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Full text of "Investigation of concentration of economic power. Hearings before the Temporary National Economic Committee, Congress of the United States, Seventy-fifth Congress, third Session [-Seventy-sixth Congress, third Session] pursuant to Public Resolution no. 113 (Seventy-fifth Congress) authorizing and directing a select committee to make a full and complete study and investigation with respect to the concentration of economic power in, and financial control over, production of goods and services .."

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INVESTIGATION  OF  CONCENTRATION 
OF  ECONOMIC  POWER 


HEARINGS 

BEFORE  THE 

TEMPOEAEY  NATIONAL  ECONOMIC  COMMITTEE 
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 

0 
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 

0 

1 

0 
0 

1 

X 

X 

4 

Undistributed  profits  tax..- .  . 

X 

X 

0 

X 

0 

2- 

0 

Federal-State  payroll  taxes 

4 

0 
0 

1 

X 

0 

0 
0 

1 

X 

0 

0 

State  sales  taxes 

0 

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- 
0 
57 
8 
0 
14 
22 

0 

Undistribr*":!  profits  tax 

0 

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 ..' 

0 

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 
0 
9 
0 
9 
4 
2 
101 
16 
1 


4,647 
1,381 
543 
8.06 
17.39 


92 
0 
9- 
0 

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... 

0 

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 

0 

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 
0 
5 
10 
1 


466 

236 

(39) 

(6. 76) 

3.05 


0 
0 
2 
250 
5 
0 
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 
0 

25 
0 
9 
1 
1 

33 
4 

142 

Undistributed  profits  tax 

21 

8 
0 

12 

0 

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 

0 

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 
0 
11 
3,753 
9 
12 
209 
61 

0 

Undistributed  profits  tax 

0 

Federal  capital  stock  tax                           .         . 

3 
1,087 

io 

3,205 

5 

Federal  excises                                                 .         

2,787 

Federal-State  payroll  taxes 

24 

State  income  taxes 

0 
10 
18 

5 
191 
40 

0 

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 
0 
7 
0 

10 
0 
3 

37 
3 
X 

59 

Undistributed  profits  tax    ..      .. 

61 

Federal  capital  stock  tax  ....                                     .  ..    ■ 

6 
0 

7 

Federal  excises      ... 

0 

40 

State  income  taxes     

0 
3 
33 

1 
0 

X 

State  sales  taxes 

3 

45 

State  corporate  taxes ? 

X 

0 

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 
0 

20 
0 
0 

42 

56 
372 

19 
0 


806 


50,961 
7,659 
2,295 
4.84 
31.90 


312 
0 

49 
0 
0 

33 

69 
377 

28 
0 


58,164 
22,394 

4,222 
8.84 

26.60 


729 
0 

119 
0 

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 


0 


2,545 
718 
36 
58 

49.10 


0 


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     .         ..          

0 

0 
0 
2 
0 
2 
2 

X 
8 

X 

X 

0 

Undistributed  profits  tax                                                        ..  . 

0 

Federal  capital  stock  tax 

4 
0 

1 

Federal  excises ___ _  .  

0 

1 

1 
0 
9 
0 

1 

1 

State  sales  taxes                                                 .                        ... 

0 

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... .  ..     _  

0 

0 

0 

592 

18 

0 

X 

0 
1,073 

Federal  capital  stock  tax ..  

6 
0 

15 
0 

15 

Federal  excises.. 

X 

Federal-State  payroll  taxes 

X 

State  income  taxes 

State  sales  taxes 

State  corporate  taxes 

11 
0 

4 
0 

4 
0 

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 


0 


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 
0 
14 
0 
42 
23 
X 
145 
20 
0 

134 

Undistributed  profits  tax...          ,      

50 

Federal  capital  stock  tax 

14 

0 

Federal-State  payroll  taxes 

153 

State  income  taxes.. 

29 

State  sales  taxes 

5 

Property  taxes 

130 

State  corporate  taxes 

18 

Miscellaneous 

0 

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 

0 

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 

0 

36 

2,679 

51 

400 

Undistributed  profits  tax  -                               -  .        

0 

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 


0 
0 
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 
0 
42 
0 
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 

0 

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 
0 

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 

0 

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 


0 
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 


0 

0 
12- 

0 
39 

0 
12 
178 
56 


297 


17,  779 

4, 859 

943 

6.95 

10.54 


137 
3 
13 
0 
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 

0 

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 

0 

0 
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 

0 

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 
0 
4 
5 
0 
9 
0 

41 

8 

2 
0 

3 

0 

8 

5 
0 

0 
1 

5 

0 

10 

0 

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 

Profit  rate . 

5  59 

Equity  ratio ;  .. 

13  12 

Federal  corporate  income  tax 

175 

125 

227 

107 

Undistributed  profits  tax 1 

X 

Federal  capital  stock  tax 

25 

29 

35 

21 

Federal  excises _ 

Federal-State  payroll  taxes 

35 
15 

4 
51 

5 

109 

State  income  ta.xes .  .. 

7 
X 
62 
5 

9 

1 
54 
5 

13 

State  Sales  taxes : 

7 

Property  taxes 

60 

State  corporate  taxes 

4 

Miscellaneous 

Total  taxes 

274 

223 

372 

321 

McCRORY  STORES  CORPORATION 


Sales 

40,235 

13,  772 

2,630 

15.57 

1.36, 

41  001 

Gross  profits ...: 

14, 734 
2  709 

Net  income.. 

'* 

Profit  fate 

14  61 

Equity  ratio 

1  68 

Federal  corporate  income  tax 

■ 

251 

Undistributed  profits  tax. .- 

Federal  capital  stock  tax 

45 

35 

Federal  e.xcises 

Federal-State  payroll  taxes 

55 

25 
67 
588 

170 

State  income  taxes 

67 

State  sales  taxes 

74 

Property  taxes 

586 

State  corporate  taxes... 

Miscellaneous 

Total  taxes 

780 

1,183 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWEll 

McORAW-HILL  PUBLISHING  CO.,  INCORPORATED 

($000's] 


18339 


Sales. 

Gross  profits. 
'Net  income.. 
[Proflt  rate.... 
Equity  ratio. 


Federal  corporate  income  fax. 

Undistributed  profits  ta.\ 

Federal  capital  stock  tax 

Federal  excises 

Federnl-State  payroll  taxes.. . 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes 


6,911 

2,920 

604 

3.53 

1.56 


21 


3 
104 


8,321 

4, 321 

975 

5.C7 

1.66 


08 


10 

4 

103 


1936 


10,097 

5,583 

1,435 

8.36 

1.86 


115 
55 
15 


THE  MCK.A.Y  MACHINE  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. 


604 

202 

114 

40.97 

2.73 


19 


1,007 
362 
195 

57.82 
2.53 


McLELLAN  STORES  COMPANY 


Sales                                                                                    -    

21,992 
7,489 
1,383 
23.81 
4.91 

22,615 

7,886 

1,196 

18.27 

6.89 

157 

63 

20 

20 

21 
9 
26 
94 
8 

102 

19 

27 

103 

14 

Total  taxes 

335 

348 

indicate  no  data  available. 

X  indicates  le.ss  than  $1,000. 


iv:4ifli— 41— pi.  ai-A- 


-22 


18340 


CONCENTRATION  OF  ECONOMIC  TOWER 


McQITAY  NORRIS  MANUFACTURING  CO. 
(SOOO's] 


Rales.     

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. 


4,383 
1,996 
637 
15.  51 
12.55 


81 


4,289 
2,055 
607 
14.19 
12.68 


72 


1936 


4,745 
2,213 
641 
14.59 
13.66 


4,831 
2,166 
413 
9.48 
9.84 


219 


R.  H.  MACY  &  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. 


118,211 

30, 667 

4,602 

5.45 

4.74 


443 


761 
22 
10 


117,841 

29,790 

4,181 

5.06 

5.53 


316 
-jj- 


14 
131 

73 

748 

22 

4 


1,385 


130, 441 

33, 955 

6,251 

7.51 

3.06 


637 
""67 


191 
118 
99 
719 
22 
23 


1,876 


135, 868 

35, 486 

5,668 

6.43 

3.83 


587 
""80 


539 
236 
79 
737 
22 
90 


2,370 


MAONOVOX  COMPANY  LTD. 


Sales.. 

2,164 

481 

20 

1.38 

5.84 

2,292 

412 

(53) 

(3.85) 

4.15 

3,091 

SOS 

(61) 

(5.11) 

2.99 

Gross  profits ...      .  . .    .        ... 

Net  income ... 

(320) 

Profit  rate .__ 

(37.  78) 

Equity  ratio 

75.84 

Federal  corporate  income  tax 

16 

1 

4 

Undistributed  profits  tax. 

Federal  capital  sfnck  tax 

2 
3 

3 
2 

2 

X 
13 

X 
1 
9 
4 

3 

Federal  excises 

Federal-State  payroll  taxes 

32 

State  income  taxes 

X 

1 
12 

3 
X 

X 

I 
9 

X 

X 

X 

State  sales  taxes 

3 

Property  taxes _ 

7 

State  corporate  taxes 

X 

Misa-Uaneous 

Total  taxes 

37 

15 

30 

49 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWEIl 

I.  MAONIN  AND  COMPANY 
[$000'8] 


18341 


1034 

1935 

1936 

1937 

Sales                                          .           

7,915 
2, 050 
282 
8.47 
3.75 

8,989 
2,419 
428 
12.30 
3.42 

10, 289 

3,773 

706 

18.60 

3.41 

10  659 

3,910 

Netincome.       ..- - 

550 

Profitrate                         --- --- - 

14.  11 

Equity  ratio 

3.86 

24 

53 

91 

70 

4 

15 

1 
22 
16 

2 
25 

8 

Federal  excises                

1 

Federal-St 'te  payroll  taxes            .--           

49 

State  income  taxes 

7 
2 
23 

11 
22 

24 

I'roperty  taxes                ..     .  -. 

30 

2 

3 

i 

1 

62 

89 

173 

185 

MAPES  CONSOLIDATED  MANUFACTURING  CO. 


Sales                     ---  

1,309 
800 
411 

32.26 
4.16 

1,140 

657 

334 

22.98 

13.65 

1,182 

608 

318 

21.  ,^9 

18.86 

1,389 

Gross  profits                            .          

672 

422 

28.  fi'.l 

Equity  ratio  . .  -. 

16.  80 

Federal  corporate  income  tax    -'--.  - 

54 

43 

43 

1 
4 

56 

Undistributed  profits  tax                                    - 

4 

4 

4 

Federal  excises                     J 

Federal-State  payroll  ta.xes -  - 

1 

2 

Property  taxes  _              -- 

3 
X 

2 
X 

2 
X 

3 

State  corporate  taxes                                       -  - 

X 

Total  taxes     

61 

49 

51 

br-, 

1 

MARCHANT  CALCULATING  MACHINE  CO. 


Sales                                                                     - 

1,327 
1,039 
102 
9.74 
11.89 

2,120 
1,661 
476 
33.46 
5.83 

3,428 
2,680 
778 
37.84 
6.12 

4,241 

3. 293 

971 

Profitrate                                         .      _     

45.  37 

5.  r.-i 

81 

116 
4 

8 

ir.-j 

12 

1 

1 

10 

20 
6 
5 
3 
2 

Ti" 

12 

5 
3 
3 

3 
3 

4 

3 

Totaltaxes - 

7 

93 

164 

257 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18342 


CONCENTRATION  OF  ECONOiVIIC  POWEH 

THE  MARION  STEAM  SHOVEL  COMPANY 
[$000'3] 


1934     ' 

1935 

1936 

1937 

Sales 

2,815 

464 

(68) 

(0. 87) 

1.77 

4,336 
958 
252 
3.43 
1.51 

6,175 

Gross  profits 

528 

6 

0.08 

1.68 

1,720 

Net  income 

651 

Profit  rate, •.. 

8  82 

Equity  ratio 

1  81 

Federal  corporate  income  tax 

42 

Undistributed  profits  tax _ 

50 

Federal  capital  stock  tax . ..    .. 

1 
X 

1 
X 

4 

3 

Federal  excises ; 

Federal-State  payroll  taxes 

19 

65 

State  income  taxes 

X 

State  sales  taxes _.- 

Property  taxes...  ..• 

46 
4 

40 
4 

50 
4 

61 

State  corporate  taxes .     . . 

6 

51 

45 

77 

217 

THE  GLENN  L.  MARTIN  COMPANY 


MASCO  SCREW  PRODUCTS  COMPANY 


indicate  no  data  available. 

X  indicates  les.s  tlmn  $1,000. 
(  )  indicate  deficit. 


Sales 

6,219 

1,355 

989 

13.02 

2.84 

7  839 

Gross  profits 

2, 179 

Net  income _ 

1,451 

Profit  rate -. 

16.56 

Equity  ratio.. 

2  10 

Federal  corporate  income  tax 

9 

225 

Undistributed  profits  tax 

8 

Federal  capital  stock  tax  

8 
X 
21 

18 

Federal  excises 

X 

Federal-State  payroll  taxes 

104 

State  income  taxes 

6 

State  .sales  taxes...  ...  . 

X 

15 
X 
7 

Property  taxes ._ 

18 

State  corporate  taxes 

X 

Miscellaneous , 

X 

Total  taxes 

60 

379 

Sales " 

162 

48 

25 

109.26 

.81 

235 

88 

51 

17.20 

9.08 

477 

Gross  profits--. -. 

155 

Net  income 

84 

Profit  rate . 

22.56 

Equity  ratio 

12.53 

Federal  corporate  income  tax 

6 

8 
4 

1- 

14 

Undistributed  profits  tax ^.. 

2 

Federal  capital  stock  tax 

1 

1 

Federal  excises  _. 

Federal-State  payroll  taxes 

1 

4 

State  income  taxes 

1 

State  sales  taxes 

Property  faxes .^.. 

1 

1 

5 

State  corporate  ta.xes 

Miscellaneous. -i... 

Total  taxes 

7 

15 

27 

CONCENTRATION  OF  ECONOMIC  POWER 

MASONITE  CORPORATION' 
[JOOO's] 


18343 


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  ta.\es 

State  income  taxes 

State  sales  taxes 

Property  taxes. 

State  corporate  taxes 

Miscellaneous... 


Total  taxes. 


1934 


2,705 

1,245 

38.16 

6.91 


162 

"io" 


1036 


5,421 
3,599 
1,718 
43.66 
4.49 


231 
"26' 


1937 


7,084 
4,495 
2,131 
43.96 
4.40 


313 
9 
26 


»  Fiscal  year  ended  Aug.  31. 


MASTER  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 

State  sales  taxes 

Property  taxes 

State  corporate  taxes.. -. 

Miscellaneous 


Total  taxes. 


2,074 
870 
268 

21.06 
3.82 


34 


3,219 
1,459 
580 
34.36 
4.64 


4,605 
2,000 
787 
37.78 
6.49 


133 

48 
6 


THE  MAYTAG  COMPANY 


Sales                        -         -  .         -      

14,717 
2,590 
2,305 
23.66 
13.58 

10, 351 
3,370 
3,005 
30.10 
8.17 

16, 748 
6.309 
3,327 
41.52 
6.01 

16,985 

6,106 

2,718 

Profit  rate    

32.37 

9.14 

297 

414 

490 

11 

45 

1 

36 

9 

X 

71 

7 

X 

389 

27 

23 
1 

47 
X 

25 

X 

123 

7 
1 
61 
9 
1 

10 

1 

62 
9 
X 

7 

1 

85 

9 

1 

Total  taxes                       .  .    - 

390 

543 

670 

667 

indicate  no  data  available. 

X  Indicates  less  than,$l,000. 


18344  CONCENTRATION  OF  KCONO:\IIC  roWRH 

THE  MEAD  CORPORATION 
l$000's] 


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. 


12, 147 

3,8ie 

(i80 

2.W2 
1.97 


77 


146 
18 


13,  9G9 

4,265 

1,162 

4.35 

2.15 


156 
24 


19,  153 

5,338 

1,694 

6.27 

1.92 


200 

1 

17 


172 
29 


MEIER  &  FRANK  COMPANY,  INCORPORATED  ' 


Sales         

16,  162 
5,  509 
1,184 
7.80 
13.14 

16, 393 

5,586 
1,225 

Profit  rate                         

8.93 

11  61 

' 

Federal  corporate  income  tax      . 

176 
86 
20 

170 

Undistributed  profits  tax 

34 

14 

Federal  excises 

Federal-State  payroll  taxes 

37 
45 

91 

State  income  taxes     .. 

32 

State  sales  taxes -- -  - 

246 
X 

237 

X 

M  iscellaneous 

Total  taxes    ..!.■ 

610 

578 

>  Fiscal  year  ended  Jan.  31. 


MENA3C0  MFG.  CO. 


Sales            .        .         ...           

102 

68 

13 

4.16 

11.05 

161 

55 

(23) 

(4.34) 

8.41 

176 

21 

(93) 

Profit  rate    

(21. 29) 
2.87 

Federal  corporate  income  tax 

2 

Undistributed  profits  tax 

Federal  capital  stock  tax. .  ..    .... 

X 

X 

1 

1 

Federal  excises _ 

Federal-State  payroll  taxes... 

5 
X 

7 

State  income  taxes 

X 

X 

X 

State  sales  taxes 

Property  taxes.- 

2 

3 

6 

8 

State  corporate  taxes 

Miscellaneous 

1 

Total  taxes 

2 

6 

12 

16 

Indicate  no  data  available. 

X  indicates  le.ss  than  $1,000. 
{  )  Indicate  deficit. 


CONCEiN  TKATION  OF  ECONOMIC  POWEIl 

MERQENTHALKK  LINOTYPE  COMPANY 
|$000'sl 


18345 


Sales 

Gross  profits. 
Net  income- . 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  ta.x. 

Undistributed  profits  tax 

Federal  capital  stock  ta.x 

Federal  excises 

Federal-State  payroll  taxes... 

State  iucome  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


4,934 

2,549 

70 

.32 

222.  62 


7,257 

3,917 

747 

2.29 

111.38 


64 


8,755 

4.370 

673 

3.05 

106.32 


32 

12 

23 

1 

121 

18 
3 


MESTA  MACHINE  COMPANY 


Sales 

Gross  profits. 
Net  income.. 

Profit  rate 

Equity  ratio. 


2,862 
1,776 
22.52 
3.75 


5,761 

3,996 

43.09 

2.10 


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 


259 


675 
"'32' 


42 
162 


Total  taxes 


7,831 

5,518 

57.55 

1.76 


62 
429 


45 
155 


1,563 


8,702 

6,021 

57.20 

1.69 


124 
52 


236 
332 


43 
200 


METAL  TEXTILE  CORP. 


Sales                     -                  -  - .  - 

895 

406 

183 

49.95 

6.12 

879 

388 

145 

39.35 

12.86 

788 

311 

77 

23.73 

6.03 

887 

314 

91 

27.16 

4.95 

26 

19 

11 

13 

•      2 

2 

1 

1 

2 

6 

X 

X 
2 

1 

X 

2 
1 
X 

2 
1 
X 

2 

2 

31 

24 

17 

24 

indifiatiMKi  data  .ivrtilahlo. 
X  liidiciilis  li-ss  (liati  %\,m). 


18346 


CONCENTUATION  OF  ECONOMIC  POWEH 


THE  METEOR  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 

S  tate  corporate  taxes •. .  . 

Miscellaneous 


Total  taxes. 


695 

47 

(10) 

(2.  75) 

10.66 


753 

61 

14 

4.15 

4.00 


956 

136 

75 

22.99 

3.30 


METROPOLITAN  ICE  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  pajroll  taxes... 

State  income  taxes 

State  sales  taxes.. - 

Property  taxes - 

State  corporate  taxes 

Miscellaneous.- 


Total  taxes - 


2,151 

1,085 

21 

0.85 

1.33 


48 


2,030 

925 

(15) 

(0. 66) 

1.38 


37 


39 


2,026 

976 

93 

4.02 

1.48 


THE  METROPOLLITAN  PAVING  BRICK  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 - 


781 

399 

4 

0.13 

81.21 


0 


35 


312 

(97) 

(2.90) 

54.72 


35 


1,062 

439 

(13) 

(0. 38) 

26.97 


-       indicate  no  data  available. 
X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


C(^NC10N'ri{ATl(>N  OF  KCONOMIC  POWEli 

MEVILLE  SHOE  COUP. 
l$0OO's] 


18347 


Sales... 

Gross  profits. 
Net  inoomc. 

Profit  rato 

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 


27, 216 
8,462 
2,003 
24.98 
4.05 

302 


27 
54 
193 


610 


30, 356 
8.971 
2,341 

25.77 
4.60 


316 
""26 


46 
16 
187 
13 


607 


1936 


35, 301 

10,  440 

2.  870 

30.  09 

3.33 


430 
40 
35 


35 
83 
14 
174 
15 
17 


38, 155 

10, 819 

2,260 

24. 14 

3.53 


369 

6 

36 


109 
96 
21 

187 
38 
11 


MEYER  BLANKE  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. 


1,684 
357 


17.11 
5.58 


1,955 

367 

74 

14.35 

3.98 


10 


2,  2r>3 
418 
105 

19.96 
2.71 


17 


2, 505 
501 
114 

21.37 
1.99 


18 


MICHIGAN  BUMPER  CORP.' 


Sales 

1,752 
364 
116 

11.54 
.96 

1,062 

Gross  profits                                                                   ... 

124 

(80) 

Profit  rate 

1.07 

8 
16 

1 

2 

5 

12 

3 

1 

4 

1 

Total  taxes                                      . 

34 

19 

'  1936-37  data  affected  by  reorganization. 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  defirit. 


18348 


CONCENTRATION  OF  ECONOMIC  POWEIl 


MICKBLBERRYS  FOOD  PROD.  CO. 
($000*8] 


1934 

1935 

770 

103 

(68) 

(16. 54) 

5.30 

1936 

935 

1,59 

Iti 

3.57 

12.55 

1937 

Sales                        .         

713 

168 

(33) 

(4.98) 

7.86 

1,437 

200 

31 

Profit  rate                  ___ — - -- 

6.69 

10.40 

4 

1 

X 

X 

2 

7 

X 

I 

X 

2 
X 

X 
3 

1 

X 

3 

1 

4 

2 

6 

16 

MICROMATIC  HONE  CORPORATION 


376 

138 

51 

34.62 

3.35 

421  . 

147 

45 

19.77 

4.12 

547 

214 

79 

Profit  rate                      .            

24.09 

1.50 

8 

6 
5 

1 

11 

8 

X 

1 

2 

6 

1 
X 
X 

2 
X 
X 

2 

X 

9 

16 

28 

MID.    .KD  STEEL  PRODUCTS  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. 


12,287 
2,002 


6.43 
15.17 


14, 199 
3,118 
1,909 
14.55 
10.40 


18,  399 
4,352 
2,620 
19.53 
6.97 


indicate  no  data  available. 
X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWEJEl 

MID-WEST  ABRASIVE  COMPANY 
[SOOO's] 


18349 


1934 

1935 

1936 

1937 

Sales         - 

307 

148 

34 

27.46 

4.34 

412 

205 

57 

27.62 

2.96 

571 

257 

61 

13.42 

8.17 

670 

Gross  profits        .  .... 

265 

Net  income       .            .... 

16 

Profit  rate _ 

3.45 

Equity  ratio 

13. 16 

Federal  corporate  income  tax 

4 

9 

5 

1 
1 

2 

Undistributed  profits  tax 

2 

Federal  csipital  stock  tax 

1 

i 

1 

Federal  ,  icises .  

Federal-state  payroll  taxes.-  .  . 

1 

6 

State  income  taxes _ 

State  sales  tax&s 

Property  taxes 

1 
X 

1 

X 

2 

1 

4 

State  corporate  taxes 

X 

Miscellaneous .  . . 

Total  taxes 

6 

11 

11 

16 

MILLER  WHOLESALE  DRUQ  COMPANY 


Sales 

839 

260 

(3) 

(0. 43) 

4.68 

762 

279 

7 

1.24 

3.04 

858 

298 

11 

2.23 

4.92 

1,004 

Gross  profits 

377 

Net  income..  

18 

Profit  rate.- .                       

3.39 

Equity  ratio 

3.29 

Federal  corporate  income  tax 

1 
1 
1 
4 
2 

3 

Undistributed  profits  tax. 

X 

Federal  capital  stock  tax..    .    .      ...    . .  

1 
4 

I 
2 

1 

Federal  excises.                                                         .... 

4 

Federal-State  payroll  taxes 

8 

State  income  taxes 

State  sales  taxes 

Property  taxes.                               .         .                

6 
1 
1 

8 
1 
X 

6 

1 
1 

6 

State  corporate  taxes - 

I 

Miscellaneous 

X 

Total  taxes 

13 

12 

17 

23 

MINNEAPOLIS  HONEYWELL  REGULATOR  CO. 


Rales 

5,390 
3,181 
1.146 
14.73 
21.64 

9,088 
5,304 
2.159 
27.29 
11.93 

13,547 
8,128 
3.861 
41.84 
6.60 

15,810 

Gross  profits..                . 

8,978 

3.579 

Profit  rate                                                        

33.27 

Equity  ratio 

9.56 

Federal  corporate  income  tax                      .      

138 

269 

570 
76 
42 
31 
44 
119 
1 
76 
6 

444 

109 

11 
4 

27 

51 

182 

2 

70 

100 

2 

45 
3 

77 
8 

87 

10 

203 

451 

965 

985 

--      indicate  no  data  available. 
X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18350  CONCKNIKATION  OF  KCOXO.MIC  POWKU 

MINNEAPOLIS-MOLINE  POWER  IMPLEMENT  CO. 
|$000's] 


1 
1934 

19.35 

1936 

1937 

Sales                                                              -.         . 

4.338 

1,  o.'.e 

(2, 166) 
(7. 06) 
22.  59 

9.061 

2,807 

182 

1.41 

13.88 

12,028 

4,071 

894 

6.72 

10.  90 

15,312 

5,950 

2,349 

Profit  rate                       

Equity  ratio                                               ..                   

5.95 

Federal  corporate  income  tax                 -             .             -         

108 
32 
11 

514 

251 

11 

8 

11 

Federal-State  payroll  taxes                        -                             .    .. 

43 
5 

l.jl 

144 

}- 
) 

107 

136 

139 

Property  taxes        ..• .  - 

120 

Total  taxes _ _ 

147 

147 

350 

1,153 

MISSOURI  PORTLAND  CEMENT  CO. 


Sales -.- 

2,049 
1,043 

(20) 

(0.21) 

2q5.  30 

2,214 

1,091 

21 

0.26 

144. 95 

3,357 

1,816 

539 

6.  50 

41.  53 

3,307 

1,747 

483 

Profit  rate                                                .     ... 

5.78 

Equity  ratio                                                          .                   .      . 

46.89 

58 

68 

o 

Federal  capital  stock  tax.      .      .      -.    - 

5 

0 

10 

6 

Federal  excises                                            .      -.    -- 

Federal-State  payroll  taxes                               -                  -           . 

8 
5 
5 
63 
5 

31 

6 

4 
67 
5 

10 
70 
5 

X 

Property  taxes                               .      .. - 

66 

State  corporate  taxes                                           -.               

4 

81 

90 

154 

183 

MOCK  JUDSON  VOEHRINQER  CO.  INC. 


indicate  no  data  available. 

X  indicates  li'ss  than  $1,000. 
(  )  indicate  deticit. 


Sales                                                                      - 

4,142 

1,001 

246 

10.18 

8.57 

4,529 
1,140 
362 
13.53 
13. 09 

5,  069 
1,249 
392 
14.10 
6.09 

0, 167 

Gross  profits.-. ■. . 

1,839 
634 

Profitratc                                       - - 

21.91 

Equity  ratio .-.  

5.04 

43 

67 

67 
34 

6- 
X 
19 
18 

1 
12 

4 

lOO 

49 

4 
1 

8 
X 

9 

X 

Federal-State  payroll  taxes                

(80) 

5 
1 
10 
3 

10 

1 

10 
4 

23 

1 

19 

4 

Total  taxes 

67 

100 

161 

285 

J 


CONCENTRATION  OF  ECONOMIC  POWEll 


18351 


MOHAWK  LIQUOR  CORPORATION 

[$000's] 


Sales 

Gross  profits. 
Net  income.. 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stock  tax 

Tederal  excises 

Federal-State  payroll  taxes — 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


1934 


893 

400 

104 

33.30 

2.    ' 


15 


65 


MOLYBDENUM  CORPORATION  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 

State  corporate  taxes .'. 

Miscellaneous. ...^... 


Total  taxes. 


2,699 
673 
341 

11.71 
6.95 


49 


3,626 
623 
317 

10.02 
3.95 


MONARCH  MACHINE  TOOL  CO. 


4,846 

630 

104 

3.29 

3.67 


Sales -  - 

391 

112 

27 

3.33 

35.95 

727 

21G 

104 

12.33 

13.61 

1,342 
441 

3ir> 

31.41 
8.06 

2,  203 

Gross  profits 

732 

555 

Profit  rate       

40.77 

Equity  ratio              .                         .    ....    . 

7.70 

3 

13 

46 
12 
3 

98 

21 

Federal  capital  stock  tax         .        ...... 

2 

4 

4 

Federal  excises                     .           .                           ... 

Federal-State  payroll  taxes .' 

5 

23 

State  sales  taxes . .  . .      

Property  taxes     ..  .    ..    

6 

1 
X 

5 
1 

6 

1 

6 

State  corporate  taxes 

1 

Total  taxes    

12 

23 

72 

153 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18352 


CONCENTRATION  OF  ECONOMIC  POWPZH 


MONROE  CHKMICAL  CO. 

($OO0'sl 


1934 

1935 

193(j 

1937 

Sales      - - 

1,139 

959 

308 

22.22 

18.87 

993 

811 

243 

17.60 

21.15 

889 

718 

242 

17.61 

19.91 

748 

591 

125 

Profit  rate          

9.43 

Equity  ratio            - 

27.01 

40 

33 

33 

17 

3 

4 
X 

3 
X 
3 
1 

3 

X 

Federal-State  payroll  taxes                               -       -       .-    

7 

X 

3 

1 

3 
1 
X 

4 

1 

4 

1 

47 

41 

45 

32 

MONSANTO  CHEMICAL  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. 


28,848 

12, 582 

5,634 

18.14 

7.69 


954 
75 


17 
199 
68 
16 


1,500 


MOTOR  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 .-. 

Miscellaneous 


Total  taxes 


12,706 

1,399 

183 

2.72 

9.92 


13, 971 
2,422 
1,291 
21.22 
3.96 


137 


indicate  no  data  available. 

X  indicates  less  than  $1,000.. 


17, 214 

3,215 

1,799 

27.30 

3.13 


204 
13 
11- 


CONCENTRATION  OF  ECONOMIC  POWEIl 

MOTOR  WHEEL  CORPORATION 
l$000'sj 


18353 


Sales 

G-ross  profits. 
Netincome.. 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  cupital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous _.. 


Total  ta\c;; 


1934 


11,381 

2,463 

472 

5.27 

11.84 


50 


13,903 
2,944 
1,251 
13.00 
7.43 


163 


270 


19, 895 
4.700 
2,268 
21.72 
5.19 

344 
123 
15 

0 
42 

0 

0 
76 
20 

2 


622 


MUELLER  BRASS  COMPANY 


Sales                    -      ..    -. 

3,338 
1,150 
215 
7.75 
2.26 

4,731 
1,530 
524 
17.18 
2.55 

6,533 
2,251 
1,031 
26.79 
4.93 

8  654 

Gross  profits 

2,511 
1  033 

Net  income .- 

21  61 

Equityratio      ..- 

3  13 

Federal  corporate  income  tax 

30 

69 

161 

156 

Undistributed  profits  tax 

63 

Federal  capital  stock  tax 

4 

6 

11 
X 
19 
2 

12 

Federal  excises.. 

1 

Federal-State  payroll  taxes.. 

73 

State  income  taxes 

2 

State  sales  taxes _.: 

Property  taxes         .      . 

24 
4 

28 
5 

29 
5 

33 

State  corporate  taxes 

7 

Miscellaneous 

Total  taxes 

62 

108 

227 

347 

MULLINS  MANUFACTURING  CORP. 


Sales 

4,358 

961 

201 

8.22 

6.73 

5,632 
1,330 
467 
16.70 
12.01 

6,606 
1,669 
614 
19.74 
6.98 

10,630 

2,265 

664 

Gross  profits 

Net  income _i 

Profit  rate 

12  01 

Equity  ratio 

8.50 

Federal  corporate  income  tax 

44 

63 
13 

5 

69 

Undistributed  profits  tax. 

Federal  capital  stock  tax 1. 

"      7 

7 

8 

Federal  excises 

Federal-State  payroll  taxes 

27 

116 

State  income  taxes 

State  sales  taxes T.. 

Property  taxes. 

29 
2 
X 

30 
2 

35 
3 

54 

State  corporate  taxes 

Miscellaneous 

Totaltaxes. 

38 

83 

146 

281 

.. .    indifato  no  ilnta  a\  nilablo. 
X  iiulk-alos  le.ss  than  .$l,(KX». 


18354  CONCENTKATION  OF  ECONOMIC  POWEll 

MUNSINGWEAR,  INCORPORATED 

[SOOO's] 


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. 


6,071 
1,572 
35 
0.55 
20.49 


10 


1935 


7,100 
1,986 
430 
6.51 
8.92 


1936 


5,537 

1,811 

579 

12. 36 

9.40 


5,576 

1,601 

24 

4.71 
23.27 


26 


G.  C.  MURPHY  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  pay  roll  taxes.. 

State  income  taxes ..- 

State  sales  taxes... 

Property  taxes 

State  corporate  taxes 

'  Miscellaneous 


Total  taxes. 


31,  598 

11,152 

2,843 

21.41 

S.  15 


359 


204 
35 


37.  995 
13,  537 
3, 865 
25.27 
2.52 


547 
118 
43 


50 
155 

74 
221 

85 
3 


1,302 


THE  MURRAY  CORP.  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  pay  roll  taxes. . . 

State  income  taxes. 

State  sales  taxes _. 

Property  taxes..- 

State  corporate  taxes 

Miscellaneous 


42, 522 
15.239 
3.957 
23.32 
3.22 


562 
168 

47 


210 
120 

74 
275 

95 
1 


1,552 


Total  taxes - 


-  - .  indicate  no  data  available. 
X  indicates  less  tbnu  ^\,m). 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 

THE  MURRAY  OHIO  MANUFACTURING  CO. 
[FOOD'S] 


18355 


1934 

1935 

1930 

1937 

Sales                                ---- --- 

2,293 
470 
IM 

11.21 
.70 

3,800 
774 
317 

19.78 
.95 

4.116 
940 

408 
21.18 
8.40 

4,489 

936 

290 

Profit,  rate                                

14.30 

10.14 

4 

33 

55 

2S 

5 

41 

16 

3 

2 

5 

13 

43 

19 
X 

19 
X 

21 

1 

21 

2 

20 

54 

123 

128 

MUSKEGON  PISTON  RING  CO.' 


Sales                                       -- 

884 
408 
32o 
60.94 
5.71 

1,368 
688 
399 

37.46 
6.35 

1,084 

818 

476 

Profit  rate                                                        - 

45.27 

9.27 

46 

58 

73 

3 

6 

7 

6 

23 

3 

1 

6 
2 

8 

2 

Total  taxes     - 

53 

78 

113 

»  Formerly  Sparta  Foundry  Co.    Name  changed  March  1936. 

A.  NASH  COMPANY 


Sales                           -    ---              - - 

3,673 
1,013 

.(IV) 
(1.13) 

7.56 

3,895 
1,  1'93 
167 
10.  05 
12.51 

,     3,836 

1,224 

135 

7.84 
9.68 

3,617 

Gross  profits .- - 

1,158 

16 

0.95 

12.67 

0 

20 

17 
4 
2 
0 

16 
0 
0 

14 
1 
X 

1 

0 

2 
0 

2 
0 

2 

0 

Federal-State  payroll  taxes 

46 

0 
0 
16 

1 

0 
0 
15 
1 
X 

0 

State  sales  taxes 

0 

15 

1 

Miscellaneous 

X 

Total 

19 

38 

54 

65 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


124491— 41— pt.  31-A- 


-2.^ 


18356 


CONCENTRATION  OF  ECONOMIC  POWEH 


NATIONAL  AUTOMOTIVE  FIBKES,  INC. 
[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. 


1934 


842 

522 

15.78 

10.72 


1935 


1,368 
1,032 
27.19 
4.43 


158 


1936 


NATIONAL  BEARING  METALS  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- 


4,690 

1,219 

472 

7.33 

2.78 


55 


5,356 
1,340 
599 
9.28 
2.73 


76 


131 


5,316 
1,705 
1,183 
26.56 
1.85 


305 


7. 136 

1,791 

923 

14.42 

2.50 


118 
17 
8 
0 
13 
23 
1 
27 
12 


219 


NATIONAL  BELLAS  HESS,  INCORPORATED 


Sales  .          

6,813 

1,951 

24 

1.51 

7.70 

8,326 
2,526 
26 
9.01 
4.02 

8,128 

Gross  profits 

2,567 

52 

Profit  rate 

2.12 

Equity  ratio 

2.01 

Federal  corporate  income  tax 

3 

28 

7 

Undistributed  profits  tax.. 

Federal  capital  stock  tax 

4 

5 

6 

Federal  excises 

Federal-State  payroll  taxes 

7 

2 

5 

36 

1 
X 

26 

State  income  taxes               ..  .. 

X 

4 
34 
1 
X 

State  sales  taxes 

7 

Property  taxes 

36 

State  corporate  taxes 

2 

Miscellaneous 

X 

Total  taxes. ..  .. 

46 

84 

84 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATIOX  OF  ECONOMIC  POWER 


18357 


XATTONTAL  BISCUIT  COMPANY 
[JOOO's] 


Sales 

Gross  profits. 
Net  income- - 

Profit  rate 

Equity  ratio. 


Kederal  corporate  income  tax. 

L'ndislrihuled  profits  tax 

Fodoral  capital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes. ._ 

State  income  taxes 

Slate  sales  taxes 

Property  taxes. 

State  corporate  taxes 

Miscellaneous... 


'  Total  taxes. 


81, 218 

44,406 

13,  566 

12.22 

15.84 


1,568 


161 


259 


2,916 


1935 


81, 421 

43, 229 

11,  734 

10.75 

14.93 


1,324 


184 


246 
16 

845 
30 


2,646 


1936 


89, 381 

49,83 

15,  674 

14.16 

18.58 


2,405 


183 


302 

313 

24 

944 


4,258 


93,730 

48,880 

14,  274 

12.92 

18.97 


1,861 

"""iso 


771 
328 
23 


4,200 


NATIONAL  CASH  REGISTER  CO. 


Sales. --- 

Gross  profits. 
Net  income.. 
Profit  rate.... 
Equity  ratio. 


Federal  corproate  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. 


23,846 

14, 184 

1,732 

5.34 

5.61 


28 


303 
267 


29,754 

16,293 

2,194 

6.68 

5.61 


128 
"40" 


38 
'243' 


35,106 

21,615 

3,364 

9.80 

3.16 


261 

86 
47 


154 

82 


42,280 

26, 515 

5,462 

13.97 

2.68 


491 
242 
45 


454 
64 


1,508 


NATIONAL  CONTAINER  CORPORATION 


Sales.. 

Gross  profits. 
Net  income.. 
Profit  rato... 
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. 


2,314 

728 

206 

9.12 

.3.68 


23 


2,589 
846 
237 

10.47 
3.32 


25 


2,639 
935 
330 

15.72 
2.66 


3,055 

1,139 

442 

7.38 

1.27 


30 

r 
10 


80 


indicate  no  data  available. 

X  Indicates  less  than  $1,000. 


18358  CONCKNTR.X'I'ION  OF  ECONOMIC   I'OWEH 

NATIONAL  DAIRY  PRODUCTS  CORP. 
[$000's] 


1934 

1935 

1936 

1937 

267,415 

41,927 

11, 857 

6.94 

1.18 

290,441 

46, 014 

14. 755 

8.64 

1.19 

329, 172 

53,046 

18, 606 

10.73 

1.11 

351,016 

51, 738 

15, 017 

Profit  rate 

8.78 

Equity  ratio             .                                .... 

1.13 

Federal  corporate  income  tax :. .. 

1,404 

1,667 

2,142 
8 
569 
66 
630 
506 
120 
1,298 

1,918 

Undistributed  profits  tax 

166 

293 
134 

229 
33 

523 

Federal  excises ^>^^ 

Federal-State  payroll  taxes                      ....    .  

8 
1,926 

State  income  taxes                                                              . 

330 

205 

1,334 

398 

162 

1,282 

367 

152 

Property  taxes  

1,366 

State  corporate  taxes. 

Miscellaneous                                            ..  ..  . 

481 

529 

493 

586 

Total  taxes                                      .                     .       

4,181 

4,300 

5,832 

7,012 

NATIONAL  DEPARTMENT  STORES  CORPORATION 


Sales 

45,258 

9,951 

1,551 

12.08 

1.38 

46, 102 

Gross  profits.               .         ..  

10, 137 

Net  income ..    

976 

Profit  rate                                                                                   .  .. 

7.54 

Equity  ratio _ 

1.82 

Federal  corporate  income  tax 

150 
43 
29 
1 
88 
30 
23 

116 
29 
11 

103 

68 

Federal  capital  stock  tax 

27 

Federal  excises      .. 

1 

Federal-State  payroll  taxes      .  .  .•.    .    . 

245 

State  income  taxes                     .                   .  . 

11 

State  sales  taxes.-  _ 

25 

Property  taxes 

114 

20 

10 

Total  taxes 

520 

614 

NATIONAL  ENAMELING  &  STAMPING  CO. 


Sales      .  .. 

8,144 

2,480 

422 

4.94 

20.33 

9,205 

2,493 

348 

4.04 

17.60 

9,806 
2,722 
397 
4.54 
13.78 

9,414 

Gross  profits .... 

2,734 
303 

Net  income 

Profit  rate 

3.45 

Equity  ratio ..    

26.29 

Federal  corporate  income  tax . 

49 

30 

57 

Undistributed  profits  tax. 

Federal  capital  stock  tax 

3 

5 

5 

6 

X 

Federal-State  payroll  taxes 

38 
4 

129 

State  income  taxes 

X 

4 

2 

State  sales  taxes 

1 

Property  taxes 

113 
4 

111 
2 

118 
3 

125 

State  corporate  taxes 

2 

Miscellaneous _ 

Total  taxes 1 

169 

158 

225 

265 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18359 


national"lead;company 

[SOOO's] 


1934 

1935 

1936 

1937 

Sales 

56,  350 
14,  732 

4,969 
6.37 

15.79 

66  559 
16,983 

6,097 
7.69 

14.76 

78,  765 

20,911 

8,495 

10.27 

10.19 

91, 947 

17, 971 

Net 'ncomo      .  ..    .-. '.-- 

5,927 

Profit  rate                      -.. 

7.05 

Eciuity  ratio _ _. 

14.55 

Federal  eoiporate  income  ta-\ _. 

706 

813 

1,214 

993 

.     25 

60 

63 

46 

89 

Kederal-Staie  payroll  taxes 

State  iucuine  ta.xes                          .  .  

X 
67 
15 

•    378 
23 
13 

X 

70 
20 
505 
25 
17 

104 

76 
19 
500 
18 
12 

414 
91 

State  sale«  taxes -. 

24 

Property  taxes 

State  eorporate  t?.xe'^ 

463 
23 

Miscellaneous.              .  ... 

29 

Total  taxes                  . -.    ..  

1,262 

1,503 

1,988 

2,151 

I^ATIONAL  MALLEABLE  AND  STEEL  CASTINGS  CO. 


Sales... 

9,728 

2,281 

111 

.81 
18.22 

14,033 
4,222 
1,368 
9.83 
10.30 

19, 210 

5,138 

Net  income                                      .... 

2,454 

Profit  rate                                         _        .      . '                

16.15 

Equity  ratio                                                .    . 

11.29 

2 

213 
25 
12 
5 
65 
21 
IS 

180 

23 

1 

369 

139 

Federal  capital  stock  tax .  

11 
4 

15 

Federal  excises 

5 

Federal  State  payroll  taxes 

263 

State  income  taxes 

20 

.'itate  sales  taxes 

11 
178 
11 
X 

39 

168 

29 

Miscellaneous      . 

X 

Total  taxes    ..         

217 

563 

1,047 

NATIONAL  PRESSURE  COOKER  COMPANY 


Sales 

Gross  profits. 
iVet  income.. 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  ttix 

Federal  capital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes... 

State  income  taxes.. 

State  Sales  taxes 

Property  taxes 

State  corporate  tax 

Miscellaneous 


Total  taxes. 


1,263 

260 

21 

4.63 

2.33 


1,838 
395 
133 

23.38 
4.06 


1,680 
390 
105 

17.  52 
3.04 


1,  .^£3 

400 

88 

14.93 

2.66 


10 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18360 


CONCENTRATION  OF  ECONOMIC  POWER 


NATIONAL  PUMPS  CORP. 
ISOOC'S] 


1934 

1935 

1936 

1937 

Sales 

174 

40 

(91) 

(62. 38) 

1.06 

500 
139 
(29) 
(21.89) 
.43 

1,044 
418 
HI 

40.71 
.34 

1.442 

Gross  profits .  ...    

535 

Net  income . 

8.". 

Profit  rate .  . 

30.84 

Equity  ratio  . ..              . 

.65 

Federal  corporate  income  tax 

0 

0 

13 
X 

1 

- 

Undistributed  profits  tax 

X 

Federal  capital  stock  tax  ..           .          .    .. 

X 

X 

1 

Federal  excises        .                                                 .             . 

Federal-State  payroll  taxes 

2 

8 

State  income  taxes _.  ._ 

State  sales  taxas. 

2 

X 
X 

4 
2 
X 

13 

Property  taxes .  .^ 

2 
X 
X 

2 

State  corporate  taxes...  _ 

X 

Miscnllaneous 

Total  taxes...     

2 

4 

22 

31 

NATIONAL  REFINING  CO. 


Sales 

14,383 
1,333 

(1.101) 
(5.87) 
22.14 

13, 821 

4,781 

125 

0.66 

18.53 

15, 393 

5,364 

564 

2.99 

12.24 

16, 379 

Gross  profits . .      ...      

5,370 

Net  income     ....                                      .        .. . 

112 

Profit  rate .  . 

0.59 

Equity  ratio     .              .  . 

14.50 

Federal  corporate  income  tax... 

11 

84 

5 

Undistributed  profits  tax .  

Federal  capital  stock  tax _ 

13 
38 

16 
35 
33 

17 

Federal  excises 

96 

33 

Federal-State  payroll  taxes 

103 

State  income  taxes _ 

State  sales  taxes ._  

6 

198 

10 

18 

6 

206 

12 

26 

13 

Property  taxes 

227 
13 

68 

213 

State  corporate  taxes... 

11 

Miscellaneous 

30 

Total  taxes... 

404 

294 

418 

425 

NATIONAL  RUBBER  MACHINERY  CO. 


Sales 

1,092 

296 

(123) 

(8. 22) 

23.99 

893 

231 

(7.5) 

(5.  30) 

8.31 

1,528 

410 

83 

4.99 

8.79 

1,  820 

Gross  profits 

Net  income . . 

438 
(84) 

Profit  rate 

(5.37) 

Equity  ratio...  .  .           

5.49 

Federal  corporate  income  tax 

0 

0 

0 
1 
0 

7 
0 
0 
11 

1 
1 

0 

Undistributed  profits  tax 

0 

Federal  capital  stock  tax.. 

1 
0 

1 
0 

1 

Federal  excises 

0 

Federal-State  payroll  taxes 

25 

State  income  taxes 1 

0 

0 

16 

2 

0 

0 
0 
11 

1 
X 

0 

State  sales  taxes 

Property  taxes : 

0 
13 

State  corporate  taxes 

Miscellaneous ... 

Total  taxes 

19 

13 

23 

41 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWEH 

NATIONAL  TEA  COMPANY 

l$000's] 


18361 


Sales -. 

Gross  profits. 
Net  income.. 
Profit  rate... 
Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stock  tax 

Federal  excises 

Fedcral-Stato  payroll  taxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes. 

Miscellaneous 


Total  taxes. 


61.777 

12, 872 

741 

3.65 

2.27 


92 


1,012 
136 
83 
53 


1,395 


1935 


01,840 

12,382 

570 

3.28 

2.64 


80 


1,224 

226 

67 

33 


1,649 


61, 096 

11,670 

417 

2.91 

2.96 


51 


21 
4 

106 


1,389 
270 
75 
39 


1,955 


NATIONAL  UNION  KADIO  CORP. 


