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BOSTON PUBLIC LIBRARY 

,1111111111 

3 9999 06317 396 5 



OFFICE OF NATIONAL RECOVERY ADMINISTRATION 
DIVISION OF REVIEW 



h ^\ 



PRODUCTION AND CAPACITY CONTROL IN THE ICE INDUSTRY 

UNDER THE NRA 



By 
Horace B. Drury 



TRADE PRACTICE STUDIES SECTION 
March, 1936 



OFPICE OF IJATIOICAL KSCOYERY ADLiI III STRATI ON 
DIVISION OF EEVIEi7 



PRODUCTION AND CAPACITY COl'TROL IN TH3 ICE II\IDUSTRY 

UNDER THE NRA 

By 

Horace B. Drury 



TRADE PRACTICE STUDIES SECTION 
March, 1936 



9827 



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FOREV/OED 

This study of Production and Capacity Control in the Ice Industry 
tinder the "NEA" was prepr.red by Horace 3. Drury of the Trade Practice 
Studies Section, Mr, Corv/in D. Edv/ards in charf^e. Acknowledgment is 
made of effective cooperation rendered 'oy i.liss Mathilda B. King, of the 
Food Division ITBA, in the selection of -oertinent matter from the mass 
of documents in the files, and by I.iiss Louise E. S. Sisenlohr, Trade 
Practice Studies Section, in the examination and compilation of jases. 

Although the study deals vith only one industry, it is of wider 
significance as a case study of efforts to introduce capacity control. 
The ice industry was selected for special stud;^'- for three reasons. First, 
the attempt at capacity control under WRk may be considered as a sequel 
to an earli^'r effort under Oklahoma law (found unconstitutional in the 
celebrated .,?,se of New State Ice Company,'' v, Liebraann) ; and may well be the 
forerunner of future attempts in this and other industries, especially those 
T/hich, like ice, almost fall in the categor;;'' of public utilities. Sc&ond, 
the ice industry, because of the readical decrease in demand due to elec- 
tric refrigeration, illustrates the issues involved in proposals to limit 
increase in capacity when demand is declining. Tliird, the code ejiperience 
of this industry was unusually rich. More than under most codes, the ice 
industry was given an opportunity to try "self government". More than in 
most cases this led to sharp clashed of view as to objectives and methods, 
both without and within NEA. 

Opinions escpressed in the report are those of the author and not offi- 
cial utterances. 

At the back of this report will be found a brief statement of the 
studies undertaken by the Division of Review, 



