressional legislation designed to clarify the meaning of the Sherman 
and Clayton Acts, and to prevent their application to legitimate, time-honored 
and proper labor union activities; and be it further 

Resolved, That the Secretary is directed to forward a copy of this resolution 
to President Roosevelt, to Attorney General Jackson and his assistant, Thurman 
Arnold, and to each member of Congress. 

A little over a year ago, organized labor was startled by a criminal prosecution 
instituted by the Anti-Trust Division of the Department of Justice against an 
American Federation of Labor affiliate for having engaged in usual and ordinary 
union activities in furtherance of labor's interests. Before labor had an oppor- 



CONCENTRATION OF ECONOMIC POWER 18185 

tunitj' to appraise fully its significance, a number of prosecutions were instituted 
by the same Division of the Department of Justice against labor unions and their 
officials. In the past two ^-ears more prosecutions liave been brought against 
organized labor for alleged violations of the anti-trust laws than had been brought 
in the preceding fifty years. 

Thus, after years of effort and at a time when labor has succeeded in protecting 
its basic rights by legislation such as the Norris-LaGuardia Act, the Social Security 
Act, the National Labor Relations Act, the Walsh-Healy Act, and similar labor 
enactments, it is now confronted with the most vicious attack ever made upon it. 
J^o power or force, intent upon destroying labor's rights, could have devised a 
more destructive weapon with which to accomplish its end than the revival of 
anti-trust law prosecutions against labor unions. 

These are not isolated prosecutions of alleged isolated violations of the law. 
The prosecutions are a course of action planned to fit in with the personal views 
of the head of the Anti-Trust Division of the Department of Justice as to what 
constitutes proper labor union activities in relation to inter-state commerce. 

With dramatics that approximate the art of showmanship, a number of prose- 
cutions were launched at one and the same time on fantastic economic theories 
never heard of before. We use the word "dramatics" advisedly, because these 
prosecutions are based on new concepts of what constitutes a violation of the 
anti-trust laws, and good legal strategy would have dictated the bringing of one 
test case instead of launching upon an expensive and untried series of cases at 
one time. Likewise, we use the word "fantastic" advisedly, for what could be 
more fantastic than the interpretation placed on the anti-trust laws as to what 
constitutes illegal restraints of interstate commerce by the head of the Anti- 
Trust Division of the Department of Justice. In a letter dated November 20, 
1939, to the Central Labor Union of Indianapolis, he holds among other things the 
following union activities to constitute criminal violations of the anti-trust laws 
if they result in restraints upon interstate commerce: 

(1) Union activities designed to prevent the use of cheaper material, iniproved 

equipment, or m.ore efficient methods. 

(2) Union activities designed to compel the hiring of useless and unnecessary 

labor. 

(3) Union activities designed to bring about a change in an established 

bargaining agency. 

(4) Union activities in furtherance of jurisdictional disputes. 

This concept discloses a woeful ignorance or deliberate attempt to destroy the 
fundamentals on which the organized labor movement was founded. 

Regardless of the interpretation the Anti-Trust Division places upon union 
activities designed to prevent he use of cheaper materials, etc., every unbiased 
and informed person knows that these acti\'ities are engaged in, to prevent sweat 
shop labor and che distribution of sweat shop products. Regardless of the con- 
struction the Anti-Trust Division places upon union activities designed to compel 
the hiring of useless and unnecessary labor, these activities are engaged in, among 
other things, for the purpose of shortening the work day and the work vveek, iiius 
reducing unemployment by bringing about the hiring of additional labor. Regard- 
less of the holding of the Anti-Trust Division, union activities designed to bring 
about a change in established -collective bargaining agencies, *ire engaged in for 
the purpose of eliminating company unions and supplanting tbem with bargaining 
agencies affiliated with the American Federation of Labor. Regardless of the 
views of the Anti-Trust Division m relation to jurisdictional disputes, such dis- 
putes generally result from differences between labor organizations, arising out of 
the asserted nght of workers to engage m particular clas.ses of work for the pro- 
tection of their livelihood. Often the jurisdictional dispute results from techno- 
logical changes .iver which unions and their members have no control. Regret- 
table as jurisdictional disputes are, and desirable as it is to eliminate thein, by 
amicable adjustments, the processes for adjustment are within the jurisdiction of 
labor and not within the civil or criminal courts. 

However, this insidious attack by the Anti-Trust Division of the Department of 
Justice upon organized labor has, to quite a degree, been halted by decisions of the 
Federal courts. 

We question the motives of the Anti-Trust Division in instituting criminal 
prosecutions and we can see no other reason for the prosecutions than that of 
malice towards our American Federation of Labor affiliates. This is further 
emphasized by the fact that only unions affiliated with the American Federation 
of Labor have been prosecuted by this Department. Interference with interstate 



18186 CONCENTRATION OP ECONOMIC POWER 

commerce in restraint of trade by sit-down strikes and other activities, staged by 
dual and rival unions, brought no prosecutions against these dual and rival 
organizations, whereas American P'ederation of Labor unions having engaged in 
peaceful activities have been prosecuted by the score. 

It remains for the American Federation of Labor to caution its affiliates against 
subtle attempts on 1;he part of the Anti-Trust Division of the Department of 
Justice to procure conformance to its views of what constitute violations of the 
Anti-Trust laws by obtainmg consent decrees from labor unions. A consent 
decree is, in effect, an injunction, rendered by the court through agreement of 
tne parties by which the union is thereafter prohibited from doing certain things. 
Id other words, it is nothing more nor less than old-style labor injunction, for the 
violation of which, unions, officials, and their members may be punished for con- 
tempt of court. This form of injunction is as abhorrent to organized labor as 
those injunctions against which labor fought for almost half a century, and which 
resulted in the passage of the Norris-LaGuardia Act. We must beware lest the 
consent decree becomes as serious a menace to organized labor as was the old 
type injunction prior to the passage of the Norris-LaGuardia Act. We therefore, 
admonish our affiliates to weigh carefully first, whether it is advisable to enter 
into a consent decree at all, and second, to have the provisions of the consent 
decree analyzed most carefully so that labor's fundamental and constitutional 
rights are not surrendered or destroyed. 

In connection with the subject under consideration, attention is called to the 
fact that so far the Anti-Trust Division has prosecuted businessmen on a civil 
basis and under the operation of civil law, while labor officials and trade unions 
have been prosecuted under the criminal law and procedure. This is another 
evidence of the unfortunate bias and misconception of his responsibilities which 
has been shown by the head of the Anti-Trust Division. 

We re-emphasize what was definitely expressed by conventions of the American 
Federation of Labor when the anti-trust laws were being considered by Congress, 
tJiat is, that we were assured that these laws were not intended to embrace within 
their provisions labor unions and their activities. We re-emphasize that classic 
pronouncement which is the first sentence of Section 6 of the Clayton Act,— "That 
the labor of a human being is not a commodity or article of commerce," and not 
being a commodity or article of commerce, it is not within the purview of the 
anti-trust laws, for such laws apply only to, and deal solely with, commodities 
and articles of commerce. There is a vast distinction between "labor" and 
the "thing produced" by labor. While "things produced" are subject to the 
anti-trust laws "labor" is not. 

Therefore, we condemn most vigorously the unwarranted course pursued by 
the present Anti-Trust Division of the Department of Justice towards organized 
labor and the fundamentals upon which it is founded. We must demand from 
those occupying higher positions than the person in charge of the Anti-Trust 
Division that they curb these unwarranted and destructive activities against 
organized labor. 

In connection with this portion of the Executive Council's report, your com- 
mittee also considered Resolution No. 129. This report is designed to cover 
both subjects. 

The report of the Committee was unanimously adopted. 

rejoinder by corwin d. edwards, economic consultant, department op 
justice, to letter from the american federation of labor 

Department of Justice, 
Washington, D. C, March S4, 1941. 
Honorable Joseph C. O'Mahoney, 

Chairman, Temporary National Economic Committee 

Washington, D. C. 
My Dear Mr. Chairman: In a memorandum submitted for publication by the 
Temporary National Economic Committee, Mr. Padway, the General Counsel of 
the American Federation of Labor, asserts that there is danger to labor unions in 
use of the antitrust laws to prevent the following restraints of trade: 

1. The strike of one union against another union which is certified by the 
National Labor Relations Board to be the only legitimate collective bargaining 
agency with whom the employer can deal. 

2. A strike to erect a tariff wall around a locality. 

3. The exclusion of efficient methods or prefabricated materials from building 
construction. 



CONCENTKATIUN OK ECONOMIC I'OWKEl ]8187 

4 The refusal of Unions to allow small indcpoiidctit firms to remain in business. 

5. The activities of unions in imposing and maintaining artificial fixed prices 
to consumers 

6. The makciwork system. 

I have been asked to answer tliis statement. In doing so I shall not discuss 
whether the practices in question are unlawful, for tlie determination of disputed 
points of law is not my bvisiness. I shall deal with certain issues of public policy 
involved in the activities defended by Mr. Padw-ay — issues relevant not to what is 
the policy of the law but to what it should be. 

The question at issue is not the right of collective bargaining nor the activities 
of unions which are designed to raise wages, reduce hours, and improve conditions 
of employment. In such matters unions have established their place, hot only in 
law but in public policy, as necessary instruments to protect health, safety, and 
human dignity, and to spread the benefits of industrial progress. The sole issue 
is whether the practices described constitute abuses of unionism against which 
the public should be safegviardcd. A year ago, when there was little appreciation 
of the need for such safeguards, the Antitrust Division was attempting to provide 
them. Today, when many groups are urging that legitimate union activities be 
prohibited or closely regulated, we have not changed our view that public control 
of unions should be limited to the prevention of such abuses. 

Within the last generation unions have acquired legal and economic strength 
sufficient to enable them to organize even the most powerful industries Their 
struggle for recognition is nearly over. The power which has brought them 
recognition has often enabled them to impose their will both upon business enter- 
prises and upon working men. Indeed, without such a degree of power they have 
only a limited effectiveness in promoting labor's well-being. 

The public question involved in antitrust proceedings against unions is whether 
anything needs to be done about abuses of labor's new power. The legal exemptions 
granted to labor have been interpreted by some as a complete immunity to use 
such distinctive w^eapons of unionism as the strike and the boycott for any purpose 
whatsoever. If labor's legal privileges are thus interpreted, they go far beyond 
anything that is necessary to make unions effective in serving their members. 
The strike and the boycott are means of coercion. The privilege to use a coercive 
device freely, with no limit upon when and why one uses it, is a grant of power 
whose only limit is set by the damage which can be done. If substantial power 
can be achieved and if it is likely to be used objectionably, such a privilege is 
highly dangerous. The actual dangers in the labor field are described t)elow. 

The need to curb certain abuses of unionism is already apparent in cases in 
which unions have achieved substantial control over opportunities for employ- 
ment and over the survival of business enterprises. When a union controls the 
labor market, its power over small business enterprises is even greater than the 
power of a single large company over the unorganized individual w^orking man, 
because the individual v/orker can seek other employers but tht small business has 
no alternative uncontrolled source of labor supply. Such a union likewise has 
more control over its own individual members than a large company can exercise 
over a non-union worker; for the blacklisting of a member deprives him of employ- 
ment opportunities throughout the entire controlled area and prevents him from 
getting employment in union shops in other areas. His opportunities for employ- 
ment are thereby seriously reduced and may even be entirely destroyed. 

During the last three years the Department of Justice has been receiving 
complaints from subordinate officials and members of certain unions, non-union 
workers, business men, and consumers which indicate that in some unions the 
abuse of power constitutes a serious problem. These complaints have centered 
in relatively few unions — chiefly those in the building trades and in truck trans- 
portation. They appear to involve the need for specific corrective protection 
by a public agency under the antitrust laws or otherwise; but their scope is not 
such as to justify a general reversal of public policy toward labor organization. 

The rest of this memorandum will attempt to clarify the types of abuses which 
have aroused complaint and to furnish illustrations of each type.' 

• Where illustratious are drawn from the procprdinps of the Antitrust Division, the situation described 
is that set forth in a ciiarpe by a Federal grand jury based upofi evidonce presented by tlie Department of 
Justice; but since most of these cases have not been tried the final determination of the tnith or falsity of the 
charges is yet to be made. Other illustrations are based upon complaints which appear to be substantial 
but which have not been fully investigated. In thcss cases wc cannot vouch for the accuracy of the state- 
ment of facts. However, the illustrations arc typical of a body of complaints so large that the substantial 
accuracy of the pattern may be guaranteed. 



18188 CONCENTRATION OF ECONOMIC POWER 

UNION RESTRAINTS UPON BUSINESS COMPETITION 

In a considerable number of cases unions have supported and participated in 
restraints of trade which are designed to control the sale of oommodities by busi- 
ness enterprises. Indictments now pending involve charges that various con- 
struction unions have forced employers to join contractors' associations by refusing 
to supply labor to non-members of such associations. ^ In some instances, although 
the independent concern may obtain union labor, the terms of employment 
exacted by the union are discriminatory in that a higher wage scale is imposed or 
the association is given preference in labor supply or slow-down policies are 
adopted on work for the independent.^ In some unions there is a similar dis- 
crimination against general contractors or building owners, designed to force them 
to employ subcontractors. In Philadelphia, for example, a provision of the labor 
agreement stipulates that requests for painters by an owner, builder, or general 
contractor shall at first be refused in an effort to have the work contracted by 
a member of Associated Master Painters and Decorators. A pending indict- 
ment charges that the plumbers' union has refused to install plumbing equipment 
not sold through orthodox channels of distribution. 

In many cases the union participates as an enforcing agent in efforts by business 
groups to fix prices. Several indictments now pending allege that various con- 
struction unions agreed to withdraw labor from contractors who did not partici- 
pate in schemes to fix prices by use of bid depositories.'' In Salt Lake City the 
union agreement between bakers and bakery drivers provides that prevailing 
market prices will be mamtained. Similar union participation in fixing the 
prices of bakery products .ppears to exist in Peoria, Illinois. In Dubuque, 
Iowa, the milk wagon drivers' union is under indictment for participating in a 
conspiracy to prevent a distributor from reducing milk prices. In Toledo, Ohio, 
it is alleged that this union is likewise involved in a scheme to fix retail milk 
prices. The labor agreement between /'ainters and painitng contractors in 
Peoria, 111., provides that all contractors must adhere to minimum prices approved 
by a local board and grants the board the right to prevent the execution of any 
work obtained at prices below this minimum. 

Union participation in such restraints apyjears to have arisen in several different 
ways. In some cases a strong employers' orgauization has insisted upon obtain- 
ing help from the union in price fixing or driving out independent business men 
as a condition for acceptance of a union contract, and the union has acceded rather 
than fight for recognition. In other cases the union has offered to sell its services 
as strongarm agent to a business group in the belief that better wages will be 
granted in return. Sometimes it appears that graft vvas paid to the business 
agent by the employers and that he earned his money by enlisting his union in a 
program of business restraint. In some instances the union itself apparently 
believed that wages and working conditions were likely to be jeopardized unless 
the intensitv of competition among employing concerns was reduced, and for 
that reason took the initiative in developing a price-fixing program. 

Provisions for price fixing and for driving out independents are often included 
in labor agreements alongside the standard provisions concerning wages, hours, 
and conditions of employment. There is no distinction in form between these 
provisions. Employers and employees have agreed to them all. Less frequently, 
the union's part in a program to restrain business activitv is set forth in union 
by-laws or is developed without any formal document. There appear to be ade- 
quate remedies in existing law to deal with conspiracies to fix prices or drive out 
independent business men when unions and business men participate together m 
such conspiracies. According to Mr. Padway, however, che Hutcheson decision 
gives labor, acting alone, the right to destroy independent business men and to fix 
commodity prices whenever it so chooses. If this interpretation of the law should 

' See, for example, U. 3. v. Santa Barbara County Chapter, National Electrical Contractors Association, ct al. 
Indictment, Febniary 28, I'MO; U. S!. v. San Francisco Electrical Contractors Association , Inc. et al, Inriiot- 
ment, March 2, 1940; U. ci v. Heating, Piping and Air Conditinnirig Contractors As^onation of Soutfinn 
California, et al. Indictmect, Tanuary 26, 1940; U 3. v. Contractim; p;"sterers' Association of Long Beach, 
Inc., et al. Indictment, February 2, J940; XJ. S. v. San Francisco Hardwood Floor Contractors' Association, et 
al. Indictment, December 20, 1939; U. S. v. Harbor Di.ttrict Chapter, Nationnl Electrical Contractors' Asso- 
ciation, et al. Indictment, February 16, 1940; and U. S. v. Master Plasterers' Association of San Francisco, et al. 
Indictment. December 22, 1939. 

3 See, for example, U. S. v. Glaze-Rite, et al. Indictment, November 10. 1939; U. S. v. St. Louis Tile Con- 
tractors' Association, et al. Indictment, May 17, 1940, pleas of nolo contendere and fines api:repatine t2f),0U 
assesssed (suspended for 3 years) and Consent Decree entered July 1. 1940; and U. S. v. Brooker Engineering 
Com-pany, et il. Indictment, March 21. 1940. 

« See, for example. U. S. v. San Francisco Electrical Contractors' Association, Inc., et al. Indictment, March 
2, 1940; U. S. v. Master Plasterers' Asscciation of San Francisco, et al. Indictment, December 22, 1939; and 
6'. S. V. Associated Plumbing and Heating Merchants, it al, Indictment, April 27, 1940. 



CONCENTRATION OF ECONOMIC POWER 18189 

prove correct, unions will need to take the precaution of placing in by-laws rather 
than labor agreements their rules which are designed to destroy independent 
business or to fix prices. The public will have no safeguard against private price 
fixing wherever a labor group has reason to believe that its price-fixing program 
will make employers more generous in dealing with it. Those unions which think 
that the well-being of a labor organization is closely related to what goes on in 
the market for the industry's goods will be free to make rules about any aspect 
of business activity without being limited by the antitrust laws; and of course 
their employers will gladly acquiesce in the enforcement of any such rules which 
embody restraints of trade congenial to the employing group. Unions which see 
no direct advantage in making their products scarce and high priced by restraints 
upon the commodity markets will be licensed to sell to their employers price-fixing 
services which no one else has a legal right to perform, provided only that the 
increase of wages which employers grant in payment for these services is not so 
conditioned upon performance as to make the employers parties to the price- 
fixing scheme. In economic effect and in burden upon the consuming public, a 
commodity price fixed by labor is indistinguishable from one fixed by other 
groups. 

So broad an exemption for unions must necessarily turn the ingenuity of busi- 
ness groups toward the development of incentives to induce unions to restrain 
trade without formal agreement with employers. Its practical effect would be to 
make the antitrust laws largely inoperative, not only for labor groups in the sale 
of their services in the labor market, but for commodity markets in industries in 
which organized labor is powerful. 

MAKE-WORK POXiICIEg 

A variety of union practices involve restrictions upon trade designed to make 
work for the members of the particular labor group which imposes them, either by 
transferring that work from some other labor group or by requiring the perform- 
ance of more work than is reasonably necessary in doing the job. In the first 
class of cases the restriction obviously brings no benefit to labor as a whole, though 
it may benefit a particular group at the expense of other organized labor. In the 
second class of cases, there is an immediate increase in the total number of jobs, 
which often evokes an offsetting decrease in demand for labor by employers who 
use labor-saving processes to escape the increased expense. In both cases, how- 
ever, the injury to the general public is similar to that which is created by any 
non-labor group when it attempts to protect a local market or to impose unneces- 
sary charges upon business activity. 

A frequent restriction designed to benefit one labor group at another's expense 
is refusal to handle materials which are not locally made. Several pending 
antitrust cases involve this practice. In Chicago, stone cutting establishments 
and the Building Trades Council are charged with a conspiracy to require that 
stone used in Chicago construction be finished in Cook County rather than else- 
where. Since rough stone may weigh as much as 20% more than the finished 
pi-oduct, this regulation entailed an unnecessary freight expense. Since Indiana 
producers are better equipped than Chicago producers, it entailed an unnecessary 
manufacturing expense. Since unionized stone cutters in Indiana get higher 
wages than their union brethren in Chicago, it entailed an actual decrease in the 
wages paid for a given amount of work. The Chicago local obtained work at 
the expense of the Indiana local and of the Chicago builder. In other cases 
involving the same principle, the local branch of the electrical union in New 
York City is charged with refusal to install electrical equipment made outside 
New York State except on condition that the equipment be disassembled and 
reassembled at the job site. In Pittsburgh and San Francisco the carpenters 
union is charged with participating in conspiracies to prevent the use of millwork 
not locally manufactured. In some instances this effort to Balkanize the Ameri- 
can market has been a joint activity of employers and workers, both interested 
in transferring business to themselves from out of town competitors. In other" 
instances labor alone has made the effort. The economic effects upon the market 
have been identical, whoever imposed the restraint. 

In a second type of case, unions have sought to require that work be done on 
the job site rather than in the factory. In antitrust proceedings against metal 
lathers in New York City, it is charged that they refused to install metal lath and 
metal rods which were not fabricated or bent on the job or in union shops within 
the city. Carpenters and building laborers in Belleville, Illinois, are involved in 
an indictment which charges that they conspired with contractors and building 
material dealers to prevent tho erection of a. house built from prefabricated 



18190 CONCENTRATION OF ECONOMIC POWER 

structural parts. In Houston, Texas, master plun»bers and the plumbing union 
agreed tiiat piping prefabricated for installation in a particular place in a specific 
job would be installed by the union only if -the thread was cut off one end of the 
pipe and new thread was cut at the iob site. They also agreed that brass pipe 
was to be delivered without a thread on either end. Plumbers in Minneapolis 
agreed with their employers that all pipe up to and including 6 inches must be 
cut by licensed plumbers cither on the job or in a local shop. Electricians in 
Peoria, Illinois, agreed with electrical contractors there that all pipe, wire and other 
materials necessary for installation should be cut, bent, and assembled on the job. 
A similar agreement in Racine, Wisconsin, provided that all conduit be cut and 
prepared on the job and that all fixtures be wired and assembled either on the 
job or by the journeymen during working hours. Electricians in Washington, 
D. C. made a similar agreement providing that all hangers and supports con- 
structed of channel or angle iron or an equivalent, up to and including 3 inches, 
sliould bo fabricated on the job and that all bus ties between transformers, switch 
boards and service entrances, with one exception, should be so fabricated. 
Painters in Chicago agreed that sash, frames, and screens must be primed, painted 
and glazed on the job. In Danville, Illinois, they reluctantly agreed to the prim- 
ing of trim brought from out of town when the architect specified priming at the 
mill, but insisted tliat local trim be primed on the job. 

Efforts to prevent the use of improved processes, more productive machines or 
tools, and better materials are very similar in their motive and effect to efforts to 
prevent factory work. In a pending Chicago case the building laborers' union is 
charged with participating in a conspiracy to prevent the use of ready-mixed 
concrete in Chicago building. Mixer trucks are in general use in the construction 
industry in other cities and have proved their economy. They not only reduce the 
number of man-hours necessary to mix concrete, but, also increase the speed of 
construction by mixing the materials while they are in transit rather than after 
they have reached the job site. In Quincy, Mass., a local of the granite cutters 
union has agreed with the employers that brooms instead of compressed air are 
to be used to remove dust. In Washington, D. C, the electrical union's agree- 
ment with the contractors prohibits the use of power in plilling small wires and 
in cutting and threading pipe of a size between Yz inch and an inch. Various locals 
of the painters union impose restrictions upon the use of spray guns which are 
designed merely to make work by requiring the slower process of applying paint 
with a brush. 

Efforts to prevent the increase of efficiency attainable by transferring work 
from the job site to factory or by using improved processes usually spP^g from a 
desire to avoid any reduction in the number of hours of labor required -to produce 
a particular result. The excuse for such policies which was formerly provided by 
the workers' lack of security from unemployment has been greatly diminished by 
public programs of unemployment insurance and work relief. It is obvious that 
such restrictions" keep costs high and demand correspondingly limited. Factory 
production and improved machines have been the cornerstones of high standards 
of living in the Western World. Labor has a legitimate interest in organizing 
factory workers and in seeing to it that pay, hours, and conditions of employment 
express not only the past gains of labor, but the increased productivity of new 
processes. It has a legitimate interest in surrounding the new methads with 
safeguards for health and comfort. But a veto upon improved technology • 
involves such a severe burden upon the public that the narrow interest of a partic- 
ular labor group should give way. 

The rules of various locals of the painters union concerning the use of spray guns 
illustrate the difference between reasonable safeguards for labor and mere make- 
work policies. The hazards to health involved in the use of oil paint are increased 
by spray painting unless proper respirators are used; and in practice men are care- 
less in using respirators unless they work in gangs under direct supervision. 
Certain local unions have recognized this fact by prohibiting the use of the spray 
gun with oil paint in construction work, while placing no obstacle in the way of 
spray painting with water paint. Although there might be other ways of dealing 
with the problem which would protect the worker's het^ith and still permit a fuller 
use of spray guns, such regulations are so obviously reasonable that under present 
conditions unions should be free to adopt them without check. In other cases 
which have been brought to our attention, however, local unions make no distinc- 
tion between oil and water paint in their rules, but provide that spray guns shall 
be prohibited in painting any wall surface where brush work may be used effec- 
tively, whereas spray painting may be used on all radiators, grills, and other sur- 
faces where it is impracticjii to use brushes. It is clear that sucli a rule fails to 



CONCENTRATION OF ECONOMIC POWER 18191 

protect the worker's health against oil paint sprays but is intended to make work 
by requiring the most time-consuming process wherever practicable. 

Union rules which seek to make work by directly requiring that unnecessary 
labor be hired involve a similar problem. In one antitrust case won by the 
Government, a local of the teamsters' union required that every truck entering 
the metropolitan area have a local driver in addition to the driver already employed. 
Such charges on trucks entering cities are appearing in various parts of the country 
with increasing frequency. In various cities the electrical union requires that 
if any temporary light or power is to be used on a construction job there shall be 
a full time maintenance electrician who shall not be permitted to do any electrical 
construction work. This rule often involves the hiring of a man who spends his 
day reading or playing solitare and does nothing except throw a switch at the 
beginning and end of the day. In several cities the operating engineers' union 
stipulates that no man may be hired for a period of less than three days and that 
if his employment exceeds three days he must be paid for a full week. 

Union rules concerning the amount of labor which must be employed shade 
off from such obviously unreasonable requirements to provisions which do no 
more than safeguard the worker against excessive burdens and excessive speed. 
Rules by bricklayers limiting the load which may be carried up a ladder, rules by 
electricians requiring the use of additional men in certain work upon high voltage 
wires, and rules by various unions of factory workers limiting the number of 
machines which may be tended by a single worker all illustrate the legitimate 
function of many regulations which limit performance or increase the number of 
employees. In view of the importance of the labor interests involved and the 
many industrial situations to which various rules must be adapted, the public 
interest probably requires that in doubtful cases the reasonableness of the union 
regulation be presumed. Nevertheless, there is no need to support union rules 
which clearly have no purpose except to compel the hiring of unnecessary labor. 
Many of these rules can be easily identified because the men hired make no effort 
to perform the work and sometimes do not even show up on the job. Their 
function is merely to receive wages. When a make-work system goes so far, it is 
no more than a program of work relief which, instead of being publicly financed 
and supervised, is privately administered|by discriminatory assessments against 
particular employers and consumers. 

EXPLOITATION OF THE RANK AND FILE 

The perversion of a powerful union creates tragic problems for workingmen. 
Members of unions may be deprived of an effective voice in choosing their leaders 
and determining their policies. The hod carriers' union, for example, has held 
no convention since 1911. Under the union constitution the national officers 
have full authority between conventions to interpret the constitution, to depose 
the officers of locals, to appoint officers, to investigate the activities of locals, to 
review the rules of locals, to make agreements with employers and enforce these 
agreements, and to settle disputes between parts of ths union. During the 30 
years since the last convention the office of president and other national offices 
have been filled as vacancies arose by vote of the remaining national officers. 
Thus a small self-perpetuating group has exercised full control over the union for 
a generation. Unless revolt within the union should reach such proportions that 
two-thirds of the members, undismayed by the wrath of the national officers, 
demand a convention, there is no requirement that any further convention ever 
be held; and even the opportunity for such a two-thirds vote need be extended to 
the membership only at five year intervals. For practical purposes control by a 
junta is established in perpetuity. 

Dictators are no more certain to be public spirited in unions than in political 
governments. This memorandum need not deal with the repeated cases of graft 
collected from members or from businessmen, since the laws against fraud and 
racketeering are adequate, if vigorously enforced, to deal with such problems. 
In some cases, however, the dictatorial power of union officials is used to coerce 
the members into restraints of trade against which there is no legal remedy except 
in the antitrust laws. In the Cleveland glass case the grand jury charged that 
certain officials of a glazing union held substantial interests in local glazing com- 
panies and prevented the installation of glass from other sources, and that members 
of the union who opposed such policies were intimidated and beaten up by the 
order of these officials. In the St. Louis trucking case the grand jury. charged that 
an official of the trucking union who owned certain filling stations required that 
truck owners obtain their gasoline at these stations. The defendants pleaded 



18192 CONCENTRATION OF ECONOMIC POWER 

nolo contendere in this case. In a Middle Western city it is alleged that the sheet 
metal workers' union excludes non-local products in order to give a monopoly to 
the only producing enterprise in the city, of- which the union's business agent is a 
partner. In such cases the rank and file of the union is used as 'the collection agent 
for its officer's private business, is thrown into sfrikes and boycotts which help 
the official to dispose of a competitor, and is given substantially no protection in 
meeting its own working problems. To be unable to get work without belonging 
to a union which is administered as a mere adjunct to a private business is in effect 
to be placed in peonage. 

EXPLOITATION OF NON-UNION WORKERS 

Perversion of union power may likewise injure non-union workers. Member- 
ship in a powerful union may be converted into a privileged status which becomes 
a valuable property right and is used to exclude less privileged workers from 
employment. Some unions categorically refuse to admit new members even 
though the applicants are willing to make the required payments and abide by 
all the union rules. Such refusals take place not only when work is scarce but 
even when there is a shortage of labor. Hence the practice will be illustrated by 
cases in. which unions have remained closed in spite of the employment oppor- 
tunities offered by the national defense program. Local 438 of the steamfitters' 
union in Baltimore admitted only six new members during the peak demanded for 
steamfitters which developed in the first world war, and now has a considerable 
number of applications for membership which its officers frankly admit will be 
rejected regardless of the ability or past employment record of the individual 
applicant. The heavy demand for steamfitters at Fort Meade, Maryland, and 
upon other projects in the Baltimore area is being partly met by issuance of work- 
ing cards to members of locals from other jurisdictions; but because of the limited 
number of union men available, large amounts of overtime are being worked at 
double pay. Complaints have likewise indicated that branches of the carpenters' 
union at Pensacola, Florida, and Charlestown, West Virginia, have refused to 
admit new members and that there have been similar refusals by the painters' 
and bricklayers' unions in the latter place. 

In some cases men are excluded from unions by high admission fees rather than 
by direct '[refusal to admit them. The admission fee of the glaziers' -union in 
Chicago is $1500, and at Camp Riley it is said to be the same amount; the admis- 
sion fee of the motion picture operators' union in East Cleveland, Ohio is $1,000; 
and the admission fee of truckers in Seattle, Washington is $500. We have record 
of various other cases in which the fee is $100 or over. In some instances the 
difficulty of paying the admission fee is enhanced by insistance that the entire 
sum be paid in cash in advance before the applicant obtains union employment. 

When available work is too plentiful to be done by the available members of 
the union, some unions, instead of admitting new members, issue working permits 
to non-union men upon terms which exploit these men. We have been informed 
that at Camp Riley non-union glaziers are charged $2.00 a day by the union for 
the privilege of working and that this sum is collected from more than 150 non- 
union men, whereas there are only about twenty union men on the job. At Fort 
Meade a similar system of working cards is being used by a Baltimore- local of 
the electrical union to obtain a dollar a day from each non-union worker, plus- 
an extra fee when he works overtime. This union, which had 412 members before 
defense construction began, has admitted 1,200 new members by transfer from 
other locals but has accepted to membership only about 100 men formerly non- 
union. 

Under the pressure of the defense program, union control over employment 
opportunities is sometimes used to exploit non-union men by what amounts to 
a racket in membership fees. Complaints from defense projects throughout the 
East and at one or two points in the Middle West allege that various unions, par- 
ticularly those representing carpenters and common building labor, are engaged 
in conspiracies to obtain admission fees from large numbers of non-union men 
and to procure the discharge of these men as soon ^s the fees have been paid. 
In one such case at Fort Meade, Maryland, we found that the union is using its 
requirement of a closed shop to obtain fees from all carpenters hired on the project, 
but that it makes no effort of any kind to determine whether the applicant is in 
fact a carpenter. Such large proportions of incompetent men are certified by the 
union as union carpenters that the discharge of many of them is inevitable. The 
union, however, gets part or all of the admission fee from each successive incom- 
petent. Attached is a newspaper report which attempts to estimate the amount 
of money obtained by the union this way. 



CONCENTRATION OF E,CONOi|IC POWER 18193 

In presenting these illustrations of the exploitation of non-union men in con- 
nection with defense programs, there is nowish to minimize the peculiar difficulties 
which unions face because of the sudden expansion of the demand for defense labor 
in certain areas,. Mass admissions to the union are necessarily difficult and the 
union's responsibility for the competence of its members is not easy to maintain. 
Nevertheless, a considerable number of union locils in defense areas are demon- 
strating that the difficulties can be met without piling up overtime by excluding 
non-union men, exploiting non-union men by excessive fees for working cards, or 
certifying as competent members of the union a mass of labor which has no other 
.qualification for the job than ability to pay a fee. 

JURISDICTIONAL DISPUTES 

A powerful union may be used to impose an impossible burden upon emploj'ers, 
particularly small employers. There need be no concern about burdens which 
may be involved in the maintenance of union wages and working conditions; for 
it is a cardinal principal of public policy that business enterprises which cannot 
maintain high labor standards should be displaced, so far as possible, by those 
which can. However, an employer who is willing to provide wages, hours, and 
working conditions which meet the highest union standards may be exposed to 
strikes and boycotts which he did nothing to provoke and which he can do nothing 
to terminate. Such cases arise when a strong union is unwilling to use peaceful 
means of adjusting disputes between unions or is unwilling to abide by an adverse 
award. 

Jurisdictional strikes typically involve such situations. Within the American 
Federation of Labor the various departments of the Federation have as one of their 
principal duties decision of disputed questions of union jurisdiction. Neverthe- 
less, strong unions frequently refuse to accept adverse decisions of the depart- 
ments of which they are members, in spite of the fact that the unions themselves 
created the machinery of decision. Probably no union has been thus recalcitrant 
more often than the carpenters' union. The Hutchenson case, in which a majority 
of the Supreme Court recently decided that the antitrust laws do not cover such 
controversies, arose out of a jurisdictional dispute between carpenters and ma- 
chinists as to which union should install machinery in a brewery. In this instance 
the carpenters had repudiated a settlement which they had previously accepted 
and had sought to impose their own terms by strikes and by nationwide boycott 
of the brewer's beer. 

Even more disastrous to the employer are cases in which jurisdictional awards 
of the National Labor Relations Board are attacked during warfare between 
unions attached respectively to the American Federation of Labor and Congress 
of Industrial Organizations. In the Chicago plywood case, both A. F. of L. and 
C. I. 0>-had requested the National Labor Relations Board to hold an election in a 
plywood manufacturing plant and had agreed to abide by the result. When the 
C. I. O. union was established as bargaining agent, the A. F. of L. carpenters' 
union boycotted the plant's products. In the New Orleans Building Trades Council 
case, the National Labor Relations Board had certified a C. I. Q. teamsters' union 
as the bargaining agent for the trucking industry, but the A. F. of L. Building 
Trades Council refused to let any A. F. of L. construction union work upon mate- 
rials delivered in trucks driven by C. I. O. labor. 

In aU such cases the employer, who is the unfortunate victim of the labor war, 
has no way of avoiding trouble, no matter how willing he may be to meet the terms 
of the unions. In the simpler case he may choose which of the unions he would 
prefer to see strike. Where one union has been certified as bargaining agent, he 
may take his choice between enduring the strikes and boycotts of the other union 
or finding himself subject to the penalties which the law provides for employers 
who engage in unfair labor practices. Moreover, when a dispute is between mem- 
bers of rival labor federations the sympathetic support given by other unions in 
the same federation may extend the area of conflict, as was done in New Orleans, 
until employers in other industries face strikes if they obtain their materials from 
concerns which obey the law. 

During the present emergency the internecine war of labor unions is of great 
conern to the nation as well as to the employers immediately involved. At 
Dayton, Ohio, construction of a wind tunnel and laboratories vital to airplaoe 
production was suspended for 17 days because unions aflSliated with the A. F. 
of L. struck against the employment of 5 workingmen who are members of the 
C. I. O. In the St. Louis area work was suspended for more than a month upon 
an addition to a zinc plant which is to produce between 500 and 600 tons of zinc 



18194 nONOENTRATION OF ECONOMIC POWER 

per day, because the C I. O. union which operates the present plant threatened 
to strike if A. l'\ of Ij. construction workers built the addition and A. F. of L. 
unions building another plant for the same company threatened to strike if the 
addition was built by C. I. O. Upon other defense projects in the St. Louis 
area, A. F. of L. unions have forced the importation of labor from other states 
in spite of the fact that C. I. O. labor was locally available and have required 
the importation of sand, gravel, and crushed stone from another state at a cost 
more than 50^ a ton greater than that of similar products from nearby C. I. O. 
quarries. C. I. O. has been threatening to retaliate against these practices by 
refusing throughout Missouri to produce or deliver materials which are to be 
used upon any public construction job employing A. F. of L. labor. 

THE NEED FOR SAFEGUARDS 

The United States has decided that it wants high wages, short hours, and good 
working conditions, and that it can obtain these results by encouraging collective 
bargaining and arming those who represent labor in ihe bargain with the right 
to use strikes and boycotts. It has not decided that it wants price fixing, the 
driving out of independent enterprise, the stoppage of improvement in technology, 
the private imposition of work relief programs upon business enterprise, or the 
conversion of unions into dictator-ridden bodies closed to the great mass of work- 
ers who are not yet members. Self-restraint by labor groups is not enough to 
prevent such developments. The problem of public policy is to maintain the 
legal immunities of the collective bargaining process without granting organized 
labor the privilege of collective action for the undesired ends. Labor's freedom 
to use coercive devices, if unchecked, is a freedom to serve any purpose whatso- 
ever. For the most part, the ends of monopoly and unreasonable restraint of 
trade to which these devices may be made to contribute are contrary to no laws 
but the anti-trust laws. The alternatives are to apply these laws to labor when- 
ever labor acts outside its legitimate sphere or else to devise new legislation afford- 
ing the public an equivalent safeguard. 
Very truly yours 

CoRWiN D. Edwards, 

Economic Consultant. 

Enc. No. 229080. 



A REVIEW BY THE HOME MARKET CLUB 

ON MONOGRAPH NO. 10, "INDUSTRIAL CONCENTRATION 
AND TARIFFS" BY CLIFFORD L. JAMES, ASSOCIATE 
PROFESSOR OF ECONOMICS, OHIO STATE UNIVERSITY; 
ALSO REJOINDER BY DR. JAMES AND EDWARD C. 
WELSH, INSTRUCTOR IN ECONOMICS, OHIO STATE 
UNIVERSITY, WHO ASSISTED DR. JAMES IN THE 
PREPARATION OF THE MONOGRAPH 



18195 



124491,— 41— pt. 31-A 13 



A REVIEW OF MONOGRAPH NO. 10, INDUSTRIAL CONCENTRATION 

AND TARIFFS 

(Issued, for use by the Temporary National Economic Committee, by William 
H. Cliff, Secretary, Home Market Club, Boston, Mass.) 

Monograph # 10, printed for the use of the Temporary National Economic 
Committee, is the result of great painstaking efforts of economists, whose sincerity 
is not questioned. This study covers an extremely wide range of commodities. 
As its conclusions are more or less questionable and because the many ramifica- 
tions emanating therefrom are not taken into consideration, this review was 
wFitten and is respectfully submitted to the Temporary National Economic 
Committee. 

Due to the time element and to a desire not to impose unnecessarily upon its 
readers, this report does not delve into all findings enumerated in the said Mono- 
graph # 10. Its primary purpose is to test the accuracy of both statements and 
conclusions and their ensuing effects upon our xxational economy. 

Letter op Transmittal by Economic Adviser to T. N. E. C. 

"As is well known, the tariff is a tax — a tax levied against all consumers." 
(Monograph, Page IX.) 

Answer: A tariff would be "a tax against all consumers" if applied to imports 
of goods we do not produce or which are not native to this country. These non- 
competitive goods are put on the free list for the specific purpose of avoiding the 
imposition of a tax upon domestic consumers. 

Tariffs on competitive goods are quite different. They are levied with the 
intent of equalizing lower foreign costs with higher domestic costs." If these tariffs 
are a tax, then American higher wage and living standards are a tax. Americans 
take pride in these higher standards and consider them as advantageous factors. 
Obviously they can't be a credit and debit at one and the same time. 

Price and quality, in the long run, control all markets. If a producer can sell 
in the domestic market at a price that will render a profit, he can afford to sell 
abroad without profit in. order to produce at a minimum of cost per unit. By 
running full time, he can give more work to his employees. Furthermore, by 
maintaining a minimum of cost, due to running fuH time, he can offer his product 
to the consumer at a price less than he otherwise would have to charge. Inci- 
dentally, selling abroad at cost is pretty close to the border line of dumping. 
On the other hand, inordinately high prices LOt only encourage domestic compe- 
tition but stimulate importation of comparable foreign merchandise, irrespective 
of tariff. 