Sales...  _-- . 

3.321 

883 

(32) 

(1. 88) 

.43 

3,047 
825 
(29) 

(1.80) 
.33 

3,197 
1,007 
70 
5. 46 
2.01 

2,405 
723 

Gross  profits 

Net  income .      . 

(80) 

Profit  rate ._     _ 

Equity  ratio..     .. 

(7. 19) 
2  12 

Federal  corporate  income  tax 

Undistributed  profits  tax 

Federal  capital  stock  tax 

1 
39 

X 

41 

2 
39 
20 

Federal  excises .. ... 

36 

Federal-State  payroll  taxes 

30 

State  income  taxes 

X 

State  sales  taxes 

X 

22 
X 
4 

Property  taxes 

14 
X 

20 
X 

21 

State  corporate  taxes 

X 

Miscellaneous.. .  ... 

Total  taxes... 

54 

67 

81 

87 

MEBI  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. 


1,001 

656 

284 

10.05 

159.  00 


1,261 

827 

304 

10.71 

43.52 


45 


2,290 
1,575 
098 
24  67 
12  43 


126 
2 
5 
1 
3 
30 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit 


18362 


CUNCEJSTKATION  OF  ECONOMIC  POWKH 


NEPTUNE  METER  CO.  OF  N.  J. 
($000's] 


Sales.- 

Gross  profits. 
New  income - 
Profit  rate.... 
Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stock  tax 

Federal  excises 

Federal-State  payroli  taxes... 

State  incopie  taxes 

State  sales  taxes 

Property  taxes... 

State  corporate  taxes 

Miscellaneous 


2,594 
1,422 
304 
10.92 
16.70 


2,700 

1,515 

219 

7.37 

19.83 


35 


Total  taxes. 


29 


63 


3,778 

2,109 

540 

18.28 

7.25 


3,923 
2,060 
473 
15.61 
7.22 


80 


13 


THE  NEW  HAVEN  CLOCK  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. 


2,291 

597 

123 

5.07 

11.77 


16 


2,888 

629 

143 

5.63 

8.28 


19 


27 


59 


3.714 
982 
397 

15.03 
6.52 


27 


158 


3,141 

743 

133 

5.22 

4.13 


15 


NEW  IDEA  INCORPORATED 


Sales 

5,107 

2,296 

1.008 

Profit  rate                .                                            

30.09 

Equity  ratio                                                                         - 

7.29 

104 

87 

9 

50 

7 

J 

X 

16 

3 

Total  taxes 

336 

indicate  no  data'available. 

X,  indicatesf  less  than  $1,000. 


CONCENTRA'i'ION  OF  ECONOMIC  POW'KK 

NEWPORT  INDUSTRIES,  INCORPORATED 

[SOOO's] 


18363 


' 

1934 

1935 

1936 

1937 

Salr>s -- - - 

2,799 

894 

203 

6.53 

7.25 

3,413 

1,014 

354 

10.66 

7.70 

4,364 

1,364 

654 

18.36 

5.71 

5,457 
2  369 

Gross  profits 

1  451 

Profit  rate    ..- -._ 

33  95 

2  77 

30 

47 

106 
31 
8 

258 

Undistributed  profits  tax. 

21 

Federal  capital  stock  tax             .        ...      .  .         . . 

10 

10 

10 

Federal  excises 

9 
2 

32 

1 

1 

18 

State  sales  taxes 

31 
2 

35 
2 

32 
3 

35 

State  corporate  taxes.      . . . 

4 

Miscellaneous. 

74 

95 

191 

378 

THE   NEW  YORK   AIR   BRAKE   CO. 


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. 


2,273 

701 

5S 

0.46 

57.  41 


17 


1,947 

497 

(102) 

(0.81) 

131.28 


0 


4,074 

1,595 

904 

7.  17 

25.70 


144 
18 
13 
0 
16 
7 
0 
35 
1 
0 


234 


6,  4i)-| 
2,282 
1,201 
9.21 
18. 97 

184 
81 
13 

0 
71 
08 

0 
39 

1 

0 


NEW  YORK  AUCTION  COMPANY,  INC. 

Sales 

214 
27 

(87) 

(9.  40) 

.85 

253 

79 

41 

4.30 

.69 

278 
83 
45 
4.78 
62 

288 

Gross  profits..          ... 

82 

Net  income 

36 

Profit  rate 

3  79 

Equity  ratio. 

65 

Federal  corporate  income  tax 

3 

3 
X 
1 

2 

Undistributed  profits  tax 

X 

1 

] 

Federal  rxclses 

Federal-State  payroll  taxes. 

2 
2 
X 
11 

4 

State  inrnme  taxes ".... 

1 
X 

11 

1 
X 
11 

2 

State  sales  taxes. 

X 

Property  taxes 

11 

State  corpurate  taxes 

Miscellaneous 

Total  taxes 

12 

16 

19 

20 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18364  CONCENTRATION  OF  ECONOMIC  POWEPv 

NEW  YORK  SHIPBUILDING  CORPORATION 
[$000's] 


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  ataxes ...^.-. 

Property  taxes 

State  corporate  taxes 

Miscellaneous.-. 


Total  taxes. 


12,  214 

1,396 

(70) 

(0.  59) 

1.86 


0 


0 

0 

234 

1 


12,  405 

727 

(1,233) 

(2.  06) 

1.46 


0 


0 

0 

234 

1 


14,  077 

1,570 

659 

6.51 

1.64 

0 
0 
10 
0 
87 
X 
0 
208 


13,017 

349 

(1,198) 

(13. 88) 

1.49 


0 
0 
10 
0 
250 
C 

0 

213 

3 


NINETEEN  HUNDRED  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. 


4,908 
1,083 
529 
21.32 
12.18 


80 


5,421 

1,  045 

620 

27.91 

5.28 


70 


6,807 
1,180 
719 
37.02 
6.78 


101 
2 


6,751 
967 
570 

27.  90 
7.32 


NOBLITT-SPARKS  INDUSTRIES,  INC. 


Sales 

5,370 

1,166 

4.53 

25.02 

5. 48 

7,761 

1,744 

796 

36.77 

3.10 

9,353 
2,719 
1,505 
50.00 
3.63 

10, 195 

2,662 

1,310 

Profit  rate . 

27.99 

Equity  ratio.. ... 

9.81 

51 

106 

232 
79 
12 
90 
23 

178 

Tlnrlist.rihiitp.ri  profits  tax 

57 

Federal  capital  stock  tax 

4 
37 

7 
59 

12 

Federal  excises .  

89 

69 

State  sales  taxes 

1 
12 

1 

19 

1 
19 

1 

Property  taxes ....                  . . 

Miscellaneous 

1 

1 

10 

Total  taxes ... 

106 

193 

456 

441 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18385 


NORTH  AMERICAN  AVIATION  INC. 
IIOOO'sl 


1034 

1935 

193G 

1937 

1,920 
460 
207 
3.77 

13.04 

3,607 
1,084 
16 
0.27 
11.27 

fi,232 
2,423 

0.07 
6.63 

8,240 

3,466 

716 

Profit  rate 

'in 

'n 

Undistributed  profits  tax        .  

•2 

3 

2 

s 

36 
X 

6 
13 
2 

116 

X 

a 

•6 
3 

9 

14 
6 

SO 

1 

Total  taxes                          .    .  . 

21 

13 

48 

366 

NORTH  AMERICAN  RAYON  CORPORATION 


Sales 

Gross  profits. 
Net  income. - 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stock  tax 

Federal  excises 

Federal-Staffe  pay  roll  taxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes - 

State  corporate  taxes 

Miscellaneous .. 


Total  taxes. 


8,113 
3,113 
1,070 
10.28 
14.46 


162 


30 


313 


9,631 
4,402 
2,403 
22.07 
10.31 


366 
76 
81 


10,068 

»5.03 
10.07 


443 
174 
32 


10? 
66 


864 


NORTHERN  PAPER  MILLS 


Sales 

Qross  profits. 
Net  incoma. . 

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. 


4,461 

1,058 

478 

5.60 


07 


4,866 
1,072 

103 
2.37 

.68 


110 


6,160 
2,0(» 

403 
6.12 

.72 


10 


117 


8.ora 

6l| 
6.86 
.64 


8 


168 


indicate  no  data  available. 

X  indicates  less  tban  $1,000. 


18366 


CONCENTKATION  OF  ECONOMIC   POWER 


NUNN  BUSH  SHOE  COMPANY 
[$000'3] 


1934 

1935 

1936 

1937 

6,503 

2,  ■104 

318 

12.46 

Equity  ratio - -- 

2.04 

53 

X 

5 

C9 

11 

1 

32 

3 

174 

THE  OHIO  BRASS  COMPANy 


Sales 

Gross  profits. 
Net  income.. 

Profit  rate 

Equity  ratio. 


Federal  corporate  Income  tax. 

Undif!tributed  profits  tax 

Federal  capital  stock  tax 

Federal  excises — . 

F-'deralState  payroll  taxes — 

Bute  income  taxes , 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Toial  taxes. 


3,719 

1, 655 

550 

6.12 

28.29 


50 


3. 862 
1,620 
390 
4.39 
25.26 


5, 151 
2,381 
1.233 
17.01 
10.97 


150 
'  10 
■"26' 


O'CONNOR  MOFFATT  &  COMPANY 


4.243 

1,143 

140 

7.23 

1.29 

4,203 

1,174 

83 

4.28 

Equity  ratio 

1.36 

.   ...  . 

13 
6 
2 

6 

2 

X 

10 
X 

127 
65 

29 

4 

125 

56 

X 

213 

221 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18367 


THE  OHIO  CONFECTION  COMPANY 
[$000'8] 


1034 

1936 

1936 

1937 

341 

36 

(3) 

(5. 38) 

4.11 

429 

50 

11 

17  29 

3.07 

719 

67 

20 

27.68 

Equity  ratio - 

2.72 

2 
0 
X 
0 
1 

3 

0 

X 
0 

X 

0 

4 

X 

1 

X 

X 

1 
X 

1 

X 

1 

4 

8 

THE  OHIO  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. 


42, 896 
20,204 

5,702 
3.48 

44.13 


273 


34 

248 


370 
1,280 
52 
X 


2,257 


45,627 
23,954 

5,832 
4.42 

20.82 


337 


46 
241 


419 

1,142 

58 


2,243 


62,992 
29.103 

8,  aw 

6.22 
29.50 


368 


249 
90 
X 

483 
1,120 
35 
X 


2,433 


64,166 

37, 432 

12,943 

9.82 

23.05 


1,068 


50 
281 
300 


1,170 
66 
X 


3,632 


ONTARIO  MANUFACTURING  COMPANY 

1,128 

207 

24 

2.01 

56.65 

1,427 

287 

89 

7.93 

47.23 

1,589 

348 

141 

13.79 

16.82 

1,666 

392 

162 

16.21 

18.64 

3 

12 

20 
6 
2 

23 

6 

2 

1 

2 

6 

18 

X 

4 

X 

4 

X 
4 

X 

6 

Total  taxes 

9 

17 

37 

«/ 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18368  CONCENTRATION  OF  ECONOMIC  POWER 

OaOAR  NEBEL  COMPANY  INC. 

[SOOO's] 


1934 

1935 

1936 

1937 

Sales 

998 

102 

17 

1.35 

17.20 

1,442 

162 

36 

2.77 

10.91 

1,621 

104 

(34) 

(2.71) 

7.64 

1, 705 
164 

Gross  profits 

Net  income 

Profit  rate 

0  28 

Equity  ratio 

5  25 

Federal  corporate  income  tax 

1 

Undistributed  profits  tax 

Federal  capital  stock  tax 

X 

1 

1 

I 

Federal  excises... 

Federal-State  pajToU  taxes 

4 

16 

State  income  taxes 

State  sales  taxes 

Property  taxes 

2 
X 

2 

4 

2 
2 

2 

State  corporate  taxes 

2 

2 

3 

9 

21 

OSHKOSH  B'GOSH  INC. 


Sales 

1,389 

300 

152 

28.35 

10.65 

1.596 

355 

139 

22.75 

19.14 

1,877 
481 
214 

38.48 
9.28 

- 1  833 

Gross  profits 

3Q4 

Net  income 

137 

Profit  rate 

23  55 

Equity  ratio 

17  55 

Federal  corporate  income  tax 

22 

18 

40 

22 

Undistributed  profits  tax 

Federal  capital  stock  tax 

1 

2 

2 
X 

9 
13 

2 

Federal  excises... 

1 

Federal-State  payroll  taxes 

16 

State  income  taxes 

7 

6 

5 

State  sales  taxes 

Property  taxes 

5 
X 

5 
X 

6 
X 

>T 

State  corporate  taxes 

X 

Miscellaneous 

Total  taxes 

35 

31 

70 

54 

OTIS  ELEVATOR  COMPANY 


Sales 

17,925 
4,772 

(1,603) 
(4.44) 
38.81 

15, 459 
5,831 
1,121 
3.15 
34.64 

19, 798 
9,438 
2.266 
6.28 
27.56 

27  S12 

Gross  profits,. .    . 

12, 612 
4  128 

Net  income.. 

Profit  rate 

11  32 

Equity  ratio.. 

22  53 

Federal  corporate  income  tax 

10 

236 

513 

Undistributed  profits  tax 

23 

Federal  capital  stock  tax 

21 

18 

32 

32 

Federal  excises 

Federal-State  payroll  taxes 

123 

58 

5 

287 

460 

State  income  taxes. 

32 

9 

313 

89 

4 

286 

116 

State  sales  taxes. 

6 

Property  taxes 

294 

State  corporate  taxes 

Miscellaneous 

6 

7 

8 

70 

Total  taxes 

381 

414 

749 

1,514 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18369 


THE  OTIS  STEEL  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  ta.xes 

Miscellaneous 


Total  taxes. 


16,780 

5,029 

1,518 

5.22 

1.12 


103 


407 
7 


1935 


22, 748 
7,567 
3,522 

.10. 83 
1.34 


396 


28, 876 

8,318 

3,518 

10.93 

1.54 


430 

375 

36 


438 
11 


1,373 


OUTBOARD  MARINE  &  MFQ.  CO. 


Sales - 

6,843 

Grossprofits 

2, 530 

Net  income 

1,157 

Profit  rate .-_ 

37.91 

Equity  ratio.. . 

4.33 

Federal  corporate  income  tax 

209 

Undistributed  profits  tax 

Federal  capital  stock  tax 

17 

Federal  excises .     .   ^,. 

26 

Federal-State  pavroU  taxes 

52 

State  income  taxes.. . 

29 

State  sales  taxes 

Property  taxes _.. _• 

28 

State  corporate  tuxes... 

2 

Miscellaneous 

Total  taxes 

363 

PACIFIC  AMERICAN  FISHERIES,  INC. 


Sales 

4,592 
1,866 
683 
8.83 
3.54 

7,198 
2,216 
930 
13.14 
4.60 

7,129 

Gross  profits ^ 

2,332 

Net  income 

96b 

Profit  rate 

13.31 

Equity  ratio         .. .. 

1  76 

Federal  corporate  income  tax 

80 

111 

120 

Undistributed  profits  tax '... 

Federal  capital  stock  tax 

12 

9 

10 

Federal  excises 

Federal-State  payroll  taxes 

4 

? 

25 
3 

47 

State  income  laxes.. ^ , 

2 
X 

21 
3 

3 

State  sales  taxes 

3 

Property  taxes 

22 

State  corporate  taxes 

X 

Miscellaneous 

Totaltaxes 

118 

156 

205 

Indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18370 


CONCENTRATION  OF  ECONOMIC  POWEJbl 


PACIFIC  CAN  COMPANY 
[$000's] 


1934 

1935 

1936 

1937 

Sales.-- - - 

2,030 
589 
370 

25.36 
5.53 

2,290 
645 
315 

14.53 
8.27 

3,200 

Gross  profits - - 

610 

Net  income 

227 

Profit  rate - 

10  28 

Equity  ratio . . .    ..                  ... 

1  55 

Federal  corporate  income  tax           ..       .. 

59 

53 
20 

7 

29 

Undistributed  profits  tax - 

16 

Federal  capital  stock  tax - 

4 

8 

Federal  excises . 

Federal-State  payroll  taxes - 

5 
16 
5 

19 

State  income  taxes -. 

ii 

3 
4 

13 

State  sales  taxes.  - 

9 

Property  taxes ^ 

11 

State  corporate  taxes - 1 

X 

X 

Total  taxes 

81 

113 

105 

PACIFIC  CLAY  PRODUCTS 


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- 


513 
137 

(109) 
(7.  29) 

7.37 


614 

285 

30 

2.08 

7.22 


1,061 

430 

134 

9.50 

4.24 


46 


PACIFIC  MILLS 


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. 


40, 107 

5,548 

(441) 

(1.81) 

3.39 


25 
1,172 


467 
32 


1,696 


50,336 

5,015 

(37-4) 

(1.55) 

2.37 


27 


25 
1,333 


430 
77 


1,892 


55.119 
7,207 
1,335 
5.41 
2,05 


121 
15 


376 
64 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCEJSTKATiOxV  OF  ECONOMIC  POWEH 


18371 


PACKARD  MOTOR  CAR  COMPANY 

[$000's] 


1934 

1935 

1936 

1937 

Sales                          -• - - 

21,855 

5,899 

(7.267) 

(17. 46) 

8.96 

58, 628 

16,  .552 

3,896 

8.67 

6.93 

86, 352 

24,190 

8,378 

18,52 

3.95 

109, 572 

26, 297 

3.  665 

Profit  rate                                   .    .        

8.23 

6.  U 

14 

549 

1,249 
14 
44 

1,753 

201 

10 

560 

X 

102 
350 

140 
1,293 

91 

2,606 

Fertoral-State  pavroll  taxes           

928 

3 

5 

11 

692 

67 

14 

X 

674 
57 

723 
74 

833 

80 

Total  taxes           ..       ..    .    ..    ..  

1.200 

2,747 

4,068 

5,112 

PAN  AMERICAN  PETROLEUM  &  TRANSPORT  CO. 


.Sales             

68, 636 
18,  782 

(513) 
(0.94) 

6.04 

71, 692 

21, 108 

647 

1.17 

6.27 

86,  560 

24, 561 

3,107 

4.80 

2.01 

94, 642 

30, 458 

7,165 

Profit  rate 

10.30 

1.61 

Federal  corporate  income  tax  .  

318 

150 

508 
22 
91 
131 
82 
41 
150 
489 
132 
74 

1,169 

Undistributed  profits  tax               .      .  ..        .  

71 

48 
110 

89 
121 

103 

134 

246 

State  income  ta.\es     ..  

12 
29 
471 
152 
43 

8 

145 

473 

124 

54 

78 

State  sales  taxes                    .  - • 

215 

532 

174 

72 

Total  taxes - 

1,183 

1.164 

1,780 

2,794 

PANHANDLE  PRODUCING  &  REFINING  CO. 


Sales 

2,379 
413 
(165) 

2,723 

663 

19 

3,469 

903 

191 

12.26 

1.44 

4,043 

1,020 

251 

Profit  rate    

14.23 

(6.69) 

(0.  74) 

1.43 

Federal  corporate  income  tax 

X 

4 

Federal  capital  stock  tax..  

X 

X 
X 

2 
X 
6 

2 

Federal  excises    

X 

16 

State  income  taxes     ..  .  . ^ 

Stale  sales  taxes 

10 
24 

1 

9 
23 

1 

12 
26 

1 

16 

27 

State  corporate  taxes 

1 

Total  taxes 

35 

33 

47 

60 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


l:;44ttl 41 — i>t.  31-A  - — 24 


18372  CONCENTRATION  OF  ECONOMIC  POWER 

PARK  &  TILFOaO  INC. 
[$000'8] 


1934 

1935 

1936 

1937 

Sales -. _ 

Orost  profits , 

9,646 

3,066 

308 

5.79 

1.78 

8,647 

2,696 

309 

6.62 

2.27 

10,721 

3,208 

734 

14.86 

1.36 

11,679 
3,393 

Net  income --. - - 

1,113 

Profit  rate , 

17.98 

Equity  ratjo : - 

1.73 

Federal  corporate  income  tax 

27 

11 

31 
17 
5 

36 

TTiif1(gtrfhntj>i1  proftfl  tn'f 

6 

Federal  capital  stock  tat 

4 

4 

4 

Federal  excises  ,           

Federtd-State  payroU.taxes « 

6 
6 
2 
77 

il 

16 

1 

114 

8 

1 

109 

12 

State  sales  taxes .  

I 

Property  taxes , 

State  corporate  taxes                   .          ...  ..  .. 

162 

133 

142 

73 

PARKE,  DAVIS  &  COMPANY 


Sales , 

27,672 
18,966 
10, 182 
28.66 
6.41 

29,049 
19,790 
10,292 
28.89 
6.59 

30,332 
20,495 
10,953 
30.35 
6.85 

31,563 

Qross  profits 

21,236 

Net  income 

10,866 

Profit  rate , .■ 

29.61 

Equity  ratio i 

6.39 

Federal  corporate  income  tax 

901 

1, 021 

1,201 
31 
109 
3 
61 
36 
7 
319 
46 

1,209 

Undistributed  profits  tax :^..... 

25 

Federal  capital  stocic  tax 

.79 
8 

109 

e 

124 

Federal  excises. , . 

3 

Federal-State  payroll  taxes 

190 

State  income  taxes 

20 

3 

434 

44 

30 

6 

317 

60 

35 

State  sales  taxes.-. 

5 

Property  taxes 

346 

State  corporate  taxes 

48 

Miscellaneous . 

Total  taxes 

1,679 

1,538 

1,812 

1,985 

THE  PARKERSBURQ  RIQ  A  HEEL  COMPANY 


Sales -j.„., , 

4,637 
1,669 
817 
23.28 
1'   52 

7,008 

Orosa  profits,' 

2,292 

Net  income., 

1,246 

Prostrate , 

32.17 

Equity  ratio '....., 

7,85 

'    — 

Federal  corporate  income  tax ,.„,... 

112 
1 
7 
3 
9 
2 
10 
19 
X 

198 

Undistributed  profits  tax 

71 

Federal  capital  stock  tax .-.. ,,, 

8 

Federal  exobes ,.,...,... 

2 

Federal-State  pa3rroIl  taxes .>. . .  .    . 

40 

State  income  taxes , 

12 

State  sales  taxes , _.  '   ._ 

13 

Property  taxes , _     

20 

State  corporate  taxes , „ 

' 

X 

Miscellaneous - ..,., , ,, 

Total  taxes 

163 

364 

indicate  no  data  available. 

X  indicates  less  than  $1 ,000. 


CONCENTRATION  OF  ECONOMIC  POWEll 

PARKER'WOLVERINE  COMPANY 
[$000's1 


18373 


1934 

1035 

1936 

1937 

Sales --- 

1,591 
442 
278 

59.86 
3.20 

1.507 
373 
196 

29.48 
3.00 

2,094 
560 

Gross  profits -- - 

324 

Profit  rate     - - 

42.63 

Equity  ratio      .  .    

2.91 

Federal  corporate  income  tax  .  . 

45 

29 
1 
3 
X 

6 
0 
0 
10 

1 

4S 

Undistributed  profits  tax                .  ^..  .  ..  .  .  .  . 

2 

3 
0 

3 

Federal  excises ,. 

X 

Federal-State  payroll  taxes  .  

21 

State  income  taxes        .           ....  .•..  ... 

0 
0 
7 
X 

0 

0 

Property  taxe?  .'    

14 

State  corporate  taxes ... .  

2 

Total  taxes 

55 

SO 

90 

DjVVID  PENDER  GROCERY  CO. 


Sales ..... 

Grogs  profits . 
Net  Income.. 
Profit  rate... 
Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federfil  capital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes 

PtHte  corporate  taxes 

Miscellaneous 


Total  taxes. 


14, 051 

3,576 

254 

11.80 

3.16 


33 


4 
119 


15, 616 

3,400 

165 

7.57 

2.50 


19 


3 
126 


158 


16,850 

3,63.S 

286 

12.23 

3.09 


3 

129 


PENICK  &  FORD.  LIMITED.  INC. 


Sfll^a ..  ... 

12,936 
4,582 
1,639 
15.  21 
14.52 

13,484 
4,278 
1.226 
11  46 
13.23 

15,403 
4,513 
1,524 
14.37 
14.64 

16,504 

Gross  profits .                    ... 

3,307 

Ne*  iTK'orae 

316 

Pro'r  rate 

3.07 

Equity  ratio 

21.69 

Federal  corporate  income  tax 

234 

173 

222 

44 

Undistributed  profits  tax       .                                 ... 

Federal  capital  stock  tax 

21 
353 

25 
339 

18 

20 

Federal  excises ' 

Federal-State  payroll  taxes 

22 

9 

1 

94 

23 

61 

State  income  taxes : 

3 
X 

82 
12 

10 

1 
88 
22 

10 

Stdte  sales  taxes 

2 

Property  taxes 

91 

State  corporate  taxes 

28 

MLsccllaneous .^ 

Total  taxes 

705 

65«t 

387 

256 

Indicate  no  data  available. 

X  indlcatos  less  than  $1,000. 


18374 


CONCENTRATION  OF  ECONOMIC  POWER 


PEXINSULAR  METAL  PRODUCTS  CORP. 
[SOOO's] 


1934 

1935 

1930 

1937 

Sales    - 

1,271 
257 
137 

27.18 
2.04 

1,794 

388 

177 

27.22 

2.05 

2,273 

Gross  profits                                      •    --    -    - 

515 

198 

Profltrate - 

31.47 

1.81 

19 

25 
11 
3 

31 

2 

1 

3 

8 

36 

State  sales  taxes           

4 

1 

6 

1 

6 

2 

3 

25 

54 

83 

PENN  ELECTRIC  SWITCH  COMPANY 


Sales 

Gross  profits. 
Net  income.. 

Profit  rate 

Equity  ratio- 


Pcderal  corjiorate  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. 


1,340 

f)75 

298 

24.78 

13.92 


46 


1,671 
783 
327 

25.02 
5.38 


PENN  TRAFFIC  CO. 


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  ta.xes-.. 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous... i 


Total  taxes. 


2,263 

750 

03 

3.92 

16.93 


11 


40 


2,344 

766 

80 

5.30 

17.41 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


3,112 
1,084 
143 
9.20 
7.24 


OONCEJSTKATJDxN  OF  ECONOMIC  POWEIl 


18375 


PENNSYLVANIA  DIXIE  CEMENT  CORPORATION 

[SOOO's] 


Sales 

Gross  profits. 
Net  income. 

Profit  rate 

Equity  ratio. 


4,642 
2,684 

(12S) 
(0.  53) 

1.63 


5,025 
2,678 

(261) 
(1. 15) 

1.56 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stocl£  ta.x..  .. 

Federal  excises 

Federal-State  payroll  taxes.. 

State  income  taxes 

State  sales  taxes , 

Property  taxes , 

Stale  corporate  taxes 

Miscellaneous. 


107 
6 
13 


102 
14 
24 


Total  taxes. 


138 


6,392 

3,571 

475 

2.15 

1.55 


18 
20 

I 

111 
18 
24 


5,077 
3,042 

536 
4.50 

.56 


69 


119 
16 
36 


239 


PEOPLES  DRUG  STORES,  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  ta.xes , 

State  sales  taxes 

Properly  taxes 

State  corporate  taxes. 

Miscellaneous 


Total  taxes. 


16, 879 
5.783 
1,393 
23.31 
3.72 


198 


19, 217 
6,138 
1,308 
19.59 
3.92 


186 


308 


21, 121 

6,842 
1,601 
26.65 
3.43 


246 
27 
25 
1 
39 
13 
1 
78 
23 


453 


22,383 
7,079 
1, 307 
20.66 
3.74 


195 
53 
21 
2 
101 
11 
1 
131 
44 


DR.  PEPPER  COMPANY 


Sales _ 

1,379 

932 

268 

10.29 

39.31 

1,076 
1,132 
471 
16.81 
30.37 

2,663 
1,807 
815 
29.89 
15.30 

3,478 

Gross  profits.. . 

2,316 

Net  income    

1,149 

Profit  rate _ 

43.72 

Equity  ratio 

10.41 

Federal  corporate  income  tax 

40 

68 

135 

194 

2 

Fedcrnl  capital  stock  tax 

6 
2 

8 

18 

15 

Federal  excises 

Federal-State  payroll  taxes     

3 

7 

11 

State  income  taxes 

1 

3 

12 

Property  taxes 

11 
4 

11 
4 

13 
5 

14 

State  corporate  taxes      .  -      .      . -  . 

4 

Miscellaneous 

Total  taxes 

64 

91 

181 

252 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18376 


CONCENTRATION  OF  ECONOMIC  POWEll 


THE  PERFECT  CIRCLE  COMPANY 
[SOOO's] 


Sales 

Gross  profits- 
Net  income.. 
Profit  rate.- - 
Equity  ratio. 


Federal  corporate  income  tux. 

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. 


3,781 
2,009. 
636 
20.73 
9.46 


78 


1935 


3,514 

1,778 

280 

9.38 

11.55 


40 


4,313 
2,153 
658 
20.64 
8.21 


THE  PHARI3  TIRE  AND  RUBBER  CO. 


PHELPS  DODGE  CORPORATION 


Sales 

Gross  profits. 
Net  income. - 
Profit  rate...- 
Equity  ratio. 


36,335 
11.853 

3.691 
2.20 

19.22 


Federal  corporate  income  tax. 
Undistributed  profits  tax..... 

Federal  capital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes... 

State  income  ta-xes 

State  sales  taxes 

Property  taxes. 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


374 


104 
2 


107 

66 

1,813 

7 

16 


2,477 


63,957 

16,690 

7,056 

4.18 

8.08 


666 


143 

38 


137 

166 

2,066 

8 

12 


3,126 


64,  917 

25,273 

13, 476 

8.02 

7.85 


1,306 

126 

120 

3 

133 

382 

212 

1,948 

7 

15 


4,342 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


1937 


4,719 
2,518 
691 
21.43 
9.23 


239 


Sales        .                     .     - .                  - 

5,746 
369 

(204) 
(13.27) 
(13. 55) 

Profit  rate 

Equity  ratio 

Federal  corporate  income  tax 

Undistributed  profits  tax 

Federal  capital  stock  tax , 

g 

Federal  excises  -. 

562 

Federal-State  payroll  taxes 

37 

State  income  taxes 

X 

State  sales  taxes 

X 

Property  taxes 

14 

State  corporate  taxes 

4 

Miscellaneous 

Total  taxes 

625 

1 

83,129 
30, 146 
15, 337 


1,631 

87 

163 

3 

656 

445 

397 

1,212 

16 

25 


4,525 


I 
I 


CONCFINI'RATION  OF  ECONOMIC  POWKU 


18377 


I'HII.ADELPHrA  INSULATED  WIRE  CO. 
[$000's] 


1934 

1935 

1930 

1937 

732 

52 

(20) 

(182) 

66.83 

1,020 

86 

(13) 

(119) 

48.28 

1,111 

181 

73 

6.8^ 

14.09 

1,273 

105 

(4) 

(239) 

53.37 

0 

0 

18 

2 

1 

1 

1 

1 

4 

7 

11 

1 

6 

6 

4 

6 
4 

5 

4 

Total  taxes                                               -  

7 

11 

40 

24 

PHILIP  MORRIS  &  COMPANY,  LIMITED,  INC. 


Sales                        -- - --- - 

15,633 

3,967 

1,844 

32.17 

1.56 

26,876 

6,788 

2,850 

30.89 

1.30 

38, 467 
10,  056 
4,427 
31.  65 
1.43 

55, 613 

13,885 

7,331 

44.34 

1.30 

249 

393 

620 
144 
66 
20,  422 
36 
95 

1,118 

464 

33 
7,866 

39 

14, 108 

4 

78 

71 

28,485 

101 

54 

179 

5 

10 
1 

23 
6 
4 

32 
9 

52 

12 

8,213 

14,  655 

21, 424 

30, 487 

PHILLIPS  PETROLEUM  COMPANY 


Sales                       - - - 

77,  520 

34,678 

8,078 

5.04 

3.P5 

92,  749 

57,  554 

16,532 

10.43 

4.58 

105, 073 

61,421 

20,  420' 

11.81 

5.81 

118,722 

68, 911 

26.804 

Profit  rate       - - - 

13.62 

Equity  ratio -- 

4.17 

Federal  corporate  income  tax 

531 

1,256 

1,964 

2,094 

71 
15 

116 
33 

254 
14 

159 

420 
10 

950 

49 

1,295 

208 

19 

536 

218 
59 

827 

58 

837 

489 
17 

923 

58 

1,172 

537 

20 

974 

49 

1,  779 

Total  taxes    - 

2,616 

4,064 

5,121 

6,210 

indicate  no  data  avaOable. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18378  CONCENTRATION  OF  ECONOMIC  POWEK 

PICTORIAL  PAPER  PACKAGE  CORPORATION 

[$000's] 


1934 

1935 

1936 

1937 

Sales                    .  .      .  -    - 

727 

251 

32 

5.26 

9.65 

832 

325 

71 

11.67 

5.77 

903 

364 

88 

Profit  rate  -.. 

13.95 

5.26 

5 

5 

9 
X 
X 

12 

3 

Fedrral  capital  stock  tax 

X 

X 

X 

3 

10 

4 
X 

4 
X 

4 
X 

4 

X 

Total  taxes     

9 

9 

16 

29 

PIERCE  GOVERNOR  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  taxc_ 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


139 
43 

(8) 
(4.71) 
3.83 


0 


303 

95 

36 

19.03 

4.63 


478 

165 

77 

19.30 

11.11 


PIQ'N  WHISTLE  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. 


1,824 

988 

(103) 

(12. 69) 

2.69 


2,165 
1,197 
(27) 
(3.  49) 
2.75 


0 


2,312 

1,273 

(4) 

(05fi) 

2.95 


1  Fiscal  year  ended  June  30. 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18379 


I'lLLSBURY   KLOUR  MILLS  COMPANY 
[$000's) 


Sales 

Gross  profits. 
Net  income. - 
Profit  rate.... 
Kquity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stock  tax 

Kcderal  excises 

Federal-State  payroll  taxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


r,8, 970 

10, 817 

•2, 4S0 

9.32 

2.22 


6C,St7 

10, 100 

1,  701 

6.79 

3.2.3 


366 


419 


22 
,285 


59 

3 

275 


25 
624 


74 

3 

270 

12 

Ci 


09, 130 

10, 823 

2,442 

9.  01 

3.02 


200 
74 
26 


102 
83 

3 
265 

9 


10,012 


1,  491 


63, 441 

9, 023 
;'.(i9 
1.  .->3 
3.00 


4 

200 

8 


529 


PINES  WINTER  FRONT  CO.  (DELAWARE)! 


Sales 

313 

120 

(2.54) 

(18.39) 

6.00 

25S 

52 

(168) 

(12.  50) 

3.37 

730 
243 

(270) 
(21.  50) 

1.48 

809 

Gross  profits  ....             .  . 

191 

Net  income                                       .                .  .  

(143) 

Profit  rate 

(10.96) 

1.03 

1 

Federal  capital  stock  tax 

1 

1 

1 

1 

7 

14 

Property  taxes                                  .                   .      .               

10 
1 

15 
1 

1 

20 
1 
X 

20 

State  corporate  taxes                                                              

1 

X 

Total  taxes 

19 

18 

29 

36 

'  Fiscal  year  ended  April  30. 


PITTSBURG  FOROINQS  CO. 


Sales                                                                               

9,117 

1,402 

6.50 

23.15 

1.53 

111 



.  ..:  ... 

5 

62 

31 

23 

State  corporate  taxes                                        ...          .    . 

14 

Total  taxes 

246 

—  indicate  no  data  available. 
X  indicates  less  than  $1,000. 
(  )  Indicate  deficit. 


18380 


CONCENTRATION  OF  ECONOMIC  POWER 


PITTSBURGH  PLATE  GLASS  00. 
ISOOO's] 


1934 

1935 

1936 

1937 

Sales                 .          - 

51. 761 
25, 626 

6,823 
7.97 

17.57 

68.526 

36, 970 

13, 721 

15.12 

10.02 

86, 110 

44,845 

18, 773 

19.82 

10.04 

93,315 

Gross  profits                

54,081 

22, 573 

Profit,  rate                                        — -              

23.04 

10.34 

1,014 

2,054 

2,889 
263 
177 

3,609 

488 

81 

132 

188 

230 
297 
20 

797 

41 
17 

264 
16 

285 

33 

63 

153 

290 

329 

1.216 

2,619 

4,166 

5,629 

PITTSBURGH  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... 

.•^tale  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous. 


Total  taxes. 


12,896 

3,742 

(112) 

(2.49) 

4.19 


1 
0 
19 
0 
0 

3 

331 

54 


21, 352 

5,809 

246 

0.57 

4.10 


0 
26 

0 
42 

I 

5 

321 

92 


35, 359 

9.874 

2,093 

5.56 

3.05 


235 

0 

30 

0 

258 

104 

12 

328 

73 


1,040 


1  Fiscal  year  ended  June  30. 


PORTO  RIGAN  AMER.  TOBACCO  CO. « 


Sales          

1,944 

962 

127 

0.61 

3.05 

1.732 

851 

406 

1.98 

3.77 

1.454 

679 

120 

0.60 

4.18 

1.303 

453 

(116) 

Profit  rate  -                    

(0. 59) 

Equity  ratio                  ....                       

4.66 

Undistributed  profits  tax     .                                ..               

Federnl  capitfil  .stnclr  tax                                           , 

2 

2 

3 

3 

Federal-State  payroll  taxes 

1 

2 

Property  taxes  

1 
2 

1 
2 

1 
2 

1 

State  corporate  taxes 

2 

Total  taxes 

5 

6 

7 

8 

I  Unusable— Tax  data  wrong. 

indicate  no  data'available. 

X  indicates  less  thanl$l,000. 
(  )iindicate  deficit. 


C^ONCENTKATION  OF  ECONOMIC  POWER 

POTERO  SUGAR  COMPANY 
[$000's] 


18381 


1934 

1035 

1936 

1937 

1,150 

611 

238 

6.38 

2.24 

1,079 

448 

115 

3.04 

2.57 

1,194 

497 

125 

Profit  rale                    .- -- 

3.64 

2.55 

X 

X 

X 

X 

1 

X 

1 

X 

1 

1 

1 

1 

PRATT  AND  LAMBERT  INC. 

Sales                                           

3,846 
1,647 
260 
4.55 
19.31 

4,668 

2,052 

463 

7.98 

14.96 

5,431 
2,316 
651 
10.92 
13.20 

5,646 

2,456 

665 

Profit  rate                  .                  

10.98 

Equity  ratio - --- 

17.75 

42 

46 

68 

7 
8 

46 

8 

8 

8 

9 
13 
17 
30 

3 

27 

6 
12 
29 

3 

U 

13 

26 

3 

26 

State  sales  ta.\es                            -  -  

21 

32 

3 

100 

107 

155 

163 

PRESSED  STEEL  CAR  COMPANY,  INC. 


20,248 

2,815 

985 

8.  IS 

Equity  ratio . 

1.70 

30 

0 

20 

1 

113 

10 

1 

180 

45 

0 

400 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18382 


(•().\(;K\'rilAT10X  OF  ]:(JONOMIC   POWKK 


THE  PR0CTP:K  &  GAMBLE  COMPANY 

[$000's] 


Sales 

Oross  profits. 
Net  income.. 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  ta.\ 

Federal  capital  stock  tax 

Federal  exci.sos 

Federal-State  pay-roll  taxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


148, 153 

G6,  2&S 

22,  239 

19.89 

13.36 


2,986 


162 
1,078 


16 

21 

632 

63 

7,210 


12,168 


1935 


170, 361 

70, 177 

19,  638 

16.94 

12.52 


2,519 


340 
959 
•78 
18 
24 
682 
127 
9,224 


13, 971 


1936 


218, 874 

91, 569 

32,  627 

26.42 

7.71 


4,697 
593 
357 

1,541 
364 
43 
29 
7'i9 
126 

8,878 


17, 424 


1937 


209, 302 

79, 954 

18,150 

14. 2G 

9.56 


2,550 
32 
342 

1,569 
662 
172 
67 
871 
161 

9,217 


15,643 


PULLMAN  INCORPORATED 


Sales. -J. 

73,  757 
29. 869 

3,625 
1.50 

23.00 

73, 133 

32,111 

(70) 

(0. 03) 

20.59 

103,  686 

42,  749 

7,885 

3.41 

15.09 

136,  549 

Gross  profits . ... . .  

53.647 

Net  income 

16, 295 

Profit  rate            .                                           .                   . 

6.57 

Equity  ratio 

15.19 

667 

204 

1,414 

69 

199 

3 

1,104 

76 

171 

1,668 

119 

1 

2,655 

Undistributed  profits  tax 

337 

Federal  capital  stock  tax 

166 
7 

182 
2 

202 

3 

Federal-State  pay-roll  taxes .  

1,143 

State  income  taxes  .  .. .      .  . .    . 

138 

146 

1,751 

97 

6 

43 

179 

1,453 

110 

1 

190 

State  sales  taxes         .  .                                 ..... 

256 

Property  taxes 

1,882 

147 

Miscellaneous    ....        ...    

3 

Total  taxes 

2,977 

2,174 

4,824 

6,818 

THE  PURE  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  pay-roll  taxes 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous. 


Total  taxes. 


79, 767 

31,685 

2,949 

2.30 

2.26 


523 


1,852 


2,578 


92, 417 

41, 392 

11, 675 

8.00 

2.07 


645 
212 


2,398 


3,205 


106, 114 

40,686 

10,956 

7.19 

2.25 


507 


143 
,40 
23 


2,504 


3,217 


119,098 

43,234 

14,048 

8.42 

9.24 


370 

4 

167 


300 
38 
44 


2,906 


3,819 


indicate  no  data  availfible. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  KCONOAIIC  POWJvK 

THE  QUAKER  OATS  CO. 
[SOOO's] 


18383 


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. 180 
6,312 
12.56 
11.10 


784 


90 
1,313 


252 
12 


2,476 


17,  490 
5,221 
10.44 
11.20 


701 


73 
410 


325 
19 


1,561 


1936 


19, 892 
7,021 
13.  93 
8.85 


1,178 
29 
64 
8 
04 
34 


305 
54 


1,736 


72,  525 
18, 128 

4,798 
9.59 

11.49 


611 

"70 

7 

168 

63 


331 

67 


1,317 


QUAKER  STATE  OIL  REFINING  CORP. 


Sales 

Gross  profits 
Net  income.. 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capiral  stock  tax 

Federal  excises 

Federal-State  payroll  taxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes .^^ 

Miscellaneous. «» 


Total  taxes. 


24,674 
5,511 
1,134 
7.12 
10.79 


196 


383 


27,207 
6,113 
1,334 
8.25 
8.94 


224 
10 
36 
1 
21 
65 
16 
83 
73 


519 


30, 482 
6, 162 
1,298 
8.03 
7.36 


203 
9 
20 
1 
66 
48 
13 
82 
64 


406 


RADIO  CORP.  OF  AMERICA  « 


Sales.. 

Gross  profits. 
Net  income.. 

Profit  rate 

Equity  ratio. 


Federal  corporare  income  tax. 

Undistributed  profits  tax 

Federal  capital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes 

State  income  taxes , 

State  sales  taxes 

Property  taxes 

State  corpQtate  taxes 

Miscellaneous 


Total  taxes. 


77, 303 

29,633 

5,631 

6.14 

4.87 


325 


476 


87, 647 

35,  371 

6,447 

7.61 

6.34 


290 
17 


138 
"25" 


100,230 

40,  395 

7,614 

10.87 

2.63 


300 
"36" 


g 

160 


528 


111,853 

46,939 

11,444 

16.32 

2.77 


24 
120 


002 


>  Unusable — Parent  only. 

indicate  no  data  available. 

X  Indicates  less  than  $1,000. 


18384  COXCMONTRATIOX  OF  P]CONO:MIC   IN)Wi:ii 

K  AXDAI.L  COATPANV 


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. 


834 

417 

213 

47.02 

6.83 


26 


708 

331 

44 

10.12 

3.56 


RAYONIER  INCORPORATED  « 


28 


Sales              

7,357 

Gross  profits         

3,354 

1,423 

Profit  rate 

2  31 

Federal  corporate  income  tax  -    .. .. 

223 

299 

406 

95 

25 

45 

43 

Federal  excises           

16 

1 

52 

100 

1 

3 

52 

X 

23 

117 

1 

3 

X 

98 

129 

X 

1 

Total  taxes.-  

392 

517 

824 

»  Fiscal  year  ended  April  30. 

RAYTHEON  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. 


40 


2.  2S5 

571 

13 

0.87 

4.01 


3,253 

613 

(71) 

(4.  92) 

2.28 


4,414 

937 

182 

11.54 

■  1.89 


20- 


•  Reported  on  fiscal  year  basis  starting  May  31,  each  year  as  listed. 

indicate  no  data  available. 

X  indicates  less'than  $1,000. 
(  )  Indicate  deficit. 


CONCKNTKA  riON  OF  ECONOMIC   TOWlUt 


18385 


'iiiK  Fii:.\n  ni;u(i  ^t  chemical  compaxv 

ItOOO's] 


Sales  -.- 

Gross  in;)f'.ts. 
Net  income-. 
Profit  rat,o_... 
.Equity  ratio. 


Fodrral  corporate  income  tax 

UiTlistributod  profits  tax 

Koilcral  capital  stock  tax 

Federal  cxcij^cs 

Federal-State  payroll  taxes. . . 

State  ineiime  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


1934 


4,334 

l,48.'i 

241 

I'J.  94 

2.32 


33 


Total  taxes. 


4,  79.5 

1,  508 

109 

5.  97 

1.51 


n 


5,407 
1,S37 

12.  89 
1.5.") 


3--'  I 


.-),  709 
1,!)00 

13.  73 
1.U8 

34 


REAL  SILK  HOSIERY  MILLS  INCORPORATED 


Sales 

Gross  profits. 
Net  income. - 

Profit  rate 

Equity  ratio - 


Federal  eorporate  income  tax. 

Ur.distnliined  prufits  tax 

Federal  capital  stock  tax 

Federal  excises 

Federal -State  payroll  taxes.  ._ 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  eori)orate  taxes 

M  iscellaiU'ous 


rotal  taxes. 


5,170 

(188) 
(4.  74) 
1.80 


19 


11,891 

5,329 

526 

13.67 

3.21 


12,  349 

5,123 

242 

7.14 

2.77 


103 


11.805 

4,  683 

105 

3.38 

3.88 


38 

34 

S 

1 

ISO 

1 

84 
37 


REECE  BUTTON  HOLE  MACHINE  CO. 


Sales 

Gross  profits - 
Net  income. - 
Profit  rate  ... 
Eqtiity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  cajiital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes... 

State  income  taxes 

State  sales  taxes... 

Property  taxes.. 

State  corporate  taxes 

Miscellaneous .. 


Total  taxes 


1,049 

757 

191 

9.63 

46.43 


26 


1,022 

839 

157 

7.77 

35.67 


1,183 

960 

201 

9.42 

33.34 


27 


1,191 

960 

193 

8.83 

42.84 

24 

4 

4 


indicate  no  data  available. 

X  indicates  less  than  .'{1,000. 
(  )  indicate  deficit. 


18386 


CONCENTRATION  OF  ECONOMIC  POWEH 


REECE  FOLDING  MACHINE  CO. 
[SOOO's] 


Sales 

Gross  profits. 
Net  income. . 
Profit  rate... 
Equity  ratio. 


Federal  corporate  inconic  tax. 

"Undistributed  profits  tax 

Federal  capital  stock  tax 

Federal  excises 

Federal-State  payroll  tuxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  ta.xes. 


1934 


109 

68 

5 

0.43 

CI  1.95 


1935 


91 

76 

18 

1.67 


23 

2.14 

173.  57 


RELIABLE  STORES  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  corporrte  taxes 

Miscellaneous 


Total  taxes- 


6,659 

2,986 

523 

7.01 

2.58 


70 


181 


7,898 

3,536 

936 

13.09 

3.90 


113 

..... 


248 


9,091 
4,058 
1.152 
14.44 
3.53 


167 
35 


RELIANCE  ELECTRIC  &  ENGINEERING  CO. 


Sales  ..  .  

2,822 
1,080 
426 
29.00 
4.25 

3,692 

1,242 

Net  income . . 

529 

Profit  rate                 ._ .      .... 

30.95 

Equity  ratio     .        . ..      .-..      .......    .... 

5.50 

76 
7 
5 

90 

Undistributed  profits  tax . 