L, C. Marshall 
Director, Division of Review 



March 22, 1936 



9827 -t- 



PEOEUCTIOK Aim CjVPACITY CONTROL III TIIE ICE INDUSTRY 
UFDEH THE NEA CODE 



Ta"ble of Contents 

Page 

SUMvIARY ix 

CHAPTER I. E ACTORS TTHICH MAKE TIIE CODE EXPERIENCE WITH ICE 

OF EXCEPT IONAL INTEREST 1 

I . THE ICE INDUSTRY AS A NEAR PUBLIC UTILITY 1 

II . THE ICE INDUSTRY AS A SICK INDUSTRY 4 

III. INDUSTRIAL PLANITING, SELF GOVERNlvIENT BY INDUSTRY, 

Al'ID CONTROL OF INDUSTRY BY GOVSRNlvSNT 9 

IV. THE BOUNDARY BETWEEN FEDERAL AID STATE OR LOCAL CONTROL 11 

V, IMPORTANCE OF THE ICE IIDUSTRY ITSELF 11 

VI. CHARACTER OF THE CONTROLS ILLUSTRATED BY TIE ICE CODE 13 

CHAPTER II. PRE--CODE FAILURE OF COMPETITION AS A REGULATING 

AND STIMULATING FORCE 15 

I. REASONS FOR TENDENCY TOT.^ARDS CUT-THECAT COMPETITION 15 

A. Limitation of Market 15 

B. Fixed Costs 16 

C. Standardization of Product 20 

D. Longevity of Plants 21 

II . PRE-CO:.S TECHNIQUE FOR SUPPRESSING COlffETITION 21 

A. Price ¥ars 21 

B. Plant Purchase 22 

C . Purchase of All or Part of Output 26 

D. Guerilla Tactics 27 

E. Forms of Agref^mcnt 31 

III. EXTENT AND DEGREE OF MONOPOLY IN THE ICE INDUSTRY 

PRIOR TO THE CODE 35 

A. Evidence Based on Price Structure 35 

B. Court Records, and Attitude of Anti-Trust Law 

Enforcing Agencies 36 

C. Spread Betyreen Cost and Price 38 

1. "Normal" Ice Prices 39 

2. Cost of Manufacturing Ice 40 

a. Analysis of estimates made Tsy machinery 

manufacturers 41 

t.. Analysis of costs as submitted "by 

ice manufacturers 43 

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Table of Contents 

III. EXTENT MD DEGREE OF MONOPOLY IN THE ICE INDUSTRY 
PRIOR TO. THE CODE (Continued) 

Page 

3. Comparison of Cost and Prices 45 

D. Ice Company Profits 45 

1. Per Cent of Gross Sales Retained as Profit 46 

2. Return on Investment 47 

IV. IiA.NU?AC TURING EFEICIENCY, SERVICE TO CUSTODIERS, AND 

BUSINESS ENTERPRISE IN THE ICE INDUSTRY BEFORE THE CODE 49 

A. Conditions in the Oklahoma Ice Industry'' Prior 
to 1925 49 

B. Recent Conditions in the South and South~West 50 

C. Service and Business Enterprise in the Ice Industry 
in the Country at Large 52 

D. Technical Efficiency of Ice Plants 53 

V. OUTLETS FOR SUPPRESSED COI\tPETITIVE INSTINCTS 54 

CHAPTER III. PRE~CODE EFFORTS AT CONTROL 56 

I . WAR-TIME CONTROL 56 

II. STATE CONTROL OVER THE ICE INDUSTRY IN OKLAHOM AND 

ELSEliraEHE 57 

III. TEE NATIONAL ASSOCIATION OF ICE INDUSTRIES AND OTHER 

INDUSTRY ORGANIZATIONS 65 

CHAPTER IV. ICE IilAITOFACTURING CAPACITY AS AN INDUSTRY PROBLEM .... 67 

I. THE LONG RUN TREND IN LOAD FACTOR PRIOR TO 1932 67 

II. TECHNICAL Ai€) COMl.IERCLAL FACTORS INFLUENCING LOAD FACTOR .... 69 

A. Errors in Rating Daily Capacity 70 

B. Technical Impossihility of Operating 365 Days 

at Maximum Daily Capacity 70 

C . The Seasonal Factor 71 

D. Obsolete Plants 72 

E. Commercial Factors i'itigating Against Complete 

Use of Capacity 73 

F. Difficiilties in Transferring Capacity from a 
Manufacturer T7h& Cannot Use it to One Who Can 74 

G. P.elocation of Industry as a Cause of Non-Use 

of Ca,pacity 75 

III. THE ABSENCE, GENERALLY SPEAKING, OF A PROBLEM OF EXCESS 

CAPACITY PRIOR TO 1932 76 

A. Examination of Statements Respecting Excess Capacity ,.. 76 

B. Conclusions Regarding the Catiacity Situation 

Before 1932 78 

3B27 _iii„ 



CHAPTER IV. IC5 MAMJ?ACTUEIJICr CAPACITY AS AIT IlIDUSTRY PROBLEM (Cont'd) 

Page 
IV. THE PROBLEM OF EXCESS CAPACITY BEGIMING IN 1932 79 

CHAPTER V. THE ICE CODE 85 

I . PROMOTION AND TffilTING OF THE CODE 85 

II . MAIN PRODUCTION CONTROL PROVISION 86 

III . MTI-DFivDPING- AND NORMAL I.IARICST AREAS 90 

IV. PRODUCTION CONTROL PROVISIONS PROPOSED BUT HOT IN- 
CORPORATED IN THE CODE 94 

V. EMERGENCY PRICES 95 

VI . POSTING Al^'D FILING OF PRICES 98 

VII. SALES JELOW COST 99 

VIII . ENTICII-IENT OF KiPLOYEES 99 

IX. LABOR PROVISIONS 100 

CHAPTER VI. ADMINISTRATION OF ARTICLE XI - CONTROL OF 

PRODUCTION 102 

I . REPRESENTATIVE CHARACTER OF ICE CODE EXPERIENCE 102 

A. Other Codes Having Provisions Similar to or 

Contrasting TJith That in the Ice Code 102 

B. Significance of the Ice Code Experience for 
the Group (of Codes Having Capacity Control 

Provisions) Talcen as a ^61 e 103 

C. Reasons for the Greater Nujn'ber of Applications 

for Perraits Under the Ice Code 103 

II. IMPORTANCE, FROM AH INDUSTRY VIEWPOINT, OP PROJECTED 
INCPJEASES IN CAPACI'TY UNDER THE CODE: AND SIZE OF THE 
ADMINISTRATIVE TASK CREATED BY THE NECESSITY OF 
PASSING ON APPLICATIONS 104 