Industry, whether in the field or factory, is generall)' divided into three classes: 
1) those which supply the whole or almost the entire demand, for domestic use 
and consumption. 2) those which, with proper cultivation, are ultimately capable 
of supplying and do eventually supply such demand and 3) those which, due to 
natural conditions either regional or climatic, are not qualified to supply and 
thereby leave domestic demand dependent on foreign supply. 

A prohibitive duty could be levied in class 1 with little or no effect on pricea 
paid by the consumer. Legislative protection simply preserves the 2nd, and has a 
tendency to raise this class to a level with the 1st. Cost to the consumer would 
not necessarily be increased. If it were raised, the increase would be merely tem- 
porary as the legislative protection would stimulate production and thereby keep 
prices down to a reasonable margin of profit, which would result in a lowered 
cost to the consumer. If the increase became permanent, there are sevefal govern- 
ment agencies watching for exorbitant price levels and are ready to proceed under 
existing law. Tariffs levied on the 3rd class are almost entirely- for revenue pur- 
poses, which is the reason why this country has created such a long list of com- 
modities free of duty. 

"A tariff is a burden put upon foreign competitors so that the amount of 
competition at home may be less." (Monograph, Page IX.) 

18197 



18198 CONCENTRATION OF ECONOMIC POWER 

Answer: If the tariff is "a tax paid by all consumers", as previously claimed 
in the Monograph, how can it be "a burden put upon foreign competitors"? But 
why shouldn't foreigners pay for the privilege of competing in the domestic 
market with American producers! Either they should pay sufficient to cover the 
difference between foreign and domestic costs, due largely to low wage rates 
abroad, or American standards of life must be reduced to levels at which domestic 
producers can successfully encouriter such comjietition. 

"The extra price (due to tariff) stands for so much bonus to domestic producers 
to enable them to maintain themselves in a disadvantageous industry. And it 
represents so much national loss." (Monograph, Page IX.) 

Answer: In the first instance, what is a disadvantageous industry? Industry 
should be efficient, but efficiency lags when industry is forced by ruinous foreign 
competition to lower its standards, which is the reason why tariffs should be suffi- 
cient to cover the difference between domestic and foreign production costs, 
■ thereby compelling imported merchandise to compete with domestic products on 
a quality rather than a cut-throat basis. Such tariffs permit the maintenance of 
and encourage an increase in efficiency. 

In the second: What represents so much national loss? If the Administra- 
tion's supposition that increased government expenses are harmless because they 
represent borrowing among ourselves is predicated on sound economics, it is most 
certainly logical to retain in this country both ends of a sale — the money paid and 
the product sold. 

"But 'trusts' are also vigorous proponents of the tariff." (Monograph, Page 
IX.) 

Ansxver: Some may be; it is auite evident that others are not. Domestic 
industries which require foreign outlets, due to their massive productive power, 
and are capable of developing such outlets, because of their tremendous financial 
power, have become so all-powerful that the public is apt to condemn them as 
"trusts". They most assuredly are not "vigorous proponents of the tariff". They 
should not be benefited by legislation to the detriment of less powerful American 
industries, which are largely dependent upon maintaining a fair share of the 
American market, which is logically theirs. 

"They (American companies) are protected like infants, presumably on the 
ground that despite their control over the domestic market they are not vigorous 
eno'jgh to hold their own in compr+ition w-ith foreigners." (Monograph, Page IX.) 
Answer: The authors of Monograph #10 fail to comprehend that all factors 
of production cost ultimately resolve into the one item of labor cost, because the 
material use of anything is the result of labor. PJvery time anything is handled, 
from the moment its raw material is severed from nature, through the longer or 
shorter processes of developing or adapting it to human usage and until it passes 
to the final point of consumption, it is labor that does it. It is not only labor that 
is on the payroll of field, mine, factory and mill, but it is the labor which matures, 
assembles and fabricates materials into the final product, for its machinery, for 
its supplies that are constantly renewed, for its expenses and services of manage- 
ment and investment, for the maintenance of local, state and Federal government 
and their public works. It is this factor of labor with which we cannot conifiete. 
Foreign industries should pay for the franchi.se that permits them to compete 
in the American market with sucli domestic industries, which pay taxes to the 
federal, state and local government, and which extend employment opportunities 
to labor, and, likewise, to capital which is t.ht fruit of labor. Capital is now idle 
because of artificially low interest rates i)aid in hiring money. It has not sufficient 
earning power to attract it to industry away from safer and less hazardous employ- 
ment. Idle capital does not open opportunities for employment to the wage earner. 
Probably 'HO sound econtunists wiil admit that both capital and labor, which are 
interdependent, are not worthy of their hire. 

"That question (one meriting extended treatment) is whether the trade- 
agreement program has incidental usefulnes.". as a device for combating rnoi:opo- 
listic or restrictive tendencies at Lome. The old method of tariff-makmg con- 
stituted a vehicle favorable to the creation and perpetuation of monopolistic 
tendencies." (Monograph, Pago X.) 

Answer: The trade-agreement program is probably a greater influence than 
the old method of tariflf-making ir abetting rather than combating monopolistic or 
restrictive tendoncie? at home; V.'ecause it opens markets abroad, which the old 
method did not, for thf surplus prodvut? of all-powerful domestic interests and 
thereby permits .such interest^ tc. ciu'i;nl reduction in prices to the domestic con- 
sumer. 



CONCENTRATION OF ECONOMIC POWER 18199 

Chapter I. Introduction and Summary of Findings 

"When tariflb exclude effectively foreign sellers of a given product from the 
domestic market, monopoly in some cases may be fostered, or at least facilitated." 
(Monograph, Page 2.) 

Answer: Monopolj^ possibly may be fostered or facilitated in some instances, 
but monopoly in itself is not necessarily either good or bad. Its effects are accord- 
ing to its practices; if unethical they may be harmful and if ethical, they will be 
beneficial to the consumer. Protective tariffs in many instances have made pos- 
sible the establishment of great domestic industries, which sell their products at 
lower prices than consumers would have to pay, if, through the elimination of 
domestic production, they were forced to rely upon imported merchandise offered 
by foreign producers. 

"Because of fewness of production units, lack of efficiency, and a group interest 
stimulated by a tariff on a given product, combinations, consolidations and 
mergers are made easier than they otherwise would be. An additional incentive, 
moreover, is the possibility that in case of a prohibitive tariff increased monopoliza- 
tion among domestic producers will permit a more complete use to be made of the 
tariff with regard to domestic price policy." (Monograph, Page 2.) 

Answer: 'I) Combinations, consolidations and mergers are generally consum- 
mated in the interest of efficiency; 2) protective tariffs stimulate production, en- 
courage domestic competition, and prices are regulated by the infallible law of 
supply and demand. High prices attract other American producers to those lines 
in which such prices exist. Furthermore, if prices artificially rise to excessive 
levels, tariffs become ineffective, thus permitting a flood of impt -ts that will 
correct the situation. For example, when consumers were forced to p^^. an exces- 
sive price for sugar subsequent to the world war, imports of that commodity com- 
ing from almost everywhere in the world soon forced that price not only down to 
but beneath the average price level. 

"In the event that the monopolistic industry engages in some exporting, the 
tariff assurance against imports disturbing the domestic market strengthens its 
bargaining position with foreign producers in agreements to allocate certain 
marketing areas." (Monograph, Page 2.) 

Answer: It is quite evident that the reciprocal trade agreement program, in 
making foreign markets available to the products of monopolistic interests, 
encourages such practice. 

"Cost of transportation enables production units in different areas of the same 
countries to exercise local monopolistic control." (Monograph, Page 3). 

Answer: Such may be possible in certain instances, but not generally so. Com- 
bination water and freight rates in normal times from abroad to inland domestic 
points, enjoyed by many foreign competitors, are often less than freight rates 
charged domestic producers from their domestic plants to the same inland domestic 
points of consumption. Likewise, water rates from abroad are less than freight 
rates from Ohio to points of import on the eastern seaboard,, which are large 
centers of consumption. 

"The same factor (transportation) with sanitary and other administrative re- 
strictions eliminates foreign selling of many types of goods and services in the 
domestic market, or confines the selling primarily to coastal areas." (Monograph, 
Page 3.) 

Answer: The outstanding case is the sanitary restriction which prohibits the 
importation of fresh, chilled or frozen beef from Argentina, but the tariflf of 6c 
per lb. is not even a factor. In accordance with section 306 (Special Provisions) 
of existing tariff law (and this or similar restrictions have been enforced since 
the second Cleveland administration), the Secretary of Agriculture found that 
foot-and-mouth disease exists in Patagonia and so notified the Secretary of the 
Treasury, who had no otlier alternative but to enforce an embargo on Argentine 
beef. r)epartment of Agriculture experts after careful study could find no evidence 
that such danger exists. However, no formal notice of such finding has been issued 
by the Secretary of Agriculture to the Secretary of the Treasury, who would be 
compelled under the provisions of the said section 306 to raise the embargo on 
beef from Argentina. Politics seem to be the determining factor in this particular 
instance. 

"If the industry produces otlier products which are practically identical with 
imported goods, it may engage in full-line forcing and thereby exclude most of 
the imports from the domestic market." (Monograph, Page 3.) 

Ansiver: This ai)pears to l)e a ca.se for the Federal Trade Commi.ssion to deter- 
mine as to restraint of trade. 



18200 CONCEN TltATION OF ECONOMIC POWER 

"Federal legislation (1933, 1935 and 1937) provides that within certain discre- 
tionary limits purchases for the Federal Government, or purchases under its 
contracts by others, are limited (o domestic products." (Monograph, Page 3.) 

Answer: This case is merely an instance wherein Congress, in a humanitarian 
effort to open opportunities for employment lias granted priority to domestic 
producers, within discretionary limits as to price and quality. 

"In 1890 Congress enacted the Sherman antitrust law in order to eliminate 
monopolistic developments in domestic industries and it also made a general up- 
ward revision of tariff rates which placed them above any previous level. No 
important downward revision was made in the tariff until 1913." (Monograph, 
Page 4.) 

Answer: The Wilson-Gorman tariff law was enacted in 1894, during the second 
Cleveland Administration, for the specific purposes of "a general revision, reduc- 
tion, and simplification of our system of import duties." Government statistics 
show an increase in rates on 53 articles and reductions as follows: transferred 
from dutiable to free list 92 articles, from 50% to 75% on 112 articles, from 25% 
to 50% on 368 articles and 25% or less on 250 articles. As that law reduced 
tariff rates on a total of 829 items, it can hardly be said with conviction that no 
important downward revision was made in the tariff until 1913. 

"Dutiable imports from Germany, for example, have not been granted trade 
agreement rates since October 14, 1935, because of discriminatory treatment of 
American e.xports, and in addition to the duties of the act of 1930, dutiable imports 
from Germany since March 18, 1939, have been subject to countervailing duties 
equal to the amount of the export subsidy which they apparently received." 
(Monograph, Page 4.) 

Answer: Great Britain, 'Franco and the United States entered a tripartite 
agreement and all three nations devalued their respective currencies. Germany, 
which previously had Hmitli'ss inflation and had revalued its new mark at 24^ 
cents in comparison with a dollar worth lOO cents, found it impossible to compete 
in world trade against a 59c dollar, which raised her mark to a level above 40 
cents. W^e did not grant to her benefits of the reciprocal trade program possibly 
because it would have been unpopular to have done so. On the other hand, we 
did not impose countervailing duties in accordance with provisions (section 303) 
of existing tariff law, although public announcement to this effect was never 
made. During 1935 and the first half of 1936, barter transactions facilitating Ger- 
man exports were permitted in the United States, even though it was plainly 
evident that Germany paid bounties to her exporters so that they might quote 
lower prices in the American market. The Federal Treasury did impose counter- 
vailing duties froxii June, 1936, to December of the same year. Why were such 
duties withdrawn in December, 1936, and not reimposed until March, 1939? 
Possibly because we desired to soften hardships inflicted upon Germany through 
the reduction in the gold content of the dollar, but more probably because barter 
transactions were the means by which we could dispose of huge quantities of sur- 
plus raw cotton, copper, oil and other Nvar materials. 

"In other cases reduction or removal of tariffs which permitted a substantial 
increase in imports would have only partial effect; that is, the increase in imports 
might be confined because of transport costs largely to coastal areas and would 
lower prices there without atfccting them appreciably in inland areas; — without 
affecting appreciably the commodity class as a whole." (Monograph, Page 5.) 

Answer: Coastal i^areas are largely great centers of consumption. As previ- 
ously ex})lained, water rates from abroad sre cheaper than domestic freight rates 
to these areas. The removal of tariff would give these groat consuming markets 
gratis to importcr.s, who employ few American workers. Why not preserve them 
for domestic producers who empk y many American wage earners? 

"Without tariff aid and in the absence of other special favorable for more 
monopolistic practices, the only possible monopolistic device would be some 
form of international agreement among iiroducers which under the circum- 
stances indicated would be very difficult to maintain." (Monograph, Page 5.) 

Answer: The negotiation of "international •agreement among producers" has 
probably been encouraged by the so-termed reciprocity program, because recipro- 
cal trade treaties have opened foreign markets to those huge American productive 
interests, frequently looked upon as "trusts", v/hich require and are capable of 
developing such outlets for their surplus products. 

"R€^;ardless of the method used, a coordinated policy in the use of tariffs and 
in the preservation of competition or regulation of monopoly is needed to promote 
efficient production and to assure that a liberal portion of the fruits of efficiency 
wiU reach the mass of consumers." (Monograph, Page 11.) 

Answer: This statement resurrects the theory that tariffs protect inefficient 
domestic producers. It would be inconsistent to assume that one individual is 



CONCENTRATION OF ECONOMIC POWER 18201 

efficient merely because he is on a farm, and that a second is inefficient simply 
because he is in a mill or factory. The Prosidont, under the Agricultural Adjust- 
ment Act, may by proclamation limit imports of agricultural products, if such 
importations render or even tend to render ineffective or matenally interfere with 
the Administration's agricultural program. The President, under the Reciprocal 
Trade Agreement Act, may by proclamation increase or decrease by not more 
than 50% any existing tariff rate on dutiable imports. He has decreased rates and 
has thus encouraged greater importations, in accordance with this Act, but has not 
increased rates and thereby limited imports. It is widely recognized and an 
official of the Tariff Commission, in testifying before a congressional appropria- 
tions committee, has admitted that, while the President may theoretically increase 
rates, there is no practical way for him to do so. The situation, predicated upon 
these two legislative acts, permits the inference that somewhere in authoritative 
government circles there is the assumption that farm workers in a certain branch 
of agriculture are more efficient than those who toil either in some other agricultural 
line, in mill or in factory. 

Farm production costs do not include the high overhead imposed on industry 
by recent legislation, such as wages and hours, labor relations and social security. 
Certain American industries, due to world leadership in mass production, have 
been able to enter export trade. On the other hand, certain lines of agriculture, 
which are doubtlessly as efficient in mass production methods and which formerly 
enjoyed world leadership, now find their production costs so high, due largely to 
the agricultural program, that their products are priced out of world markets and 
the Government deems it necessary to grant subsidies in order to make possible 
exportations of certain farm products, notably cotton, wheat, tobacco, etc. 

Chapter II. 

"Two products, sugar and rayon yarn, w-ere analyzed from the point of view of 
consumers' cost." (Monograph, Page 11, Chapter I.) 

"Because of restrictions on imports, consumers each year pay a substantial 
additional amount on sugar." (Monograph, Page 14.) And similarly 

"In 8 recent years the domestic consumers have paid on the average about 
$273,633,000 more for sugar because of import restrictions." (Monograph, Page 
11, Chapter I.) 

Answer: Such statements are not substantiated by reports of the United States 
Tariff Commission. This country entered a reciprocal trade treaty with Hawaii 
in 1887. The consideration given for a naval base at Pearl Harbor was the ad- 
mission into the United States, duty free, of specified products originating in the 
islands, w^hile similar commodities, w^hen coming from other sources, were subject 
to substantial rates of duty. The one commodity signally affected was sugar, 
beyond all expectation. According to the report: "The remission of duty on this 
sugar was not followed by a reduction in the price to the American consumer; 
the gain went to the sugar producers." 

The following is taken from a Tariff Commission report captioned "Cost of 
Production in the Sugar Industry": "The foregoing compilations are based on the 
supposition that when the duty is removed the price will fall by the full amount 
of the tariff. Obviously the foreign purchaser could place his sugar on our mar- 
kets at the lowered price and still be as well off as before. But because he could, 
it by no means follows that he would. . . . There would be the same buyers, the 
same sellers, the same quantity to be dispo.sed of. Because the Cubans could 
afford to sell cheaper would in no wise move them to do so. They could get the 
best price attainable and the price would be precisely the price received before, 
plus the duty." 

Furthermore, an official of the Tariff Commission testified before an appropria- 
tion committee of the Congress on the then pending Independent Offices Appro- 
priation Bill. What he said, which is quoted here in part, is interesting in view 
of the finding that the duty on sugar costs the consumer $273,000,000 annually: 
"The lowering of the rate of duty on Cuban sugar under the trade agreement 
probably has had little effect on the wholesale price of sugar or on the price to 
the consumer in the United States". 

As the price in many cases is not based on the cost and bears little if any re- 
lation to the cost, the tariff does not in many instances directly affect the price. 
Statistics of the Department of Labor, issued Augu.st, 1940, substantiate the fore- 
going statement. In 1932, when the duty on Cuban sugar was 2c per lb., the 
retail price paid by the consumer was 89.6 as against an average of 100%. In 
1933, after the sugar tariff had been reduced by presidential proclamation, the con- 
sumer price rose to 94.3. Jn subsequent years, after the duty had been reduced 
to .9c per lb. in the Cuban agreement, the price for the ensuing years was as 



18202 CONCENTRATION OF ECONOMIC POWER 

follows: 1934-97.9; 1935—100.7; 1936—99.6; 1937—101.2; 1938—97.9; 1939— 
100.6 and for the first eight months of 1940 it stood at 100.5. 

A comparison of Monograph and Tariff Commission statistics is interesting, 
if not enlightening. Beet sugar (gramijated) : 87 domestic plants, of which 4 
produce 76% of the entire production, according to the Monograph, while the 
Tariff Commis.eion states that six importing concerns import almost all the Cuban 
raw sugar. Incidentally, the Federal Government has paid a subsidy of %c per lb. 
to domestic sugar growers. This case is merely one of many which tends to prove 
that prices of imported commodities are probably all that the consumer will bear. 

"Tariff protection of rayon yarn (principal weights only) imposed in 1937 and 
1938 an additional cost on the consumers of $139,171,000." (Monograph, 
Page 11.) 

In conjunction with the above, it might be well to consider the following: 

"Dr. James has made a study of only two commodities, sugar and rayon yarn, 
and arrived at estimates well corroborated by scientific studies independently 
made that the tariff in these two commodities alone probably costs American 
consumers more than a quarter billion and possibly as much as a third of a billion 
dollars a year." (Theodore J. Kreps, Monograph, Page X.) 

Answer: The estimates as to rayon yarn "well-corroborated by scientific studies 
independenth' made", were derived by multiplying the difference between the 
invoice or entered price of imported yarn and the domestic price of rayon yarn 
bj' the total number of pounds sold. They fail to take into consideration various 
items of cost, including profit for the importer. Under such circumstances, these 
estimates "well-corroborated by scientific studies" are at least open to serious 
doubt, if not utterly valueless. 

"A substantial reduction of the duty on rayon yarn ("the most important" 
of 11 listed textile products) will probably allow imports to serve as a partial 
regulator of domestic prices." (Monograph, Page 17.) 

Answer: Imports are small not so much because of the tariff but rather because 
most foreign countries that produce and export rayon yarn, particularly Japan, 
are involved in war. When the millions of men now in arms are returned to 
jieace-time pursuits the ensuing results upon our national economy may be dis- 
astrous. Irrespective of present conditions abroad, competition between domestic 
yarn producers has lowered the price. In the meanwhile, scientific research has 
increased the quality. This reduced price and higher quality of the domestic 
product have overcome the initial consumer prejudice against synthetic fibers. 

"Removal or substantial reduction of duties which are related to the industry's 
products (starch) would allow foreign selling to become a partial regulator of 
domestic prices." (Monograph, Page 15.) 

Answer: This statement, which might be applied to many industries enumer- 
ated in the Monograph, is not necessarily so. As is shown in a previous case, 
neither the foreign value nor the amount of duty, which is levied on the foreign 
wholesale value, has much effect on retail prices of imported merchandise, for such 
prices are apt to be set at whatever level it is thought the consumer will pay. 

The analysis of the wood and paper group, which consists of 16 products in 
the wood and paper industries having a total value of $112,741,142, is on page 17 
of the Monograph. The conclusion on cigarette paper, which is a fair sample of 
the findings pertaining to the entire group, reads: 

"A substantial reduction of the duty would increase imports and would lower 
prices." (Monograph, Page 17.) 

Answer: Under the trade agreement with France, effective June, 1936, the 
rate of duty was reduced from 60% to 45%, which is equivalent to a reduction 
of 25%. Testimony given by an official of the Tariff Commission, which is both 
interesting and enlightening, reads in part: "The consumer of cigarette paper is the 
manufacturer of cigarettes. The Commission has no information as to the extent 
to which savings through lower duties have been passed on to the American 
cigarette manufacturer in lower prices for imported paper and to what extent re- 
tained by French paper manufacturers and importers. In some cases the American 
cigarette manufacturers are affiliated with one or the other of these groups. In 
any case the cost of the paper is such a small part of the cost of a cigarette that a 
reduction of 25 per cent in the duty on cigarette paper could not be expected to 
resiilt in t. lower retail price for cigarettes." Incideiitally, the principal importers 
of cigarette paper are only six in number. 

Regarding Chemicals and Allied Products the Monograph concludes that: 

"The existing duties are a partial support for monopolistic elements in the 
domestic industry." (Monograph, Page 20.) 

AfT-sn-er: It is admitted previously on page 20 of the Monograph that "The 
European Dye Cartel composed mainly of German, Swiss and French companies 
allocates markets, formulates prices, etc." It is a matter of record that prices of 



CONCENTRATION OF IX'ONOMIC POWER 



18203 



chemicals were much higher when there was no real potent domestic industry 
and the European Cartel fixed prices in the American market. The German 
chemical industry, which is by far the stronjjjest factor in the European Cartel, 
assumed the arrogant attitude, during World War I, that it could force many 
American industries to shut down by withholding supplies of dyes, chemicals 
and medicinals. Why then, in a discourse on monopoly, is a policy advocated 
which might again place America in the grasp of a foreign monopoly? 

Regarding machine tools and e(|uipment, the Monograph finds that 

"In view of the basic importance of this industry to the economy of the country, 
additional information is needed with regard to its organization and its status 
in international trade." (Monograph, Page 25.) 

Answer: American machine tools are known throughout the world for their 
excellence, with recognition especially for automatic and semi-automatic tools. 
Exports in ordinary times are about one-fourth of the domestic production. 
Because of war and preparation for same, the rate of exports in 1938 increased 
to approximately one half of domestic production. 

The conclusions generally given in the Monograph are that a reduction or 
removal of duty either would have "very little effect on the import-domestic price 
situation" or, in very few instances, 'Sv(';!d Jcv r prices slightly". Such conclu- 
sions, in view of what may happen whe:> peace is restored, are simply predicated on 
assumption. For instance, American exports of machine tools in 1938 amounted 
to slightly more than $100,000,000; about 2l','o going to Japan and more than 
'S5% to Russia, with the probability in the second case that a large part eventually 
reached Germany. Exports to Great Britain were about 15%. 

Prices of British, German and Japanese tools are below American prices, and 
Germany's exports are approximately equal in value to American exports in 
normal times. After the war, those nations which have been geared for huge 
production, simply because of the great demand for military purpo.ses, will have to 
find outlets in international trade. It is well known that foreign makers, partic- 
ularly German and Japanese, formerly reproduced American designs and offered 
the reproductions in the American market at prices below those of domestic 
machines. Because such practices have been exercised in the past, it is logical 
to assume that they may be exercised in the future, after peace is restored. So 
it seems somewhat premature to assume that a reduction in duty would have 
"very little effect upon the import-domestic price situation". 

As cited above, Ru.ssia is the largest importer of American machine tools. One 
example is sufficient to show, under existing conditions, the seriousness of. such 
imports. In 1938 the Soviet Government bought only $230,000 worth of oil- 
drilling equipment, out of total imports of machine tools from America amounting 
to $35,000,000. A single shipment of 40 complete drills, worth more than $1,000,000, 
was sent to Russia in December, 1940. This type of American drill, having a 
daily capacity of 25,000 to 30,000 bbls., is portable and is of such high quality 
that it would last for years. Needless to say, oil is a vital war material. Those 
machines may some day be used to the detriment of America. 

As to electrical machinery, equipment and related products, the Monogifaph's 
findings read in part: 

"The General Electric Company, for example, is the largest domestic producer 
of electric lamps and several other kinds of electrical equipment. It is also con- 
nected, directly or indirectly (International General Electric Company) by finan- 
cial interests and agreements with many important foreign companies. . . . Re- 
moval of duties in certain instances might not be followed by any appreciable 
increase in imports, but domestic prices might be lowered in order to discourage 
any attempts of foreign selling in the domestic market by independent companies 
or by potential violators of agreements." (Monograph, Page 26.) 

Answer: The above deductions hardly parallel those from the inference taken 
from wholesale prices, before Japan became embroiled in war, of domestic lamps 
and competing imported Japanese lamps: 

American 

Per C 
$10. 00 
10. 00 
10. 00 
10.00 
10. 00 
12. 50 
15. 00 
15.00 
25.00 



Japanese 



15 W 


I F 


25 W 


I F 


40 W 


I F 


50 W 


I F 


60 W 


I F 


50 W 


Clear 


75 W 


Clear 


00 W 


Clear 


50 W 


Clear 







PerC 


15 W 


I F 


$3. 33 


25 W 


I F 


3. 33 


40 W 


I F 


3. 33 


50 W 


I F 


3.33 


60 W 


I F 


3.33 


50 W 


Clear 


3.08 


75 W 


Clear 


5. 30 


100 W 


Clear 


6. 70 


150 W 


Clear 


10.00 



18204 CONCENTRATION OF ECONOMIC POWER 

Miscellaneous Products (Page 26) include 36 commodities, all of which are 
subject to duties, with the exception of binder twine. Due to the various types of 
commodities considered, it is difficult to reach satisfactory conclusions. From 
statistics given, it would seem that this particular section hardly warrants the 
"study" made. For instance, these 36 commodities are manufactured by 1,107 
companies having a total output of $1,353,707,072. But 86.3% of this total, 
amounting to $1,160,125,549 is manufactured by 818 companies and is subject to 
duties that are "not restrictive" and, furthermore, have "no effect on monopoly". 
Nevertheless, the findings as to one product (slide fasteners or zippers) is "A sub- 
stantial reduction of the duty would increase imports, would lower domestic prices, 
and would assist in offsetting monopolistic elements in the domestic industry" 
(Monograph, Page 27.) 

Answer: The duty on zippers or slide fasteners was in 1936, after an investiga- 
tion of the difference between the domestic and Japanese production costs, in- 
creased from 45% to 66% by presidential proclamation. It is a question, there- 
fore, as to the accuracy of the findings of Prof. Clifford James as compared with 
those of the Tariff Commission, which were accepted by the President. 

VARIOUS ITEMS OF THE MONOGRAPH CHOSEN INDISCRIMINATELY 

"If a tariff were levied on coffee, for example, consumers would pay more fo 
coffee and the additional payment would approximately equal the revenue col- 
lected by the Government." (Monograph, Page 79.) 

Answer: The logic of this statement is self-evident, as coffee is not produced 
in the United States. Nevertheless, a duty levied even on coffee might redound 
eventually to the benefit of the American consumer. For instance, as a war 
revenue measure we levied a duty of 3c per lb. up to 1872. Coincident with the 
free-listing of coffee, Brazil, the world's largest producer, imposed an export duty, 
and that tax was levied for the specific purpose of getting money from American 
consumers. If we, her largest customer, had reimposed an import duty, it is 
quite possible that Brazil would have had to withdraw her export tax. Even 
though she were not forced to do so, it is questionable whether American con- 
sumers would have had to pay an added price to cover such duty. According to 
an officer of a prominent importing concerns, it is probable that local jobbers would 
have paid half of it and Brazilian producers would have absorbed the other half. 
This official is quoted as saying: "If coffee were to go up 2c per lb. I doubt very 
much whether it would mean much change in the retail price except in the ex- 
tremely low grades, which are the smallest end of consumption." 

"The difference in price between the domestic product and the imported 
product, exclusive of the duty, or between the domestic price and the price in a 
non-resistricted market, measures approximately the additional consumer's cost 
which in this case is paid to domestic producers and represents a form of subsidy." 
(Monograph, Page 79.) 

Answer: While the inference from the above statement is convincing, many 
examples show the fallacy of it. For instance: there are, or were prior to the 
Sino-Jap war, two cigarette lighters so similar that the purchaser could only tell 
the difference by the country-of-origin pj;irking. The wholesale price of the 
domestic article was 6c; the foreign whoio^a)' rice, on which the duty was levied, 
of the Japanese article was 0.8 cents. A oaty of 200% (far above that im- 
posed) would b6 1.6c and cost of transportation 0.08c, which would make a 
total landed cost of less than 2}4c. The domestic and the imported articles sold 
at the same retail price. Naturally, the Japanese article arove the domestic out 
of the American market, but the consumer benefited not one iota. 

Woolen and Worsted Fabrics. (Page 134): "A substantial reduction in duty, 
including the dutyo n raw wool, would increase imports greatly and would lower 
prices appreciably." (Monograph, Page 135.) 

Answer: A reduction of duty would lower prices appreciably to whom? 
The wholesale prices of woolens and worsteds vary on an average not over 40c 
per yard, and in extreme cases might reach 50c per yard. It takes 3% yds. to 
make a ready-made suit and not over 3}i yds. for a custom-made. Even though 
raw wool were put on the free list, the entire elimination of the duty of 34c per 
lb. on raw wool would not affect the retail price of a suit of clothes. For example: 
before the Sino-Jap war blue serge made in Japan of Australian wool sold at 
wholesale (duty paid) in the American market for $1.30, while the wholesale 
price of comparable domestic blue serge was $1.85 per yard. The consumer 
could not tell when buying a blue serge suit whether the cloth was domestic or 
imported The price was probably the same in either case, unless the suit was 
sold on the glamour of the word "imported", which probably meant that the 
consumer paid more. 



CONCENTRATION OV ECONOMIC POWER 18205 

DRY BATTERIES 

"A substantial reduction of the duty would increase imports primarily of the 
smaller, cheaper types and would lower prices slightly." (Monograph, Page 279.) 

Answer: Dry batteries are manuXiactured in the United States by at least ten 
independent and competing concerns. The smaller, cheaper types are sold at 5c 
and 10c, according to size, by the "5 and 10" and chain drug stores. They sell 
at universally recognized prices, and a reduction of duty on the imported would 
not lower the retail price paid by the consumer. 

When a reciprocal trade agreement was being negotiated v/ith Great Britain,, 
public hearings were held by the Committee for Reciprocity Information, which 
included experts \(rom the Tariff Commission and the Department of Commerce, 
and the American negotiators were guided, in a measure, by the recommendations 
of that Committee. Though recommendations to reduce the duty from 35% to 
25 % on a number of electrical apparatus and appliances were made, dry batteries 
were specifically exempted. 

FLASHLIGHT CASES 

*"A substantial reduction of the duty would increase imports, especially of the 
cheaper grades, and would lower prices slightly." (Monograph, Page 279.) 

Answer: Piracy of design, with utter disregard of American patents, is not 
infrequently encountered in merchandise from Japan. It is difficult to combat 
because legal action is costly and, if judgment were obtained, it would hardly be 
collectible. These imported articles are sold at ruinously low prices. P'or 
instance, an American-made flashlight, of which there are at least a dozen domestic 
manufacturers, sells with lamp and battery at retail for 59c. The imported 
article, which could be identified only by the country-of-origin marking, wl'.ole- 
sales without battery but with lamp for 2c and is retailed with battery to the 
American consumer for 39c. The importer of the Japanese flashlight took ad- 
vantage of the advertising paid fpr by the American manufacturer. This type 
of flashlight was abandoned because the American producer was forced to change 
his article frequently in order to keep ahead of the Japanese who had pirated his 
product and infringed upon his patent. 

THE FINDINGS ON PHOTOGRAPHIC DRY PLATES AND SLIDES, SENSITIZED PHOTO- 
GRAPHIC PAPER, PHOTOGRAPHIC FILM, PHOTOGRAPHIC X-RAY FILM AND MOTION- 
PICTURE PROJECTORS 

The findings on these items are respectively that 1) a reduction of the duty 
would have little or no effect on the import-domestic price situation, 2) would 
lower prices, 3) would ha~ve only a moderate effect with regard to import-domestic 
price situation, 4) same as 3, and 5) would lower prices slightly. (Monograph, 
Pages 307, 308, 309 and part of 310.) 

Answer: In reply a case, suggested by actual experience, is taken. It is chosen 
because there is a general realization that industries in this particular field of 
production are large. The Monograph admits, in certain instances, that "Im- 
ports are mainly from foreign countries which have American-affiliated com- 
panies". 

Domestic Company A finds that the foreign cartel is exporting its product to 
its American-affiliate' B, which in turn sells the foreign-made merchandise at 
cost of possibly below cost. Company A, in order to fight this sort of competition, 
desires to sell its product abroad at cost or pof3sibly below cost in markets controlled 
by the foreign cartel. Neither federal administrative executives nor congres- 
sional leaders, irrespective of political connections, can guarantee the domestic 
Company A that some demagogue, in an effort to get headlines in the press, 
won't attack the said Company A 'or selling abroad cheaper than it sells to th6 
American consumer, who has no knowledge of the tremendous struggle being 
waged between foreign and American producers. 

Domestic Company A is advised, by a federal executive that the logical way 
to combat such a situation is either to erect or procure a plant in some neighborljr 
land, such as Canada, from which it can sell abroad without danger of investi- 
gation. Finding that its Canadian plant is successful. Company A either builds 
or procures additional plants in countries aborad. 

Then the tariff is lowered on products made by Company A. The foreign 
rartel, because it is now able to supply its American demand direct, stops pro- 
duction in its American-affiliate B. Domestic Company A, in its effort to meet 
competition under such circumstances, might be placed in a i>osition where it 



18206 CONCENTRATION OF ECONOMIC I'OWER 

weald be expedient to close its domestio plai'ts and supply its American trade by 
importing from its foreign subsidiarifes. This paradox might bo financially bene- 
ficial to the Company; there is no proof that its merchandise would be sold at a 
lower price to the American consumer, l)ut it is quite evident that such a move 
would result m distress for American wage earners, who would thereby lose their 
jot)S. 

PHONOGRAPH NEEDLES 

"A substantial reduction of the duty will increase imports and would lower 
prices." (Monograph, Page 318.) 

Answer: Foreign competition, which formerly was from German j% has for many 
j'ears been centered largely in imports from Japan. Due to the smallness of the 
article, the domestic producer is not protected by the country-of-origin marking, 
so it is practically impossible for the buyer to recognize the imported product. 
In fact it is quite possible that an unscrupulous person might take advantage of 
the low foreign selling costs by offering the imported merchandise as his own brand. 
The foregoing statement is verified by the following excerpts, taken from a com- 
munication from Tokyo to a domestic dealer: "1) In case amount of your one 
order (is) over 1,000,000 needles, we are able to make yours designated name and 
can. 2) If you want further samples, we would (be) willing to send to you in 
plenty." 

There is, irrespective of fluctuations in wholesale prices, a uniform retail price 
of 10 cents for package of 100 needles. Both the domestic product and the com- 
peting Japanese article retail at that established price. Incidentally, in spite of 
the Sino-Jap conflict, imports during the last year, from January to November, 
inclusive, exceeded 61,000,000 needles A reduction in duty might result in 
lower costs to the importer, but it would have no effect on the retail price paid 
by the consumer. 

Conclusion 

Monograph #10 — Industrial Concentration and Tariffs — is of interest to stu- 
dents of national economic policies, especially those adopted to correct uneconomic 
conditions suffered by a large part of the people. Its deductions seemingly 
emanated from the mind of economic theorists who have never trimmed the lamp 
of practical experience, for its findings fail to recognize the numerous ramifications 
entailed therewith. Its definite conclusion in most instances is that a reduction 
of duty would increase imports and lower prices. While it is self-evident, that, 
reductions in duty would increase imports, the Monograph pre.sents no evidence 
to prove that an increase of imports would lower prices, at )ea.st to the consumer. 

A convincing example, which shows the lack of such proof, is the well-publicized 
case of "a beautiful party gown covered with hand embroidery, costing $"^.40 in 
France, hand made and competing with no American product, retails here for 
$65, because the tariff on it is 75%: and the cost of getting it through the Customs 
House is sometimes 10%". The original wholesale cost in France is $7.40, the 
tariff levied on the foreign wholesa,le value is $5 5^, and the cost of getting it 
through the Customs House (transportation, insurance and freightl is 74c, which 
totals a landed cost of $13.69. That duty of $5.65 had little if any effect in raising 
the wholesale cost of $7 40 to the retail price of $66. If the duty were eliminated 
entirely or even reduced, the cost to the importer might have been less; but there 
is no proof whatseover that there would have been a reduction in the retail price 
paid by the consumer. 

Monograph #10 pertains exclusively to competitive imports, which are dutiable, 
and utterly disregards those that are non-competitive, which are on the free list, 
with the exception of some that are subject to a revenue duty. It neither touches 
upon nor hints at the actuality or even the possibility that an increase of com- 
petitive products imported from abroad displaces a like amount of comparable 
domestic products and thereby reduces opportunities for employment. When 
those millions of foreigners now in military uniforms again seek their liveiihooo in 
industrial pursuits, after martial strife is succe.eded by economic war, they will be 
forced by necessity to accept wages lower than the traditionally low foreign wage 
rates in order to derive a meager existence. Xitis condition will accentuate the 
wide differential between domestic and foreign produclion costs and lowered tariffs 
will stimulate exports of cheaply produced foreign merchandise to our markets. 

Furthermore, depreciated foreign currencies, which in many instances may be 
practically valueless, wiU make it easier for foreigners to sell their v/ares in America 
and more difficult for them to buy American commodities A report issued by 
the Director of the Bureau of Foreign and Dqinestic ©ommerce, which has not 
been refuted, reads in part as follows: "It is recognized that depreciated exchange 



CONCENTRATION. OF ECONOMIC POWER 18207 

.rates of European currencies as compared to the American dollar raise the price 
of our products to prohibitive figures and act as a check on exports to that market." 

This situation may lead to the experiment of stabilizing. foreign currencies at 
higher levels in an effort to correct foreign trade conditions, by sending abroad 
gold that cost us $35 an ounce. The American people would probably then be 
confronted with a loss more serious than that which they have already sutfered. 
The less we bend to foreign pressure and the more we minimize internal problems 
by fortifying the stupendous potentialities of our own domestic economy, the 
weaker will be repercussions from foreign strife. Second only to keeping clear of 
military entanglements is the avoidance of economic involvement in this world 
crisis. 

Monograph #10 delves into almost all lines of industrial production which are 
susceptible to foreign competition. In order to conserve both space and the read 
er's patience, it seems expedient to confine consideration mostly to the textile 
industry, which seems to be the butt of downward tariff revisionists. 

The manufacture of textiles antedates history, and archaeologists are unable to 
define its origin. Textile production has advanced wherever the slightest progress 
in civilization has been achieved. The natural market for all industries, including 
textiles, is the home market. When the saturation point of market is reached, - 
industry seeks other outlets to be found in export trade. Many nations produce 
more textiles than they consume, so textiles have become a big factor in inter- 
national trade. 

The American trend has been to increase earnings per hour and at the same time 
decrease units of work. If other countries produce cloth at a lower cost per yard 
than we do, it is not because our wage earners are not skillful; it is not because our 
machinery is not the best, for American machinery and American methods have 
been adopted by other nations; it is, not because of inefficiency of management, 
whose mass production practices are the marvel of the world; but rather because 
wages, along with other items, are so much lower abroad. 

There is no denial that textile wages are low in comparison with those paid in 
other domestic industries. Nevertheless, those who toil in the American textile 
industry are the highest paid textile workers in the world. It would be illogical 
to jeopardize the continuance of an industry that is the means of livelihood for 
more than 1,500,000 American wage earners. 

A reduction in textile tariff rates, according to Monograph #10, would increase 
imports and lower prices. As previously shown, a reduction in tariff would not 
necessarily lower prices to the consumer. It would increase imports, which would 
displace textiles produced by American wage earners. The resulting eflfect would 
be not only disastrous to those wiio toil in the domestic mills but would endanger 
the welfare of countless additional Americans, such as doctors, lawyers, clergymen, 
school teachers, storekeepers, tradesmen, whose living largely depends on supplying 
the needs and requirements of textile employees. 

Likewise, when imports are prevented from competing ruinously with domestic 
production, car loadings are greater and thereby railroad wqrkers receive the 
benefit of greater employment, because imports are generally sold in large con- 
suming sections surrounding ports of entry. In other words, greater haulage of 
freight from domestic points of production to destination in the neighborhood of 
importing centers, such as Boston, New York, Philadelphia, Galveston, etc., 
permits common carriers to increase employment opportunities to American 
workers. 

Furthermore, the Fair Labor Standards Act may, because of an influx of imports 
produced by poorly paid foreign labor, become largely a "dead letter" law. The 
evils of bootlegging during the prohibition era are widely realized. Destructive 
competition from cheaply produced imports, due to tariff reduction, may tend 
toward bootlegging in wages and hours of work. American wage earners, whether, 
unionized or not, will be confronted with a serious situation shortly after military 
strife is supplanted by economic war in world trade. 