51 

Federal  capital  stock  tax . 

5 

Federal  excises                             .. .        . 

Federal -State  pajrroll  taxes                     ..              .        ... 

8 

35 

State  income  taxes     ...                                    ....... 

State  sales  taxes.. 

X 
14 

1 

X 

14 

State  corporate  taxes                                                             .    .  . 

2 

Total  taxes... 

111 

197 

indicate  no  data  available. 

X  Indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18387 


REMINGTON  RAND,  INCORPORATED 
[SOOO's] 


1934 

1935 

1936 

1937 

34,  726 

18. 365 

2,975 

6.78 

1.29 

40,837 

21,819 

4,425 

11.45 

.78 

47,  335 

23, 848 

5.  075 

13.55 

.70 

51, 104 

27,273 

6,140 

15.83 

.80 

102 

280 

499 
73 
45 

584 

11 

21 

23 

44 

308 
56 

677 

13 

19 

92 

160 

162 

188 

195 

69 

124 

82 

86 

365 

608 

1,251 

1,689 

THE  RENNER  COMPANY 


Sales                                             - -    

1,707 
1,238 
153 
16.50 
4.60 

1,627 

1,198 

11 

1.21 

6.07 

1,783 
1,402 
146 
15.64 
7.97 

1,722 

1,292 

66 

Profit  rate       -      --- -- - ---  - 

6.95 

Equity  ratio 

9.55 

29 

10 

18 

2 

2 

611 

1 

11 

2 

1 
599 

1 
574 

2 

563 

5 

219 
6 
1 
X 

199 
6 

1 

243 

7 
1 

253 

6 

1 

X 

855 

791 

885 

843 

REO  MOTOR  CAR  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. 


13, 836 
2,390 

(956) 
(8.90) 

9.71 


0 


143 
36 


194 


16, 136 

3,204 

(214) 

(2,04) 

5.17 


0 


13, 171 
2,276 
(1,  3931 
(14.  49) 
7.72 


13,069 

1,640 

(1, 942) 

(25.  26) 

5.74 


0 
0 

7 

'lOl 
0 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18388  CONCENTRATION  OF  ECONOMIC  POWEH 

SEVERSKY  AIRCRAFT  CORPORATION  ' 

[$000 'si 


1934 

1935 

419 

65 

(51) 

(14.48) 

1.93 

1936 

589 

118 

(68) 

(3. 94) 

5.72 

1937 

Sales -.- 

303 

Gross  profits. 

(94) 

Netincome . 

(1,202) 

Profit  rate            

(196  94) 

Equity  ratio              .     -  -        —              

25 

Federal  corporate  income  tax .-     

Undistribu ted  profits  tax 

Federal  capital  stock  tax                        .                _  .  . 

X 

1 

3 

5 
2 

52 

X 

3 

State  sales  taxes ■_ 

8 

X 

X 

2" 

X 

Total  taxes       -  -         - -  -  -  . 

X 

8 

68 

I  Now  Republic  Aviation  Corp. 

REYMER  AND  BROTHERS,  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. 


1,388 
479 

(242) 

(20.  28) 

2.57 


32 


1,409 

479 

(29) 

(3. 06) 

2.24 


1,588 

555 

26 

2.51 

2.47 


REYNOLDS  SPRING  COMPANY 


Sales 

2,842 
593 
198 

10.22 

2.48 

4,679 
954 
466 

20.77 
1.68 

6,140 

1,518 

808 

29.34 

1.35 

7,082 

1,170 

290 

Profitrate    

11.64 

1.14 

23 

63 

117 
61 
12 

37 

X 

4 

3 

10 

Federal-State  payroll  taxes 

23 

94 

State  sales  taxes 

■ 

23 

4 

23 
4 

20 
4 

27 

4 

54 

93 

237 

172 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 

RICE-STIX  DRY  GOODS  CO. 
[SOOO's] 


18389 


1934 

1935 

1936 

1937 

gales                                                --      -- 

19.168 

2,833 

104 

.98 

16.72 

22,024 

3,789 

796 

7.29 

4.33 

21,636 

3, 154 

122 

I'roflt  rate       .  . - .  

1. 17 

3.30 

Federal  corporate  income  tax 

10 

102 

2 

Undistributed  profits  tax 

Federal  capital  stock  tax 

10 

10 

10 

federal  excises 

Federal-State  payroll  taxes       ...                   ... 

28 
16 

81 

X 

State  sales  taxes 

Property  taxes     

70 
25 

70 
27 

71 

State  corporate  taxes _ 

28 

Miscellaneous. 

115 

253 

192 

RICHFIELD  OIL  CORP. 


THE  RICHMAN  BROTHERS  COMPANY 


Sales ,. 

35,002 

15,647 

Net  income.,. .      . 

1,851 

Profit  rate 

Equity  ratio 

6.24 

Federal  corporate  income  tax 

86 

Undistributed  profits  tax . 

1 

Federal  capital  stock  tax . .  . 

159 

Federal  excises. 

2, 165 

Federal-State  payroll  taxes 

209 

State  income  taxes ............ 

4 

State  sales  taxes .                .  . 

6,795 

Property  taxes 

676 

State  corporate  taxes 

20 

Miscellaneous 

1 

Total  taxes 

10,106 

Sales 

13, 818 
5,939 
2, 082 
14.36 
12.36 

14, 274 
6,314 
2,405 
16.33 
14.65 

16,927 
7,042 
2,591 
17.33 
9.77 

15,960 
6  379 

Gross  profits .  . 

Net  income 

1,862 

Profit  rate 

12.42 

Equityratio 

18  26 

Federal  corporate  income  tax... . 

249 

301 

355 
2 
33 
0 
51 
24 
4 
191 
18 

240 

Undistributed  profits  tax 

0 

Federal  capital  stock  tax 

30 
0 

30 
0 

33 

Federal  excises.  - . ..    . 

0 

Federal-State  pajrroll  taxes 

108 

State  income  taxes ^ 

I 
181 
14 

19 

3 

184 

14 

14 

State  sales  taxes. 

3 

Property  taxes .. 

187 

State  corporate  taxes 

17 

Miscellaneous 

Total  taxes 

481 

551 

678 

602 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18390       CONCENTRATION  OF  ECONOMIC  POWER 

H.  W.  RICKELS  &  CO. 
($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. 


1,377 
332 
226 

22.99 
6.72 


33 


1,296 

293 

169 

17.85 

23.44 


RIKE  KUMLER  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 

S  tate  corporate  taxes 

M  iscellaneous 


Total  taxes. 


4,868 
1,059 
283 
10.17 
8.50 


40 


5,022 
1,084 
327 
12.74 
6.99 


6,077 
1,413 
453 
16.90 
5.07 


RITTER  DENTAL  MFG.  CO.,  INC. 


Sales 

Gross  profits. 
Net  income. . 
Profit  rate-.. 
Equitry  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. 


1,535 

290 

(351) 

(6. 02) 

85.03 


0 


2,310 
1,150 
354 
6.00 
31.64 


2,  794> 
1,457 
493 
8.50 
27.48 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 

RIVER  RAISIN  PAPER  COMPANY 

l$OO0's] 


18391 


1934 

1935 

3,952 

1,025 

344 

9.72 

2.25 

1936 

4,665 
1,119 
348 
10.00 
2.13 

1937 

Sales                                           

3,584 

1,240 

585 

17.86 

1.75 

6,024 

1,361 

427- 

Profit  rate             - 

12.95 

1.82 

69 

41 

41 
4 
3 
0 

16 
0 
X 

71 
7 

5« 

,1 

6 

1 

7 
X 

fe 

Federal  excises- .- - -- 

0 

% 

0 
0 
70 
4 

0 
X 

67 
5 

X 

72 

7 

150 

120 

142 

196 

ROLLINS  HOSIERY  MILLS,  INC. 


ROME  CABLE  CORP. 


Sales                                                   - -- - 

2,530 

586 

(25) 

(1. 12) 

10.92 

2,832 

569 

(55) 

(2.47) 

5.13 

3,270 

674 

(33) 

(l.«5) 

6.06 

3,470 

879 

141 

Profit  rate     •                                 

8.47 

7.46 

23 

2 

2 

2 

1 

X 

X 

27 
X 

12 
X 
X 

25 
X 

35 

X 
X 

2 
X 

X 

X 

25 

X 

29 

29 

39 

84 

Sales                                             '           - 

1,470 

235 

2 

0.09 

12.56 

4,416 

602 

110 

Profit  rate          - 

5.99 

5.81 

0 
0 
4 
0 
5 
1 
0 
7 
X 

16 

10 

3 

0 

Federal-State  payroll  taxes            . - 

19 

3 

X 

Property  taxes                                    

5 

State  corporate  taxes                          

X 

Totaltaxes     

17 

64 

...  Indicate  no  data  available. 
X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18392       CONCENTRATION  OF  ECONOMIC  POWEH 

ROOS  BROTHERS  INCORPORATED 
[SOOO's] 


1934 

3,866 
1,189 
199 
10.00 
4.34 

1935 

4,512 
1,490 
360 
16.91 
4.32 

1936 

5,081 
1,645 
386 
17.  64 
3.  .56 

1937 

Sales 

5,587 

'  iross  profits 

1  826 

Net  income 

406 

Profit  rate       

17.53 

Equity  ratio _ 

3.33 

Pederal  corporate  income  tax    .._ 

30 

54 

"     58 
9 
5 

62 

Undistributed  profits  tax      ..  ._ _. 

24 

i'ederal  capital  stock  tax.  - 

3 

1 

3 

1 

5 

Federal  excises _ 

Federal-State  payroll  taxes 

9 
16 

30 

State  income  taxes     . 

2 

9 

16 

State  sales  taxes  _  _ _ 

Property  taxes.  -_ 

18 
X 
X 

18 
X 
X 

i9 
X 
X 

19 

State  corporate  taxes .     . 

X 

Miscellaneous...- 

1 

Total  taxes    

54 

85 

116 

157 

ROYAL  TYPEWRITER  CO.,  INCORPORATED  i 


Sales 

9,942 
4,  757 
1,205 
9.16 
6.80 

12,825 
6.459 
2,065 
2.3.37 
4.75 

16. 666 
9,038 
3,274 
35.72 
5.54 

11,098 

Gross  profits. 

G,  07? 

Net  income .  . 

2,153 

Profit  rate 

Equity  ratio ._               ... 

6.  16 

Federal  corporate  income  tax... ._ 

Undistributed  profits  tax 

169 

323 

408 
171 
33 

336 

81 

Federal  capital  stock  tax. ... 

11 

20 

19 

Federal  excises 

Federal-State  payroll  taxes . 

91 
48 
12 
02 
18 

186 

State  income  taxes .... 

25 
4 
58 

8 

30 

5 

60 

10 

44 

State  sales  taxes 

9 

Property  taxes  . 

37 

State  corporate  taxes 

14 

Miscellaneous 

Total  taxes 

275 

448 

843 

726 

1  Calendar  years  1934-35-36;  1937  fiscal  year  (7  mo.'s  ended  7-31). 

RUDD  MANUFACTURING  CO. 


Sales 

1,249 

506 

(33) 

(1.21) 

76.56 

1,  775 

655 

38 

1.39 

26.48 

2,446 

870 

57 

2.12 

22.41 

3,055 

Gross  profits 

Net  income 

1,031 

87 

Profitrate       ...  . 

3.27 

Equityratio 

10.43 

Federal  corporate  income  tax 

3 

1 

7 

Undistributed  profits  tax . .. 

2 

2 

3 

2 

Federal  excises 

Federal-State  payroll  taxes 

8 

24 

State  sales  taxes 

Property  taxes. .      

ii 

10 

10 
9 

11 
19 

8 

State  corporate  taxes 

14 

Miscellaneous    .             .                  

Total  taxes..... 

23 

24 

42 

55 

-.  indicate  no  data  available. 
X  indicates  loss  tlian  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWEJ 

RYAN  AERONAUTICAL  COMPANY 

fSOOO's] 


18393 


1934 

1935 

1936 

217 

73 

5 

2.25 

3.41 

1937 

Sales                                                                          

58 

17 

6 

4.02 

4.32 

398 

140 

Net  income 

19 

Profit  rate               .                                         

5.81 

Equity  ratio 

7.54 

4 

X 
X 

X 

2 

Undistributed  profits  tax                  .            

X 

Federal  capital  stock  tax 

X 

1 

Federal-State  payroll  taxes 

1 

X 

X 
3 

7 

State  income  taxes  .          ._        

1 

I 

State  sales  taxes 

X 

1 

i 

1 

Total  taxes _ 

6 

5 

15 

SAFEWAY  STORES 


Sales 

242, 966 

53,045 

4.502 

10.12 

6.91 

294. 698 

58,  573 

4,178 

9.21 

3.29 

346,  178 

67, 982 

5,  351 

9.34 

2.41 

381,  803 

Gross  profits _ _ 

Net  income 

Profit  rate - 

72, 647 
4,S58 

7.  OS 

Equity  ratio          .             .                                 .  -          .             - 

1.33 

Federal  corporate  income  tax... 

686 

699 

950 
64 

57 

73S 

Undistributed  profits  tax 

15 

Federal  capital  stock  tax 

62 

89 

78 

Federal  excises 

Federal-State  pavrol!  taxes 

320 

75 
449 
863 
308 
299 

i,aw 

State  income  taxes     ....                            ..          ..... 

35 
1.37 
600 

84 
197 

58 
262 
607 
196 
233 

81 

State  sales  taxea.. 

Property  taxes 

469 
865 

State  corporate  taxes 

375 

M  iscellaneous 

342 

Total  taxes 

1,801 

2,144 

3,385 

4,113 

SCHENLEY  DISTILLERS  CORP. 


Sales 

40,275 

30,  816 

8.643 

43.15 

3.02 

63. 046 

48,274 

9.S29 

27.28 

5.  l.S 

82,  220 

61,  423 

in,  068 

2.5.  42 

2.16 

83, 863 

Gross  profits 

61. 622 

Net  income 

9,833 

Profit  Trtte 

13-93 

Equity  ratio 

1.S7 

Federal  corporate  income  tax 

1,301 

1,279 

1,775 

l,9Si 

Undistributed  profits  tax 

Federal  capital  stock  tax. 

87 
16,295 

117 
29,251 

121 
38,400 
62 
121 
3,295 
418 

103 

Federal  excises 

37,  4f>3 

Federal-State  payroll  taxes 

25S 

State  income  taxes 

12 

723 

1,755 

35 
2,  024 
1,052 

100 

State  sales  t^ixes 

3,390 

Property  taxes 

188 

State  corporate  taxes 

Miscellaneous 

8 

7 

19 

(j 

Total  taxes 

20, 182 

33, 765 

44,211 

43  439 

indicate  no  data  available. 

X  Indicates  less  than  $1,000. 


18394 


CONCENTRATION  OF  ECONOxMIC  POWER 


THE  SCHIFF  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. 


10, 900 

3,754 

514 

16.49 

8.75 


11,753 

4,293 

436 

13.31 

4.22 


13,  040 

4,744 

561 

17.28 

2.73 


23 
5 
102 
18 
■  -5 
35 


SCOTTEN  DILLION  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 - 


4,216 
2,763 
477 
11.47 
32.06 


57 


4 

1,709 


1,816 


4,229 
2,725 
523 
12.43 
40.41 


77 


4 
1,561 


4,304 
2,787 


15.34 
35.22 


7 
1,525 
6 
5 
0 
32 


1,671 


SCOTT  PAPER  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. 


9,012 
4,533 
1,083 
16.27 
10.73 


171 


11 
109 


10,  207 
4,981 
1,149 
17.39 
8.84 


168 


■<?l      299 


11,624 
5,609 
1,291 
19.45 
6.91 


201 
21 
14 

71 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18395 


SCRANTON  LACE  CO. 
ISOOO'sJ 


1934 

1935 

193C 

1937 

Sales        - 

3, 585 
1,579 
735 
26.13 
11.26 

3,398 

1.210 

^et  income  .     - - 

343 

Profit  rate            

12. 13 

23.77 

Federal  corporate  income  tax 

86 
7 
9 

28 

Undistributed  profits  tax 

6 

Federal  excises           

Federal-State  payroll  taxes . 

14 
48 

36 

8 

20 

18 

18 

State  corporate  taxes 

15 

202 

111 

SCRUOaS-VANDERVOORT-BARNEY,  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. 


13,658 

4,295 

347 


14,  763 

4,732 

661 


16, 469 
5,373 


128 


'  Fiscal  year  ended  July  31. 


SCULLIN  STEEL  CO. 


Sales 

Gross  profits. 
Net  income. - 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stoclc  tax 

Federal  excises 

Federal-State  payroll  taxes... 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

M  iscellaneous _ 


Total  taxes. 


596 
259 
(19) 
(0.27) 
.30 


625 
216 
(36) 
(0.  52) 
.21 


...  Indicate  no  data  available. 
X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


2,652 

604 

485 

6.56 

.21 


5,321 
1,886 
1,210 


137 


273 


18396 


CONCENTRATION  OF  ECONOMIC  POWER 


THE  SEAQRANE  CORPORATION 

[$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 -... 

Property  taxes ..'... 

State  corporate  taxes 

Miscellaneous 


Total  taxcs- 


611 

201 

(86) 

(6.  70) 

8.35 


853 

296 

4 

0.30 

12.10 


1936 


917 

306 

(31) 

(2.87) 

9.60 


SEEMAN  BROTHERS,  INCORPORATED 


1,731 
615 
152 

13.  71 
3.52 


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, 279 

1,593 

474 

11.71 

11.71 


104 


x5 


14, 103 

1,658 

588 

14,  15 

10.76 


15,  956 

1,820 

604 

14.31 

4.42 


15,310 
1,512 

307 
7.  3C 
5.41 


90 


SEIBERLINQ  RUBBER  CO. 


Sales 

6,109 

1,291 

(421) 

(9. 69) 

63 

7,327 

1,944 

349 

7.84 
68 

8,807 

2,092 

Net  income  - 

243 

Profit  rate 

5.48 

Equity  ratio          

69 

Federal  corporate  income  tax 

X 

X 

Undistributed  profits  tax ...: 

X 

Federal  capital  stock  tax. 

3 
352 

4 

411 

14 

X 

X 

28 

3 

2 

4 

398 

Federal-State  payroll  taxes 

i>i 

State  inqome  taxes 

X 
X 

31 
4 
2 

X 

State  sales  taxes 

X 

Property  taxes .          .. 

20 

State  corporate  taxes 

4 

M  iscellaneous 

2 

Total  taxes 

392 

462 

480 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWEH 

SENTRY  SAFETY  CONTROL  CORPORATION 

fSOOO'sI 


18397 


lOS't 

52 

34 

10 

3.75 

30.74 

1935 

1936 

1937 

Sales 

56 

33 

4 

1.50 

32.78 

108 

36 

2 

0.91 

56.12 

lOS 

Gross  profits 

37 

Net  Income 

Profit  rate ^ 

(0  23) 

Equity  ratio ^ 

10  78 

Federal  corporate  income  tax... j 

Undistributed  profits  tax 

Federal  capital  stock  tax 

X 

X 

X 

X 

Federal  excises.. 

Federal-State  payroll  taxes 

X 

1 

State  income  taxes 

State  sales  taxes 

Property  taies 

X 

2 
X 

X 

State  corporate  taxes  ..    ^..       .       ...         .         . 

1 

1 

1 

Miscellaneous 

X 

1 

1 

2 

3 

SERRICK  CORPORATION 


Sales... 

260 

107 

48 

43.13 

4.22 

2,694 
788 
286 

25>54 
1.96 

2,461 

Gross  profits .             •  ..           

394 

Net  income 

(91) 

Profit  rate....... 

(9.  52) 

Equity  ratio ... 

4.13 

Federal  corporate  income  tax 

0 

4 

12 

Undistributed  profits  tax 

Federal  capital  stock  tax i.... 

X 

3 
1 
2 

4 

Federal  excises 

1 

Federal-State  payroll  taxes.. 

41 

State  income  taxes     ....              .       .... 

State  sales  taxes 

X 

1 
1 
0 

8 

Property  taxes _ 

1 

16 

State  corporate  taxes... 

1 

Miscellaneous 

X 

Total  taxes 

7 

18 

82 

SERVEL,  INC. 


Sales 

19,233 
7,068 
2,682 
25.20 
2.88 

24,881 
10, 718 
5,085 
37.16 
3.03 

30,328 

Gross  profits , 

12,948 

Net  income 

5,723 

Profit  rate 

40.76 

Equity  ratio 

2.81 

Federal  corporate  income  tax 

408 

670 

768 

Undistributed  profits  tax 

Federal  capital  stock  tax 

39 
879 

68 

1,164 

63 

4 

6 

113 

X 

60 

Federal  excises 

1,402 

Federal-State  payroll  taxes .\ 

197 

State  income  taxes 

6 
2 
99 

1 
3 

6 

State  sales  taxes 

3 

Property  taxes 

189 

State  corporate  taxes.. 

X 

Miscellaneous 

Total  taxes 

1,436 

3,067 

2,676 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  Indicate  deficit. 


18398 


CONCENTRATION  OF  ECONOMIC  POWER 

8ET0N  LEATHER  00 

[$000'S] 


1934 

1935 

1936 

1937 

Sales   - - 

1,159 

150 

26 

3.21 

9.98 

1,719 

278 

133 

14.47 

3.22 

2,166 

290 

137 

14.01 

2.22 

2,250 

293 

105 

10.42 

3.21 

4 

20 

19 
11 
1 
X 

15 

6 

i 

1 
X 

3 

X 

8 

5 
X 

6 

6 
X 

6 

X 

10 

27 

37 

38 

SHARON  STEEL  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. 


11,246 

3,268 

387 

2.00 

2.01 


35 


15,625 

4,346 

1,414 

10.02 

1.30 


21,186 
4,970 
1,708 
11.31 
2.94 


198 
75 
20 


508 


SHARP  AND  DOHME  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. 


8,365 
5,174 
1,096 
11.14 
30.95 


146 


236 


8,556 

4,952 

903 

9.38 

25.05 


17 


9,519 
5,547 
1,366 
13.99 
12.01 


92 


.     -  indicate  no  data  available. 
X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18399 


SIGNAL  OIL  AND  GAS  CO. 

[$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 1... 


Total  taxes. 


1934 


13,407 

3,832 

229 

6.86 

0.24 


15 


72 


1935 


14,363 

4,765 

251 

6.77 

0.18 


67 


1936 


20, 374 
6,520 
1,208 
27.84 
0.30 


86 


206 


1937 


23,669 
7,716 
1,323 
32.67 
0.47 


212 


417 


SIQNODB  STEEL  STRAPPING  CO. 


Sales 

2,482 
1,060 
109 
6.82 
7.83 

2,820 
1,216 
236 
13.81 
2.78 

3,169 
1,216 
455 
27.,64 
2.19 

3,707 

Gross  profits                    .. 

1,402 

494 

Profltrate     

28.30 

Equity  ratio 

2.61 

Federal  corporate  income  tax                             

13 

26 

70 
4 
6 

74 

4 

Federal  capital  stock  tax  ..  . 

6 
X 

0 

Federal  excises                                  .                  .. . 

X 

X 

Federal-State  payroll  taxes 

6 

21 

State  sales  taxes                             ..         -... 

1 
8 
1 

1 
10 
2 

i 

11 
3 

1 

Property  taxes 

14 

State  corporate  taxes 

3 

Totaltaxes   

23 

46 

101 

123 

THE  8ILEX  COMPANY 


Sales 

2,343 

936 

309 

Profit  rate     

61.71 

Equity  ratio 

3.02 

Federal  corporate  income  tax 

63 

Undistributed  profits  tax...'. 

34 

Federal  capital  stock  tax 

8 

Federal  excises 

Federal-State  payroll  taxes 

11 

State  income  taxes 

t 

State  sales  taxes 

Property  taxes 

6 

State  corporate  taxes 

Miscellaneous 

Totaltaxes 

119 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18400 


CONCENTRATION  OF  ECONOMIC  POWER 


SIMMONS  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 


38 
712 


434 
29 


1,250 


30,692 

10,992 

2,700 

10.00 

1.55 


250 


41 

406 


408 
67 


1,185 


1936 


41,332 

15, 165 

6,116 

23.69 

1.43 


834 
"74' 


IfiO 
234 


452 
59 


1,813 


SIVYER  STEEL  CASTING  COMPANY 


Sales.. - 

Gross  proflts- 
Net  income.. 
Profit  rate--. 
Equity  ratio. 


Federal  corporate  income  tax. 

Undi.stributed  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- 


728 

225 

5 

0.32 

70.39 


1,165 

316 

48 

3.13 

60.82 


1,978 

556 

200 

12.98 

15.34 


SKELLY  OIL  COMPANY  AND  SUBSIDIARIES,  CONSOLIDATED 


Sales - -- 

29.326 
15, 105 

35, 749 

19,  253 

5,934 

13.24 

2.19 

41, 484 

Gross  profits  -..    .-    -- ..    ..    

23,092 

Net  income ..    ..    ..    

3,551 
8.91 
2.50 

7.635 

Profit  rate          

15.17 

Equity  ratio 

2.35 

Federal  corporate  income  tax               . . 

269 

411 

458 

Undistributed  profits  tax 

Federal  capital  stock  tax 

42 
42 

36 
31 
55 
30 
289 
336 
32 
36 

35 

Federal  excises 

40 

Federal-State  payroll  taxes '. 

164 

20" 

197 
257 
23 
34 

83 

State  sales  ta,xes -. 

477 

Property  taxes 

344 

State  corporate  taxes 

58 

Miscellaneous  .    .. 

32 

Total  taxes ..  .. 

884 

1.256 

1,691 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18401 


L.  C.  SMITH  &  CORONA  TYPEWRITERS,  INC. 

(SOOO's) 


1934 

1935 

1936 

1937 

Sales 

10, 336 

5,914 

981 

16.90 

2.21 

13,069 
7,328 
1,515 
18.40 
2.02 

11. 914 

6,395 
716 

'  Gross  profits 

t  Net  income ...                                           ... 

'  Profit  rate 

8.85 

2.17 

Federal  corporate  income  tax 

142 

169 

100 

14 

179 

Undistributed  profits  tax 

76 

Federal  capital  stock  tax 

13 

14 

Federal  excises 

Federal-State  payroll  taxes .. 

57 
26 

9 
37 
15 

1 

204 
75 
16 
43 
11 
4 

226 

State  income  taxes 

73 

State  sales  taxes 

11 

Property  taxes 

45 

State  corporate  taxes.. .  . 

11 

Miscellaneous 

2 

Total  taxes 

300 

636 

637 

SNIDER  PACKING  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. 


5,559 
1,687 

832 
20.52 

.79 


103 


6,242 

1,774 

787 

22.10 

1.97 


99 


5,496 
1,635 
691 
18.88 
2.57 


6,046 

1,393 

349 

9.40 

3.01 


140 


SOCONY-VACUUM  OIL  COMPANY,  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. 


456, 016 

213,  349 

34,838 

4.86 

3.83 


2,940 


974 
17,  462 


258 

49. 849 

6,443 

798 

1,078 


79,802 


454,064 

193,  815 

31,003 

4.34 

4.12 


1,466 


343 
18, 496 


233 

56,880 

5,681 

617 

1,837 


85,553 


498.  528 

21;.  754 

56.017 

7.76 

4.03 


4,812 

1,913 

524 

20, 034 

657 

332 

64,994 

5,762 

1,011 

2,320 


U2,78S 

240,681 

73,338 

9.02 

2.98 


6,558 

1,925 

584 

21,239 

2,169 

606 

69,  719 
6,123 
1,063 
3,355 


101,639  I      113,341 


indicate  no  data  available. 

X  Indicates  less  than  $1,000. 


18402 


CONCENTRATION  OF  ECONOMIC  POWER 


SOLAB  MANUFACTURING  CORP. 
I$000's) 


1934 

1935 

1936 

1937 

Sales                                                                        

1.830 
633 
246 

58.09 
2.11 

1,887 

489 

71 

16.29 

Equity  ratio                              .  -                -  

3.56 

■      ■■- 

37 
19 
3 

8 

1 

Federal  capital  stock  tax  ..       

3 

7 
17 
X 

23 

1 

X 

Total  taxes                              -       

83 

36 

BOSS  MANUFACTURING  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. 


318 

120 

34.98 

4.36 


20 


1,140 
447 
233 

49.60 
3.30 


72 


SOUNDVIEW  PULP  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. 


1,704 
635 
218 


2,600 

856 

304 

7.31 

8.98 


3,116 
1,143 


10.65 
2.78 


100 

"is" 


160 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 

SOUTH  BEND  LATHE  WORKS 

IJOOO's) 


18403 


1934 

193?; 

1930 

1937 

Sales                                                            -- 

1,913 
823 
358 

30.93 
6.22 

2,378 

Gross  profits 

1,040 

462 

Profit  rate             - 

34.64 

Equity  ratio                              .                     ...               

5.99 

Federal  corporate  income  tax .- 

61 
20 

7 

59 

TTndistrihiitArlprnflt.<)  t.^* 

18 

Fflrlflral  f«pital  st.nob  tax 

5 

Federal  excises  

Federal-State  payroll  taxes ^ 

7 

26 

State  income  taxes              .      . .  

State  sales  taxes                                        .      .  .      - 

X 

8 

16 

Property  taxes 

10 

Miscellaneous 

1 

1 

Total  taxes 

94 

135 

SOUTH  COAST  CORPORATION 


Sales                       ...          .' 

4,266 

1,423 

662 

12.00 

1.20 

4,660 

Gross  profits _ 

1,601 

Net  income 

462 

Profit  rate             .-. 

8.49 

Equity  ratio 

1.03 

Federal  corporate  income  tax 

90 

34 

6 

67 

Undistributed  profits  tax 

3 

Federal  capital  stock  tax                                                .      

6 

Federal  excises 

226 

Federal-State  payroll  taxes 

4 
18 

17 

State  inmmn  tnrM 

12 

State  sales  taxes 

X 

Property  taxes 

47 
8 
1 

61 

State  corporate  taxes              

7 

Miscellaneous               ,          ..      ...         ..      .. 

2 

Total  taxes 

207 

380 

A.  O.  SPALDING  &  BROS.,  INC, 


Sales 

13,326 

4,977 

(628) 

(6.06) 

18.75 

13,987 

5,279 

(888) 

(7.90) 

14.11 

13,761 

Gross  profits 

^166 

Net  income.         .      

(283) 

Profit  rate 

(2.69) 

Equity  ratio 

14.04 

Federal  corporate  income  tax 

Undistributed  profits  tax 

Ferteral  p^pital  stock  tfti 

13 
663 

8 
696 
33 

8 

Federal  excises 

672 

Federal-State  payroll  taxes ^ 

101 

State  income  taxes 

State  sales  taxes 

3 

126 

44 

16 

6 
170 
41 
32 

7 

Property  taxes 

162 

State  corporate  taxes 

41 

Miscellaneous 

6 

Total  taxes 

754 

886 

886 

—  indicate  no  data  available. 
X  Indicates  less  than  $1,000. 
(  )  indicate  deficit. 


124491 — 41— pt.  31-A- 


-26. 


18404  CONCENTRATION  OF  ECONOMIC  POWER 

8PBAR  AND  COMPANY 
IfOOO'sj 


1934 

1935 

1936 

1937 

Sales 

6,511 

2,078 

148 

2.14 

6.26 

7,022 

2,335 

352 

4.88 

6.83 

9,851 
3,771 
1,224 
16.21 
2.21 

9,703 

Gross  profits . .  .                 . 

3,380 

Net  income 

775 

Profit  rate.. 

9.47 

Equity  ratio 

2.23 

24 

119 

22 

Federal  capital  stock  tax 

3 

4 

6 

6 

Federal  excises 

Federal-State  payroll  taxes 

24 
X 

10 

.102 

25 

2 

58 

45 

State  sales  taxes    ..         .i               .. 

5 

112 

16 

5 

114 

17 

1 

7 

Property  taxes ■. 

118 

State  corporate  taxes 

23 

Miscellaneous 

2 

Total  taxes        .         .                       -                 

136 

141 

193 

400 

SPENCER  ZELLOQQ  &  SONS,  INC.  ' 


Sales 

25,820 

4.037 

1.297 

7.35 

9.36 

35,892 

4,957 

1,634 

9.01 

3.61 

45,629 

Gross  profits 

5,718 

Net  income 

1,863 

Profit  rate 

9.09 

Equity  ratio 

1.88 

Federal  corporate  income  tax.. j 

163 

139 

188 

Undistributed  profits  tax 

Federal  capital  stock  tax 

9 

16 

16 

Federal  excises  .            

Federal-State  payroll  taxes 

9 
18 

28 

State  income  taxes 

9 

27 

State  sales  taxes 

Property  taxes 

108 

104 

109 

State  corporate  taxes .      .    .... 

2 

Miscellaneous  . 

Total  taxes 

289 

286 

370 

'  Fiscal  year  ended  Aug.  31. 


SPERRY  CORPORATION 


Sales       

14,684 
3,611 
2,913 
31.25 
4.73 

16, 361 

Gross  profits 

3,378 
2,166 
28.47 
6.62 

3,101 
1,893 
21.86 
6.84 

6.040 

Net  income 

3,692 

Profit  rate .               

34.86 

Equity  ratio 

1.97 

Federal  corpyorate  income  tax 

1          255 
103 

181 
110 

269 
87 

Undistributed  profits  tax 

686 

Federal  capital  stock  tax 

161 

Federal  excises 

Federal-State  payroll  taxes 

38 

189 

State  income  taxes.  ... 

State  sales  taxes ..       ... 

X 

29 

1 
36 

1 
38 

Property  taxes 

60 

State  corporate  taxes 

Miscellaneous 

8 

8 

* 

Total  taxes 

395 

336 

437 

975 

Indicate  no  data'avallablc. 

X  indicates  loss  than.$l,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18405 


8PICER  MANUFACTURING  CORP. 
[$000's] 


1934 

1935 

1936 

1937 

Sales                                                       - 

13, 559 
3,502 
1,739 
21.66 
4.45 

15,059 

2,098 

751 

10.28 

8.66 

2,177 

696 

9.03 

6.05 

3,762 

Net  income                       .. 

1,515 

Profit  rate 

17.80 

Equity  ratio    . 

3.14 

Federal  corporate  income  tax    . 

78 

64 

231 
16 
22 

8 
48 
34 

2 
65 
23 

186 

Undistributed  profits  tax 

26 

Federal  capital  stock  tax    ... 

19 

7 

19 
6 

21 

Federal  excises                                                                  

7 

Federal-State  payroll  taxes 

161 

State  income  taxes    . 

7 

1 

61 

21 

20 

State  sales  taxes 

4 

Property  taxes 

62 
7 

72 

Slate  corporate  taxes 

23 

Total  taxes 

173 

179 

449 

521 

SPIEGEL,  INCORPORATED 


Sales 

26,262 

11,180 

3,348 

32.69 

1.61 

34, 012 

13,704 

2,867 

18.27 

2.49 

44, 695 

17,566 

4,618 

26.35 

1.29 

56,118 

Gross  profits 

20,381 

Net  income '. 

3,254 

Profit  rate 

14.08 

Equity  ratio 

1.54 

Federal  corporate  income  tax    '... 

221 

192 

198 
158 
56 

264 

Undistributed  profits  tax       .         ...      .            

Federal  capital  stock  tax 

66 

SO 

60 

Federal  excises 

1 

Federal-State  payroll  taxes 

37 

149 

State  income  taxes 

State  sales  taxes 

23 
30 
3 
X 

38 
22 
4 

72 

80 

4 

90 

Property  ta.xes 

91 

State  corporate  taxes 

7 

Miscellaneous 

Total  taxes 

333 

306 

605 

662 

A.  E.  STALEY  MANUFACTURING  CO. 


Sales 

15,606 

4,313 

682 

4.01 

2.47 

21,655 

5,955 

1,959 

12.41 

1.67 

22,730 

Gross  profits 

3,824 

Net  income 

131 

Profltrate 

.85 

Equity  ratio 

1.83 

Federal  corporate  income  tax 

52 

229 

25 

23 

4 

30 

1 

2 

117 

6 

6 

4 

Undistributed  profits  tax 

0 

Federal  capital  stock  tax.. 

22 
141 

20 

Federal  excises.. 

0 

Federal-State  payroll  taxes 

88 

State  income  taxes 

X 

1 

117 

6 

16 

2 

State  sales  taxes 

2 

Property  taxes 

124 

State  corporate  taxes 

6 

Miscellaneous 

6 

Total  taxes 

354 

442 

251 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(.J  indicate  deficit. 


18406 


CONCENTRATION  OF  ECONOMIC  POWER 


STANDARD  BRANDS  INCORPORATED 
[$000'sl 


1934 


1936 


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. 


100, 449 

47,784 

16, 097 

27.00 

11.77 


2,012 


89 
918 


165 
10 

415 
93 
37 


3,739 


102, 040 

47, 916 

14,890 

24. 81 

12.47 


114, 976 

50,386 

17, 302 

28.19 

8.25 


1,985 


194 
2,142 


191 

14 

444 

109 

32 


2,661 

70 

268 

2,252 

105 

232 

8 

526 

123 

47 


5,111 


122, 517 

47,059 

11,851 

16.89 

11.82 


1,742 

2 

220 

2,441 

502 

360 

12 

484 

162 

62 


6,987 


THE  STANDARD  COMMERCIAL  TOBACCO  COMPANY, 

INC. 

Sales 

58 

13 

139 

6.75 

7.29 

629 

209 

286 

10.35 

4.52 

222 
37 

150 
6.10 
2.64 

Gross  profits 

50 

Netincome 

(96) 

Profit  rate 

(3.63) 

Equity  ratio 

2.09 

Federal  corporate  income  tax 

X 

32 

Undistributed  profits  tax 

Federal  capital  stock  tax 

5 

2 

2 

X 

Federal  excises 

Federal-State  payroll  taxes ^.. 

X 

2 

State  income  taxes 

State  sales  taxes 

X 
X 

3 
X 

X 
X 

9 

1 
X 
3 

X 

Property  taxes 

X 

State  corporate  taxes 

2 

Miscellaneous .. 

Total  taxes 

8 

43 

6 

4 

STANDARD  OIL  COMPANY  OF  CALIFORNIA 


Sales 

130, 986 

78,929 

20,000 

3.73 

59.85 

134, 772 

74,388 

19,  722 

3.64 

30.00 

153,  253 

80.062 

24,876 

4.56 

27.81 

192, 146 

Gross  profits 

106,686 

Net  Income 

45,668 

Profit  rate 

8.24 

Equity  ratio 

30.13 

Federal  corporate  income  tax 

1,652 

1,108 

1,545 

328 
446 
335 
297 
120 
3,823 

4,313 

Undistributed  profits  tax 

Federal  capital  ptock  tax..  .  . 

348 
377 

343 

400 

345 

Federal  excises 

374 

Federal-State  payroll  taxes 

1,203 

State  income  taxes 

68 

176 

348 

State  sales  taxes 

408 

Property  taxes 

3,379 

3,659 

4,138 

State  corporate  taxes 

Miscellaneous 

171 

332 

243 

429 

Total  taxes •. 

6,996 

6,018 

7,138 

11,558 

Indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18407 


STANDARD  OIL  COMPANY  OF  INDIANA 
(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 


1,968 


507 
17,920 


24 

48,829 

4,667 

196 

220 


293,  219 

138, 127 

34, 457 

5.25 

14.17 


3,661 


820 
18,984 


152 

51, 997 

4,627 

227 

858 


74, 331         81, 326 


1936 


331,176 

148,  983 

54,568 

8.22 

12.76 


6,399 
152 

1,001 

21,274 

588 

170 

59, 113 

4,820 
281 
90S 


94,703 


1937 


366,  521 

172, 873 

65, 373 

9.56 

12.37 


7,256 
415 

1,029 
22, 212 

1,871 

574 

64,287 

5,043 
361 
877 


103,  925 


STANDARD  OIL  CO.  INC.— KENTUCKY 


Sales - -- 

40,258 

13,  759 

2,468 

7.31 

7.87 

45,631 

18,346 

4,589 

13.48 

6.25 

53,121 

Gross  profits -.        ..  .  

19,637 

Net  income     .              -.                                         ...-. 

5,068 

Profit  rate 

14.77 

6.04 

Federal  corporate  income  tax    .                    

270 

642 

732 

Undistributed  profits  tax. 

Federal  capital  stock  tax 

34 

28 

37 

Federal  excises.          . 

Federal-Stete  payroll  taxes 

X 

24 

65 
164 

274 

166 

State  sales  taxes 

Property  taxes 

456 

14 

316 

449 

13 

307 

497 

State  corporate  taxes 

19 

280 

Total  taxes    

1,114 

1,648 

2,005 

STANDARD  OIL  CO.,  OF  NEBRASKA 

Sales 

5,936 
1,437 
(595) 
(11.24) 
16.78 

5,924 

1,805 

(21) 

(.40) 

24.07 

5,942 

1,698 

34 

.67 

21.99 

6,334 

Gross  profits .  .                .            

1,426 

Net  income 

(96) 

Profit  rate ^ 

(1. 97) 

Equity  ratio 

24.70 

Federal  corporate  Income  tax 

Undistributed  profits  tax 

Fpfifirftl  r»pit.ft.l  stnc.k  tft» 

4 

6 

5 

4 

Federal  excises 

Federal-State  payroll  taxes ^ 

8 

22 

State  income  taxes 

State  sales  taxes 

Property  taxes 

107 
2 
2 

96 
2 
2 

95 
2 

2 

95 

State  corpwrate  taxes 

2 

Miscellaneous 

2 

Total  taxes 

115 

108 

112 

215 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
( )  Indicate  deficit. 


18408 


CONCENTRATION  OF  ECONOMIC  POWER 


THE  STANDARD  OIL  COMPANY  OF  OHIO 

[SOOO'sV 


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. 


42, 074 

12,  978 

(1, 835) 

(4. 14) 

8.54 


0 
0 
0 
500 
37 
76 


1935 


44,380 

15, 192 

3,060 

6.53 

8.68 


478 
35 
87 


921 


1936 


51,441 

18,003 

5,336 

10.98 

6.13 


640 

353 

63 

6 

82 
23 


576 
37 
61 


1,841 


THE  STANDARD  PRODUCTS  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  pajToll  taxes.. . 

State  income  taxes 

State  sales  taxes 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


182 
30 
12 
0 
4 
0 


230 


6,354 
1,404 
843 
55.20 
2.03 


126 

67 

12 

0 

20 

0 

0 

5 

1 


231 


STANDARD  STEEL  SPRING  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. 


3,827 

637 

137 

7.52 


56 


4,549 

683 

170 

9.10 

8.08 


77 


4,517 

646 

191 

8.38 

2.95 


17 


83 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  Indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 

A.  STEIN  &  COMPANY 
[SOOO's] 


18409 


1935 


1936 


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. 


4,517 

1,388 

384 

9.04 

14.  f.5 


45 


4,649 
1,524 
450 
11.38 
15.88 

58 


4,726 

1,603 

534 

14.67 

9.44 


4,877 
1,694 
473 
12.71 
13.47 


STERLING  ALUMINUM  PRODUCTS,  INC. 


Sales - - 

1,607 
448 
408 

97.99 
2.69 

2.019 
598 
502 

96.80 
3.01 

2,237 
591 

473 

Profit  rate  - 

77  33 

Equity  ratio - 

4  93 

Federal  corporate  income  tax 

59 
X 
6 
0 

y 

71 
10 
5 
4 
3 

64 

Undistributed  profl ts  tax 

11 

Federal  capital  stock  tax  -- . 

5 

g 

Federal-State  payroll  taxes 

10 

State  income  taxes.. 

State  sales  taxes         ...          .  . 

3 
2 
X 

5 
3 
1 

5 

State  corporate  taxes - 

X 

Miscellaneous - -". 

Total  taxes... _ 

70 

102 

107 

STEWART-WARNER  CORPORATION 


Sales. ... 

17,  075 

4,884 

616 

5.34 

9.98 

20, 479 

6,449 

2,002 

15.24 

7.55 

27,075 
7,871 
2,695 
19.24 
4.75 

30, 9R1 
8,495 
2,344 
15  72 

Gross  profits . 

Profit  rate 

Equity  ratio 

3  43 

Federal  corporate  income  tax... . 

23 

271 

423 
142 
29 
386 

78 
10 

374 
86 
36 
463 
293 

Undistributed  profits  tax 

Federal  capital  stock  tax - 

■    28 
180 

34 
166 

Federal  excises 

Federal-State  payroll  taxes ..^ 

State  income  taxes 

7 

State  sales  taxes 

X 

Property  taxes 

147 
6 

177 
4 

221 
5 

201 
6 

State  corporate  taxes 

Miscellaneous 

Total  taxes 

384 

652 

1,294 

1,466 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18410 


CONCENTRATION  OF  ECONOMIC  POWER 


STOKLEY  BROTHERS  &  COMPANY,  INC* 
[$000's] 


1934 

1035 

1936 

1937 

Sales 

14,226 
3,023 
1,566 
26.65 
2.24 

17,846 
3,470 
1,987 
27.03 
1.83 

16  686 

Gross  profits 

2,892 

Net  income 

49 

Profit  rate ^    .      ..-           

0.49 

Equity  ratio 

99 

Federal  corporate  income  tax... 

189 

254 
22 
8 

4 

Undistributed  profits  tax     .  .. 

Federal  capital  stock  tax                                   ..  ..        

16 

10 

Federal  excises 

33 

7 
2 

68 
3 

10 

106 

State  income  taxes 

25 

State  sales  taxes -... 

3 

48 
5 

1 

1 

Property  taxes 

82 

State  corporate  taxes , -.. 

6 

Miscellaneous —  - 

1 

Total  taxes 

262 

407 

235 

'  Fiscal  year  ended  May  31. 

«  Does  not  include  a  subsidiary  which  was  acquired  as  of  January  1936,  Santa  Cruz  Fruit  Packing  Co. 


THE  STUDEBAKER  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. 

M  iscellaceous 


Total  taxes. 


33,838 
4,149 
(1, 535) 


16 
904 


10 

25 

422 

1 

14 


1,392 


68,929 

12,100 

3,346 

13.04 

1.56 


565 
10 

47 

1,614 

127 

8 

49 

358 

1 

8 


2,787 


SULLIVAN  MACHINERY  COMPANY 


Sales          

4,047 
1,023 
(356) 
(5.04) 
27.10 

4,892 
1,377 
(80) 
(1. 19) 
14.77 

6,496 
1,956 
180 
2.74 
6.87 

8  957 

Gross  profits 

2,811 

Net  income 

325 

Profit  rate 

4.74 

Equity  ratio .. 

4.27 

Federal  corporate  income  tax     . . 

Undistributed  profits  tax 

Federal  capital  stock  tax .- 

6 

5 

10 

10 

Federal  excises 

Federal-State  payroll  taxes 

24 

02 

State  income  taxes _ 

State  sales  taxes  ._. 

Proppi-ty  taxes 

61 
5 

72 
5 

63 
11 

64 

State  corporate  taxes 

13 

Miscellaneous 

Total  taxes 

72 

82 

108 

179 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  TOWEU 


18411 


SUTHERLAND  PAPER  COMPANY 
[SOOO's] 


1934 


1936 


1937 


Sales 

Gross  profits. 
Net  income. - 

Profit  rate 

Equity  ratio - 


5,903 
1,480 
575 
14.96 
12.18 


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 


70 


Total  taxes. 


6,560 
1,681 
724 
17.35 
13.83 

106 


7,495 
1,997 
978 
22.31 
10.23 


136 
33 
20 

0 
20 

0 

0 
41 
10 

0 


260 


8,245 
2,346 
1,089 
23.24 
10.77 

149 
44 
16 

0 
66 

0 

0 
44 
10 

0 


329 


SWEET'S  STEEL  COMPANY 


SWIFT  AND  COMPANY 


Sales 

1.432 
340 
105 

10.97 
1.78 

1,599 

291 

(39) 

Profit  rate 

(4. 10) 

1.37 

9 
7 
1 
X 
4 
5 

Undistributed  profits  tax 

Federal  capital  stock  tax 

1 

X 

Federal-State  payroll  taxes .        .....         

12 

State  income  taxes  .  .               .                                  ... 

X 

State  sales  taxes 

5 
3 

5 

5 

Total  taxes         - .  . 