A. Cases Handled "by Local Industry Agencies "ithout 
Reference to Administration 105 

B. Grand Total of Applications Sutaitted to 

Uashington 105 

C. Duplicate Cases and Exemptions 106 

D. \ ithdrawals 107 

E. Applications for Ice Storage Only 107 

P. Net Number of Genuine Proposals to Construct 

Ice-Malcing Capacity Daring Code Period 107 

G. Comparison of Tonnage of Proposed Construction 

with Tonnage Construction Prior t o the Code 109 

-iv- 
98 27 



CHAPTES VI. AIilvIINIST5ATI0K OF iJlTICLE XI - CONTROL OP 
PRODUCT I ON (Continued) 

Page 
III . THE CODE ADMIKISTRATITS SET-UP 110 

IV. IDMIKISTRATIOU 01^ PRODUCTION (OR, liORE PROPERLY, CAPACITY) 

CONTROL BY TIIE CODE AUTHORITY DURING THE FIRST EIGHT MONTHS- 
OCTOBER, 1933 TO IvLAY, 1934 113 

A. Sone Early Appi-ovals 113 

B. Oil Eai-lj?- Denial - Eortidding John M. Miisser and 
H. C. Fischer to Erect a Plant at Springfield, 

Illinois 115 

C. Su'^gestions As to Procedure Hacle "by the Code 

Authority in Januarj^ 1934 119 

D. Suimnary of Policy During the First Si:-: or Eight Months 

With Respect to Approvals and Denials 120 

E. The First Attacks on Production (Or Ca-oacitj'-) 

Control 121 

1. Doutts Exioressed Prior to Approval of the Code .... 121 

2. The DarrovT Board 122 

3. The Huston Thompson Petition 122 

V. JOINT ADIIINISTEATION BY CODE AUTHORITY AND I\IRA 

ADivIINISTRATION, JUlCS— DECElviBER, 1934 125 

A. Shortening of Time IThich Could be Taken "by 
Code Authority and Agencies Before Reporting 
Applications to the Administration 125 

B. Introduction "ithin NRA of the Practice of 

Consultation with Advisory Boards 125 

1. Reversal of Code Authority in the Case of 

17. L. Austin of Miami , Texas 126 

2. Reversal of Code Authority in the Case of 

the Davidson Ice Company, of Portland, Oregon 131 

C. Substitution of Administrative Orders for 
Action "oy Deputy Administrator in Granting or 

Denying of Applications 134 

VI. ASSmrPTION by NRA of PRLMARY RESPONSIBILITY FOR THE 

ADMINISTPlATION of the production (or CAPACITY) CONTROL 

PROVISION OF THE CODE, TTHICK CAMS TO A HEAD IN 

JANUARY, 1935 135 

A. Emergence of the Problem of Monopoly 135 

1. Struggle for Control Between llajiufacturers 

and Dealers in New York City 135 

a. The Kings County Ice and Fuel Corporation 

and State Ice Corporation Cases 135 

b. Amalgamated Coal Corporation 

Case 138 

c. Franl: Tursellino Case 140 



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VI. ASSU1,IPTI0N BY KEA OF PRIllARY RESPONSIBILITY FOR THE 

ADMINISTRATION OF THE PRODUCTION (OR CAPACITY) CONTROL 

PROVISION OF THE CODE, UHICH CAME TO A HEAD IN 

JANUARY, 1935 .• ( Cont ' d) 

A. Emergency of the Problem of lionopoly (Continued) 

2. Coraraercial Consiuners Versus Producers 141 

a. Denial of Application of Farmers' 
Cooperative Ice Company of 

Norfolk, Virginia 144 

b. Reversal of Code Authority and 
Granting of Permit to Goetz Ice Company of 
Tolleson, Ariz. , 145 