Every patriotic citizen endorses and the American public guarantees lavish 
appropriations now being expended for war defense. It is high time for all to 
devote serious consideration to creating an adequate economic defen.se against 
unpredictable disruption that will follow the consummation of peace treaties. 
America is extending her utmost in assisting Great Britain in her heroic efforts 
to overcome the tyranny of totalitarianism. Likewise, America will contribute 
liberally in the rehabilitation of nations ravaged by the chicanery of dictatorship. 
The weak cannot be strengthened by weakening the strong. America can do her 
best by all not merely in maintaining her present strength but rather by increasing 
it to the full limit of her virility. She can achieve a maximum of strength only by 



18208 CONCENTRATION OP ECONOMIC POWER 

retaining control of her own markets, which are the Samson locks that opinionated 
domestic Delilahs are ready to clip for the benefit of avaricious foreign Philistines. 
In the final analysis, we must erect a defense, both military and economic, that 
will withstand totalitarian attacks from without and repel socialistic ideology 
from within. 
March, 1941. 



Rejoinder by Clifford L. James and Edward C. Welsh to Statement of 
THE Home Market Club re T. N. E. C. Monograph No. 10, Industrial 
Concentration and Tariffs 

In this brief response not all of the comments in the Home Market Club's 
Review can be included. A correction, however, of a few of the misinterpreta- 
tions of the monograph will indicate to the reader the nature of the Review. 
The first si.x criticisms, for example, refer to the letter of transmittal and have 
little to do with the findings of the investigation. They do indicate an unusual 
lack of information on the part of the author of the Review with regard to the 
nature and probable effects of import duties. 

The author, for instance, seems to be unable to grasp the meaning of a "dis- 
advantageous industry". Excluding the modifications which may arise during 
war conditions, a disadvantageous industry is one which is permitted to produce 
with the aid of tariffs when the same amount of goods could be obtained from 
abroad in exchange for a smaller expenditure of labor and capital in some other 
domestic industry. The tariff often prevents the consumers in the U. S. from 
obtaining that larger total income, which would arise from the more efficient uses 
of our labor and capital, and hence, the maintenance of such industry can be 
. considered as contributing to a national loss. 

In the last of the criticisms upon the letter of transmittal the author suggests 
that the reciprocal trade agreement program has been helpful to the monopolies 
because it has increased foreign trade. This seems to be an important point 
because it appears several times in other portions of the Review. How lower 
trade barriers, which the author admits would increase competition, would aid 
the domestic monopolies is a bid difficult to see. Perhaps the reciprocal part of 
the program is not understood by the author or perhaps he fails to see how much 
easier domestic monopolies can allocate the unprotected portion of the world 
market when they themselves are hiding behind high trade walls. In any event, 
the position that monopolistic industries, such as steel, are interested in lower 
tariffs is untenable. 

In the monograph (page 2) it is stated that "when tariffs exclude effectively 
foreign sellers of a given product from the domestic market, monopoly in some 
cases may be fostered, or at least facilitated". The author of the Review admits 
that this statement is true, but then feels that he is adding to it, or is criticising 
the statement when he adds; "but monopoly in itself is not necessarily either good 
or bad." The point made in the monograph is not one of justifying or condemn- 
ing at this juncture, the resultant monopolies, but simply states the supportable 
truth that the tariff sometimes fosters monopolies. The author's point is simply 
that when monopolies are ethical they are beneficial. He has apparently over- 
looked the simple fact that to be good (ethically) does not necessarily mean to 
be good (economically). 

One of the most untenable criticisrns of the monograph is based upon the 
premise that "combinations, consolidations, and mergers are generally consum- 
mated in the interest of efficiency." There are, of course, several definitions of 
the term "efficiency" and if the author considers efficiency to be a situation which 
exists when jjroduction is curtailed to afford larger profits at a higher (scarcity) 
price, then his premise is probably correct. However, if he considers efficiency 
to mean the obtaining of a large output with a small input, then the supply- 
restricting purposes of the monopoly could not be served by an efficiency moti- 
vation. If this restrictive policy of monopolies results in high prices, the author 
says that a flood of imports would correct the situation. Thereby, he gives his 
case away and at the ^ame time presents a case upon which both he and the 
monopoly would start to lobby for a still higher tariff so that the monopoly could 
continue, to exploit the consumer without benefit of succor from foreign pro- 
ducers. 

In the monograph (page 3) it is stated that "the same factor (transportation) 
with sanitary and other administrative restrictions eliminates foreign selling 
of many types of goods and services in the dbmestic market . . ." the author 



CONCENTRATION OF ECONOMIC POWER 18209 

emphasizes this point by an iUustration and then says but that is not the tariff. 
Careful reading of the statement deleted from the monograph by the critic (and 
quoted here) nets the brief response — "And no one said that it was!" Trans- 
portation and administrative trade barriers are not customs duties. They do, 
however, act to hinder the entry of foreign goods into the domestic market and, 
in that respect, have effects similar to tariffs. 

Exception is taken to the statement that there were no important downward 
revisions in the U. S. tariff between 1890 and 1913. The author has used a 
(count of the number of duty reductions in the 1894 tariff as evidence of con- 
siderable downward revision. This is a spurious technique as reduction in 
ten items of major importance to consumers should be considered much more 
of a tariff reduction than the outright removal of duties upon 500 other items 
in which the public has no interest, or in wnich the domestic producers market 
more efficiently anywav. Professor Taussig has written (Tariff History of the 
U. S.; Putnam's Sons, N. Y., 1914. Page 317) that "the new tariff (1894) made 
no deep-reaching change in the character of our tariff legislation. The one excep- 
tion was the removal of the duty on wool. ... A slice here ... a shaving 
there . . . but the essentially protective character remained." 

The rest of the criticisms of Chapter I of the monograph are quite similar to 
those examined briefly above. They make no tenable attack upon the reason- 
ing, or the facts as stated, but simply use the statements as springboards for a 
general indictment of the reciprocal trade agreement program, foreign pro- 
ducers, and anyone who can show the social advantages of lower trade barriers. 
Since they are based on faulty premises and implemented by fallacious reasoning, 
they do not merit individual attention. 

In Chapter II of the monograph, the author attacks several statements about 
the cost to consumers of the restrictions on imports of rayon and sugar. He 
maintains that trade barriers do not affect the price of sugar in the U. S. and his 
proof lies in the fact that, when the U. S. removed restrictions on entry of sugar 
from Hawaii, the U. S. price did not fall. The portion, however, of the total 
supply of sugar entering the U. S. market from Hawaii was so small that it could 
have little effect upon the price. If the tariff removal had been on all sugar 
imports no matter from what source (and there was not a quota arrangement sub- 
stituted), it is very likely that the sugar price would have fallen. Even if the 
sugar price didn't fall, it would possibly be desirable to use some of the capital and 
labor employed in beet sugar production in the U. S. in industries where they are 
more efficient and still buy more of our sugar abroad. The author, however, 
reiterates that "the price in many cases is not based on cost and bears little if any 
relation to cost (and hence) the tariff does not in many instances directly affect 
the price." Such a statement weakens rather considerably contentions elsewhere 
that tariffs are needed because U. S. costs are higher than foreignvjiosts. 

The comment of the Home Market Club with regard to imports of rayon yarn 
is a unique combination of errors and inconsistencies. "Imparts are small," we 
are informed, "not so much because of the tariff but rather because most foreign 
countries that produce and export rayon yarn, particularly Japan, are involved in 
war." In the monograph (page 86) the statistical situation is summarized as 
follows: "Since 1929 (domestic) production has increased by more than 100 
percent while imports have declined to only a small portion of their former level". 
Historians, apparently, will have to place earlier the date of the outbreak of recent 
hostilities, or the Home Market Club will have to revise its statistical inter])reta- 
tion. The latter alternative seems to be the sensible, practical procedure. In 
the next sentence, however, the Club "becomes a trifle uncertain about its state- 
ment of the effect of the tariff on imports of rayon yarn because it warns that in 
the post-war period "the ensuing results upon our national edonomy may be 
disastrous". Since the comment ends by emphasizing the "competition between 
domestic yarn producers" and the "reduced price and higher quality of the 
domestic product", the Club agrees with the analysis of the monograph, namely: 
"If consumers' cost of import restrictions on rayon yarn is to be reduced signifi- 
cantly, the duty will have to be greatly reduced, or eliminated entirely (page 89)." 

Referring to the analysis of the corn wet-milling industry, the Club opines that 
"neither the foreign value nor the amount of duty, which is levied on the foreign 
wholesale value, has much effect on retail prices of imported merchandise, for such 
prices are apt to be set at whatever level it is thought the consumers will pay". 
The domestic producers, however, who have "tr-mmed the hinip of practical 
experience", held a slightly difforent opinion in 1938 when they reciuested formally 
that the agreement with the Netherlands be revised in order to eliminate the 
binding of tapioca and sago on the free list (page 15). 



18210 CONCENTRATION OF ECONOMIC POWER 

A brief reference in the monograph to coal-tar dyes (pages 19 and 20) is ques- 
tioned by the club on the basis of an apparent oversight. It asks^ — "Why then, in 
a discourse on monopoly, is a policy advocated which might again place America 
in the grasp of a foreign monopoly?" The answer is that no such policy is advo- 
cated in the monograph (pages 19 and 20). In a similar fashion an answer to the 
comment of the Club concerning the post-war trade in machine tools will be found 
in the monograph (page 10); to the comment on the trade in electric lamps 
(pages 280 and 281) ; to the objection, presented in an example of prices of cigarette 
lighters, with regard to calculating consumers' costs of at tariff; pages 79 and 80) ; 
etc. In judging other references made by the Home Market Club to specific com- 
modities, the reader is invited to consult the monograph. 

A reply to one concluding statement of the Club is offered as a conclusion to this 
brief rejoinder. The Club laments that "the monograph presents no evidence to 
prove that an increase of imports would lower prices, at least to the consumer". 
The authors of the monograph agree that a more extensive investigation is needed, 
especially with regard to monopolistic practices which may prevent the benefit of 
reduced duties from being passed on to consumers. 



STATISTICS ON THE TAXATION OF CORPORATIONS 

Submitted by Clifford j. hynning, Department of Commerce 

A Listing of 682 Returns 

This report is entirely factual. It contains no analysis or interpre- 
tation.^ The report sets forth the figures on the tax payments of 
682 manufacturing and trade corporations for the period 1934-37, 
as supplied to the Temporary National Economic Committee by the 
companies themselves. Certain other economic facts, e. g., sales, 
profits, and profit and capital ratios, are also set forth as taken from 
the records of the vSecunties and Exchange Commission. 

The companies included in this report are primariiy manufacturing 
and trade corporations wluch are subject to the Securities Act of 1934. 
Their registration statements, filed under the requirements of and 
subject to the sanctions of the said Act, provide a wealth of informa- 
tion on the economic activities of large-scale corporate enterprise in 
the United States, The tax information contained therein, however, 
was not sufhcientiy detailed for useful analysis, consisting of only 
two aggregate items m the profit-and-loss statement namely, (a) 
taxes (other than income) charged to operations and (6) provisions 
for income taxes. 

In order to supplement this mformation a special tax questionnaire 
was sent out, on behalf of the Temporary National Economic Com- 
mittee, by the Department of Commerce to all corporations engaged 
in manufacturing and trade and registered under the Securities Act 
of 1934. The accompanvmg letter pointed out that the ta^ infor- 
mation was requested on a voluntary basis in connection with special 
studies of the Denartment on business taxation for the Temporary 
National Economic Committee and that the filing of the question- 
naire was not subject to the requirements of the 1934 xVct. 

Giving this information involved considerable time and expense 
for the individual corporation, but the response was very generous. 
The Companies were asked to report their taxes for the last 5 years 
on the same basis as that used as their annual report on Form 10-K 
to the Securities and Exchange Commission. Most of the corporations 
filed the tax questionnaire on a consolidated basis, comparable with 
other data filed with the Securities and Exchange Commission. These 
returns are as a whole not comparable to the type of returns given in 
Statistics of Income, which have been on an unconsolidated basis 
since 1934. Taxes reported included only such taxes as were paid 
directly to a governmental body, even though the firm might be biUed 
for- other taxes by a seller. Some companies reported taxes as esti- 
mated for the year in question while others reported actual payments 

' See other tax studies prepared for the. Temporary National Economic Committee by H. Dewey Ander- 
son, Taxation, Recovery, and Defense .Monograph No. 20), by Gerhard Colm and Helen Tarasov, Who 
Pays the Taxes? (Monograph No. 3"i; and by Clifford J. Ilynning, Taxation of Corporate Enterprise 
(Monograph No. 9) . 

18211 

124491— 41— pt. 31-A 14 



18212 CONCENTRATION OF ECONOMIC POWER 

for the year. Others gave the payments as made and then the adjust- 
ments that subsequently took place. 

According to the instructions, the amount of taxes should coincide 
with the sum of "the taxes classed as (1) operating expenses and (2) 
charges on net income" in the annual report on Form 10-K to the 
Securities and Exchange Commission. If they did not, the company 
was requested to give a reconciliation. For most cases, taxes did not 
agree with those listed for the firms in the Survey of American Listed 
Corporations, and some returns gave no reconciliation. The greatest 
number of discrepancies arose in the Federal income-tax item because 
the Securities and Exchange Commission asks for "provision for" 
income taxes. Almost without exception, the companies reported a 
lower payment than the amount set aside (except in the case of the 
large steel companies, which gave the estimated payments). A further 
discrepancy arose from the fact that the Securities and Exchange 
Commission included under this heading: "Federal taxes on income, 
excess profits, and undistributed earnings; State taxes on income; and 
foreign taxes on income." 

The report is arranged alphabetically by name of company. In 
certain cases the footnotes indicate that the figures for a specific com- 
pany may not be strictly comparable with one another for the same 
or other companies because of changes m accounting methods or 
periods. A list of companies which did not file the questionnaire 
with the Department of Commerce or which requested confidential 
treatment of the data is on file with the Department of Commerce. 

DEFINITION OF TERMS 

Proft ratio. — This ratio was computed by taking the net operating 
result for the period before interest, prior claims, and income tax, 
and dividing this amount by the total of invested capital at the end 
of the period. Invested capital consists of (a) long-term debt including 
Treasury bonds carried as assets; bonds held in sinking funds; bonds 
of subsidiaries consolidated held by subsidiaries consolidated, and 
long-term debt due within 1 year for which funds had already been 
earmarked, and (b) net worth, i. e., capital stock and surplus less 
(k'ficit carried as an asset, Treasury stock carried as an asset, preferred 
stock held in sinking fund, and discount on capital stock plus minority 
interest. 

Equity ratio. — This ratio is that of net worth (as previously defined 
to total debt (including long-term debt and currcjit liabilities). 



CONCENTRATION OF ECONOMIC POWER 

ABBOTT LABORATORIES 

[SOOO's] 



18213 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Fedcral-Stat ■ payroll taxes... 

State income taxes 

State sales taxes... 

Property taxes. 

State corporate taxes 

M iscellaneous 



Total taxes. 



6,193 
3, 029 
1,076 
23.02 
7.29 



148 



6,118 
4,377 
1,305 
23.11 
6.48 



178 



7,768 
6,439 
1,681 
21.05 
9.33 



248 
12 
27 

2 
24 
12 

4 
23 

4 



ACME STEEL COMPANY 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes. 

M iscellaneous 



Total taxes. 



9,408 
4,066 
1,255 
11.82 
5.33 



171 



13,868 
5,492 
2.093 
21.42 
5.58 



2^1 



16,729 
6,648 
2,645 
23.85 
4.15 



382 
85 
32 


40 

2 

3 
82 

4 



AINSWORTH MANUFACTURING CORPORATION 



Sales - 


6,435 

1,297 

661 

22.47 

6.85 


7,823 
1.734 
1,186 
33.07 
3.95 


9,177 
1,791 
1,164 
30.69 
5.11 


8,982 


Gross profits 


1,810 


Net income . 


1, 144 


Profit rate 


27.89 


Equity ratio .. .... 


8.31 






Federal corporate income tax... 

Undistributed profits tax.. 


95 


195 


174 
25 
13 


170 
46 


Federal capital stock tax 


6 


8 


16 






Fed(Tal-State payroll taxes 






16 


51 


State income taxes .' 








State sales taxes.. 










Property taxes :: 


32 
6 
X 


32 

7 


39 

8 


55 


State corporate taxes 


10 


Miscellaneous ; 












Total taxes... 


139 


242 


275 


347 







indicate no data available. 

X Indicates less than $1,000. 



18214 CONCENTRATION OF ECONOMIC IH^WEIl 

AIR Ai;SOCIATES INC 
[SOOO's] 





1934 


1935 


1936 


1937 




1,450 


Gross profits .,.■ _ 








351 


Net income 








102 


Profit rate .. -. 








18.77 


Equity ratio --- . 








3.89 




















13 










4 










2 












Federal-State payroll taxes .._ 








5 










2 










1 










2 










X 


Miscellaneous 




























29 




' 









' Fiscal year ended Sept. 30. 

AIRWAY ELECTRIC APPLIANCE CORP. 



Sales . -. - 




V 319 

2,'>45 

(191) 

(10. 14) 

3.35 


3, 628 

2, Z53 

(1d3) 

(8. (,5) 

2.18 


3,444 


Gross profits - 




2,132 
(363) 


Profit rate 




(26. 70) 






1.46 
































2 


3 


2 


Federal excises .. .. ♦_ 






Federal-State payroll taxes .. .. 






15 


42 


State income taxes . 








State .sales taxes. , 














12 
4 


10 

8 


12 


St.ite corporate taxes 




11 


















Total taxes 




IS 


■3C 


67 









AKRON BRASS MANUFACTURING COMPANY, INC. 



Sales .- - ■ -- -- 




254 

120 

62 

21.69 

9.44 


.■^15 

144 

77 

25. 93 

6.93 


351 


Gross profits . . 




132 






33 


Profit rate ..._ _.. 




11.74 






3.62 








Federal Corporate income tax 


8 


10 


7. 
X 
X 



1 




1 

X 

X 


4 


Undistributed profits tax..- . . 


X 




X 




X 




2- 







Federal-State payroll taxes 


4 







1 

X 







1 

X 







State sales taxes 





Property taxes 


1 


State corporate taxes .. -.. . . 


X 


Miscellaneous ... . . 


X 






Total taxes 


9 


11 


9 


11 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTIIATION OF ECONOMIC POWER 

ALAN WOOD STEEL COMPANY 
[SOOO's] 



18215 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State pay roll taxes.. 

St;ite income taxes 

Sfiite sales taxes _ 

Projxrty taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



7. 705 

2,120 

(133) 

(.82) 

5.17 



8,479 
1,925 

(383) 
(2. 49) 

4.69 



13, 541 

3,419 

639 

4.05 

4.01 



17 



138 



18, 927 
5. 325 
1,685 
10.65 
5.76 



259 

139 

15 



147 
75 



ALASKA PACKERS ASSOCIATION 



Sales 


5.561 
2.702 
1,425 
13.30 
5.23 


6,342 
2.121 
1,000 
9.42 
23.36 


5,080 

1,920 

.198 

5.37 

15.25 


5,102 


Gross profits 

Net income. - 

Profit rate . ...... .. 


1,977 
429 
3.92 




3.63 








163 


143 


67 


63 








13 
41 


13 
9 


13 
31 
17 
14 


13 




31 


Federal-State pay roll taxes 


72 


State income taxes _ 


8 


33 


10 


Property taxes 


60 


59 


54 


59 


Miscellaneous,.- 


9 


1 


1 


1 


Total taxes 


294 


258 


197 


249 







ALLEGHENY LUDLUM STEEL CORP. 



Sales 


21.800 
6,249 
1.864 
12. 67 
32.80 


28,124 
7,504 
2,049 
19. 45 
11.52 


42, 357 
9,473 
3,700 
28.07 
12.45 


49, 627 


Gross profits. . 


1 1, 686 


Net income 


3.886 


Profit rate 


28.86 




17.10 








70 


137 


306 

5 

21 


315 


(Tndistribiited profits tax . 


34 


Federal capital stock tax ... . . 


15 


21 


22 


Federal exci.ses . 


X 


Federal-State pay roll taxes 






112 
118 


355 


State income taxes 




42 


92 


State sales taxes.. 








115 

1 


127 
78 


i.59 

87 


131 


State corporate taxes 


125 


M iscellaneous .» 














Total taxes .. 


201 


405 


808 


1,074 







indicate no data available. 

X indicates less than .$1,000. 
( ) indicate deficit. 



18216 CONCENTRATION OF ECONOMIC POWER 

ALLEN ELECTRIC AND EQUIPMENT COMPANY 
[SOOO's] 





1934 


1935 


1936 


1937 


gales 






786 

337 

121 

48. 02 

4.18 


668 








243 








38 








14.64 








8.53 
















15 
X 

1 


3 








X 








1 
















3 


7 
















X 

2 
1 
X 


X 








2 








1 


















Total taxes 






22 


14 











ALLEN INDUSTRIES INCORPORATED 



Sales - 


2.607 

669 

273 

22.86 

..4. 13 


4,628 

1,298 

680 

48. 55 

2.78 


6,056 

1,591 

918 

47.19 

3.55 


6.405 




1,264 




467 


Profit rate --- 


19.78 




2.64 








37 


136 


135 
47 
10 


75 




24 




Z 


7 


11 












10 


45 




















Property taxes . -. 


18 
3 


22 
3 


23 
4 


34 




5 


















61 


168 


229 


194 







ALLIED KID COMPANY 



Sales 






10, 733 

2,155 

777 

15.89 

2.36 


7,675 








448 


Net income 






(604) 


Profit rate 






(14. 96) 


Equity ratio 






4.99 










Federal corporate income tax _ _ 






■ 138 
21 
9- 

57 
8 

14 
22 





Undistribr*":! profits tax 









Federal !">r.iiHl stock tax 






6 


Federil j Koises '. 






0- 








66 










State sales taxes. 






c, 








20 


State corporate taxes 






15 




















Total taxes . . 






269 


107 











indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18217 



ALLIED MILLS INC. 
[SOOO's] 





1934 


1935 


1936 


1937 


Sales --- 


28, 795 
5.751 
2,589 
30.04 
9.72 


28,085 
6,359 
3, 235 
30.53 
9.61 


35, 928 
6, 143 
2,884 
24.33 
11.92 


26, 068 




4, IIH 




797 


Profit rate - - 


6.62 




22.20 








442 


668 


496 
13 
31 


143 




32 




17 
64 


37 


21 








8 
6 

X 
72 
3 

X 


45 
8 
1 

71 
3 


75 




4 
X 
66 

3 
X 


7 




3 




86 




3 












Total taxes 


596 


794 


668 


370 







ALLIED PRODUCTS CORPORATION 



Sales -.- - 


1,773 

501 

117 

4.39 

25.94 


2,411 
690 
269 
9.43 

20.96 


2,844 

868 

397 

13. 51 

16.79 


2,956 


Gross profits - - 


971 




374 


Profit rate _ . _ 


12.31 


Equity ratio 


34.99 






Federal corporate income tax _ 


1 


30 


47 

4 

3 

X 

13 


42 
3 


Federal capital stock tax 


3 
X 


4 
X 


4 




X 


Federal-State payroll taxes 


41 




















Property ta.\es 


26 
2 


27 
2 


27 
3 


27 


State corporate taxes . 


4 
















Total taxes 


32 


63 


97 


121 







ALLIED STORES CORPORATION 



Sales _ 


77, .547 

17, 792 

1,775 

. 3.73 

2.25 


84. 538 

29,498 

2,569 

5.44 

1.65 


97, 065 

34, 818 

4,927 

9.10 

1.29 


100, 976 


Gross profits 


35,883 
4,659 


Profit rate 


8.30 


Equity ratio 


1.39 






Federal corporate income tax . 


155 


260 


606 
22 
69 


543 


Undistributed profits tax 


226 




- 28 


52 


73 


Federal excises 




Federal-State payroll taxes. _ 






213 
159 
33 
1,265 
48 
32 


578 


State income taxes 


56 
35 
1,166 
41 
39 


116 

40 

1,197 


136 


State sales taxes.. 


40 


Property taxes 


1, 314 


State corporate taxes . , ."■... 




Miscellaneous ... 


32 


21 






Total taxes 


1,520 


1,697 


2,447 


2,931 





indicate no data available. 

X indicates less than $1,000. 



18218 CONCENTRATION OP ECONOMIC POWER 

ALLIS CHALMERS MANUFACTURING CO. 

[$000 's] 



Sales 

Gross profits . 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capita) stock tax 

Federal excises.. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1934 



20,332 

6,518 

(277) 

(.45) 

2.65 



2 

618 

14 



38,787 

12, 056 

3,255 

5.03 

2.34 



492 



2 

600 

12 



1,162 



58,949 

18, 952 

6,398 

9.76 

5.82 



1,215 
650 
83 



292 
276 
1 
654 
24 



3,195 



ALTORFER BROTHERS CO. 



Sales 


3,820 

798 

182 

11.95 

11.52 


5,209 
1,092 
427 
24.26 
5.84 


7,188 
1,588 
668 
33.96 
2.66 


6,821 




1,159 




301 


Profit rate 


14.78 




6.33 








12 


62 


102 
31 
10 


46 




8 




3 


4 


6 












19 
X 

4 
18 

1 


66 




X 

1 
17 

1 


X 

1 
17 

1 


X 




3 




23 




1 


















34 


86 


186 


142 







ALUMINUM INDUSTRIES INC. 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax 

Undistributed profits tax 

Federal capital stock tax 

Federal excises . 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property ta.xes 

State corporate ta.xes 

Miscellaneous 



Total taxes 



2,340 

916 

128 

6.83 

7.21 



17 



2,216 

879 

112 

5.83 

4.31 



15 



49 



2,832 
1,007 
56 
2.98 
4.22 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF EC( GNOMIC POWER 

THE AMERICAN AGRICULTURAL CHEMICAL CO. (OF DEL.) 

(SOOO's] 



18219 





1934 


1935 


1936 


1937 


Sales.- --- 


IS, 663 
5,691 
1,533 
8.43 
24.25 


16, 210 
5.281 
I, 134 
6.30 
21.79 


19, 722 
6,856 
2,296 
12.30 
14.31 


18, 440 




6, 534 




1 6oe 


Profit rate 


8.73 


Equity ratio - 


16.42 






Federal corporate income tax 

Undistributed profits tax 




70 


131 


256 


Federal capital stock tax. 


16 


15 


15 


15 






Federa'-State payroll taxes . 




is 

5 


94 

8 


153 




1 


24 








296 
14 
71 


314 
17 
70 


324 

15 
84 


298 


State corporate taxes 


19 

81 








398 


506 


671 


846 







AMERICAN BANK NOTE COMPANY 



Sales ... 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises .■ 

Federal-State payroll taxes. .. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous..- 



Total taxes. 



1,646 

(216) 

(1.34) 

29.62 



3,557 
1,441 
8.60 
15.09 



133 



9,478 
3, 56G 
1,362 
8.03 
I'l 44 



192 
'20' 



391 



AMERICAN BOX BOARD COMPANY 



Sales... . 




2,119 
849 
360 

21.44 
8.23 


2,468 
907 
3(57 

19.32 
'9,1 


3,086 


Gross profits 




1,095 


Net income 




425 


Profit rate 




23. §4 


Equity ratio- . . . . 




10.08 








Federal oxirporate income tax . . 




49 

'" 6" 


50 


64 


Undistributed profits tax . 

Federal capital stock tax.. 




2 
5 


Federal excises 






Federal-State payroll taxes 




X 


8 


29 


State income taxes . 






State sales taxes "" ,. 










Property taxes. l . . 




16 

4 


18 
4 


18 


State corporate taxes 




a 






2 












Total taxes 




75 


84 


125 









indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18220 



CONCENTRATION OF ECONOMIC POWER 



AMERICAN CAN COMPANY 
ISOOO's] 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State pay roll taxes.. 

State income taxes 

State sales taxes - 

Property taxes 

State corporate taxes 

Miscellaneous 

Total taxes 



130. 424 

40, 238 

23, 273 

13.07 

10.54 



4,000 



375 



233 

34 

1,336 

32 



6,010 



1935 



150,315 

39, 503 

20,188 

11.21 

10.09 



2,800 



561 

62 

1,404 



170, 328 

44, 235 

20, 618 

11.32 

9.66 



3,300 



205 



288 

343 

72 

1,624 



187, 253 

51,282 

22. 507 

15.31 

5.88 



4,300 



249 



945 
386 

96 
1,551 

56 



7,583 



AMERICAN CHAIN &. CABLE CO. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed 

Federal capital stock tax 

Federal excises 

Federal-State pay roll taxes.. 

State income taxes 

State .<;ales ta.xes 

Property taxes , 

State corporate taxes 

M iscellaneous 



Total taxes. 



14, 375 
5,190 
1,010 
5.12 
3.94 



80 



2 

2 

145 



17, 922 
6, 591 
1,985 
10.91 
5.88 

178 



29 

2 
140 
53 



24, 977 
9,268 
3, 603 
20.20 
4.39 



547 
12 
60 
71 
77 

149 
2 

143 
97 



28,711 

9,958 

3,655 

19.27 

6.06 



488 
52 
41 
52 

277 

172 
3 

142 
56 



1,283 



AMERICAN COLORTYPE COMPANY 



Sales 


5, 543 

1,692 

80 

1.66 

1.60 


6,504 

1,954 

237 

5.14 

1.60 


7,781 

2, 415 

438 

9.47 

1.52 


8,857 


Gross profits __ 


2,808 


Net income . . 


544 


Profit rate . 


11.59 


Equity ratio . 


1.52 






Federal corporate income tax . 


7 


16 


43 
40 
8 
1 
34 


60 


Undistributed nrofits tax 


47 


Federal capital stock tax . 


4 
X 


4 
X 


8 


Federal excises . 


1 


Federal-State pay roll taxes 


105 


State income taxes 






State sales taxes 


X 

40 
2 


X 

39 
2 


X 

34 
2 




Property taxes _ 


46 


State corporate taxes. 


3 


Miscellaneous. . . 














Total taxes 


53 


61 


162 


270 







indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OP ECONOMIC POWER 

AMERICAN COMMERCIAL ALCOHOL CORP. 
[lOOO's] 



18221 



Sales 

Gross profits - 
Net income.. 

Profit rate 

Equity ratio. 



13, 141 

4,773 

605 

6.54 

1.98 



15,230 
5,845 
1,324 
13.52 
1.26 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal exc. s 

Federal-State payroll taxes... 

State income taxes 

State .sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



194 



221 



24 
194 



24 
221 



24 
16, 867 



655 
48 

30 



24 
19,723 
18 
24 
349 
58 
22 
72 



Total taxes. 



17,818 



20, 514 



13, 779 
5,156 
1,839 
16.85 
1.23 



178 
31 
32 

178 
31 
32 
20,813 
33 
31 

397 

62 

3 

50 



21, 630 



AMERICAN CRYSTAL SUGAR COMPANY i 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes. 

Miscellaneous 



Total taxes 



13,115 

4,622 

1,635 

7.13 

4.78 



200 



16 
1,753 



17 
3 
179 
7 
1 



2, 176 



10, 360 

4,005 

1,245 

5.55 

6.59 



180 



17 

234 

2 

20 

6 

171 

4 

1 



15, 269 
6,040 
2,282 
10.61 
6.75 



351 

49 

35 

6 

24 

115 
16 

185 
5 
X 



11,997 

4,927 

1,523 

7.13 

3.71 



227 
8 
28 
1,515 
62 
48 
14 
224 
5 
X 



2,131 



Fiscal year ended Mar. 31. 

AMERICAN ENCAUSTIC TILING COMPANY 



Sales. 








489 


G ross profits 








1 51 


Net income 








(56) 
(7. 95) 
1 29 


Profit rate 








Equity ratio •.. 


















Federal corporate income tax ..' 











Undistributed profits tax 










Federal capital stock tax 








1 


Federal excises ...?.._ 










Federal-State payroll taxes . 








8 


State income taxes 










State sales taxes 










Property taxes _ 








12 


State corporate taxes... 








X 


Miscellaneous 




















Total taxes 








21 













Indicate no data available. 

X indicates less than $1,000. 
( ) Indicate deficit. 



18222 



CONCENTRATION OF KCONOMIC TOWER 



AMERICAN HIDE AND LEATHER COMPANY 
ISOOO's] 





1934 


1935 


1936 


1937 


Sales 

Gross profits 


5,469 

462 

(187) 

(1.34) 

65.71 


5,950 

1, 183 

560 


7,805 
1, 181 


5, 742 
204 


Net income -.... ..-..'. 


(597) 
(9.41) 
10.84 


Profit rate 


7. 96 5. 04 

8. 81 7. 29 


Equity ratio _. 


Federal corporate income tax 


4 


68 49 




Undistributed profits tax _ _ . _ 




5 
7 
X 
41 
10 
X 
26 




Federal capital stock tax . 


5 


7 


6 


Federal exci.'^es 




Federal-State payroll taxes 


50 


State income taxes 

State sales taxes . 


9 
X 

33 
18 


2 
X 

31 


5 
X 


Property taxes 


31 


State corporate taxesl.. 


17 1 20 


21 


M iscellaneous 


15 














Total taxes 


69 


140 


158 


113 



AMERICAN HOME PRODUCTS CORP. 



Sales , 


16, 091 
6, 363 
2,472 
31.85 
4.90 


16, 391 
5,957 
2,124 
28.14 
4.99 


21, 378 
7,666 
3,579 
42.79 
1.96 


25, 71 1 


Gross profits 


9,297 


Net income 


3,662 


Profit rate 


43. 15 


Equity ratio . 


1.57 






Federal corporate income tax . . . _ 

Undistributed profits tax 


435 


392 


578 
77 
50 

111 
29 


588 
73 


Federal capital stock tax 

Federal excises _ 


25. 
35 


35 
30 


59 
257 


Federa-State payroll taxes 


116 


State income taxes. - ..v 








State sales taxes 










Property taxes . .. 


58 


49 


59 


70 


State corporate taxes _ _.. 




Miscellaneous.-- ._ .-_ 


183 


131 


366 


531 






Total ta.xes ^ . 


736 


637 


1,270 


1,694 







AMERICAN ICE COMPANY 



Sales 


14, 226 

8,470 
839 
2.87 
4.04 


12, 517 

6, 655 

340 

1.47 

3.59 


13,233 

6, 395 

425 

1.90 

4.46 


13,223 


Gross profits -.. 


6,581 


Net income 


524 


Profit rate 


2.47 


Equity ratio 


6.15 






Federal Corporate income tax 

Undistributed profits tax. . . 


128 


84 


58 


25 


Federal capital stock tax . 


13 
3 


13 
2 


12- 
2 

26 

15 

4 

332 

25 


12 




2 


Federa-State jsay roll taxes --- 


115 


State income taxes .. 


6 

21 

360 

28 


9 

5 

351 

35 


3 


State sales taxes -.. 


5 


Property taxes 


334 


State corporate taxes 


19 


Miscellaneous.- . 














Total taxes - 


559 


499 


474 


515 







indicate no data available. 

(X) indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18223 



AMERICAN LOCOMOTIVE CO. 

I$000'sl 



Sales --. 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes .".- 

State sales taxes 

I'roperty taxes 

State corporate taxes 

M iscellaneous - 



Total taxes- 



14,312 
l,«fil 

(i.ywi) 

Ci. 74) 
50. 11 



6 

413 

42 

1 



12,008 
2,011 

(1,421) 
(2. 78) 
31.12 



5 

389 

73 



21,381 

5, 300 

1,302 

2.54 

14.34 



33 



80 

1 

7 

3S)5 

03 
2 



50,447 

13, 374 

0,782 

12.82 

13.20 



446 

3 

42 

402 

13 

rt 

413 

48 

1 



AMERICAN MACHINE AND FOUNDRY CO. 



Sales 

Gross profits - 
Net income -- 

Profit rate 

Equity ratio. 



Federal corporate income tax- 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

States sales taxes. 

Property taxes. 

State corporate taxes 

Miscellaneous 



Total. 



3,652 
1, 546 
1,179 
7.29 
20. 35 



14 



3,532 
1,452 
1,136 
7.04 
70.26 



3,911 
1, 020 
1.210 
7.36 
37.28 

X 



4,930 
1,848 
1,053 
0.42 
15.93 



THE AMERICAN METAL COMPANY, LIMITED 



Sales 

Gross profits - 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes. . 

States sales taxes 

Property taxes 

State corporate taxes 

Miseellaneous 



Total Jiaxes- 



103, 059 

2, 554 

501 

.95 



126 
22 



78, 553 
3,456 
1,235 
2.30 
9.12 



178 



152 
16 



75. 868 
4,233 
2, 295 
4.31 
6.38 



415 
19 

'' 47 

5 

1 

141 

30 

1 



131.949 
5, 797 
5,048 
9.44 
6.21 



537 
10 
56 
2 

190 
26 
18 

161 
16 



1,016 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18224 



CONCENTRATION OF ECONOMIC POWER 



THE AMERICAN ROLLING MILL COMPANY 
[$000's] 



Sales 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State pay roll taxes.. 

State income taxes 

State sales taxes . 

Property taxes 

State corporate taxes 

M iscellaneous 



Total taxes. 



54, 485 

14, 525 

3,716 

3.75 

1.26 



189 



14 

11 

546 

42 



76, 799 
20, 548 

7,622 
6.96 

J. 12 



514 



41 

13 

518 

57 



1,201 



1936 



101,463 
26,811 
9,859 



1,048 

51 

115 

X 

286 

116 

10 

583 

119 



2,328 



AMERICAN SEATING COMPANY 



Sales... 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes. 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



3,871 

1,422 

335 

5.04 

J. 25 



14 



4,918 

1,843 

549 

8.46 

1.50 



7,032 
2,472 

759 
12.23 

1.88 



78 



THE AMERICAN SHIP BUILDING CO.' 



Sales 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises _.. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous. 



Total taxes. 



1,597 

620 

15 

.22 

33.13 



2 
1 

102 

7 



2,582 



3.11 
23.47 



36 

9 

9 
4 
2 
101 
16 
1 



4,647 
1,381 
543 
8.06 
17.39 



92 

9- 


44 
4 

10 
102 



> Fiscal year ended June 30. 

indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 

AMERICAN SNUFF COMPANY 
[.$000's] 



18225 



Sales 

Gross profits. 
Net income.. 
Prolit rate .. 
Kquity ratio. 



Federal corporate income tax. 

Undistributed profits ta.x 

Federal capiial stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes... 

Property taxes 

State corporate taxes 

M iscellaneous 



Total taxes- 



1934 



7,809 
3, 540 
2,334 
10. 19 
24. 15 



317 



21 
2,114 



2,497 



7,710 
3,204 
1.907 
8.32 
26.38 



7,696 
3,079 
1,928 
8.20 
27.05 



261 



X 

23 
1,787 

12 
3 
X 

36 

22 



2,151 



1937 



7,701 
3,095 
1,833 
7.81 
27.80 



255 



24 

1, 806 

34 

39 



AMERICAN STOVE COMPANY 



Sales--. .- 








12 806 


Gross profits _ _ 








4 682 


Net income 








1 386 


Profit rate 








12 45 


Equity ratio 








14 25 












Federal corporate income tax 








213 


Undistributed profits tax 








50 


Federal capital stock tax 








12 


Federal excises... 











Federal-State payroll ta.xes 








129 


State income taxes __ 










State sales taxes 








14 


Property taxes _ _. 








90 


State corporate taxes... _ 








32 


M iscellaneous 








1 












Total taxes 








541 













THE AMERICAN TOBACCO COMPANY, 


INC. 






Sales 


222, 648 

54,624 

26, 702 

9.70 

26.69 


220,264 

51,112 

28,309 

11. 15 

6. ,59 


232, 985 

50,318 

24, 335 

9.94 

6.59 


242, 645 
50 ."iDl 


Gross profits 


Net income 


31 365 


Profitrate 


12 98 


Equity ratio 


4 11 






Federal corporate income tax 


2,429 


3,166 


3,341 


4,291 


Undistributed profits tax 


Federal capital stock tax 


277 
114,586 


337 
110,779 


47'J 
112,102 
143 
915 
8 
775 
328 


446 


Federal excises 


116,423 

482 


Federal-State payroll taxes 


State income taxes 


962 
75 
675 
246 


967 
29 
800 
329 


961 


State sales taxes 


11 


Property taxes .^ 


693 


State corporate taxes _ ■ 


217 


M iscellaneous 














Total taxes 


119,250 


116,407 


118,091 


123,524 





indicate no data available. 
X indicates less than $1,000. 



18226 CONCENTRATION OF ECONOMIC POWER 

AMERICAN TYPE FOUNDERS, INCORPORATED ' 2 
[$000 's] 





1934 


1935 


1936 


1937 










7,564 










3,011 










307 










3.38 










5.20 


















22 


















9 


9 
















24 
X 

1 

77 
10 
X 


64 








X 








4 








73 








7 








X 
















143 


l.")? 











1 Fiscal year ondod Mar. 31. 

- Formerly Anu'riuan Tyjje Founders Co. 



AMERICAN WOOLEN COMPANY, INCORPORATED 



Sales --- 

Gross profits. 
Net income. 
Profit rate --. 
Equity ratio. 



Federal corporate income ta.x. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises .-. 

Federal-State payroll taxes. -. 