34 

23 

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- 


767,227 

172, 372 

13,  740 

5.22 

3.06 


2,193 


209 
1,334 


75 

74 

2,556 

78 

232 


6,751 


831,672 

171,  391 

16,  453 

6.17 

5.21 


2,141 


210 
1,480 
721 
187 
82 
2,914 
120 
842 


8,697 


885,837 

187, 808 

12, 959 

4.91 

3.61 


1,751 

7 

188 

607 

2,528 
234 
115 

3,031 
219 
246 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18412 


CONCENTRATION  OF  ECONOMIC  POWER 


TAYLOR  MILLING  CORP. 
[$000's] 


1934 

1935 

1936 

1937 

Sales 

3,268 

605 

238 

11.71 

11.20 

4,172 

562 

152 

7.71 

10.57 

5,757 
952 
457 

21.87 
1.83 

7,429 
746 

Gross  profits..  1 

Net  income 

192 

Profit  rate.. 

9  05 

Equity  ratio 

1  93 

Federal  corporate  income  tax 

Undistributed  profits  tax 

42 

38 

69 
7 
3 

28 
10 

Federal  capital  stock  tax .  . 

2 

3 

3 

Federal  excises , 

Federal-state  payroll  taxes 

4 
9 

15 

State  income  taxes 

4 

12 

20 

State  sales  taxes 

Property  taxes. 

18 
X 
X 

20 
X 

1 

23 
X 

1 

33 

State  corporate  taxes. - 

X 

Miscellaneous . 

2 

Total  taxes •. 

66 

74 

116 

111 

TENNESSEE  CORPORATION 


Sales 

Gross  profits. 
Net  income. . 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  profit'  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. 


7,033 
2,184 
411 
2.28 
4.85 


5 
10 
109 
26 


7,915 
2,437 
382 
2.07 
4.67 


10 
115 
30 


9,657 

2,685 

554 

2.80 

3.29 


2 
129 
45 


THE  TEXAS  CORPORATION 


Sales 

272, 619 

106, 875 

12,  397 

2.81 

2.48 

300, 237 

118,608 

23,716 

5.50 

2.62 

337, 468 

140, 804 

45, 838 

9.82 

2.61 

376, 238 

Gross  profits 

164, 374 

Net  income.. 

65,291 

Profit  rate.. 

12.22 

Equity  ratio 

3.86 

Federal  corporate  income  tax 

965 

1,161 

3,100 
380 
239 
965 
417 

6,275 

Undistributed  profits  tax 

825 

Federal  capital  stock  tax 

248 
662 

295 
632 

388 

Federal  excises 

850 

Federal-State  pajroll  taxes. 

1,479 

State  income  taxes 

State  sales  taxes 

4,230 

4,710 

5,494 

6,203 

Property  taxes 

State  corporate  taxes 

339 
766 

262 
80C 

322 
858 

449 

Miscellaneous 

1,000 

Total  taxes 

7,210 

7,860 

11, 775 

17,  469 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18413 


TEXAS  PACIFIC  COAL  AND  OIL  COMPANY 
[$000's] 


1934 

1935 

1936 

1937 

Sales 

3,735 
1,190 
(198) 
(2.  18) 
10.32 

3,010 
1,424 
38 
0.42 
25.  77 

3,321 
1,814 
6.'>2 
6.  85 
28.00 

3.958 

2,612 

Net  income                   . 

980 

Profit  rate                                     .                          

9. 65 

Equity  ratio _. 

33.53 

Federal  corporate  income  tax 

3 

4 

4 

1 

Federal  capital  stock  tax                              .  .          -.. 

10 
6 

9 

5 

11 
4 

8 
4 
53 
83 
3 
0 

10 

Federal  excises _ 

Federal-State  payroll  taxes 

4 
29 

State  income  taxes -.. 

State  sales  taxes 

4 

42 

100 

2 

8 
38 
83 

3 

4 
81 

Property  taxes                  .                                                .      . 

90 

State  corporate  taxes .- .  _-_ 

4 

M  iscellaneous 

0 

Total  taxes 

167 

150 

170 

223 

THOMPSON  PRODUCTS,  INCORPORATED 

Sales i 

6,329 

1,817 

451 

10.  43 

6.72 

8,328 
2,376 

817 
15.41 
2.90 

11,408 

3,277 

974 

15.16 

3.51 

14, 577 

Gross  profits ._.  

3,978 

Net  income... _ 

Profit  rate 

1,105 
15.94 

Equity  ratio 

3.52 

Federal  corporate  income  tax 

Undistributed  profits  tax. 

48 

95 

131 

32 

16 

51 

41 

1 

1 

84 

8 

143 
25 

Federal  capital  stock  tax 

10 
30 

11 
33 

20 

Federal  excises 

Federal-State  payroll  taxes 

64 
161 

State  income  taxes 

X 
X 

•-58 
5 

X 
X 
65 
6 

1 

State  sales  taxes    .      . 

1 

Property  taxes , .  

95 

State  corporate  taxes 

7 

Miscellaneous 

Total  taxes 

151 

210 

365 

517 

TIDE  WATER  ASSOCIATED  OIL  CO. 


Sales 

124, 584 

56,667 

8,942 

5.22 

4.16 

145, 177 

Gross  profits . .      .  . ...... 

65,286 

Net  income 

18, 281 

Profit  rate          

9.95 

Equity  ratio 

2.45 

Federal  corporate  income  tax 

1,211 

1 

276 

319 

175 

218 

10 

2,390 

97 

133 

1,323 

Undistributed  profits  tax 

Federal  capital  stock  tM 

213 

Federal  excises .  .      

307 

Federal-State  payroll  taxes". , 

804 

State  income  taxes i 

91 

State  sales  taxes... .'. 

21 

Property  taxes . 

2,362 

State  corporate  taxes. 

85 

Miscellaneous..  

354 

Total  taxes 

4,830 

5,560 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  Indicate  deficit. 


18414  CONCENTRATION  OF  ECONOMIC  POWER 

,    TIMKEN  DETROIT  AXLE  COMPANY 
[SOOO'sL 


1934 

1935 

1936 

1937 

Sales 

21,  279 
7,032 
2,621 
18.33 
8.51 

23,  539 

Gross  profits. __ .: .._ 

Net  income. ._ ■_     . 

5,447 

528 

3.79 

16.48 

5,757 
1,402 
9.56 
16.22 

6,899 
2,281 

Profit  rate 

15.61 

Equity  ratio  .   _                  .        ^ 

10.51 

Federal  corporate  income  tax.. 

68 

211 

415 
20 
36 

385 

Undistributed  profits  tax ..  ,     .. 

60 

Federal  capital  stock  tax 

11 

17 

32 

Federal  excises ,_ ___ 

Federal-State  pay  roll  taxes 

64 
28 
1 
191 
22 

219 

State  income  taxes 

State  sales  taxes 

6 

16 

26 

1 

Property  taxes ._ 

174 
21 

184 
22 

244 

State  corporate  taxes _ 

30 

Total  taxes  . 

280 

450 

777 

997 

THE  TIMKEN  ROLLER  BEARING  CO. 


Sales 

21,  279 
7,032 
2,621 
18.  .33 
8.51 

23, 539 

Gross  profits 

5,447 

528 

3.79 

16. 48 

5,757 
1,402 
9.56 
16.22 

6,699 

Net  income  ... 

2,281 

Profit  rate.- ._  .■ 

15.61 

Equity  ratio 

10.51 

Federal  corporate  income  tax 

585 

1,345 

1,619 
X 

134 

22 

132 

1 

10 

220 

40 

2 

1,900 

Undistributed  profits  tax 

0 

Federal  capital  stock  tax 

56 
20 

77 
19 

112 

Federal  excises _ 

Federal-State  pay  roll  taxes __ 

26 
505 

State  income  taxes '_.. 

X 
X 

210 

38 

1 

1 

5 

207 

41 

2 

10 

State  sales  taxes 

22 

Property  taxes 

240 

State  corporate  taxes 

42 

Miscellaneous..  . 

4 

Total  taxes 

910 

1,697 

2,180 

2,861 

THE  TRANE  COMPANY 


Sales 

3,279 

1,491 

479 

42.99 

3.15 

4,495 

Gross  profits 

1,922 

Net  income 

513 

Profit  rate 

31.42 

Equity  ratio . 

5.71 

Federal  corporate  income  tax 

68 
39 
3 

68 

Undistributed  profits  tax 

12 

Federal  capital  stock  tax. 

4 

Federal  excises _ 

Federal-State  pay  roll  taxes. 

10 
30 

31 

State  income  taxes ._ 

23 

State  sales  taxes 

Property  taxes 

9 

1 

14 

State  corporate  taxes _. 

1 

M  iscellaneous 

Total  taxes 

160 

153 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18415 


TRUNZ  PORK  STORES,  INCORPORATED 
[$000 's] 


1934 

1935 

1936 

1937 

Sales                               - --- 

3,510 

927 

20 

1.61 

16.87 

4,112 

-765 

(124) 

(11.18) 

3.48 

4,276 

948 

37 

2.88 
7.78 

4,966 

1,113 

104 

Profit  rate                                        

7.80 

9.87 

3 

13 

3 


14 

1 

2 

2 

2 

2 

Federal-State  payroll  taxes                   -      _  -  

7 
6 
4 
10 

23 

■       6 

1 
12 

2 
3 
11 

5 

5 

9 

2 

2 

2 

3 

26 

33 

34 

62 

TWIN  COACH  COMPANY 


Sales                               - --- 

6,065 
1,524 

664 
22.55 

1.72 

7,918 
2,050 
1,028 
43.98 
3.24 

8,237 

Gross  profits                               -  

1,928 

841 

24.25 

1.70 

98 

158 

64 

16 

179 

13 

2 

1 

11 

3 

X 

144 

42 

9 
135 

11 

203 

50 

X 

2 

1 

9 
3 
X 

13 

1 

Miscellaneous                             - 

X 

Total  taxes                                          --  .- 

254 

447 

467 

UNDERWOOD  ELLIOTT  FISHER  CO. 


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. 


20,716 
10.  507 
2,990 
17.66 
12.92 


385 


66 

4 

151 


23,975 
11,942 
3,  551 
19.28 
11.  14 


455 


42 

6 

160 

10 


716 


27,312 
13,285 
4,284 
21.78 
8.65 


445 
0 
49 
0 
147 
55 
44 
161 
14 


915 


30, 767 

15, 382 

5,781 

27.16 

8.18 


803 
65 
52 
0 

482 
47 
15 

163 
17 


1,644 


Indicate  no  data  available. 

X  Indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18416 


CONCENTRATION  OF  ECONOMIC  POWER 


UNION  BAG  &  PAPER  COMPANY 

[$000 's] 


1934 


1935 


Sales 

Gross  profits - 
Net  income.- 
Profit  rate.. 
Equity  ratio. 


9,  2S8 
2,849 
791 
12.9f) 
11.16 


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,  535 

2, 302 

272 

3.riG 

9.86 


36 


11,771 

3,038 

439 

3.78 

3.28 


189 


15, 691 

5,82y 

1, 71U 

9.82 

1. 13 


21G 

6:) 

25 


144 

4fi 

2 

86 


UNION  SUGAR  COMPANY 


Sales 

Gross  proflts- 
Net  income.. 

Profit  rate 

Ecjuity  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  iscellanesous 


Total  taxes . 


273 

147 

(581 

(2.09) 

2.98 


1,518 
505 
142 

4.89 
4.18 


12 


49 


1,628 
574 
309 

10.26 
2.98 


1,62S 

46'. 

140 

4.71 

2.22 


10 


UNITED  AIRCRAFT  CORPORATION 


Sales .-...! .' 

11,787 

3,796 

509 

3.40 

4.70 

22, 121 
6,699 
2,182 
9.99 

7.98 

28,  755 

Gross  profits -. 

10, 141 

Net  income 

4.630 

Profit  rate     ..                            .. 

19.47 

Equity  ratio 

6.77 

Federal  corporate  income  tax 

58 

■    216 
11 
57 
10 
80 
33 

605 

Undistributed  profits  tax 

143 

Federal  capital  stock  tax        ..          . 

79 
6 

59 

Federal  excises 

3 

Federal-State  payroll  taxes. 

302 

29 

89 

State  sales  taxes..     .                

Property  taxes          .           

82 
2 

90 
2 

9S 

State  corporate  taxes. 

5 

Total  taxes 

256 

499 

1, 305 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18417 


UNITED  CARBON  COMPANY 

[$000 's] 


1934 

1935 

1936 

1937 

Sales                                               - 

5, 632 
3, 569 
1,607 
12.  ;!C 
9.95 

S.230 
5,  035 
2,415 
16.  48 
9.69 

9,019 
5.  878 
3,051 
20.45 
15.94 

9,272 

(i,314 

3,002 

19.69 

18.76 

202 

264 

357 
53 
31 
1 
9 
10 
31 
98 
21 
38 

367 

22 

21 
10 

26 

11 

32 

0 

35 

0 
20 

67 
4 
SI 

15 
11 
100 
21 
42 

20 

150 

95 

17 

32 

355 

490 

649 

770 

UNITED-CARR  FASTENER  CORPORATION 


Sales                        -  ---  - 

4,187 

1,160 

671 

18.43 

1.42 

5,523 

1,506 

947 

24.13 

5.15 

6,491 
1,920 
1,306 
31.87 
5.80 

7,072 

2.140 

1.331 

29.00 

8.55 

60 

100 

168 

39 

10 

2 

19 

X 

X 

23 

39 

1 

137 

21 

4 

1 

6 

1 

11 

1 

48 

X 
X 

20 
12 
2 

X 
X 

25 
17 
2 

X 

X 

22 

35 

Total  taxes                -                 

99 

151 

301 

275 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


UNITED  CHEMICALS, 

INC. 

Sales              - 

1,  595 

429 

(53) 

(1.  12) 

42.57 

1,648 

493 

(58) 

(1.27) 

45.54 

1,908 

536 

10 

0.25 

22.57 

777 

180 

104 

3.23 

Equity  ratio       - 

87.88 

0 

0 

2 

3 
X 

X 

X 

X 

X 

X 

X 

X 

i 

X 

1 
X 

i 
1 

1 

X 

Total  taxes. .._ 

1 

1 

5 

3 

18418       CONCENTRATION  OF  ECONOMIC  POWER 

UNITED  DRUG,  INCORPORATED 
[$000's] 


1934 

1935 

1936 

1937 

Sales                                                 - 

78, 439 

27,641 

4,078 

8.68 

.23 

82, 740 

28,280 

3,693 

7.26 

.35 

88, 465 

29, 908 

4,407 

8.56 

.36 

93,  358 

31,645 

3,624 

Profit  rate ---    --- - 

7.51 

.33 

359 

354 

430 
101 

39 
247 
163 

58 
883 
229 

428 

129 

32 

265 

33 

235 

38 

373 

515 

10 

8 

167 

29 
672 
202 

69 

824 

235 

456 

406 

233 

208 

1,297 

1,931 

2,383 

2,819 

UNITED  DYEWOOD  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. _- 


5,890 
1,883 
344 
4.87 
4.41 


6,007 

2,128 

557 

7.69 

4.56 


13 


6,001 

2,319 

704 

9.85 

5.93 


UNITED  ENGINEERING  &  FOUNDRY  COMPANY 


Sales 

Gross  profits. 
Net  income.  - 
Profit  rate.... 
Equity  ratio. 


1,832 
852 


3,277 
2,097 
21.83 
3.38 


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. 


383 


5,270 

3.471 

35.84 

2.57 


531 
12 
45 
0 
49 
131 
0 
61 
79 


Total  taxes. 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OP  ECONOMIC  POWER 

UNITED  PAPERBOARD  COMPANY 
[SOOO'sl    ,  ■ 


18419 


,- 

1934 

1935 

1936 

1937 

Sales  ...  .                                           

3,115 
597 

450 
4.35 
21.39 

2,338 
412 

Gross  profits _ 

402 

Profit  rate 

1.03 

Equity  ratio  ....                    

42.08 

Federal  corporate  income  tax                         .               .... 

19 

3 

Undistributed  profits  tax _ 

3 

3 

Federal  excises _        

Federal-State  payroll  taxes 

23 
2 

26 

State  income  taxes 

1 

State  sales  taxes 

Property  taxes 

24 
5 

23 

5 

Total  taxes 

76 

61 

UNITED  SHIPYARDS,  INC. 


Sales -      . 

15, 123 

1,954 

(155) 

(1.  14) 

1.07 

14  327 

Gross  profits 

1  242 

Net  income 

(533) 

Profit  rate.- 

(4. 16) 
.94 

Equity  ratio 

Federal  corporate  income  tax 

Undistributed  profits  tax 

Federal  capital  stock  tax _  _ 

15 

8 

Federal  excises __.     ..       _ 

Federal-State  payroll  taxes 

68 
4 

16 
172 

189 

State  income  taxes ._ 

4 

State  sales  taxes 

12 

Property  taxes 

174 

State  corporate  taxes ._  . 

Miscellaneous 

Total  taxes 

275 

387 

UNITED  SHIRT  DISTRIBUTORS,  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  taxees 

State  corporate  taxes 

M  iscellaneous 


Total  taxes. 


952 

401 

90 

36.33 

2.86 


12 


1,209 

523 

111 

37.97 

1.58 


663 
145 


3.39 


1,503 

627 

90 

19.96 

7.37 


•  Figures  for  1936  are  for  13  months  ended  Jan.  31,  1938. 

indicate  iio  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


124491— 41— pt.  .".l-A- 


18420  CONCENTRATION  OF  ECONOMIC  POWER 

UNITED  SPECIALTIES  COMPANY 

($000's] 


1934 

1935 

1936 

1937 

Sales .  .      .                      - 

2,028 

Gross  profits                                                                       

681 

240 

22.71 

3.36 

53 

Undistributed  profits  tax                     .  .  -  . 

3 

19 

X 

19 

7 

7 

3 

111 

UNITED  STATES  DISTRIBUTING  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... 

Stale  income  taxes 

State  sales  taxes.. 

Property  taxes 

State  corporate  taxes 

Miscellaneous. 


Total  taxes. 


24, 528 

2,744 

977 

5.75 

1.208 


13 


126 


21, 106 

2,838 

823 

4.80 

1.29 


26 


235 


20, 561 

2,880 

751 

4.94 

1.57 


U.  S.  GRAPHITE  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. 


1,129 

617 

257 

23.47 

18.91 


1,290 

634 

304 

27.75 

13.15 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 

U.  S.  HOFFMAN  MACH.  CORP. 
I$000's] 


18421 


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. 


3,251 
1,252 
132 
3.72 
4.51 


3,854 

1,510 

256 

7.  U 

2.57 


1936 


5,309 
2,236 

687 
12.67 
5.87 


6,583 
2,504 
691 
11.91 
2.31 


UNITED   STATES   HOFFMAN  MACHINERY   CORP. 


Sales 

8,253 
3,126 
955 
3.26 
25.50 

8,251 
3,414 
1,345 
4.63 
22.55 

13, 878 
5,728 
2.981 
11.08 
7.01 

13  434 

5,343 
2  614 

Profit  rate 

E  quity  ratio     

9.56 
8  76 

Federal  corporate  income  tax      

137 

176 

417 

Sis 

Undistributed  profits  tax...  . 

Federal  capital  stock  tax.     

30 

24 

53 

40 

Federal  excises 

Federal-State  payroll  taxes ... 

34 
2 

108 

State  income  taxes      

X 

1 

<<g 

State  sales  taxes... 

113 
18 

113 
26 

101 
97 

ioo 

State  corporate  taxes 

11 

Miscellaneous 

Total  taxes... 

298 

340 

704 

600 

U.  S.  PLAYING   CARD   CO. 


Sales . 

7,522 
2,397 
879 
8.63 
17.80 

6,943 
2,275 
766 
7.57 
23.94 

7;  402 

2!  291 

723 

7.28 

22.65 

7,530 

2,690 

944 

Net  income .. 

Profit  rate 

9  49 

Equity  ratio 

21  37 

Federal  corporate  income  tax. . 

78 

62 

66 

113 

Undistributed  profits  tax 

Federal  capital  stock  tax... 

6 
3,212 

12 
2,957 

9 

3,136 

17 

3 

11 

Federal  excises 

3,055 
45 

Federal-State  payroll  taxes 

State  income  taxes 

2 

4 

5 

State  sales  taxes... : 

Property  taxes. 

53 

8 

42 
9 

50 
8 

40 

State  corporate  taxes.., 

8 

Miscellaneous 

Total  taxes 

3,359 

3,086 

3,289 

;i  277 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18422 


CONCENTRATION  OF  ECONOMIC  POWER 


THE  UNITED  STATES  PRINTING  &  LITHOGRAPH  CO. 
[$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-Stat«  payroll  taxes- -. 

State  income  taxes 

State  sales  taxes.-. 

Property  taxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes - 


1934 


2,064 
415 
5.48 
1.54 


21 


1935 


2,149 
329 
4.31 
1.54 


7,510 

2,175 

215 

2.98 

1.55- 


UNITED  ST-\TES  RUBBER  COM-PANY 


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. 


105. 477 

34, 097 

3,546 

2.41 

.93 


215 


50 
5,332 


33 

13 

N     1.2?9 

50 


6,930 


127,  794 

44,  739 

12, 957 

9.30 

1.04 


1,484 


159 
6,294 


84 
21 
1,291 
56 
14 


9,403 


160, 361 

51,691 

15.  567 

10.88 

1.16 


2,372 
X 

267 

6,802 

412 

120 

14 

1,266 

80 

12 


UNITED  STATES  SMELTING,  REFINING  AND  MINING  CO. 


Gross  profits. 
Net  income.. 

Profit  rate 

Equity  ratio. 


Federal  corporate  income  tax. 

Undistributed  oroflts  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- 


27, 443 

14, 427 
7,507 
12.50 
10.08 


794 


105 
2 


330 


32, 006 

16, 829 

8,299 

13.79 

8.04 


649 


151 
4 


135 
4 

359 
6 
1 


30,643 
14,051 
6,647 
11.03 
10.82 


863 


63 

197 

5 

321 

7 

2 


1,501 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 


18423 


UNITED  STATES  STEEL  CORP. 
[SOOO's] 


1936 


Sales --- 

QroFS  proflts- 
Net  income. . 

Profit  rate 

Equity  ratio. 


591, 609 

157, 997 

(11, 078) 

(0. 57) 

11.03 


754, 514 

197, 189 

10,  051 

0.60 

8.83 


1, 083,  337 

309, 323 

66, 731 

3.97 

7.30 


1,  395, 550 

424, 937 

129,653 

7.55 

6.71 


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 - 


2,600 
X 
1,633 


3,925 
X 

1,736 
480 
X 


10, 984 
215 

1,809 
408 

4,082 


24,500 

5,000 

1,929 

321 

13,  416 
2,088 


32, 475 


35, 783 


40,794 


Total  taxes - 


35,  216 


88,048 


UNITED  STOCKYARDS  CORPORATION 


Sales                                                                                 

3,418 

1,650 

1.389 

Profit  rate 

7.19 

Equity  ratio. - 

.72 

X 

1 

3 

Total  taxes 

4 

UNIVERSAL  COOLER  CORPORATION 


Sales                 .              -                       - 

3,962 

512 

90 

10.19 

2.06 

5,249 
886 
409 

34.31 
1.89 

3,979 

Gross  profits.      ..      

623 

90 

Profit  rate     

9.34 

4.47 

1 

67 

17 

Undistributed  profits  tax                                          

4 

3 

54 

4 

171 

6 

3 

94 

Federal-State  pay  roll  taxes. - -. 

31 

6 
9 
2 

2 
16 
2 

2 

19 

State  corporate  taxes  .             ....      .-  

2 

Total  taxes - - 

75 

268 

172 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18424 


CONCENTRATION  OF  ECONOMIC  POWER 


UNIVERSAL  LEAF  TOBACCO  COMPANY 
[$000's] 


1934 

1935 

1936 

1937 

Sales - 

17,227 
2,631 
1,844 
14.87 
12.63 

20, 161 
2,779 
1,859 
14.42 

7.05 

26,  .WO 
2,920 
1,815 
13.99 
13.84 

23,704 

Gross  profits 

2,501 

Net  income - 

Profit  rate 

1.814 
13.88 

Equity  ratio  

13.39 

Federal  corporate  income  tax _ 

Undistributed  profits  tax. 

245 

195 
0 
24 

158 

2 

24 

264 
0 

Federal  capital  stock  tax 

25 

21 

Federal  excises. .  .  . 

Federal-State  payroll  taxes 

7 
57 

23 
32 
X 

45 
12 

48 

State  income  taxes 

State  sales  taxes. ._ _ 

49 

57 

Property  taxes 

46 
12 

'Si 
13 

59 

State  corporate  taxes 

14 

M  iscellaneous 

Total  taxes _  _ 

377 

350 

296 

463 

UNIVERSAL  PRODUCTS  CO.  INC. 


Sales..     .. 

3,334 
840 
526 

29.77 
4.18 

3,952 

Gross  profits.  _ 

538 

201 

14.62 

5.92 

624 

303 

19.22 

3.39 

948 

Net  income. 

Profit  rate 

.S61 
i!8.71 

Equity  ratio _ 

10.10 

Federal  corporate  income  tax 

Undistributed  profits  tax _ .. 

13 

11 

73 

20 

5 

78 
21 

Federal  capital  stock  tax ...  

3 

3 

5 

Federal  excises 

Federal-State  payroll  taxes ■ 

7 

26 

State  income  taxes      

State  sales  taxes 

Property  taxes..  - 

16 
3 

16 
4 

17 
4 

20 

State  corporate  taxes 

5 

Total  taxes    

35 

34 

126 

155 

THE  UPSON  WALTON  COMPANY 


Sales 

1,311 

390 

CI 

11.36 

11.61 

1,759 
523 
163 

16.62 
8.02 

2,067 

Gross  profits 

638 

213 

Profit  rate 

20.46 

Equity  ratio 

8.62 

Federal  corporate  income  tax. 

13 

25 
11 
2 
X 

3 

1 
1 
10 

1 

34 

Undistributed  profits  tax. .. 

9 

Federal  capital  stock  tax 

1 
X 

2 

Federal-State  payroll  taxes 

11 

State  income  taxes 

X 

X 
9 

1 

1 

State  sales  taxes.- 

1 

Property  taxes : 

10 

State  corporate  taxes 

1 

Total  taxes 

24 

54 

69 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 

UTAn-IDAHO  SUGAR  CO. 
ISOOO's] 


18425 


1934 

1935 

1936 

1937 

Sales                                                        

11,928 
4,757 
1.711 
8.58 
4.04 

9,880 

4,210 

1,672 

7.88 

4.58 

7,915 

dross  profits                                                          

4,538 

878 

4.16 

2.55 

Fpdpral  corporate  income  tax           

206 

0 

20 

97 

0 

94 

2 

217 

X 

2 

173 

7 
18 
0 
14 
43 
X 

206 
X 
1 

104 

I'ndistrihutpii  profits  tax                                             

0 

17 

1,173 

49 

31 

State  sales  taxes                                                      ..          

X 

228 

X 

1 

638 

462 

1,603 

UTAH  RADIO  PRODUCTS  CO. 


THE  K.  TAYLOR  DISTILLING  CO.,  INC. 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


Sales _ _ 

2,385 

446 

(60) 

(4.  72) 

10.05 

2,512 

427 

(121) 

(10.95) 

4.49 

2,487 

504 

17 

1.61 

3.33 

2,871 

0  ross  profits _ 

Net  income 

573 

(3) 

Profit  rate              .                                         

(0.  22) 

Equity  ratio 

4.71 

Federal  capital  stock  tax                                                                 

13 

7 

State  sales  taxes 



Total  taxes 

20 

Sales 

1,057 

473 

160 

23.82 

1.83 

1,9B0 
881 
407 

30.29 
3.00 

932 

Gross  profits 

443 

89 

Profit  rate .  _                    

6.69 

Equity  ratio 

1.07 

Federal  corporate  income  tax 

27 

119 
0 
4 
X 

1 
12 

11 

Undistributed  profits  tax _ 

0 

Federal  capital  stock  tax 

1 
X 

5 

Federal  excises 

X 

2 

Stale  income  taxes    .         "" 

3 

State  sales  taxes 

Property  taxes 

1 

2 

1 

3 

State  corporate  taxes 

1 

M  iscellaneous 

Total  taxes 

30 

139 

25 

18426 


CONCENTRATION  OF  ECONOMIC  POWER 


VANADIUM-ALLOYS  STEEL  CO. 
[$000's] 


1934 

1935 

1936 

1937 

Sales 

2,767 
1,232 
425 
7.44 
20.73 

4,029 
1,709 
694 
11.67 
13.12 

5,822 
2,467 
1,171 
19.59 
6.70 

3,541 

Gross  profits .... 

1,251 

Net  income .. 

253 

Profit  rate _ 

4.37 

Equity  ratio. _..  . 

19.58 

Federal  corporate  income  tax     -         . 

65 

100 

194 
5 

16 
X 
35 
42 
4 
30 
20 

35 

Undistributed  profits  tax _ 

Federal  capital  stock  tax 

3 
X 

16 
X 

13 

Federal  excises..:... 

Federal-State  payroll  taxes .                -...-. 

39 

State  income  taxes.-          

20 
3 
28 
22 

6 

12 

State  sales  taxes 

2 

30 
6 

4 

Property  taxes. ............          ...  ... 

31 

State  corporate  taxes .             .      . 

18 

106 

195 

346 

152 

VAN  RAALTE  COMPANY  INC. 


Sales  _ .      .  . 

5,721 
1,428 
333 
9.15 
17.17 

7,547 
2,079 
766 
18.63 
10.74 

9,354 

2,630 

973 

22.  25 

6.42 

9,826 
2,716 

Gross  profits.- 

Net  income 

910 

Profitrate 

20.06 

Equity  ratio 

8.92 

Federal  corporate  income  tax : 

Undistributed  profits  tax . 

26 

101 

124 
13 
9 

121 

11 

Federal  capital  stock  tax .    ■ 

2 

6 

9 

Federal  excises 

Federal-State  payroll  taxes.--  .- - .  ... 

37 

7 

107 

State  income  taxes 

2 

1 
29 

2 
2 
28 

19 

State  sales  taxes    

2 

Property  taxes - --- 

29 

28 

State  corporate  taxes .      . 

Miscellaneous 

Total  taxes- - 

60 

139 

219 

297 

VICTOR  BREWING  COMPANY 


Sales - - 

2,505 
1,991 
320 
22.81 
7.51 

2,004 

1,372 

22 

1.72 

5.59 

3,093 
2,129 
220 
16.86 
4.26 

2,979 

Gross  profits 

1,901 

Net  income 

(45) 

Profit  rate       

(3. 68) 
2.84 

Equity  ratio 

Federal  corporate  income  tax      

44 

2 

43 
0 
4 
958 
5 
18 
226 
8 
5 

Undistributed  profits  tax - 

0 

Federal  capital  stock  tax 

3 
724 

3 
610 

2 

Federal  excises - 

947 

Federal-State  payroll  taxes 

12 

State  income  taxes 

0 

203 

6 

5 

1 
167 

7 
5 

0 

State  sales  taxes - 

235 

Property  taxes - 

9 

State  corporate  taxes. 

4 

Miscellaneous 

Total  taxes .  . 

985 

705 

1,267 

1,209 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 

VICTOR  CHEMICAL  WORKS 

[$000's] 


18427 


1934 

1935 

1936 

1937 

Sales               

5,731 

Gross  profits     .  . 

2,740 

Net  income          . 

837 

Profit  rate - 

12.70 

17  08 

120 

Undistributed  profits  tax 

X 

Federal  capital  stock  tax 

14 

Federal  excises                                      .     .... 

Federal-State  payroll  taxes 

63 

5 

X 

Property  taxes          

23 

State  corporate  taxes 

6 

Total  taxes 

221 

VIKING  PUMP  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. 


803 

392 

224 

21.57 

19.16 


29 


33 


941 

454 

265 

28.19 

14.21 


35 


39 


1,181 
567 
355 

41.60 
8.11 


1,338 
622 
397 

44.68 
7.93 


VIRGINIA-CAROLINA  CHEMICAL  CORP. 


Sales            ... 

11,621 
2, 966 
1.303 
4.40 
82.05 

12,583 

2,055 

106 

43 

6.47 

16,794 
4.086 
1,546 
6.21 
7.80 

15, 762 

Gross  profits 

3,085 

Net  income 

575 

2.31 

Equity  ratio .      . 

9.91 

Federal  corporate  income  tax          .      . 

0 

23 

2 

0 

17 

X 

22 

6 

2 

154 

34 

115 

Undistributed  profits  tax 

79 

Federal  capital  stock  tax 

14 
2 

14 
X 

20 

Federal  excises 

X 

Federal-State  payroll  taxes ...  . 

54 

State  income  taxes ..."" 

0 

2 

172 

35 

0 

2 

174 

36 

15 

State  sales  taxes .  .  . 

2 

Property  taxes 

143 

State  corporate  taxes 

32 

Miscellaneous... ■ 

Total  taxes 

225 

249 

237 

460 

—  indicate  no  da  avatlAteMe. 
X  indicates  loss  tha.  tl  000. 


18428  CONCENTRATION  OF  ECONOMIC  POWER 

WAGNER  ELECTRIC  CORPORATION 
[SOOO'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  ta.xes 

State  corporate  taxes. 

Miscellaneous. 


Total  'axes. 


6,288 

1,949 

362 

4.38 

21.89 


3,300 

988 

12.10 

4.33 


14.746 
4,8.36 
1.797 
21.35 
3.83 


43 


130 


209 


291 
73 
16 


THE  WAHL  COMPANY 


Sales 

Oro.'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  taxe^ 

Miscellaneous 


Total  taxes. 


1,853 

961 

44 

1.84 

23.89 


2,230 

1,175 

158 

6.00 

12  40 


12 


2,562 

1,253 

155 

5.76 

11.77 


WAHLGREEN  COMPANY 


Sales                  - 

58,107 

20, 241 

2,580 

15.60 

6.23 

61, 784 

21,636 

3.159 

17.87 

5.12 

67,890 

Gross  profits                       .        

24,630 

Net  income ■- . 

3.232 

Profit  rate     . 

13.35 

Equity  ratio     ... 

6.51 

Federal  corporate  income  tax                             .          .  . 

240 

410 

582 

Undistributed  profits  tax 

I 

28 
40 

39 
39 

81 
31 
1,097 
254 
228 

42 

46 

Federal-State  payroll  taxes 

304 

is 

821 
207 
227 

43 

1,164 

308 

State  corporate  taxes  ... 

240 

Miscellaneous                                            ... 

Total  ta.xes                                             ..    .. 

1,581 

2,185 

2, 730 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 

WARNER  AIRCRAFT  CORPORATION 

i$(X)0'sI 


18429 


1934 


1935 


1936 


Sales.   

Gross  profits. 
Net  income.. 
Profit  rate.  . 
Equity  ratio. 


188 
38 

(22) 
(3.74) 
8.24 


203 

44 

(16) 

(2.79) 

8.70 


FedRral  corporate  income  tax. 

Undistributed  profits  ^ax 

Federal  capital  stock  tax 

Federal  excises 

Federal  State  payroll  taxes.. . 

State  iiicome  taxes.. 

State  .sales  taxes 

Property  faxes 

State  corporate  taxes 

Miscellaneous 


Total  taxes- 


S.  D.  WARREN  COMPANY 


270 

74 

1 

0.13 

7.75 


365 

67 

(U) 

(2. 02) 

7.66 


Sales                

6,565 

1,885 

266 

2.95 

94 

7,620 

1,987 

394 

4.47 

1.11 

8,288 

2,228 

•566 

6.42 

1.11 

9,616 

Gross  profits                             ..              ■ 

2,864 

871 

Profit  rate -.. 

8.74 

.97 

23 

24 

Undistributed  profits  tax          .  .          .        ^. 

Federal  capital  stock  tax                            .  .                .  .  .  - 

12 
X 

8 
X 

6 

1 

26 

2 

6 

Federal  excises... ^ 

Federal-S tate  payroll  taxes 

2 
87 

State  iiicome  taxes        .                   

2 

2 

2 

State  sales  taxes                .         .                  .. 

Property  taxes                        .                       . . 

206 
1 

204 
2 

225 
1 

218 

State  corporate  taxes 

12 

Total  taxes ..- 

221 

216 

284 

351 

WARREN  FOUNDRY  &  PIPE  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. 


2,023 

789 

383 

9.78 

19.71 


32 


131 


1,679 
634 
210 

5.45 
26.09 


20 


121 


2,503 

920 

433 

11.11 

20.57 


37 


139 


3,234 
1,211 
608 
15.44 
15.08 


40 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18430 


CONCENTRATION  OF  ECONOMIC  POWER 


WAUKESHA  MOTOR  CO. 
I$O0O's] 


1934 

1935 

1936 

1937 

Sales                  ---- - 

6,130 

1,589 

625 

13.63 

12.82 

8,213 

1,905 

906 

17.96 

7.68 

10  503 

2' 571 

1  417 

Profit  rate 

95  08 

5  88 

88 

118 

207 

Undistributed  profits  tax       - 

91 

20 

15 

16 

32 

58 

66 

45 

90 

36 

44 

50 

27 

216 

267 

520 

WAVERLY  OIL  WORKS  COMPANY  • 


Sales 

Gross  profits - 
Net  income. - 

Profit  rate 

Equtiy  ratio. 


Federal  corporate  income  tax. 

Undistributed  profits  tax 

Federal  capital  stock  tax 

Federal  excises 

Federal-State  payroll  ta.xes-.- 

State  income  taxes 

State  sales  taxes. 

Property  taxes. 

S  tate  corporate  taxes 

Miscellaneous 


Total  taxes. 


1,125 
180 

(44) 
(7.  84) 
1.80 


0 


1,124 

250 

(2) 

(0.  38) 

1.83 


1,  118 

246 

7 

0.93 

1.43 


Fiscal  year  April  30. 


WAYNE  KNITTING  MILLS 


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 - 


2,551 
512 


4.09 
20.98 


2.987 
656 
196 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 

WAYNE  SCREW  PRODUCTS  COMPANY 
[$000'S] 


18431 


1934 

1935 

1936 

1937 

Sales                                

493 
148 

72 

758 

161 

87 

Profit  rate                                                   

20.44 

9.06 

6.67 

10 

15 

1 
X 

1 

1 

X 

9 

2 

1 

3 

1 

Total  taxes                    - 

15 

29 

WEINBERGER  DRUG  STORES.  INCORPORATED 


Sales                         -          - 

4,226 
1,318 
191 
19.27 
2.95 

5,275 
1,680 
299 
27.61 
2.16 

5,259 

Gross  profits                             -                        -• 

1,638 

149 

Profit  rate       , 

13.88 

2.16 

Federal  corporate  income  tax 

22 

43 
9 
3 

22 

Undistributed  profits  tax     

1 

Federal  caiutal  stock  tax                                  ^              ..... 

3 

3 

15 
1 
X 
10 

1 

3 

27 

1 
X 

9 

1 
6 

2 

State  sales  taxes    .           

1 

Property  taxes                                                    

15 

State  corporate  taxes 

2 

6 

Total  taxes _.. 

42 

85 

79 

WENTWORTH  MANUFACTURING  COMPANY 


Sales                                     .           .  . 

3,242 
602 
284 

33.35 
6.57 

4,711 
830 
411 

40.04 
2.04 

4,707 

Gross  profits                                    .  . 

637 

Net  income 

189 

Profit  rate _ 

12.27 

Equity  ra tic  _ 

13.04 

Federal  corporate  income  tax ... 

45 

62 

28 

Undistributed  profits  tax,. _. 

3 

6 

5 

Federal  excises,  - 

Federal-State  payroll  taxes    

12 

37 

State  income  taxes 

State  sales  taxes 

Property  taxes ,.. 

2 

a 

3 
8 
26 

3 

State  corporate  taxes. 

c 

M  iscellancous- 

Total  taxes.. 

63 

116 

78 

ln<3icste  no  data  available. 

X  Indicates  less  than  $1,000. 


18432  CONCENTRATION  OF  ECONOMIC  POWER 

WESSON  OIL  &  SNOWDRIFT  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. 


62, 906 

12.415 

6,  354 

17.97 

7.64 


1.038 


42 

1,096 


182 

5 

277 

85 


1936 


65, 139 

11.257 

4,528 

12.34 

8.65 


709 

48 
1.481 
28 
160 
7 
279 


70.110 

10,  997 

4.225 

11.41 

10.00 


751 


49 

1.262 

116 

219 

15 
303 

79 


2,794 


WESTERN  AUTO  SUPPLY  COMPANY 


Sales 

25,717 
7,709 
2,594 
26.33 
5.16 

36,912 

10,  549 

3,  ,372 

Profit  rate               . 

22.40 

2.41 

391 
114 
23 

557 

288 

Federal  capital  stock  tax 

32 

Federal  excises                     .           ..                  .        - 

Federal-State  payroll  taxes 

36 

20 

9 

100 

148 

23 

12 

Property  taxes 

92 

2 

1 

695 

1,153 

WESTON  ELECTRICAL  INSTRUMENT  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  tixes 

State  sales  taxes 

Property  taxes. 

State-corporate  taxes 

M  iscellaneous 


Total  taxes. 


1,130 

122 

3.81 

31.55 


16 


1,391 

264 

7.89 

19.60 


38 


3,236 
1,622 
298 
9.34 
14.18 


3,929 
2,023 
533 
15.88 
10.90 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCExN'TRATION  OF  ECONOMIC  POWER 

WESTVACO  CHLORINE  PRODUCTS  CORPORATION 
[$000 's] 


18433 


1934 

1935 

1936 

1937 

Sales                     ...                             .                      

5,506 
1,997 
830 
11.31 
7.22 

6,121 
2,223 
833 
9.75 
3.82 

6,914 
2,636 
910 
8.76 
32.18 

8,592 

Gross  profits                  .                                                      ... 

3,274 

Net  income.. 

1,025 

Profit  rate 

8.52 

Equity  ratio     

18.79 

Federal  corporate  income  tax 

125 

95 

124 
22 
6 
X 

16 

X 

26 

47 

2 

9 

143 

Und istributed  profits  tax 

21 

"Federal  capital  stock  tax 

16 

13 
X 

14 

58 

State  income  taxes 

X 

20 
45 
2 
X 

X 

21 
48 
2 
X 

State  sales  taxes.. ___ 

23 

Property  taxes 

54 

State  corporate  taxes 

Miscellaneous 

2 

Total  taxes 

208 

179 

252 

315 

WEST  VIRGINIA  PULP  AND  PAPER  CO 


Sales _ - 

31,413 

Gross  profits 

12, 487 

Net  income 

3,678 

Profit  rate 

6.18 

Equity  ratio     

4.94 

Federal  corporate  income  tax 

501 

Undistributed  profits  tax 

203 

Federal  capital  stock  tax      .  . 

44 

Federal  excises _ 

FederahState  payroll  taxes 

276 

State  income  taxes 

49 

State  sales  taxes 

6 

Property  taxes 

218 

State  corporate  taxes _ 

29 

Miscellaneous 

1 

Totaj  taxes    

1,327 

i 

WEYENBERG  SHOE  MANUFACTURING  COMPANY 


Sales 

8, 1'25 

1,476 

471 

14.77 

1.12 

8  609 

Gross  profits 

1,550 

Net  income 

262 

Profltrate... 

8.30 

Equity  ratio 

1  32 

Federal  corporate  income  tax 

57 
6 
4 
1 
40 
23 

51 

Undistributed  profits  tax. 

X 

Federal  capital  stock  tax 

4 

Federal  excises \ 

3 

Federal-State  payroll  taxes 

79 

State  income  taxes. 

6 

State  sales  taxes 

Property  taxes 

25 
X 

29 

State  corporate  taxes 

X 

Miscellaneous 

Total  taxes 

156 

172 

—  indicate  no  data  available. 
X  indicates  less  than  $1,000. 


18434 


CONCENTRATION  OF  ECONOMIC  POWER 


THE  S.S.WHITE  DENTAL  MANUFACTURINa  CO. 
[$000's] 


1934 

1935 

1936 

1937 

8,541 
3,158 
524 
6.10 
13.99 

8,941 

3,311 

Net  income                                            -- -  - 

503 

Profit  rate                                                                 

5.85 

14.63 

86 
11 
7 
1 
25 
25 
3 
24 
25 

71 

Undistributed  profits  tax         .- -- 

6 

Federal  capital  stock  tax                          -      

8 

1 

77 

29 

2 

26 

State  corporate  taxes        -  -. -      -- 

25 

207 

245 

WHITE  MOTOR  COMPANY 


Sales                       --- --- 

20,540 
6,174 
(1,286) 
(4.  27) 
12.80 

19,908 
5,052 
(2,  790) 
(10.  72) 
8.61 

28,770 

7,665 

869 

3.30 

7.70 

30, 685 

Gross  profits                            - 

7,860 

227 

1.09 

4.17 

Federal  corporate  income  tax 

30 
250 

29 
312 

25 

431 

74 

25 

410 

Federal-State  payroll  taxes                     .         - 

257 

State  income  taxes -.    -  -      

Property  taxes     .. 

230 
12 

394 
12 

358 
12 

190 

State  corporate  taxes                     .        

12 

522 

747 

900 

894 

WHITE  SEWING  MACHINE  CORPORATION 


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. 


3,419 

2,186 

92 

1.97 

.63 


0 


4,031 

2,164 

188 

4.40 

.79 


5,018 

2,829 

375 

11.73 

1.89 


139 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 

R.  C.  M'lLLIAMS  &  COMPANY,  INCORPORATED" 

[$000's] 


18435 


1934 

1935 

1936 

11,126 

1,760 

219 

7.86 

1.07 

1937 

Sales                                                        

11,211 
1,813 

187 
5.57 
1.23 

10,090 

1,679 

145 

5.17 

1.27 

10, 587 

1,726 

197 

Profit  rate                    .  .             

7.21 

Equity  ratio                                                 -- - 

1.33 

Federal  corporate  income  tax                           

9 

3 

19 

12 

3 

3 

3 

2 

Federal-State  payroll  taxes         .                " 

3 

2 

4 

26 

9 

16 

6 
15 
26 

6' 

31 

3 

7 
27 

6' 

6 

7 

Proper t  y  taxes - 

State  corporate  taxes      .—    . 

27 

Miscellaneous,. ._, 

6 

55 

50 

91 

91 

'  Fiscal  year  ended  April  30. 

WILLYS-OVERLAND  MOTORS  INCORPORATED 


Sales                                                        

30,268 

Gross  profits                                                                     .        

4,277 

686 

4.75 

Equity  ratio                                                        -. 

5.49 

Federal  corporate  income  tax 

120 

81 

Federal  capital  stock  tax.  ..  . 

50 

Federal  excises                                                             

724 

Federal-State  payroll  taxes 

168 

X 

3 

Property  taxes                                             .      -      -        

95 

State  corporate  taxes 

5 

X 

Total  taxes                                     -                     .  . 

1.246 

WOODALL  INDUSTRIES,  INCORPORATED 


5;  030 

726 

414 

36.52 

1.83 

5,421 
997 
553 

43.74 
1.67 

5,730 

615 

Net  income                                            .             

188 

Profit  rate _ 

15.68 

2.09 

52 

105 

28 

Federal  capital  stock  tax                                    

7 

10 

10 

13 

48 

Property  taxes                              .                  . 

18 
2 

20 
2 

22 

State  corporate  taxes         .                                    - 

3 

Miscellaneous                                                                ...... 

Total  taxes 

79 

150 

111 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 


18436 


CONCENTRATION  OF  ECONOMIC  POWER 


WOODWARD  &  LOTHROP 

[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. 


11,271 

4,344 

861 

10.04 

12.04 


130 


1936 


13, 374 
5,165 
1,186 
13.42 
11.72 


171 


1936 


14,586 
5,636 
1,355 
14.82 
8.48 


210 
27 
20 


126 
..... 


WOODWARD  IRON  COMPANY 


Sales 

7,531 
3,416 
1,460 
6.57 
0.50 

9.238 

Gross  profits 

4,329 

2,024 

Profit  rate       .                       ...... 

8.50 

Equity  ratio 

1.03 

Federal  corporate  income  tax : 

95 

179 

Undistributed  profits  tax 

11 

15 

Federal  excises      ..           . 

5 

Federal-State  payroll  taxes    . 

28 
17 
40 
114 
27 

99 

State  income  taxes 

31 

State  sales  taxes 

41 

Property  taxes 

HI 

State  corporate  taxes 

30 

Miscellaneous               ... 