3. Ice Manufacturers Whose Business Was 

Growing- Versus the Group , 145 

a. Shenandoah, Abattoir Sompany, 

Shenandoah, Pennsylvania 145 

"b. Grocers' Ice and Cold Storage 

Company of Louisville 145 

c. Pacific Refrigerating Company 

of Kent, Washington 146 

d. C. E. Wylie of Oklahoma City 147 

B. Unpreparedness for Handling Problems of Administra- 
tion, In the Period Preceding January, 1935 149 

C. The Drive to Get Facts 150 

D. Introduction of Field Investigations, and 
the Assumption hy the Administration of 

Direct Responsihility for Conduct of Hearings 151 

1. Procedure for Handling Control of Production 
Cases Issued "by the Administration on 
January 17, 1935 151 

E. Results of Conduct of Field Investigations 

and Hearinfjs "by Administration 153 

VII. POLICIES RESPECTING THE ISSUANCE OR DENIAL OF CERTIFICATES, 
AND THE CONTINUANCE IN FORCE OF ARTICLE XI, FROM THE 
LATTER PART OF 1934 TO £HS CLOSE OF THE CODE PERIOD 156 

A. Pressure Brought to Bear Against Article XI from 

Outside NRA 156 

1. Renewed Attacks hy Manufacturers of Ice-Making 
Machinerj'' 156 

2. Newspaper Attacks hy Mark Sullivan 161 

3. Attacks at Hearings before Senate Finance Committee 

and Defence by Industry 161 

B. Opposition to Restrictions on New Capacity within NRA... 164 

1, Consumers' Advisory Board 164 

2. Division of Research and Planning 170 

C. Attitude of Other Divisions and. Boards of NRA 172 

1. Legal Division 172 

2. Labor Advisory Board 172 

3. Industrial Advisory Board 174 

4. Industrial Appeals Board 175 

5. Advisory Council 176 

D. Over-All NRA Policy Touching Article XI in 1935 177 



9827 



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V 



Page 
VIII. Attitude Towards Capacity Control at the Close of the Code 

Period 182 

CHAPTER VII. THE FORT TO ETH Ai m OTHSR LOCAL tIAEEZETIInTG AaaEEMEUTS . . 189 

I . THE LOS AIWELES ICE EXCHAMGE 189 

II . THE PORT TTORTH PLAN 192 

A. Relation of Port Worth Plan to the Ice Code, to 
Actual and Proposed Adainistration Policies, to 
Activities of Code Authority, and to Pre- and Post-Code 
Plans of Industry 192 

B. General Organization of Plan 195 

C. Bearing of Plan on Competition 198 

D. Adaptation to Sx)ecial Circwistances of 

Individual Plants 200 

E. Findings "by Bohannan after Six Months of Operation 202 

P. Findings "by Moore after ahout a Year and a Half of 

Operation 202 

APPEEDIX A USE IN 1CE¥ YORIC CITY OF MINILfJlA PRICES AS A DEVICE 

FOR CONTROLLING THE CHANIIELS OF ICE DISTRIBUTION 207 



9827 "^^^' 



SUiaAH". 

The Ice Code --as a'oorovGo. in tii-t e.-^.-'lie" D^rt of the life of KRA 
^hen the TDr.c'^p.'iization and lolicies of tr.e Admini'or.rntion '''ere not '^s 
fully develo'oed as later and indnstries were riole to secure assent to 
codes which were very Inr.^el ^ of th -ir own '-T"itiru^. The code contained 
a numljer of -orovisions which could indirectly inflaence the -oroduction 
which given manufacturers could tiirn out, the nornal ;aarket area and 
anti-duroing "orovision, the emer^'ency t)rice and selling below cost loro- 
visions, and oossibly the ^ostin.y 0+" o^ices •T^ovision. In this "brief 
sumraar^'', hu^^'ever, attention will be given onl"' to that central pi'ovision 
in the ice code w.uch went oy tne n-iie of "Control of Prodxiction. " 
This title, howev.^v^ V7as sone^-'hat o" a •i.isnoie'^, a,s the provision did 
not attsiTot control of -oroouction, in the ?euse that under some codes i-'ro- 
duction auotas we""e set u'6 or -^.achi-ie nou"s limited. Tnat n^ticle XI 
of the code really orovided 't^s control of nev' c^'oacit"-' . 

Const'^uction of ne-- crioacit'' h- a not constituted a serious -Droblera 
in the ice industry "orior to 1932. ITro-n early in the T'-entieth Centruy, 
manu.'i'actured ice had ueen dis'olacin - na*:ur-l ice, and ice manufacturing 
capacity w'.s not on the '"hole oein^ fevelo-^ed more raoidly thpji the 
growth of ice consUia~~ition. The ind^str^' ws ;robably '/ell above the 
average in "orofits. 