State income taxes 

State sales taxes 

Property taxes 

State cor[)orate taxes 

M i.scellaneous 



Total taxes 



48,711 
1,711 

(5, 329) 
(8.42) 
33.11 



19 



47 

3 

836 

5 



70,317 
11,387 

3.260 
4.95 

12.05 



456 



1,443 



71,023 

10, 813 

2,441 

3.67 

5.25 



349 

47 

50 

2 

240 

345 



1,656 



AMERICAN ZINC LEAD AND SMELTING COMPANY 



Sales . 

fJross profits _ 
Net income _ . 
Profit rale 
Equity ratio- 



Federal corporate income tax 

Undistributed profits tax 

Federal capital stock tax 

Federal exci.ses 

Federal-State payroll taxes 

S^ate income ta.xes 

State sales taxes 

I'ropcrty taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



6,430 

1.232 

l.'i2 

1.96 

18.79 



36 



7,336 

887 
(208) 
(7.77) 
14.88 



9,621 

1.293 

74 

.96 

8.18 



indicate no data available. 

X indicates less than $1,000. 
( ) iudicate deficit. 



CONCKNTFtATION OF I0("( )N<).MI(' I'OWIOR 



18227 



'I'HK AN (iOSTlKA-WriM' HUMAN ( Olil'()l{A'l'l()N 
($000 's] 



Salrs . ---- 
Gross profits. 
Net income. 
Profit rato 
Equity ratio- 



Fedoral corporate income tax 
1 ndistrihuted profits tax^ 
Federal capital stock tax. . 

Federal excises - 

Federal-State payroll taxes 

Stale income taxes 

St ate sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes 



KTH 

.'■)74 

133 

47. <J2 

4. 13 



193,') 



076 

4>i« 

73 

22. 36 

6. 04 



73S 

oOU 

112 

31.42 

3. 32 



604 

440 

ISO 

32. lit 

y. 05 



ARCHER DANIELS MIDLAND CO. 



Sales.-. 
Oross profits. 
Net income.. 
Profit rate ... 
Equity ratio_ 



Federal corporate income tax 
Undistributed profits tax . 
Federal capita! stock tax. . . 

Federal excises . . 

Federal-State payroll taxes... 

State income ta.xes 

State sales taxes... 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxcs- 



57, 805 

11, 149 

3, 230 

14. 64 

6.12 



4,50 



28 
306 




ARMSTRONG CORK COMPANY 



indicate no data available. 

X indicates less than $1,000. 



Sales 


22, 962 


30. 296 


39, 803 


42, 759 


Gross profits 

Net income ... 


9,299 1 1,902 
2, 91 1 4. 467 
6. 34 10 21 
2. 39 3. 03 


15, .590 
6,785 
16.42 
2.75 


1.5,960 
6.076 


Profit rate 


13. 42 


Equity ratio 


16.47 






Federal corporate income tax 

Undistributed profits tax 

Federal capital stock tax ..... 

Federal excises 

Federal-State payroll taxes. . . 
State income taxes 


218 400 

56 72" 
X X 

19 191 

4 4 

203 214 


836 
182 
08 
X 
104 
306 

5 
220 
149 

5 


515 

2 

72 

X 

366 

136 


State sales ta.xes 


8 
232 


Stati corporate taxes . 

Miscellaneous 


24 




43 
9 


168 
9 


Total taxes 


529 


933 


1.875 1,.508 



1J44!)1 — 41 — pt. .'M-.V 1,'. 



18228 CONCENTRATION OF ECONOMIC POWER 

ARNOLD CONSTABLE CORP.' 
[$000 's] 



Sales 

Gross profits. 
Net income.. 
Profit rate .. 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excise 

Federal-State payroll taxes... 

State income taxes . 

State sales taxes 

Property taxes 

State corporate taxes - . 

Miscellaneous 



6,440 

1,632 

202 

5.96 

6.87 



21 



Total taxes. 



6,834 

1,717 

251 



7,761 
1,762 
474 
12. 95 
5.22 



20a 



' Fiscal year ended Jan. 31. 



THE ARO EQUIPMENT CORP. 









1,069 
638 
284 

49.71 
3.46 


1,280 








735 








331 


Profit rate 






49.94 








4.53 
















45 
22 
3 


51 








17 








3 
















2 


8 
















X 

2 
X 


X 








2 








X 




















Total taxes 






74 


81 











ARTLOOM CORP. 



Sales 


1,162 

254 

(238) 

(7.23) 

105. 05 


2,134 

466 

50 

1.57 

15.01 


2,193 
520 
20 
63 

15. 57 


2,144 


Gross profits 


469 


Net income _ 

Profit rate 


(148) 
(5. 14) 
7.26 






Federal corporate income tax 




4 


2 










Federal capital stock tax 


4 


3 


3 


3 












7 
3 


20 






2 










Property taxes 


15 
2 


14 
13 


14 

7 


15 


State corporate taxes 


10 


Miscellaneous ... . . 














Total taxes 


21 


36 


36 


46 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18229 



ASBESTOS MANUFACTURING CO. 
[SOOO's] 



1935 



1936 



1937 



Sales 

Gross profits - 
Net Income. - 

Profit rate 

Equity ratio. 



287 

00 

9.16 

9.64 



403 

150 
14.12 
7.67 



Federal corporate income tax. 
Undistributed profits tax._... 

Federal capita] «tock tax 

Federal excises.. •.. ..'- 

Federal-State payroll taxes... 

State income taxes -. 

State sales taxes 

froperty taxes -.l:. 
tate corporate taxes : . - . 

Miscellaneous.^ 



10 



17 



Total taxes. 



1,024 

365 

58 

5.54 

4.98 



1,087 
428 



2.87 
2.94 



32 



ASSOCIATED DRY GOODS CORPORATION 



Sales.....-.,. 
Gross profits. 
Net income. - 
Profit rate.... 
Equity ratio. 



Federal corporate income tax. 
Undistributed profits tax..... 

Federal capital stock tax 

Federal excises 

Federal-Stateitayroll taxes... 

State income taxes. 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



46, 347 

11,408 

1,248 

3.12 

4.79 



206 



34 
140 



47, 845 

11,814 

1,636 

3.89 

4.74 



195 



8 

55 

46 

845 



54,222 

13, 461 

2,-130 

5.51 

4.85 



333 

1 

42 



126 
91 
26 

831 
20 



56,999 

14, 062 

1.636 

3.81 

4.19 



285 

1 

45 



343 
93 
21 

890 
18 
14 



ATLANTIC REFINING CO. 



Sales. 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capita! stock tax,;... 

Federal excises 

Federal-State payroll ta.\es... 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



96,118 

38, 569 

7,100 

4.81 

5.91 



862 



204 
367 



729 

1,094 

282 

167 



3,695 



101, 535 

38,460 

6,291 

3.62 

6.96 



622 



226 
332 



26 

781 

1,077 

657 

137 



3,667 



113, 128 

41,601 

9,260 

6.31 

13.39 



815 

3 

176 

377 

185 

102 

1,066 

1,104 

622 

154 



4,604 



131, 217 

46, 461 

11,420 

7.43 

6.46 



902 
3 
196 
383 
602 
104 
129 
1,676 
786 
166 



4, 845 , 



' indicate no data available. 

X indicates less than $1,000. 



18230 



CONCENTRATION OP ECONOMIC I'OWER 



ATLAS IMPERIAL DIESEL ENGINE CO. 
l$O0O's] 





1934 


1935 


1936 


1937 


Sales -- 




1,301 

446 

86 

4.01 

1.70 


1,464 

495 

55 

2.53 

1.68 


2,417 
735 


Gross profits . 




Net income .. - .._- 




231 


Profit rate . .-- 




9 98 


Equity ratio . - - 




1.66 












6 


6 


26 


Undistributed profits tax . 




X 


Federal capital stock tax _ . 




1 


5 


4 








Federal-State payroll taxes - - - .- 






5 
X 

1 
24 
X 
X 


20 


State income taxes - - -- - 




1 
1 
15 
X 
X 


6 


State sales taxes - - ... 




1 






26 






X 






X 












24 


41 


83 









ATLAS POWDER CO. 



Sales 

Gross profits - 
Net income,. 
Profit rate..- 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises '_ 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous 



Total taxes. 



12, 559 
4,064 
1,291 
6.07 
29.03 



166 



13,087 
4.056 
1,335 
6.72 
24.04 



173 
"2i 



15, 895 
4,845 
1,672 
8.40 
15.59 



232 
10 
22 

4 
39 
53 

4 
79 
42 



AUSTIN NICHOLS & CO. INC. 



Sales 


15,924 

2,131 

46 

2.20 

1.08 


17, 349 

2,191 

136 

6.39 

1.04 


19,984 
2,485 

268 
11.74 

.90 


18,886 


Gross profits .. 


2,331 


Net income . . 


(43) 


Profit rate . 


(2.01) 


Equity ratio 


.88 






Federal corporate income tax 


5 


15 


44 


1 


Undistributed profits tax 




Federal capital stock tax... 


3 


3 


3 


3 


Federal excises 




Federal-State payroll taxes 




24 
5 
9 

27 
2 


58 
11 
10 
27 
2 


56 


State income taxes 






State sales taxes „ 

Property taxes _ 


8 

28 

5 


11 
29 


State corporate taxes 


3 


Miscellaneous . 














Total taxes _._ 


49 


85 


155 


103 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18231 



AUTO CITY BREWING CO. 
[$000's] 



Sales _.. 

Gross profits - 
Net income. - 

Profit rate 

Equity ratio. 



500 

253 

136 

25.04 

3.83 



519 

257 

80 

13.22 

4.01 



Federcl corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises - 

Federal-State payroll taxes. .. 

State income taxes .-- 

State sales taxes... 

Property taxes 

State corporate taxes 

Miscellaneous 



20 



12 



2 
345 



2 
323 



Total taxes. 



416 

140 

22.49 

3.68 



21 



2 
376 
2 

5 
10 
1 



466 

236 

(39) 

(6. 76) 

3.05 





2 
250 
5 

2 
10 
1 



270 



AUTOMATIC PRODUCTS CORPORATION 



Sales . - - -. , .- 


1,439 

813 

109 

5.52 

3.45 


1,696 
1,003 
144 
6.12 
3.65 


3,013 
1,527 
152 
4^92 
2.25 


84 


Gross profits . . 


(5) 




(33) 


Profit rate - .- 


(1. 74) 




1.81 




























X 


X 


X 


X 














X 


























1 
2 


2 
2 


3 




X 


2 
















Total taxes . . 




3 


4 


5 









.THE AXTON-FISHER TOBACCO COMPANY 



Sales - 


28,532 
4,902 
1,706 
22.86 
2.79 


20,543 

3,246 

596 

8.00 

2.35 


17,231 

2,921 

621 

8.29 

1.92 


19, 255 




2,937 


Net income . 


241 


Profit rate . 


3.32 


Equity ratio 


2.16 






Federal corporate income tax ... . 


236 
X 

14 

18, 682 
X 


83 
X 

21 
13,238 
X 


74 


X 


Undistributed profits tax ... 




Federal capital stock tax 


15 

10, 771 


15 




12, 537 


Federal-State payroll taxes ...... ... . . 


28 




13 


^# 








*^ 


Property taxes . .. .. . ..?. . 


43 


46 


40 


41 




5 


Miscellaneous 


2 






2 










Total taxes . .. . . ._. 


18, 977 


13 388 


10, 913 


12.628 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18232 CONCENTRATION OF ECONOMIC POWER 

BALDWIN LOCOMOTIVE WORKS, THE 

[$000's] 





1934 


1935 


1936 


1937 










36, 586 


Gross profits .. 








11,514 


Net income - - 








2,272 


Profit rate . _ . ..- 








4.27 


Equity ratio 








2.05 




















513 










55 










47 




















466 










148 




















332 










230 










1 












Total taxes - . 








1,792 













BALDWIN RUBBER COMPANY i 



Sales - - -- 


2,044 
362 
125 

23.57 
2.09 


3,731 

1,045 

606 

64.89 

2.33 


3,440 

1,164 

713 

59.02 

2.41 


3,180 




907 




549 


Profit rate - --- - 




Equity ratio . - -- 


1.93 






Federal corporate income tax. _-_ 

Undistributed profits tax - - 


14 


101 


111 

54 

7 

4 

10 


81 
X 


Federal eflpital stnct tax 


2 
4 


2 
5 


4 




3 


Federal-State payroll taxes . 


26 
















X 

6 
2 


X 




8 
1 
X 


5 
1 
X 


6 




2 












Total taxes - 


29 


114 


194 


122 







' Figures for 1937 are for nine months ended Sept. 30. 

W. H. BARBER COMPANY 



Sales . . . - - - 




9,747 
993 
380 

15.47 
4.79 


11,589 

1,049 

378 

14.31 

3.82 


12, 596 


Gross profits 




979 


Net income 




332 


Profit rate 




12.27 


Equity ratio 




5.83 








Federal corporate income tax . . 




56 


55 
2 
5 

1 
4 
8 


47 


TTndi.strihiited prnfit.i! ts\r 




1 


Federal capital stock tax 




4 

1 


5 


Federal excises 




1 


Federal-State payroll taxes- 




12 






10 


9 








Property taxes ... 




15 

1 


18 
3 


18 


State corporate taxes - •..- .. . . 




2 


















Total taxes... 




87 


96 


95 









indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 

BARDSTOWN DISTILLERY, INC. 

[SOOO's] 



18233 





1934 


1935 


1936 


1937 


Sales - 






925 
476 
271 
46.12 
1.12 


675 








392 








95 


Profit rate -- 






10.30 








1.37 
















38 


13 








10 








3 
42 

1 
7 


2 








152 








1 








3 
















X 

2 
58 










2 








41 
















151 


224 











BARIUM STAINLESS STEEL CORP. 



Sales - -. 








207 










(78) 










(195) 


Profit rate 








(26. 08) 


Equity ratio 








2.40 












Federal corporate income tax 






























Federal excises. - 










Federal-State payroll taxes - . . 








5 


State income taxes.- . 










States sales taxes . 










Property taxes ■-.. -. ... 








2 


State corporate taxes 








5 






















Total taxes - 








12 













BARKER BROS. CORP. 



Sales - 


7,997 
2,897 

(367) 
(5.64) 

7.60 


9,680 
3,745 
322 
4.76 
5.45 


12. 577 

5,097 

817 

11.45 

3.16 


14, 314 


Gross profits 


5,726 


Net income.. 


592 


Profit rate 


8. 13 


Equity ratio 


2.27 






Federal corporate income tax 




10 


118 
42 
11 


88 


Undistributed profits tax 




29 


Federal capital stock tax.. ... 


8 
3 


5 

1 


10 


Federal excises 




Federal-State payroll taxes 


30 
2 
1 
118 
1 
5 


102 








29 


State sales taxes 




8 
108 

1 
5 


1 


Property ta.xes 


114 
1 
3 


144 


S tate corporate taxes 


1 


Miscellaneous 


7 






Totaltaxes 


129 


138 


328 


411 







.- indicate no data available. 
X indicates less than $1,000. 
( ) indicate deficit. 



18234 



CONCENTRATION OF ECONOMIC POWER 



BATH IRON WORKS CORPORATION 
[$000 's] 





1934 


1935 


1936 


1937 


Sales - - 






6,746 
S60 
276 

10.84 
1.51 


8,293 








321 








38 








1.60 








1.46 
















48 


2 










Federal capital stock tax.. 






10 


9 


Federal excises .• 








Federal-State payroll taxes .. .. 






17 


76 


























17 
X 


27 








X 


Miscellaneous . .. .- 


















Total taxes _ 






92 


114 











BEATRICE CREAMERY COMPANY 



Sales.- 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes... 

State corporate taxes 

M iscellaneous 



Total taxes. 



54,883 

11,250 

1,406 

6.17 

22.20 



176 



548 



57, 117 

10, 836 

991 

4.47 

26.90 



135 



334 

"is 



510 



59,667 
12, 632 

1,955 
9.04 

18.14 



286 
85 
34 



351 



852 



BEAUNIT MILLS INCORPORATED 



Sales. 








6,038 


Orossprofits .. ,. . 








772 










7.26 


Profitfate .. 








Equity ratio 








3.92 












Federal corporate income tax 










Undistributed profits tax 










Federal capital stock tax... 








4 


Federal excises .-^.. .. . 










Federal-State payroll taxes 








32 


State income taxes 








13 


State sales taxes 








X 


Property taxes 








5 


State cor' orate taxes 










Miscellaneous 




















Total taxes 








54 













indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 

BEECH AIRCRAFT CORPORATION 
[$000's] 



18235 





1934 


1935 


1936 


1937 


Sales - . ..- --- 








788 










135 










19 










3.02 










1.64 




















2 


Undistributed profits tax 








3 


Federal capital stock tax .- 








1 












Federal-State payroll taxes - 








9 


State income taxes 










State sales taxes - - 










Property taxes - 








2 


State corporate taxes 








X 


Miscellaneous _ 




















Total taxes. 








17 













BELL AIRCRAFT CORPORATION 



Sales - - 






336 

113 

18 

2.04 

6.09 


1,708 


Gross profits -._ 






271 








66 


Profit rate 






7 21 


Equity ratio 






8 04 










Federal corporate income tax ___ 






2 
3 
2 


10 


Undistributed profits tax.- _ _ _ 






13 


Federal capital stock tax -.- ._ 






3 


Federal excises ._ 








Federal-State payroll taxes 






5 
2 


36 


State income taxes _. .. 






2 


State sales taxes 








Property taxes _ 










State corporate taxes 










Miscellaneous 






1 








. 




Total taxes 






15 


64 











BELLANCA AIRCRAFT CORPORATION 



Sales 


538 
40 

(139) 
(18. 63) 
14.14 


332 

1 

(194) 

(33. 66) 

4.01 


218 

34 

(60) 

(11.65) 

5.18 


1 592 


Gross profits ........ 


317 


Net income 


151 


Profit rate. _ . 


23 75 


Equity ratio 


2 62 






Federal corporate income tax. ■. 








27 


Undistributed profits tax 








■ 1 


Federal capital stock tax . 


X 
X 


X 
X 


X 
X 

1 


X 


Federal excises 


X 


Federal-State payroll taxes 


10 


Stat3 income ta-xes 








•State sales taxes. 




X 

1 

X 

X 


X 

1 

X 
X 


X 


Proijerty taxes 


1 
X 
X 


1 


State corporate taxes.. . . . 


X 


Miscellaneous.. _ 


X 






Total^taxes 


1 


1 


2 


39 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18236 CONCENTRATION OF ECONOMIC POWER 

BENDIX AVIATION CORPORATION 

[SOOO's] 



1936 



Sales -- 

Gross profits. 
Net income. - 
Profit rate- --. 
Equity ratio - 



8,966 



8.97 
11.79 



11,558 
3,781 
13.62 
9.09 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxes i... 

State corporate taxes 

M iscellaneous 



600 



43 



55 

3 

112 

3 



60 

4 

130 

3 



Total taxes- 



548 



34,590 

12, 520 

3,764 

13.67 

7.35 



662 

59 

84 

3 

120 

86 

6 

121 

1 



1,150 



BERGHOFF BREWING CORP. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



2,359 
1,657 

(101) 
(9. 25) 

2.51 



102 
19 
5 



1,067 



2,696 
1,933 
313 
23.60 
4.46 



46 



1,008 



1,161 



4,110 
2,962 
628 
40.73 
4.29 



1,458 
6 



123 
17 
4 



1,733 



BERKEY AND GAY FURNITURE CO. 



Sales - 








1,059 


Gross profits .. . 








299 


Net Income 








(17) 


Profit rate - 








(1.28) 


Equity ratio - 








5.79 












Federal corporate income tax ... 










Undistributed profits tax 










Federal capital stock tax 








2 


Federal excises . 










Federal-State payroll taxes . 








23 






















Property taxes 








14 


State corporate taxes 








1 


Miscellaneous 




















Total taxes 








40 













Indicate no data available. 

X indicates less than $1,000. 
( ) Indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18237 



BIRD AND SON, INCORPORATED 
[$000's] 



Sales 

Gross profits. 
Net income. - 
Profit rate..-. 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excuses 

Federal-State payroll taxes... 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1934 



1936 



14,398 
4,300 
1,171 
9.88 
13.35 



178 
18 
16 



107 

71 



1937 



14,623 

4, -126 

872 

7.26 

16.19 



91 

2 

17 

1 

133 



6 
118 
49 



416 



BIRDSBORO STEEL FDY. & MACHINE CO. 



Sales - 






3,285 

1,092 

307 

17.71 

3.05 


4,589 








1,354 








526 


Profit rate - 






23.28 








7.28 
















42 


77 


Undistributed profits tax 






17 








4 


6 










Federal-State payroll taxes .. 






13 
24 


49 








27 
















25 
X 

7 


26 








X 








9 
















116 


210 











BLACK AND DECKER MFG. CO. 



Sales -. 




3,631 
1,746 
616 
15,79 
14.68 


4,892 
2,535 
1,092 
24.11 
10.88 


6,164 


Gross profits ..- .-. 




3,190 


Net income 




1,366 


Profit rate. 




28.68 






9.69 








Federal corporate income tax 




75 


97 


25 

9 
1 
1 

33 
4 


142 


Undistributed profits tax 




21 






8 



12 









Federal-State payroll taxes 




M 


State income taxes. 




X 

1 
26 
4 


4 


State sales taxes 




2 


Property taxes .,. 




33 


State corporate taxes '■ 




4 


Miscellaneous 
















Total taxes. -.- 




114 


170 


271 









indicate no data available. 

X indicates less tban $1,000. 



18238 CONCKNTUATION OF ECONOMIC POWER 

BLAUNERS 
[SOOO'sl 



Sales 

Gross profits. 
Net income.. 
Profit rate.-.. 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



9, 145 
1,891 
358 
17.95 
3.98 



52 



9,227 
1,733 
265 
13.01 
3.47 



31 



60 



10, 621 

2,245 

418 

19.17 

2.89 



BLAW-KNOX COMPANY 



Gross profits. 
Net income.. 

Profit rate 

Eqity ratio.. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises _.. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous 



Total taxes. 



6.844 
1,803 
107 
0.57 
60.24 



41 



7,533 
2,349 
665 
3.55 
79.73 



11,512 
4,232 
1,852 
10.86 
14.38 



204 
"45' 



55 
101 



548 



BOEING AIRPLANE CO. 












1,237 

111 

(334) 

(10.41) 

11.04 


2,293 

767 

240 

7.09 

4.59 


5,545 






1,140 






382 


Profit rate w - 




5.29 


Equity ratio 




6.81 








39 
31 
15 

4 
24 
X 

4 
24 

1 

3 


65 








2 






11 
1 


17 






1 






90 








3 






3 

32 
X 
3 


18 






37 






2 






3 








Total taxes - 




50 


145 


238 









indicate no data available. 

X Indicates less than $1,000. 
( } indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

BOHN ALUMINUM & BRASS CORP. 
[$000's] 



18239 





1934 


1935 


1936 


1937 








17,995 
3,197 
1,863 
22.80 
4.47 


20,224 




3,103 
1,812 
24.03 
6.43 


3,114 
1,855 
24.27 
3.87 


3,711 




2,115 


Profit rate .. 


24.76 




8.44 








216 


242 


259 
9 
16 


306 




34 




18 
3 


23 
X 


21 








44 
X 


152 




X 


X 


X 








113 
14 


118 
15 


119 
18 


12C 




18 
















Total taxes .• - 


364 


398 


465 


656 







BOND STORES, INC. 



Sales - • - 






17,592 


20,153 








8,491 










2,031 


Profit rate 








26.23 


Equity ratio - 








2,09 












Federal corporate income tax - . - . - 








310 


Undistributed profits tax 








126 










75 




















193 












State sales taxes . . . . 








3 


Property ta.xes . .. ... 








87 


State corporate taxes . 








56 


M iscellaneous 




















Total taxes 








859 













THE BORDEN COMPANY 



Sales 


215, 724 

32,603 

5,569 

4.15 

8.87 


229,888 

32, 715 

6,049 

6.06 

8.08 


238, 845 

43, 135 

9,858 

9.77 

7.08 


237,562 


Gross profits . 


41, 546 


Net income . . . . . 


7,573 


Profit rate 


7.58 


Equity ratio . . 


7.13 






Federal corporate income tax . .. . 


704 


945 


1,524 


959 


Undistributed profits tax . . . 




Federal capital stock tax ... .... 


124 


160 


143 


160 


Federal excises 




Federal-State payroll taxes 






490 

246 

428 

1,308 


1,510 


State income taxes.. . . ... 


168 

318 

1,357 


isi 

312 
1,324 


275 


State sales taxes 


397 


Property taxes ^. 


1,339 


State corporate taxes 




Miscellaneous 


448 


499 


810 


527 






Total taxes 


3,119 


3,421 


4,649 


5,167 




f 



indicate no data available. 

X indicates less than $1,U00. 



18240 



CONCENTRATION OF ECONOMIC POWER 



BORO WARNER CORPORATION 
[$000's] 



Sales 

Gross proflts- 
Net income. . 

Profit rate 

Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State pay-roll taxes.. 

State income taxes 

State sales taxes... 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1934 



13, 305 

4,730 

15.40 

5.10 



690 



107 
583 



11 

5 

248 

30 
3 



1,677 



1936 



18, 997 

8,400 

25.43 

5.21 



1,424 



67 
745 



267 
19 
1 



2,539 



1936 



78, 172 
24,500 
10, 797 
31.16 
3.06 



,914 

29 

150 

895 

197 

17 

10 

267 



3,488 



BOSTON HERALD TRAVELER CORP. 



Sales 




6.298 
2,042 
718 
14.30 
7.39 


7,041 
2.442 
1,090 
21.56 
6.92 


7,118 


Gross profits 




2,493 


Net income 




1,041 


Profit rate 




20.59 


Equity ratio 




5. i4 








Federal corporate income tax 




103 


182 


li54 


Undistributed profits tax. 




2 


Federal capital stock tax 




7 


12 


12 


Federal excises. 






Federal-State payroll taxes 






22 
46 


74 


S tate income taxes 




33 


46 


State sales taxes 






Property taxes 




56 


56 


46 


State corporate taxes 






Miscellaneous 




















Total taxes 




199 


318 


344 









BOWER ROLLER BEARING COMPANY 



Sales .. 






6,668 
1,975 
1,337 
36.97 
4.05 


.', 489 


Gross profits 






2,222 


Net income 






1.535 


Profit rate 






38.99 


Equity ratio 






5.63 










Federal corporate income tax 






215 
50 
13 


257 


Undistributed profits tax 






58 


Federal capital stock tax 






13 


Federal excises 








Federal-State payroll taxes 






21 


73 


State income taxes 








State sales taxes 










Property taxes 






36 

7 


48 


State corporate taxes 






8 


Miscellaneous 


















Total taxes . 






342 


457 











indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 



18241 



BOYD-WELSH, INCORPORATED 

[$000 "s] 





1034 


1935 


1936 


1937 


Sales 




1,030 

201 

54 

15.26 
.43 


1,046 
206 

fl.69 
.51 


1,283 






1.89 









Profit rate - 




.DC 


Equity ratio - 




lJ—'-"** 








2 












Federal capi tal stock tax 




X 
X 


X 


X 












4 
X 


1$ 






















2 
X 

1 


2 
X 
2 


2 






X 






2 








Total taxes 




3 


10 


19 









BRIDGEPORT BRASS COMPANY 



Sales 

Gross profits . 
Net income.. 
Profit rate.... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. . 

State income taxes 

State sales taxes 

Property taxes 

S tate corporate taxes 

Miscellaneous 



Total taxes. 



9,695 
2,384 

850 
17.31 

3.17 



91 



13, 538 
3,081 



18.16 
4.38 



100 
1 



238 



17, 400 
3,830 
1,522 
22.57 
6.43 



218 
58 
13 
1 
44 
30 



103 
1 



468 



21,048 
3,564 
1,084 
11.57 
19.12 



135 
13 
16 
3 

152 
18 



120 
1 



458 



THE BRIDGEPORT MACHINE CO. 



Sales 


1,900 
511 
256 

17.64 
2.16 


2,538 

521 

177 

11.88 

1.92 


4,281 
808 
436 

14.28 
2.83 


6,717 


Gross profits 


1,205 


Net income 


644 


Profltrate . . 


15.93 


Equity ratio 


1.62 






Federal corporate income tax . 


7 


16 


52 


79 


Undistributed profits tax.. 




Federal capital stock tax 


1 


1 


3 


6 


Federal excises . 




Federal-State payroll taxes 






4 

7 


17 


State income taxes - 


1 


2 


8 


State sales taxes 




Property taxes 


9 
2 

1 


11 
2 

1 


11 
2 
2 


28 


State corporate taxes 


3 


Miscellaneous 


6 






Total taxes 


21 


33 


81 


147 







indicate no data available. 

X indicates less than $1,000. 



18242 



CONCENTRATION OF ECONOMIC POWER 



BRIOGS & STRATTON CORPORATION 
IIOOO's] 



Sales .-- 

Gross profits. 
Net income. . 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

UndLstributed profits tax 

Federal capita! stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes. •.. 

State corporate taxes 

Miscellaneous... 



Total taxes. 



3,198 
1,256 



23.75 
7.30 



196 



1935 



4,864 
2,031 
1.285 
41.69 
5.73 



156 



1936 



5,168 
2,093 
1,202 
38.00 
5.67 



165 
3 
16 



BRIOGS MANUFACTURING COMPANY 



Sales „ 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises.. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous- 



Total taxes. 



12, 954 
6,083 
23.55 
3.57 



961 



1,772 



123 



25 

457 

38 



3 

537 
42 



1,538 



2,486 



18,883 

11, 038 

37.26 

3.27 



151, 020 

22,646 

12,711 

39.40 

2.88 



1,930 

370 

182 

11 

363 



26 
545 
51 



3,478 



BRISTOL-MYERS COMPANY (DELAWARE) 



Sales 


9,754 
4,103 
2.459 
41.47 
8.46 


12, 045 
4,996 
2,871 
47.44 
6.62 


14,719 
5,643 
3,062 
46.76 
5.94 


15, 974 


Gross profits 


5,767 


Net income 


2,963 


Profit rate _ 


43.00 


Equity ratio 


7.26 






Federal corporate income tax 


258 


365 


428 
55 
31 

506 


371 


Undistributed profits tax 


38 


Federal capital stock tax 


57 
329 


42 
439 


36 


Federal excises 


521 


Federal-State payroll taxes... 




State income taxes 


3 


6 

•. X 

46 
1 


6 
X 
42 
2 


10 


State sales taxes 


X 


Property taxes 


17 

1 


44 


State corporate taxes 


1 


Miscellaneous _ 














Total taxes 


665 


899 


1,068 


1,021 







indicate no data available. 

X indicates less than $1,000. 



concp:ntuation of economic power 

BROADWAY DEPARTMENT STORE INC.' 
[loco's] 



18243. 





1934 


1935 


1936 


1937 


Sales.- - 




15, 073 

5,382 

367 

5.09 

1.81 


16, 377 

5,896 

585 

8.22 

1.80 


17,062 


Dross profits .-- 










Profitrate 




9 24 


Equity ratio 




4' 98 








Federal corporate income tax .. . 




38 
X 

7 


70 
X 

7 


87 


U ndistribu tc(i profits tax _ 




1 


Federal capital Steele ta.x .. 




6 


Federal excises 






Federal-State payroll taxes 




X 
X 

392 
121 

7 


23 

12 

483 

123 

4 


78 


State income taxes ...... 




23 


State sales taxes 




502 


Property taxes 




143 


State corporate taxes. 




4 


Miscellaneous 




5 












Total taxes 




565 


722 


849 









' Fiscal year ended Oct. 31. 



BROCK AND CO. 



Sales , 


480 

176 

(74) 

(3. 36) 

81.33 


.545 

206 

(51) 

(2.37) 

91.45 


769 

299 

8 

.39 

62.63 


660 


Gross profits 


264 


Net income 


X 


Profitrate... 


X 


Equity ratio 


15 06 






Federal corporate income tax 






5 




Undistributed profits tax 








Federal capital stock tax... 










Federal excises 










Federal-State payroll taxes 






2 
1 

16 
28 


6 


State income taxes 








State sales taxes _ 

Property taxes 


8 
20 


11 
26 


19 
35 


State corporate taxes 




Miscellaneous 




















Total taxes 


28 


37 


52 


60 







THE BROWN FENCE A WIRE COMPANY 



Sales 


3,429 


3,575 
1,165 
396 
16.76 
15.45 


4,120 
1,119 
624 
26.16 
8.03 


3,831 


Gross profits 


1,297 


Net income 


466 
18.69 
6.79 


346 


Profitrate. 


14.67 


Equity ratio 


12.83 






Federal corporate income tax 


66 


54 


89 


47 


Undistributed profits tax 




Federal capital stock tax 


4 


7 


7 


6 


Federal excises 




Federal-State payroll taxes 






9 


16 


State income taxes 








State sales taxes 2 


9 

22 

3 

1 


9 

27 

3 

3 


12 
22 
3 
X 


12 


Propertv taxes 


25 


State corporate taxes 


3 


MiscellEfneous , 


1 






Total taxes 


105 


103 


142 


110 







— indicate no data available. 
X indicates less than $1,000. 
( ) indicate^ deficit. 



18244 CONCENTRATION OF ECONOMIC POWER 

BROWN FORMAN DISTILLERY CO. 
[tOOO's] 





1034 


1935 


1936 


1937 


Sales 


3,887 

2,113 

48 

2.04 

2.17 


7,664 
2.206 

646 
24.00 

.95 


8,618 
6,672 

497 
15.16 

1.03 


6,485 


Gross profits 


5,014 


Net Income . 


136 


Profit rate . _• . . 


4.28 


Equity ratio - - .. -- 


1.16 






Federal corporate Income tax 


32 


137 


100 

11 
3,753 
9 
12 
209 
61 





Undistributed profits tax 





Federal capital stock tax . . 


3 
1,087 


io 

3,205 


5 


Federal excises . 


2,787 


Federal-State payroll taxes 


24 


State income taxes 



10 
18 


5 
191 
40 





State sales taxes 


68 


Property taxes .'^ 


62 




























1,150 


3,688 


4,145 


2,926 







BROWN McLaren mfo. co. 



Sales - 








1,170 


Qrosss profits . 








1.93 


Net income 








61 


Profit rate . . ... 








9.37 


Equity ratio 








10.95 












Federal corporate income tax 








4 


Undistributed profits tax i... 










Federal capital stock tax 








X 


Federalexci^ 










Federal-State payroll taxes. . . • . . . 








18 


State income taxes 










State sales taxes 










Property taxes 








11 


State corporate taxes 








1 


Miscellaneous 




















Total taxes ... . .... 








34 













BROWN RUBBER CO., 


INC. 








Sales 








1,277 


Qross profits ■ 








318 


Net income 








151 


Profit rate 








41.71 


Equity ratio 








4.93 












Federal corporate income tax 








22 


Undistributed profits tax 








3 


Federal capital stock tax 








2 


Federal excises 








X 


Federal-State payroll taxes 








10 


State Income taxes ■ 










State sales taxes . 








X 


Property taxes 




* 




1 


State corporate taxes ^... 










Miscellaneous j,... 




















Total taxes 






r 


38 











indicate no data available. 

X indicatci. less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 



18245 



BROWN SHOE COMPANY, INC. 
[tOOC's] 





1934 


1935 


1936 


1937 


Sales 




24,904 
6,522 
1,226 
7.76 
2.63 


24,011 

5,549 

820 

6.25 

2.56 


29,397 


Gross profits 




6,287 


Net Income . . 




1,111 


Profit rate 




7.12 


Equity ratio ..- 




2.40 








Fw1<<nil rorpornt4> Income tAX ... . , . , 




100 


67 


159 


Undistributed profits tax 










16 


16 


18 


Federal excises . - 






Federal-State payroll taxes 






63 

3 

29 

58 


245 


State income taxes 






7 


State sales taxes 




16 
57 


24 


Property taxes 




67 


RtAti< p/irpnrate t-axes 






Miscellaneous 




















Total taxes 




183 


236 


510 









E. L. BRUCE COMPANY 



Sales . 




5,527 
1,405 
316 
8.19 
3.09 


7,940 
2,044 
564 
13.80 
2.93 


6,364 
1,641 


Gross profits 




Net income. 




235 


Profit rate.- 




5.76 


Equity ratio 




3.56 








Federal corporate income tax 




16 


74 


29 


Undistributed profits tax 






Federal capital stock tax 




6 


6 


6 


Federal excises 






Federal-State payroll taxes 






38 
9 


68 


State income taxes 






1 


State sales taxes. 








Property taxes 




67 


64 


84 


S tate corporate taxes ... 






Miscellaneous 




















Total taxes 




78 


190 


177 









THE BRUNSWICK-BALKE-COLLENDER CO. 



Sales 

Gross profits. 
Net Income.. 
Profit rate.... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income texes 

State sales taxes. 

Property taxes 

State corporate taxes 

M iscellaneoU*^. 



Total taxes. 



5,391 

1,812 

245 

2.64 

37.62 



6,059 

2,207 

175 

1.59 

29.41 



195 



8,793 

3,752 

912 

7.84 

14.05 



20 



15 
121 
25 



11,553 
5,207 
1,034 
8.70 
9.50 



105 



17 
334 
111 



indicate no data available. 

X indicates less than $1,000. 



18246 



CONCENTRATION OF ECONOMIC POWER 



BUCYRUS ERIE CO. 
[lOOO's] 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax.- .. 

Federal excises . 

Federal-State payroll taxes . . 

State income taxes 

State sales taxes... ...: 

Property taxes. . ...■ 

State corporate taxes 

Miscellaneous 



Total taxes. 



1934 



4,900 
1,389 
(251) 
(1.09) 
48. 60 



1 

101 
2 



124 



0,002 

2,164 

216 

.94 

32.58 



204 



1936 



10, 578 

4,185 

1,729 

7.32 

13.54 



255 
26 
25 



543 



BUCYRUS MONIGHAN CO. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax 
Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes 

Slate corporate taxes 

Miscellaneous 



Total taxes. 



631 

187 

76 

6.11 

.8.32 



378 

237 

18.83 

8.64 



34 



1,068 

369 

182 

14.36 

10.55 



EDWARD G. BUDD MANUFACTURING COMPANY 



Sales. 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



19, 651 
3,023 

(1.081) 
(7. 98) 
1.23 



123 



23,682 

4,396 

1,226 

6.44 

1.49 



81 



119 
28 



30,603 
5,040 
1,458 
6.41 
2.61 



60 



26- 

2 

107 

r ^ 

116 
72 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWEU 



18247 



BUDD WHEEL COMPANY 
[SOOO's] 



Sales. - 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Fedenil excises 

Federal State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes^ 

Miscellaneous 



Total taxes. 



1934 



10, 743 

2,018 

168 

3.52 

3.84 



14 



14. 575 

3,063 

922 

17.23 

4.89 



122 



1936 



14, 349 

3,061 

954 

16.99 

3.91 



153 
5 
19 



THE BULLARD COMPANY 



1937 



16, 708 

3,421 

875 

14.77 

5.18 



1R5 
90 
16 



5, 132 
2,394 
1.114 
39. 35 
6.08 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal exci.'ses.. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes •. 

Miscellaneous 



Total taxes. 



1,411 

571 

111 

6.03 

33.09 



2.464 

1,049 

339 

15.84 

3.82 



4,237 

1,835 

8.59 

36.53 

5.96 



1,36 
30 



72 



184 
50 



BUNTE BROTHFRS 



indicate no data available. 

X indicates less tban $1,000. 









,5, 430 
1,491 
390 
15.04 
6.21 


5,585 








1,150 








137 








5.17 


Equity Ratio... 






9.65 








60 
14 
3 


8 
















3 
















14 


43 


























23 
1 


25 








1 




















Total taxes 


1 


115 


80 









18248 CONCENTRATION OF ECONOMIC POWER 

BURROUGHS ADDING MACHINE CO. 
[$000's) 





1934 


1935 


1936 


1937 


Sales - 


24,588 
13, 142 
3,842 
14.17 
16.94 


27,908 
15, 575 
6,029 
22.08 
11.96 


32, 527 

19, 085 

8,241 

29.19 

9.29 


38,395 


Gross profits -• ^ — 


23,514 
10,065 


Profit rate 


34.31 




7.81 






Federal corporate Income tax 


330 


617 


996 
18 

152 
X 

156 
31 
9 

404 
54 
14 


1.214 




44 




78 


78 
X 


154 




X 






640 




5 
4 
372 
52 
19 


6 
6 
3f76 
53 
19 


44 




13 




454 




63 




25 






Total taxes 


860 


1,155 


1,834 


2,551 







BURRY BISCUIT CORP. 








Sales 






2,771 
645 
193 


2,128 








758 








172 


Profit rate 






21.28 








4.40 


5.73 
















25 
X 

9 


38 








X 








7 










Federal-State payroll taxes 






3 


13 




















Property taxes -- - 






X 

X 


4 








1 




















Total taxes 






37 


63 











BUTLER BROTHERS 



Sales 


73,786 

- 12,463 

1,900 

7.47 

1.46 


73,150 

11,982 

1,927 

7.39 

1.65 


81, 367 

14,080 

2,674 

8.99 

4.87 


84, 710 




14,375 




2,065 


Profit rate .. . . - 


6.90 


Equity ratio . 


4.81 






Federal corporate income tax -. 


175 


185 


257 
135 
38 

82 
13 
18 


251 




32 


Federal capital stock tax _ - 


23 
9 


28 
X 


39 






Federal-State payroll taxes . 


264 




10 

. 40 

344 

33 

2 


12 

48 

342 

42 

1 


12 




22 


Property taxes 


456 


State corporate taxes -. . . 


28 


Miscellaneous . . 


5 






Total taxes ... ... . 