Total  taxes. ..  _ 

332 

511 

F.  W.  WOOLWORTH  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. 


270, 685 

101,317 

36,042 

20.51 

31.21 


3,600 
X 

300 
33 
X 

268 

913 
3,486 

125 


268,750 

99,  758 

34,722 

18.91 

34.09 


3,020 
X 

455 
34 
X 

475 

376 
3,501 

193 


8,054 


290,387 

106, 826 

37,235 

19.29 

21. '59 


3,910 
300 
400 
44 
491 
644 
476 

3,614 
227 


10, 106 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 


CONCENTRATION  OF  ECONOMIC  POWER 

WORTHINQTON  PUMP  &  MACHINERY  COKP. 
[$000's] 


18437 


1934 

1935 

1930 

1937 

Sales 

Gross  profits 

7,766 
1.497 
(1.073) 
(5. 17) 
23,93 

10,  766 

2,687 

(78) 

(0. 38) 

7.74 

15,903 

4,241 

335 

1.61 

7.33 

20,  707 
6,509 

Net  income.-  .  .                             .                . 

2  190 

Prostrate _ 

10.41 

Equity  ratio 

3. 13 

Federal  corporate  income  t^x , 

2 

11 

13 
27 

309 

Undistributed  profits  tax 

214 

Federal  capital  stock  tax 

9 

12 

49 

Federal  excir. " 

Federal-State  payroll  taxes . 

65 

255 

State  income  taxes 

State  sales  taxes. 

Property  taxes 

161 
11 

164 
12 

146 
12 

156 

State  corporate  taxes 

17 

Miscellaneous 

44 

Total  taxes    ... 

181 

190 

274 

1,044 

WRIGHT  AERONAUTICAL  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  taxeu 

Miscellaneous 


Total  taxes. 


9,340 
3,943 
1,059 
16.11 
4.38 


54 


20 


7,757 
3,166 
454 
6.54 
13.33 


24 


95 


11,377 
4,854 
1,223 
15.21 
6.53 


180 
7 
18 


16, 654 
6,925 
2,608 
26.97 
1.99 


401 

103 

16 


YATES  AMERICAN  MACHINE  CO. 


Sales 

1,687 

525 

2 

0.05 
.99 

2,314 

698 

103 

3.48 

.99 

2,039 

Gross  profits 

585 

Net  income .      . 

(4) 

Profit  rate.- 

(0. 11) 

Equity  ratio 

1.29 

Federal  corporate  ii  come  tax 

Undistributed  proP  ;s  tax 

Federal  capital  sto' f  tax 

2 

i 

2 

2 

Federal  excises ._ 

Federal-State  payr  )11  taxes .". 

25 

State  income  taxes: 

State  sales  taxes. 

1 
44 

X 

Property  taxes. 

45 

44 

48 

State  corporate  taxes 

Miscellaneous 



Total  taxes 

47 

45 

47 

75 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18438       CONCENTRATION  OF  ECONOMIC  POWER 

YELLOW  TRUCK  &   COACH  MANUFACTURING  CO. 
[lOOO'sJ. 


1936 


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. 


28,250 

7,806 

(881) 

(2.  98) 

12.81 


35, 857 

9,740 

571 

1.90 

8.10 


45 


18 
427 


19 
607 


101 
25b 
24 


132 
190 
13 


Total  taxes. 


1,006 


59, 426 

17, 048 

5,848 

14.96 

5.25 


729 
21 

204 
1,140 

130 
27 

189 

215 
67 


2,722 


YOSEMITE  PORTLAND  CEMENT  CORP. 


Sales              - 

777 

390 

150 

4.99 

30.67 

828 

422 

Net  income 

159 

Profit  rate     

5.22 

36.90 

Federal  corporate  income  tax      . 

20 
2 
2 

22 

Undistributed  profits  tax. 

2 

2 

Federal-State  payroll  taxes                .  .             .      _  .             .► 

3 
3 

6 

7 

Property  taxes                  

8 
X 

9 

State  corporate  taxes 

X 

Total  taxes     

38 

48 

L.  A.  YOUNG  SPRING  AND  WIRE  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. 


10,  595 

2,544 

966 

13.15 

7.07 


134 


130 
13 


14,  982 
4,025 
2,157 
29.76 
6.38 


322 


126 
12 


17,816 
4,686 
2,386 
30.65 
4.42 


415 
67 
29 
1 
63 
15 


135 
15 
1 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


CONCENTRATION  OF  ECONOMIC  POWER 


18439 


THE  YOUNQSTOWN  SHEET  AND  TUBE  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. 


63,138 
19, 163 
1,767 


19 

1,458 

46 

4 


1,755 


86, 789 

25, 322 

6,148 

3.17 

1.14 


127,675 

39, 108 

14,  7i;3 

7.41 

1.35 


120 


511 

4 

193 


11 
16 

1,443 
43 

X 


352 

20 

23 

1,660 

42 

1 


1,856 


2,806 


144,  289 

47, 130 

17,107 

8.58 

1.85 


1,877 

324 

238 

8 

1,306 

74 

31 

1,715 

65 

2 


5,640 


YOUNQSTOWN  STEEL  DOOR  CO. 


Sales                                       --                  - .- 

2,399 

821 

318 

8.79 

11.97 

.5,  915 
2,294 
1,589 
44.30 
4.32 

9,183 

3,660 

2,808 

Profit  rate 

65.12 

6.20 

35 

244 
83 
16 

453 

Undistributed  profits  tax .. 

92 

Federal  capital  stock  tax                    .        .                  ... 

7 

14 

9 

34 

X 

11 
2 

2 

12 
3 

X 

17 

3 

55 

369 

613 

ZENITH  RADIO  CORP. 


Sales               -.        

4,388 

1,479 

13 

.44 

8.76 

8,538 
3,142 
1,445 
35.61 
3.58 

16,967 
6,370 
2,640 
47.96 
2.29 

17,299 

Gross  profits 

5,350 

873 

15.27 

Equity  ratio                  .     .. .. 

5.27 

Federal  corporate  income  tax                     .       ...           .  ..  . 

231 

395 

322 

54 

373 

31 

X 

1 

27 

2 

133 

Undistributed  profits  tax . 

27 

Federal  capital  stock  tax     . 

5 
61 

9 
176 

31 

Federal  excises                        .      .      

330 

Federal-State  payroll  taxes                                     .    , 

84 

X 

X 

17 
2 

1 
12 
2 
4 

2 

Property  taxes                            .                

45 

State  corporate  taxes                                       ..    

3 

Miscellaneous                                                      .'. 

Total  taxes.- 

85 

435 

1,205 

655 

'  Fiscal  year  ended  April  30. 

indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


18440  CONCENTRATION  OF  ECONOMIC  POWER 

ZONITE  PRODUCTS  CORPORATION 

[$000'sl 


Sales 

Gross  profits. 
Net  income.. 
Profit  rate  -. 
Equity  ratio. 


Federal  corporate  income  tax. 

Undislributeii  profits  tax 

Federal  cai)ital  stock  tax 

Federal  excises 

Federal-State  payroll  taxes... 

State  income  taxes.. 

State  sales  taxes 

Property  taxes _ 

State  corporate  taxes 

Miscellaneous 


Total  taxes. 


3,437 
2,330 

(111) 
(7.  65) 

1.95 


35 


2.482 

1,784 

(83) 

(5.82) 

2.50 


24 


68 


1936 


2,409 

1,808 

229 

17.76 

4.28 


146 


2,774 

2, 042 

247 

17.33 

5.31 


indicate  no  data  available. 

X  indicates  less  than  $1,000. 
(  )  indicate  deficit. 


LETTER    FROM    METROPOLITAN    LIFE    INSURANCE 

COMPANY 

REGARDING  TNEC  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.  ALSO  . 
REJOINDER  BY  MR.  GESELL 


18441 


Leroy  a.   Lincoln,   President. 

Metropolitan  Life  Insurance  Company, 

New  York  Citrj,  January  23,  1941. 
Senator  Joseph  C.  O'Mahoney, 

Chairman,  Temporary  National  Economic  Committee, 

Washington,  D.  C. 

Dear  Senator  O'Mahoney:  Li  the  minutes  of  the  meeting  of  the  Temporary 
National  Economic  Committee  of  January  L^,  I  observe  that  you  expressed  the 
opinion  that  certain  criticisms  by  the  National  Association  of  Retail  Druggists  of 
Monograph  No.  1  should  be  incorporated  in  the  Record  of  your  Committee. 
Accordingly,  I  am  writing  to  ask  that  you  similarly  cause  this  present  letter  to 
be  incorporated  in  the  Record  of  your  Committee  as  a  comment  upon  that  part 
of  the  report  made  to  your  Committee  in  open  session  on  January  15  by  its 
Executive  Secretary,  Dr.  Dewey  Anderson,  which  had  to  do  with  Lidustrial  life 
insurance.  This  report  was  released  to  the  newspapers  and  presumably  is  a 
part  of  the  Committee's  official  record. 

Dr.  Anderson's  report  seems  to  have  overlooked  those  parts  of  the  Statement, 
submitted  to  the  Temporary  National  Economic  Committee  in  behalf  of  Life 
Insurance  on  August  13,  1940,  which  dealt  with  Industrial  life  insurance.  This 
report  results  in  an  unfortunate  and  unmerited  attack  upon  Life  Insurance 
companies  generally,  which  write  this  form  of  insurance,  and  upon  the  Metro- 
politan Life  Insurance  Company  specifically.  Therefore,  in  the  interests  of 
justice  to  our  Company  and  its  nearly  twenty-nine  millions  of  policyholders,  I  am 
pointing  out  in  ihis  letter  some  of  the  fallacies  which  are  to  be  found  in  the  report. 
That  part  of  the  report  which  refers  to  Industrial  life  insurance  is  to  be  found  on 
page  10  of  the  verbatim  record  of  the  proceedings  of  the  Temporary  National 
Economic  Committee  on  January  15,  1,941,  as  published  by  the  Bureau  of 
National  Affairs.' 

The  full  use  by  policyholders  of  the  services  offered  by  the  institution  of  life 
insurance  is  dependent  upon  public  confidence.  No  reasonable  person  could  read 
the  report  without  questioning  whether  the  existing  confidence  in  Industrial  life 
insurance  is  justified.  It  is  noted  tliat  the  conclusions  are  predicated  upon  what 
is  said  to  be: 

"an  ample  body  of  fact  *  *  *  assembled  in  the  hearings  on  Industrial 
Insurance,  supplemented  by  the  very  thorough  research  contained  in  Mono- 
graph No.  2,  Families  and  Their  Life  Insurance. 

The  Temporary  National  Economic  Committee  has  been  good  enough  to  place 
in  its  records  the  Statement  by  178  life  insurance  companies  which  refuted  erron- 
eous inferences,  material,  and  testimony  presented  by  the  Securities  &  Exchange 
Commission,  and  which  oflFered  to  submit  witnesses  to  testify  in  open  hearings  in 
support  of  the  companies'  statement.  The  report  submitted  to  your  Committee 
on  January  15th  makes  no  reference  thereto,  whatsoever.  As  to  Monograph  No. 
2,  upon  which  such  report  is  based  in  part,  it  was  not  the  subject  of  examination 
and  testimony  in  public  hearings  before  the  Committee  and  its  evidential  value 
may  well  be  open  to  question. 

The  conclusions  in  the  report  relate  to  Industrial  life  insurance  generally.  They 
are  based,  at  least  in  part,  upon  a  survey  in  Boston  by  W.  P.  A.  workers  whose 
activities  were  under  the  general  auspices  of  the  Securities  &  Exchange  Commis- 
sion, which  agency  drafted  Monograph  No.  2  and  prepared,  under  the  chapter  en- 
titled "Summary  and  Conclusions,"  its  own  interpretations.  Many  of  these  con- 
clusions have  little  or  no  support  in  the  statistical  material  publislied  in  the  Mono- 
graph. Furthermore,  the  interpretations  practically  ignore  the  statistical  mate- 
rial which  reflects  a  view  contrary  to  the  testimony  ofi'ered  by  the  Securities  & 
Exchange  Commission  during  the  hearings.  To  illustrate,  the  statistics  prove 
conclusively  that  not  only  has  the  Massachusetts  Savings  Bank  Life  Insurance 
Plan  failed  to  serve  the  industrial  classes  in  any  substantial  manner,  but  that 
without  the  services  of  regular  life  insurance  companies,  an  overwhelming  number 

'  See  Final  Report  and  noconuiiencialions  of  the  Temporary  National  Kconomic  ronimittee,  pp.  69,81. 

18443 


18444  CONCENTRATION  OF  ECONOMIC  POWER 

of  these  people  would  have  no  protection.  Yet  not  a  word  of  this  is  to  be  found  in 
the  "Summary  and  Concliisiotis" 

How  much  weight  should  be  given  to  these  conclusions  is  apparent  when 
one  realities  that  the  survey  covered  1666  families  out  of  the  twenty  odd  million 
people  who  have  Industrial  ins\irance.  The  commission  itself  evidently  realized 
the  weakness  of  such  a  small  sample  as  a  basis  for  conclusions,  because  it  states 
on  page  4  of  Monograph  No.  2; 

"Tt  is  not  claimed  that  the  conditions  in  the  area  surveyed  are  necessarily 
typical.  *  *  *  Nevertheless  it  is  felt  that  the  conditions  described  in 
this  study  apply  to  a  very  large  proportion  of  the  population." 

Yet  we  find  no  facts  in  the  Monograph  to  .support  the  contention  that  the  Secur- 
ities &  Exchange  Commission's  conclusions  do  "apply  to  a  very  large  proportion 
of  the  pojiulation." 

It  is  important  to  realize  the  hostile  attitude  of  some  of  those  who  conducted 
the  survey  underlying  Monograph  No.  2.  We  had  numerous  complaints  from 
our  j>olicyholders  who  had  confidence  enough  in  the  Metropolitan  to  report 
that  the  Commission's  investigators  whre  unfair.  The  following  are  a  few  illus- 
trations of  what  at  least  .^oine  of  the  mvf^stigators  are  reported  by  our  policy- 
holders to  have  said: 

"The  companies  were  gyping  the  people  by  charging  too  much  money. 
I  would  get  a  lump  sum  if  the  law  went  through.  *  *  *  i  ^^g  very 
much  upset." 

'"Agents  were  putting  over  things  on  policyholders.  There  was  money 
due  to  policyholders  but  the  polioyhoiders  lidn  t  know  it  and  he  (the 
investigator)  was  here  to  see  whether  there  was  any  money  due  me,  and 
if  there  was,  the  Government  was  going  to  get  it  from  the  Company." 

"In  analyzing  my  15- 1  ear  Endowment  policy,  he  asked  why  T  carried 
that  kmd  of  policy,  which  gave  so  little  in  return.  It  would  oe  almost 
wiser    he  said,  to  put  the  money  in  the  bank  instead." 

"Two  men  came  at  different  times.  The  first  said  that  pepple  Were 
paying  too  much  of  their  income  for  insurance.  The  second  man  said 
that  when  a  person  with  no  relatives  or  family  died,  the  company  .kept  the 
moiiev  and  the  Government  intended  to  do  something  about  it." 

"When  I  refused,  he  was  angry  and  .said  that  he  .vould  see  the  Insurance 
Commissioner  who  would  force  me  to  show  my  policies." 

Let  us  now  observe  some  illu.strations  of  inaccuracies  contained  in  Monograph 
No.  2.  In  Chapter  Three,  the  statement  is  made  that  in  Massachusetts  the 
John  Hancock  has  onlj^  24%  as  many  Industrial  policies  as  the  Prud'^ntial.  The 
annual  report  of  the  Mas.sachusctts  Commissioner  of  Insurance  for  1938  shows 
that  the  John  Hancock  had  64%  more  of  such  policies  than  the  Prudential. 

Then  in  the  discu.ssion  of  the  insurance  program  of  the  Jameson  family,  it  is 
stated: 

"It  is  a  little  hard  to  understand  this  mixture  of  industrial  and  savings 
bank  life  insurance — particularly  how  Mr.  Jameson  was  persuaded  to  pay 
•'B23.92  for  $.^00  of  Industrial  insurance  almost  on  the  same  day  that  he 
found  out  he  could  get  twice  as  much  .savings  bank  life  insurance  (and 
that  on  the  endowment  plan)  for  only  $22.48." 

As  the  Monograph  states  that  the  Savings  Bank  policy  referred  to  was  a  20 
Year  Endowment,  it  is  interesting  to  note  that  the  Savings  Banks'  published 
rates  for  such  a  policv  indicate  the  premium  would  have  been  about  $44  per 
$1,000  of  coverage,  and  not  .$22.48. 

Much  emphasis  was  placed  in  the  "Summary  and  Conclusions"  in  the  Mono- 
graph upon  the  unproved  allegation: 

"That  there  is  an  over-loading  of  policies  in  many  families"  and  "that  low 
income  families,  where  the  average  per  family  member  income  is  in  the 
neighborhood  of  $300,  should  be  spending  as  much  as  24%  of  that  income 
for  insurance  premiums  is  inexcusable  and  it  is  startling  to  realize  that 
9.59%  of  the  non  relief  families  and  8.67%  of  the  relief  families  spent  10% 
or  more  of  their  income  upon  insurance  premiums." 

It  is  unfair  to  charge  over-loading  on  any  basis  other  than  the  relationship  of 
the  total  family  income  to  the  total  industrial  family  premiums  at  the  time  the 
policies  were  taken  out.  Speaking  for  the  Metropolitan,  a  real  effort  is  made, 
before  the  issuance  of  a  policy,  to  keep  the  total  premiums  paid  within  the 


CONCENTRATION  OF  ECONOMIC  POWER  18445 

financial  ability  of  a  family.  That  the  companies  have  succeeded  in  such  efforts, 
by  and  large,  is  obvious  from  the  over-all  figures  in  the  Monograpii  which  indi- 
cate that  the  average  percentage  of  the  family  income,  spent  for  Industrial  in- 
surance was  only  4.92%.  Certainly  this  would  not  support  any  charge  of  over- 
loading policies  generally. 

To  investigate  alleged  over-loading,  the -survey  should  have  inquired  as  to 
what  the  incomes  of  the  alleged  over-loaded  families  were  at  the  time  the  policies 
were  taken  out.  Yet  on  this  controlling  factor  tlie  rejiort  contains  nothing  on 
which  to  establisli  these  figures  for  the  families  referred  to.  Nor  will  one  find 
an  iota  of  information  in  the  "Summary  and  Conclusions"  as  to  whether  the 
Industrial  policyholders  interviewed  regarded  their  life  insurance  programs  as 
not  in  keeping  with  their  particular  circumstances,  or  the  total  family  premiums 
representative  of  an  undue  portion  of  the  family  income. 

Is  it  the  purpose  of  the  Securities  &  Exchange  Commission  to  recommend  that 
Industrial  insurance  policyholders  shall  be  arbitrarily  controlled  in  their  discre- 
tion as  to  the  number  and  face  amount  of  Industrial  life  insurance  policies, 
previously  purchased,  which  they  may  retain?  Certainly  the  life  insurance  com- 
panies have  no  right,  once  a  policy  is  issued,  to  make  such  arbitrary  decisions. 
Yet  it  is  alleged  that  there  is  over-loading  because  the  total  family  premiums  for 
Industrial  life  policies,  which  have  been  in  force  on  the  average  for  some  years, 
appear  to  the  Securities  &  Exchange  Commission  to  represent  an  unreasonable 
percentage  of  the  current  family  income. 

Only  the  policyholders  themselves  have  the  right  to  determine  what  reductions, 
if  any,  are  to  be  made  in  the  number  of  their  existing  insurance  policies  when 
adversity  of  one  sort  or  another  overtakes  their  respective  families.  It  is  clear 
that  in  cases  of  this  kind  those  involved  will  usually  elect  to  continue  that  form 
of  thrift  in  which  they  have  the  most  confidence.  In  the  light  of  the  record  of 
life  insurance  over  the  years  and  particularly  during  the  past  depression,  can 
any  reasonable  person  say  that  the  confidence  of  these  policyholders  is  mis- 
placed? If  not,  who  is  better  able  or  has  a  better  right  to  determine  what  per- 
centage of  the  families'  income  should  remain  in  life  insurance  or  other  forms 
of  thrift  than  the  policyholders  themselves? 

In  further  support  of  the  allegation  of  overloading,  much  is  made  in  the  Sum- 
mary and  Conclusions  in  the  Monograph  of  the  large  number  of  policies  held  in  a 
few  families.  However,  elsewhere  in  the  Monograph  statistics  show  that  among 
families  only  Industrial  life  insurance,  the  average  family,  consisting  of  4.3  mem- 
bers, had  only  5.6  policies.  It  must  be  apparent  that  a  charge  of  overloading  can- 
not be  sustained  generally  and  if  it  exists,  it  is  in  a  few  isolated  cases.  Accord- 
ingly, we  find  the  Monograph  endeavoring  to  prove  a  general  conclusion  by  isolated 
cases.     To  illustrate: 

"84  families  carried  more  than  15  policies  each  at  the  same  time,  with 
numbers  ranging  as  high  as  43  policies  in  the  case  of  one  family."      (It  is  to 
•     be  noted  that  these  84  families  were  selected  from  the  total  of  1606  insured 
families  which  were  studied.) 

There  is  nothing  in  the  Monograph  to  indicate  what  the  incomes  of  these  fam- 
ilies were  when  the  policies  were  taken  out  and,  therefore,  there  is  no  evidence  of 
overloading  by  the  companies. 

Furthermore,  the  chapter  on  "Summary  and  Conclusions"  carefully  refrains 
from  pointing  out  that  there  were  about  seven  members,  on  the  average,  in  these 
particular  families,  whereas  the  average  for  all  families  holdi,ng  Industrifil  insur- 
ance is  slightly  more  than  four.  In  other  words,  the  families  holding  the  larger 
number  of  policies  have  more  members  to  insure  and  therefore  have  more  policies 
than  the  average. 

As  to  the  ca.se  where  43  policies  were  held  by  one  family  (referred  to  as  the 
"Baker"  family),  it  is  interesting  to  note  that  there  are  ten  members  in  the  fam- 
ily, that  these  43  policies  had  been  accumulated  over  a  43-year  period,  that  the 
family  income  is  $4,224,  that  the  family  is  spending  10.9%  of  its  annual  income 
for  the  payment  of  life  insurance  premiums,  and  that  it  has  never  lapsed  or  sur- 
rendered a  policy  which  it  obtained.  Who,  with  propriety,  can  say  that  this 
family  should  not  hold  to  its  Industrial  insurance?  Where  is  there  any  evidence 
in  the  Monograph  that,  at  the  time  the  policies  were  taken  out,  the  total  premiums 
represented  an  unreasonable  part  of  this  family's  income? 

If  the  thesis  set  forth  by  the  Commission  is  sound,  namely,  that  a  high  per- 
centage of  income  devoted  to  Industrial  life  insurance  is  undesirable,  then  the 
lapse  rate  in  the  cases  where  this  is  so  would  be  abnormally  high,  yet  the  reverse, 
on  the  average,  is  true.     Abnormal  lapse  rates  are  found  generally  among  the 


18446  CONCENTRATION  OF  ECONOMIC  POWER 

families  which  have  a  small  number  of  policies  rather  than  among  those  whose 
confidence  in  life  insurance  is  so  real  that  they  have  a  considerable  number. 

It  is  further  charged  in  the  Monograph  that  there  has  been  a  "sale  of  insurance 
to  families  on  relief."  In  the  entire  Monograph,  only  one  instance  is  presented 
where  the  sale  of  insurance  was  made  to  a  family  receiving  relief  at  the  time  the 
insurance  was  sold.  The  rules  of  the  Metropolitan  absolutely  forbid  the  issuance 
of  new  insurance  to  families  receiving  relief.  We  know  that  other  companies 
have  similar  rules.  It  is  clear  that  the  policies  in  force  in  families  on  relief, 
which  were  reviewed  during  the  survey,  must  have  been  written  before  economic 
adversity  affected  the  in-comes  of  the  families  interviewed. 

As  to  the  statement  that  there  is 

"an  apparent  absence  of  any  technique  for  satisfactorily  readjusting  insur- 
ance programs  in  the  light  of  these  changing  circumstances" 

the  Commission  ignored  much  evidence  under  oath  by  witnesses  before  the  Tempo- 
rary National  Economic  Committee  as  to  what  the  companies  themselves  have  been 
doing  in  this  respect  and  as  to  the  work  of  the  Life  Insurance  Adjustment  Bureau 
which  is  maintained  by  companies  to  cooperate  with  relief  and  welfare  agencies 
on  adjustment  matters. 

The  ^'Summary  and  Conclusions"  of  the  Monograph  assert  that: 

"The  failure  of  the  distributive  system  to  give  proper  service  to  the  insured 
is  clearly  demonstrated  in  the  many  families  where  the  breadwinner  was 
inadequately  insured". 

Dr.  Anderson  referred  to  this  idea  in  his  presentation  before  the  Temporary 
National  Economic  Committee.  This  criticism  in  the  Monograph  is  based  upon 
the  so-called  "startling"  findings  in  the  Summary  ajid  Conclusions: 

"That  in  the  insured  families  11.58%  of  the  chief  breadwinners  and  20.21  % 
of  the  'other  breadwinners'  were  not  insured  at  all,  and  that  from  among 
1,071  families  which  carried  Industrial  insurance  there  were  730  cases  where 
the  percentage  of  premiums  paid  by  the  family  for  insurance  on  the  life  of  the 
chief  breadwinner  was  less  than  50%  of  the  total." 

Instead  of  these  figures  serving  as  a  basis  for  any  criticism,  they  should  have 
been  used  to  commend  the  agency  system  for  its  effective  work!  Those  figures 
really  show  that  agents  have  prevailed  upon  88.42%  of  the  chief  breadwinners  t,o 
insure  their  lives  voluntarily,  and  79.79%  of  "other  breadwinners"  to  do  likewise. 
This  impresses  me  as  a  most  remarkable  record,  especially  when  it  is  realized  that 
some  of  the  uninsured  breadwinners  are  not  eligible  for  life  insurance  because  of 
their  physical  condition,  etc.,  while  others  may  not  wish  to  own  it.  Obviously, 
it  follows  that  in  those  cases  where  the  breadwinner  is  unable  or  unwilling  to 
insure  his  life,  it  is  better  that  the  other  members  of  the  family  be  insured  than 
that  the  family  be  left  entirely  without  insurance. 

The  Metropolitan  emphasizes  to  its  agents  the  importance  of  insuring  chief 
breadwinners  and  we  have  every  reason  to  believe  that  our  agents  are  thoroughly 
cooperative  in  seeking  this  objective.  As  to  the  criticism  of  thoste  cases  where 
less  than  50%  of  the  total  family  premiums  for  Industrial  life  insurance  are  spent 
on  the  lives  of  the  chief  breadwinners,  we  can  only  say  that  the  poh'cyholders 
themselves  must  determine  questions  of  this  character.  We  cannot  ignore  the 
economic  loss  sustained  by  the  low  income  families  through  the  death  of  the  wife. 
The  inconsistency  of  the  criticism,  though,  is  obvious  from  the  reference  in  the 
Monograph  to  the  insurance  program  of  the  Roxby  family,  which  had  only  savings 
bank  life  insurance.     Here  it  is  stated  that: 

"the  distribution  in  amounts  shows  evidence  of  intelligent  planning  in  the 
program  for  the  family", 

and  the  concluding  sentence  reads: 

"It  should  be  noted  that  39%  of  the  total  premium  was  paid  for  insurance 
on  the  life  of  the  only  breadwinner." 

As  evidence  of  inconsistency,  contrast  this  commendation  of  39%,  in  a  case  hav- 
ing savings  bank  life  insuralnce,  with  the  previously  quoted  statement  which  singled 
out  for  special  critical  comment  cases  where  the  percentage  of  premiurns,  paid 
on  the  lives  of  the  chief  breadwinners,  was  less  than  50%  of  the  total  and  therefore 
viewed  as  improper.  It  is  interesting  to  note  that  the  latter  cases  had  insurance 
with  regular  companies. 


CONCKN'I  RATION  OK  ECONOMIC  POWER        18447 

The  jnaterial  contained  in  the  Monograph  does  not  substantiate  the  charge  made 
in  the  chapter  entitled  "Summary  and  Conclusions"  that  unsound  distribution 
of  Industrial  insurance  has  caused  heavy  lapsation,  yet  we  are  told: 

"That  as  a  result  of  this  unsound  distribution  and  the  changing  economic 
circumstances  of  the  policyholders,   there  is  much  lapsing  of  policies." 

This  statement  is  made  despite  the  "fact  that  two-thirds  of  the  insured  families 
referred  to  in  the  report  had  never  lapsed  or  surrendered  a  single  policy.  Un- 
fortunately Dr.  Anderson's  report  contained  the  same  mistake  the  Securities 
&  Exchange  Commission  made  when  it  endeavored  to  measure  the  loss  to  policy- 
holders through  lapses  in  terms  of  the  numl:)er  or  face  amount  of  insurance  of 
policies  issued.  The  report  to  your  Committee  indicated  that  "from  50% 
to  more  than  75%  of  the  new  (Industrial  life  insurance)  policies  issued"  were 
lapsed.  The  current  experience  of  the  Metropolitan  indicates  that  less  than 
15%  of  the  new  weekly  premium  policies  issued  lapse  before  a  non  forfeiture 
value  is  available.  It  will  be  noted  that  the  Metropolitan  is  specifioally  referred 
to  in  this  report  as  one  of  the  two  companies  which  carrj'  the  major  part  of  In- 
dustrial life  insurance. 

Dr.  Anderson  did,  however,  touch  upon  the  real  test  for  measuring  the  loss 
to  policyholders  through  lapses  when  he  referred  to  "the  aggregate  money 
loss"  to  policyholders.  This  means  the  actual  money  which  holders  of  lapsed 
policies  are  out  of  pocket.  The  Statement  on  Life  Insurance,  submitted  by  life 
insurance  companies,  treats  with  this  subject  on  Pages  50,  51,  52,  and  53.  It 
indicates  that: 

"Of  the  premiums  paid  since  issue  on  the  Industrial  policies,  terminating 
in  1937,  2.7%  had  been  paid  on  the  policies  that  lapsed.  For  1938  and  1939 
this  percentage  would  be  even  less." 

That  Statement  also  pointed  out  that  these  very  policyholders  had  their  insurance 
protection  while  their  policies  were  in  force.  Policyholders  do  die  during  the 
early  months  when  a  policy  is  in  force;  for  instance,  the  Metropolitan  Life  Insur- 
ance Company  in  1940  paid  out  $1,692,000  on  Industrial  insurance  policies,  which 
had  been  in  force  less  than  one  year.  It  is  high  time  tliat  the  public  should 
understand  the  fallacy  of  alluding  to  total  amounts"  of  insurance  in  force  as  a 
tragic  loss  when  policies  are  lapsed. 

The  report  presented  to  the  Committee  by  Dr.  Anderson  refers  to  a  figure  of 
$33,011,000  as  the  aggregate  amount  of  money  lost  through  lapses  and  surrenders 
by  the  policyholders  of  the  two  companies  which  write  most  of  the  Industrial 
life  insurance.  Evidently  this  figure  was  taken  from  the  Gain  and  Loss  exhibits 
formerly  included  in  the  annual  statements  of  the  particular  companies.  This  is 
based  on  an  erroneous  assumption  that  the  technical  "Gains"  from  lapses  and 
surrenders  of  Industrial  policies  during  1938  were  profits  for  the  companies 
involved  and  losses  for  the  policyholders.  The  real  function  of  the  Gain  and  Loss 
exhiijit  is  explained  on  Pages  63  to  65  of  the  "Statement  on  Life  Insurance" 
which  we  previously  referred  to.  A  pervisal  of  such  Statement  will  clearly  indicate 
that  the  so-called  "gains"  are  not  profits.  Assuming  that  they  were  profits, 
both  of  the  companies  being  mutual,  such  profits  would  have  been  passed  on  to 
policvholders  in  the  form  of  dividends. 

The  "Summary  and  Conclusions"  in  Monograph  No.  2  indicate  that  the 
Securities  &  Exchange  Commission  has  established  in  the  Boston  survey,  which 
covered  an  infinitesimal  percentage  of  the  total  Industrial  policyholders  in  the 
United  States,  that  the  selling  methods  of  life  insurance  companies  are  the 
primary  causes  of  lapses.  For  reasons  previously  set  forth  in  this  letter, 
this  interpretation  cannot  be  accepted  because  it  is  contrary  to  experience  not 
only  in  Boston  but  throughout  the  country.  The  Commission's  interpretation 
is  so  emphasized  however  that  a  casual  reader  will  overlook  in  the  "Summary 
and  Conclusions"  the  few  words  which  suggest  "the  changing  economic  circum- 
stances of  the  policyholders"  is  a  cause  of  lapsation.  As  shown  in  the  State- 
ment on  Life  Insurance,  submitted  to  your  Committee  by  the  life  insurance 
companies,  the  basic  causes  for  lapses  are  beyond  the  control  of  the  companies. 
To  illustrate,  this  Statement  contains  a  chart  which  shows  a  definite  correla- 
tion between  economic  conditions  and  lapses:  in  fact,  it  demonstrates  that  as 
business  conditions  improve,  lapses  decrease,  and  conversely,  when  business  is 
bad,  lapses  are  high. 

It  is  interesting  to  note  that  the  Monograph  contained  nothing  about  the 
timely  assistance  which  comes  to  families  in  distress  from  funds  paid  by  life 


18448  CONCENTRATION  OF  K("ONO:\IIC  POWER 

insurance  companies  in  cash  surrender  values  and  for  death  claims.  Xor  did 
the  "Summary  and  Conclusions"  include  information  about  the  widespread 
satisfaction  of  policyholders  and  beneficiaries  with  the  service  rendered  by 
life  insurance  companies.  It  would  seem  that  a  complete  understanding  of 
Industrial  life  insurance  would  have  prompted  the  Commission  to  make  some 
effort  to  collect  information  of  this  cliaracter,  as  well  as  to  establish  the  social 
and  economic  values  arising  from  the  prompt  and  fair  fulfillment  of  the  con- 
tractual obligations  of  the  companies.  No  other  system  has  brought,  to  the 
low  income  groups,  the  opportunit}'  to  secure  protection  upon  terms  within 
their  reach. 

It  is  significant  tliat  in  the  "Sununary  and  Conclusions"  of  the  Monograph 
not  a  word  is  to  be  found  abofit  the  efforts  of  tlic  various  companies  to  help 
Industrial  policyholders  to  get  the  most  for  their  insurance  premiums.  The 
two  elements  which  are  responsible  for  the  extra  cost  of  Industrial  life  in- 
surance, in  comparsion  with  Ordinary  insurance,  ari.se  from  the  higher  mor- 
tality experienced  by  Industrial  classes  and  the  extra  ex{)ense  of  handling 
insurance  in  small  units  on  tlie  weekly  basis.  Speaking  for  the  Metroi)olitan, 
we  have  not  been  content  to  stand  idly  by  without  endeavoring  to  be  of  real 
service  to  our  Industrial  policyholders.     A  few  of  our  efforts  may  be  of  interest. 

We  maintain  a  health  program  and  cooperate  with  public  and  private  agen- 
cies in  a  continuous  effort  to  bring  health  and  longer  lives  to  Industrial  policj'- 
holders.  That  this  cooperative  effort  has  met  with  success  is  evident  during 
the  past  thirty  years.  No  reference  was  made  in  the  report  to  your  Com- 
mittee on  January  15  to  a  statement  already  in  its  Records  which  relates 
in  some  detail  to  a  munber  of  the  health  and  welfare  activities  of  the  Metro- 
politan in  behalf  of  its  Industrial  policyholders. 

We  want  our  policyholders  to  get  the  greatest  amount  of  insurance  for 
the  least  amount  of  money.  Since  1912  we  have  offered  our  Industrial  policy- 
holders an  opportunity  to  reduce  the  cost  of  their  insurance  by  10%  under 
certain  conditions  whereby  they  pay  their  weekly  premiums  at  one  or  another 
of  our  district  offices,  instead  of  having  an  agent  call  at  their  home  to  collect. 
Last  year  about  30%  of  Metropolitan  weekly  Industrial  premiums  were  paid 
at  our  district  offices  by  policyholders.  Furtliermore,  for  those  who  can  afford 
to  pay  premiums  on  a  monthly  basis,  we  estal)lished  years  ago  Monthly  Premium 
insurance.  This  provides  more  insurance  at  less  cost  than  weekly  Industrial 
life  insurance  for  those  who  can  make  payments  on  a  monthly  basis.  For 
policyholders  who  can  afford  to  buy  $1,000  of  Ordinary  life  insurance  at  one 
time,  we  have  also  made  it  possible  for  them  to  pay  on  a  monthly  basis.  Both 
the  Industrial  and  Ordinary  monthly  insurance  departments  have  met  with 
popular  favor  and  therefore  have  had  a  splendid  growth. 

I  am  writing  to  solicit  your  good  offices  to  the  end  that  the  unfortunate 
impression  which  may  have  resulted  from  the  report  in  question  may  be  in  a 
measure  corrected  by  incorporating  this  letter  in  the  record  of  the  Temporary 
National  Economic  Committee.  I  ask  this  in  common  fairness,  even  though 
the  news  releases  carried  no  approval  or  authorization  by  the  Temporary 
National  Economic  Committee. 
Sincerely  yours, 

Leroy  a.  Lincoln,  President. 


rejoinder  by  gerhard  a.  gesell  to  letter  from  metropolitan  life 
insurance  co 

Securities  and  Exchange  Commission, 

Washington,  February  18,  1941  • 
Dewey  Anderson, 

Executive  Secretary,  Temporary  National  Economic  Committee, 

381  Apex  Building,  Washington,  D.  C. 
Dear  Mr.  Anderson:  On  February  7,  1941,  you  referred  for  comment  a  letter 
to  Senator  O'Mahoney  dated  January  23,  1941,  from  the  President  of  the  Metro- 
politan Life  Insurance  Company  relative  to  Monograph  No.  2  of  the  Temporary 
National  Economic  Committee  entitled  "Families  And  Their  Life  Insurance."  I 
wish  to  state  the  following  in  respect  of  the  criticism  of  this  monograph  con- 
tained in  the  above  letter. 

First,  as  to  the  charge  that  the  W.  P.  A.  enumerators,  wno  made  the  house 
to  house  survey  upon  which  this  Monograph  is  based,  manifested  a  "hostile 
attitude"  and  "were  unfair,"  permit  me  to  call  attention  to  explicit  written 
instructions  given  each  enumerator.  A  copy  of  such  instructions  is  printed 
in  Appendix  4  of  the  Monograpii      They  contain  the  following  statomt'iil. 


CONCFATKAIK.X  OV   KC*  »N().MIC   I'oWKR  18449 

"I^numerators  and  clerks  will  he;  sworn  to  handle  the  information  ob- 
tained in  a  confidential  manner  and  not  to  reveal  to  any  unauthorized  per- 
son facts  relating  to  the  survey.  Enumerators  must  not  give  advice  to 
persons  interviewed  on  the  wisdom  or  adequacy  of  their  insurance  hold- 
ings. If  advice  is  sought  the  questioner  should  be  referred  to  the  State 
Insurance  Commissioner,  Hon.  C.  I'\  J.  Harrington,  Boston,  Mass. 

"It  must  be  made  clear  that  this  survey  is  solely  for  the  purpose  of 
determining  the  facts  relating  to  the  holders  of  life-insurance.  It  is  not 
an  attack  upon  the  life-insurance  business  nor  is  there  any  criticism  in- 
tended of  the  policies  or  practices  of  any  insurance  comi)any.  The  enu- 
merators must  not  convey  the  impression  that  either  they,  or  those  con- 
ducting the  survey,  look  with  disapproval  on  any  company  or  on  any  kind 
of  insurance  or  on  any  amount  of  insurance  held  by  individuals." 

The  above  instructions  were  emphasized  time  and  again  while  enumerators  were 
being  trained  and  every  possible  effort  was  made  to  conduct  the  survey  in  an 
objective  and  dispassionate  manner.  While  it  was  impossible  to  check  the 
conduct  of  each  enumerator,  no  information  was  ever  received  mdicating  that 
the  enumerators  had  conducted  themselves  in  the  manner  indicated.  In  the 
course  of  the  survey  we  did  receive  information  to  the  effect  that  a  certain 
individual  was  calling  upon  policyholders  in  the  area  under  survey  falsely 
representing  himself  to  be  employed  bj-  the  Securities  and  Exchange  Commis- 
sion. This  individual,  who  had  no  connection  with  the  survey,  was  apparently 
anxious  to  obtain  information  from  policyholders  for  ulterior  purposes.  The 
incident  was  brought  to  the  attention  of  the  Federal  Bureau  of  Investigation. 

It  is  true  the  report  was  in  error  in  stating  that  the  John  Hancock  had  gnly 
24%  as  many  industrial  policies  as  the  Prudential.  The  correct  percentage 
should  have  been  stated  as  64%.  This  error,  however,  has  no  bearing  whatso- 
ever on  the  validity  of  the  eonclusions  reached  in  the  Monograph.  As  to  the 
comments  with  regard  to  the  "Jameson"  family,  the  error  mentioned  in  the 
letter  from  the  President  of  the  Metropolitan  was  noted  prior  to  release  of 
the  Monograph  and  an  errata  sheet  reading  as  follows  was  inserted  in  copies 
of  the  Monograph: 

"The  two  20-Year  Endowment  Policies  in  the  Savings  Bank  Life  Insurance 
System  recorded  on  page  74  as  held  by  William  Jameson  and  Hannah 
Jameson,  respectively,  should  each  be  designated  as  whole  life  policies." 

In  selecting  Massachusetts  for  the  purposes  of  this  survey,  an  area  was  chosen 
which  is  almost  exclusively  serviced  by  the  three  largest  industrial  companies. 
We  are  convinced  from  sample  surveys  made  in  the  District  of  Columbia  and 
from  our  general  study  of  the  situation  that  the  conditions  h)  Massachusetts,  a 
state  which  has  always  been  noted  for  strict  insurance  regulation,  are  far  better 
than  many  other  areas  of  the  country,  particularly  those  areas  where  extreme 
competition  exists  among  numerous  smaller  industrial  companies.  Indeed,  I  am 
inclined  to  feel  that  the  conditions  nation-wide  are  more  serious  than  indicated 
in  the  particular  areas  surveyed.  It  is  true  that  the  Monograph  states,  as  the 
President  of  the  Metropolitan  is  at  great  pains  to  point  out,  that  it  is  not  claimed 
that  the  conditions  in  the  area  surveyed  were  necessarily  typical.  He  omit« 
including  in  his  excerpts  from  this  portion  of  the  Monograph,  however,  the  fol- 
lowing words  appearing  at  page  4  of  the  Monograph,  immediately  following  the 
comment  on  conditions  in  the  area  surveyed,  to  wit:  "indeed,  there  are  many 
reasons  to  believe  that  they  may  be  somewhat  better  than  those  existing 
elsewhere." 

Criticism  is  also  directed  against  the  statement  contained  in  the  Summary  and 
Conclusions  to  the  effect  that  there  is  an  "overloading"  of  policies  in  many  fami- 
lies. This  statement  is  amply  supported  by  the  facts  set  forth  in  the  body  of  the 
Monograph.  It  should  be  obvious  to  anyone  who  reads  this  volume  with  care 
that  the  coverage  in  the  various  family  groups  is  considered  in  the  light  of  their 
holdings  and  income  at  the  time  of  the  survey.  To  use  but  one  illustration, 
there  were  36  relief  families  spending  10%  or  more  of  their  income  on  insurance 
premiums  and  6  of  these  families  were  spending  in  excess  of  16%.  Surely  such 
a  situation  is  indicative  of  overloading  of  policies  in  these  particular  families. 
The  figure  of  4.9%,  which  is  the  overall  figure  indicating  the  average  percentage 
of  family  income  spent  for  insurance,  is  not  of  any  value  taken  by  itself.  As 
the  Monograph  demonstrates,  this  is  purely  an  average  figure  and  fails  to  dis- 
close the  numerous  cases  where  families  are  spending  substantially  in  excess  of 
this  amount  for  insurance  premiums.     The  use  of  such  an  average  without  regard 


18450  (lONCKNTIlATfON  OF  10(H)NnMIC  POWFU 

to  the  variations  above  and  below  that  figure  indicates  an  unwillingness  to  face 
the  realities  of  the  situation. 

The  President  of  the  Metropolitan  Life  Insurance  Company  also  criticizes  the 
Monograph  because  it  did  nor  present  information  indicating,  the  income  of 
family  groups  at  the  time  the  various  policies  were  taken  out.  In  test  enumera- 
tions made  before  the  W.  P.  A.  project  was  formally  initiated,  we  attempted  to 
learn  the  income  of  families  at  various  dates  prior  to  the  date  of  enumeration 
without  success.  It  is  difficult  to  determine  the  amount  of  family  income  even 
on  the  date  of  enumeration  since  so  many  intangible  factors  are  involved  and  it 
was  found  to  be  literally  impossible  to  obtain  information  on  this  subject  for 
previous  dates.  Not  only  do  the  families  fail  to  keep  any  records  but  their 
income  fluctuates  considerably,  particularly  in  the  case  of  relief  families  where 
casual  employment  and  changes  in  the  type  of  relief  received  may  have  a  sub- 
stantial effect  upon  the  total  family  income.  Added  to  this  is  the  fact  that  the 
family's  chief  breadwinner,  who  is  most  conversant  with  such  matters,  is  usually 
the  person  away  from  the  home  the  longest  and  the  one  most  difficult  to 
interview. 

Furthermore,  it  seems  to  me  that  it  is  begging  the  question  to  argue  that  at 
the  time  the  policies  were  sold  the  income  of  the  family  may,  in  some  cases  have 
justified  taking  out  the  insurance  in  question.  The  point  which  has  been  urged 
in  the  Monograph  and  which  has  been  the  basis  for  the  examination  of  several 
witnesses  before  the  Committee  is  clear;  namely,  that  regardless  of  their  good 
intentions,  the  large  industrial  insurance  companies  have  not  yet  been  able  to 
work  out  a  satisfactory  arrangement  for  readjusting  the  insurance  holdings  of 
low  income  families  when  the  income  of  such  families  is  adversely  aff^ected  by 
economic  oircumstances  or  for  other  causes.  The  Life  Insurance  Adjustment 
Bureau  was  shown  to  have  done  only  a  partial  job  in  respect  of  a  limited  type 
of  family  situation.  Its  very  existence,  however,  proves  the  need  and  it  remains 
the  uncontroverted  fact  that  the  industrial  companies  have  not  satisfactorily  met 
the  problem  in  respect  of  the  great  bulk  of  industrial  poUcyholders. 

Reference  is  also  made  to  our  failure  to  present  information  concerning  lapsed 
and  surrendered  policies.  The  leading  industrial  companies  had  repeatedly  ad- 
vised us  that  they  could  not  give  us  information  of  this  character  for  particular 
family  groups  and  we  were  most  anxious  to  obtain  it  through  the  survey.  Un- 
fortunately, the  policyholders  have  no  record  of  their  lapsed  insurance  or  surren- 
dered insurance  and  though  there  were  many,  many  cases  where  policyholders 
were  in  a  position  to  exhibit  some  lapsed  policies,  our  experts  at  no  time  felt  that 
the  number  of  policies  shown  or  the  information  given  concerning  lapsed  or  sur- 
rendered policies  was  sufficiently  accurate  to  be  included  in  the  survey.  We  are 
confident  from  our  experience,  however,  that  the  lapsing  of  policies  was  severe 
and  there  most  definitely  is  not  any  basis  for  the  statement  appearing  on  page  8 
of  the  letter  from  the  President  of  the  Metropolitan  to  the  effect  that  two-thirds 
of  the  families  referred  to  in  the  report  had  never  lapsed  or  surrendered  a  single 
policy. 

A  few  additional  matters  deserve  brief  mention.  The  Metropolitan  states  that 
less  than  15%  of  new  weekly  premium  policies  lapse  before  a  non-forfeiture  value 
is  available.  This  statistic  does  not  answer  the  implications  implicit  in  the  dis- 
cussion of  high  lapsation  for  it  does  not  controvert  the  facts  shown  as  to  the 
company's  previous  experience  nor  does  it  give  any  reliable  measure  of  the  extent 
to  which  new  policies  now  being  written  terminate  through  premium  default 
during  the  first  year.  While  the  availability  of  earlier  non-forfeiture  values  may 
reduce  lapse,  it  is  still  clear  that  any  policy  on  which  premium  payments  are 
defaulted  in  the  first  year  is  a  policy  which  has  resulted  in  a  loss  to  the  policy- 
holder, i.  e.  that  he  has  paid  in  more  than  the  cost  of  the  protection  he  receives. 
Figures  which  are  a  more  reliable  measure  of  the  Metropolitan's  experience  in  this 
regard  are  shown  by  those  statistics  indicating  the  relation  between  the  number 
.of  new  policies  issued  and  the  gain  in  policies  in  force  during  any  given  year. 