Altuough ca'oacitv 'va3 not on tae whole ercessive before 1932, the 
ice industry '"as f i L all times sittiif' on sonething of a, volcano in the 
way of ' "orice 'oroblen. The de i^rid fo-^ ice is h\?>il-f seasona.l. Even 
when no more canacit'"' e"ists than 'n needed to meet raai'umiun demand, there 
isbound to be nuch 'nore caix^-city thr i oe used during certain "oarts 
of the year, unless stora.'^e of ice is undertaken to o wa.steful and un- 
dersirable extent. Because of a hiv^-h ratio of overhead costs to total 
costs, and jecause ice can '.ot oe shi T-'iDed to any great distance, there 
is a latent tendency for ice mainufncturers to sha.ve 'orices in an effort 
to rotmd out their O'-n -iroduction at the ecoense of their neighoors. 
But a ■orice reduction strrted by one manufacturer will be met by others. 
Further ^Tice reductions ensue, and in short order the industry may oe 
TDlunged into a 'orice '-rar. 

The losses which are claimed to folio- uirestrictod co-roetition in 
ice manufp.cturing are so great that it is nuite understanda.ble that there 
should b''' raa.rked tendencies R-^-^^r from -orice comet ition - erce-ot during 
the "oeriods of rrice var^'s and emergencies. 

This ingrown tendency tc-'ards nono-:^olisitc a. rceraent in the ice 
industry catised at least one T)re-code atteuot ov those interested in 
better ice oc^rvice at fair -orices to set uo "oublic control over the ice 
industry, i.':.ich involved aiong other things control over new ca"DPvCity. 
A revie'.T of tae exiDerience of Oklahoma along this line is contained in 
this re'oort. 

The interest of the ice ind^istry in ca-oacity control '---'s caused 
chiefly b''' the dr^-stic dro") in the demand for ice which first clearlv 
showed itself in 1932. This decline "ras not in any grea^t measure a 
de-nressic^ decline but \ira.s due mainly to the introduction of electric 
refrigeration. 
9827 -vii- 



By 1933 th'=^ ice industry tmquestiona'bly had a large amount of excess 
capacity, ev^n though it "be recognized that some of tho xilants made 
idle could "be scrapped without much real vraste "because of age and 
otsolescence. 

When the demand for ice fell off, the construction of ne^ plants 
practically cea.sed, except that a considerahle numher of small plants 
were l-iuilt in places which had not hefor^ had a local source of ice 
sup-oly, and there was some continuation of the Tjrocess of displacing 
natural ice with manufactured ice canacity. The immediate problem of 
the industry related, therefore, not to new plant construction, "but to 
the maintenance of ice prices ahove ice costs under conditions in which 
existing ice capacity was in general operating much below capacity. 
Although prior to 1932 the small number of ice manufacturers in any one 
commtmity had usually been relatively successful in adhering to agreed 
prices, this became increasingly difficult ""h^n ice manufacturers 
generally had considerable capa.city '^hich they could not use at any 
time of the year. 

As ice consumption fell off, increa,sed stress wa,s laid by manu- 
facturers on the necessity of working in harmony, and in order to put 
this harmony on a tangible basis, plans w^re d^^veloped in some pla.ces 
by which part of the unneeded capacity was retired at the common expense 
of all. Obviously, however, a program of plant scrapping, or even a 
policy by which ea,ch manufacturer ^ould refrain from trying to steal 
from others the business which '--ould mean full operation, could not be 
succesrfal if ne™ -people k-^pt coming into the ice business. And what 
was to k-jpp them from coming in, assuming, as the manufacturers hoped, 
that prices could be 1-ept above costs? 

It was probably the realization of the seriousness of this 
dilemma which lay ahead, more than any plant construction "'hich had as 
yet occurred, which made the ice industry determined that, whatever else 
the code contained or did not contain, it must protect the inriustry 
against n^'w construction. So they asked for and obtained in the code 
a provision to the effect that increase of capacity could not be made 
without the obtaining of a certificate of public necessity and con- 
venience whose issuance had been approved by the Administra.tor, 

During the first eight months or so of code operation, the Admin- 
istration, in the granting or denying of requ'^sts for certificates, 
almost always approved the recommendations made by the Code Authority, 
which in turn were almost al'^ays approvals of actions taken by forty- 
four local Committees of Arbitration and Appeal, 

'These committees were ma.de rp exclusively of members of the ice 
industry. Unless some one of their own niimber wanted to make some 
addition to plant capacity tha.t would not affect the ma.rket of other 
members, these committees, practically without exception, would vote to 
recommend denial. Relatively little attention was paid to public con- 
venience if there was any existing maniif acturer who thought that he could 
supply ice in a given place. Scant consideration was given as to 
whether existing manufacturers were charging more than they should - even 
in cases where prices were twice as much as those usually charged. 