636 


658 


1,056 


1,109 







indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 

CALIFORNIA ART TILE CORPORATION 

[$000's] 



18249 





1934 


193S 


1936 


1937 


Sales. . ... • . 




72 

37 

(1) 

(0.26) 

77.61 


164 

79 

44 

19.61 

8.31 


211 


Gross profits i 




89 


Net income 




44 


Profit rate 




20 33 


Equity ratio 




11 32 








Federal corporate income tax 






7 


5 


Undistributed profltF tax. 








Federal capital stock tax 




X 


1 


1 


Federal excises 






Federal-State payroll taxes 






X 

2 
X 

3 
X 


2 


State income taxes 




X 


2 


State sales taxes 




X 


Property taxes 




3 
X 
X 


3 


State corporate taxes 




X 


Miscellaneous 














Total taxes 




3 


13 


13 









CALIFORNIA COTTON MILLS COMPANY 



Sales 


2,690 

804 

184 

4.47 

.74 


2,882 
526 
213 
5.06 
.74 


2,830 

507 

256 

6.30 

.96 


2,812 
608 


Gross profits 


Net income .- 


81 


Profit rate 


2 00 


Equity ratio _ 


1.07 






Federal corporate income tax _ __ 


1 


8 


12 




Undistributed profits tax 




Federal capital stock tax 


3 


2 


5 


4 


Federal excises 




Federal-State payroll taxes 






8 

3 

9 

29 


22 


State income taxes . 


1 

6 

28 


2 

5 

26 


X 


State sales taxes. . .. 


7 


Property taxes .,_ 


28 


State corporate taxes 




Miscellaneous 






1 


1 










Total taxes 


39 


43 


67 


62 







THE CALIFORNIA INK COMPANY 


INCORPORATED 




Sales _ 




1,914 

808 

375 

18.57 

11.57 


2,314 
966 
476 

22.31 
8.61 


2,604 
1 030 


Gross profits 




Net income 




444 


Profit rate. 




19 82 


Equity ratio 




12 93 








Federal corporate income tax 




49 
X 

5 


62 


60 


Undistributed profits tax 




2 


Federal capital stock tax - 




5 


5 


Federal excises 






Federal-State payroll taxes 




X 

11 
X 

11 


4 
15 

1 
13 


12 


State income taxes. 




19 


State sales taxes. 




I 


Property taxes 




13 


State corporate taxes "... 






Miscellaneous 




















Total taxes... 




76 


100 


112 









indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18250 CONCENTRATION OF ECONOAIIC POWER 

CALIFORNIA PACKING CORPORATION 
[$000's] 



Sales 

Gross profits. 
Net income.- 
Profit rate.. - 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises - 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous - 



Total taxes. 



1934 



54,336 

14, 146 

4,213 

7.94 

2.61 



331 



29 
17 
428 
26 
30 



58, 188 

14, 284 

3,247 

6.61 

2.83 



260 



70 



83 
61 
424 
66 
47 



1936 



61, 750 

16, 929 

6,078 

11.63 

2.30 



768 



53 
1 
131 
50 
142 
430 
4 
39 



1,618 



Fiscal year ended Feb. 28. 



THE CANFIELD OIL COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



4,462 

921 

(81) 

(4.07) 

5.05 



4,779 

941 

17 

0.89 

5.55 



5,573 

1,078 

119 

5.96 

3.70 



THE CARPENTER STEEL COMPANY 



Sales 

Gross profits. 
Net income.. 
Profit rate. .. 
Equity ratio . 



Federal corporate income tax. 
Undistributed profits taxes... 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



5,458 
2,215 
808 
12.21 
11.55 



116 



7,953 
3,256 
1,612 
22.73 
6.39 



297 
64 



indicate no data available. 

X indicates less than $1,000. 
( ) Indicate deficit. 



CONCENTRATION OF ECONOMIC I'OWER 

CARTHAGE MILLS INCORPORATED 
[$000's] 



18251 



CASCO PRODUCTS CORP. 





1934 


1935 


1936 


1937 


Sales '. 


1,436 

510 

206 

14.18 

3.07 


1,608 
497 
148 

10.90 
3.79 


2,091 

512 

125 

9.08 

3.39 


1,474 


Oross profits 


461 


Net income . , . 


86 


Profit rate 


6.40 




5.22 






Federal corporate income tax . 


26 


19 


16 
3 
2 


9 


U ndistributed profits tax 






2 


2 


2 






Fcdoral-State payroll taxes 






4 


10 










State sales taxes 












12 

1 


11 

1 


12 

1 


12 


State corporate taxes 


1 


Miscellaneous. 














Total taxes. 


41 


33 


38 


34 







Sales 




2,145 
765 
368 

67.00 
2.89 


3,160 
1,336 
576 
59.77 
3.11 


2,840 


Gross profits 




1,287 


Net income . ... 




336 


Profit rate _ 




35.23 


Equity ratio 




6.17 








Federal corporate income tax.. - . 




64 


86 
6 
8 
27 
13 
12 


47 


Undistributed profits tax . .... 




1 


Federal capital stock tax ... . 




1 
20 


8 


Federal excises 




23 


Federal-State payroll taxes 




26 


State income taxes 




8 


7 


State sales taxes 






Property taxes 




1 


5 


8 


S tate corporate taxes 






Miscellaneous 




i 














Total taxes. 




95 


157 


120 









J. I. CASE COMPANY 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



Sales 


8,586 
3.556 
(700) 
(1.96) 
34.28 


17,037 
8,410 
2,230 
6.00 
18.81 


21,906 
10, 694 
3,783 
10.00 
19.19 


27,429 


Gross profits 


11,956 


Net income 


4,826 


Profit rate 




Equity ratio 


8.40 






Federal corporate income tax... 




284 


691 
159 
42 


977 


Undistributed profits tax 




524 


Federal capital stock tax 


• 29 


28 


44 


Federal excises 




Federal-State payroll taxes 






90 
84 


267 


State income taxes _ 


20 


27 


149 


State sales taxes 




Property taxes 


253 


258 


259 
31 


247 


State corporate taxes .". 


20 


Miscellaneous 


















Total taxes . , 


302 


597 


1,356 


2,228 





18252 



CONCENTRATION OF ECONOMIC POWER 



A. M. CASTLE AND COMPANY 
[$000's] 



Sales 

Gross profits. 
Net income. - 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1,184 

428 

9.69 

26.11 



38 



1935 



4.020 

1,140 

425 

9.70 

19.25 



54 



119 



1936 



6,011 
1,578 
714 
15.88 
10.19 



106 
18 
4 



194 



CATALIN CORP. OF AMERICA 



Sales . . 




1,485 
570 
295 

25.08 
6.92 


1,629 
613 
337 

27.18 
7.68 


1,352 


Gross profits. 




498 


Net income 




132 


Profit rate _ ..:.. 




9.91 


Equity ratio _ 




12.46 








Federal corporate income tax 




40 


49 
7 
5 


41 


Undi.stributed profits tax 




22 


Federal capital stock tax ■ 




5 


5 


Federal excises 












3 
X 

1 


8 


State income taxes .. ... 




X 

1 


X 


State sales taxes ....... 




1 


Property taxes 






State corporate taxes 






X 


X 


Miscellaneous 


















Total taxes _ _ 




46 


65 


77 









CELANESE CORP. OF AMERICA 



Sale,"! 






30, 891 

11,117 

5,454 

11.56 

5.06 


34,004 


Gross profits 


8,170 
3,732 
10.50 
8.09 


9,807 
4,798 
11.49 
4.57 


12,042 




5,332 


Profitrate 


11.15 


Equity ratio . . 


5.25 






Federal corporate income tax 










Undistributed profits tax 










Federal capital stock tax 










Federal excises 










Federal-State payroll taxes 










State income taxes . . ... 










State sales taxes . ... 










Property taxes 










State corporate taxes . . 










Miscellaneous 




















Total taxes 





















indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18253 



CELOTEX CORP. 
[$000's] 





1934 


1935 


1936 


1937 


Sales . - i 






7,777 

3,743 

928 

13.79 

1.23 


10, 729 








5,108 








1,554 


Profit rate - 






17.26 








.99 
















29 


64 
















23 


18 
















20 


75 








2 


















44 

1 


58 








5 








2 












Total taxes -- 






117 


224 











CENTLIVRE BREWING CORP. 



Sales -- -- 


1,376 

731 

187 

24.79 

12.72 


1,402 

1,176 

170 

21.76 

7.57 


1,513 
1,180 
166 
19.32 
2.60 


1,483 


Gross profits - -. -. 


1,083 


Net income,.- _ _ -. 


80 


Profit rate 


9.40 


Equitv ratio .- 


3.25 






Federal corporate income tax . 


27 


23 


25 


8 






Federal capital stock tax 


2 
480 


1 
509 


3 

532 
2 


2 


Federal excises .. 


497 


Federal-State payroll taxes 


7 










State sales taxes . . . . 


131 

7 


95 

7 


112 
6 


138 


Property taxes 


6 


State corporate taxes 








2 














Total taxes .. - - .. .. 


647 


637 


680 


658 







CENTRAL BREWERIES, INC. 



Sales 




906 
622 
(62) 
(7. 56) 
1.35 


1,349 

951 

98 

11.49 

1.87 


1,281 


Gross profits . 




824 






13 


Profit rate--- 




1.54 


Equity ratio 




2.01 








Federal corporate income tax 






11 




Undistributed profits tax . 








Federal capital stock tax '. 




1 
389 


1 

554 

2 


1 






529 


Federal-State pay roll taxes.. . - 




6 


State income taxes . 








State sales taxes ^. 










Property taxes 




9 
• X 
1 


7 
X 
1 


7 






X 


Miscellaneous 




1 








Total taxes . . . . 




400 


676 


544 









indicate no data available. 

X indicates less than $l,00fi. 
( ) indicate deficit. 



18254 CONCENTRATION OF ECONOMIC POWER 

CENTRAL FOUNDRY CO. INC. 
ISOOO's] 





1934 


1935 


1936 


1937 


Sales 






4,577 

908 

66 

1.43 

1.82 


4 240 








934 








28 








0.61 








2.89 
















2 




Undistributed profits tax 








Federal capital stock tax ._ . 






8 
X 
19 


9 








1 


Federal-State payroll taxes -.. - 






55 
















X 

24 
2 
1 


1 








23 








3 


Miscellaneous - - - - - - 
















Total taxes - - 






56 


92 











CENTURY RIBBON MILLS, INCORPORATED 



Sales 

Gross profits. 
Net income-. 

Profit rate 

Equity ratio- 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. _ 

State income taxes -. 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous. 



Total taxes. 



1,952 

785 

6.41 
..2.61 



11 



1,991 

654 

146 

4.06 

•2.20 



2,054 
846 
328 
9.00 
1.69 



CERTAINTEED PRODUCTS CORPORATION 



Sales. .- 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellanepus 



Total taxes. 



10, 938 

3,367 

(322) 

(1. 60) 

1.04 



118 
3 



14, 155 

4,537 

834 

4.09 

1.50 



124 
4 



15, 669 

4,365 

(46) 

(0. 24) 

91 



124 
11 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

CHAMBERLIN-METAL-WEATHER-STRIP CO. 

[SOOO'sI 



18255 





1934 


1935 


19SC 


1937 


Sales -• - 








4 192 


Gross profits .. 








2,101 










173 


Profit rate - 








11 75 










3 42 












Federal corporate income tax... 








24 










4 


Federal capital stock tax : 








2 












Federal-State payroll taxes 








71 










5 










11 










19 










3 


Miscellaneous. 








3 












Total taxes ..- 








142 













CHAMPION SHOE MACHINERY CO. 



Sales 


524 
309 

(28) 

(1.66) 

67 


616 
363 

30 
1.94 

66 


411 

187 

(71) 

(5. 10) 

61 


461 


Gross profits 


224 


Net income . . 


(35) 
(2. 58) 


Profit rate.._ 


Equity ratio - . - 


57 






Federal corporate income tax.. :.. 










Undistributed profits tax >... 










Federal capital stock tax .... .. .. 


X 


X 


1 


1 


Federal excises _ 




Federal-State payroll taxes 






2 


5 


State income taxes 








State sales taxes 


1 
4 
2 


1 
4 
2 


X 

4 
2 


X 


Property taxes .. 


4 


State corporate taxes.. ".. 


2 


Miscellaneous.- 














Total taxes 


7 


7 


9 


12 







CHARIS CORPORATION 



Sales 






1,481 
708 
159 

13.21 
9.41 


1 467 


Gross profits .. 


705 

188 

13.94 

7.76 


760 

187 

15.43 

14.24 


651 


Net income 


115 


Profit rate.- . ... 


9 86 


Equity ratio... 


10 90 






Federal corporate income tax 


24 


24 


21 


14 


Undistributed profits tax. :. . 




Federal capital stock tax 


3 


3 


3 


3 


Federal excises- 




Federal-State payroll taxes-...; 






4 

7 


32 


State income taxes 




4 


5 


State sales taxes- :... ;. . .. 






Property taxes : .. 


3 

1 


3 
4 


3 

5 


3 


State corporate taxes... 


5 


Miscellaneous- 














Total taxes 


31 


38 


43 


62 







indicate no data available. 

X indicates less than $1 ,000. 
( ) indicate deficit. 



18256 CONCENTRATION OF ECONOMIC POWER 

CHECKER-CAB-MANUFACTURINQ CORPORATION 
[lOOO'sl 



Sales - 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Fodoral corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxes . 

State corporate taxfes .-- 

M iscellaneous 



Total taxes. 



1934 



1,165 

146 

(286) 

(10. 03) 

2.32 



2,679 

582 

62 

2.18 

3.04 



5,648 
1,373 
872 
23.52 
2.01 



69 
82 

7 
147 



CHERRY-BURRELL CORPORATION 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxes 

S tate corporate taxes 

Miscellaneous 



Total taxes. 



8,544 
2,954 

952 
13.73 

5.60 



108 
""i9" 



9,616 
3,267 
1,241 
17.85 
8.04 



149 



CHICAGO FLEXIBLE SHAFT CO. 



Sales - --- 


3, 245 
1,401 
344 
14.97 
11.77 


4,747 
1,973 
807 
27.82 
6.24 


6,813 
2,701 
1,274 
38.56 
4.09 


7,392 




2,828 




1,168 


Profit rate ...... 


33.40 




5.28 






Federal corporate income tax 


79 


140 


' 193 
70 
16- 


169 
27 




3 


15 


13 












18 
X 
X 

25 
1 
X 


63 




X 


X ' 


X 




X 




15 
1 
1 


20 
1 
X 


26 


State corporate taxes .. .. 


1 


Miscellaneous 


1 


Total taxes .. . 


99 


176 


323 


305 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

CHICAGO PNEUMATIC TOOL 
[$000 's] 



18257 



Salas 

Oross prollts. 
Net income.- 
Proftt rate.... 
Equity ratio. 



Federa! corjjorftte income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll ta.\es... 

State income taxes 

State sales taxes 

Property taxes. 

State corporate taxes.. 

M iscellaneous 



Total taxes. 



7,103 
3,478 

en 

3.54 
4. 10 



9, 055 

4, C30 

9S4 

5.49 

3 59 



21 



10, 953 
5,403 
1.506 
h. 3S 
3.80 



124 
3 
10 



13, 566 

6,S74 
2,206 
15. 69 
7.98 



252 
73 



no 

19 
9 
80 
21 



CHICK.VSHA COTTON OIL CO. 



Sales --- 


6,590 

1,104 

639 

7. 17 

21.34 


10, 622 

721 

147 

1.78 

21.26 


6,';;9 

4U7 

(25) 

(0. 32) 

56. 53 


7,250 




766 


Net income 


215 


Profit rate 


2 75 


Equity ratio 


39.49 






Federal corporate income tax 


191 


73 


19 


2 


Undistributed profits tax . .. 




Federal capital stock tax . . 


9 


9 


13 


13 


Federal excises . . _ . 




Federal-State payroll taxes. _ 






3 


12 




46 


14 












99 


R5 
5 


99 

7 


94 




6 


Miscellaneous 
















Total taxes 


345 


186 


141 


li27 







CHRYSLER CORPORATION 



Sales 

Oross profits. 
Net income.. 
Profit rate.-.. 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



371.657 

76,929 

13, 723 

11. S8 

1.27 



1,847 



145 
9, 345 



20 
76 
2,008 
01 
42 



13,544 



516, 830 

114.701 

44, 806 

38.30 

1.56 



8,906 



13, 2.S3 



65 
84 
2,094 
112 
62 



25, 054 



667, 138 

150, 858 

76, 201 

61.79 

1.64 



12, 760 

1,200 

918 

17,861 

1,133 

130 

123 

2,180 

97 

67 



769, 808 

162, 629 

63. 031 

48.32 

3 .37 



10,950 

1,300 

739 

20,467 

3,830 

155 

162 

2,394 

143 

77 



40, 217 



indicate no data available. 

X indicates le.ss than $1,000. 
( ) indicate deficit. 



18258 



CONCENTRATION OF ECONOMIC POWER 



THE CINCINNATI UNION STOCK YARD COMPANY 
[$000's] 



Sales 

Gross profits- 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax. 

Federal excises 

Federal-State pay-roll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



452 

264 

191 

8.04 

8.46 



370 

202 

154 

6.61 

77.46 



379 

219 

135 

5.83 

75.86 



THE CITY ICE AND FUEL COMPANY 



Sales 


26, 472 

11,521 

5,441 

8.68 

6.31 


25, 710 

10, 111 

3,965 

6.54 

7.14 


29,043 

12, 092 

6,039 

11.32 

5.32 


28, 971 


Gross profits.. 


11,712 


Net income 


4,342 


Profit rate _. - 


10.09 


Equity ratio 


6.52 






Federal corporate income tax . ' . 










Undistributed profits tax 










Federal capital stock tax _ 




















Federal-State pay roll taxes .. 




















State sales taxes 










Property taxes . . 










State corporate taxes . 










Miscellaneous 




















Total taxes . . 





















THE CLARK CONTROLLER COMPANY 



Sales 




1,321 
746 
311 

56.52 
2.06 


2,093 
1,199 
596 
70.23 
2.07 


2,545 


Gross profits ... ... _.. . .-. . 




1,329 






598 


Profit rate 




54.88 


Equity ratio 




6.30 








Federal corporate income tax 




53 


91 
8 
6 
X 
6 


83 


Undistributed profits tax 




9 


Federal capital stock tax 




3 
X 


5 


Federal excises . 




X 


Federal-State pav roll taxes... 




21 


State income taxes 








State sales taxes 




X 

6 
X 


1 

7 

1 


1 


Property taxes 




10 


State corporate taxes 




1 


Miscellaneous. 
















Total taxes 




62 


120 


130 









indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18259 



CLARK EQUIPMENT COMPANY 
[$000 's] 



Sales 

Gross profits. 
Net income . . 
Profit rate.... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State pay roll taxes.. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Aliscellaneous 



Total taxes- 



1934 



1,128 



2.70 
34.98 



1,139 

16 

0.22 

20.77 



11 



9,482 

2,064 

618 

7.68 

5.12 



12,718 
3, 026 
1.416 
16.57 
6.34 



230 



THE CLEVELAND-QRAPHITE-BRONZE CO. 



Sales.. 

Gross profltS- 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State pay roll taxes. . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous- -.. 



Total taxes. 



4,696 
1,545 
657 
35.30 
4.65 



82 



102 



7,084 
2.872 
1,617 
64.87 
3.40 



252 



7,754 
3,076 
1,635 
52.68 
4.87 



229 
65 
16 



10, 388 
4,080 
1,952 
52,68 



292 
97 
18 



542 



THE CLEVELAND TRACTOR COMPANY 



Sales -. - --- 




6,065 

1,308 

343 

14.41 

1.86 


5,349 

1,119 

105 

2.88 

1.27 


7,820 






1,845 






362 


Profit rate - . 




9.79 






1.07 








Federal corporate income tax . 




28 


6 

7 


10 

3 

37 
3 
X 


59 


Undistributed profits tax .. .. 




61 


Federal capital stock tax .... . .. ■ 




6 



7 


Federal excises ... 











40 


State income taxes 





3 
33 

1 



X 


State sales taxes 




3 






45 


State corporate taxes ? 




X 















Total taxes 




71 


66 


215 









indicate no data available. 

X indicates less than $1,000. 
( ) Indicate deficit. 



] 24491 — 41— pt. .'il-A- 



18260 CONCENTRATION OF ECONOMIC POWER 

CLIMAX MOLYBDENUM COMPANY 
tSOOO's] 





1934 


1935 


1936 


1937 


Sales -- --■ - 








17,038 










11,218 










8,126 


Profit rate 








10.20 








^ 


49.42 




















887 










65 










79 


Federal excises -. - 










Federal-State payroll taxes - 








98 










36 










65 










87 










8 


Miscellaneous 




i 
















Total taxes . .. 








1,315 













CLOROX CHEMICAL CO. 



Sales 

Gross profits. 
Net income.. 
Profit rale... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales ta.xes... 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1, 813 

420 

2r>. 76 

5.32 



64 



3,122 

2,078 

450 

28.70 

3.67 



63 



3,068, 
1,939 
486 
29.94 
3.98 



90 



CLUB ALUMINUM UTENSIL COMPANY 



Sales - 


22 

13 

9 

7.22 

.14 


22 

14 

11 

8.19 

.17 


40 
32 
.')4 
30.38 
27 


59 


Gross profits 


52 


Net income i.. ,, 


109 


Profit rate . ,,., 


18.26 


Equity ratio 


.63 






Federal corporate income tax 








7 


Undistributed profits tax 










Federal capital stock tax 




X 


X 


2 








Federal-State payroll taxes 




X 


X 


X 




















1 
X 


1 
X 
X 


1 
X 


1 




X 
















1 


1 


1 


10 







indicate no data available, 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18261 



CLUETT PEABODY & CO. INC. 
[SOOO's] 



Sales 

Gross proflts- 
Net income.. 

Profit rate 

Equity ratio - 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous 



Total taxcs- 



13, 969 

4,059 

983 

8.79 

8.33 



101 



15,122 

4,017 

991 

8.81 

12.69 



73 



18, 436 
5,389 
2,053 
18.06 
4.26 



205 
12 
20 



107 
8 



1937 



21, 671 
6,769 
1,643 
11.23 
4.01 



168 
64 



460 



COLOATE-PALMOLIVE-PEET COMPANY 



Sales 


71,969 
38,453 

5,704 
9.97 

10.70 


81,684 

40,645 

6,680 

11.26 

8.92 


89,631 

42,186 

7,313 

12.43 

7.01 


99 991 


Gross profits - . 


46,636 




3,442 


Profit rate 


6.04 




6.90 






Federal corporate income tax __ 






389 
28 
70 
3,946 
92 
30 


60 


Undistributed profits tax 








Federal capital stock tax r'". 






71 


Federal excises.- 






4,176 


Federal-State payroll taxes 






304 


State income taxes 






14 


State sales taxes . 








Property taxes 






493 


486 


State corporate taxes 








Miscellaneous . 






13 


13 










Total taxes 






6,061 


6,123 









COLLINS AND AIKMAN CORP. 



Rales - 










Gross profits 


2, 497 

308 

2.16 

18.45 


7,603 

4,932 

28,66 

7.22 


0,611 

6,413 

36.67 

6.66 


6,977 


Net income - .. . . 


2,960 


Profitrate . 


17.10 


Equity ratio. 


12.96 






Federal corporate income tax ■. 


19 


812 


989 
187 
61 


434 


Undistributed profits tax 


10 


federal capital stock tax 


16 


32 


61 


Federal excises.. _ 




Federal-State fiayroll taxe^.. 






73 
222 
X 
76 


160 


State income taxes 


2 
X 
74 
18 


126 
X 

75 
54 
7 


00 


State sales taxes.. . . 


X 


Property taxes ... 


77 


State corporate taxes 


40 


Miscellaneous , 












Total taxes 


128 


1,106 


1,680 


877 







indicate no data available. 

X indicates less than $1,000. 
( ) Indicate deficit. 



18262 



CONCENTRATION OF ECONOMIC POWER 



THE COLORADO FUEL AND IRON CORPORATION 
[lOOO's] 





1934 


1935 


1936 


1937 


Sales - - -- 






26, 953 

9,528 

2,437 

7.08 

.97 


20,119 








6, 125 


Net income .. - - -. - 






(36) 


Profit rate - --- 






(0.11) 


Equity ratio . - .- 






1.06 
















198 


1 










Federal capital stock tax. 






43 

7 
376 

3 
39 
007 

2 


33 








10 








329 








1 








17 








845 








2 




















Total taxes.-- - --- 






1,275 


1,038 











COLUMBIA BREWING CO. 



Sales 

Gross proflts- 
Net income- - 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .- 

State income taxes 

State sales taxes... .i..... 

Prop)erty taxes -... 

State corporate taxes... .' 

Miscellaneous. 



Total taxes. 



901 
678 
27 
3.95 
3.56 



1 
321 



364 



1,239 

926 

70 

9.54 

3.52 



1 

427 



1,374 
1,054 
65 
9.22 
4.16 



7 
3 
1 
458 
2 
1 
55 
5 
4 



1,475 

1,094 

(U) 

(1.50) 

2.78 



1 

485 



COMMERCIAL SOLVENTS CORPORATION 



Sales 


10, 813 
4,268 
2,653 
16.46 
14.18 


20,380 
6,139 
3,254 
16.96 
8.51 


20,707 
5,461 
2,624 
14.24 
8.59 


19,936 


Gross profits 

Net income.- 


4,751 
2,052 


Profit rate- - --- - . 


10 35 


Equity ratio - 


2.96 






Federal corporate income tax--. 


240 


350 


345 


276 


Undistributed profits tax 




Federal capital stock tax 


40 
2,580 


44 
9,59) 


23 
25, 858 
21 
16 
10 
83 
13 
12 


35 


Federal excises 


24 289 


Federal-State payroll taxes 


67 


State income taxes- - - 


6 
X 

50 
6 
X 


' 11 

4 

63 

7 
7 


10 


State sales taxes. 


4 


Property taxes '. . 


87 


State corporate taxes 


8 


Miscellaneous . . 


13 






Total taxes 


2,922 


10,077 


26,381 


24, 789 





— indicate no data available. 
X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18263 



CONDE NAST PUBLICATIONS, INC. 
[lOOO's] 





1934 


1935 


1936 


1937 


Sales.- -- 


6,502 
3,057 
155 
2.81 
2.64 


7,632 
2, .57.5 

(95) 
(1.83) 

2.68 


7,Q70 
3.178 
191 
3 76 
3.04 


8,982 
4,105 




334 


Profit rate - 


fi.38 




2.13 












43 


22 












8 


8 


4 


7 












26 
5 


79 




2 


6 


9 




21 




20 


19 


19 


19 




1 










1 














30 


33 


97 


159 







CONQOLEUM-NAIRN INC. 



Sales.. 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes. 

Property taxes 

State cor,)orate taxes 

Miscellaneous 



Total taxes - 



13,697 
5,785 
2,381 
10.11 
32.92 



244 



212 
3 
2 



16. 682 
6, 570 
2,608 
11.03 
28.34 



325 



232 

8 
2 



646 



19, 748 
7,338 
3,Q85 
12. P5 
15. 78 



45u 



234 

41 

3 



19,416 
7,902 
3,014 
12. .'■•3 
21.46 



430 



33 
1 

177 
40 



205 
55 
3 



CONGRESS CIGAR CO. INC. 



Sale? 

Qro.ss profits. 
Net income.. 
Profit rate- 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax.. .. 

Federal excise" .. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

M iscellaneous. - 



Total taxe.s. 



3,450 
1,619 
18 
0.26 
6fi.50 



5 
225 



2,839 
1,280 
207 
3.31 
30. 08 



21 



5 
191 



5,514 
1,969 
261 
4.45 
29.63 



37 



8 

3.82 

12 

5 



5,202 
1,839 
128 
2.29 
19,74 



15 



7 

342 

34 

6 



25 
6 
13 

448 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18264 CONCENTRATION OF ECONOMIC POWER 

CONSOLIDATED BISCUIT COMPANY 
IIOOO's] 





1934 


1935 


1936 


1937 


Sales . 




2,978 
401 
112 

16.09 
1.35 


4,980 
990 
389 

20.77 
1.07 


5,252 


Gross profits .. - 




829 






222 


Profit rate .- 




12.51 






1.29 












16 


46 
10 
6 

1 
9 
4 

1 
4 

1 
1 


15 








Fpriprftl pf^pjt.ftl stnnt tax 




2 


6 








Federal-State payroll taxes - 






30 








1 








X 






2 


9 






X 








X 














20 


83 


61 









CONSOLIDATED CIGAR CORPORATION 



Sales... 

Grogs profits - 
Net income.. 

Profit rate 

Equity ratio - 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes. 

State sales taxes 

Property taxes.. 

State corporate taxes 

Miscellaneous... 



Total taxes. 



9,622 

4,383 

841 

5.30 

25.79 



40 



829 



901 



9,549 
4,327 
755 
4.84 
37.28 



22 

'"9 
700 



805 



10, 022 

4,640 

1,109 

7.19 

25.39 



105 



10 

667 

27 



904 



11,001 
5,272 
1.234 
8.11 
19.88 



142 



10 
721 
83 
40 



1,052 



CONSOLIDATED STEEL CORPORATION LIMITED 



Sales 

Gross profits. 
Net Income.. 
Profit rate.... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stoclitax 

Federal excises.. 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



4,870 



0.10 
4.21 



3,934 

598 

200 

4.25 

3.25 



5,243 
1,014 
567 
11.80 
1.76 



151 



5,987 

1,139 

649 

12.91 

1.64 



253 



Indicate no data available 

X Indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18265 



CONSUMERS COMPANY OF ILLINOIS, VT. 
[SOOO's] 





1934 


1935 


1936 


1937 


Sales --- - 








10,753 


Gross profits - 








1,778 


Net income 








81 


Profit rate. 


















L28 
































Federal capital stock tax 










Federal excises . -. . 










Federal-State payroll taxes 










State income taxes 










State sales taxes -. 




















State corporate taxes 






























Total taxes - 





















CONTINENTAL BAKING CORP. 



Sales - 

Gross profits 

Net income --■ 

Profit rate 

Equity ratio 

Federal corporate "income tax 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous .-. 

Total taxes 



47,733 

8,142 

2,406 

4.97 

16.63 



297 


20 



42 

56 
372 

19 




806 



50,961 
7,659 
2,295 
4.84 
31.90 



312 


49 



33 

69 
377 

28 




58,164 
22,394 

4,222 
8.84 

26.60 



729 


119 


184 
53 
85 

386 
24 
12 



1,592 



CONTINENTAL CAN CO., INC. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises.- _ 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



68,207 

23,155 

13, 020 

15.65 

15.51 



2,212 



40 

32 

384 

14 



2,789 



80,923 

24,422 

13,532 

15.45 

15.70 



2,250 



242 
2 



81 

30 

356 

20 



2,981 



91, 172 

23,072 

10,706 

11.09 

14.03 



1,600 



112 

2 

206 

101 

24 
520 

32 



2,597 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18266 



CONCENTRATION OF ECONOMIC POWER 



CONTINENTAL-DIAMOND FIBRE CO. 
[$000's] 



1934 



1935 



Sales ..- 

Gross profits - 
Net income. . 

Profit rate 

Equity ratio - 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises-. 

Federal-State payroll taxes 

State income taxes 

State sales taxes. ^ 

Property taxes _•.... 

State corporate taxes 

Miscellaneous. 



Total taxes. 



4,584 
1,336 
(78) 
(1. 12) 
22.79 



5,718 
1,672 
226 
3.42 
15.23 



6,895 
2,340 
740 
11.90 
10.41 



94 



CONTINENTAL MOTORS CORPORATION 



Sales 




4,632 
545 

(837) 
(12. 86) 

3.29 


5,849 
814 

(567) 
(9. 71) 

2.28 


8, 2l4 


Gross profits 




1,557 


Net income 




186 


Profit rate 




3.13 


Equity ratio .... 




2.34 








Federal corporate income tax. 




3 


2 




Undistributed profits tax ... 






Federal capital stock tax 




4 

1 


5 

1 
18 


4 


Federal excises ^. 




3 


FederEil-State payroll taxes 




71 


State income taxes 








State sales taxes 








X 


Property taxes 




99 
47 
X 


83 
29 
X 


76 


State corporate ta.xes . 




13 


Miscellaneous .. 




X 








Total taxes 




154 


138 


167 









CONTINENTAL OIL COMPANY 



Sales _ . . 


65, 721 
14, 563 

5,392 
4.05 

12.42 


69, 501 
32,429 

9,037 
4.45 

11.34 


75, 762 

39, 498 

10, 235 

3.46 

10.51 


89, 180 


Gross profits 


48,328 


Net income 


14, 669 


Profit fate 


3.49 


Equity ratio 


10.15 






Federal corporate income tax 


127 


191 


496 


446 


Undistributed profits tax. .... .... . ... 




Federal capital stock tax 


58 
66 


55 
62 


77 
55 
125 
107 


64 


Federal excises 


87 


Federal-State payroll taxes .• : 


401 


State income taxes. . . 


36 


14 


161 


State sales taxes. 




Property taxes ...... .; 


1,057 
53 


1,095 
50 


1,035 
65 


1,186 


State corporate taxes 


61 


Miscellaneous ; 














Total taxes. . ... 


1.397 


1,467 


1,960 


2,406 







indicate no data available. 

X indicates less than $1,000. 
< ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

COOK PAINT AND VARNISH CO. 
[lOOO's] 



18267 





1934 


1935 


1936 


1937 


Sales 




5,357 
2,371 
487 
13.98 
8.09 


6,418 
2,749 
606 
15.34 
6.98 


6,667 

2,745 

560 


Gross profits -.. 




Net income.- 




Profit rate ._ 






Equity ratio. . 




8 48 








Federal corporate income tax 




66 


90 
19 
6 


75 


Undistributed profits tax 




13 


Federal capital stock tax 




3 


7 


Federal excises 1 






Federal-State payroll taxes _ 






14 
3 


43 


State income taxes 




2 


7 


State sales taxes 






Property taxes _ 




22 
3 


19 
3 


20 


State corporate taxes _ 




3 


Miscellaneous-- 
















Total taxes 




96 


154 


168 









COOPER BESSEMER CORPORATION 



Sales.-- 

Gross profltS- 
Net income. - 
Profit rate.-- 
Equity ratio. 



Federal corporate income tax- 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes. -_ 

Property taxes 

State corporate taxes . . 

Miscellaneous 



Total taxes - 



2,036 

473 

(148) 

(2. 39) 

70.20 







2,545 
718 
36 
58 

49.10 







5,783 
1,600 
575 
8.57 
6.51 



CORN PRODUCTS REFINING COMPANY 



Sales ..- 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises -- 

Federal-State payroll taxes... 

State income taxes.. 

State sales taxes 

Property taxes 

State corix)rate taxes 

Miscellaneous 



Total taxes- 



46, 470 
19, 109 
11, 698 
10.36 
14.65 



1,255 



4 
1,599 



31 

2 

230 

29 



50, 378 

16, 361 

10, 263 

9.33 

15.45 



1,111 



252 
1,330 



35 
24 
274 
31 



58,420 

22, 052 

14, 157 

12.92 

13.17 



1,' 



124 
67 
89 
30 
15 

415 
32 



1,749 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18208 CONCENTRATION OF ECONOMIC- POWER 

COSDEN PETROLEUM CORPORATION 

[SOOO'sJ 





1934 


1935 


1936 


1937 


Sales -- -- 


3,153 

254 

(833) 

(12. 95) 

.55 


3,954 
595 
(388) 

(6. 42) 
.47 


5,181 

1,081 

26 

.48 

.28 


5,862 




1,116 




175 


Profltrate. — - - 


3.04 


Equity ratio . - 


.86 


























Federal capital stock tax .. 










Federal excises .. -. . .- 










Federal-State payroll taxes . 




















State sales taxes., .- 






























Miscellaneous 




















Total taxes .. 





















CRANE COMPANY 



Sales. 

Gross profits. 
Net income-. 

Profit rat? 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes. 

State corporate taxes 

Miscellaneous. 



Total taxes. 



50,703 

18, 140 

2,572 

2.87 

5.18 



206 



4 
24 
871 
28 

5 



1,203 



57, 494 

20,767 

3,155 

3.56 

5.02 



297 
'"92' 



10 
23 
845 
32 
11 



1,319 



78, 012 

27, 759 

9,079 

9.70 

4.15 



1,052 

353 

86 

2 

193 

18 

28 

859 

40 

7 



2,638 



CREAMERIES OF AMERICA INC. 



Sales 






8,512 
3,296 
480 
7.13 
2.93 


9,828 


Oross profits 






3,800 


Net income 






623 


Profltrate.- 






15.52 


Equity ratio.. 






1-.44 










Federal corporate income tax 






66 
15 
11 
101 
13 
17 
18 
53 
2 
1 


79 


Undistributed profits tax. 






10 


Federal capital stock tax . 






9 


Federal excises . ... ■. 






181 


Federal-State payroll taxes. 






52 


State income taxes 






31 


State sales taxes 




1 


20 


Property taxes 






56 


State corporate taxes 






1 


Miscellaneous. 






20 










Total taxes 






297 


459 











Indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

CROWN CORK AND SEAL COMPANY, INCORPORATED 
[$000's] 



18269 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises.. _ 

Federal-State payroll taxes... 

State income taxes ..^ 

State sales taxes. 

Property taxes 

State corporate taxes :... 

Miscellaneous 



Total taxes. 



10,880 
4,959 
1,870 
11.81 
2.20 



14, 161 

6,165 

2,614 

14.92 

1.71 



211 



236 



15,623 

7,115 

3,386 

11.17 

2.86 



443 
135 



24,786 

9,901 

3,145 

10.33 

1.48 



572 
238 

78 



208 
7 
1 
84 
2 
4 



1,194 



CROWN CORK INTERNATIONAL CORPORATION 



CROWN DRUG COMPANY 



Indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



Sales .-_ . 


3,950 
1,462 
454 
11.23 
5.42 


4,203 
1,643 
547 
9.14 
4.99 


5,115 
1,927 
,689 
12.53 
2.61 


6,166 

2,370 

855 


Gross profits 


Net income.. 


Profit rate . 


15 70 


Equity ratio 


1.88 






Federal corporate income tax 






4 




Undistributed profits tax 








Federal capital stock tax » 


4 


4 


4 


3 


Federal excises.. 




Federal-State payroll taxes 








X 


State income taxes 










State sales taxes 










Property taxes ... 


X 

2 
1 


X 

2 
I 


X 
2 

6 


X 


State corporate taxes .. 


2 


Miscellaneous . 


5 






Total taxes 


7 


7 


15 


10 







Sales 




7,624 

2,290 

222 

14.44 

2.50 


8,241 
2,492 
319 
19.59 
2.35 


8,563 






2,620 
273 






Profit rate . . 




16 29 






2.41 








Federal corporate income tax 




15 


36 


82 


Undistributed profits tax 




X 


Federal capital stock tax 




6 


6 


7 


Federal excises 






Federal-Stata payroll taxes. . ... 






e 

4 


30 


State income taxes 




1 
21 
14 
23 


3 


State sales taxes .. . 






Property taxes ..^.. ... 




10 
28 


19 


Ptpf« pnrporate tj(TAS 




n 


Miscellaneous 
















Total taxes 




80 


06 


114 









18270 CONCENTRATION OF ECONOMIC POWER 

CROWN ZELLERBACK CORPORATION 

[$000's] 





1934 


1935 


1936 


1937 


Sales .. _ . - 






49, 814 

20, 878 

7,531 

7.74 

2.58 


50,790 








21, 289 








8,502 








8.57 








2.75 


















947 










341 










80 










42 


Federal-State payroll taxes . .. _ .- 








144 










126 










117 










593 










74 










4 












Total taxes -- 








2,468 













CRUCIBLE STEEL CO. OF AMERICA 



Sales.- 

Gross profits - 
Net income- . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes ._ .-. 

State sales taxes 

Property taxes 

Sitate corporate taxes 

MiscCi'aneous 



Total taxes. 



27, 774 

7,482 

771 

.74 

6.11 



10 



28 

14 

G63 

22 



32,918 

9,137 

2,040 

2.00 

6.82 



138 



35 

9 

638 

67 



46, 621 

12, 866 

4,289 

4.17 

6.31 



519 
231 
39 



159 
HI 
11 
673 
131 



59, 680 

16, 113 

5,543 

5.33 

8.12 



887 
241 

36 

5 

664 

160 

20 



2,851 



THE CRYSTAL TISSUE CO. 



Sales 

Gross profits. 
Net income.. 
Profit rate. _. 
Equity ratio - 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. - 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes- 



1,175 

357 

60 

5.00 

22.50 



1,254 
371 



5.44 
23.20 



1,474 

479 

123 

9.95 

13.70 



1,591 

514 

124 

9.84 

18.57 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

THE CUDAHY PACKING CO. 
[lOOO's] 



18271 





1934 


1935 


1936 


1937 


Sales -- 




180, 218 

43.360 

2,498 

3.79 

1.15 


201,606 

47,114 

3,360 

5.06 

1.04 


222, 222 






47, 749 






(414) 


Profit rate 




(0. 66) 


Equity ratio . 




.83 












93 


345 


24 






7 






36 
82 


32 
88 
142 


35 






82 






523 




















Property taxes. . 




492 


487 


518 








Miscellaneous . - 




91 


105 


146 








Total taxes .- 




794 


1,199 


1,335 









THE CURTIS PUBLISHING CO. 



Sales 


31,290 

14,371 

6.575 

14.09 

7.35 


31,829 
14,532 
6,166 
13.51 

9.87 


35,515 

16, 879 

7,487 

16. 37 

9.93 


36, 154 


Gross profits 


16, 052 


Net income . 