The  Metropolitan's  nursing  service  was  referred  to  in  the  Monograph  on  page 
55,  contrary  to  the  implication  contained  in  the  letter  from  its  President.  Fur- 
thermore, while  there  was  no  definite  statement  in  the  Monograph  about  the 
timely  assistance  which  comes  through  cash  surrender  values  and  death  claims 
since  information  to  provide  the  basis  for  such  a  statement  could  not  be  accurately 
obtained,  the  point  was  referred  to  at  page  60  of  the  Monograph.  Finally,  there 
is  ample  basis  for  designating  the  insurance  program  of  the  "Roxby"'  family  as 
well  planned.  Not  only  did  that  family  confine  its  insurance  to  one  organization, 
which  is  in  itself  an  advantage,  but  it  also  had  the  fourth  highest  percentage  of 
its  premiums  payable  on  insurance  covering  the  bread-winner  in  spite  of  the 


CONCENTRATION  OF  ECONOMIC  POWER  18451 

fact  that  it  was  an  unusually  large  family  group.  These  factors  rather  than  the 
circumstances  that  the  insurance  was  savings  bank  life  insurance  prompted  the 
favorable  reference.  And  in  this  connection,  it  might  be  stated  that  no  effort 
was  made  in  this  Monograph  to  criticize  or  support  savings  bank  life  insurance 
but  since  the  issue  has  been  raised  it  might  well  be  noted  that  other  areas  would 
have  been  far  more  favorable  to  the  savings  bank  life  insurance  system  than  would 
that  chosen  for  purposes  of  the  survey. 

There  are  other  portions  of  the  letter  from  the  President  of  the  Metropolitan 
which  perhaps  deserve  comment  but  since  they  are 'mostly  matters  of  argument 
rather  than  of  fact,  it  is  my  preference  to  let  the  facts  speak  for  themselves. 
It  is  impossible  to  reconcile  different  points  of  view.  The  Summary  and  Con- 
clusions is  fully  supported  by  the  facts  revealed  in  the  body  of  the  Monograph. 
Since  these  facts  are  set  forth  in  full  and  have  not  been  challenged  except  in 
very  minor  respects,  the  opportunity  is  presented  for  any  interested  person  to 
analyze  the  Summary  and  Conclusions  in  the  light  of  those  facts. 
Very  truly  yours, 

Gerhard  A.   Gesell, 
(Gerhard  A.  Gesell) 

Special  Counsel. 


124491— 41— pt.  31-A 29 


LETTER  FROM  THURMAN  ARNOLD,  ASSISTANT 
ATTORNEY  GENERAL,  DEPARTMENT  OP: 
JUSTICE,    REGARDING    T.    N.    E.    C. 
MONOGRAPH  NO.  43,  "THE  MOTION 
PICTURE    INDUSTRY— A    PAT- 
TERN   OF    CONTROL,"    BY 
DANIEL  BERTRAND,  W. 
DUANE  EVANS  AND 
E.  L.  BLANCHARD 


18453 


Depastmbnt  or  Justice, 
Washington,  March  £4,  1941. 
Mr.  Dewbt  Andebson, 

Executive  Secretary,  Temporary  National  Economic  Committee, 
Federal  Trade  Commission,  Washington,  D.  C. 
Dear  Sir:  Enclosed  herewith  is  a  memorandum  for  the  Temporary  Natio'nal 
Economic  Committee  dated  March  24,  1941,  indicating  the  views  of  the  Depart- 
ment of  Justice  with  respect  to  Temporary  National  Economic  Committee 
Monograph  No.  43,  entitled  "The  Motion  Picture  Industry — A  Pattern  of 
Control.''^ 

It  is  requested  that  the  memorandum  and  the  Department's  public  statement 
of  October  29,  1940,  attached  to  the  memorandum,  be  made  a  part  of  the  record. 
Very  truly  yours, 

Thubman  Arnold, 
Assistant  Attorney  General. 

MEMOBANDXTM   FOB  THE   TEMPOBABT   NATIONAL  ECOMOHIC   COMMITTEE 

Re:  T.  N.  E.  C.  Monograph  No.  43,  entitled  "The  Motion  Picture  Industry— 
A  Pattern  of  Control." 

It  is  unfortunate  that  the  otherwise  excellent  monograph  on  the  motion  picture 
industry  is  marred  by  a  misleading  and  inadequate  discussion  of  the  consent 
decree  entered  by  the  District  Court  of  the  Southern  District  of  New  York  on 
November  20,  1940,  in  the  Government's  action  against  the  major  motion  picture 
companies.  This  discussion  is  contained  in  Appendix  III  and  our  criticism  is 
solely  directed  to  that  appendix. 

The  inadequacies  of  this  diScussion  are  based  on  two  errors.  First,  the  decree 
itself  is  not  set  out  in  the  report  and  it  is  not  considered  as  a  whole  by  the  author 
of  the  appendix.  Certain  excerpts  are  quoted  and  conclusions  drawn  therefrom. 
Other  provisions  of  the  decree  which  militate  against  these  conclusions  are  omitted 
from  the  appendix.  Second,  the  writer  of  the  monograph  apparently  does  not 
realize  that  the  decree  gives  additional  remedies  to  exhibitors  of  motion  pictures 
and  does  not  take  away  any  of  the  existing  remedies  under  the  antitrust  laws. 

For  example,  any  exhibitor  suffering  a  discrimination  prohibited  by  the  decree 
has  two  alternatives:  (1)  He  may  bring  an  action  for  triple  damages,  or  equitable 
relief,  or  both,  tinder  the  antitrust  laws,  in  which  action  it  will  usually  be  necessary 
to  prove,  subject  to'  the  rules  of  evidence,  a  conspiracy  between  the  offending 
companies.  (2)  He  may  use  the  more  convenient  and  less  expensive  arbitration 
machinery  set  up  by  the  decree  in  which  proof  of  conspiracy  is  not  required  and 
conformity  to  legal  rules  of  evidence  is  not  necessary.  The  author  does  not 
realize  that  this  machinery  is  an  additional  safeguard  rather  than  a  substitute  for 
the  antitrust  laws. 

If  the  decree  limited  the  application  of  law  to  exhibitors,  it  would  be  a  dangerous 
experiment.  No  one  can  foresee  the  possible  abuses  of  monopoly  power  which 
may  arise  in  the  future,  and  therefore  no  one  should  attempt  to  legislate  against 
them  by  any  form  of  decree.  The  Government  has  not  done  this.  The  exhibitors 
are  not  bound  by  the  decree  in  any  way  except  for  their  own  advantage.  They 
are  not  compelled  to  utihze  any  of  its  provisions  unless  they  so  desire. 

At  the  time  the  decree  was  entered,  the  consenting  defendants  were  faced  with 
many  problems  which  did  not  exist  at  the  time  the  action  was  filed.  Most  of 
them  were  confronted  with  the  loss  of  a  substantial  part  of  their  foreign  business. 
Huge  investments  had  been  made  both  here  and  abroad,  and  it  appeared  tnat  a 
further  dislocation  of  these  companies  at  this  time  would  not  be  warranted  if 
their  operations  could  be  brought  into  harmony  with  the  antitrust  laws. 

The  monograph  quotes  from  a  public  statement  of  the  Department  at  the  time 
the  action  was  instituted  concerning  the  purpose  of  the  action..  In  order  to 
present  a  complete  picture  of  the  Department  s  position,  it  is  believed  that  the 
purpose  of  the  Department  in  signing  the  decree  to  provide  a  forum  for  the  ex- 
peditious settlement  of  disputes  between  exhibitors  and  distributors,  as  announced 
in  its  public  statement  of  October  29,  1940,  should  be  incorporated  m  the  record. 

18455 


18456       CONCENTRATION  OF  ECONOMIC  POWER 

A  copy  of  this  statement  is  attached  hereto,  and  it  is  suggested  that  it  be  made  a 
part  of  the  record. 

What  the  decree  itself  does  is  to  provide  the  dominant  trade,  upon  which  people 
depend  for  amusement,  with  an  instrument  of  government.  It  represents  an 
attempt  to  shape  the  judicial  process  to  the  life  of  an  industry  at  work.  It  is  a 
series  of  additional  privileges  given  to  exhibitors  to  protect  them  against  the  prac- 
tices of  the  larger  organizations  which  distribute  motion  pictures  on  a  Nation-wide 
scale. 

Thurman  ArnolDj 
Assistant  Attorney  General. 

[Public  statement  released  October  29, 1940] 

Department  op  Justice — Division  for  Enforcement  of  Antitrust  Laws 

United  States  v.  Paramount  Pictures,  Inc.,  et  al. 

(U.  S.  D.  C.  S.  D.  N.  Y.— Eq.  No.  87-273) 

Statement  of  Grounds  For  Action 

proposed  consent  decree 

Department  op  Justice, 

October  29,  1940. 

The  Department  of  Justice  today  announced  the  filing  of  a  consent  decree 
under  the  terms  of  which  five  major  moving-picture  companies  agree  to  ter- 
minate practices  which  have  long  been  the  subject  of  dispute. 

The  decree,  which  was  filed  today  in  the  United  States  District  Court  for  the 
Southern  District  of  New  York,  calls  for  termination  of  the  sales  practice  known 
as  "blind  selling"  and  drastic  modification  of  the  so-called  "block  booking" 
methods  of  the  defendant  companies. 

Companies  consenting  to  the  decree  are  Paramount  Pictures,  Inc.,  Loew's, 
Inc.,  RKO  Pictures,  Inc.,  Warner  Brothers  Pictures,  Inc.,  Twentieth  Century- 
Fox  Film  Corporation  and  their  subsidiary  and  affiliated  companies. 

United  Artists  Corporation,  Universal  Pictures  Co.,  Inc.,  and  Columbia  Pic- 
tures Corporation,  three  other  companies  named  in  the  original  complaint  have 
not  joined  in  the  decree.  An  open  hearing  will  be  held  before  the  Honorable 
Henry  W.  Goddard,  District  Judge,  on  November  14,  1940,  at  10:30  A.  M.,  at 
which  time  interested  persons  not  parties  to  the  suit  will  be  given  an  opportunity 
to  present  their  views  with  respect  to  the  proposed  decree. 

In  addition  to  revising  selling  practices  of  the  five  signatory  companies,  the 
decree  sets  up  a  system  for  the  arbitration  of  disputes  between  exhibitors  and 
distributors  to  be  administered  by  the  American  Arbitration  Association.  In 
order  to  give  this  arbitration  system  a  fair  trial,  the  government  agrees  not  to 
seek  divorcement  or  dissolution  of  production  and  distribution  in  the  industry 
for  a  period  of  three  years.  During  this  period  the  signatory  companies  agree 
not  to  engage  in  any  general  program  of  expansion  of  theatre  holdings  and  to 
maintain  the  status  quo  so  far  as  is  practicable. 

practices  affected  by  the  decree 

Blind  Selling  and  Block  Booking. 

The  decree  strikes  at  two  selling  practices  in  the  motion-picture  industry 
which  have  long  been  under  attack  by  exhibitor  organizations,  as  well  as  parent- 
teacher  associations  and  other  public  groups,  i.  e.,  block  booking  and  blind 
selling.  Various  proposals  to  eliminate  these  practices  have  been  suggested  from 
time  to  time,  and  legislation  to  that  end  has  been  under  consideration  by 
Congress. 

Under  the  present  practice,  at  the  start  of  each  motion-picture  season  an  en- 
tire year's  supply  of  pictures  is  sold  at  one  time.  The  contract  is  executed  before 
production  has  started  on  the  majority  of  pictures  covered  by  it.  An  exhibitor 
must  rely  on  what  is  at  best  but  a  sketchy  outline  of  the  pictures  the  distributor 
intends  to  produce.  This  selling  practice  is  commonly  known  as  blind  selling. 
Not  infrequently  the  completed  picture  differs  materially,  with  respect  to  story, 
cast  of  characters,  and  quality,  from  the  outline  previously  presented  to  the 
exhibitor.  As  a  result,  an  exhibitor  often  finds  himself  in  a  position  where  he 
must  play  a  picture  which  he  would  never  have  licensed  if  he  had  seen  it. 


CONCENTRATION  OF  ECONOMIC  POWER       18457 

Trade  Showing. 

Blind  selling  is  prohibited  by  the  decree.  Pictures  must  be  completed  and 
exhibited  to  the  trade  before  they  can  be  sold  or  offered  for  sale.  The  defendant 
companies  are  required  to  trade  show  their  pictures  in  each  of  their  respective 
exchange  districts.  Thus  every  exhibitor  is  given  an  opportunity  to  see  the 
pictures  before  he  buys  them. 

Under  existing  practice,  each  distributor  tries  to  sell  as  many  pictures  at  one 
time  as  it  possibly  can  and  requires  exhibitors  to  contract  for  all  or  substantially 
all  of  the  season's  output  in  order  to  get  any  of  its  pictures.  As  many  as  fifty 
pictures  may  be  included  in  a  single  block.  This  is  the  practice  that  is  known  as 
block  booking. 

As  a  result  of  this  practice,  exhibitors  have  practically  no  opportunity  to  select 
pictures  based  on  the  local  tastes  of  the  communities  which  they  serve.  In  addi- 
tion, the  playing  time  of  theatres  is  filled  by  pictures  bought  in  large  blocks  from 
the  defendant  companies,  and  exhibitors  have  little  screen  time  available  for 
showing  the  product  of  independent  producers. 

Selling  in  Blocks  of  Five. 

The  decree  prohibits  the  licensing  of  more  than  five  pictures  in  a  single  group. 
It  does  not  prohibit  the  licensing  of  less  than  five  pictures  in  a  single  group; 
distributors  are  free  to  sell  pictures  one  at  a  time  or  in  groups  of  two,  three,  or 
four.  Although  distributors  may  sell  more  than  one  group  of  five  pictures  at  a 
time,  they  may  not  condition  the  sale  of  one  group  of  pictures  on  the  sale  of 
another  picture  or  group  of  pictures. 

Under  the  method  of  selling  prescribed  by  the  decree,  if  an  exhibitor  finds  that 
a  particular  group  of  pictures  contains  some  that  are  objectionable,  he  can  request 
that  these  pictures  be  eliminated  or  that  other  pictures  be  substituted  for  them. 
If  the  distributor  refuses  to  gtant  his  request,  the  exhibitor  is  in  a  position  to 
reject  the  group  without  jeopardizing  his  entire  year's  supply  of  films. 

The  decree  neither  requires  distributors  to  grant  nor  prohibits  them  from 
granting  to  exhibitors  the  privilege  of  cancelling  one  or  more  pictures  in  a  given 
group.  As  a  result  of  the  process  of  bargaining  between  distributors  and  ex- 
hibitors, cancellation  privileges  in  varying  degrees  have  been  granted  by  distrib- 
utors in  the  past  though  they  have  not  been  legally  required  to  do  so.  Under  the 
decree,  the  parties  are  free  to  bargain  with  respect  to  cancellation  as  well  as  with 
respect  to  the  particular  pictures  to  be  included  in  a  given  group. 

Offensive  Pictures. 

Exhibitors  are  given  the  right  tp  cancel  any  picture  that  is  locally  offensive  on 
moral,  religious,  or  racial  grounds. 

Because  pictures  to  be  released  during  the  present  selling  season  have  already 
been  contracted  for,  the  provisions  of  the  decree  with  respect  to  trade  showing 
and  sales  in  small  blocks  do  not  become  effective  until  the  opening  of  the  new 
selling  season  on  September  1,  1941. 

Benefits  to  be  Anticipated. 

It  is  reasonably  to  be  expected  that  the  provisions  of  the  decree  as  to  trade 
showing  and  sales  in  small  groups  will  result  in  an  improvemevt  in  the  quality  of 
pictures  as  well  as  in  greater  opportunity  for  local  community  tastes  to  be  reflected 
in  the  pictures  selected  by  exhibitors.  This  new  method  of  selling  should  open 
to  independent  producers  a  market  now  closed  to  them  under  the  system  of  season 
block  booking.  In  addition,  exhibitors  will  have  greater  and  more  frequent 
opportunities  to  compete  for  pictures. 

.Although  the  method  of  selling  provided  for  in  the  decree  is  new  and  untried 
in  the  motion-picture  industry,  it  is  believed  that  it  will  be  of  benefit  to  exhibitors 
and  distributors,  as  well  as  to  the  public.  Whether  or  not  the  new  method  of 
selling  will  operate  effectively  can  only  be  determined  after  a  fair  trial  and  that  is 
provided  for  by  the  decree. 

ALLEGED    UNFAIR   TRADE    PRACTICES 

The  suit  charged  that  the  defendants  had  engaged  in  certain  unfair  and  dis- 
criminatory trade  practices  to  the  detriment  of  independent  exhibitors.  Among 
these  practices  were  the  following: 

(1)  Granting  certain  threatres  unreasonable  clearance  over  other  theatres; 

(2)  Discriminating  in  favor  of  large  circuits  of  theatres  and  against  .small 
independent  exhibitors  by  licensing  pictures  on  preferred  runs  to  the  circuit 
theatres'; 


18458  (X)NOENTRATION  OF  ECONOMIC  POWER 

(3)  Refusing  to  license  pictures  at  all  to  certain  theatres; 

(4)  Forcing  exhibitors  to  buy  short  subjects,  newsreels,  trailers,  serials, 
reissues,  or  westerns  as  a  condition  of  licensing  feature  pictures; 

(5)  Arbitrarily  withholding  available  prints  for  the  purpose  of  giving  a 
competitive  advantage  to  certain  exhibitors  over  others. 

ARBITBATiaN   OF   DISPUTES 

To  provide  a  forum  for  the  Settlement  of  complaints  with  respect  to  the  trade 
practices  described  above,  the  decree  sets  up  a  system  for  the  arbitration  of 
disputes  between  exhibitors  and  distributors.  In  this  respect,  the  decree  is 
unique.  Its  approach  to  the  solution  of  the  problems  existing  in  the  industry 
differs  from  that  of  any  consent  decree  heretofore  entered  pursuant  to  the  pro- 
visions of  the  antitrust  laws.  Instead  of  merely  prohibiting  certain  practices 
and  leaving  enforcement  to  the  ordinary  process  of  contempt  proceedings  insti- 
tuted by  the  Government,  the  decree  provides  a  forum  in  which  exhibitors  are 
given  an  opportunity  to  have  thejr  .complaints  promptly  heard  and  promptly 
decided  independently  of  any  action  by  the  Government. 

The  arbitration  machinery  will  be  administered  by  the  American  Arbitration 
Association.  The  decree  provides  that  a  panel  of  not  "less  than  ten  arbitrators 
shall  be  established  in  each  of  the  thirty-two  exchange  centers  in  the  United 
States.  The  arbitrators,  who  are  to  be  selected  by  the  American  Arbitration 
Association,  must  be  persons  having  no  past  or  present  connection  with  the 
motion-picture  industry.  Arbitration  can  be  instituted  by  the  payment  of  a 
nominal  filing  fee.  Controversies  are  to  be  heard  by  arbitrators  from  the  panel, 
selected  either  by  agreement  of  the  parties  or  .by  the  American  Arbitration 
Association.  Persons  whose  business  or  property  may  be  affected  by  an  award 
are  given  the  right  to  intervene  as  parties  and  to  participate  in  the  proceeding. 

Provision  is  made  for  an  appeals  board  of  three  members  to  be  appointed  by 
the  Court  to  hear  appeals  from  decisions  of  the  local  arbitrators.  The  board  is 
to  have  its  oflBces  and. hold  its  hearings  in  the  City  of  New  York.  The  cost  of 
maintaining  the  arbitration  system  is  to  be  borne  by  assessments  levied  against 
the  defendant  companies. 

.This  arbitration  system  wiU  provide  a  simple,  speedy,  inexpensive  and  impartial 
remedy  for  the  settlement  of  disputes  between  distributors  and  exhibitors. 

JUBISDICTION   RESERVED   FOB  FURTHER   RELIEF 

The  petition  filed  by  the  Government  in  this  case  asks  the  court  to  order  the 
divorcement  of  production  and  distribution  of  pictures  from  exhibition.  The 
petition  is  based  on  the  theory  that  divorcement  of  production  and  distribution 
from  exhibition  is  necessary  to  eliminate  tbe  unfair  competitive  practices  in  ihe 
industry  and  to  restore  fair  competition  therein.  The  purpose  of  the  present 
decree  is  to  provide  a  ijaeans  for  the  elimination  of  unfair  competitive  practices  in 
'the  industry  without  resorting  to  the  more  drastic  remedy  of  divorcement. 

The  establishment  of  a  system  of  arbitration  to  implement  the  slower  and  more 
expensive  remedy  of  private  suits  under  thie  antitrust  laws  supplies  a  long-felt 
need  in  the  motion-picture  industry  It  is  to  be  noted,  however,  that  the  decree 
takes  away  no  existing  legal  rights  of  any  exhibitor  under  the  antitrust  laws.  It 
provides  an  additional  forum  for  the  settlement  of  disputes  for  which  no  pro- 
visions have  heretofore  been  made.  Properly  administered,  it  should  put  an 
end  to  disputes  between  distributors  and  exhibitors  which  have  been  a  constant 
source  of  discord  and  friction  in  the'i)ast  and  should  result  in  placing  the  industry 
on  a  fair  competitive  basis.  If  these  results  are  not  obtained  after  a  reasonable 
trial  period,  there  Will  be  no  alternative  for  the  Government  but  to  proceed  with 
the  litigation  and  press  for  a  revision  of  the  entire  industry  structure  in  accord- 
ance with  the  prayer  of  the  petition. 

To  give  the  arbitration  system  a  fair  trial  the  Government  will  not  seek  divorce- 
ment or  dissolution  lor  ^.p^ipd  of  three  years.  In  the  interim  the  defendants 
have  agreed  not  to  engage  inariy  general  prograofi  of  expansiop  of  theatre  holdings, 
with  certain  stated  exceptions.  Thus  the  status  quo  will  be  maintained  during 
the  three-year  period  to  the  extent  that  it  is  practicable. 

PARTIES   CONSENTING   TO'  DECREE 

The  companies  consenting  to  the  decree  are  Paramount  Pictures,  Inc.,  Loew's, 
Incorporated,  RKO  Radio  Pictures,  Inc.,  Warner  Brothers  Pictures,  Inc.,  Twen- 
tieth Century-Fox  Film  Corporation  and  their  subsidiary  and  aflfiliated  companies 


CONCENTRATION  OF  ECONOMIC  POWER       18459 

All  five  of  these  companies  are  engaged  in  the  exhibition  of  pictures  as  wel  as  in 
production  and  distribution.  Three  of  the  companies  that  were  named  m  the 
original  complaint,  namely,  United  Artists  Corporation,  Universal  Pictures  Com- 
pany, Inc.,  and  Columbia  Pictures  Corporation,  have  not  joined  in  the  decree. 
Node  of  these  companies  owns  any  theaters.  The  case  will  proceed  to  trial 
against  these  three  companies  at  a  time  to  be  fixed  by  the  court.  To  prot^-ct  the 
consenting  defendants  against  the  competitive  advantages  that  the  three  non- 
consenting  companies  may  enjoy  if  they  are  not  required  to  conform  their  celling 
practices  to  the  provisions  of  the  decree  with  respect  to  trade  showing  ana  sales 
in  small  groups,  the  decree  provides  for  the  determination  of  these  provisions  as 
against  the  five  consenting  companies  in  the  event  the  Government  has  not  suc- 
ceeded in  procuring  a  decree  requiring  the  three  non-consenting  companies  to 
comply  with  sinaiJar  provisions  by  June  1,  1942.  All  of  the  other  provisions  of 
the  decree  remain  in  effect  regardless  of  the  outcome  of  suit  against  the  three  non- 
consenting  companies. 

CONTINUED    SUPERVISION    BY    DEPARTMENT    OF   JUSTICE 

The  Department  proposes  to  keep  a  constant  check  on  the  operation  of  the 
decree.  The  records  of  the  arbitration  system  are  subject  to  inspection  jy  the 
Department  at  all  times,  as  are  the  records  of  the  defendants  relating  o  the 
operation  of  the  decree.  A  unit  will  be  established  in  the  Antitrust  Divif-  on  to 
keep  in  touch  with  the  operation  of  the  decree  and  to  handle  complain!  with 
respect  to  it.  As  a  result  of  the  information  thereby  obtained,  the  Depa  tment 
will  be  in  position  to  determine  what  further  action,  if  any,  need  be  taken  it  the 
end  of  the  trial  period. 

rejoinder  by  w.  duanb  evans 

April  2,  1*41, 
Mr.  H.  Dewey  Anderson, 

Executive  Secretary,  Temporary  National  Economic  Committee, 

Washington,  D.  C. 

Dear  Dr.  Anderson:  Thank  you  for  bringing  to  my  attention  the  mei-ioran- 
dum  of  Mr.  Thurman  Arnold,  dated  March  24,  commenting  on  Monograj  h  No. 
43,  The  Motion  Picture  Industry — a  Pattern  of  Control.  Merely  for  th(  sake 
of  the  record,  a  few  comments  on  Mr.  Arnold's  criticisms  appear  to  be  in  order. 

Mr.  Arnold  states  that  "the  decree  itself  is  not  set  out  in  the  report  and  it  is 
not  considered  as  a  whole  by  the  author  of  the  appendix.  Certain  excerpi^s  are 
quoted  and  conclusions  drawn  therefrom."  It  should  be  obvious  that,  to  the 
contrary,  the  comments  of  the  authors  were  based  on  a  careful  examinauon  of 
the  decree  itself  in  its  entirety  as  well  as  aU  collateral  sources  of  information  "which 
were  available.     The  conclusions  of  the  authors  were  not   based  on  "excerpts." 

The  possibility  of  including  the  entire  consent  decree  in  the  monograph  as  an 
appendix  was  carefully  considered.  The  idea  was  abandoned  since  it  seemed  in- 
advisable to  inflict  this  long  and  legally  worded  document  on  readers  who,  after 
all,  would  in  the  main  be  nonlawyers.  It  was  felt  that  a  paraphrase  of  the  relevant 
portions  of  the  decree,  fortified  by  direct  quotations  where  the  intricacies  of  legal 
expression  permitted,  would  be  most  useful  to  the  majority  of  readers. 

To  Mr.  Arnold,  as  a  master  of  both  forms,  this  choice  between  the  legal  jargon 
and  everyday  English  may  have  appeared  unfortunate.  But  it  must  be  remem- 
bered that  the  purpose  of  this  appendix  was  to  examine  the  bearing  of  the  consent 
decree  on  certain  matters  discussed  in  the  body  of  the  report  rather  than  to  pro- 
vide a  road  map  through  the  decree  itself. 

As  a  second  objection,  Mr.  Arnold  states,  "*  *  *  the  writer  of  the  mono- 
graph appariently  does  not  realize  that  the  decree  gives  additional  remedies  to 
exhibitors  of  motion  pictures  and  does  not  take  away  any  of  the  existing  remedies 
under  the  antitrust  laws."  I  am  unable  to  find  any  statement  in  the  monograph 
which  suggests  that  any  remedy  formerly  available  to  exhibitors  has  been  with- 
drawn under  the  decree.  But,  since  the  subject  has  been  broached  by  Mr. 
Arnold,  it  may  be  pointed  out  that  before  the  decree  was  entered,  an  exhibitor 
was  free  to  make  a  complaint  to  the  Department  of  Justice  that  unfair  methods 
of  business  in  violation  of  the  antitrust  laws  were  being  used  against  him.  He 
presumably  could  feel  confident  that,  were  his  complaint  well-founded,  the 
Department  would  act  in  the  matter.  It  is  a  matter  of  common  knowledge  that 
many  complaints  of  this  nature  were  adjusted  by  mutual  agreement  after  it 
became  known  that  the  Department  of  Justice  was  investigating  the  matter. 
Is  this  possible  avenue  of  relief,  inexpiensive  at  least  so  far  as  the  complainant  is 
concerned,  still  open  to  the  exhibitor?  One  cannot,  of  course,  anticipate  the 
policy  of  the  Department,  but  it  seems  likely  that  the  complaining  exhibitot  in  a 


18460       CONCENTRATION  OF  ECONOMIC  POWER 

case  involving  one  of  the  major  companies  would  be  referred  back  to  the  arbitra- 
tion method  of  adjustment.  Having  created  the  arbitration  machinery,  the 
Department  would  appear  to  be  under  some  obligation  to  encourage  its  use. 

The  purpose  of  Mr.  Arnold's  mention  of  the  loss  of  foreign  markets  by  the 
major  companies  is  a  little  obscute.  The  grievous  financial  plight  of  the  com- 
panies involved  has  not  been  visible  to  the  naked  eye.  Nevertheless,  granting 
a  loss  of  foreign  business,  it  is  difficult  to  see  the  connection  with  a  suit  based 
eolely  on  the  domestic  operations  of  these  companies.  The  connection  with  an 
analysis  of  the  consent  decree  itself  appears  still  more  remote. 

The  purpose  of  -quoting  from  a  public  statement  of  the  Department  of  Justice 
at  the  time  the^surt  was  instituted  was  to  contrast  the  stated  objectives  of  the 
action  with  the  results  obtained.  It  is  possible  that  a  quotation  from  the  De- 
partment's statement  of  October  29,  1940,  might  assist  in  developing  the  con- 
trast, but  this,  after  all,  is  a  matter  of  viewpoint. 

The  authors  are^  gratified  that  only  in  the  matter  of  the  consent  decree  does 
Mr.  Arnold  find  the  monograph  inadequate.  The  authors  made  every  effort  to 
treat  the  consent  decree  as  objectively  as  any  other  subject  discussed  in  the 
monograph. 

Very  truly  yours, 

W.  DuANE  Evans. 


LETTER  FROM  THE  ASSOCIATION  OF  AMERICAN 

RAILROADS  CRITICIZING  T.N.E.C.  MONOGRAPH 

NO.  26,  ECONOMIC   POWER  AND   POLITICAL 

PRESSURES,   BY  'DONALD   C.  BLAISDELL 

AND    JANE    GREVERUS.    ALSO 

REJOINDER  BY  MR.  BLAISDELL 


18461 


Association  op  American  Railroads, 

Transportation  Building, 
Washington,  D.  C,  March  IS,  1941. 
The  Honorable  Joseph  C.  O'Mahonby, 

United  States  Senate,  Washington,  D.  C. 

My  Dear  Senator:  My  attention  has  just  been  called  to  Monograph  No.  26, 
printed  at  the  Government  Printing  OflSce  and  issued  as  a  part  of  the  work  of  the 
Temporary  National  Economic  Committee,  of  which  you  are  chairman.  This 
monograph  has  for  its  title  "Economic  Power  and  Political  Pressures."  In  the 
foreward  to  this  publication,  you  state  that  the  monograph  was  written  by 
Donald  C.  Blaisdell,  assisted  by  Jane  Grevcrus.  It  is  evident  from  your  state- 
ment that  the  Committee  assumes  no  responsibility  for  the  correctness  of  the 
statements  contained  in  these  monographs  and  their  function  is  clearly  under- 
stood. However,  a  statement  of  this  kind,  issued  under  the  auspices  of  the  Com- 
mittee, implies  a  certain  degree  of  endorsement,  particularly  when  the  author  is 
commended  by  the  Economic  Adviser  of  the  Committee. 

I  have  read  with  care  what  is  said  in  this  monograph  beginning  on  page  141, 
under  the  caption  "Utilities  and  Railroads."  Candor  compels  me  to  say  that  I 
have  never  seetn  a  document  issued  under  public  authority  or  quasi-public  authority 
which  contains  so  many  reckless  and  unsupported  statements.  It  is  difficult  to 
discuss  all  of  these  misstatements  within  the  compass  of  an  ordinary  letter. 
However,  as  an  example,  I  call  attention  to  a  statement  on  page  145,  so  outrageously 
unfair  and  so  palpably  false  that  I  cannot  refrain  from  calling  it  thus  to  your 
attention.     In  one  paragraph  on  this  page,  Mr.  Blaisdell  says: 

"Estirhates  of  the  amount  of  money  spent  by  the  A.  A.  R.  and  its  numerous 
subsidiaries  on  propaganda  and  lobbying  activities  are  so  high  as  to  be  almost 
incredible,  running  to  far  over  $100,000,000  for  the  period  since  1918." 

As  authority  for  this  extraordinary  statement,  the  author  quotes  the  April  12, 
1938,  issue  of  LABOR,  a  weekly  publication  owned  and  issued  by  certain  standard 
railroad  labor  organizations.  This  newspaper  is  frankly  partisan.  It  is  incredi- 
ble, if  I  may  use  Mr.  Blaisdell's  word,  that  anyone  charged  with  responsibility 
should  make  a  statement  of  this  kind,  with  no  authority  therefor  except  an  article 
in  a  newspaper  which  is  the  partisan  organ  of  particular  groups.  I  have  examined 
the  issue  of  LABOR  referred  to  and  it  is  there  stated  that  "carrier  lobbying  organi- 
zations spent  over  $189,000,000  in  the  years  since  the  war."  This  statement  in 
LABOR  has  been  answered  repeatedly  and  conclusively  refuted. 

What  foundation  it  has  rests  upon  certain  exhibits,  known  as  Exhibits  Nos. 
3440-3443,  introduced  into  the  record  of  the  investigation  conducted  pursuant 
to  the  authority  of  S.  Res.  71  by  a  subcommittee  of  the  Senate  Committee  on 
Interstate  Commerce,  which  had  to  do  with  the  financing,  reorganization  and 
consolidation  of  railroads.  Beginning  on  page  10,441  of  the  printed  record  of 
the  hearings.  Part  23,  will  be  found  certain  exhibits  put  into  the  record  by  the 
agents  of  the  Senate  subcommittee,  containing  certain  information  collected  from 
railroad  files.  That  statement  indicates  (page  10,442)  that  in  the  period  from 
1920  to  1936  the  railroads  spent,  for  all  of  their  associated  activities,  $182,367,000. 
The  pages  following  10,442  give  the  details  of  these  expenditures.  That  state- 
ment shows  that  they  cover  the  expense  for  17  years  of  all  the  work  done  by  the 
railroads  through  the  medium  of  committees  and  associations.  It  covers  a  vast 
amount  of  work  which  the  experience  of  the  railroads  indicates  can  more  efficiently 
and  economically  be  done  through  joint  action  than  individually. 

As  an  example,  there  is  included  the  work  done  by  the  railroads  in  connection 
with  the  exchange  of  equipment  and  the  repair  and  return  thereof,  including 
payment  for  the  use  of  cars  delivered  to  other  railroads  in  exchange;  the  research 
work  of  the  Association  in  the  field  of  equipment  and  operating  methods;  the 
formulation  of  rules  for  the  transportation  of  explosives  and  other  dangerous 
articles;  the  work  of  demurrage  and  storage  bureaus,  which  have  to  do  with  the 
making  of  demurrage  rules  and  the  collection  of  demurrage;  investigation  and 
work  done  for  fire  protection;  and  the  work  of  traffic  bureaus,  having  to  do  with 
the  investigation  of  rates  and  the  publication  of  tariffs.  This  work  of  the  traffic 
bureaus  alone  covers  approximately  $119,400,000,  about  65.5%  of  the  total. 


18464       CONCENTRATION  OF  ECONOMIC  POWER 

I  was  given  the  privilege  of  making  an  explanation  to  the  subcomnnttee  with 
respect  to  these  expenditures  and  I  did  so  in  a  letter  addressed  to  the  subcom- 
mittee, bearing  date  of  April  5,  1938,  which  letter  was  made  a  i^art  of  the  record 
in  the  S.  Res.  71  investigation.  This  statement  was  available  to  Mr.  Blaisdcll, 
if  he  had  cared  to  make  an  impartial  investigation  of  the  question.'  In  that 
letter,  I  pointed  out  that  all  of  the  work  of  the  Association  of  American  Railroads, 
including  its  expenditures  for  advertising,  represented,  in  the  year  1937,  no  inore 
than  79/1000's  of  1%  of  the  total  operating  revenues  of  the  Class  I  railroads  of 
the  country.  I  pointed  out  also  that  if  you  add  together  the  total  exjjensc  of  the 
Association  of  Railway  Executives,  of  the  Law  Dei)artment  of  the  Association  of 
American  Railroads  and  the  total  expenditures  for  State  Railroad  Associations, 
you  would  have  a  figure  which  is  no  more  than  $8,000,000  for  the  whole  i)eriod 
covered. 

It  will  be  noted  that  the  $8,000,000  figure  covers  the  entire  expense  of  the 
Association  of  Railway  Executives.  This  Association  dealt  with  a  great  many 
questions  which  had  no  concern  with  legislation.  It  covers  also  the  entire  expense 
of  the  Law  Department  of  the  present  Association,  the  Association  of  American 
Railroads.  Our  Law  Department  handles  cases  before  the  Interstate  Commerce 
Commission  and  before  the  courts  and  furnishes  a  medium  for  the  consideration 
of  a  great  many  questions  other  than  those  pertaining  to  legislation.  The  State 
Railroad  Associations,  while  they  do  concern  themselves  with  legislative  activities 
in  the  States,  i)erform  many  other  functions.  It  may  lie  safely  asserted  that  the 
amount  expended  in  legislative  work,  national  and  State,  consisting  ])rincipally 
of  bills  for  printing,  clerical  help  and  postage,  would  be  a  very  small  part  of  this 
$8,000,000. 

This  Association  was  not  called  upon  by  Mr.  Blaisdell  for  any  explanation  and, 
of  course,  there  was  no  testimony  before  your  Committee  on  the  subject. 

If  this  monograph  is  typical  of  those  issued  by  the  agents  and  employees  of 
the  Committee,  I  say  with  great  deference  that  these  reports  are  not  worthy  of 
being  received  by  the  country  as  having  any  probative  value  in  solving  the  impor- 
tant problems  which  the  Committee  is  considering.  I  may  say  that  the  entire 
report,  so  far  as  it  refers  to  railroads,  bears  evidence  of  hasty  preparation  and 
inadequate  examination  of  the  facts  and  a  degree  of  bias  which  is  indeed 
"incredible." 

I  may  say  that  since  this  report  has  been  made  public,  I  feel  justified  in  sending 
a  copy  of  this  letter  to  all  the  members  of  the  Committee  and  in  giving  a  copy  to 
the  press. 

Very  truly  yours, 

J.  J.  Pelley. 


Association  of  American  Railroads, 

Transportation  Building, 
Washington,  D.  C,  March  17,  1941. 
The  Honorable  Joseph  C.  O'Mahoney, 

United  States  Senate,  Washington,  D.  C. 
My  Dear  Senator:  Since  writing  my  letter  of  March  13,  which  referred  to 
Monograph  No.  26,  I  have  had  an  opportunity  to  review  some  of  the  other  mono- 
graphs issued  under  the  auspices  of  the  Temporary  National  Economic  Committee. 
In  my  letter  of  the  13th,  I  said  in  substance  that  if  Monograph  No.  26  is  typical, 
the  studies  released  by  the  Committee  would  not  be  worthy  of  serious  considera- 
tion by  the  country.     My  only  purpose  is  to  say  that  I  am  now  satisfied  that  this 
monograph  is  not  typical  and  that  I  sincerely  hope  that  nothing  contained  in 
my  letter  of  the  13th  will  be  taken  as  an  expression  of  opinion  that  the  work  of 
the  Temporary  National  Economic  Committee  is  without  substantial  value. 
Very  truly  yours, 

J.  J.  Pelley. 


rejoinder     by     DONALD     C.    BLAISDELL    TO    LETTER    FROM    THE    ASSOCIATION    OP 

american  railroads 

March  20,  1941. 
Dr.  Dewey  Anderson, 

Executive  Secretary,  Temporary  National  Economic  Committee, 

Washington,  D.  C. 
Dear  Dr.  A^nderson:  In  attempting  to  refute  the  statement  on  railroad  lobby- 
ing expenditures  made  on  p.  145  of  T.  N.  E.  C.  Monograph  No.  26  by  throwing 
doubt  on  the  authenticity  of  the  excerpt  from  Labor  Mr.  J.  J.  Pelley  "protests 
too  much."     Whatever  validity  his  arguments  may  possess  is  more  than  offset  by 


CONCENTRATION  OF  ECONOMIC  POWER        18465 

his  siirprisiiifj  insistence  that  only  "a  very  small  part"  of  $8,000,000  measures 
adi'(|uati'ly  tlie  railroads'  expenditures  on  legislative  work,  national  and  state,  over 
a  !)erii)d  of  17  years.  If  Mr.  Pelley  believes  that  "printing,  clerical  help  and  post- 
age" account  ft)r  tlie  principal  costs  of  lobbying  and  propaganda,  in  the  case  of 
railroads  or  of  any  other  pressure  group,  lie  displays  the  same  assumed  naivete 
characterizing  his  statement  of  March  29,  1938  to  Senator  Hurton  K.  Wiieeler,  of 
Montana,  that  he  did  not  know  what  Senator  Wheeler  nicant  by  "lobbyist." 

Mr.  Pelley  bases  his  charge  that  the  statement  complained  of  is  "outrageously 
unfair  and  j)alpably  false"  on  the  data  contained  in  exhibits  Xos.  3440-3443 
jjrinted  in  Part  23  of  the  Hearings  conducted  under  authority  of  S.  Res.  71  (74th 
Congress),  on  certain  statements  in  his  letter  of  April  5,  1938,  to  the  Subcommittee 
of  tlie  Senate  Interstate  Commerce  Committee  constituted  under  authority  of  that 
resolution,  and  upon  certain  deductions  made  therefrom.  These  argunients  are 
worth  examination,  bearing  in  mind  that  the  statement  objected  to  refers  to 
"estimates"  of  expenditures  for  "propaganda  and  lobbying  activities"  of  the 
A.  A.  R.  and  subsidiary  organizations,  that  the  period  under  consideration  is  1918 
to  1940,  and  tiiat  the  terms  proi)aganda  and  lobbying  as  u.sed  in  Economic 
Power  and  Politic.xl  Pke.ssures  include  all  activities  carried  on  coUectivelv  by  a 
citizen  group  otlier  tiian  a  political  party  for  the  purpose  of  influencing  legislative, 
administrative,  judicial  and  political  behavior. 

According  to  l^xiiil)it  No.  3440  the  cost  to  railroads  of  maintaining  railroad 
as-sociations,  1920  to  1930,  amounted  to  $182,367,000.  How  much  of  this  was 
spent  for  lobbying  and  i)roi)aganda?  There  is  no  way  of  knowing.  The  break- 
downs made  in  Exhibit  No.  3441  offered  by  the  railroads  and  in  3442  and  3443 
prepared  by  the  Committee's  staff,  while  of  some  value,  still  do  not  provide  the 
answer. 

Certain  items  obviously  fall  within  the  category  of  propaganda,  as,  for  example, 
the  item  in  lOxlubit  Xo.  3443  of  $1,376,341  paid  by  the  railroads  to  the  Bureau  of 
Puljlic  Relations,  Western  Railways,  while  others  are  clearly  payments  for  lobby- 
ing, such  as  the  $2,400,758  made  to  state  legislative  committees  and  railroad 
a.ssociations. 

At  the  same  time  other  items  would  appear,  superficially  at  least,  to  be  free  of 
suspicion  that  they  or  any  part  of  them  were  made  for  purposes  in  any  way  related 
to  jiropaganda  and  lobbying.  This  would  seem  to  be  true  of  items  classified  in 
Exhibit  No.  3442  under  the  iieadings  Operations  and  Maintenance  Department 
and  Traffic  Department.  But  testimony  of  Mr.  Pelley  and  of  Mr.  Fletcher,  A.  A. 
R.  Vice  president  and  general  counsel,  throw  some  doubt  on  the  correctness  of  this 
conclusion.  Expenditures  for  a.ssociations  and  committees  under  jurisdiction  of 
the  car  service  division  in  the  Operations  and  Maintenance  Department  cannot  be 
said  to  have  'lecn  made  entirely  for  non-propaganda  and  non-lobbying  purposes, 
inasmuch  as  Messrs.  Pelley  and  Fletcher  testified  (pp.  10147-10159)  that  tiie  ma- 
chinery of  shippers'  advisory  boards  also  under  the  car  .service  division  was  used 
by  the  A.  A.  R.  to  jiromote  its  legislative  program.  Moreover,  it  was  brought 
out  in  the  hearings  that  the  Association's  traffic  department  was  also  active  in 
promoting  legislation  (pp.  10144-10147)..,  How  much  or  what  part  of  these  items 
ought  to  be  allocated  to  propaganda  and  lobbying  is  not  known.  Nor  did  the 
Committee  and  the  A.  A.  R.  attempt  to  make  such  allocation.  In  liis  letter  Mr. 
Pelley  states  tliat  "work  of  the  traffic  bureaus  alone  covers  approximately  $119,- 
400,000,"  inferring  that  in  arriving  at  a  figure  representing  expenses  for  propa- 
ganda and  lol>bying  activities  this  amount  should  be  excluded  from  the  total. 
In  the  light  of  the  above  facts  this  inference  does  not  .seem  justified. 

In  attempting  to  minimize  the  amount  of  railroad  lobbying  and  propaganda 
expenditures  Mr.  Pelley  calls  attention  to  what  (to  him)  are  apparently  modest 
outlays  for  these  purposes.  This  is  familiar  strategy  of  pressure  groups,  particu- 
larly when  they  are  well-financed.  To  emphasize,  as  Mr.  Pelley  does,  that  1937 
A.  A.  R.  expenses  amounted  to  but  79/1000's  of  1%  of  the  total  operating  revenues 
of  the  Class  I  railroads  of  the  country  and  to  expect  it  to  be  accepted  as  a  measure 
of  the  cost  of  lobbying  and  propaganda  is  expecting  a  good  deal.  In  addition, 
it  is  misleading.  Similarly,  Mr.  Pelley's  figure  of  $8,000,000  hardly  gauges  accu- 
rately the  amount  of  money  spent  by  the  railroads  for  lobbying  and  propaganda. 
And  to  a.ssert  that  legislative  work  accounts  for  but  "a  very  small  part  of  this 
$8,000,000"  and  in  so  doing  to  imply  that  this  tells  the  whole  story  can  hardly 
be  taken  seriously. 

None  of  these  figures  and  data  cited  by  Mr.  Pelley  include  the  contributions 
made  by  railroads  to  the  Railroad  Security  Owners  Association  and  to  the  Na- 
tional Association  of  Owners  of  Railroad  and  Public  Utility  Securities.  Nor  do 
they  include. the  cost  to  the  railroads  of  having  their  regular  employees  iMrforin 
lobby  and  propaganda  work  under  the  plan  of  the  Association  of  Railwav  1-  xecu- 


18466  CONCENTRATION  OF  ECONOMIC  POWER 

tivee  of  organizing  the  states  for  offense  and  defense  on  all  matters  of  legislation, 
state  and  federal,  affecting  railroads.  They  fail  to  embrace  the  cost  of  aiding 
railroad  shippers  in  matters  pertaining  to  state  legislation,  the  cost  of  aid  rendered 
by  non-railroad  organizations,  such  as  state  chambers  of  commerce,  boards  of 
trade  and  manufacturers'  associations,  to  the  A.  A.  R.  with  reference  to  legis- 
lative programs.  They  do  not  include  railroad  donations  to  chambers  of  com- 
merce and  to  various  other  organizations  nor  the  cost  of  research,  legislative,  and 
publicity  work  stimulated  by  the  railroads  but  carried  on  by  taxpayers  and  other 
citizen  associations.  They  do  not  include  railroad  contributions  to  the  Trans- 
portation Association  of  America.  All  of  these  are  clearly  propaganda  and 
lobbying  expenses  and  a  full  statement  of  such  expenses  of  the  Association  of 
American  Railroads  ^nd  of  its  numerous  subsidiaries  would  necessarily  include 
them. 

The  fact  is  that  neither  the  public  nor  the  railroads  know  how  much  the  rail- 
roads have  spent  for  propaganda  and  lobbying.  If  this  is  so,  the  suspicion  arises 
that  Mr.  Pelley  in  writing  his  letter  and  in  making  it  public  had  some  purpose  in 
mind  other  than  disputing  the  accuracy  of  a  reference  in  a  report.  This  suspicion 
is  deepened  by  noting  other  parts  of  his  letter.  In  the  next  to  the  last  paragraph 
he  tries  to  condemn  the  entire  report,  at  least  "so  far  as  it  refers  to  railroads," 
by  charging  hasty  preparation,  inadequate  examination  of  the  facts,  and  bias  on 
the  part  of  the  author.  He  does  this  despite  the  fact  that  of  the  1 1  pages  in  the 
report  dealing  with  railroads  he  extracts  but  a  single  sentence  as  the  basis  on 
which  to  make  his  blanket  criticism. 