98P7 



-IX- 



Attacks on th«^. r'^^striction of n'^^ "building in tlift ice industry 
"began in the Spring of 1934. The Administration, in the summer of 1934, 
began to review mor» carefullj'' the recommendations of the code 
authority, and a considerable number of recommendations of denial about 
vrhich there was doubt were held in abeyance. In the fall of 1934, the 
staff of the Administration workinf^ on this urovision of the code was 
considerably increased, and in January a cha,nge in procedure was put 
into effect by which the Administration's own representatives made 
investigations in the field and conducted hearings, instead of these 
being conducted by members of the industry. 

Beginning in January, 1935, many of the recommendations of the 
code authority for denial which had been held in abeyance were reversed. 
For sometime prior to the close of the code period, the Administration 
had, pending a clarification of nolicy, withheld all approvals of 
denials. This was, of course, a temporary program. 

There was great difference of opinion '-'ithin l^fEA as to the 
wisdom of the capacity limitation. The DeiDuty Adjninistrator of the code 
and his assistants believed that, granted sufficient funds for proper 
a,dministration, the provision would be of net gain. Probably a 
majority of other officials, cognizant of the situation, felt that this 
feature should be removed from the code. Ice manufacturers were 
critical, during the closing months, of the cautious attitude in 
enforcing the -nrovision and attributed growing non^-Gomnoliance largely 
to this attitude. However they did not leaver in their advocacy of 
restriction of new capa,city. 



9827 ''^** ■ 



-1- 

. . CHAPTER I 

FACTORS ;7HICE MAKE THE CODE EXPERIENCE 
■ _. t;itH ice of EXCEPTIONAL IIITSREST :' 

I . THE ICE nroUSTRY AS A I^TEAR PTJBLIC UTILITY 

In the selection of subjects for special consideration in this re- 
view -of NRA experience, preference o'bvioij.sl7 should "be given to those 
codes which illustrate prohleras and "orocedures ?/hich are most likely to 
constitute live issues in the future. There is one field in which there 
can te no question hut that there must, in, the future as in the past, "be 
some regula.tion of service and capacity and that is the field of public 
utilities. In the case of full-fledged public utilities; 'oublic control, 
where' it does not take the form of government operation is ordinarily 
adi:iinistea.'ed by some special regulatory body whose policies and decisions 
are imposed on the industry, so that little room is left for regulation 
by code after the general MA pattern. But bet^^een full-fledged public 
utilities and those industries which are invested rdth only an average 
amount of public interest, there is a broad aret, with respect to which 
there may be doubt as to the need for complete public control, but where 
there is a sufficient admixture of public utility characteristics to 
raise a question as to vhether the industry might appropriately be per- 
mitted, by codes entered into voluntarily — and presumably under the 
supervision of some public authority — to exercise some measure of pro- 
duction or capacity control. 

What are those characteristics which have caused some industries to 
be placed apart in the category of public utilities and have raised a 
question as to whether other industries might not also be considered as 
falling at least in part in this class? Clearly it is not merely that 
the product of an industry is essential to life or happiness. Foods are 
incomparably more important than any one "utility." 

As a general rule, industries tend to enter the public utility class 
whenever it is foiind that nothing approaching the ordinary play of com- 
petitive forces can be relied upon as a means of regiilating production, 
price and service. Recognition of public utility status will not, of 
course, come at once. The first step in the process is ordinarily cut- 
throat competition — competition not so mxich for the purpose of gain- 
ing a larger share of the business through lower prices, as for the pur- 
pose of eliminating competition. The second step is the establishment 
of a monopoly of some kind. ITeither cut-throat competition nor monopoly 
need to be a permanent condition. There is likely to be an alternation, 
first of the one condition and then the other. It is the recognition of 
the tendency toward monopoly which ordinarily leads either to the taking 
over of a business by the government, to its regulation on a utility 
basis, or to some modification of the rules of competition, as under 
codes, which may be designed to break up at some point the circle of de- 
structive competition and monopoly. . 