4,878 


Profit rate ..- 


11.29 


Equity ratio 


6.72 






Federal corporate income tax 


1,004 


822 


882 


676 


Undistributed profits tax 






iso 


127 


56 


93 












96 
266 
1 
151 
114 


295 




X 
X 

183 
70 


170 

1 

176 

191 


176 




X 




151 


State corporate taxes . .- 


703 




X 












Total taxes - 


1,437 


1,487 


1,566 


2,094 







CUBTISS-WRIGHT CORPORATION 



Sales 








24, 116 










7,314 











2,545 


Profit rate 








8.72 










6.11 




















408 










HI 










23 










1 










312 










5 










X 










227 










12 










6 





















1.105 








f 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18272 



CONCENTRATION OF ECONOMIC POWER 



CUTLER HAMMER, INCORPORATED 
($000's] 



Sales 

Gross proflts- 
Net incoir>e.. 
Profit rate... 
Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. _- 

btate income taxes 

State sales taxes 

Property taxes. 

State corporate taxes 

Miscellaneous - 



Total taxes. 



5,098 

1,692 

79 

1.21 

16.47 



7,460 
2,735 
737 
10.49 
9.66 



105 



1936 



10, 743 
3,952 
1,663 
22.41 



226 
45 
15 

3 
80 
75 

2 
91 

2 



1937 



12, 765 

4,276 

1.650 

21.06 

7.64 



235 

67 

16 

4 

195 

67 

3 

113 

2 



DA VEGA STORES CORPORATION 



Sales 




9,243 

2,101 

223 

10.09 

2.43 


10, 424 

3.014 

507 

12.61 

7.45 


10, 778 


Gross profits .. . .- - 




2,839 


Net income . .- .-..-- - 




104 


Profit rate 




3.09 






8.78 












28 


72 
2 
6 
X 
25 
26 
5 
X 
X 
1 


38 


Undistributed profits tax _ . 




X 


Federal capital stock tax . 




5 
X 

4 
11 

6 

8 
X 
X 


8 


Federal excises - . ..... 




X 


Federal-State payroll taxes 




54 


State income taxes 




8 


State sales taxes 




e 


Property taxes i. -. 




2 


State corporate taxes 




2 


Mi,<!f>pllan(»nii,<; 




X 








Totaltaxes 




62 


137 


118 









THE DAYTON RUBBER MANUFACTURING COMPANY 



Sales 




4,482 

1,445 

74 

3.82 

2.55 


7,122 
2,304 
632 
20.12 
3.79 


8,274 


Gross profits 




2,709 


Net income 




514 


Profit rate 




15.20 


Equity ratio 




2.29 








Federal corporate income tax... 




7 


100 


108 


Undistributed profits tax _ 




54 


Federal capital stock tax _ 




4 
154 


5 
346 

16 


6 






322 


Federal-State pajrroU taxes 




52 


State income taxes. 






1 


State sales taxes. - 




X 

25 
5 


2 

27 
5 


X 


Property taxes : 




31 


State corporate taxes 




5 


Miscellaneous 
















Total taxes ..- 




.195 


501 


579 









indicate no data available 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

ALFRED DECKER & COHN, INC. 
[$000's] 



18273 





1934 


1935 


1936 


1937 


Sales 




3,809 

856 

101 

8.81 

1.59 


4,769 

1, 134 

185 

14.15 

1.54 


5 150 


Gross profits 




1 181 


Net income 




156 


Profit rate 




11 26 


Equity ratio 




1 22 








Federal corporate income tax 




11 


23 


38 


Undistributed profits tax 






Federal capital stock tax 




X 


3 


3 


Federal excises 






Federal-State payroll taxes 






16 


57 


State income taxes 






I 


State sales taxes.. 










Property taxes 




18 
X 
X 


22 
X 
X 


27 


State corporate taxes 




1 


Miscellaneous.. . 










• ^ 


Total taxes 




29 


64' 


127 









DEERE & COMPANY 



Sales 




50,880 

24, 537 

9,476 

14.64 

7.13 


71, 527 
35,420 
16,941 
23.32 
8.08 


100,380 
48,980 
25 393 


Gross profits 




Net income . 




Profit rate 




31 83 


Equity ratio _ 




3 80 








Federal corporate income tax 




1,660 


2,758 


4,814 
1 980 


Undistributed profits tax 




Federal capital stock tax 




76 
8 


231 

8 
155 
126 

16 
503 

20 


246 


Federal excises _.. 




6a 


Federal-State payroll taxes _ 




681 


State income taxes 




63 

11 

479 

8 


259 


State sales taxes 




24 


Property taxes 




547 


State corporate taxes 




31 


Miscellaneous . 
















Total taxes 




2,305 


3,817 


8,645 









THE DEISEL-WEMMER-QILBERT CORP. 



Sales 

Gross profits. 
Net income. - 

Profit rate 

Equity ratio. 



Federal corpo'ate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous. 



Total ta:fes. 



4,887 
1,5.')4 
472 
7.96 
28.07 



72 



4.680 
1,394 
485 
8.15 
18)55 



5,108 
1,484 
702 
11.63 
35.25 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18274 CONCENTRATION OF ECONOMIC POWER 

DETROIT MICHIGAN STOVE CO. 
[$000's] 





1934 


1935 


1936 


1937 


Sales - - 




2,701 

745 

44 

2.03 

6.29 


3,680 

1,168 

267 

1,038 

3.21 


4,398 






1,308 






263 






9.55 






3.68 












1 


32 
9 


43 












2 


5 
















8 


38 














1 
46 

7 


1 

48 
4 


3 






47 


State corporate taxes - --'- 




6 






















57 


102 


142 









DETROIT STEEL CORP. 



Sales 




3,577 
624 
425 

31.77 
2.17 


5,166 

1,068 

658 

30.68 

2.05 


6,819 


Oross profits - 




1,498 






915 






36.71 






5.82 












70 


102 
70 
9 


138 






78 


Federal capital stock tax . _ 




5 


11 


Federal excises ^ . - 






Federal-State payroll tsxes 






6 


23 


State income taxes 








State sales taxes 














20 
2 
1 


29 
3 
X 


39 


State corporate taxes. . 




5 


Miscellaneous . . 




1 








Total taxes . 




98 


219 


295 









DETROIT STEEL PRODUCTS COMP.\NY 



Sales 


4,743 
1,277 
220 
6.23 
3.51 


6,482 
1,641 
389 
9.46 
3.97 


9,463 
2,796 
1,041 
22.41 
2.51 


10,560 


O ross profits _ _ 

Net income 

Profit rate 


3,089 

937 

18.94 


Equity ratio 


3.33 






Federal corporate income tax ._. 

Undistributed profits tax 


22 


40 


150 


135 


Federal capital stock tax _ _ _ 


4 

5 


6 
9 


12 
12 
26 


11 


Federal excises 


9 


Federal-State payroll taxes 


94 


State income taxes 






2 


State sales taxes 


3 

58 
8 


2 
53 

8 


2 
55 
10 


7 


Property taxes 


69 


State corporate taxes . . 


11 


M iscellaneous 














Total taxes 


100 


118 


267 


338 







indicate no data available. 

X indicates lc?s than $1,000. 
( ) indicate dtfitit. 



CONCENTRATION OF ECONOMIC POWER 



18275 



THE DIAMOND MATCH CO. 
[SOOO's] 



Sales 

Gross profits. 
Net income.. 

'Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undustributed profits tax 

Federal capital stock tax. . __ 

Federal excises 

Federal-State payroll taxes .. 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous. 



Total taxes. 



1934 



21,667 

8,474 

2,528 

7.84 

23.13 



397 



52 
1,931 



61 
45 
161 
20 



2,657 



26, 465 
10, 146 

2,646 
8.29 

21.87 



370 



42 
2,676 



52 
30 
241 
31 



3,442 



28,653 
9,370 
2,330 
7.36 
24.24 



274 



21 
2,827 
64 
48 
13 
230 
17 



DISTILLED LIQUORS CORPORATION 



Sales 




801 

108 

19 

1.27 

24.06 


1,172 
283 

(128) 
(8. .53) 
17.58 


1,024 


Gross profits -.. .. -. .. 




175 


Net income... . ... 




(34) 


Profit rate 




(2. 36) 


Equity ratio 




155.90 








Federal corporate income tax . .. 









2 

2 
2 

X 
8 

X 

X 





Undistributed profits tax .. . 







Federal capital stock tax 




4 



1 


Federal excises ___ _ . 











1 






1 

9 


1 


1 


State sales taxes . ... 











8 


State corporate taxes 




X 


Miscellaneous 












Total taxes 




15 


14 


11 









DODGE MANUFACTURING COMPANY 



Sales 






2,081 

833 

229 

9.56 

13.01 


2,937 


Gross profits 






1,237 








406 


Profit rate 






15.22 








8.10 
















30 


56 








27 








3 


3 
















8 
X 

1 
23 
X 


33 








X 


State sales taxes ^ ... 






10 








26 








X 


























65 


155 











indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18276 CONCENTRATION OF ECONOMIC POWER 

doi:hler die casting company 

[$000's]. 



Sales --- 

Gross profits - 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income taxj 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. ._ 

State income taxes 

State sales taxes 

Property taxes >.. 

State corporate taxes _ - 

Miscellaneous 



Total taxes. 



1934 



4,589 

1,390 

609 

16.03 

8.35 



37 



1935 



6,698 

1,716 

736 

21.13 

5.26 



143 



1936 



9,471 
2,436 
1,169 
28.14 
3.98 



161 

■69 

13 



356 



1937 



12, 400 
2,923 
1,217 
27.60 
3.54 



162 
48 
13 



151 
28 
3 
38 
15 



458 



DOERNBECHER MANUFACTURING CO. 



Sales 






3,530 
962 
357 

17.08 
1.89 


3,859 








876 








244 








10.33 








13.54 
















50 
11 
4 


28 








16 








8 
















16 
12 


48 








4 
















27 

1 


32 








X 




















Total taxes . - 






121 


136 











DOUGLAS AIRCRAFT COMPANY INCORPORATED 



Sales - 




7,392 
1,994 
1,512 
28.39 
7.89 


7,868 
2,098 
1,176 
11.40 
4.02 


20,950 






4,173 






1,632 






15.20 






1.28 












279 


167 


229 






273 






11 


19 


27 














64 

71 

7 

98 


312 


State income taxes .. ^ 




14 


54 


State sales taxes . . -- 




13 






64 


179 
















X 












Total taxes' . .. 




368 


426 


1,087 









indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

THE DOW DRUG COMPANY 
[$000's] 



18277 



Sales.. 

Gross profits- 
Net income. . 
Profit rate.-. 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes... 

Property taxes 

State corporate taxes. ._ 

Miscellaneous 



Total taxes. 



3,958 
1,407 
153 
11.73 
4.75 



12 



1935 



3,890 
1,363 
94 
7.15 
4.10 



1936 



4,167 
1,433 
115 
8.69 
3.93 



14 



4,104 

1,401 

(7) 

(0. 53) 

3.61 



DRESSER MANUFACTURING COMPANY 



Sales 






3,916 
1,576 
464 
16.68 
8.10 


6,C62 
2,151 


Gross profits 




943 

155 

5.86 

20.20 


Net income _._ 




546 


Profit rate 




12.54 


Equity ratio 




3.94 








Federal corporate income tax.. . . 




24 


47 


116 


Undistributed profits tax _. 






Federal capital stock tax _ . ._ 




9 


9 


15 


Federal excises 






Federal-State payroll taxes . . . _ 








65 


State income taxes _ . 




17 


25 


40 


State sales taxes _ 






Property taxes. _ _ 




"\q 


11 


15 


State corporate taxes - 






Miscellaneous .... . ._ 




















Total taxes . ... 




60 


92 


251 









DUPLAN SILK CORP. 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes.. 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



9,315 
1,852 
500 
8.60 
12.25 



69 



118 



10, 179 

1,876 

509 

8.77 

9.71 



12,058 

2,435 

902 

14.74 

5.59 



185 



10. 172 

1,806 

413 

6.85 

11.41 



58 



7 

2 

108 

12 
2 

55 



indicate no data available. 

X indicates less than $1,000. 

( ) indicate deficit. 

(This corporation reports on fiscal year basis ending May 31.) 



18278 



CONCENTHA^riON OF ECONOMIC I'OWER 



E.I. DUPONT DE NEMOURS AND COMPANY 

[SOOO's] 





1934 


1935 


1936 


1937 


Sales 


170,933 

83, or.,^ 

52, 494 

10. 31 

2,'i. 03 


220, 528 

103, 449 

69, 726 

13.25 

22.16 


200, 333 

125,615 

102, 786 

18. 52 

16.50 


286, 043 


Gross profits 

Net income 


137,640 
99, 298 


Profi t rat e _ _ 

E quity rat io 


16.00 
17.75 


Federal corporate income tax 

Undistributed jirofits tax 


4,820 


6,581 


9, 627 

2,148 

718 

4 

859 

1,394 

82 

1,871 


9,943 
1,267 


Federal caiiital stock tax 


423 
10 


549 
4 


687 


Federal excises 

Federal-State payroll taxes.- -.. -_. 


5 
2,777 


State income taxes , 


335 

53 

1,540 


790 

63 

1,769 


675 


State sales taxes.- 


148 


Property taxes • .... . 


1,900 


State corporate ta.xes - . . . 


499 


Miscellaneous 


19 


6 


2 


2 






Total taxes 


7, 206 


9, 768 


16, 705 


17,903 







EAGLE PICHER LEAD CO. 



Sales 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

A I iscellaneous 



Total taxes 



11,802 

2, 859 

(119) 

(0. 72) 

, J1.53 



16,041 
3,912 



6. 11 
11.27 



1 
4 
108 
6 
4 



20 

12 

109 

8 

2 



20, 883 

4, 906 

843 

7.24 

6.42 

122 
14 
14 



53 
16 
11 
135 

5 
5 



24. 691 

5,278 

470 

4.15 

3.15 

52 



141 

14 
24 
151 
4 
4 



THE EARLY & DANIEL COMPANY i 



Sales ■ 


18, 672 

662 

192 

10.32 

74 


16, 502 

737 

201 

10.68 

1.05 


23, 220 

843 

223 

11.25 

1.57 


14,553 


Orossprofits. ... ... ,_ .: 


817 


Net income , 

Profit rate .. 


176 
9.01 


Equity ratio 


3.78 






Federal corporate income tax 


21 


25 


81 
X 
3- 


22 


Undistributed profits tax 


1 


Federal capital stock tax... 


1 


2 


3 


Federal excises 




Federal-State payroll taxes. . _. 








































State corporate taxes 










Miscellaneous 




















Total taxes.- 


42 


50 


150 


77 







1 Fiscal year changed from calendar year, 5-31-36. 

indicate no data available. 

X indicates less than $1,000. 
O indicate deficit. 



1936 data comprises 17 months ending 5-31-37. 



CONCENTKATIOX OF E(X^NOMIC POWER 

EASON OIL COMPANY 
[SOOO's] 



18279 





1934 


1935 


1936 


1937 


Sales 




2,204 

1,116 

227 

12.38 

1.27 


2,304 
969 
192 

11.21 
1.94 


2,293 


Gross profits - 




786 






(5) 


Profit rate 




(0. 29) 






5.17 












9 


19 














2 
X 


3 
X 

2 
9 
17 
Hi 
5 


3 






X 


Federal-State payroll taxes - .. 




U 






4 

2r, 
10 
4 








lU 






18 


State corporate taxes . ' 




3 


















Total taxes 




CO 


71 


45 









EASTMAN KODAK COMPANY 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax 

Undistributed profits tax 

Federal capital stocli tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes.. .-. 

Miscellaneous 



Total taxes. 



96, 829 

51,927 

17,677 

12.82 

9.13 



2,407 



212 
208 

338 
16 

840 
11 



105, 083 

54, 610 

18,921 

13.41 

8.15 



2,354 



292 
274 



479 
9 



119,800 

62, 507 

23, 650 

16.63 

7.61 



4,410 



3,514 
211 
387 
440 
333 
692 

11 
985 

25 



136,115 

68, 786 

27, 933 

19.24 

6.00 



3,817 

431 

311 

688 

1,2,55 

784 

15 

1,072 

17 



8,390 



EASY WASHING MACHINE CORPORATION 



Sales 

Gross profits. 
Net income.. 
Profit rate. .. 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes. 

Property taxes. 

State corporate taxes 

Miscellaneous 



Total taxes. 



5, 159 
1,526 
(18) 
(0. 43) 
24.57 



33 



6, 290 

1,840 

324 

7.56 



7,882 
2,306 
638 
14.75 
9.04 

81 



7, 968 

2,044 

357 

8.39 

7.87 

38 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



159 



18280 CONCENTRATION OF ECONOMIC POWER 

EDISON BROS. STORES, INC. 
[$000's]. 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax__ 
Undistributed profits tax_..__. 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes.. ._ 

Property taxes : 

State corporate taxes 

Miscellaneous. ..- 



Total taxes.. 



14, 125 

2,434 

664 

32. 85 

3.12 



92 



16, 296 

2,741 

722 

29.22 

3.56 



103 



19, 690 
3,511 
1,011 
35. 11 
3.38 



146 
66 
13 



1937 



23,765 

4^101 

903 

19.44 

5.55 



139 
32 
13 



100 
7 
10 
20 

7 



328 



EITINGON SCHILD COMPANY, INCORPORATED 



Sales 

Gross profits. 
Net income. - 
Profit rate — 
Equity ratio. 



Federal corporate income tax. 
Undistributed profits tax..... 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. ._ 

State income taxes 

State sales taxes.. 

Property taxes 

State corporate taxes... 

Miscellaneous. 



Total taxes. 



7,506 
1,509 

(347) 
(6. 90) 

.80 



13 



5,611 

104 

15 

.35 

1.78 



9,789 

1,028 

774 



10, 758 

294 

(200) 

(5. 36) 

.94 



EL DORADO OIL WORKS 



Sales - 


2,313 

481 

327 

13.03 

13.06 


3,616 

636 

430 

16.59 

15. 56 


2,873 

232 

110 

4.42 

16.51 


8,739 




560 




357 


Profit rate 


14. 05 


Equity ratio .. ... ...-. . 


1.34 








44 


65 


23 
X . 

4 
113 
3 
11 
X 
15 


43 




X 


Federal capital stock tax . 


3 

253 


3 

807 


3 




64" 




13 




5 


9 
X 

15 


4 




X 




14 


22 


























Total taxes 


319 


899 


169 


149 







indicate no data available 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

ELECTRICAL PRODUCTS CORP. 

[SOOO's] 



18281 





1934 


1935 


1936 


1937 


Sales , -1 


2,029 

471 

43 

5.79 

2.68 


1,966 

431 

60 

8.23 

2.51 


3,244 
710 
216 

30.76 
2.44 


4,053 


Gross profits 


Net income 


334 


Profit rate 


44 14 


Equity ratio .. 


2 17 






Federal corporate income tax 


5 


11 


18 


30 


Undistributed profits lax 




Federal capital stock tax. . 


1 


1 


1 




Federal excises 




Federal-State payroll taxes 






2 


8 


State income taxes 








State sales taxes 










Property taxes 


4 
X 


4 

X • 


4 
X 


4 


State corporate taxes 


X 


Miscellaneous..- _ 














Total taxes 


10 


16 


25 


43 







THE ELECTRIC AUTO-LITE CO. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroU taxes... 

State income taxes... 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



22, 093 

5,710 

1,332 

7.30 

6.02 



37, 933 
9,069 
3,440 
16.96 
3.64 



234 



50,821 
12, 163 
5,552 
25.95 
2.67 



428 



80 
23 
116 



60,832 

13, 809 

5,552 

20.35 

1.13 



524 



82 
48 

449 
26 
3 

110 
13 
13 



1,268 



ELECTRIC BOAT COMPANY 



Sales 

Gross profits. 
Net incf.)me.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock lax 

Federal excises 

Federal-State payroll taxes... 

State income taxes.. 

State sales taxes... 

Property ta.'ces 

State corporate taxes 

Miscellaneous... 



Total taxes. 



4,731 
1,033 
349 
4,26 
12.39 



65 



7,205 

1,717 

438 

7.13 

6.22 



62 



7,890 
1,608 
415 
6.85 
4.12 



163 



9,061 

2,003 

596 

9.73. 

2.86 



127 
5 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18282 CONCENTRATION OF ECONOMIC POWER 

ELECTRIC HOUSEHOLD UTILITIES CORP. 
[$000 'si 



Sales 

Gross profits. 
Net income . . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



5,345 
1,906 
559 
11.92 
6.41 



76 



6,366 
1,718 
407 
8.96 
6.53 



6,164 

1,530 

304 

6.86 

7.37 



21 



5,321 
1,557 
(294) 
(7. 15) 
9.83 



18 



ELECTRIC PRODUCTS CORP. 



Sales - - - --- 






3,244 
710 
216 

30.76 
2.44 


4,053 








840 








334 


Profit rate -- -- - --■ - .-- 






44.14 






' 


2.97 
















22 


27 
















6 


5 










Federal-State payroll taxes 






9 
22 


27 








9 
















20 


19 


































/ 


79 


87 











THE ELECTRIC STORAGE BATTERY CO. 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



Sales - 


19, 237 
6,948 
2,245 
6.38 
25.86 


21, 527 
7,388 
2,660 
7.52 
21.10 


25, 452 
8,524 
3,219 
8.90 
20.00 


27, 057 


Gross profits 


8,179 




2,483 


Profitrate . 


6.92 




16.17 






Federal corporate income tax 

Undistributed profits tax 


241 


286 


350 
X 

45 
190 
72 
57 
11 
206 
163 


293 


Federal capital stock tax ___ . . .. 


35 
90 


51 
166 


45 


Federal excises 

Federal-State payroll taxes 


217 
216 


State income taxes 


2 
X 

213 
10 


63 
X 

204 
85 


33 


State sales taxes 


11 


Property taxes 


210 


State corporate taxes 


130 


Miscellaneous 














Total ta.xes 


591 


855 


1,094 


1,155 







CON'CENTRATION OF ECONOMIC TOWKR 

ELECTROORAPIIIC COHPOHATION 

($000's] 



18283 





1934 


1935 


1936 


1937 


Sales 




3,534 
1,524 
375 
22,03 
11.01 


3,993 
1,757 
340 
20.45 
8.92 


4,304 


Gross profits 




1,935 






436 


Profit rate 




26.40 


Equity ratio 




7.06 








Federal corporate income tax 




48 


65 
3 
6 


67 


Undistributed profits tax 




5 


Federal capital stock tax 




5 


6 








Federal-State payroll taxes . . . . . . 






19 
8 
3 
4 
X 


71 


State income taxes 




15 
1 
4 
X 


16 


State sales taxes. --. 




2 


Property taxes _ 




5 


State corporate taxes _ _._ 




X 


Miscellaneous _ 
















Total taxes. 




73 


108 


172 









EMPIRE GAS AND FUEL CO., PITTSBURGH 



Sales 




68, 457 

39, 552 

17, 402 

4.57 

.97 


77, 801 

44,314 

15, 433 

3.96 

.87 


88,609 


Gross profits 




50, 006 


Net income 




17, 456 


Profit rate .. 




4.37 


Equity ratio 




.85 








Federal corporate income tax 

Undistributed profits tax... . .. _ 










592 

18 



X 



1,073 


Federal capital stock tax .. 


6 



15 



15 


Federal excises.. 


X 


Federal-State payroll taxes 


X 


State income taxes 








State sales taxes 




















State corporate taxes 


11 



4 



4 



4 


Miscellaneous 


X 






Total taxes 


17 


19 


614 


1,092 







THE EMPORIUM CAPWELL COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous. 



Total taxes. 



18,014 

6,669 

815 

4.27 

.92 



102 



321 
2 
5 



19, 602 

7,363 

1,166 

6. 11 

1.03 



113 



335 
2 
4 



22, 124 

8,432 
1, 507 
7.49 
1.44 



100 
3 
26 



322 
2 



22,606 

8,843 
1,462 
7.67 
1.42 



270 
34 
29 



156 
38 



334 
2 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18284 



CONCENTRATION OF ECONOMIC POWER 



EX-CELLO CORPORATION 

l$000's] 



1937 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes _., 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



2.659 

770 

164 

7.75 

7.94 



3,452 

1,070 

377 

15.69 



4,259 
1,282 



18.24 
8.26 



23 



34 



5,385 
1,947 
799 
28.29 
4.16 



115 
29 



EXETER OIL COMPANY, LTD. 



Sales 


1,379 

225 

(1) 

(0. 10) 

2.78 


955 

143 

(10) 

(1.33) 

2.33 


1,383 

210 

(1) 

(0. 07) 

3.15 


2,010 


Gross profits.. 


476 


Net income .. 


158 


Profit rate ..... 


16.94 


Equity ratio 


3.83 






Federal corporate income tax. ._ 










Undistributed profits tax ...... 










Federal capital stock tax . ... 




















Federal-State pajToU taxes. . ... 










State income taxes .... . . 










State sales taxes . . .. . 










Property taxes .. . . 










State corporate taxes . . . . 










Miscellaneous . .... 




















Total taxes.. . 





















FAIRBANKS COMPANY 



Sales - 


1,036 

287 

(80) 

(4. 22) 

^.42 


1,193 

329 

(50) 

(2.84) 

2.40 


1,491 

438 

55 

3.12 

2.6! 


1,747 


Gross profits .... . . . 


602 


Net income . . _ 


141 


Profit rate 


8.09 


Equity ratio 


3.50 






Federal corporate income tax ...... 






6 


25 


Undistributed profits tax ... _ . . 








Federal capital stock tax.. 


1 


1 


2 


2 


Federal excises .... 




Federal-State payroll taxes . ' . 






6 


17 


State income taxes . . 






5 


State sales taxes .. . .. 


X 

16 
8 


1 
15 
8 


X 

16 
8 


2 


Property taxes 


17 


State corporate taxes .. . 


6 


Miscellaneous 














Total taxes 


25 


25 


37 


73 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

FAIRCHILD AVIATION CORPORATION 
[$000's] 



18285 





1934 


1935 


1936 


1937 


Sales _ 






1,118 

522 

139 

6.70 

3.27 


1 412 


Gross profits 






682 


Net income.- --. .- 






192 


Profit rate 






25 95 


Equity ratio 






1.04 










Federal corporate income tax 






24 
3 
3 


29 


Undistributed profits tax _ 






X 


Federal car "^al stock tax 






2 


Federal excises ,. 






X 


Federal-State payroll taxes . 






5 

1 


18 


State income taxes _.- 






6 


State sales taxes 








Property taxes 






1 


1 


State corporate taxes 








Miscellaneous .. .. ... 






1 


1 










Total taxes 






38 


57 













FANNY FARMER CANDY SHOPS, INC. 






Sales 


4,185 
2,278 
512 
38,45 
11.85 


4,818 
2,674 
626 
38.22 
10.88 


5,683 
3,189 
818 
43.47 
6.13 


6,640 




3,678 


Net income 


1 079 


Profit rate 


54 03 


Equity ratio i _ _ 


6.32 






Federal corporate income tax... 


82 


109 


179 
62 
4 


226 


Undistributed profits tax 


24 


Federal capital stock tax ...m.. 


3 


2 


5 


Federal excises - 




Federal-State payroll taxes 






32 
31 


51 


State income taxes ..... 


19 


25 


44 


State sales taxes 




Property taxes 


4 


6 


8 


11 






Miscellaneous 




















Total taxes 


108 


142 


310 


361 







FANSTEEL METALLURGICAL CORPORATION 



Sales 

Gro.ss profits. 
Net income.. 
Profit rate. .. 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises.- 

Federal-State payroll taxes. .. 

State income taxes -. 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous. 



Total taxes- 



565 

197 

11 

0.48 

4.98 



829 

296 

115 

5.08 

6.01 



10 



1,053 

430 

210 

8.32 

7.81 



1,307 

484 

ICU 

6.45 

9.57 



indicate no data available. 

X indicates less than $1,000 
( ) indicate deficit. 



18286 CONCP^NTRATION OF ECONOMIC POWER 

FEDERAL SCREW WORKS 
[$000's] 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributod profits tax 

Federal capital stock tax 

Federal excises 

Federal State payroll taxes.. . 

State income taxes 

State sales taxes 

Property taxes - 

State corporate taxes .- 

Miscellaneous.. 



Total taxes. 



365 

(9) 

(0. 60) 

(.12) 



335 

(105) 
(7. 54) 
(.18) 



1,777 

410 

74 

5.03 

(.14) 



FERRO ENAMEL CORPORATION 



Sales 






3,554 
1,441 

528 
33.49 

.95 


6,184 




886 

241 

28.55 

2.72 


1,013 

294 

29.29 

1.85 


2,456 




771 


Profit rate ._. .. 


28.99 




4.58 






Federal corporate income tax 


33 


37 


74 
X 
6 


72 








3 


4 


6 












6 


26 


State income taxes . ^-• 








State sales taxes 












4 
1 


5 
1 


5 

1 


6 




2 
















Total taxes 


41 


47 


92 


112 







THE FIRESTONE TIRE & RUBBER CO.i 



Sales -- 




121,671 

49,064 

8.131 

6.94 

2.85 


136, 702 

51, 504 

12, 150 

10.08 

2.75 


156,823 


Gross profits 




61,997 


Net income . . 




12, 567 


Profit rate 




10.41 






1.97 








Federal corporate income tax 




1,088 


•1,512 


1,502 


Undistributed profits tax 




36 






84 
4,694 


120 

5,670 

313 

28 


150 






5,530 






1,004 


State income taxes . ■ 




20 


42 


State sales taxes 






Property taxes.. 




2,498 


973 


1,108 


State corporate taxes 






Miscellaneous 




















Total taxes 




8,384 


8,616 


9,372 









' Fiscal year ended Oct. 31. 

indicate no data iiv^ilable. 

X indicates less tbai. il,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

FIRST NATIONAL STORES INC. 
ISOOO's] 



18287 





1934 


1935 


1936 


1937 


Sales 


111.323 

21,661 

4,001 

17.73 

5.10 


119,575 

22,446 

3,710 

15.87 

4.93 


120,683 

23,064 

4,352 

18.28 

4.59 


124,295 
22,892 
3,213 


Gross profits 


Net income 


Profit rate.-- 


Equity ratio 








Federal corporate income tax 


694 


576 


526 


618 


Undistributed profits tax 


15 


Federal capital stock tax 


48 

• n 


47 
1 


58 


60 


Federal excises 




Federal-State payroll taxes.. 


140 
161 
126 
265 

71 


454 


State income taxes 


• 146 
84 
246 
53 


163 
20 

261 
67 


150 


State sales taxes 


103 


Property taxes.. 


278 


State corporate taxes 


58 


Miscellaneous. ... 














Totaltaxes .. . 


1,282 


1,135 


, 1.347 


1 736 







FLINTKOTE COMPANY 



Sales 




11,145 
4,223 
1,659 
20.37 
7.58 


13, 676 
4,495 
1,560 
18.50 
6.93 


15, 164 


Gross profits. 




4.845 
1 393 


Net income . 




Profit rate. 




16 04 


Equity ratio 




7.14 








Federal corporate income tax 




157 


155 


128 


Undistributed profits tax 






Federal capital stock tax. 




20 
1 


30 
1 
32 
49 
3 

86 
16 
X 


28 


Federal excises . . . . . 






Federal-State payroll taxes _. 




104 


State income taxes 




69 
3 

73 
17 
1 


37 


State sales taxes .. 




5 


Property taxes. .. .. 




97 


State corporate ta.xes - .■ .. .. 




13 


Miscellaneous 




1 








Total taxes 




341 


372 


413 









FLORENCE STOVE COMPANY 



Sales 




8,282 
2,695 
1,132 
28.38 
3.51 


12.664 
3,885 
1,728 
31.08 
5.77 


12,728 






3,703 






1.534 






26.44 


Equity ratio 




1.48 












216 


301 
35 
19 


245 


Undistributed profits tax .. . 




31 


Federal capital stock tax 




4 


20 














21 
1 
1 

12 
55 


81 






1 
1 

15 
21 


1 






X 






15 






73 


















Total taxes 




258 


445 


466 









indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18288 



CONCENTRATION OP ECONOMIC POWER 



FLORSHEIM SHOE COMPANY 
[$000's] 





1034 


1935 


1936 


1937 






7,053 

2,508 

678 

7.97 

24.32 


8.416 
2,897 
1,175 
13.40 
18.21 


9,693 






3,036 






1,084 


Profit rate 




12.18 


Equity ratio - - - - 




17.93 






87 


134 


147 






7 






8 


15 


15 














24 


83 
























18 

1 


73 

1 


66 






1 
























114 


247 


219 








FOOD MACHINERY CORPORATION 






7,528 
3,351 
1,288 
20.07 
4.43 


8,890 
3,652 
1,598 
20.08 
6.03 


11,964 






4,870 






2,316 


Profit rate - -- - 




18.98 






9.04 














177 


230 


355 






30 






21 


16 


24 














20 
25 
79 
31 
5 
2 


81 






11 

55 

26 

5 

1 


47 






114 






39 






6 






5 














296 


408 


701 








FORMICA INSULATION COMPANY 


Sales -- 


1,576 

391 

26 

1.83 

23.79 


2,096 

587 

176 

12.06 

11.32 


2,620 
692 
234 

15.40 
8.61 


3,476 




789 




292 




18.05 


Equity ratio - - --- 


10.57 


Federal corporate income tax _._ _ 


2 


21 


32 


50 




2 


3 


2- 


3 












9 


38 
















t 






8 

1 


9 
1 


9 

1 


11 




1 


















Total taxes.... 


13 


34 


53 


103 







. - . indicate no data available. 
X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

FORT PITT BHEWINQ COMPANY 
[SOOO's] , ^ 



18289 





1934 


1935 


1936 


1937 


Sales - ; 




1,866 
1,282 
80 
7.49 
3.05 


1,531 
1,037 
72 
6.59 
4. 63 


1 367 


Gross profits '. 




773 


Net income . - 




(89) 
(8.24) 
9 06 


Profit rate 




Equity ratio 










Federal corporate income tax 




11 


7 


1 


Undistributed profits tax... 






Federal capital stock tax 




4 

582 


2 

453 

2 

3 


2 


Federal excises .. . - 




430 


Federal-State payroll taxes 




2 


State income taxes 








State sales taxes 












9 
155 


9 
119 


11 






122 


M iscellaneous 
















Total taxes 




701 


595 


568 









FOSTORIA PRESSED STEEL CORP. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stocli tax 

Federal excises. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes... 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



413 

136 

(12) 

2.53 

39.74 



399 

136 

(8) 

(1.92) 

28.03 







441 

121 

(26) 

(6. 34) 

8.83 



522 

133 

(7) 

(2. 06) 

12.11 



FRANKENMUTH BREWING COMPANY 



Sales 




940 

683 

176 

63.40 

4.36 


1,219 
919 
147 

19.50 
5.97 


1,866 






1,339 


Net income . . . 




177 






22.62 






6.81 











































































































































indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18290 CONCENTRATION OF ECONOMIC POWER 

FRANKLIN SIMON AND COMPANY INCORPORATED 
[$000's] 



1934 



Sales 

Gross profits - 
Net income.. 

Profit rate 

Equity ratio. 



10, 225 

2,831 

(176) 

(2. 16) 

3.78 



10, 102 

2,710 

(83) 

(1.05) 

3.61 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous..- 



6 

5 

124 



4 

8 

127 



Total taxes- 



139 



9,774 
2,512 

(265) 
(3. 56) 

3.44 



8,683 

2,021 

(95) 

(1.30) 

3.26 



1 

..... 

' 27 

4 

11 

120 



169 



1 



56 

5 

7 

118 



FREDERICK STEARNS & CO.' 





4,350 

2,114 

174 

3,08 

26.05 


4,729 

2,284 

338 

5.95 

25.07 


4,954 
2,548 
464 
8.07 
21.98 


5,024 




2,682 




522 




8.93 




19.38 








4 


29 


53 
1 
6 


60 




10 




3 


4 


5 












12 

1 

X 

65 

11 


39 




X 
X 

76 
10 


1 
X 

58 
11 


2 




X 




79 




11 


















93 


103 


149 


206 







1 Consolidated report of Frederick Stearns & Co. and Nyal Company. 

FULLER MANUFACTURING COMPANY 



Sales 








2,908 










514 










162 


Profit rate 








15.00 










5.02 












Federal corporate income tax .. . . 








20 










9 


Federal capital stock tax 








7 










1 










38 






























25 










3 






















Total taxes 








103 













indicate no data available . 

X indicates less than $J,OOU. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

ROBERT QAIR COMPANY, INC. 
[SOOO's] 



18291 





1934 


1935 


1936 


1937 


Sales ,...1 






19,002 

4,991 

1,271 

7.71 

1.63 


21 655 


Gross profits 






5 559 


Net income 






1 202 


Profit rate. 






7.24 


Equity ratio _ 






1.18 










Federal corporate income tax 






100 

14 

42 
23 
X 
145 
20 



134 


Undistributed profits tax... , 






50 


Federal capital stock tax 






14 











Federal-State payroll taxes 






153 


State income taxes.. 






29 


State sales taxes 






5 


Property taxes 






130 


State corporate taxes 






18 


Miscellaneous 

















Total taxes 






344 


533 











GANNETT COMPANY, INCORPORATED 



Sales -- 




5,843 
2,095 
1,252 
9.92 
3.78 


6,864 
2, 442 
1,331 
10.20 
3.96 


7,202 
2 534 






Net income 




1 366 


Profit rate .. . . 




10 25 


Equity ratio 




4 68 








Federal corporate income tax . . 




75 


146 
87 
15 


155 


Undistributed profits tax... . . 




94 


Federal capital stock tax . . 




13 


17 


Federal excises 






Federal-State payroll taxes 






30 

48 


92 


State income ta.xes 




35 


83 


State sales taxes. 






Property taxes 




52 


50 


53 


State corporate taxes .. _ 






Miscellaneous.. . .. .. ... .. 




5 


1 


1 








Total taxes 




180 


377 


495 









OAR WOOD INDUSTRIES, INCORPORATED 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous... 



Total taxes. 



6,979 
2,436 
867 
20.18 
4.20 



152 



9,426 
3,416 
1.240 
26.20 
2.97 



158 

77 

9 



9,313 
3,088 
642 
12.70 
3.08 



238 



-.- indieate no data availabk 
X indicates less than $1,000 / 



18292 CONCENTRATION OF ECONOMIC POWER 

GAYLORD CONTAINER CORPORATION 
[$000's] 





1934 


1935 


1936 


1937 


Sales • --- -- 








6,774 










2,949 










1,091 




















9.35 




















344 










240 










49 








X 


X 








108 










58 








X 


X 








247 










23 










34 




















1,103 













QELLMAN MFQ. CO. 



Sales - .-- - - 






208 

125 

32 

10.44 

9.22 


241 








112 








(17) 


Profit rate 






(3. 05) 








32.32 
















4 
X 
X 


















1 
















1 


3 


























X 

X 


X 


State corporate taxes - . 






X 




















Total taxes 






5 


4 











QEMMER MANUFACTURING COMPANY 



Sales - 


1,717 

343 

4 

.17 

4.81 


2,375 
517 
259 

10.13 
4.77 


3,143 
787 
473 

19.46 
3.65 


4,477 


Gross profits.. _ . .. 


1,087 


Net income 

Profit rate . . . 


605 
24.91 


Equity ratio - 


5.47 






Federal corporate income tax 

Undistributed profits tax _. 


1 


29 


52 
X 
4 


85 
3 


Fp.dprftl capit.j^l stock taf 


2 
X 


2 
X 


4 




X 


Federal-State payroll taxes.. . 


9 


39 


State income taxes . . . . 








State sales taxes . . . .. . 










Property taxes 

State corporate taxes.. ..... .. 


25 
4 


26 
5 


31 
6 


39 
5 
















Total 


32 


62 


102 


175 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

GENERAL ALLOYS COMPANY 
[$000's] 



18293 





1934 


1935 


1936 


1937 


Sales 1 


364 

143 

28 

7.21 

15.90 


449 

149 

27 

6.58 

13.14 


601 

223 

49 

11.03 

16.16 


881 

348 

101 

20.66 

7.13 


Gross profits 


Net income 


Profit rate_ 


Equity ratio 




Federal corporate income tax 


4" 


1 


3 
6 
1 


11 

8 
1 


Undistributed profits tai 


Federal capital stock tax •. 


X 


X 

X 


Federal excises 


Federal-State payroll taxes 




2 
1 
X 
3 


g 


State income taxes 


i 


X 


3 
X 


State sales taxes 


Property taxes 


3. 


3 


3 


State corporate taxes 


Miscellaneous 






1 














8 


4 


16 


34 





GENERAL BRONZE CORP. 



Sales... 


828 
(51) 
(341) 
(10.09) 
.87 


1,849 

295 

182 

5.33 

.94 


1,161 

138 

(225) 

(f. 36) 

.73 


2,474 
631 


Gross profits 


Net income .- 


206 


Profltrate. 


6 78 


Equity ratio _ 


84 






Federal corporate income tax... 










Undistributed profits tax 










Federal capital stock tax i. 