Even  this  does  not  indicate  the  sweeping  nature  of  Mr.  Pelley's  charges.  He 
tries  to  build  up  in  the  public  mind  doubt  as  to  the  value  of  the  entire  series  of 
monographs  published  under  T.  N.  E.  C.  auspices.  The  purpose  of  such  tactics 
is  so  transparent  as  to  deceive  no  one.  Economic  Power  and  Political  Pres- 
sures draws  attention  to  railroad  practices  in  the  field  of  pressure  politics  which 
are  in  flagrant  contradiction  to  democratic  ethics,  subversive  of  representative 
government,  and  unworthy  of  the  leaders  of  America's  basic  transportation 
system.  To  divert  public  attention  from  them  the  A.  A.  R.  produces  a  red  her- 
ring and  tries  to  drag  it  across  the  path. 

In  the  hands  of  leaders  such  as  Mr.  Pelley,  receiving  annual  salaries  of  $60,000, 
the  sum  of  $8,000,000  will  buy  a  lot  of  propaganda  and  political  pressure  even 
over  an  eighteen-year  period.  If  the  real  figure  is  closer  to  that  mentioned  in 
Monograph  No.  26  and  in  Labor,  as  seems  likely,  one  can  well  understand  why 
the  Association  of  American  Railroads  dislikes  having  it  called  once  more  to 
public  attention. 

Donald  C.  Blaisdell. 


LETTER   FROM   HARRIET  ELLIOTT,  CONSUMER 
COMMISSIONER,  THE  ADVISORY  COMMISSION 
TO  THE  COUNCIL  OF  NATIONAL  DEFENSE, 
ENDORSING  CERTAIN  RECOMMENDA- 
TIONS MADE  TO  THE  TEMPORARY 
NATIONAL  ECONOMIC 
COMMITTEE 


18467 


124401— 41— pt.  31-A 30 


The  Advisory  Commission  to  the  Council  of  National  Defense, 

Office  of  the  Consumer  Commissioner, 

Washington,  D.  C,  March  1,  1941. 
The  Honorable  Joseph  C.  O'Mahoney, 

Chairman,  Temporary  A^aliorial  Economic  Committee, 

Washington,  D.  C. 

My  Dear  Senator:  I  have  followed  with  great  interest  the  testimony  and 
proposals  recently  presented  to  your  Committee,  and  on  behalf  of  the  Consumer 
Division  of  the  Nat'  lal  Defense  Advisory  Commission  I  should  like  to  add  my 
support  to  certain  ui  the  recommendations  which  were  made.  Because  of  their 
direct  relationship  to  civilian  welfare  under  the  defense  program,  1  am  especially 
interested  in  the  proposal  to  repeal  the  Miller-Tydings  amendment  to  the  Sherman 
Anti-Trust  Act,  and  in  the  recommendations  designed  to  break  down  certain  types 
of  barriers  to  interstate  commerce  and  conspiracies  to  raise  the  cost  of  goods 
purchased  by  the  Government. 

Repeal  of  the  Miller-Tydings  Act  as  proposed  by  the  Department  of  Justice 
would  restore  the  effectiveness  of  the  anti-trust  laws  in  dealing  with  certain  types 
of  price  fixing  activities  which  the  law  now  permits.  The  memorandum  for  the 
Assistant  Attorney  General  dated  February  10,  1941,'  setting  forth  the  grounds 
for  repeal  of  this  Act,  appears  to  me  sound,  and  I  strongly  urge  that  this  recom- 
mendation be  followed. 

I  favor  also  the  proposal  of  the  Department  of  Justice  that  Congress  ^  should 
enact  a  statute  authorizing  the  Federal  Trade  Commission  to  make  findings  oi" 
fact  as  to  whether  a  designated  local  ordinance  or  state  statute  interfere:>  with 
interstate  commerce,  and  providing  that  such  findings  shall  be  accepted  as  prima 
facie  evidence  in  actions  in  the  Federal  courts  to  enjoin  the  enforcement  of  any 
such  statute  or  ordinance. 

The  proposal  of  the  Department  of  Commerce  to  ^  establish  a  joint  Federal- 
state  committee  for  the  purpose  of  considering  trade  barrier  problems  involving 
Federal-state  relations  would  supplement  the  preceding  recommendation  and 
appears  to  me  meritorious.  There  are  certain  types  of  state  statutes  which  have 
a  restrictive  effect  upon  interstate  commerce  and  may  bring  unnecessary  price 
increases  in  this  period  of  emergency.  Their  modification  is  essential  to  a  fuller 
production  and  flow  of  commodities  vital  to  civilian  welfare  and  national  defense. 

It  has  also  been  proposed  before  your  Committee  *  that  a  statute  be  enacted 
enabling  the  Government  to  proceed  against  conspiracies  designed  directly  or 
indirectly  to  raise  the  cost  of  goods  and  services  purchased  by  the  Federal  Govern- 
ment, the  effect  of  which  would  be  to  permit  the  use  of  the  anti-trust  laws  in  cases 
of  national  importance  not  involving  interstate  commerce.  I  believe  such  a  law 
is  necessary  in  dealing  with  emergency  situations  which  are  likely  to  arise  under 
the  defense  program. 

I  urge  that  the  Temporary  National  Economic  Committee  approve  these  recom- 
mendations with  a  view  to  their  early  enactment  by  the  Congress  into  law. 
Sincerely  yours, 

Harriet  Elliott, 
Consumer  Commissioner. 


'  Final  Report  and  Recommendations  of  the  Temporary  National  Economic  Committee,  S.  Doc.  35, 
77th  Cong.,  1st  sess..  Exhibit  No.  2793,  p.  232. 
»  Ibid.,  Exhibit  No.  2797,  p.  261. 
» Ibid.,  Exhibit  No.  2805,  p.  353. 
« Ibid.,  Exhibit  No.  2797,  p.  261. 

18469 


LETTER  FROM   CONWAY  P.   COE,   COMMISSIONER, 
UNITED  STATES  PATENT  OFFICE,  COMMENT- 
ING   ON    THE    RECOMMENDATIONS    ON 
PATENTS  SUBMITTED  TO  THE  T.N.E.C. 
BY  THURMAN  ARNOLD,  ASSISTANT 
ATTORNEY  GENERAL,  UNITED 
STATES  DEPARTMENT 
OF  JUSTICE;  ALSO 
REJOINDER  BY 
MR.  ARNOLD 


18471 


*1 


Department  of  Commerce, 

United  States  Patent  Office, 

Washington,  March  7,  1941- 
Honorable  Joseph  C.  O'Mahoney, 

Chairman,  Temporary  National  Economic  Committee, 

Apex  Building,  Washington,  D.  C. 

My  Dear  Mr.  Chairman:  This  is  in  response  to  the  letter  of  the  Executive 
Secretary,  dated  February  19,  1941,  requesting  me  to  submit  to  your  Committee 
"a  detailed  analysis  and  criticism"  of  the  recommendations  i)roposed  by  the 
Department  of  Justice.' 

On  the  occasion  of  my  appearance  before  your  Committee  on  February  19, 
1941,^  I  stated  that  it  would  be  much  ca^^ier  to  comment  on  the  merits  of  these 
proposals  if  I  had  a  clear  conception  of  the  particular  objectives  sought  by  their 
adoption. 

The  explanation  accompanying  the  proposals  is  so  extremely  meagre,  and  so  far 
as  I  know  has  never  been  amplified  on  the  record,  that  without  further  enlighten- 
ment in  this  direction,  I  must  assume  that  the  proposals  are  intended  generally  to 
eliminate  certain  abuses  in  the  use  of  patents  which  have  been  detected  by  the 
Department  of  Justice  in  its  anti-trust  investigation  and  which  are  revealed  by 
the  evidence  submitted  by  that  Department  before  your  Committee. 

While  I  concede  without  argument  that  evidence  presented  to  your  Committee 
shows  the  existence  of  some  practices  which  are  contrary  to  the  public  welfare, 
no  one  has  attempted  to  show  whether  these  practices  were  due  primarily  to 
particular  corporate  relationships,  policies  and  agreements,  or  whether  they  arose 
because  of  the  existence  of  patents.  It  is  important  to  clarify  this  point  because 
it  will  indicate,  first,  whether  there  is  need  of  legislation  of  the  scope  contemplated 
by  these  proposals,  and  second,  whether,  if  such  legislation  were  enacted,  the 
situation  would  be  corrected.  Thus,  it  would  be  pertinent  to  inquire  whether  the 
particular  practices  against  which  dissatisfaction  is  expressed  have  or  could  have 
existed  in  a  corporation  because  of  policies  and  practices  in  no  way  related  to  or 
affected  by  the  ownership  of  patents.  I  should  have  supposed  that  in  part  at 
least  the  complaint  against  the  old  Standard  Oil  Trust  arose  from  practices  which 
controlled  prices,  geographical  area  of  production  and  distribution,  and  restric- 
tions on  the  fields  of  activities;  and  apparently  that  situation  obtained  in  the 
complete  absence  of  patent  control. 

The  ability  to  exercise  general  control,  or  to  specifically  control  prices,  produc- 
tion, etc.,  flows  from  many  factors  other  than  the  authority  conferred  by  patent 
ownership.  For  example,  a  company  having  control  of  the  source  of  raw  materials 
may  impose  all  of  the  restrictions  regarded  as  undesirable  without  ownership  of  a 
single  patent  on  the  raw  material  itself,  or  the  process  of  fabrication,  or  any 
product  thereof. 

The  control  of  price,  production,  geographical  area  of  distribution  and  field  of 
use  which  may  now  reside  or  which  may  have  resided  in  many  monopolistic  situa- 
tions can  be  due  to  many  other  factors  besides  patents. 

I  feel  that  I  am  justified  in  concluding  from  the  nature  of  the  questions  directed 
at  me  by  members  of  the  Committee  that  in  their  opinion  the  need  for  these  pro- 
posals is  demonstrated  by  the  evidence  afforded  in  connection  with  the  Hartford- 
Empire  Company. 

An  anti-trust  suit  is  now  pending  against  that  company.  The  existence  of  such 
a  suit  raises  a  very  interesting  question  having  a  direct  bearing  on  a  decision  as 
to  the  need  for  the  changes  contemplated  by  the  proposals  under  consideration 
or  other  changes.  If  the  indictment  against  the  Hartford-Empire  Company  was 
obtained  on  the  basis  of  the  evidence  presented  to  the  Committee,  the  logical  con- 
clusion would  seem  to  be  that  the  present  laws  are  entirely  adequate  to  handle 
the  practices  objected  to;  if,  on  the  other  hand,  considerations  and  evidence  in 
addition  to  that  presented  to  your  Committee  were  required  to  secure  the  indict- 
ment, it  is  certainly  open  to  question  as  to  whether  the  grounds  of  complaint  do 
not  arise  from  considerations  other  than  the  ownership  and  use  of  patents. 

'  See  Final  Report  and  Recommendations  of  the  Temporary  National  Economic  Committee,  S.  Uoc. 
35,  77th  Cone.,  1st  sess.,  Exhibit  No.  2794,  p.  249. 
» Ibid,  p.  357. 

18473 


18474       CONCENTRATION  OF  ECONOMIC  POWER 

If  the  practices  which  these  proposals  seek  to  remedy  are  due  to  the  existence 
of  controls  set  up  as  a  result  of  contractual  relationships  between  two  or  more 
corporations,  it  should  be  determined  if  the  control  which  is  alleged  to  be  con- 
trary to  the  public  policy  is  not  predicated  broadly  upon  contractual  relationship 
rather  than  on  patent  ownership.  If  the  objectionable  control  is  predicated  on 
contracts  broadly,  then  the  anti-trust  laws  should,  if  necessary,  be  broadened  to 
correct  such  practices  by  corporations  who  do  not  rely  on  patents  as  well  as  those 
who  do  use  patents  for  improper  purposes. 

Even  though  one  be  motivated  by  an  intense  desire  to  correct  and  eliminate 
practices  and  abuses  against  the  public  welfare,  it  is  nevertheless  essential  to 
determine  the  reason  for  and  source  of  the  abuse  before  a  corrective  can  be  sug- 
gested. I  am  confident  the  Committee  will  agree  that  any  solution  of  the  problem 
should  seek  to  eliminate  the  abuses  without  the  punishment  of  the  thing  abused. 

I  am  firmly  of  the  opinion  that  because  of  their  breadth,  these  proposals  of  the 
Departm.ent  of  Justice  go  much  further  than  the  eradication  of  any  demonstrated 
abuses,  and  indeed  they  are  so  broad  as  to  inevitably  include  the  imposition  of 
restrictions  and  penalties  upon  perfectly  proper  and  desirable  practices.  In  other 
words,  even  conceding  that  the  evidence  before  your  Committee  demonstrated 
that  the  four  restrictions  unconditionally  outlawed  by  the  proposals  under  con- 
sideration have  constituted  or  might  constitute  an  abuse  of  the  patent  monopoly 
to  the  detriment  of  the  public  welfare,  nevertheless  the  proposals  are  not  restricted 
to  situations  which  could  be  identified  as  contrary  to  the  public  interest. 

To  unconditionally  outlaw  these  restrictions  will  preclude  their  use  no  matter 
how  clearly  it  may  be  demonstrated  that  they  are  definitely  in  the  public  interest 
or  even  essential  to  National  Defense.  That  licenses  with  such  restrictions  may 
be  to  the  benefit  of  the  public  is  illustrated  by  many  situations  which  can  be  shown 
and  which  are  referred  to  in  the  course  of  this  discussion. 

The  main  provision  of  the  proposals  is  contained  in  Recommendation  No.  1, 
which  makes  it  unlawful  to  include  in  any  license  under  a  patent  any  condition 
or  qualification  restricting  quantity,  price,  geographical  area,  or  use.  According 
to  the  language  of  the  proposal,  "Restrictions  in  respect  of  price,  production,  use 
or  geographical  areas  would  be  unconditionally  outlawed." 

Obviously,  the  adoption  of  these  proposals  would  have  important  and  wide- 
spread effect  upon  business  develop.ipent  and  the  commercialization  of  inventions. 
Therefore  they  demand  serious  consideration  and,  in  my  judgment,  more  of  an 
opportunity  than  has  thus  far  been  afforded  to  the  American  public  and  the  general 
users  of  patents  to  express  their  views.  The  proposals  seem  to  be  predicated 
solely  on  evidence  of  abuse  by  certain  persons  to  whom  the  abuse  is  attributed. 
The  evidence  is  not  sufficiently  representative  to  justify  generalizations  as  to 
patent  practices. 

I  believe  that  the  proposals  go  much  further  than  has  been  demonstrated  as 
necessary — indeed,  much  further  than  is  actually  necessary. 

It  should  be  noted  that  the  enumerated  restrictions  are  outlawed  and  inflexibly 
banned  under  any  and  all  circumstances,  including  situations  in  which  the  granting 
of  restricted  licenses  could  be  demonstrated  as  being  wholly  in  the  public  interest, 
as  well  as  situations  in  which  the  granting  of  restricted  licenses  would  be  of  no 
interest  to  anyone  but  the  parties  involved  m  the  contract.  The  intent  is  not 
merely  to  condemn  the  restrictions  when  their  effect  would  be  contrary  to  the 
public  interest,  but  to  outlaw  them  in  every  case,  good,  bad  and  indifferent. 

A  further  objection  lies  in  the  great  divergence  in  the  two  alternatives  given 
the  owner  of  a  patent.  The  patent  owner  can  refuse  to  grant  licenses  to  anyone, 
but  if  he  grants  a  license,  the  license  must  be  general  and  unrestricted.  These 
two  alternatives  are  so  disparate  that  the  effect  would  be  the  discouragement  of 
licensing  and  the  restriction  of  development,  rather  than  the  promotion  of  science 
and  the  useful  arts. 

The  proposal  confronts  the  patentee  with  a  dilemma.  Either  he  must  refuse 
to  grant  a  license  or  else  he  must  grant  an  unrestricted  license  which  may  put  him 
out  of  business.  Either  alternative  available  to  the  patentee  would  frequently 
place  him  in  a  position  where  he  could  not  best  serve  the  public  welfare.  If  he 
accepts  the  first  alternative,  namely,  refuses  to  grant  any  license,  the  invention 
naay  be  made  available  to  the  public  only  in  a  limited  field  and  in  accordance 
with  the  patentee's  own  facilities  of  production  which  may  well  be  entirely 
inadequate  to  supply  the  public  demand.  On  the  other  hand,  if  he  is  empowered 
to  grant  only  general  licenses  he  may  not  be  able  to  negotiate  any  licenses  at  all 
because  a  general  license  would  be  unattractive  to  many  otherwise  willing  licensees, 
or  he  would  be  unwilling  to  grant  a  general  license  since  he  would  thereby  jeopardize 
his  own  business. 


CONCENTRATION  OF  ECONOMIC  POWER       18475 

The  proposals  recognize  no  distinction  between  a  situation  where  the  patent 
owner  is  himself  engaged  in  a  business  enterprise  which  he  must  protect  and  one 
in  which  the  patentee  himself  is  not  in  any.  manufacturing  business  employing 
patents.  In  the  first  case  the  patentee  cannot  safely  grant  a  general  license  be- 
cause it  might  place  him  in  direct  competition  with  larger  and  more  resourceful 
corporations;  his  primary  use  of  the  patent  is  to  protect  his  established  business 
rather  than  as  an  instrumentality  for  obtaining  royalties.  It  is  imperative  to 
recognize  tlie  differences  between  these  two  situations,  and  regardless  of  other 
effects  the  proposals  might  have,  the  general  tendency  would  be  to  place  a  small 
business  or  individual  at  a  disadvantage.  The  beneficial  effect,  if  any,  would  be 
to  the  large  corporations  whose  productive  capacity,  resources,  facilities  for  mar- 
keting, etc.,  would  enable  them  to  operate  under  a  general  license  in  direct  com- 
petition with  the  business  of  the  small  patent  owner  and  perhaps  drive  him  from 
the  field.  It  follows,  therefore,  that  the  proposals  would  discourage  the  granting 
of  licenses  altogether  and  thereby  restrict  the  manufacture  and  distribution  of  the 
patented  invention  to  the  public. 

Any  legislation  that  tended  to  restrict  or  prevent  the  granting  of  licenses  would 
not  materially  injure  the  large  corporation  or  the  large  aggregate  of  capital,  be- 
cause the  refusal  to  grant  licenses  would  bring  no  injury  to  themselves.  The 
small  business  which  utilizes  its  patents  primarily  to  protect  its  investment  and 
lacks  the  ability  or  intent  to  use  the  invention  to  its  fullest  extent  in  all  fields,  can 
gain  a  substantial  revenue  by  licensing  in  those' fields  in  which  it  is  not  operating. 
If  this  is  prevented  by  these  proposals  the  public  will  thereby  lose  the  benefit  of 
the  invention  in  such  other  fields,  and  the  patentee  will  be  deprived  of  his  revenue. 

The  proposals  outlawing  qualified  licenses  distinctly  jeopardize  the  rights  of 
individual  inventors,  particularly  inventor-employees.  Their  adoption  would 
prevent  the  employer  from  accepting  a  shop  right  or  a  license  in  his  own  industry 
or  plant,  while  permitting  the  inventor  to  retain  the  right  to  profit  from  the  de- 
velopment of  the  invention  in  other  industries.  In  these  days  when  so  much 
criticism  is  directed  against  the  absorption  of  rights  of  the  inventor  by  corpo- 
rations, it  should  be  noted  that  these  proposals  would  prevent  a  willing  employer 
from  permitting  an  inventor  to  profit  from  the  use  of  the  invention  in  fields  other 
than  that  engaged  in  by  the  employer. 

A  license  under  a  patent,  even  when  it  contains  conditions  or  qualifications,  is 
inherently  not  in  restraint  of  trade,  but  just  the  opposite.  By  the  patent,  the 
government  grants  to  the  patentee  an  exclusive  right;  only  he  can  make,  use,  or 
sell  the  particular  invention  covered  by  the  patent.  A  license  by  the  patentee  is 
a  yielding  of  exclusive  rights  existing  in  the  patentee.  Before  a  license  is  granted, 
other  persons  are  prohibited  from  dealing  with  the  invention.  With  a  license, 
they  are  free  to  deal  with  the  invention  to  the  extent  of  the  license. 

The  Supreme  Court  has  recognized  that  a  restrictive  license  is  not  inherently 
bad  but  on  the  contrary  under  some  conditions  may  be  regarded  as  "reasonably 
within  the  reward  which  the  patentee  by  the  grant  of  a  patent  is  entitled  to  secure". 
Thus  in  the  case  of  the  Llnited  States  vs.  General  Electric  Company,  272  U.  S.  476, 
speaking  through  Chief  Justice  Taft,  the  Court  held: 

"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  and  selling  them  myself.'  He  does  not  therebj'  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." 

In  the  above  case  the  Court  had  under  consideration  the  propriety  of  a  restriction 
in  price  in  a  license. 

In  another  ca.se,  General  Talking  Pictures  vs.  Western  Electric  Co.,  305  U.  S. 
124,  the  Supreme  Court  recognized  that  a  qualification  in  a  license  as  to  the  field 
of  use  is  likewise  not  inherently  bad  and  not  necessarily  an  abuse  of  the  patent 
monopoly. 

The  proposals  under  consideration  would  arbitrarily  outlaw  and  condemn  such 
qualified  licenses  even  under  circumstances  which  have  been  held  not  to  constitute 
an  abuse  of  the  patent  monopoly  and  not  detrimental  to  the  public  welfare. 

The  Committee  should  recall  that  it  is  established  law  that  a  patentee  has  no 
immunity  from  the  provisions  of  the  anti-trust  laws  or  any  other  statutes  of  this 
country;  he  is  not  now,  and  has  not  been,  able  to  utilize  a  patent  or  a  license  under 


18476       CONCENTRATION  OF  ECONOMIC  POWER 

a  patent  as  an  instrument  for  illegal  purposes.  The  Supreme  Court  has  repeatedly 
recognized  this  principle.  For  example,  it  stated  in  Standard  Sanitary  Mfg.  Co. 
vs.  U.  S.,  226  U.  S.  20,  that: 

"Rights  conferred  by  patents  are  indeed  very  definite  and  extensive,  but  they  do 
not  give  any  more  than  other  rights  an  universal  license  against  positive  prohibi- 
tions. The  Sherman  law  is  a  limitation  of  rights,  rights  which  may  be  pushed  to 
evil  consequences  and  therefore  restrained." 

The  principle  was  reaffirmed  by  the  Supreme  Court  in  the  case  of  United  Shoe 
Machinery  v.  U.  S.,  258  U.  S.  451,  where  the  Court  stated: 

"Undoubtedly  the  patentee  has  the  right  to  grant  the  use  of  the  rights  or  privileges 
conferred  by  his  patent  to  others  by  making  licenses  and  agreements  with  them 
which  are  not  in  themselves  unlawful,  but  *  *  *  the  patent  right  confers 
no  privilege  to  make  contracts  in  themselves  illegal,  and  certainly  not  to  make 
those  directly  violative  of  valid  statutes  of  the  United  States." 

On  the  occasion  of  my  appearance  before  the  Committee  on  February  19,  1941, 
the  Chairman  of  the  Committee  appeared  to  emphasize  the  denial  of  a  license  by 
the  Hartford-Empire  Company  to  a  man  who  sought  a  license  in  the  State  of  Texas. 
Without  analyzing  in  detail  the  testimony  of  this  particular  witness  and  the 
equities  of  his  complaint,  I  want  to  point  out  that  the  present  proposals  would  in 
no  way  change  or  remedy  that  particular  situation.  The  complaint  of  the  witness, 
referred  to  by  the  Chairman,  appeared  to  be  that  the  witness  was  unable  to  secure 
a  license  under  the  patents  owned  or  controlled  by  the  Hartford-Empire  Company. 
I  am  not  able  to  see  how  the  unconditional  outlawing  of  licenses  with  the  re- 
strictions mentioned  would  in  any  manner  contribute  to  the  relief  of  this  witness. 
The  abolition  of  qualified  licenses  certainly  would  not  make  it  easier  for  any  one 
to  obtain  a  licen.se. 

A  further  difficulty  that  I  find  with  these  proposals  is  that  they  assume  in  the 
absence  of  evidence  that  the  restrictions  referred  to  are  invariably  and  inherently 
evil.  This  assumption  ignores  the  decisions  and  observations  by  the  Supreme 
Court  as  to  the  reasonableness  of  certain  of  these  restrictions  under  certain  cir- 
cumstances. Since  no  evidence  was  received  by,  or  offered  to,  the  Committee 
as  to  the  beneficial  results  which  would  flow  from  qualified  licenses  under  certain 
conditions,  I  feel  that  the  Committee  should  not  recommend  the  adoption  of 
proposals  which  go  further  than  the  correction  of  demonstrated  abuses. 

RECOMMENDATION    NO.  1 

The  above  observations  apply  more  or  less  generally  to  several  of  the  proposals. 
I  shall  now  specifically  analyze  the  proposals  individually. 

The  text  of  Recommendation  No.  1  is  as  follows: 

"1.  It  should  be  made  unlawful  for  any  person  to  sell  or  assign  a  patent,  or  to 
grant  any  right  or  license  under  a  patent,  on  any  condition  which  restricts  the 
assignee  or  grantee  in  respect  of  the  amount  of  any  article  which  he  may  produce 
under  the  patent,  the  price  at  which  he  may  sell  any  such  article,  the  purpose  for 
which  or  manner  in  which  he  may  use  the  patent  or  any  article  produced  there- 
under, or  the  geographical  area  within  which  he  may  produce  or  sell  such  article. 
The  foregoing  prohibitions  should  be  supplemented  by  a  further  prohibition  against 
any  other  restriction  embodied  in  a  condition  to  any  such  assignment  or  license, 
which  would  tend  substantially  to  lessen  competition  or  to  create  a  monopoly, 
unless  such  restriction  is  necessary  to  promote  the  progress  of  science  and  useful 
arts.  These  prohibitions,  however,  should  not  apply  to  any  assignment  of  a 
patent  or  any  grant  of  a  license  under  a  patent  for  use  exclusively'  outside  the 
United  States  and  its  territories  and  possessions. 

"In  short,  the  owner  of  a  patent  would  enjoy  the  full  patent  monopoly  if  he 
elected  to  retain  the  exclusive  privilege  of  producing  or  selling  under  the  patent 
"iiimself.  He  would  be  free  to  assign  the  patent;  to  grant  an  exclusive  license; 
and  to  grant  licenses  to  anyone  he  pleased.  But  if  he  grants  a  license,  the  license 
must  be  general  and  unrestricted,  unless  he  is  prepared  to  demonstrate  that  a 
particular  restriction  (other  than  restrictions  in  respect  of  price,  production,  use  of 
geographical  area)  is  necessary  to  promote  science  and  useful  arts.  Restrictions 
in  respect  of  price,  production,  use,  or  geographical  areas  would  be  unconditionally 
outlawed." 

This  proposal  unconditionally  outlaws  restrictions  in  license  agreements  in 
respect  of  price,  production,  use  or  geographical  area  and  thus  prohibits  licenses 
qualified  in  these  respects.  As  previously  indicated  in  the  general  discussion, 
and  conceding  that  such  restrictions  may  sometimes  be  a  factor  contributing  to  an 


CONCENTRATION  OF  ECONOMIC  POWER       18477 

abuse  of  a  patent  privilege,  nevertheless  it  is  equally  clear  that  such  restrictions 
may  in  other  and  more  numerous  cases  be  not  only  compatible  with  the  general 
welfare,  but  conducive  to  its  advancement. 

The  disadvantages  to  the  individual  inventor  and  the  small  business  concerns 
have  already  been  discussed.  In  addition,  these  restrictions  will,  in  many  worthy 
end  proper  instances,  impede,  if  not  wholly  obstruct,  the  commercialization  of 
inventions  on  a  sacle  required  to  meet  the  public  demand.  It  should  not  be 
overlooked  that  these  restrictions  in  many  cases  are  imposed  in  the  license  not 
V)ecause  of  the  desire  of  the  patentee  to  maintain  control  but  due  to  the  insist- 
ence of  the  licensee  for  his  protection  in  a  new  venture.  The  commercialization 
of  inventions,  as  is  well  understood,  frequently  demands  the  employment  of 
speculative  capital  and  such  capital  demands  a  reasonable  protection.  It  is 
not  an  unreasonable  requirement  on  the  part  of  the  licensee  that  he  be  protected 
against  competition  in  the  territory  in  which  his  own  factory  is  located,  especially 
where  the  inauguration  of  the  enterprise  has  required  a  substantial  investment. 
A  corporation  of  substantial  magnitude,  capable  of  developing  the  entire  markets 
of  the  country  and  in  a  position  to  utilize  fully  the  exclusive  privilege  of  a  patent, 
would  not  grant  licenses  if  the  proposals  were  in  effect.  The  small  corporation, 
the  individual  inventor  starting  put  to  exploit  his  invention,  the  small  business 
man,  may  be  incapable  of  using,  because  of  financial  limitations,  the  exclusive 
privilege  in  its  entirety.  The  present  proposals  confront  him  with  the  difficulty 
that  he  either  must  deprive  himself  of  the  opportunity  to  profit  from  that  part 
of  the  exclusive  field  which  he  does  not  develop  or  use  or  else  open  the  door  wide 
to  unrestricted  competition  by  umlinited  licenses.  The  public  is  thus  denied  the 
npnortunity  to  obtain  the  invention  through  other  sources,  in  other  fields,  and 
in  oi>or  areas. 

Rega.dless  of  arguments  for  or  against  outlawing  these  license  restrictions,  it 
is  indispi- table  that  one  most  unfortunate  effect  would  be  to  increase  litigation 
both  i"*  tlie  courts  and  in  interference  proceedings  in  the  Patent  Office.  An 
interference  proceeding  in  the  Patent  Office  is  for  the  purpose  of  determining 
priority  between  two  or  more  claimants  for  a  patent.  It  frequently  happens 
that  such  claimants  are  engaged  in  businesses  in  entirely  different  fields.  There- 
fore it  is  possible  to  settle  the  litigation  by  agreements  which  protect  the  busi- 
r.esses  of  the  parties  by  geographical,  use  or  other  restrictions.  This  is  done  in 
numerous  cases.  The  same  remarks  apply  to  settlement  of  infringement  cases 
before  the  courts  The  denial  of  the  general  right  to  gfant  qualified  licenses, 
therefore,  would  inveitably  prevent  amicable  and  satisfactory  settlements,  and 
would  force  litigants  to  fight  to  the  bitter  end.  This  would  often  deprive  the 
public  of  the  use  of  the  invention  in  the  field  in  which  it  is  being  used  at  the  time 
of  the  litigation.  In  many  cases  one  party  to  the  litigation  is  perfectly  willing 
to  settle  on  the  basis  that  he  be  permitted  to  continue  his  own  business. 

Licenses  Qualified  by  Restrictions  on  Use 

The  granting  of  licenses  containing  restrictions  as  to  use  is  unually  well  within 
the  public  interest,  particularly  with  respect  to  inventions  which  have  applica- 
tions in  ditTerent  fields. 

As  an  example,  there  may  be  mentioned  the  case  of  an  inventor  who  developed 
a  particular  type  of  internal  combustion  engine  after  a  great  deal  of  experimental 
and  development  work.  His  company  further  developed  the  invention  for  use 
in  stationary  internal  combustion  engines  which  was  their  particular  field.  As 
soon  as  the  interested  public  became  aware  of  the  value  of  the  invention,  a  motor 
car  company  applied  for  and  obtained  a  license  to  manufacture  engines  under  the 
patent,  the  license  being  confined  to  automobile  engines.  A  motorcycle  company 
then  applied  for  and  obtained  a  license  in  the  field  of  motorcycle  engines.  Another 
company,  builders  of  marine  motors,  applied  for  and  secured  a  license  for  using 
the  invention  in  the  marine  motor  field;  many  other  special  fields  were  developed 
and  numerous  separate  licenses  in  those  fields  were  granted.  If  nothing  but  a 
general  license  could  have  been  issued  by  the  original  inventor  and  his  company 
these  various  fields  of  use  might  have  had  to  wait  until  the  expiration  of  the 
patent  before  the  benefits  of  the  invention  could  be  fully  utilized,  because  the 
company  would  have  been  unwilling  to  have  others  enter  its  specific  field  in 
which  it  was  manufacturing  under  the  patent. 

Illustrations  like  this  can  be  multiplied  indefinitely.  There  is  no  valid  reason 
why,  if  a  patented  invention  is  susceptible  of  use  in  various  fields,  the  patent 
owner  should  be  prohibited  generally  from  granting  restricted  licenses  to  allow 
others  to  practice  the  invention  in  these  different  fields. 


18478       CONCENTRATION  OF  ECONOMIC  POWER 

The  Supreme  Court  has  considered  licenses  of  this  character  and  stated,  through 
Justice  Brandeis,  in  the  General  Talking  Pictures  case,  that  they  are  "reasonably 
within  the  reward  which  the  patentee  by  the  grant  of  the  patent  is  entitled  to 
secure."     306  U.  S.  124;  127. 

Geographical  area 

Limitations  of  this  character  may  be  likewise  within  the  public  interest.  Con- 
sider the  case  of  a  small  manufacturer,  located  in  the  East,  who  is  making  some 
article  under  a  patetit  which  he  owns.  Due  to  his  small  size  and  capacity  or  some 
other  factor,  he  supplies  only  a  local  market.  He  would  be  perfectly  willing  to 
grant  a  license  to  some  other  manufacturer  located  elsewhere  if  he  could  be  assured 
that  this  other  manufacturer  w6uld  stay  in  his  own  locality.  However,  under  the 
proposal  he  could  not  grant  a  license  with  a  restriction  as  to  area.  Faced  with 
only  two  alternatives,  of  either  granting  an  unrestricted  license  or  of  granting 
no  license  at  all,  the  tendency  would  be  not  to  grant  any  license. 

Again,  no  valid  reason  is  seen  why,  when  a  patent  is  not  or  can  not  be  used  on 
a  national  scale  by  one  owner,  he  should  be  prohibited  generally  from  granting 
restricted  licenses  to  allow  others  to  practice  the  invention  in  other  areas. 

The  practical  observations  made  by  the  Supreme  Court  in  the  case  of  the 
United  States  vs.  General  Electric  Company  in  its  consideration  of  the  legality  of 
license  restrictions  pertaining  to  price  are  equally  applicable,  and  for  the  same 
reasons  to  geographical  restrictions.  Since  the  patentee  who  licenses  another 
to  make  and  vend,  but  who  "retains  the  right  to  continueHo  make  and  vend  on  his 
own  account",  is  entitled,  as  the  Court  stated,  to  prevent  the  licensee  from  de- 
stroying the  profit  which  the  patentee  has  a  right  to  expect  from  his  own  endeavor, 
he  should  not  be  denied  the  protection  which  comes  from  geographical  restrictions. 

Price 

That  price  restrictions  in  licenses  may  be  both  desirable  and  necessary  was 
indicated  by  the  testimony  of  Dr.  Vannevar  Bush,  President  of  the  Carnegie 
Institution  of  Wa.'^hington,  and  now  Chairman  of  the  National  Defense  Research 
Committee.     He  stated: 

"It  is  a  part,  of  course,  of  the  situation  that  I  just  mentioned,  where  the  intro- 
duction 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  con- 
siderable 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  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."     (Hearings,  Part  3,  page  891.) 

That  such  licenses  may  be  reasonable  was  also  recognized  by  the  Supreme 
Court  in  the  General  Electric  case. 

The  price  restriction  referred  to  here  is  the  initial  sale  price  by  the  manufacturer, 
and  not  the  resale  price  to  the  consumer. 

Production 

Licenses  containing  restrictions  relating  to  quantity  or  production  are  likewise 
not  invariably  contrary  to  the  public  interest.  Numerous  instances  arise  when 
a  prospective  licensee  wishes  only  one  or  a  small  quantity  of  a  machine  or  article 
for  his  own  use  or  consumption  and  the  patentee  is  willing  to  grant  a  license 
limited  to  the  quantity  desired,  but  would  have  no  reason  or  inducement  for 
granting  a  general  license-. 

Other  Coriditionn  in  Licenses 

The  four  types  of  conditions  whidh  have  been  discussed  above  are  uncondi- 
tionally outlawed.  In  addition  tc  this,  the  ""proposal  further  provides  that  any 
other  restriction  or  condition  in  a  license  "which  would  tend  substantially  to 
lessen  competition  or  create  a  monopoly"  should  be  prohibited  unless  the  patentee 


CONCENTRATION  OF  ECONOMIC  POWER       18479 

"is  prepared  to  demonstrate  that  a  particular  restriction  is  necessary  to  promote 
science  and  the  useful  arts." 

With  respect  to  the  latter  part  of  this  proposal,  at  least  two  points  deserve  con- 
sideration. The  first  is  that  the  patentee  is  presumed  guilty  with  respect  to  these 
other  restrictions,  and  is  required  to  demonstrate  his  innocence.  Even  in  our 
criminal  law  an  accused  person  is  presumed  innocent  until  his  guilt  is  demon- 
strated. 

The  second  is  the  nature  of  the  proposed  test,  i.  e.,  that  "a  particular  restriction 
is  necessary  to  promote  science  and  the  useful  arts".  The  purpose  and  policy 
expressed  in  the  Constitution  for  the  granting  of  patents  is  the  promotion  of 
progress  and  the  useful  arts.  With  respect  to  dealings  in  patents,  the  manner  in 
which  patents  are  used,  the  Supreme  Court  of  the  United  States,  in  determining 
the  validity  of  conditions  in  licenses,  applies  the  test  that  the  condition  must  be 
"reasonably  within  the  reward  which  the  patentee  by  the  grant  of  the  patent  is 
entitled  to  secure"      This  test  appears  to  be  a  fair  one. 

Conditions  in  Assignments 

Recommendation  No.  1  applies  aU  the  prohibitions  and  restrictions  to  assign- 
ments containing  the  enumerated  qualifications.  In  part  this  inclusion  of  assign- 
ments appears  to  serve  only  the  purpose  of  making  the  recommendation  appear 
more  general.  Conditions  with  respect  to  use,  quantity,  and  price  seldom,  if 
ever,  appear  in  assignments  since  an  assignment  is  a  sale  or  transfer  of  the  patent 
itself.  Conditions  appearing  therein  may  have  the  effect  of  changing  the  assign- 
ment to  a  license.  The  Supreme  Court  has  pointed  out  that  any  purported  assign- 
ment which  falls  short  of  a  transfer  of  the  entire  and  unqualified  exclusive  right 
granted  by  the  patent  is  a  mere  license  {Pope  Mfg.  Co.  v.  Gormully,  144  U.  S. 
248:  250). 

However,  an  assignment  of  a  patent,  Testricted  to  a  particular  geographical 
area,  can  be  made,  and  such  assignment  is  called  a  grant.  It  was  early  recognized 
that  assignments  by  area  may  be  in  the  public  interest  and  specific  authorization 
was  placed  in  the  law.  The  present  statute  (U.  S.Code,  title  35,  sec.  47)  provides 
that  a  patentee  may  "grant  and  convey  an  exclusive  right  under  his  patent  to 
.  .  .  any  specified  part  of  the  United  States."  In  this  connection  the  Supreme 
Court  has  several  times  ruled  that  the  sale  of  articles  made  under  the  patent  by  a 
territorial  assignee  carries  the  right  to  use  the  articles  anywhere.  In  other  words, 
a  patent  confers  no  right  to  restrict  the  place  of  use  of  articles  sold  under  the 
patent. 

RECOMMENDATION  NO.  2 

The  second  recommendation  of  the  Department  of  Justice  reads  as  follows: 

"2.  It  should  be  made  unlawful  for  any  person  to  whom  a  patent  had  been 
issued  or  who  has  in  any  other  way  acquired  any  patent  or  any  interest  in  or-right 
or  license  under  a  patent,  to  sell,  lease,  or  otherwise  dispose  of  any  article  produced 
or  sold  under  such  patent  or  any  such  right  or  license  on  any  restrictive  condition 
of  the  kind  described  in  paragraph  1." 

In  so  far  as  this  proposal  is  intended  to  be  supplementary  or  ancillary  to  Recom- 
mendation No.  1,  the  same  criticisms  pointed  out  in  connection  with  the  first 
proposal  apply  here.  However,  this  paragraph  does  not  deal  with  the  assignment 
of  patents,  or  with  Incenses  under  patents,  but  with  the  sale  or  lease  of  articles, 
which  is  a  wholly  different  tnatter. 

This  second  recommendation  appUea  the  provisions  of  the  first  recommendation 
to  the  sale  or  lease  of  patented  articles.  It  is  made  unlawful  to  sell,  lease,  or  other- 
wise dispose  of  any  article  produced  or  sold  under  a  patent  on  any  condition  of  the 
kind  described  in  the  first  proposal. 

The  general  observation  that  the  suggestions  are  much  broader  than  is  necessary 
to  correct  abuses  is  re-emphasized  by  this  proposal.  Consider  the  following  sijnple 
transactions  which  would  be  made  ^Uegal.  If  this  prohibition  becomes  law,  it 
would  make  illegal  the  sale  of  a  machine  with  the  condition  that  the  machine 
must  not  be  removed  from  a  given  locality  until  it  is  paid  for.  The  proposal 
would  even  restrain  a  patentee  from  stipulating,  in  the  lease  of  a  machine  or 
product,  that  the  article  leased  shall  not  be  used  for  illegal  purposes.  I  do  not 
think  that  anyone  can  seriously  contend  that  it  is  necessary  to  abolish  the  right  to' 
impose  such  conditions  on  any  ground  of  public  welfare. 

Apparently  the  proposal  would  have  the  effect  of  outlawing  some  dealings  in 
connection  with  patented  articles,  while  the  identical  practices  with  respect  to 
unpatented  articles  would  be  sanctioned.     Two  articles  having  the  same  purpose 


18480       CONCENTRATION  OF  ECONOMIC  POWER 

and  functions,  one  of  which  falls  within  the  scope  of  a  patent,  and  the  other  does 
not,  would  be  accorded  entirely  different  treatments  and  privileges  in  law.  Even 
the  identical  article,  in  one  case  made  with  a  patented  machine  or  process,  and 
in  another  case  not,  would  be  accorded  different  rights.  In  other  words,  the 
creator  of  a  new  invention  is  placed  under  a  handicap  by  the  denial  of  privileges 
afforded  to  one  who  has  not  made  any  contribution  to  the  advancement  of  science 
and  the  useful  arts.  It  may  be  pointed  out  that  the  Clayton  Act  as  it  applies 
to  dealings  in  articles,  such  as  sales  and  leases,  makes  no  discrimination  either  in 
favor  of  or  against  patented  articles. 

As  drafted,  the  recommendation  fails  to  take  existing  law  into  consideration, 
since  it  makes  proposals  which  are  already  in  effect.  For  example,  the  recom- 
mendation proposes  that  it  should  be  unlawful  for  a  patentee  to  sell  an  article 
with  restrictions  in  respect  of  price  at  which  it  may  be  sold  by  the  purchaser. 
It  is  now  the  law,  and  has  been  for  a  good  many  years,  that  a  patentee  cannot 
use  the  patent  to  impose  restrictions  as  to  the  price  at  which  articles  are  to  be 
sold  by  those  who  purchase  such  articles  from  him.  This  has  been  decided  in 
numerous  decisions  of  the  Supreme  Court  and  other  courts. 

RECOMMENDATION    NO.    ? 

The  third  recommendation  of  the  Department  of  Justice  reads  as  follows: 

"3.  It  should  be  made  mandatory  for  any  sale,  assignment,  or  other  disposition 
of  any  patent  or  of  any  interest  in  or  right  or  license  under  a  patent  to  be  evidenced 
by  an  instrument  in  writing.  Similarly,  any  condition,  agreement,  or  understand- 
ing relating  to  any  sale  or  other  disposition  of  any  article  produced  or  sold  under 
a  patent  by  a  person  to  whom  such  patent  has  been  issued  or  who  has  in  any  other 
way  acquired  such  patent  or  any  interest  in  or  rig]it  or  license  thereunder,  should 
be  required  to  be  evidenced  by  an  instrument  in  writing.  The  seller  or  assignor 
in  such  case  would  be  required  to  file  a  copy  of  such  written  instrument  with  the 
Federal  Trade  Commission  within  30  days  after  execution.  A  register  of  these 
copies  should  be  kept  by  the  Federal  Trade  Commission,  and  both  the  register  and 
the  copies  should  be  held  available  for  inspection  by  the  Attorney  General,  the 
Commissioner  of  Patents,  or  any  officer  designated  by  either." 

The  first  sentence  proposed  that  all  assignments  of  patents  and  interests  therein, 
and  all  licenses  under  patents,  must  be  in  writing.  According  to  the  third  sentence 
copies  of  the  licenses  must  be  filed  with  the  Federal  Trade  Commission. 

This  recommendation  will  be  considered  first  as  it  relates  to  the  assignment  of 
patents  and  interests  therein. 

It  should  be  noted  that  the  present  law  provides  that  such  assignments  must 
be  in  writing.  Section  47  of  the  United  States  Code,  Title  35  (R.  S.  Sec.  4898) 
begins: 

"Every  patent  or  any  interest  therein  shall  be  assignable  in  law  by  an  instru- 
ment in  writing  ..." 

and  such  a  provision  has  been  in  the  law  for  over  one  hundred  years.     Conse- 
quently there  is  no  necessity  for  a  new  law  requiring  assignments  to  be  in  writing. 

There  has  also  been  a  provision  in  the  law,  continuously  since-  1793,  for  the 
recording  of  assignments.  The  present  law,  in  the  same  section  quojted  in  the 
preceding  paragraph,  reads: 

"An  assignment,  grant,  or  conveyance  shall  be  void  as  against  any  subsequent 
purchaser  or  mortgagee  for  a  valuable  consideration,  without  notice,  unless  it  is 
recorded  in  the  Patent  Office  within  three  months  from  the  date  thereof  or  prior 
to  such  subsequent  purchase  or  mortgage." 

The  recommendation  proposes  that  assignments  must  be  filed  with  the  Federal 
Trade  Commission.  No  advantage  or  reason  has  been  suggested  to  justify  the 
future  recording  of  assignments  with  the  Federal  Trade  Commission  rather  than 
in  the  Patent  Office.  Moreover  it  seems  obvious  that  the  recording  of  licenses 
should  be  done  in  the  same  place  and  by  the  same  agency.  It  is  therefore  recom- 
mended that  if  such  an  amendment  is  to  be  made  in  the  law,  the  Patent  Office 
should  be  designated  as  the  repository  for  licenses. 

I  shall  now  develop  some  very  practical  difficulties  in  complying  with  the  require- 
ment. First,  the  proposal  demands  that'  all  licenses  shall  be  in  writing — a  require- 
ment impossible  of  performance. 

A  large  proportion  of  licenses  under  patents  arise  not  from  agreements  between 
parties,  but  by  conduct  of  the  parties  bV  by  operation  of  law  or  even  by  lapse  of 
time.  A  party  who  fails  to  seasonably  file  an  infringement  suit  against  a  known 
infringer  may  find  himself  an  involuntary  licensor.  How  can  such  a  license  be 
reduced  to  writing,  and  if  so  who  is  to  do  the  writing?  The  man  who  is  not  sued 
or  the  owner  of  the  patent?     How  can  a  licease  created  by  operation  of  law,  such 


CONCENTRATION  OF  ECONOMIC  POWER       18481 

as  by  estoppel  or  conduct  of  the  parties,  be  reduced  to  writing,  and,  if  so,  who  is 
to  do  the  writing?  Every  purchaser  of  a  patented  article  has  a  license  from  the 
patentee  to  use,  sell  and  repair.  The  proposal  is  so  broad  as  to  demand  the 
recording  of  all  such  licenses  because  it  permits  of  no  exceptions.  Licenses  are 
frequently  acquired  under  the  doctrine  of  intervening  rights.  A  shop  right  is 
also  a  form  of  license.  Is  it  intended  to  require  that  shop  rights  in  employers 
(including  the  United  States  Government)  be  reduced  to  writing  and  recorded? 