This le-ads us to one further question. What is it about some in- 
dustries which destroys the efficacjr of competition as a smoothly run- 
ning, ever present factor regulating price and service? Broadly speaking, 



9827 



"2- 

it might te said that there are indeed no industries T'here competition 
operates wholly smoothly and with full ef:^'icacy. But there do exist im- 
portant differences in de^^ree and, it uay he said that the chief cause 
of the hreakdovn of competitive forces to ivhich we are here referring 
lies in the juxtaposition in an industry of tno conditions — fixed costs 
and fixed markets. 

Pixity of markets ordinarily rests on a geographic hasis. The ser- 
vice of a railway is limited to tne traffic which goes or can he made 
to go hetween certain-points. It cannot enter new fields as freely as 
can an ocean vessel. Even where it is xiossihle to move the phj'^sical 
equipment, it sometimes happens that the good-will and patronage, per- . 
taining, for instance, to a steamship service or hus route, having as 
it does a distinctly geographical hasis — and the difficulty of enter- 
ing fields previously occiipied hy others — may give a large measure of 
fixity and limitation to the market in which any individual firm can 
compete. Other industries '"^here markets are fixed include retail stores, 
theatres and ice plants. From these cases of acute limitation, the de- 
gree of fixity of markets tapers off — all markets except those which 
are world wide, or where the producers are individually very small, liav- 
ing in them some element of. rigidity. . 

Limitation of market would cause no complication if there was not 
also fixity of costs ■ — especially if we include in costs not merely 
capital investment, hut the investment which a v'orker may have sunk in 
his skill, or in the home which he owns, or in the environment of which 
he feels he is a part. Passing over the less tangible sorts of invest- 
ment, fixed costs appear as disruisters of the competitive system chiefly 
in cases where, in the presence of more or less i^igidily fixed markets, 
the investment in plant, plus the overhead in lahor which cannot he es- 
caped if the plant is to he keot in operation, is large as compared with 
the out-of-pocket cost of producing additional output or rendering ad- 
ditional service. This condition is particularly acute in cases where 
there are fluctuations in demand, cyclical (as in iron and steel), sea- 
sonal (as in ice), or perhaps through the day (as in street railways or 
motion pictures) . In all of these cases, even if there has heen no ov- 
er-huilding of ca,pacity there is certain to he at times a large amotmt 
of unused .capacity. The pressure, whenever the volume of business is 
insufficient, is, therefore, strong to try to cut into the business of 
one's competitors by cutting prices. This leads to retaliation, and 
then fresh attacks, which may go faa- — resulting in bankruptcy in im- 
portant sections of the industry, and to great confusion, from an in- 
dustry standpoint. 

If matters stopped at this point, the public might regard the pro- 
blems of the industrjr as of no great public significance. But in most 
of the industries where this condition is acute the members of the in- 
dustry, in time (or at least at times) cone to recognize tha.t the con- 
dition presents a comiuon oeril to all in the industry, and in one way 
or another they manage to combine. Thiis monopoly is established, and 
in place of these industries being supercompetitive , they become the 
reverse. The public is therefore likely to be faced with the practical 
alternative of either tolerating some sort of restriction of competition 
in which the public itself has some hand; or seeing some restriction of 

9827 



'^~ 



CO rioetitiori estfbliched ty the industry itself without public participa- 
tion. 

The American peo-ole have been slov; to see the inevitaoleness of 
this alternative. For more than fifty years they have striven to en- 
force laws agrinst competition. These hpve had an important effect on 
the structure of business; but they certainly have not , in certain imr- 
portant fields, brought about the kind of competition which the framers 
of the anti-trust laws intended. In innumerable industries it is ap- 
parent th.?t the desire of firms to protect their investments has been 
sufficient to overcome the incer^tive for their owners and managers 
to act independently, "dth the result tnat prices have in a large 
measure been fixed, and -oroduction and capacity correspondingly con- 
trolled. In certrin other ii dustries failure to achieve this goal has 
led to abnormally sev* re competition, to business loss, and, it is claimed, 
to low wages- and unbearable conditions. Usurlly more because of the 
last set of conditions than the first, it has from tiuie to time been 
TDroiDOsed that some one industry, such as tne coal industry, the lumber 
industry, the petroleum industry, or t:.e ice industry, should be regard- 
ed as a Dublic uti"" itv, or at least quasi-public utility, and receive a 
measure of tiiat- protection and regulation which has in the past been con- 
fined to the recognized public utility field. 