2 


1 


2 


1 


Federal excises 




Federal-State payroll taxes 






e 

2 
2 

17 
1 


86 


State income taxes 


2 
X 

17 
1 


2 
2 
15 

1 


3 


State sales taxes 


7 


Property taxe^ 


19 


State corporate taxes 


] 


Miscellaneous 














Total taxes 


22 


21 


33 


60 







GENERAL CANDY CORPORATION 



Sales - 


3,920 

973 

216 

17.34 

10.69 


4,143 
1,038 
278 
27.918 
12.12 


4,962 

1,384 

420 

40.16 

4.42 


6,768 
1 603 




Net income 


326 


Profltrate 


30 80 


Equity ratio .: 


6 66 






Federal corporate income tax _ 


21 


33 


62 


82 


Undistributed profits tax 




Federal capital stock tax 


I 
16 


4 


3 


3 


Federal excises 




Federal-State payroll taxes 




8 


27 


State income taxes 








State sales taxes » 










Property taxes . . .... 


7 
X 


7 
X 


9 
X 


10 


State corporate taxes . . . 


X 


Miscellaneous .. ... . 














Total taxes 


46 


44 


82 


72 







Indicate no data available. 

X Indicates less than $1,000. 
( ) indicate deficit. 



18294 CONCENTRATION OF ECONOMIC POWER 

GENERAL CIQAR CO., INC. 
[JOOO's] 





1934 


1935 


1936 


1937 


Sales - - - - - 


23, 674 

11, 677 

2,739 

11.47 

7.72 


22, 243 
10, 441 

2,409 
9.96 

16.19 


21,650 

9,556 

2,109 

8.88 

21.32 


21, 724 




9,412 




1,955 


Profit rate - - -- 


8.27 




23.75 








350 


305 


304 


280 








30 
1,834 


27 
1,675 


31 
1,227 
64 
38 
1 
103 
30 


31 




1,243 


Federal-State payroll taxes 


193 




3 
X 

80 
2 


ii 

X 
100 
3 


47 




1 




85 




33 


















2,299 


2,121 


1,798 


1,913 







GENERAL ELECTRIC COMPANY 



Sales - - 


225, 663 

85, 132 

24, 052 

6.56 

9.48 


277, 189 

104, 465 

38. 014 

12.01 

6.91 


354,059 

136, 321 

54,609 

17.44 

5.48 


468, 027 




179, 885 




78,207 


Profit rate '■- 


25.68 




4.57 











4,600 


7,280 

300 

720 

1,708 

1,076 

1,089 

179 

1,952 

721 

4 


10, 690 




570 




891 
1,079 


674 
1,312 


740 




1,930 




4,268 






248 

47 

2,056 

820 

4 


1,486 




180 

2,163 

432 

13 


309 




2,060 




1,139 




1 








4,758 


9,761 


15,029 


23, 193 







GENERAL FOODS CORPORATION 



Sales - 


102,999 

42,863 

14,709 

25.49 

10.16 


107, 417 

44,304 

15, 315 

25.37 

8.89 


122, 462 

48, 293 

18, 944 

30.05 

6.03 


133, 127 




43, 785 




13, 185 




21.95 




3.97 








1,954 


2,049 


2,709 
269 
259 

2 
136 
118 

4 
432 
160 
99 


1,968 




24 




322 
19 


331 
1 


233 


Federal excises . 


2 


Federal-State payroll taxes . 


443 




162 

2 

467 

129 

1,916 


156 

2 

399 

115 

687 


120 


State sales taxes - - 

Property taxes . . ' 


5 
488 


State corporate taxes 

Miscellaneous .. . 


239 
145 






Total taxes 


4,971 


3,640 


4,188 


3,667 







indicate no data available. 

X indicates IcsS than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18295 



GENERAL METALS CORPORATION 
llOOO's] 





1934 


1935 


1936 


1937 


Sales 


1,044 

272 

56 

3.93 

33.48 


1,245 

369 

195 

12.77 

19.43 


1,806 

511 

329 

20.52 

15.51 


2,056 


Gross profits 1 


747 


Net income 


486 


Profit rate •. _ 

Equity ratio -.. 


29.06 
8.76 






Ffirifirftl finrporftti^ itimmft tar 


2 


21 


39 
1 
4 


76 


Undistributed profits tax 


6' 




1 


5 


4 


Federal excises 




Federal-State payroll taxes . .- 






7 
6 


29 


State income taxes ^ - .. 


X 


1 


11 


State sales taxes' 


3 


Property taxes 


22 


21 


20 


23 


State corporate taxes 'l .-.- 


























25 


48 


77 


151 







GENERAL MILLS, INC. 



Sales 

Gross profits. 
Net income. . 
Profit rate.-.. 
Equity ratio. 



Federal corporate income tax_ 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes. 

Miscellaneous 



Total taxes. 



143, 074 

24,050 

5,312 

10.62 

8.05 



879 



1,719 



147, 380 

24,761 

4,592 

9.06 

11.15 



765 
"i28" 



1,830 



159, 980 

28,497 

5,857 

ir.34 

9.43 



1,067 
315 
234 



2,731 



152,673 

27,968 

4,874 

9.30 

12.63 



608 
11 
71 



468 
'778 



1,934 



GENERAL MOTORS CORPORATION 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



882, 094 

303, 469 

110,363 

12.62 

9.57 



12, 787 



874 
16,230 



510 

801 

5,222 



36,424 



1, 182, 100 

408, 327 

196, 896 

21.1,1 

6.42 



27, 197 



1,657 
22,860 



856 

168 

5,230 



57,968 



1,468,245 

605,260 

282, 313 

29.01 

5.57 



36,925 
2,396 
2,801 

28,749 

3,096 

1,191 

706 

6,433 



81,296 



1, 636. 141 

519,306 

246,8fi3 

24.82 

6.81 



36,604 
5,737 
2,799 
26,907 
11,716 
1,223 
632 
6,163 



91,770 



.... indicate no data available. 
X indicates less than $1,000. 
( ) indicate deficit. 



18296 



CONCENTRATION OF ECONOMIC POWER 



GENERAL PAINT CORPORATION 
[$000'S] 



Sales --- 

Gross profits. 
Net income- - 

Profit rate 

Equity ratio - 



3,291 
1,240 
365 
14.87 
12.32 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. -. 

State income taxes 

State sales taxes 

Property taxes 

S tato corporate taxes 

Miscellaneous- . - - 



37 



Total taxes. 



4,093 

1, M7 

555 

20.11 

9.70 



124 



GENERAL PRINTING INK CORI^ORATION 



Sales.. 

Gross profits. 
Net income. - 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .- 

State income taxes --- 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous - 



Total taxes. 



7,539 

3,480 

890 

15.89 



164 



8,610 
3,887 
1,147 
19.98 
9 44 



97 



178 



10, 135 
4.587 
1,488 
25.64 



190 
2 
13 



303 



GENERAL RY. SIGNAL CO. 



Gross profits. 
Net income.- 

Proflt rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Profjerty taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



677 

(342) 

(2. 96) 

27.96 



1,990 

820 

6.95 

17.93 



107 



3,723 

1,287 

210 

1.78 

15.70 



10 



CONCENTRATION OF ECONOMIC POWER 



18297 



GENERAL STEEL CASTINGS CORPORATION 

[$000's] 





1934 


1935 


1936 


1937 


Sales .*- 


4,903 

1, 086 

(772) 

(2.28) 

.96 


2, 425 
340 

(1. 573) 

(5.01) 

.82 


4,533 
1,026 
(1, 195) 
(4. 05) 
.70 


14,641 
4,332 
1,432 


Gross profits . . . ... 


Net income 


Profit rate 


4.78 


Equity ratio 


.72 






Federal corporate income tax 










Undistributed profits tax . 










Federal capital stock tax 


19 


17 


15 


12 






Federal-State payroll taxes .. . 






32 


245 


State income taxes 








State sales taxe^ 










Propertv taxes ... 


120 
16 


122 
32 


126 
27 


127 


State corporate taxes 


27 
















Total taxes 


155 


171 


200 


411 







GENERAL THEATERS EQUIPMENT. CORP. 



Sales -. -. '. 








9,498 


Gross profits ..... .... 








2,979 


Net income ... 








1,433 










12.39 


Equity ratio . . 








14.25 












Federal corporate income tax 








119 


Undistributed profits tax 








13 


Federal capital stock tax 








35 










1 


Federal-State payroll taxes .. .. . .. . . .. 








56 


State income taxes 








35 


State sales taxes . 








2 


Property taxes 








18 


State corporate taxes 








4 






















Total taxes 








283 













GIBSON ART COMPANY « 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



3,364 
1,372 
5,50 
19.94 
9.78 



3,«H6 
1,483 
626 
21.14 
10.28 



3,241 

-1, 478 

646 

23.41 

8.56 



3,413 

1,532 

616 

21.70 



» Fiscal year ended Feb. 28. 

indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18298 



CONCENTRATION OF ECONOMIC POWER 



OILETTE SAFETY RAZOR COMPANY 
[$000's] 



Sales. 

Gross profits - 
Net Income. . 
Profit rate ... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes .j.... 

Property taxes *... 

State corporate taxes 

Miscellaneous. 



Total taxes. 



1934 



15,224 
11, 178 
6,243 
20.47 
3.95 



333 



122 
33 



1935 



15,649 
11,512 
5,472 
23.44 
7.78 



279 



115 
40 



1936 



17,220 
12,392 
6,140 
26.47 
7.63 



354 

' 7 
58 



OIMBEL BROTHERS INCORPORATED 



Bales ^ 

Gross profits - 
Net income. . 

Profit rate 

Equity ratio - 



Federal corpoj^te income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises - 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



77, 155 

17,669 

1,938 

2.64 

1.37 



162 
771' 



944 



82,068 

19, 932 

2,463 

3.42 

1.44 



60 
34 
748 



986 



95,684 

24,509 

5,174 

7.08 

1.59 



268 
103 
42 



125 
100 
32 
733 



1,421 



GLADDING, McBEAN & COMPANY 








Sales. 


1,990 

745 

(298) 

(4. 19) 

10.29 


2,533 
1,008 

(138) 
(1. 83) 

8.05 


4,045 

1,863 

433 

5.55 

8.07 


4,650 


Gross profits ■- 

Net Income ,.. . 


1.943 
130 


Profit rate . 


1.63 


Equity ratio , 


4.65 






Federal corporate income tax . 






64 


20 


Undistributed profits tax 








Federal capital stock tax 


6 
X 


6 
X 


12 


4 






Federal-State payroll taxes... 


18 


70 


State income taxes ..^ 






11 


State sales taxes .■ 




.\ 






Property taxes 


69 
2 


68 
2 


74 
2 


89 


State corporate taxes ■. 1 


2 


Miscellaneous 














Total taxes .-. 


77 


75 


170 


196 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

THE GLIDDEN COMPANY 

l$000's] 



18299 





1934 


1935 


1036 


1937 


Sales 




39,529 

10,341 

3,290 

11.40 

3.99 


44,581 

11,346 

3,735 

13.42 

9.07 


54,052 


.Gross profits 




11,724 






3,021 


S'roflt rate 




10.86 


Equity ratio . -. . 




4.65 








Federal corporate inoo me tax. .. 




400 


486 



36 

2,679 

51 


400 


Undistributed profits tax - - . 







Federal capital stock tax 




35 
3,659 


43 


Federal excises _ 




1,766 


Federal-State payroll taxes 




191 








29 


State sales taxes ..... .. . . 




















State corporate taxes . . .. .. 










Miscellaneous ' . 




194 


239 


267 












4,188 


3,491 


2,696 









GLOBE DEMOCRAT PUBLISHING CO. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes. 

State corporate taxes 

Miscellaneous 



Total taxes. 



3,762 
1,518 
443 
10.09 
12.32 



56 



129 



3,975 

1,530 

374 

8.35 

16.88 



4,253 

1,544 

309 

6,90 

17.09 



4,701 

2,150 

287 

6.37 

16.83 



160 



GLOBE GRAIN & MILLING COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



11,050 

2,666 

119 

1.90 

4.66 



77 



13,013 

2,165 

(49) 

(0. 79) 

5.69 



15,751 

2,014 

594 



12,879 

1,270 

(146) 

(2.30) 

48.97 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18300 CONCENTEATION OF ECONOMIC POWER 

OODCHAUX SUGARS, INCORPORATED 
[$000's] 



Sales. 

Gross proStS- 
Net income... 

Profit rate 

Equity ratio.. 



Federal corporate income tax- 
Undistributed profits tax 

Federal capital stock tax 

Federal e.xcises 

Federal-State payroll taxes. .. 

State income taxes 

State sales taxc 

Property taxes .'*.-. 

State corporate taxes 

Miscellaneous 



Total taxes. 



1934 



2,190 
1,092 
9.97 
2.96 



108 



8 
1,485 



19, 320 
2,338 
1,033 
8.73 
3.69 



122 



10 
1,716 



1936 



19, 820 

2,269 

1, 151 

9.54 

3.73 



149 
2 
10 



278 



22, 352 
3,440 
1,122 
9. 19 
3.54 



145 
39 
10 

766 
41 
23 



1,097 



GOEBEL BREWING COMPANY 



Sales .... 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes 

Property taxos. 

State corporate taxes 

Miscellaneous. 



Total taxes. 



6,225 
4,663 
1.598 
57.77 
5.98 



253 



22 
1,820 



501 
26 

5 
4 



2,631 



5,248 
3,977 
1,148 
39.65 
7.94 



186 



14 

1,545 
6 



428 
34 
6 
4 



2,222 



4,562 
3,286 
627 
21.71 
12.19 



93 



14 

1,359 

19 



353 

46 

7 

4 



THE GOODYEAR TIRE & RUBBER CO. 



Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excis-s 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



136,801 

60, 845 

8,502 

4.85 

1.72 



307 



106 
9,053 



90P 



35 



Total taxes. 



164, 864 

57, 347 

9,144 

5. 19 

1.80 



341 



165 
8,707 



186 
993' 
"53' 



10, 613 10, 445 



185,916 

62, 747 

15,342 

8.38 

1.95 



717 
X 

238 
9,406 

461 

225 



982 
"34 



12,063 



216, 175 

76, 075 

11,942 

6.65 

1.89 



652 
X 

204 

9,753 

1,579 

251 



1,228 
"""35 



13,702 



indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWEJR 

GORHAM INCORPORATED 

[SOOO's] 



18301 



Sales - 

Gross profits. 
Net income.. 
Profit rate ... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes . 

M iscellaneous 



Total taxes. 



1934 



2,295 

776 

(360) 

(6. 49) 

37.67 



2,315 

852 

(139) 

(2.64) 

41.26 



146 



2,932 
1,076 
23 
0.45 
18.74 



1937 



2,989 

1,142 

52 

1.08 

37.70 



GOTHAM SILK HOSIERY CO., INC. 



Sales 

Gross profits. 
Net income.. 
Profit rate.-.. 
Equity ratio. 



Federal corporate income rax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes , 

State sales taxes 

Property taxes... 

State corporate taxes... 

M iscellaneous 



Total taxes. 



4,784 

1,261 

(23) 

(0. 31) 

1.78 



8,053 
1,910 
673 
9.09 
2.23 



103 

11 



9,216 
2,052 
Q34 
8.79 
2.11 



161 



9,174 
2,128 
620 
8.69 
2.37 



163 
6 



266 



GRAND VALLEY BREWING COMPANY 



Sales 

Gross profits. 
Net income. - 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax . 

Federal capital stock tax 

Federal excises.. 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes. , 

Property taxes. 

State corporate taxes. 

Miscellaneous. 



Total taxes. 



638 

171 

87 

40.27 

5:34 



15 



1 
160 



220 



382 

133 

31 

14.45 

6.06 



6 
1 
1 
112 
1 



161 



210 

130 

(22} 

(11. U) 

6.06 



indicate no data available. 

X indicates less than $1,000. 
( ) Indicate deficit. 



18302 



CONCENTRATION OF ECONOMIC POWER 



GRANITE CITY STEEL COMPANY 
[$000's] 



Sales 

Gross profits. 
Net income. - 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



5,189 

1,318 

272 

2.90 

27.58 

13 



8,083 

1.960 

705 

6.49 

15.89 

75 



152 



10,118 

1,735 

347 

2.88 

5.90 



34 



GRIESEDIECK WESTERN BREWERY COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio - 



Federal corporatfi income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1,390 
1,020 
155 
29.86 
6.03 



21 



2 

567 



1,195 

854 

61 

11.54 

7.94 



2 
452 



2,386 

1,682 

250 

37.67 

1.28 



36 



3 

784 
3 



THE HALLE BROTHERS COMPANY 



Sales,-- 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes,.. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



13, 339 

3,739 

744 

8.31 

1.43 



67 





173 
5 
3 



13,849 

3,799 

632 

7.28 

1.52 



52 



186 
4 
3 



16, 339 
4,562 
1,071 
11.46 
J. 76 



110 
10 
10 



174 
5 
3 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

C. M. HALL LAMP COMPANY 
l$000's] 



18303 





1934 


1935 


1936 


1937 


Sales 


1.171 

267 

66 

3.04 

29.69 


1,815 

313 

163 

7.36 

19.13 


1,808 
452 
205 
9.19 

15.78 


1 941 


Gross profits 


442 


Net income. .. 


26 


Profit rate •. 


1 21 


Equity ratio 


31 21 






Federal corporate income tax . . 


6 


12 


30 


e 


Undistributed profits tax ^ 




Federal capital stock tax 


3 
X 


2 
X 

5 


2 
X 

19 


2 


Federal excises 


X 


Federal-State payroll taxes 


13 


State income taxes. 






State sales taxes 


X 

37 
3 


X 

37 
4 


X 

42 
4 


X 


Property taxes.. 


47 


State corporae taxes 


6 


Miscellaneous ._ 














Total taxes , 


49 


60 


97 


73 







HAMILTON MANUFACTURING COMPANY 



Sales 

Gross profits. 
Net Income.. 

Profit rate 

Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroU taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1,199 

347 

(21) 

(0. 79) 

1.32 



43 



1,851 

650 

138 

5.07 

1.37 



2,512 
922 
207 
7.19 
1.39 



2,940 
1,038 
243 
7.78 
1.32 



HAMILTON WATCH COMPANY 



Sales 


2,853 

1,009 

332 

7.30 

40.96 


4,160 
1,541 
641 
12.86 
24.52 


6,958 
2,244 
1,112 
20.68 
4.74 


7,389 




2,931 




1,639 


Profit rate 


28.01 




3.43 






Federal corporate income tax . . 


39 


70 


88 


294 






Federal capital stock tax . 


4 


14 


6 


10 






Federal-State payroll taxes 






21 
49 


84 






25 


76 










19 

1 


12 
23 


14 
37 


11 


State corporate taxes . 


17 
















Total taxes 


63 


144 


216 


492 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18304 CONCENTRATION OF ECONOMIC POWER 

HANCOCK OIL COMPANY OF CAL.i 

[lOOO's] 





1934 


1935 


1936 


1937 


Sales 


5,614 
1,438 
283 
13.26 
2.31 


5,461 
1,994 
473 
19.51 
3.53 


6,184 
2,273 
556 
21.28 
4.97 


7,047 


Gross profits. 


3,510 


Net income _. 


1,161 


Profit rate..- 


35.93 


Enuity ratio 


3.71 






Federal corporate income tax 


17 
X 

4 

22 
X 
X 

17 

40 

2 

1 


41 


54 


90 


Undistributed profits tax. _. 


5 




6 

18 
2 
5 
27 
35 
2 
1 


6 
12 
11 

12 
25 
75 
2 
.1 


20 




9 




26 




17 


State sales taxes 


30 


Property taxes . . . . 


74 


State corporate taxes . . . . . 


2 


Miscellaneous . . .- ..-. 


1 






Total taxes -.. 


103 


137 


198 


273 







> Fiscal year ended June 30. 



THE HARBAUER COMPANY 



Sales - 




1,156 

256 

80 

9.48 

11.73 


1,222 
259 

85 
9.61 
7.85 


873 


Gross profits 


293 

122 

14.60 

10.33 


116 




(44) 


Profit rate 


(5. 44) 


Equity ratio 


10.80 








22 


14 


a 


11 


Undistributed profits tax 


1 




' 'l 
X 


1 
X 


X 


1 




X 




5 


State income taxes.. 








State sales taxes 










Property taxes . . 


9 
1 
X 


7 
1 
X 


X 


9 


State corporate taxes . . 


1 


Miscellaneous ._ ...... . . 


1 






Total taxes _ 


33 


23 


21 


29 







THE HARTFORD RAYON CORP. 



Sales... .. .... 


849 

98 

(109) 

(11.36) 

6.0' 


1,367 

247 

(6) 

(0. 50) 

3 34 


1,850 

416 

62 

5.25 

3.52 


2,031 


Gross profits. . ...... 


657 


Net income . . 


211 


Profit rate 


12.94 


Equity ratio , . . . . . . 


4.00 






Federal corporate income tax . 




' 


2 


28 


Undistributed profits tax 








Federal Capital stock tax.. 


1 


1 


2 


2 


Federal excises . 




Federal-State payroll taxes 






9 


30 


State income taxes 






3 


State sales taxes 


1 
14 


1 
15 


1 
12 


1 


Property taxes _ 


15 


State corporate taxes 




Miscellaneous . 


.. . .1 














Total taxes 


16 


17 


26 


79 







indicate no data available. 

X indicates less tban $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18305 



HAT CORP. OF AMERICA 

($000's] 





1934 


1935 


1936 


1937 


Sales 




8.390 
3,208 
902 
14.11 
14.64 


9.666 
3,775 
1,072 
16.09 
10.28 


10 630 


Gross profits.. . . 




3,844 
790 


Net inconic.- . . ... ...... . 




Profit rate . . 




12 08 


Equity ratio 




9 66 








Federal corporate income tax 




123 


149 


123 


Undistributed profits tax 




2 


Federal capital stock tax 




13 


13 


15 


Federal excises 






Federal-State pavroll taxes 






35 

38 

2 

16 


122 


State income taxes . . ... 




36 

1 

16 


23 


State sales taxes . . . 




2 


Property taxes 




16 


State corporate taxes 






Miscellaneous 


















,' 


Total taxes 




189 


253 


303 









HATHAWAY BAKERIES, INC. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio - 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal e.vcises- 

Federal-State payroll taxesl-. 

State income taxes. 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous 



Total taxes. 



5,975 
2,533 
(53) 
(1. 36) 
8.87 



6,416 

2,670 

24 

0.62 

7.45 



43 



6,551 
2,899 
104 
2.67 
8.22 



6,851 

3,078 

(45) 

(1.47) 

7.59 



HAWAIIAN PINEAPPLE COMPANY LTD.' 



Sales 

Gross profits - 
Net income. - 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



11,622 

6,589 

1,859 

17.68 

3.77 



190 



533 



16, 352 
9,502 
3,236 
22.22 
7.73 



423 



200 

137 

180 

1 

4 



21, 857 
12,049 
3,049 
25.81 
5.20 



582 



53 
242 
200 
217 
1 
2 



1,431 



19, 772 

10,668 

2,663 

13.97 

5.64 



412 
"50 



110 
157 
203 
226 
1 
9 



1,168 



• Fiscal year ended May 31. 

indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18306 



CONCENTRATION OF ECONOMIC POWER 



HAYES BODY CORPORATION 
[$000's] 





1934 


1936 


1936 


1937 








2,109 

273 

(17) 

(1.00) 

8.57 


2,761 








178 








(47) 


Profit rate , . 






(2. 81) 








3.19 




































1 


1 
















7 


34 


























19 
4 
X 


20 








4 








X 
















31 


59 











HAZEL ATLAS GLASS COMPANY 



Sales 

Gross profit^. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes 

State sales taxes -- 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



22,868 
7,456 
2,614 
14.72 
22.45 



351 



25,504 
8.916 
3,763 
19.94 
19.70 



470 



794 



29,193 
9,613 
3,379 
18.14 
13.52 



531 

42 

103 
57 
35 
81 
52 



,HEARN DEPARTMENT STORES, INC. 



Sales - 




16,436 
4,678 
405 
12.04 
13.28 


17,054 

5,627 

656 

15.61 

6.91 


4 
20,750 


Gross profits .. - 




6,815 


Net income .. .. .. 




16 


Profit rate . . ...... 




3.88 


Equity ratio 




2.42 








'^"ederal corporate income tax . .. 




47 


82 


24 


. 'ndistributed profits tax . .... 






Iiieral capital stock tax '... 




7 


8 


9 


Federal excises 






Federal-State payroll taxes 




2 
12 
15 

74 


29 
7 
17 
75 


106 


State income taxes. 




23 


State sales taxes... 




20 


Property taxes 




136 


State corporate taxes 










2 


1 


2 








Total taxes... 




159 


219 


320 









- indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18307 



HECKER PRODUCTS CORPORATION ' 

[$000's] 



Sales 

Gross proflts- 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

T5ndistribute(i profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes. 

State sales taxes. 

Property taxes 

State corporate taxes 

M iscella neous 



Total taxes- 



1934 



31,408 
10, 979 
2,277 

7.78 

n.24 

162 



39 
237 



250 

26 

3,2fil 



4,022 



31, 726 

8,748 

1,624 

7.43 

5.70 

221 



39 

237 

8 

40 

6 

202 



10 



1936 



31,014 

8,091 

1,721 

7.86 

12.95 



226 



63 
195 
61 
46 
6 

m 

13 

16 



862 



27, 939 
5,924 



4.48 
15.62 



48 
133 
120 

49 

6 

264 

13 

14 



730 



1 Fiscal year basis. Formerly Gold Dust Corp. Also includes data for Best Foo<is Inc. A 71% owned 
subsidiary. 

HEIN-WERNER MOTOR PARTS CORPORATION 



Sales 




580 

201 

105 

32.24 

3.23 


883 

262 

138 

29.22 

4.60 


1,022 


Gross profits 




277 


Net income 




115 


Profitrate 




23 38 


Equity ratio 




7 22 








Federal corporate income tax 




16 


18 
7 
3 
9 
5 
8 


15 


Undistributed profits tax. » 




3 


Federal capital stock tax 




3 

5 


2 


Federal excises 




9 


Federal-State payroll taxes. 




7 


Stateincome taxes 




7 


5 


State sales taxes. 






Property taxes.... -- . 




2 


3 


6 


State corporate taxes 






Miscellaneous 




' 
















Total taxes 




33 


53 


46 









HELENA RUBINSTEIN INC. 



Sales... 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

M iscellaneous 



Total taxes. 



1,947 
1,435 
188 
12.61 
4.14 



24 



4 

154 



1,862 
l,-223 
96 
6.86 
3.53 



24 



4 

178 



2,084 

1,592 

215 

18.06 

1.83 



46 



4 
205 
4 
4 
1 



272 



2,509 

1,857 

309 

25.57 

1.57 



45 



4 

229 
17 
4 
3 
7 
1 
2 



indicate no data available. 

X indicates less than $1,000. 



18308 CONCENTRATION OF ECONOMIC POWER 

HERCULES MOTOR3 CORPORATION 
[lOOO's] 



1935 



1937 



Sales - 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio- 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes. 

State sales taxes 

Property taxes X.. 

State corporate taxes 

Miscellaneous 



Total taxes. 



825 
243 
8.67 
9.23 



1,173 

468 

16.83 

5.58 



64 



8,248 
1,371 
526 
18.43 
2.98 



10,588 
2,069 
1,009 
29.89 
2.16 



181 
70 
6 

92 


20 
3 



372 



HERCULES POWDER COMPANY 



Sales 


25,795 
11,340 

3,437 
9.79 

27.74 


29,670 
12, 270 
3,637 
10.93 
20.81 


36, 741 
15, 335 
5,230 
15.51 
12.14 


44, 55< 
17, 837 
6,621 
14 55 


Gross profits 


Net income.. 


Profit rate 


Equity ratio 


16 56 






Federal corporate income tax 


396 


530 


873 
97 
72 


1 003 


Undlstrihuted profits tax 


168 


Federal capital stock tax 


61 


57 


61 


Federal excises 




Federal-State payroll taxes 






87 
67 
24 
245 
23 


295 


State income taxes 


30 
24 
234 
22 
3 


40 

31 

237 

19 


113 


State sales taxes 


X 


Property taxes 


250 


State corporate taxes 


43 


Miscellaneous 












Total taxos 


760 


914 


1,488 


1 933 







THE HERMAN NELSON CORPORATION 



Sales - 






1,256 

516 

66 

6.40 

13.53 


1 055 


Gross profits ., 

Net income . ^, 

Profit rate _ 

Equity ratio T 


216 

(04) 

(6. 40) 

83.24 


404 

34 

3.33 

42.89 


342 

(66) 

(6. 82) 

3 23 






Federal corporate incocie tax _ 




9 


9 
1 
1 




Undistributed profits tax 






Federal capital stock tax . . . 


1 


1 


1 


Federal excises 




Federal-State payroll tax.« 






3 





State Income taxes 









State sales taxes 


1 
4 
1 


X 

5 
1 
X 


1 
4 
X 


] 


Property taxes 


6 


State corporate taxes 


X 


Miscellaneous 












Total taxes 


7 


16 


19 


16 







indicate no data avalla ^lei 

X Indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

HERSHEY CHOCOLATE CORPORATION 
[SOOO's] 



18309 





1934 


1935 


1936 


1937 


Sales 


30,347 

11. 134 

6.032 

38.58 

4.88 


34, 956 

11,648 

fi.252 

34.76 

4.96 


37, 393 

10,913 

4,679 

26.11 

2.32 


38, 267 
11,067 
1 279 


Gross profits 


Not income 


Profit rate 


8 98 


Equity ratio 


1 15 






Federal corporal Income tax 


925 
X 
23 
134 
X 

. 101 
X 
44 
1 


895 

X 

63 

1 

X 

295 

1 

49 

198 


659 
X 

57 

1 

49 

349 


188 


Undistributod profits tax 




Federal capital stock tax 


63 


Federal excises 


2 


Federal-State payroll taxes.. 


138 


State income taxes J 


72 


State sales taxes 




Property taxes_ 


25 
349 


33 


State corporate taxes 


• 155 


Miscellaneous 














Total taxes 


1,228 


1,502 


1,489 


651 







HEWITT RUBBER CORPORATION 



Sales. 






2,904 

1,173 

356 

18.84 

1.33 


3 387 


Gross profits 






1 298 


Net income . 






331 


Profit rate 






16 37 


Equity ratio 






9.96 










Federal corporate income tax ...'. 






48 
12 
4 
X 
9 
9 
X 
13 
1 


42 


Undistributed profits tax 






11 


Federal capital stock tax 






4 


Federal excises 






X 


Federal-State payroll taxes 






26 


State income taxes .. 






10 


State sales taxes .. . . 






X 


Property taxes. 






15 


State corporate taxes 






3 


Miscellaneous 


















Total taxes 






96 


111 











HIBBARD SPENCER BARTLETT •& COMPANY 



Sales.... 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes. 

State corporate taxes 

Miscellaneous 



Total taxes. 



01,412 
2,486 



7.12 
7.19 



7 
105 

a 
1 



200 



11.665 

2,432 

438 

5.04 

6.39 



53 



13, 742 

3,047 

713 

8.19 

3.36 



105 



14, 312 
3,518 



9.03 
11.92 



145 
7 
10 



20 

103 

3 



348 



indicate no data available. 

X indicates less than $1,000. 



18310 



CONCENTRATION OF ECONOMIC POWER 



HILTON DAVIS CHEMICAL COMPANY 

[$000's] 





1934 


1935 


1936 


1937 


Sales.. - -- 






2,011 

455 

226 

. 18. 76 

3.84 


2,073 
433 


Gross profits 






Net income 






151 


Profitrate 






11 07 


Equity ratio -- 






2 33 
















28 
3 
4 


25 


Undistributed profits tax 






4 


Federal capital stock tax - -.. 






3 










Federal-State payroll taxes -.. 






6 


10 


State income taxes 








State sales taxes 










Property taxes .• - 






4 

1 


7 


State corporate taxes .. ..... 






2 


Miscellaneous. _ 
























45 


51 











HIRAM WALKER & SONS, INC., AND H. WALKER-QOODERHAM & WORTS LTD. 



Sales. 

Gross profits. 
Net income. - 
Profit rate.-- 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax. . .. 

Federal excises 

Federal-State payroll taxes . . 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes- 



45, 353 

12, 121 

4,041 

12.59 

3.20 



262 



53 
20,983 



54,729 

14, 772 

6,121 

14.41 

2.47 



514 



107 

28, 036 

21 

7 

1 

108 

1 

41 



21, »53 28, 836 



63,970 

18, 579 

8,529 

18.76 

2.05 



666 



30,231 
81 



124 

2 

33 



31, 243 



HOLLY SUGAR CORPORATION ' 



Sales -- 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax. . .. 

Federal excises 

tederal-State payroll taxes .. 

State income taxes 

State sales taxes. 

Property taxes. - 

State corporate taxes 

Miscellaneous 



Total taxes. 



12, 763 
4,470 
2,126 
17.43 
.68 



239 



21 
3,119 



204 
4 



3,634 



20,042 
6,585 
3,663 
27.52 
1.01 



609 



45 

265 

4 

78 

C 

244 
22 
4 



1,271 



23,400 
7,395 
3,975 
24.22 
1.21 



565 
88 
47 



203 
1 



1,011 



14,200 

4,808 

1,502 

9.70 

.66 



192 

1 

25 

2,021 

101 

32 

36 

242 

1 



2,651 



• Fiscal year ended Mar. 31. 

indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 

HOME DAIRY COMPANY 
[$000 's] 



1831J 





1934 


1935 


1936 


1937 


Sales - 


1,410 

553 

18 

1.69 

9.68 


1,482 

571 

18 

1.78 

7.88 


1,756 

640 

29 

2.87 

5.72 


1 949 


Gross profits . 


694 


Net income 


31 


Profit rate 


3.10 




6.19 








2 


2 


3 


3 


Undisii Ibuted profits t£ix 






1 
X 


1 


X 


1 


Federal excises 




Federal-State payroll taxes 




4 ' 


12 


State income taxes - . 








State sales taxes - - - - - 


39 
16 
3 


41 
16 
3 


48 
15 
3 


64 




14 




9 


Miscellaneous - 














Total taxes 


61 


63 


73 


86 







HONOLULU PLANTATION COMPANY 



Sales 

Gross proflts- 
Net income.. 
Profit rate. .. 
Equity ratio. 



Federal cBrporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal -State payroll' taxes.. - 

State income taxes 

State sales taxes. . _ 

Property taxes 

S tate corporate taxes -. 

M iscellaneous. 



Total taxes. 



2,816 
1,234 
154 
2.91 
25.66 



19 



10 
162 



38 
124 



3,294 
1,623 
448 
8.61 
23.74 



43 



7 
385 



11 
108 



3,923 
1,908 



13.12 
14.76 



3,438 
1,625 



9.63 
13.99 



68 



7 
121 
11 
42 
31 
90 



BORDERS INCORPORATED 



Sales -.. 

Gross profltS- 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes. 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



2,590 
954 
222 

10.38 
3.56 



2,840 

987 

147 

6.83 

4.21 



3,392 
1, 185 
286 
12.97 
4.27 



3,795 
1,324 
319 
14.19 
4.59 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18312 



CONCENTRATION OF ECONOMIC POWER 



QEORQE A. HORMEL & COMPANY 
[SOOO'sl 





1934 


1935 


1936 


1937 


Sales 




47, 641 

4,755 

864 

9.29 

3.21 


55, 807 
5, 90S 
1,131 
11.90 
3.63 


60,760 


Gross profits , 




5, 776 


Net incoiDe . . - . - - 




984 


Profit rate 




10.14 






4.77 












223 


280 


139 






3 


Federal capital stock tax .'. . 




9 


12 


12 


Federal excises .. . 






Federal-State payroll taxes 




5,816 
28 


44 
42 


161 






37 












146 
11 


168 
18 


141 


StHte corporate taxes • - 




25 






44 












Total taxes 




6,233 


6C4 


562 









A. C. HORN COMPANY 



Sales 






2,846 
1,338 

241 
13.. 79 
4. 2S 


3,471 








1 628 








'2O6 


Profit rate 






-30.1S9 


Equity ratio .. - .. 






2.96 




"• ' 






Federal corporate income tax 






42 
IS 
2 


' 44 








11 


Federal capital stock tax . . 






3 


Federal excises 








Federal gtnte payroll taxes 






7 


36 


State income taxes 








State sales taxet> . 










Property taxes 






15 


28 


State corporate taxes _ 


' 






Miscellaneous 




















Total taxes 






84 


122 











JOSEPH HORNE C0.» 



Sales 

Gross profits. 
Net income.. 
Profit rate.... 
Equity ratio. 



Federal corporate income tax. 

Undistributed protits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



12,919 

3,476 

751 

4.95 

11.29 



104 




11 
183 
59 



366 



13, 688 

3,649 

773 

5.00 

10.80 



101 



40 
12 

179 
54 
2 



404. 



15, 325 
4,172 
1,017 
6.64 

8.82 






12- 


39 


12 
178 
56 



297 



17, 779 

4, 859 

943 

6.95 

10.54 



137 
3 
13 

119 
55 
14 
178 
50 



569 



' Fiscal year ended Jan. 31. 

indicate no data available. 

X indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWElt 



18313 



HOSKINS MANUFACTURING COMPANY 
IIOOO's] 





1934 


1935 


1936 


1937 


Sales : 


1,297 

626 

293 

19.70 

10.59 


1,687 
787 
496 

29 28 
7.27 


2,042 

957 

671 

37.31 

5.07 


2,270 




1,075 


Netincome 


742 


Profit rate 


42.46 


Equity ratio 


4.83 








38 


66 


95 


107 








5 


8 


9 


9 












6 


17 






















21 
3 


1 


18 
5 


19 




4 
















Total taxes 


67 


92 


133 


156 







HOUDAILLE-HERSHEY CORPORATION ' 



Sales 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes. 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



3.119 
1,104 
10.70 
10.24 



5.398 

2,927 

26.89 

7.22 



160 



272 



422 



18, 949 
5,552 
2,833 
25.73 
5.76 



467 
""84" 



735 



20,714 
6,838 
2.842 
24.79 
8.01 



483 
3 
63 



214 

66 



921 



> Including figures of subsidiary, Muskegon Motor Specialties Ct)mpany. 
HARVEY HUBBELL, INCORPORATED 



Sales 

Gross. proflts- 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises. 

Federal-State payroll taxes... 

State income taxes.. 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



2,232 
893 
399 

39.83 
4.54 



2,759 
1,051 
509 
38.35 
6.79 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18314 



CONCENTRATION OF ECONOMIC POWEIl 



HUDSON MOTOR CAR COMPANY 
[$000's] 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax. . .. 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes... 

Miscellaneous. 



Total taxes. 



52,568 

9,360 

(3, 135) 

(13. 43) 

3.80 



-41 
1,113 



54 
22 
536 
57 



63, 077 

14, 467 

1,042 

3.48 

1.92 



60 



43 
1,456 



62 
17 
600 
56 
10 



2,304 



1936 



77, 151 

18, 628 

4,276 

13.37 

2.00 



544 



23 
53 
19 
568 
55 
12 



3, 139 



74,602 

15, 534 

1,092 

3.40 

3.97 



96 



65 

1,607 

551 

62 

. 16 

68d 

54 

9 



3,049 



HUMPHRYES MANUFACTURING CO. 



Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed lirofits tax 

Federal capital stock tax. . .. 

Federal excises _ 

Federal-State payroll taxes 

State income taxes 

State sales taxes. 

Property taxes.. 

State corporate taxes 

Miscellaneous. ._ 



Total taxes. 



448 

83 

(61) 

(7.84) 

22.33 



1,067 

224 

57 

6.98 

27.04 



1,339 

341 

131 

13.86 

11.96 



1,820 

448 

162 

16.26 

17.29 



HUPP MOTOR CAR CORPORATION 



Sales 


7,196 

(519) 

(4. 398) 

(43. 35) 

13.74 


6,868 

(101) 

(2. 589) 

(45. 49) 

7.31 


416 

(102) 

(1. 042) 

(23. 38) 

818 


1 681 


Gross profits .. 


(456) 
(1 802) 


Net income .. 


Profit rate . .. 


(34.03) 
626 


Equity ratio 






Federal corporate income tax 










Undistributed profits tax 










Federal capital stock tax 


18 


8 
5 


3 
X 
3 


5 


Federal excises . 


1 


Federa-State payroll taxes 




27 


State income taxes . . . 








State sales taxes. 


162 
11 


1 
135 
22 


X 

116 
24 


X 


Property taxes.. 


105 


State corporate taxes 


20 


Miscellaneous J.. 














Total taxes 


197 


171 


146 


168 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

HUSSMAN LIGONIER COMPANY 
[SOOO's] 



18315 





1934 


1935 


1936 


1937 


Sales , 


1,631 

897 

94 

11.80 

6.60 


1,920 

1,112 

141 

15.98 

1.17 


3,175 

1,766 

341 

22.85 

1.82 


3,879 

2,121 

.170 

19.30 

1.71 


Gross profits.. 


Net income.... 


Profit rate 


Equity ratio _. 




Federal corporate income tax 


7 


19 


44 
16 
6 


51 
10 


Undistributed profits tax 


Federal capital stock tax 


X 


. 2 




Federal excises 




Federal-State payroll taxes 






6 
3 


20 


State income taxes 


1 


2" 




State sales taxes 




Property taxes. _ 


4 
2 
2 


4 
2 
3 


5 
3 
5 


5 


State corporate taxes 


3 




Q 








16 


32 


87 


105 







HYDE PARK BREWERIES ASSOCIATION, INC.i 



Sales 

Gross profits . 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. . 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes _ . . 

State sales taxes 

Property taxes ^ 

State corporate taxes 

Miscellaneous 



Total taxes. 



1,964 
1,580 
278 
22.63 
8.17 



1,788 
1,406 
164 
11.30 
4.71 



37 



5 
633 
1 
4 
71 
12 
1 
3 

767 



2,491 
1,988 
164 
11.87 
5.60 



21 



819 
6 
3 
91 
13 
1 
2 



3,790 

2,945 

547 

32.96 

2.71 



27 



5 

,153 

17 

3 

123 

13 

1 

2 



> Fiscal year ended Mar. 31. 



