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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
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III
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a
OT
m
a,
a
ja
OT
a
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C3
m
a
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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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