The  second  sentence  of  the  recommendation  under  discussion  does  not  relate  to 
assignments  or  licenses,  but  to  the  sale  of  articles.  It  is  proposed  that  "any  con- 
dition, agreement,  or  understanding  relating  to  any  sale  or  other  disposition  of  an 
article  produced  or  sold  under  a  patent  ..."  must  be  in  writing,  and,  by 
the  following  sentence,  a  copy  of  the  writing  must  be  filed  with  the  Federal  Trade 
Commission.  It  would  be  necessary  to  record  all  transactions  where:  (1)  the 
purchased  article  is  to  be  delivered  before  a  certain  date;  (2)  the  article  is  to  be 
shipped  by  express;  (3)  the  article  is  to  be  paid  for  in  thirty  days;  (4)  the  article 
is  to  be  paid  for  in  specified  installments;  (5)  the  article  is  to  meet  certain  mini- 
mum standards  of  quality.  In  fact,  the  imposition  of  almost  any  condition  com- 
mon to  ordinary  business  practices  would  demand  a  recording  with  a  govern- 
mental agency. 

Even  the  recording  of  licenses  either  now  written  or  susceptible  of  being  re- 
duced to  writing  would  involve  a  mass  of  documents  only  a  small  portion  of 
which  could  conceivably  be  of  any  usefulness  or  interest  to  the  agencies  of  gov- 
ernment. 

Recognizing,  however,  that  there  are  some  licenses  which  should  be  recorded 
and  thus  made  available  for  government  inspection,  I  suggest  that  consideration 
be  given  to  the  desirability  of  a  law  requiring  that  licenses  of  the  following  char- 
acter be  reduced  to  writing  and  recorded  in  the  United  States  Patent  Office: 

1.  Licenses  to  which  a  citizen  or  corporation  of  a  country  foreign  to  the  United 
States  is  a  party. 

2.  Licenses  capable  of  reduction  to  writing  between  citizens  or  residents  of  the 
United  States  which  contain  restrictions  on  production,  price,  geographical  area, 
and  field  of  use. 

RECOMMENDATION   NO.   4 

Recommendation  No.  4  reads  as  follows: 

"4.  No  action  based  upon  a  charge  of  infringement  of  any  patent,  whether  for 
damages,  for  au  injunction,  or  for  any  other  relief,  should  be  permitted  against 
any  licensee  under  a  patent  or  against  any  purchaser  or  lessee  of  any  article 
unless  either  (a)  the  plaintiff  has  previously  prosecuted  to  the  successful  judgment 
an  action  against  the  grantor  of  the  license  or  the  seller  or  lessor  of  the  article,  as 
the  case  may  be,  for  infringement  arising  out  of  or  in  connection  with  the  grant- 
ing of  such  license  or  the  sale  or  lease  of  such  article;  or  (b)  jurisdiction  over  the 
grantor,  seller,  or  lessor  cannot  be  obtained  in  any  court  of  the  United  States. 

"A  provision  to  the  foregoing  effect  would  help  meet  one  of  the  most  serious 
abuses  in  the  patent  field:  The  use  of  litigation  as  a  deliberate  weapon  of  busi- 
ness aggression,  rather  than  as  an  instrument  for  adjudicating  honest  disputes." 

In  part,  at  least,  this  proposal  is  unintelligible  when  considered  in  the  light  of 
the  nature  of  a  patent  and  the  rights  conferred,  thereby.  Taken  at  face  value,  it 
assumes  the  existence  of  a  non-existing  right.  The  proposal  contemplates  a  suit 
for  infringement  against  the  grantor  of  a  license  who  is  not  infringing  because  he 
is  neither  making,  using  nor  selling  a  patented  article.  Assuming  that  the  pur- 
pose of  the  proposal  is  to  force  patentees  to  bring  suit  against  a  manufacturer 
and  prohibit  suit  against  possessors  of  the  infringing  article,  except  as  specified 
in  the  proposal,  the  following  observations  are  pertinent  and  worthy  of  considera- 
tion: 

The  requirement  would  be  especially  burdensome  to  individual  patent  owners 
and  small  businesses.  A  patent  owner  living  in  Washington  having  available  in 
Washington  a  seller  of  an  infringing  article  might  be  forced  to  go  to  California  to 
bring  suit  against  the  manufacturer,  carrying  with  him  all  his  witnesses,  records 
and  exhibits.  In  another  case,  it  may  require  a  patentee  to  bring  a  multiplicity 
of  suits  against  different  manufacturers  located  in  diflferent  parts  of  the  United 
States,  whereas  one  suit  brought  against  a  seller  might  reach  the  same  end.  For 
example,  a  seller  of  pencils  might  carry  a  dozen  different  brands  made  by  a  dozen 
different  manufacturers  throughout  the  United  States  and  all  of  these  brands  be 
an  infringement  of  one  patent.  •  Here,  a  dozen  suits  would  be  required  against 
the  manufacturers,  whereas  a  single  suit  against  the  seller  would  conclude  the 
litigation. 


18482       CONCENTRATION  OF  ECONOMIC  POWER 

While  I  am  mogt  sympathetic  with  the  declared  purpose  of  this  proposal, 
namely,  the  prevention  of  the  use  of  litigation  "as  a  deliberate  weapon  of  business 
aggression  rather  than  as  an  instrument  for  adjudicating  honest  disputes,"  I  do 
not  believe  that  the  proposal  even  approaches  the  objective  stated.  I  must 
confess  my  own  inability,  in  spite  of  a  desire  to  be  helpful,  to  suggest  an  alternate 
method  of  accomplishing  the  objective  for  the  reason  that  I  do  not  know  hew  to 
determine,  prior  to  the  institution  of  suit,  the  "honest"  intention  of  the  parties. 
I  would  hesitate  to  rely  upon  the  results  of  the  litigation  as  an  indication  of  honest 
intentions,  because  even  a  losing  litigant  is  frequently  wholly  sincere.  I  heartily 
concur  in  the  desirability  of  outlawing  suits  filed  for  the  purpose  of  harassment 
or  intimidation,  whether  based  on  patents  or  not,  but  I  do  not  know  the  answer 
to  the  problem.  Furthermore,  the  problem  is  not  peculiar  to  patent  litigation. 
It  would  be  equaUy  desirable  to  outlaw  dishonest  suits  whether  they  were  filed  in 
the  field  of  patent  law  or  any  other  law. 

RECOMMENDATION  NO.  6 

Recommendation  No.  5  reads  as  follows: 

"5.  If  any  person  who  owns  a  patent  or  an  interest  in  or  exclusive  right  under  a 
patent,  violates  any  of  the  prohibitions  described  in  paragraphs  1  and  2  above,  he 
should  forfeit  his  patent  or  his  interest  in  or  right  under  a  patent  to  the  United 
States,  and  such  forfeiture  should  be  recoverable  in  a  civil  action  against  such 
person  by  the  United  States.  It  should  be  provided  that,  upon  a  proper  showing 
in  such  an  action,  a  judgment  should  be  entered  requiring  the  defendant  to  assign 
his  patent,  or  interest  in,  or  right  under  a  patent,  to  the  United  States,  such 
assignment  to  be  received  by  the  Secretary  of  the  Treasury  in  the  name  of  the 
United  States.  Thereafter,  the  patent  or  patent  right  would  be  offered  for  sale 
under  the  direction  of  the  Secretary  of  the  Treasury  in  the  manner  prescribed  by 
law. 

"A  provision  to  the  foregoing  effect  would  adapt  to  the  patent  situation  a  familiar 
principle  of  law:  That  the  abuse  of  a  privilege  granted  by  the  State — e.  g.,  public- 
utility  franchises,  licenses  to  sell  securities,  etc. — should  result  in  forfeiture  of  that 
privilege.  In  this  case,  it  seems  wise  to  provide  that  the  patent  should  be  seized 
and  resold,  and  so  kept  alive  for  useful  exploitation,  rather  than  to  provide  for  its 
cancelation." 

This  proposal  provides  that  anyone  who  violates  the  prohibitions  as  specified 
in  Recommendations  1  and  2  shall  forfeit  his  patent,  or  interest  in  a  patent,  or 
right  under  a  patent.  The  forfeiture  is  to  the  United  States,  which  would  there- 
after sell  the  patent  or  right  "in  the  manner  prescribed  by  law." 

The  extreme  severity  of  the  penalty  is  immediately  apparent.  It  is  all  out  of 
proportion  to  the  alleged  wrong.  As  pointed  out  in  the  preceding  discussion,  the 
first  two  recommendations  are  very  general  and  cover  numerous  situations, 
small  and  large,  and  the  penalty  for  violation  in  each  instance  is  forfeiture  or 
confiscation  of  the  patent.  The  penalty  applies  to  innocent  violators,  as  well  as 
to  willful  violators,  and  also  applies  to  situations  where  the  violation  of  the 
prohibitions  would  be  of  no  material  consequence. 

The  granting  of  licenses,  even  those  clearly  in  the  public  interest,  would  be 
greatly  discouraged.  Patent  owners  would  hesitate  to  grant  any  license,  even 
those  with  acceptable  conditions,  first,  because  the  rights  of  the  patentee  are 
sharply  curtailed  by  the  proposals,  and  second,  because  the  penalty,  if  the  license 
should  be  found  to  be  in  violation  of  the  law,  is  so  severe  that  no  amount  of 
royalty  or  other  payment  for  a  license  would  justify  the  risk  taken  by  the  licensor, 

A  valuable  business  built  up  on  a  patented  invention  might  be  wholly  destroyed 
by  the  seizure  of  the  patents  for  some  small  violation  of  the  proposed  prohibitions. 

Where  a  patent  is  of  outstanding  value  and  usefulness,  sale  by  the  Government 
following  forfeiture  would  inevitably  add  to  the  holdings  of  some  large  cor- 
porations, since  obviously  the  former  owner,  if  an  individual  or  a  small  business 
concern,  could  not  bid  successfully  against  a  large  organization.  This  shift  in 
the  ownership  of  the  patent  to  a  large  corporation  would  enable  the  new  owner 
to  drive  the  former  owner  from  his  field  of  activity. 

Furthermore,  there  would  be  an  unavoidable  lapse  of  time  between  the  transfer 
of  the  patent  to  the  United  States  and  the  resale  of  the  patent,  during  which 
period  presumably  no  one  would  be  authorized  to  operate  under  the  patent. 

Of  equal  importance  is  the  fact  that  the  penalty,  severe  as  it  is,  does  not  correct 
the  alleged  evil.  The  outstanding  license  would  not  be  cancelled  by  either 
seizure  or  resale  of  the  patent  and,  therefore,  would  continue  with  all  its  unde- 
sirable restrictions.  Query,  would  the  new  purchaser  be  excused  from  being 
the  owner  of  a  patent  under  which  a  license  existed  which  was  originally  so 
objectionable  as  to  result  in  seizi^re?     What  would  be  the  position  of  the  licensee 


CONCENTRATION  OF  ECONOMIC  POWER  18483 

while  all  this  is  going  on?  On  \yhose  hand  shall  the  guilt  be  placed,  the  licensor 
or  the  licensee,  since  each  would  presumably  be  charged  with  the  knowledge  of 
the  law  against  license  restrictions?  The  answer  is  important,  since  the  penalty 
apparently  applies  only  to  the  patent  owner,  whereas,  obviously  the  licensee  is  a 
party  to  the  violation.  If,  however,  the  licensee  is  equally  guilty,  his  participation 
being  necessary  to  the  agreement,  instead  of  being  penalized  he  becomes  a  bene- 
ficiary of  his  own  willful  act.  He  can  now  proceed  to  utilize  the  invention  without 
the  payment  of  royalties;  he  is  now  in  a  stronger  jiosition  than  he  was  prior  to  the 
seizure  by  virtue  of  the  fact  that  he  is  relieved  from  the  restrictions  of  the  license. 
He  would  profit  by  his  awn  wrong.  Not  only  will  the  licensee  profit  by  the 
removal  of  the  restriction,  but  he  will  have  the  additional  advantage  of  an  oppor- 
tunity to  acquire  ownership  of  the  very  patent  which  he  himself  caused  to  be 
forfeited  to  the  Government. 

I  need  not  comment  on  the  advisability  of  having  the  United  States  Government 
engaging  in  the  business  of  selling  patents  and  patent  rights,  which  the  recom- 
mendation proposes  to  do.  , 

The  justification  for  the  penalty,  contained  in  the  second  paragraph  of  the 
proposal,  is  that  it  "would  adapt  to  the  patent  situation  a  familiar  principle  of 
law" — i.  e.,  that  tho  patent  agreement  is  similar  to  a  "public  utility  franchise", 
and  an  abuse  should  result  in  the  same  penalty  which  is  forfeiture  of  the  privilege. 

I  am  not  too  familiar  with  the  law  on  the  subject  of  forfeiture  of  public  fran- 
chises for  abuse  of  the  privilege,  but  assuming  this  is  an  established  principle  in 
the  law,  nevertheless  there  are  inherent  distinctions  between  the  privilege  of  a 
public  franchise  and  the  private  property  tight  in  a  patent.  It  does  not  follow 
that  a  penalty  appropriate  in  one  case  would  necessarily  be  appropriate  in  the 
other. 

CONCLUSION 

I  have  attempted  to  analyze  the  scope  and  effect  of  the  proposals  advanced  by 
the  Department  of  Justice. 

I  suggest  consideration  be  given  to  the  desirability  of  legislation  along  the  fol- 
lowing lines: 

1.  That  licenses  of  the  following  character  be  required  to  be  reduced  to  writing 
and  recorded  in  the  United  States  Patent  Oflice : 

a.  Licenses  to  which  a  citizen  or  resident  of  a  country  foreign  to  the  United 
States  is  a  party. 

b.  Licenses  capable  of  reduction  to  writing  between  citizens  or  residents  of 
the  United  States  which  contain  restrictions  on  production,  price,  geograph- 
ical area,  and  field  of  use. 

2.  Where  a  single  control  or  ownership  of  a  group  of  patents  has  the  eflFect  of 
permitting  the  owner  to  dominate  an  industry  or  directly  restrain  interstate  com- 
merce to  the  detriment  of  the  public,  rights  under  such  patents  shall  be  made 
available  to  others  on  Such  terms  and  conditions  as  may  be  determined  as  reason- 
able by  the  Court  before  whom  the  facts  are  developed. 

The  test  as  to  the  restraint  of  interstate  commerce  to  the  detriment  of  the  public 
shaU  be  whether  or  not  the  articles  covered  by  the  patents  are  made  available  to 
the  public  in  such  quantity  as  to  satisfy  the  demand,  and  at  a  reasonable  price. 
Cordially  yours, 

Conway  P.  Coe,  Commissioner, 


bbjoinder  by  thuhman  arnold  to  letter  from  conway  p.  coe 

Department  of  Justice, 
Washiiigton,  March  29,  1941. 
Honorable  Joseph  C  O'Mahoney, 

Chairman,  Temporary  National  Economic  Committee, 

Senate  Office  Building,  Washi7igton,  D.  C. 
Mt  Dear  Senator:  In  a  letter  dated  March  12,  1941,  Mr.  Dewey  Anderson, 
the  Executive  Secretary  of  the  Committee,  has  asked  me  to  comment  on  the 
criticism  of  the  proposals  of  the  Department  of  Justice  for  amendments  to  the 
antitrust  laws  which  has  been  submitted  by  Conway  Coe,  Commissioner  of  Patents, 
and  which  appears  in  the  verbatim  record  of  the  Committee  for  March  11,  1941. 
The  recommendations  of  the  Department  which  Mr.  Coe  now  attacks  were 
approved  by  the  committee  "for  immediate  action  by  Congress"  in  its  preliminary 
report  submitted  to  the  Senate  on  July  14,  1939,  and  this  was  done  without  any 
objection  on  the  record  from  either  the  Department  of  Commerce  or  the  Com- 

124491— 41— pt.  31-A 31 


18484       CONCKNTRATION  OF  ECONOMIC  POWER 

missioner  of  Patents.  Despite  this  circumstance,  I  feel  that  I  should  now  make 
some  commeTit  on  the  criticisms  contained  in  Mr.  Coe's  letter.  I  feel  that  a  reply 
is  particularly  appropriate  because  the  letter  reproduces,  without  substantial 
chanjTc,  the  criticisms  of  our  proposals  which  have  been  made,  from  time  to  time, 
by  certain  members  of  the  Patent  Bar  and  because  it  concludes  with  an  extraor- 
dinary proposal  to  weaken  the  antitrust  laws  so  as  to  promote  abuses  of  the  patent 
privilege.  ^ 

The  greater  part  of  Mr.  Coe's  letter  is  devoted  to  a  general  criticism  of  our 
proposal  that  certain  kinds  of  restrictive  conditions  in  patent  license  agreements 
be  declared  illegal.  The  letter  also  contains  a  number  of  detailed  criticisms  of  the 
specific  recommendations  made  by  the  Department  of  Justice.  One  of  these 
detailed  criticisms  appears  to  possess  some  merit;  a  few  of  the  others  seem  sub- 
stantial enough  to  deserve  comment.  But  these  detailed  criticisms  are  of 
little  importance  as  compared  with  the  fundamental  issue  which  separates  the 
Department  of  Justice  from  Mr.  Coe.  That  issue  is  whether  restrictive  con- 
ditions in  patent  license  agreements  are  socially  and  economically  desirable.  I 
shall  direct  the  greater  part  of  my  reply  to  this  question,  and  shall  reserve  my 
comments  on  Mr.  Coe's  detailed  criticisms  for  the  concluding  part  of  this  letter. 

We  take  the  view  that  provisions  in  patent  license  agreements  which  restrict 
the  production  of  commodities,  the  purpose  for,  or  manner  in  which  they  may  be 
used,  or  the  geographical  area  in  which  they  may  be  produced  or  sold,  or  which 
fix  the  prices  at  which  commodities  may  be  sold,  are,  in  most  instances,  contrary 
to  the  public  interest.  Mr.  Coe,  on  the  other  hancl,  flatly  takes  the  position  that 
those  restrictive  positions  are  desirable  and  within  the  proper  scope  of  the  patent 
privilege. 

Our  view  that  these  restrictive  practices  are  undesirable  rests  upon  detailed 
testimonj-  presented  to  the  Committee  in  public  hearings,  upon  a  study  of  the 
practical  operation  of  the  patent  system,  particularly  in  relation  to  competitive 
conditions  in  American  industry,  and  more  particularly  upon  evidence  unearthed 
in  an  investigation  of  specific  violations  of  the  antitrust  laws,  under  cover  of  the 
patent  privilege,  which  we  have  carried  on  for  the  past  two  years.  A  careful 
examination  of  the  evidence  has  led  us  to  the  considered  conclusion  that  these 
restrictive  provisions  in  patent  lictMise  agreements  are  used:  (1)  to  concentrate 
control  in  small  groups  and  to  exclude  others  from  industrj-;  (2)  to  fix  prices, 
control  production,  limit  capacity.'and  otherwise  prevent  the  free  play  of  com- 
petitive forces;  and  (3)  to  control  and  impede  American  production  and  American 
development  to  the  advantage  of  foreign  interests,  both  private  and  governmental. 

The  evidence  to  support  these  conclusions  seems  to  me  to  be  overwhelming. 
It  was  sufficient  to  convince  the  Committee  when  it  made  its  preliminary  report, 
and  adequate,  I  think,  to  convince  anyone  who  does  not  approach  the  problem 
with  an  emotional  bias  which  contrues  every  criticism  of  a  patent  practice  as  an 
attack  upon  the  entire  patent  system.  Mr.  Coe  makes  no  attempt  to  discuss 
this  evidence  in  detail  or  to  evaluate  it  in  the  light  of  the  experience  of  those 
governmental  agencies  particularly  charged  with  the  duty  of  preventing  restraints 
on  trade  and  preserving  free  competition.  On  the  contrary,  except  for  two  refer- 
ences to  isolated  pieces  of  testimony  before  this  Committee,  Mr.  Coe  seeks  to 
support  his  criticism  by  o  priori  reasoning,  by  references  to  hypothetical  cases 
which  it  is  asserted  illustrate  the  hardship  which  the  Department's  recommenda- 
tions would  impose,  and  by  the  citation  of  general  expressions  of  opinion  unsup- 
ported by  any  references  to  specific  facts  or  situations.  In  passing,  I  may  add 
that  the  two  references  to  the  testimony  before  the  committee  disclose  either  an 
ignorance  of  the  facts  which  were  presented,  or  an  inability  to  understand  the 
true  import  of  the  testimony. 

Mr.  Coe's  argument  that  restrictive  provisions  promote  the  public  interest  is 
presented  in  several  forms:  At  one  point  Mr.  Coe  suggests  it  is  unwise  to  confront 
the  patent  owner  with  the  choice  of  granting  an  unrestrfcted  license  or  no  license 
at  all.  This  argument  is  without  merit.  There  is  no-  substantial  ground  for 
believing  that  the  public  interest  will  suffer  if  the  patentee  is  required  to  make 
this  choice.  If  he  grants  an  unrestricted  license,  the  public  interest  will  be  served, 
and  Mr.  Coe  makes  no  suggestion  to  the  contrary.  The  patentee's  own  interests 
will  be  protected  because  he  will  be  entitled  to  collect  royalties.  If  he  determines 
not  to  grant  a  license  and  retains  the  invention  for  his  own  use,  there  .seems  little 
real  basis  for  fearing  the  consequences  which  Mr.  Coe  predicts.  Mr.  Coe  pro- 
fe.sses  to  believe  that  if  the  law  gives  the  patentee  an  incentive  to  retain  the  patent 
for  his  own  use,  monopoly  conditions  in  industry  will  be  encouraged.  In  fact, 
this  is  not  what  happens  under  modern  economic  conditions.  Few  patents  are 
so  basic  in  their  claims  or  so  sweeping  in  their  effect  that,  .standing  alone,  they 
will  enable  a  patentee  to  dominate  or  to  monopolize  an  industry  in  whole  or  in 


CONCENTRATION  OF  KCONOMIC  POWER  18485 

part.  If  the  patent  has  real  value,  that  is  to  say  if  it  covers  a  device  or  a  process 
or  a  product  whicli  is  important  and  desirable  and  whose  use  will  be  profitable, 
other  persons  can  and  will  develop  an  alternative  method  of  accomplisliing  the 
same  result.     Tliis  will  serve  to  encourage  research,  development  and  invention. 

This  brings  mo  to  another  point  which  is  of  great  importance.  If  a  patentee 
does  not  have  tiie  power  to  grant  restrictive  licenses,  the  chances  will  be  better* 
for  a  real  test  of  the  patent's  scope  and  validity.  If  the  patentee  retains  the 
patent  for  himself,  and  the  patent  has  real  commercial  value,  others  engaged  in 
the  same  industry  will  either  develop  an  alternative  invention  or  test  the  validity 
of  the  patent.  Time  and  again,  in  our  investigations  we  have  found  the  restrictive 
lice/'se  used  to  avoid  the  test  of  a  patent's  validity.  Various  groups  in  an  industry, 
who  po.ssess  patents  of  doubtful  validity,  will  combine  and  agree  Jiot  to  contest 
each  other's  patents.  They  then  issue  restrictive  cross  licenses  which  divide  the 
field,  fix  prices,  limit  production,  and  otherwise  protect  the  patent  holders  against 
the  consequences  of  a  free  market.  The  individual  members  of  the  combination 
are  willing  to  make  the  cross-licensing  arrangement  because  the  restrictive  pro- 
visions in  the  licenses  protect  each  of  them  in  its  selected  field  of  activity  and 
protect  the  group  as  a  whole  against  the  consequences  of  competition.  A  prohibi- 
tion against  restrictive  licenses  would  drastically  curtail  both  the  incentive  and 
the  opportunity  for  this  kind  of  arrangement. 

Mr.  Coe  himself  '•ecognizes  that  this  will  be  one  effect  of  the  Department's 
recommendations.  He  seeks  to  obscure  the  real  effect  of  this  consequence,  liow- 
ever,  by  saying  that  a  "most  unfortunate  effect"  of  tlie  proposal  "would  be  to 
increase  litigation,  both  in  the  courts  and  in  interference  proceedings  in  the  patent 
office."  The  Department  of  Justice  has  no  desire  to  increase;  patent  litigation. 
On  the  other  hand,  it  is  important  that  the  validity  and  scope  of  patents  be  tested 
in  the  courts.  Indeed,  the  patent  law  itself  contemplates  that  a  patent  shall  be 
subjected  to  this  tost  if  there  is  any  doubt  as  to  its  validity  or  scoi)e.  The  testi- 
mony before  this  Committee  indicates  beyond  doubt  that  the  patent  office,  as 
presently  administered,  is  incapable  or  unwilling  to  subject  patelit  applications 
to  the  kind  of  rigorous  examination  which  is  desirable.  On  the  one  hand,  patents 
are  issued  with  claims  so  broad  that  they  purport  to  cover  virtually  the  entire 
technique  of  an  industry.  On  the  other  hand,  patents  are  multiplied  upon  the 
trivia  of  technologj'.  The  committee  will  recall  that  on  one  occasion  in  its  iiear- 
ings  it  was  shown  that  upwards  of  25  patents  had  been  issued  which  related 
solely  to  the  shape  of  the  slot  in  the  head  of  a  screw.  This  example  is  doubtless 
more  dramatic  than  others  which  might  be  used  to  prove  the  same  point,  never- 
theless, it  is  indicative  of  a  trend  which  no  thoughtful  person  can  regard  without 
concern.  A  prohibition  against  restrictive  licenses  would  do  much  to  impel  liti- 
gation in  the  courts  which  would  test  the  validity  and  scope  of  many  of  these 
doubtful  patents.  Certainly,  it  would  eliminate  one  device  which  is  commonly 
used  to  avoid  precisely  the  kind  of  test  or  validity  which  every  doubtful  patent 
should  undergo. 

If  there  is  serious  danger  that  monopoly  will  be  encouraged  by  a  rule  which 
requires  the  patentee  either  to  grant  unrestricted  licenses  or  none  at  all,  the 
remedy  seems  obvious  to  me.  If  this  danger  is  as  substantial  as  Mr.  Coe  thinks 
it  is,  the  committee  may  well  wish  to  consider  recommending  tliat  if  a  p  tentee, 
by  the  possession  of  a  patent,  is  in  a  position  to  dominate,  or  monopolize,  or 
control  an  entire  industry,  the  law  should  require  him  to  grant  licenses  upon 
reasonable  terms  and  conditions. 

The  argument  that  it  is  unwi.se  to  require  a  patentee  to  grant  an  unrestrictive 
license,  or  none  at  all,  is  coupled  with  the  suggestion  that  the  effect  of  this  proposal 
win  be  to  injure  small  business.  No.  doubt  it  is  possible  to  think  of  hypothetical 
cases  in  which  a  small  business  would  be  placed  at  a  disadvantage  if  these  restric- 
tive provisions  are  outlawed.  Probably  it  is  also  true  that  there  may  be  a  few 
actual  instances  in  which  this  recommendation  may  w^ork  a  real  hardship  on  some 
small  business.  But  the  merit  of  the  proposal  cannot  be  tested  by  hypothetical 
cases  or  by  i.solated  examples.  The  decision  under  consideration  here,  like  any 
legislative  decision,  must  be  made  in  general  tei;ms  and  with  an  eye  to  a  general 
situation.  It  is  impossible  to  frame  a  rule  which  will  aciiieve  perfect  results  in 
every  conceivable  case.  The  problem  is  to  find  a  rule  which  will  work  well  in 
the  generolity  of  cases.  In  the  experience  of  the  Depiirtinent  of  Justice,  it  is  not 
the  small  business,  but  the  large  one  which  uses  restrictive  licenses  to  control 
and  stifle  competition.  It  is  significant  that  no  representative  of  a  small  business. 
and  by  that  I  i-^ean  a  man  actually  engaged  himself  in  business,  has  a-ppered 
before  the  commiVoe  to  defend  these  particular  patent  practices.  To  the  extent 
that  the  conimittee  h.-s  heard  complaints  from  small  businessmen,  those  complaints 
have  been  directed  agi.-j)«t  precisely  the  kind  of  practices  w^hich  these  restrictive 


18486  CONCENTRATION  OF  ECONOMIC  POWER 

provisions  represent.  The  proposals  made  by  the  Department  of  Justice  permit 
the  small  businessman  to  retain  his  patent  for  his  own  use  and  to  exclude  others 
from  exploiting  the  particular  device  or  process  which  he  patent  covers.  I  beiieve 
that  this  protection  is  all  that  the  small  businessman  wants  or  needs  from  his 
patent. 

Mr.  Coe  also  seeks  to  color  his  argument  by  frequent  reference  to  the  desira- 
bility of  protecting  the  individual  inventor.  The  weight  of  the  testimony  before 
the  committee  proved  that  research  and  development  has  now  become  a  group 
or  corporate  activity.  This  testimony  served  merely  to  document  a  conclusion 
which  I  believe  has  been  accepted  by  everyone  who  has  observed,  the  conditions 
actually  existing  in  the  business  and  economic  world.  In  dealing  with  the  patent 
systein,  it  is  no  longer  helpful  to  think  in  terms  of  the  erratic  and  solitary  genius. 
The  problem  no  longer  hinges  on  the  activities  of  a  Watt,  a  Stephenson,  a  Whitney, 
or  an  Edison.  To  think  in  those  terms  is  to  consider  history  and  not  the  reality 
which  we  face  todaj.  The  patent  system  and  the  scope  of  the  patent  privilege  must 
now  be  considered  against  the  background  of  such  aggregates  of  capital  as  I.  G. 
Farben,  General  Electric  Company,  The  Radio  Corporation  of  America,  The 
American  Telephone  and  Telegraph  Company,  The  Hartford-Empire  Company, 
and  the  patent  pools  and  international  cartel  arrangements  to  which  they  are 
parties.  This  is  not  to  say  that  patents  are  not  important  in  the  operations  of 
smaller  enterprises.  But,  eyen  here,  the  eniphasis  has  shifted  from  the  individual 
to  the  company  or  the  group. 

A  .similar  detachment  from  the  facts  of  modern  society  underlies  all  of  the  re- 
marks which  Mr.  Coe  makes  with  respect  to  the  various  kind  of  restrictions  which 
the  Department  proposes  to  outlaw.  Thus,  the  restrictions  as  to  price  which  Mr. 
Coe  says  are  "both  desiralile  and  necessary,"  are,  in  fact,  used  to  fix  arbitrary  and 
non-competitive  prices  for  commodities  through  every  .^tagc  of  their  distribution 
from  the  factory  door  to  the  hands  of  the  ultimate  consumer.  Tliis  is  not  a  device 
ordinarily  used  to  protect  the  inventor  or  the  small  businessman.  If  it  were,  a 
grave  doubt  would  still  exist  as  to  whether  the  large  body  of  consumers,  including 
all  of  the  low-income  group,  should  be  victimized  by  artificial  prices  in  order  to 
provide  an  enhanced  reward  for  the  individual  inventor  or  the  small  businessman. 

Nor  is  the  restriction  as  to  use  a  means  of  protecting  the  inventor  or  the  small 
businessman.  On  the  contrary,  it  is  a  device  which  is  used  by  large  aggregations  of 
capital  to  carve  up  a  field  of  activity  into  exclusive  industrial  empires  and  to  pro- 
tect tliose  empires  against  the  consequences  of  free  competition.  So  it  is  vvith  a 
restriction  as  to  the  geographical  area  within  which  a  patent  or  a  patented  article 
may  be  used.  This  particular  restriction  is  of  great  importance  in  the  international 
field.  Its  prevalence  is  largel.y  responsible  for  the  fact  that  this  country  is  now 
short  of  man}'  vital  and  strategic  material;-  which  we  need  badly  for  our  defense 
effort.  Indeed,  this  particular  kind  of  restrictive  condition  has  been  the  chief 
weapon  which  foreign  interests  have  used  to  exclude  our  industries  from  the  world 
market  and  to  curb  and  control  our  productive  capacity.  It  is  this  specific  prac.  ice 
which  led  Assistant  Attorney  General  Littell  to  say  with  great  force  and.  accuracy 
in  a  recent  speech  that  "the  American  Patent  Office  has  been  a  happy  hunting 
ground  for  German  agents." 

Even  Mr.  Coe  can  find  little  to  say  in  support  of  restrictions  which  control  the 
quantity  of  a  product  which  may  be  produced.  He  contents  himself  with  the 
observation  that  "numerous  instances  arise"  when  such  a  restriction  is  desirable 
and  makes  no  real  attempt  to  support  this  observation. 

One  additional  argument  which  Mr.  Coe  makes  deserves,  I  think,  a  brief  com- 
ment. He  seeks  to  derive  some  support  from  language  found  in  two  decisions  of 
the  Supreme  Court — United  States  v.  General  Electric  Company,  272  Y.  S.  476, 
and  General  Talking  Pictures  v.  Western  Electric  Compani/,  305  U.  S.  124.  It  is 
by  no  means  clear  to  what  extent  tlie  language  in  these  opinions  can  be  regarded 
as  definitive  of  the  present  state  of  the  law.  Tlic  Department  of  .Tustice  has 
publicly  announced  that  when  an  approj^riate  occasion  arises,  ii  will  aok  the  Court 
to  reconsider  its  deci.sion  in  both  cases.  It  has  been  the  experience  of  the  Depart- 
ment that  the  more  astute  and  puljlic-spirited  counsel  for  private  interests  are 
now  reluctant  to  rely  upon  a  literal  interpretation  of  the  language  of  these  opinions. 
But  these  aspects  of  the  matter  are  beside  the  point.  Mr.  Coe  seems  to  be  under 
a  misapprehension,  both  as  to  the  nature  of  the  problem  which  the  committee  has 
under  consideration,  and  as  to  the  function  which  the  Supreme  Court  performs 
in  our  system  of  government.  This  Committee  is  considering  a  legislative  (jues- 
tion,  i.  e.,  what  should  be  the  scope  of  the  patent  privilege  in  relation  to  the  anti- 
trust laws.  The  Supreme  Court  expresses  no  views  on  a  legislative  problem  of 
this  kind.  The  most  that  can  be  said  for  the  language  which  Mr.  Coe  cites  is 
that  il  is  indicative  of  the  present  state  of  the  law.     The  Supreme  Court  itself 


OONCENTRATION  OF  ECONOMIC  POWER        18487 

would  doubtless  be  the  first  to  deny  that  its  language  has  any  bearing  wliatsoever 
on.th^  rjuestiou  of  'A'hat  the  law  should  be  or  what  action  Congress  should  take 
in  dealing  with  the  gra.ve  problems  which  abtises  of  the  jjatent  system  create. 

These  general  observations  dispose  of  all  of  the  more  important  arguments 
advanced  by  Mr.  Coe  in  objection  to  the  basic  recommendation  of  the  Depart- 
ment that  these  restrictive  conditions  in  license  agreements  be  made  illegal.  I 
shall  now  discuss  briefly  the  detailed  criticisms  which  Mr.  Coe  makes  of  our 
recommendations  The  points  which  Mr.  Coe  makes  with  respect  to  recommen- 
dation No.  1  of  the  Department  have  been  covered  in  the  general  discussion  of 
restrictive  provisions.  Recommendation  Xo.  2  of  the  Dei^artment  is  that  the 
same  kind  of  restrictive  conditions  be  made  illegal  in  the  case  of  the  sale,  lease 
or  other  disposition  of  an  a.  tide  produced  or  sold  under  a  patent.  Mr.  Coe  makes 
a  number  of  minor  criticisms  of  this  recommendation,  most  of  which  are  frivolous. 
The  quality  of  his  criticisms  can  be  indicated  by  his  remark  that  this  recommenda- 
tion is  objectionable  because  it  would  prevent  a  patentee  from  stipulating  in  the 
lease  of  a  machine  or  product  that  the  article  leased  should  not  be  used  for  illegal 
purposes.  Assuming  that  this  is  true,  it  seems  incredible  that  it  should  be  ad- 
vanced as  a  serious  objection  to  this  recommendation. 

Recommendation  No.  3  is  that  license  agreements,  sales,  assignments  of  patents, 
or  patent  rights  be  evidenced  in  writing  and  a  copy  filed  with  the  Federal  Trade 
Commission.  Mr.  Coe  objects  to  the  requirement  that  the  agreements  be  filed 
with  the  Federal  Trade  Commission  and  suggests  that  they  be  filed  instead  with 
the  patent  oflSce.  This  criticism  betrays  a  complete*  misunderstanding  of  the 
purpose  of  this  recommendation.  The  recommendation  was  made  for  the  pur- 
pose of  providing  agencies  of  the  Government  with  complete  information  as  to 
license  agreements  so  that  it  would  be  possible  to  strike  down  restrictive  practices 
in  their  incipiencj".  The  proposal  is  not  designed  to  assist  in  the  administration 
of  the  patent  office  or  to  provide  information  which  will  be  useful  in  the  consider- 
ation of  technical  patent  problems.  Thus,  the  very  purpose  of  the  '■ecommenda- 
tion  is  inconsistent  with  the  suggestion  that  the  agreements  be  filed  with  the 
Patent  Office.  Even  if  we  should  assume  that  the  Patent  Office,  as  presently 
administered,  has  any  desire  to  preser-^^  a  free  economj^  it  ^las  been  given  no 
authority  by  Congress  to  deal  with  this  problem.  If  license  agreements  are  to  be 
filed,  they  should  be  filed  with  a  vigorous  and  independent  agency,  charged  b}- 
Congress  with  the  duty  of  protecting  free  enterprise,  and  alert  and  ready  to  per- 
form that  duty.  The  Federal  Trade  Commission,  and  not  the  Patent  Office, 
satisfies  these  requirements. 

The  other  criticisms  made  by  Mr.  Coe  of  the  proposal  of  this  Department 
require  little  comment.  One  is  that  the  proposal  appears  to  apply  to  assignments 
wllich  arise  by  operation  of  law.  The  proposal,  of  course,  was  cast  in  general 
language  and  no  attempt  was  made  to  put  it  in  final  statutory  form.  If  it  is 
desirable  or  necessarj*  to  exempt  assignments  by  operation  of  law,  and  if  the 
present  language  of  the  proposal  does  not  do  so,  that  change  can  no  doubt  be 
made  by  the  draftsman.  Mr.  Coe  also  suggests  that  the  jjrovision  woidd  require 
the  filing  of  contracts  covering  a  number  of  situations  which  arise  in  the  ordinary 
course  of  business.  The  only  comment  which  seems  necessary  on  this  point  is 
that  the  recommendation  in  its  present  form  does  not  appear  to  apply  to  trans- 
actions of  this  kind. 

Recommendation  No.  4  of  the  Department  was  designed  to  prevent  one  practice 
which  is  widely  prevalent  in  patent  litigation.  That  is  the  practice  of  suing  for 
infringement  some  minor  user  or  vendor  of  an  article  or  process  who  is  unable  or 
unwilling  to  make  a  vigorous  defense  against  the  suit.  By  this  method  the 
validity  of  patents  is  often  sustained  in  litigation  as  to  which  the  real  party  in 
ititerest  has  no  information  and  in  circumstances  which  make  it  impossible  for  him 
to  control  the  defense  of  his  own  interests.  Furthermore,  the  threat  of  a  multi- 
plicity of  suits  against  users  and  vendors  is  often  used  to  restrain  competition, 
even  in  advance  of  an  adjudication  of  a  patent's  validity.  Mr.  Coe,  himself, 
recognizes  the  existence  of  the  evils  which  this  proposal  was  designed  to  remedy. 
He  points  out  that  in  certain  cases  the  proposal  may  involve  some  hardship  on  a 
patentee;  this  may  be  admitted  without  in  any  way  destroying  its  merits.  So  far 
as  Mr.  Coe's  objections  to  the  form  of  the  proposal  are  concerned,  we  shall  be  glad 
to  consider  any  suggestions  he  may  wish  to  make  which  will  serve  to  clarify  the 
proposal  or  to  make  its  operation  more  practical  and  effective. 

Recommendation  No.  5  of  the  Department  follows: 

"If  any  person  who  owns  a  patent  or  an  interest  in  or  exclusive  right  imder  a 
patent,  violates  any  of  the  prohibitions  described  in  paragraphs  1  and  2  above, 
he  should  forfeit  his  patent  or  his  interest  in  or  right  under  a  patent  to  the  United 
States,  and  such  forfeiture  should  be  recoverable  in  a  civil  action  against  such 


18488  OONC15NTRATION  OF  ECONOMIC  POWER 

person  by  the  United  States.  It  should  be  provided  that,  upon  a  proper  showing 
'n  such  an  action,  a  judgment  should  be  entered  requiring  the  defendant  to  assign 
his  patent,  or  interest  in,  or  right  under  a  patent,  to  the 'United  States,  such 
assignment  to  be  received  by  the  Secretary  of  the  Treasury  in  the  name  of  the 
United  States..  Thereafter,  the  patent  or  patent  right  would  be  oifered  for  sale 
under  the  direction  of  the  Secretary  of  the  Treasuiy  in  tho  manner  prescribed 
by  law." 

If  the  proposal  to  make  the  restrictive  provisions  illegal  is  desirable,  then  this 
provision  seems  to  provide  an  appropriate  sanction.  It  is  a  pity  that  Mr.  Coe 
should  attempt  to  dismiss  the  analogy  between  a  patent  and  a  public  franchise 
by  the  statement  that  he  is  not  familiar  with  the  law  on  the  subject  of  the  for- 
feiture of  public  franchises.  A  patent,  in  fact,  is  a  public  franchise.  If  Mr.  Coe 
could  bring  himself  to  recognize  this  fact  and  to  cease  regarding  the  patent  as 
absolute  private  property  which  may  properly  be  exploited  to  the  limit,  he  might 
be  more  sjanpathetic  to  our  proposals. 

Mr.  Coe  makes  one  point  in  connection  with  this  proposal,  however,  which 
appears  to  have  merit.  He  points  out  that  there  are  objections  to  having  the 
Government  seize  the  patent  and  sell  it.  Upon  consideration,  these  objections 
seem  to  me  to  carry  consideiable  weight.  I  am,  therefore,  glad  to  adopt  Mr. 
Coe's  criticism  in  this  respect.  It  seems  to  me  that  those  criticisms  provide  a 
basis  for  recommending  that  instead  of  having  the  patent  seized  and  sold  by  the 
government,  the  patent  should  be  forfeited  and  the  product  or  process  or  device 
which  it  covers  should  thereafter  lie  in  the  public  domain  and  be  open  to  the  use 
of  anyone  without  the  payment  of  royalties. 

1  now  come  to  a  very  extraordinary  passage  in  Mr.  Coe's  letter  which  contains 
the  one  important  affirmative  recommendation  which  he  appears  to  be  willing  to 
make.     The  recommendation  is  made  in  the  following  language: 

"Where  a  single  control  or  ownership  of  a  group  of  patents  has  the  effect  of  per- 
mitting the  owner  to  dominate  an  industry  or  directly  restrain  interstate  com- 
merce to  the  detriment  of  the  public,  rights  under  such  patents  shall  be  made 
available  to  others  on  such  terms  and  conditions  as  may  be  determined  as  reason- 
able by  the  Court  before  whom  the  facts  are  developed. 

"The  test  as  to  the  restraint  of  interstate  commerce  to  the  detriment  of  the 
public  shall  be  whether  or  not  the  articles  covered  by  the  patents  are  made  avail- 
able to  the  public  in  such  quantity  as  to  satisfy  the  demand,  and  at  a  reasonable 
price." 

The  startling  character  of  this  proposal  does  not  appear  on  the  surface.  It  is 
only  when  one  examines  the  concluding  paragraph  that  the  nature  of  this  proposed 
change  in  the  law  is  exposed.  In  my  view,  it  is  now  the  law  that  where  control  or 
ownership  of  a  group  of  patents  has  the  effect  of  permitting  a  person  or  a  group  of 
persons  to  doininare  an  industry  or  to  restrain  interstate  commerce,  the  antitrust 
laws  are  violated  without  the  proof  of  any  additional  facts.  Mr.  Coe  proposes, 
however,  that  a  new  and  diflerent  test  be  applied.  He  would  require  the  Govern- 
ment to  show  affirmatively  that  the  articles  covered  by  the  patent  are  not  made 
available  in  a  quantity  to  sati.sf3'  demand  and  that  the  price  at  which  they  are  sold 
is  not  reasonable.  No  such  burden  is  now  imposed  upon  the  Government  by  the 
antitrust  laws.  The  test  which  Mr.  Coe  snggests  is  obvionsly  illusory.  It  is  not  a 
test  which,  as  a  practical  matter,  could  i^e  applied  successful]  No  court  could 
determine  whether  a  price  is  reasonable  without  engaging  in  a  lengthy  investiga- 
tion comparable  to  the  kind  of  process  which  an  administrative  body  goes  through 
when  it  fixes  rates  for  a  public  utility.  Inasmuch  as  demand  is  linked  inseparably 
to  price,  that  separate  test  would  likewise  involve  the  same  difficulty.  In  any 
event,  the  theory  which  imderlies  the  antitrust  law  is  that  demand  and  price  will 
be  controlled  by  the  free  play  of  competitive  forces  and  not  by  the  action  of  a  court 
or  an  administrative  body.  The  practical  effect  of  this  proposal,  if  adopted, 
would  be  to  [preclude  the  Government  from  dealing  with  situations  which  it  is  now 
free  to  attack  and  to  remedy  under  the  antitrust  laws.  In  sliort,  this  is  a  pro- 
posal, somewhat  obscured  by  its  form,  to  strengthen  the  economic  position  of 
groups  which  dominate  industries  in  reliance  upon  the  patent  privilege  at  the 
expense  of  the  public  generally  and  particularly  at  the  expense  of  the  low-income 
groups.  In  my  experience,  I  have  heard  many  i^roposals  to  substitute  a  regi- 
mented and  controlled  economy  for  free  enterprise.  I  have  never  before  seen  one 
advanced  in  such  an  oblique  form  and  with  such  apparent  ignorance  of  its  obvious 
consequences. 

In  concluding,  I  should  like  to  make  two  general  observations:  The  great 
body  of  Mr.  Coe's  criticism  seems  to  me  to  be  vitiated  by  his  failure  to  under- 
stand the  true  basis  of  the  patent  systen).  The  power  i^  grii'i'-t  patents  is  con- 
ferred by  Article  VIII,  Section  1  of  the  Constitntion, -which  authorizes  the  Con- 


CONCENTKATION  OF  ECONOMIC  TOWEK  18489 

gress  "to  projiiote  the  progress  of  science  and  useful  arts."  The  scope  of  the 
patent  ]>rivilcge  inust  be  deterjuined  in  the  light  of  this  general  constitutional 
purpose.  The  reward  to  the  inventor  is  a  nieuns  for  the  accomplishment  of  this 
general  purpose  and  not  arj  end  in  itself.  This  basic  principle  has  become  some- 
what obscured  ))y  the  practices  of  the  market  and  l).\-  the  natural  inclination  of 
men  to  regard  a  privilege  long  enjoyed  and  frequently  abused  as  conferring  on 
them  some  absolute  and  inalienable  right.  In  the  interests  of  the  patent  system 
itself  atid  in  the  interests  of  the  public,  some  recognition  of  the  basic  con.stitutional 
purpose  of  the  patent  law  and  of  the  larger  oi)jectives  which  it  seeks  to  attain  is 
desirable. 

This  leads  me  to  the  second  observant  ion,  which  I  address  particularly  to  those 
who,  like  Mr.  Coe,  have  a  special  interest  in  patents  and  in  patent  law.  It  is 
ray  belief  that  at  the  present  time  there  is  great  dissatisfaction  with  the  operation 
of  the  j)atent  system.  The  consumers  see  in  man}-  patent  practices  devices  for 
raising  and  maintaining  artificial  prices  and  discouraging  ])roduction.  Individ- 
ual inventors  com])lain  that  the  patent  law  does  not  serve  to  protect  them  against 
exploitation  bj-  large  organizations.  Businessmen  comi)lain  that  the  patents 
interfere  with  their  fullest  use  of  their  competitive  talents,  that  they  are  required 
to  spend  time  and  monej-  in  fighting  off  attemjits  to  dominate  them  by  the  use  of 
patents,  and,  in  l)rief,  that  the  patent  has  ceased  to  be  a  means  of  rewarding 
invention  and  has  l)econie  a  weapon  for  economic  and  industrial  aggrandizement. 
Those  \s  ho  arc  familiar  with  the  patent  system  and  with  its  technical  details  would 
do  well  to  set  themselves  to  the  task  of  reform.  It  is  the  history  of  all  branches 
of  law,  particularly  those  whioh  are  esoteric  in  character,  that  if  their  custodians 
too  long  and  too  stubbornly  resist  reform,  the  change  which  ultimately  comes  is 
so  cataclysmic  that  the  good  often  disappears  with  the  evil.  The  greatest  danger 
to  the  American  patent  system  today  is  the  blindness  of  its  friends  and  not  the 
malevolence  of  its  critics. 
Sincerely  yours, 

Thxjrman  Arnold, 
Assistant  Attorney  General. 


BOSTON  PUBUCUBJABV 


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