ILLINOIS BRICK COMPANY 



Sales 


260 

177 

(386) 

(12. 52) 

12.64 


322 

219 

(313) 

(10. 98) 

26.17 


726 

511 

(196) 

(6. 18) 

13.51 


821 


Gross profits .. .. . 


482 


Net income . . . 


(243) 
(8 46) 


Profit rate 


Equity ratio 


9 45 






Federal corporate income tax 










Undistributed profits tax •.. 










Federal capital stock tax 


6 


5 


6 


6 


Federal excises 




Federal-State payroll taxes 










State income taxes 










State sales taxes 










Property taxes :: 


63 
3 


56 
3 


56 
2 


57 


State corporate taxes... 


2 


Miscellaneous 














Total taxes . . 


72 


64 


64 


65 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18316 CONCENTRATION OF ECONOMIC POWER 

ILLINOIS ZINC CO. 
[$000's] 



- 


1934 


1935 


1936 


1937 


Sales 






1,462 

282 

75 

2.77 

3.38 


2,144 
402 


Gross profits... _ _ 












130 


Profit rate - 






4.70 


Equity ratio 






7 28 










Federal corporate income tax 










Undistributed profits tax 










Federal capital stock tax 


2 


1 


2 


2 












8 
X 


29 


State income taxes 








State sales taxes _. 






X 


Property taxes . .. .... 


12 

1 


11 
1 


10 

1 


8 


State corporate taxes 


2 
















Total taxes ' 


15 


13 


21 


41 







INDEPENDENT PNEUMATIC TOOL CO. 



Sales. 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal State payroll taxes 

State income taxes 

State sales taxes 

Property taxes... 

State corporate taxes. 

Miscellaneous _ 



Total taxes. 



2,138 
1,392 
775 
19.42 
22.32 



100 



2,896 
1,780 
1,023 
24.71 
15.05 



129 



157 



3,858 
2,269 
1,289 
30.37 
10.71 



181 
3 
14 



INDUSTRIAL RAYON CORP. 



Sales 

Gross profits - 
Net income.. 

Profit rate 

Equity ratio- 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes. 

State sales taxes 

Property taxes. 

State corporate taxes 

Miscellaneous 



Total taxes. 



7,925 
2,613 
1,558 
9.42 
16.42 



237 



8,054 
2,624 
709 
4.34 
16.00 



111 



10 

1 

109 

12 



10, 137 
3,737 
1,604 
9.79 
13.99 



248 

8 

40 



35 

11 

1 

101 

11 



indicate no data available. 

X Indicates less than $1,000. 



CONCENTRATION OF ECONOMIC POWER 

INQER80LL RAND COMPANY 
[$000's] 



18317 





1034 


1935 


1936 


1937 


Sales 


18, 873 
8,783 
3.448 
9.59 
16.87 


22,586 
10,538 
4,053 
11.75 
12.46 


29,605 
14,914 
7,369 
21.17 
10.55 


38,786 
19,900 
11 702 


Gross profits 


Net income . 


Profit rate 


29 87 


Equity ratio 


9 60 






Federal corporate income tax .... 


400 


493 


967 


1 627 


Undistributed profits tax 


349 


Federal capital stock tax . . . 


41 
11 


41 
12 


101 
25 
86 
63 
11 

201 
1 


83 


Federal excises 


34 


Federal-State payroll taxes. 


307 


State income taxes 

State sales taxes 


13 
3 

172 

1 
1 


32 

5 

194 

2 

X 


137 

7 


Property taxes.. . . 


232 


State corporate taxes. . . . 


3 


Miscellaneous . 


I 






Total taxes . . 


642 


779 


1,455 


2,780 





INLAND STEEL COMPANY 



Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal- State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes ^ 

Miscellaneous 



Total taxes. 



40, 404 

15, 292 

6,245 

6.57 

1.29 



572 



16 

501 

5 



1,145 



62,545 

24,234 

12,925 

11.97 

1.71 



1,550 



128 

7 



2 

18 

653 

12 



2.370 



98,904 

34,540 

16, 804 

13.57 

1.50 



,820 
374 
167 

248 
48 
58 

771 
17 



3,511 



110. 744 

38,560 

18.087 

12.62 

1.44 



2,683 
825 
185 

10 
812 

47 

60 
910 

18 



5,550 



INTERCHEMICAL CORPORATION 



Sales 

Gross profits. 
Net income.. 

PrpDt rate 

Equity ratio . 



Federal corporate irrcome tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



12, 427 
5,184 
1,049 
9.21 
14.87 



112 



14, 339 
5,894 
1,336 
11.43 
9.08 



202 
24' 



314 



17, 446 
6,931 
1.601 
12.74 
4.68 



274 
18 
26 



20,207 
7,595 
1,131 
9.32 
3.42 



209 
13 
32 

164 
22 
6 

111 
12 



569 



indicate no data available. 

X indicates less than $1,000. 



18318 



CONCENTRATION OF ECONOMIC POWEH 



INTERNATIONAL AGRICULTURAL CORP. 
I$0O0's) 





1934 


1935 


1936 


1937 


Sales . '. -- - 






12,643 
3,355 
1,101 
4.27 
3.92 


12, 199 








3,138 








1,003 


Profit rate 






3.96 








4.93 



















10 


55 








11 








12 
















9 


38 








6 


















113 
2 

54 


120 








3 








68 










Total taxes - -- 






188 


313 











INTERNATIONAL BUSINES6V MACHINES CORPORATION 




Sales - 


20, 949 

17, 360 

7,570 

15.43 

7.01 


21,864 

19, 402 

8,267 

15.74 

5.54 


26,243 

23,354 

9,361 

15.76 

3.77 


31, 787 




27,909 




10,605 




15.67 


Equity ratio - - 


2.64 




842 


912 


1,288 

175 

112 

4 

75 

127 

13 

162 

17 


1,579 




633 




84 


126 


118 












305 




90 

8 

106 

11 


83 
12 
117 
12 


226 


State sales taxes... 


20 
255 




42 


















1,141 


1,262 


1,973 


3,178 







INTL. BUTTON HOLE SEWING MACH. CO. 



Sales -- 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes. 

State corporate taxes 

Miscellaneous 



Total taxes- 



769 

657 

151 

9.40 

23.15 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18319 



INTERNATIONAL HARVESTER COMPANY 
[$000'sl 



Sales 

Gross profits. 
Net income - - 
Profit rate..-. 
Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State incomf taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1934 



138, 312 
66,198 



3.04 
13.39 



3,969 



342 

427 



95 
22 
2,906 
64 
95 



7,920 



1935 



217,683 

87,980 

24,744 

8.15 

9.26 



3,174 



368 
575 



77 
36 
1,837 
69 
119 



6,255 



1936 



254,934 
100, 433 
37,444 



7.19 



4,705 
2,037 
448 
451 
187 
298 
41 
i!. 244 
80 
142 



10, 633 



1937 



351,928 

129, 434 

43, 945 

13.44 

5.26 



7,137 

2,8.54 
467 
545 

2,107 

414 

31 

2,618 
147 
203 



16,623 



INTERNATIONAL SHOE CO. 



Sales 

Gross proflts- 
Net income.. 

Profit rate 

Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excLses 

Federal-State payroll taxes... 

State income taxes 

State.sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous..- 



Total. 



83,073 

23,190 

10, 032 

12. 87 

17.97 



l,36l 



143 

58 



90 

2 

415 

44 
2 



2,145 



84,857 

24,880 

9,771 

12. 38 

13.13 



1,337 
"139" 



245 

81 

4 

421 

46 

2 



2,275 



88,279 
22,637 

7,394 
9.42 

19.56 



1,126 



907 
100 

4 
421 
49 

1 



2,704 



INTERNATIONAL SILVER CO. 



Sales.- 

Gross profits. 
Net income.. 
Profit rate-... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises.-. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes. 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



9.736 

4,255 

230 

1.46 

47.28 



18 



142 
6 



10,520 

3,646 

(479) 

(3. 15) 

61.64 



140 
6 



172 



12.380 

4,466 

511 

3.32 

31.15 



140 

20 

6 



303 



14, 321 

5. 678 

856 

6.52 

28.16 



136 
12 

6 

'187 
16 



136 
8 



indicate no data available. 

X indicates less than $1,000. 
( ) Indicate deflbit. 



18320 



CONCENTRATION OF ECONOMIC POWER 



INTERTYPE CORPORATION 

(SOOO's] 



Sales 

Gross profits- 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises _ 

Federal-State payroll taxes.. - 

State income taxes 

State sales taxes 

Property taxes .•... 

St ate corporate taxes 

Miscellaneous. 



Total taxes. 



3, 053 
1,782 
217 
3.50 
4.02 



42 



1935 



3,362 
1,998 
413 
6.80 
4. 15 



86 



4,074 
2,140 
481 
8.49 
6.46 



1937 



4,861 

2,428 

513 

8.48 

6.34 



IRVINO AIR CHUTE CO. INC. 



Sales 

Gross profits. 
Net income. . 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

:M iscellaneous- 



Total taxes- 



600 

338 

145 

15.43 

.17. 73 



1,304 
614 
423 

39.03 
4.80 



1, 345 
501 
250 

22.77 
7. 14 



1,700 
622 
378 

34.06 
4.56 



F. L. JACOBS COMPANY 



indicate no data available. 

X indicates less than $1,000. 



Sales - - . . . 




1,440 
463 
287 

68.71 
2.04 


3, 430 
932 
502 

41. 85 
l.fil 


5,680 


Gross profits 




1,415 






625 


Profit rate 




38.21 


Equity ratio 




1.34 








Federal corporate income tax ._. . 




50 


74 
S 
6" 


101 


Undistributed profits tax ... ... 






Federal cajiital stock tax 




1 


9 


Federal excises 






Federal-State payroll taxes 






8 


56 










State sales taxes . . 










Property taxes . . 




3 
X 


6 

1 
1 


13 


State corporate taxes 




2 


Miscellaneous 




X 










Total taxes.. .. . . . 




54 


104 


181 









CONCENTRATION OF ECONOMIC POWER 

THE JAEGER MACniNE COMPANY 
[JOOO's] 



18321 



Sales 

Oross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tai. 

I'udistributed profits tax 

Federal capital stock tax 

Federal excises. 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous..- 



Total taxes. 



1934 



1,328 

423 

82 

3.90 

23.69 



1930 



2,723 

1,048 

487 

19. 6(t 

7.63 



94 



1937 



3,367 
),31& 
616 
24.38 
4.80 



JEANNETTE GLASS COMPANY, THE 



Sales 








1,020 
170 










Net income -- - -- 








(68) 
(9.04) 
9 10 


Profit rate 


























Federal corporate income tax. _ 










Undistributed profits tax 










Federal capital stock tax - 








3 












Federal-State payroll taxes 








12 


State income taxes .- 










State sales taxes 










Property taxes . 








4 


State corporate taxes . . 










Miscellaneous. 




























19 













JEFFERSON ELECTRIC COMPANY 



Sales 

Gross profits. 
Net income. - 

Profit rate 

Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal e.xcises 

]-«deral-State payroll taxes. .. 

^'tat« income taxes. 

State sales taxes 

Property taxes... 

State corporate taxes 

Miscellaneous... 



Total taxes. 



876 

391 

19.97 

11.34 



49 



70 



993 

443 

21.39 

12.19 



55 



4,373 

1,340 

675 

30.93 

5.89 



101 
14 
5 
1 
15 



4,098 
1,354 
627 
26,70 
8.91- 



161 



indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18322 CONCENTRATION OF ECONOMIC POWEH 

JOHANSEN BROS. SHOE CO. 
[SOOO'sJ 



Sales 

Gross profits. 
Net income.. 
Profit rate--- 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. - 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1935 



1,461 

280 

46 

5.52 

1.80 



1,827 

361 

91 

11.39 

1.93 



JOSLYN MFQ. & SUPPLY CO. 



Sales - 






7,876 
1,562 
630 
13.84 
2.63 


12, 387 








2,677 








1,261 








21.28 








3.64 
















86 

1 
2 


217 








16 








10 
















11 

X 

14 

26 

3 


27 








4 








17 








40 








4 








X 


















143 


335 











THE JULIAN & KOKENGE CO. 



Sales 




3,360 
i;062 
411 
17.00 
9.72 


3,604 
1,167 
474 
17.78 
10.35 


4,124 






1,146 






365 






13.63 






13.44 












72 


68 


64 






2 






2 


6 


5 














8 


32 


































13 


19 


20 






















87 


101 


113 









.... indicate no data available, 
X indicates less than $1 .000. 



CONCENTRATION OF ECONOMIC I'OWKU 

E. KAHNS SONS COMPANY 
ISOOO's] 



18323 





1934 


1935 


1936 


1937 




10,908 

1, 005 

179 

4.53 

2.90 


14,329 

1,196 

356 

8.69 

3.61 


15. 243 

1, 264 
317 
7.23 
5.07 


16 482 




1 271 




207 


Profit rate . . . 


4 87 




6 26 








18 


162 


45 


27 








3 


4 
1,018 


3 


3 










ii 

X 

1 

28 
3 
X 


36 




X 


X 

1 

21 
3 
X 


X 




1 




22 
3 
X 


33 




6 




10 








46 


1,209 


91 


116 







KALAMAZOO STOVE AND FURNACE CO. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes --. 

State sales taxes 

Property taxes ^ 

State corporate taxes 

Miscellaneous 



Total taxes. 



3, 448 

1,748 

519 

18.05 

8.71 



77 



136 



5, 157 
2,566 



26.55 
5.95 



152 

'"u 



7, 547 
3,719 
1,3.53 
27.41 
3.76 



213 
60 
22 



7, .597 
3,868 
1,188 
22.63 
6.32 



195 
74 
21 



465 



KATZ DRUG COMPANY 



Sales 

Gross profits - 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises ... 

Federal-State pajToll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes,. 

Miscellaneous 



Total taxes. 



8,48 

2,274 

622 

20.84 

5.12 



87 



8,961 

2,379 

492 

16.82 

8.34 



8,879 

2,438 

561 

19.12 

6.37 



9,730 

2,589 

213 

6.32 

2.90 



28 



— indicate no data available. 
X indicates less than $1,000. 



18324 CONCENTRATION OF ECONOMIC POWEH 

KAUFMANN DEPARTMENT STORES, INCORPORATED 
[$000'S] 



Sales 

Gross profits. 
Net income,. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. -. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes - 



1934 



18, 491 
4.719 
1.036 
5.38 
5.27 



90 



15 

327 

22 



20,153 

5,964 

1,321 

6.82 

6.59 



142 



61 

18 

322 

50 



606 



24,405 
7,460 
1,927 
10.10 
3.76 



245 



45 
128 

18 
336 

61 



KELLY-KOETT MANUFACTURING COMPANY 



Sales 






1,322 
518 
107 

18.54 
1.16 


1,521 








518 








19 


Profit rate. . 






3.33 








.96 
















12 


















2 


2 
















4 

1 


14 


State income taxes .. '. 






X 


State sales taxes . . 














5 


5 


State corporate taxes . 






X 


Miscellaneous .. .. 


















Total taxes . .. . . 






24 


21 











KELSEY-HAYS WHEEL COMPANY 



Sales 


19, 014 


27, 853 


27, 186 


31,096 


Gross profits .-. -. 






559 

5.17 

.85 


1,606 

21.76 

.88 


1,019 

12.49 

.83 


926 


Profit rate 


10.64 




.97 






Federal corporate income tax. .. . 




212 


14 










Federal capital stock tax .. .. .. ..; 




21 
1 


15 
X 

61 


14 


Federal excises 

Federal-State payroll taxes . 


X 

269 




















Property taxes . . .. .. .. .. . .. 


125 
4 


124 
6 


174 
14 


182 


State corporate taxes . . 


15 
















Total taxes 


137 


364 


278j 


480 







indicate no data available. 

X indicates loss than $1,000. 



CONCENTKATION OF ECONOMIC POWEH 



18325 



KENDALL COMPANY 
($000's] 



Sales -.. 

Gross profits. 
Net income.. 
Profit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises.. 

Federal-States payroll taxes.. 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



1034 



18,763 
6.593 
1,067 



96 



23 
4 

106 
3 

393 



1935 



19, 935 

6,602 

758 

6.59 



82 



7 
7 

125 
8 

110 



365 



21, 872 

7,197 

1,613 

14.78 

.64 



151 
75 
19 



121 
10 



456 



1937 



27,071 

7,848 

828 

6.62 

.67 



186 
22 
6 

181 
18 



429 



KENNEDY'S, INCORPORATED 



Sales . 








4,245 


Gross profits . . . . .. 








1,809 








J 


424 


Profit rate 








10.17 


Equity ratio . . 








2.31 












Federal corporate income tax ... 








63 










26 










11 












Federal-State payroll taxes - 








26 


State income taxes . .... 








23 




















104 










X 






















Total taxes.. . . ... . . 








253 













KEN-RAD TUBE & LAMP CORPORATION 



Sales - 


3,023 
1,035 
302 
21.74 
3.78 


3,469 
1,025 
275 
17.08 
6.40 


4,559 
1,547 
721 
36.01 
6.34 


4,570 


Gross profits . ........ 


1,513 


Net income .... ... 


539 


Profit rate . ... 


25.15 


Equity ratio . . . . 


6.20 






Federal corporate income tax.. . 


44 


43 


122 
90 
7 

13 
16 
21 


88 


Undistributed profits tax . . . 


24 




3 
16 


5 
14 


4 




15 




50 








18 












1 
1 


3 
2 


4 

1 


7 




3 
















Total taxes 


65 


67 


274 


209. 







indicate no data available. 

X iDdicates less thau $1,000. 



> 



18326 



CONCENTRATION OF ECONOMIC POWER 



KEY COMPANY 
[SOOO's] 



Sales 

Gross profits - 
Net income. - 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes 

State sales taxes.. 

Property taxes 

State corporate taxes 

Miscellaneous... .-- 



Total taxes. 



1934 



675 

205 

(36) 

(6. 78) 

2.65 



1035 



1,002 
391 
118 

20.82 
4 04 



14 



1936 



1,244 
422 



17.30 
2.72 



KEYSTONE STEEL & WIRE COMPANY' 



Sales.. 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



7,912 
3,214 
1,455 
15.60 
7.81 



168 



10, 599 
3,846 
1,828 
18.79 
2.70 



272 



12, 164 

3,716 

1,477 

15.22 

2.91 



207 

32 

14 

1 

74 

I 

1 

46 

3 



' Fiscal year basis. 



KINQSBUHY BREWERIES COMP.VNY 



Sales . . 






1, 697 
1,2(J9 
57 
4.80 
1.12 


1,911 


Gross profits.. 






1,306 


Net income .. 






(1) 


Profit rate 






(0. 10) 


Equity ratio 






1.04 










Federal corporate income tax... ._ 






31 




Undistributed profits tax 








Federal capital stock tax 






2 

595 


2 


Federal excises. . 






663 


Federal-State payroll taxes 






10 


State income taxes . ^ 






27 

89 

14 

1 




State sales taxes . . .■ 






107 


Property taxes 






18 


State corporate taxes ... 






1 


Miscellaneous 


















Total taxes 






759 


801 











indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

KINOSPORT PRESS, INCORPORATED 
[SOOO's] 



18327 





1034 


1935 


1936 


1937 


Sales - 


1,352 

428 

35 

1.63 

2.29 


1,875 

548 

80 

3.54 

2.74 


1,924 

647 

115 

5.17 

2.72 


2,568 
844 




Net income 

Profit rate .-. 


200 
8.81 




2.65 






Federal corporate income tax .- 




7 


14 
13 
2 


32 


Undistributed profits tax - 





17 




i 

X 


1 
X 


2 






Federal-State payroll taxes 


9 


33 


State income taxes . 




X 


2 


State sales taxes - - 






Property taxe^ -. .. . . 


15 


15 
2 


16 
3 


17 


State corporate taxes.- - - 


2 


Miscellaneous - 














Total taxes •- 


16 


25 


67 


105 







D. EMIL KLEIN COMPANY, INCORPORATED 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes '.. 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



2,445 

818 

:i3 

18.85 

40.83 



38 



3 
191 



2,530 

858 

336 

19.77 

38.27 



40 



2,69: 

914 

305 

18.73 

33.84 



36 

3 

4 

175 



2,873 

895 

288 

20.08 

28.12 



34 

5 

3 

189 

26 
7 



270 



KNAPP MONARCH COMPANY 



Indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



Sales 


1,166 

289 

(39) 

(531) 

2.13 


2,046 

466 

85 

12.81 

1.29 


2,754 
760 
246 

25.30 
2.11 


4^424 


Gross profits 


940 




279 




24.48 


Equity ratio . . . . . . 


2.20 






Federal corporate income tax . .... 




7 


34 

17 
2 


41 


Undistributed profits tax .... 




3.'. 


Federal capita) stock tax.. 


1 


i 


2 




X 








8 
2 

1 
6 

1 


30 






X 
X 

2 
X 


2 






1 




3 
X 


6 




X 




X 












Total taxes 


4 


10 




117 







18328 CONCENTRATION OF ECONOMIC POWEH 

8. S. KRESGE COMPANY 
[$000's] 



Sales: 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax_ 

Und'"!tributed profits tax 

Federal capital stock tax 

Federal excises _-. 

Fcdoral-State payroll taxes... 

State income taxes. 

State sales taxes 

Property taxes 

State corporate taxes 

]\I iscellaneous 



Total taxes. 



1934 



137, 667 

54, 370 

12, 623 

11.12 

3.53 



1,639 



171 



91 

1,210 

2,669 

110 

61 



5,951 



1935 



138, 340 

53, 899 

12. 621 

11.58 

5.85 



1,537 
"223 



133 
1,422 
2,626 

189 
22 



6,152 



149, 253 

58, 498 

14, 065 

13.02 

5.87 



2,035 
500 
123 



249 

249 

2,121 

2,779 

202 



8,266 



KRESGE DEPARTMENT STORES 



Sales.- 


4,223 

925 

102 

2.00 

14.29 


4,776 
1,122 
174 
3.79 
12.56 


5,500 
1,398 
349 
9.47 
9.01 


5,127 




1,258 




137 


Profit rate.- _ 

Equity ratio .. 


3.36 
17.02 








13 


34 


53 
5 
4 


24 


TJndistributed profits tax . ..... .. ... . 


4 




1 


4 


2 












12 
X 


33 




X 


X 


y 




4 




47 


47 
X 

1 


21 
X 
2 


25 




1 


Miscellaneous 


X 


1 






Total taxes . . . .. . 


61 


86 


97 


94 







S. H. KRESS AND COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. . . 

State income taxes 

State sales taxes _ . _ 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



75,662 

22, 944 

6,955 

10.54 

21.44 



995 



72 

624 

906 

13 

30 



2,712 



78, 479 

23,382 

6,737 

10.00 

21.89 



944 



923 
17 
34 



3,015 



86,768 

25, 697 

7,185 

10.47 

13.94 



1,220 

98 

107 

2 

114 

209 

1,109 

1,030 

21 

95 



4,005 



indicate no data available. 

X indicates less than $1,000. 



CONCENTUATION OF K(X)N(>iMlC I'OWKU 

KKOfiKli (iUOCEHY AND BAKINO COMl'ANV 
[$000'8] 



18329 



Rales -. 

<iross profits. 
,Nct income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. . 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous It 



Total taxes. 



221, 175 

.12, 838 

4,791 

10.11 

6.30 



588 



11 

2,852 

510 

662 

32 



5,299 



229, 906 

52, 930 

4,590 

9.39 

7.08 



552 



47 
134 



22 

4,100 

507 

686 

18 



6,066 



242, 273 

54, 376 

3, 997 

8.18 

5.89 



507 
""56' 



339 

17 

4,108 

590 

vol 

X 



6,318 



248, 444 

54, 365 

3.280 

6.71 

6.60 



430 
"53 



1,069 

14 

3,433 

591 

698 

X 



6,2S8 



LACLEDE STEEL COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes _ 

Property taxes 

State corporate taxes . 

Miscellaneous 



Total taxes. 



4,169 

1,272 

189 

1.85 

6.72 



23 



5,250 

1,561 

309 

3.97 

4.99 



40 



8,398 

2,245 

309 

4.16 

3.55 



9, 999 

2,678 

577 

7.83 

4.97 



3 
7 
1 
131 
6 
17 
19 



272 



LAKEY FOUNDRY & MACHINE COMPANY 



Sales . 




1,235 
62 

(196) 
(6. 69) 

1.79 


2, 329 

394 

51 

3.79 

2.85 


4,117 






718 






176 






12.29 






2.52 














1 


21 








9 






X 


2 


2 














12 


58 
























10 
3 


11 
3 


12 






3 






















13 


29 


105 









- . . indicate no data available. 
X indicates less than $1,(100. 
( ).indicate deficit. 



18330 



CONCENTIIATION OF ECONOMIC L'OWEll 



LAMSON AND SESSIONS CO. 
[SOOO's] 



Sales --- 

Gross profits. 
Net income.. 
Profit rate.... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises. — 

Federal-State payroll taxes.. . 

State income taxes 

State sales taxes... _ 

Property taxes V.. 

State corporate taxes 

Miscellaneous.. 



Total taxes- 



1934 



831 

(63) 

(1. 26) 

3.76 



1935 



831 

(152) 

(2. 73) 

2.86 



5,932 
1,415 
307 
5.36 
2. .52 



LANDIS MACHINE COMPANY 



Sales .. 


916 

509 

111 

4.38 

6.06 


1,087 

(m 

170 
fi.66 
6.85 


1,106 

598 

120 

4.90 

14.74 


1,135 




613 




129 


Profit rate --- 


5.25 


Equity Ratio - 


15.38 








12 


23 


19 


22 












2 


2 
















4 


13 












5 
9 
4 


5 
9 
5 


5 
9 
4 


.5 




9 




3 


















30 


42 


43 


54 







LANE BRYANT, INC.> 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income ta-X. 

Undistributed profits tax 

Federal capital stock tar 

Federal excises -. 

Federal-State payroU taxes. .- 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



12, 754 

3,017 

162 

3.48 

1.42 



13,296 

3,147 

318 

6.90 

1.39 



14, 614 

3,483 

392 

8. .53 

1.35 



130 



> Fiscal year basis. Year ended May 31. 

indicate no data available. 

X indicates less than f 1,000. 
( ) indicate deflcit. 



CONCENTRATION OF ECONOMIC POWER 

LANQENDORF UNITED BAKERIES INO. 

[lOOO's] 



18331 





1934 


1935 


1936 


1937 


Sales .- 


5,991 

2,145 

32 

99 

3.30 


6,636 

2,406 

5 

14 

3.10 


7,718 
2,765 
169 
5.58 
2.69 




Gross profits 


3,440 
436 


Net income 


I'rofit rate.- 


14 85 


Equity ratio 


3 02 






Fpdprpl f orpnrat.R inoomp tf^y , . , , 


7 




4 


56 


Undistributed profits tax 




g 


Federal capital stock tax 


3 


3 


4 


4 


Federal excises ._. 




Federal-State payroll taxes - 






46 
2 
2 

29 


92 




6 

1 

28 

X 

10 


3 
2 
29 


6 


State sales taxes : . . 


1 


I'ropertv taxes. . . 


31 


State corporate ta.\es 




Miscellaneous 


26 


15 


15 








55 


63 


102 


213 







LANSTON MONOTYPE MACHINE C0.> 



• Fiscal year ended Feb. 28. 



LEATH AND COMPANY 



indicate no data available. 

X indicates less than $1,(mX). 
( ) indicate deficit. 



Sales - 






2,353 
1,261 
302 
3.41 
57.76 


2,227 
1 296 


Gross profits 






Net income _ 






277 


Profit rate 






3 16 


Equity ratio 






55 U 










Federal corixirate income tax 


IS 


38 


43 


38 


Undistributed profits tax 




Fpderal cnpit.at stock tax 


5 


6 


6 


6 


Federal excises _ 




Federal-State payroll taxes 




2 
10 


15 
14 


37 


State income taxes .. 




g 


State sales taxes 






Property taxes 


15 

1 
8 


15 
12 
9 


13 
17 
9 


13 




17 


Miscellaneous 


9 






Total taxes 


44 


92 


117 


129 







Sales - - -- 


I,. 552 

080 

26 

2.50 

10.05 


1,988 
879 
129 

11.52 
9.13 


2,451 
1,113 
274 
22.44 
6.99 


2,723 
1,223 


Oross profits .... . 


Net income - .. .-. 


274 


Profit rate 


20.82 




7.75 








2 


22 


41 


43 


Undistributed profits tax . . 






2 


2 


5 


4 


Federal exci.ses , 




Federal-State payroll taxes 






5 
7 
1 
8 
3 


14 






X 

1 
6 
1 
2 


5 


State sales taxes . 


X 



1 


1 




11 




2 














Total taxes .. 


n 


34 


70 


80 







18332 CONCENTRATION OF ECONOMIC POWER 

LEE RUBBER AND TIRE CORPORATION 
[SOOO's] 



Sales 

Gross profits. 
Net income -- 
Prpfit rate... 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes 

State sales taxes ... 

Property taxes '.-- 

State corporate taxes 

Miscellaneous 



Total taxes 



8,128 
2,668 
208 
2.62 
12.43 



21 



3 

326 



376 



1936 



10, 197 

3,217 

657 

7.85 

8.87 



14 
402 

24 
9 
1 

23 

21 



583 



1937 



13, 268 

3, 655 

716 

8.37 

8.10 



99 
18 

7 

502 

88 

17 

2 
24 
30 



LEHIGH PORTLAND CEMENT COMPANY 



Sales -.- 

Gross profits. 
Net income. _ 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes. .. 

State income taxes. --_ 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



9.492 

5,032 

954 

2.34 

59.81 



105 



11 

7 
225 
30 



409 



9,002 

4,672 

496 

1.40 

65.95 



12 

4 

227 

38 



316 



12, 779 
7,137 
2,516 
7.37 
32.87 



355 
"32 



40 
82 
7 
221 
55 



792 



12, 401 
6,342 
1,353 
3.97 
47.37 



102 
'35 



143 

32 

2 

215 
35 



THE LELAND ELECTRIC CO. 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes.. . 

State income taxes 

Slate sales taxes. 

I'roperty taxes... 

State coriwrate taxes. . 
Mis<('llaneous 

Total taxes 



972 

245 

(52) 

(7.89) 

4.10 



1,493 

485 

32 

3.81 

2.71 



iufiicjilo no data available. 

X iiulicili'S l.-s.'< than $1,II00. 
( ) iinhiali; dclnil. 



2,427 

694 

95 

10.41 

1.41 



3,308 
939 
163 

16.43 
1.85 



CONCBNTRATION OF ECONOMIC POWER 

LERNER STORES CORPORATION 
ISOOO's) 



18333 





1934 


1935 


1936 


1937 


Sales 


30,434 
'«,934 
2,101 
31.57 
2.61 


32,216 
9,389 
2, 266 
31.23 
2.65 


37, 178 
10,930 
2,737 
28. C4 
3.29 


39, 551 


Gross profits .- 


Net income . . 


2, 552 


Profit rate 




3^40 




Federal corporate income tax. 


274 


330 


398 
110 
39 


365 


Undistributed profits tax 


129 


Federal capital stock tax . . 


15 


16 


42 


Federal excise 


Federal-State payroll taxes 






33 

67 

16 

225 

X 


128 


state income taxes 

State sales taxes -.. . 


41 


45 


S6 
19 


Property taxes.. 

State corporate taxes . . 


210 
X 


188 
X 


257 
X 


Miscellaneous 














Total taxes ,. 


540 


579- 


888 


1,027 



LE ROI COMPANY 



Sales - 






2,169 
558 
248 

17.37 
4.80 


2,556 
686 


Gross profits. 






Net income 






225 


Profit rate _ 






15 23 


Equity ratio . ... 






3 07 










Federal corporate income tax 






35 
38 
2 


32 


Undistributed profits tax _ 






15 


Federal capital stock tax 






2 


Federal excise." 








Federal-State payroll taxes 






12 
13 
X 
32 


31 








10 


State sales taxes ■- 






X 


Property taxes . . 






38 


State corporate taxes... ._ 








Miscellaneous 




















Total taxes 






132 


128 











LiBBY McNeill and libby 



Salse 

Gross profits. 
Net income.. 
Profit rate _. 
Equity ratio, 



Federal corporate income tax. 

Undi,<;tributed profit tax 

Federal capital stock tax . 

Federal excises 

Federal-State payroll taxes .. 

State income taxes. 

State sales taxes 

Property tixes... 

State corporate taxes 

Miscellaneous 



Total taxes 



56,142 
13, 646 
4,289 
11,30 
1,56 



48 



2 

328 

113 

13 



533 



59, 876 
14, 170 
4,284 
]a59 
1.39 



420 
"32 



91 
82 
318 
136 
22 



1,101 



74, 392 
17, 635 
6,013 
13. »6 
1.60 



354 
"36 



111 
66 
119 
290 
92 
14 



74, 718 

16. 582 

3, U87 

8.95 

1 3S 



892 



40 
"4i2 



154 

314 

173 

12 



... indicate no data avnilable. 
X indicates less than $1,000. 



18334 CONCENTRATION OF ECONOMIC POWER 

LIBBEY-OWENS-FORD GLASS COMPANY 
[SOOO'sl 



Sales 

Gross proflts- 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous... 



Total taxes. 



1934 



9,066 
3,637 
12.. 5 
17.84 



486 



22 
169 
24 



759 



1935 



35.900 

16, 189 

9,568 

27.51 

9.79 



1,292 



28 
173 
23 



1936 



44, 712 

20,393 

12,880 

34.68 

8.29 



1,! 



254 
135 



131 
17 
30 

184 
27 



2.758 



LIFE SAVERS CORPORATION 



Sales 

Gross profits. 
Net income. - 
Profit rate — 
Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises.. 

Federal-State pasroU taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous 



Total taxes. 



2,990 
2,234 
931 
30.26 
12.68 



115 



28 



183 



3,331 

2,457 

937 

28.13 

13.52 



115 



172 



3,626 
2,676 
1,019 
30.84 
9.78 



156 

7 

20 

C 

5 

42 



244 



LIMA LOCOMOTIVE WORKS INCORP. 



Sales. 

Gross profits. 
Net Income. . 

Profit rate 

Equity ratio. 



Federal corporate Income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes... 

Miscellaneous 



Total taxes. 



2,037 

241 

(491) 

(4. SI) 

65.64 



2,541 
334 

(539) 
(7. 57) 
21.81 



4,497 
959 

(247) 
(3.28) 

5.58 



Indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 

LINK BELT COMPANY 
[$000's] 



18335 



Sales.. 

Gross profits. 
Net Income 

Profit rate 

Equity ratio - 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes .,.. 

Miscellaneous 



. Total taxes- 



1934 



10, 378 

4,685 

961 

5.76 

20.36 



90 



219 



1935 



14,093 
5,882 
1,260 
7.43 
14.17 



156 



8 

18 

138 

4 



1936 



20,789 
7,997 
2,628 
14.87 
9.21 



391 
13 
20 
2 
76 
13 
51 

149 
18 



733 



1937 



26,644 

10,600 

4,054 

21.52 

6.95 



704 
111 

21 

2 

299 

40 

43 
177 

16 



LION OIL REFINING COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes . 

Property taxes. .' 

State corporate taxes. 

Miscellaneous 



Total taxes. 



6,021 

1,976 

61 

1.07 

3.14 



7.120 
2,250 
(11) 
(0. 19) 
2.81 



87 



9,429 
3,194 
687 
9.08 
4.93 



189 



10, 555 
4,856 
1,308 
11.12 
1.44 



121 



9 
19 
36 
22 
108 
47 
25 
4 



301 



THE LIQUID CARBONIC CORPORATION 



Sales . 




11,013 

5,858 
1,093 
6.98 
12.96 


13, 706 
6,996 
1,342 
8.35 
10.67 


18,327 


Gross profits . . . . 




8,971 


Net income . . ... 




2.121 


Profit rate 




10.65 


Equity ratio J. 




3.08 






160 


190 


280 






26 






16 


17 


18 












X 

10 
23 
95 
14 


50 
12 
42 
114 
16 


155 






26 






67 






119 






21 






X 












Total taxes 




318 


441 


720 









indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



18336 



CONCENTRATION OF ECONOMIC POWER 



THE LOCKE STEEL CHAIN CO. 
[SOOO's] 










1934 


1935 

771 
363 
217 
34.56 
7.28 


1936 


1937 


Sales -.- --- 


839 
360 
238 
37.26 
5.94 


988 






455 






271 


Profit rate 




38.78 






6.86 








Federal corporate income tax 




42 


36 
6 
2 

4 
5 

9 



41 






8 






2 



3 













8 






5 



1 


5 













10 



























57 


62 


75 








LOCKHEED AIRCRAFT CORP. 




563 

(27) 

(188) 

(52. 44) 

1.34 


2,097 
642 
270 

37.85 
4.14 


2,007 

507 

149 

6.11 

4.20 


5,210 


Gross profits 


1,198 


Net income . - 


212 




8.47 




1.02 






Federal corporate income tax . . 




49 


21 
26 
11 


30 


Undistributed profits tax -.--..- -. -. 




37 






1 


10 














ii 

4 


78 


State income taxes . i 




X 
X 

4 


. 6 




1 

2 




Property taxes - - . . . . . . 


7 


16 


























Total taxes _ - 


3 


54 


80 


177 






LOr \ STAR CEMENT CORPORATION 


Sales . . 


13, 649 

8,207 

1,863 

3.71 

1.71 


14, 085 

8,439 

2,123 

4.92 

2.34 


18, 516 
10, 865 

3,743 
8.52 

19.33 


21, 252 




11, 649 




4, 665 


Profit rate . 


10.40 


Equity ratio.. 


24.20 






Federal corporate income tax - .- 


195 


118 


422 

111 

53 

2 

28 

31 

71 

215 

43 

14 


502 




13 




25 
3 


29 
2 


43 




2 




95 




23 
54 
212 
30 
20 


11 
55 
211 
23 
12 


15 




89 




210 




33 












562 


461 


990 


1,002 







indicate no data available. 

X indicates less than $1,000. 
( ) indicate deficit. 



CONCENTRATION OF ECONOMIC POWER 



18337 



LOOSE-WILES BISCUIT COMPANY 
($000's] 



Sales 

Gross profits. 
I Net income. - 
'Profit rate 

Equity ratio . 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

State sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous... 



Total taxes. 



1934 



33,245 
14, 789 

1,891 
7.42 

20.86 



263 



30 

6 

238 

16 



1935 



36, 897 
15, 50.". 

1,729 
6.54 

20.28 



1936 



39,009 
16,479 

1,665 
6.28 

19.49 



268 
47 
30 



130 
32 
9 

261 
30 



807 



1937 



42. (if.2 

17, 180 

988 

3.79 

11.60 



217 
17 
39 



419 

49 

7 

256 
37 



1,041 



P. LORILLARD COMPANY 



Sales 

Gross profits. 
Net income.. 

Profit rate 

Equity ratio. 



Federal corporate income tax. 

Undistributed profits tax 

Federal capital stock tax 

Federal excises 

Federal-State payroll taxes... 

State income taxes 

States sales taxes 

Property taxes 

State corporate taxes 

Miscellaneous.. 



Total taxes. 



59, 175 

13, 608 

4,224 

7.36 

2.31 



50 
25, 038 



234 
91 
21 



59, 155 

15, 685 

4,322 

7.67 

2.76 



434 



58 
23,830 



17 

4 

313 

72 
18 



24,746 



67,128 

18, 211 

4,766 

8.70 

3.09 



493 



67 

27, 358 

72 

25 

X 

333 

26 

3 



28,377 



75,963 

19, 169 

3,375 

Q. 23 

3.07 



375 
X 

58 

31,388 

218 

36 

X 

321 

'92 

5 



32,493 



LYONS MAGNUS INCORPORATED 





2,553 

868 

124 

9.60 

5.96 


2,625 

797 

92 

6.97 

7.79 


2,356 

731 

55 

4.13 

7.36 


2,446 




810 




59 


Profit rate 


4.39 




10.89 








16 


9 


3 


5 








2 
X 


2 


2 


I 










5 
5 


17 




X 

1 
9 
1 
3 


1 
2 


1 








11 
1 
3 


13 




1 




3 








32 


25 


30 


41 







indicate no data available 

X indicates less than $l,(liHl. 
( ) indicate deficit. 



18338 



CONCENTRATION OF ECONOMIC POWEll 

McALEER MANUFACTURING COMPANY 
l$000's] 





1934 


1935 


1936 


1937 


Sales 


699 

303 

1 

0.35 

1.71 


814 

284 

39 

14.46 

3.46 


820 

302 

(44) 

(13. RO) 

2.20 


1 020 


Gross profits _ 


301 


Net income 


(23) 


Profit rate . . 


(8. 40) 
78 


Equity ratio 






Federal corporate income ta.\ 


2 


5 






Undistributed profits tax 






Federal capital stock tax _ . 


1 


1 


1 


I 


Federal excises ^^J. . 


5 


Federal-State payroll taxes .... 






2 


6 










State sales taxes. 










Property taxes __*....... 


4 

1 


4 
1 


3 

1 


7 


State corporate taxes . 


1 


















8 


U 


7 


20 







McCALL CORPORATION 



Sales 


11,066 
5. 948 
1,360 
9.49 
11.07 


10, 897 
5,726 
1,340 
9.33 
14.68 


11,788 
6,032 
1,414 
9.88 
11.64 


12,242 
5,680 

781 


Gross profits 


Net income 


Pr