These proposals made little headway until the coming of the de- 
pression. Then, however, under KRA, it -as proposed to go immeasurablv 
further, and brirg practically all industries within the field of regula- 
tion and protection — thougi. according to. a new pattern. The Supreme 
Court decision in the Schechter case rudely, shattered tnis sweeping pro- 
gram, at least for the present; but there still remains the issue as to 
whether certain incustries, not heretofore regrrdec as utilities, should 
not be put into a special status; and also as to whether the technique 
for controlling these industries should be not more closely allied to 
tne controls undertaken under !\^jiA.-than to the older type as exemplified 
by the Interstate Commerce Commission and the various state utility 
regulating bodies. 

The question as to how far NRA proceoure may wisely be ex- 
tended to industries having more or less of a public utility character 
is, therefore, an exceed inglv live one at the present time, and will no 
doubt continue to be, no matter w:iat i-iay be the nature 'of pending Supreme 
Court decisions. If regulation becaase of the public utility character 
of certain industries, but more or less in line with HEA procedure, 
should be extended to a few industries, there will inevitably rise a 
question as to whether similar procedure might not be extended to a 
much wider industrial area, both for the purpose of protecting the weak, 
and for that of restraining the strong — more or less displacing in 
these special, but perhaps ultimately rather broad fields, the.anti- 
trust law technicue. 

The experience under the ice code is useful for the purpose of 
throwing light on the practicability and wisdom of moving in this gen- • 
eral direction: first, because the ice industry comes very close to 
being a trae public utility: and second because, as we shall see, the 
effort to establish control according to an NRA. pattern was in the case 

9827 



-4- 



of this industry exceedingly intense and prolonged and varied. 

II. THE ICE INDUSTRY AS A SICK IKDUSTiiY 

Among those who advocate, or concede, the possible justification 
of production or capacity controls, the strongest defense of such con- 
trols is likely to rest on the belief that in this industry or that, 
changed conditions (or perhaps the realization that the old conditions 
themselves led to unfortunate results) Doint to the necessity of radical 
readjustments. An industry finds that its market has in large measure 
disappeared. Some plant capacity, some labor, ought to be withdrawn 
from the industry; or at least the influx of new caioacity and new 
labor should be discouraired. There is serious question. as to whether 
the unaided operation of ecororaic forces will affect these necessary 
readjustments "dthout serious delay, hardship to individuals, and waste 
of physical and human resources. Therefore, it is ur^^::ed that the. Indus-- 
try, or society at large, should be permitte'" to plan for the readjust- 
ment of such an industry in some more satisiactory way — or, better yet, 
that preventive measures should be tak:en at so early a strge that the 
development of the original situation wnich would reouire readjustment 
could be avoided or J:ept within bounds. 

■The ice industry affords a vivid illustration of how, in one in- 
dustry, conditions calling for major adjustment developed; of the sort 
of measures which the industry proposed, and which the government took, 
to meet the isroblem; and of trie results which followed before, during 
and after the code, iihat may ar-oropriately be termed the sickness of 
the ice industr^r vrps -orecipitated by the widespread and rapid develop- 
ment of electric .refrigeration. (*) As an- Import nnt contributing factor, it 
should also be noted, ho'^'ever, that members of the industry failed to make 
adaptations which would have made the competition of this new means of 
refrigeration less serious. 

From the accomrianying Table it will be observed tiia.t through- 
out the entire decade of the ly20s and, indeed, through 1931, the ice 
industry enjoyed a fairly steady and rapid growth. Only in the year 
1926, following a very great increase in 1925, was there a slight de- 
cline in tons of ice sold. It will be noted that in 1931 sales were 
more than 80 percent greater than they had been in 1919, only twelve 
years before. Between 1931 and 1932, hovevei , sales fell off 24 per- 
cent; and between 1932 and 1935 an addtiional 11 percent — a total _ ; 
drop from tne 1931 pealc in tv;o years of 32 percent. 

Year Tons of Ice Sold (^) 

1S19 31,616 -,,000 

1920 ' 32,641,000 

1921 35,317,000 

1922 36,429,000 

(*)' A lesser laimber of gas regrigerators tended to -oroduce the same re-r 
suits. Kerosene refrigerators require more attention and are less 
likely to be introduced where ice is. available. 

(**i) Source: Statistics of the National Association of Ice Industries, 
as offered by the Code Authority for the Ice Industry in the Code 
Authority's reply to . the report of Deputy Administrator Robert K. 
Straus on Administration of the Ice Code, page 27. 
9827 



"■^err Tons of Ico Sold 

1923 3'J,916,000 

1924 4^1,292,000 

1925 46,864,000 
■••' 1925 45,927,000 

1927 47,543,000 

1928 50,994,000 

1929 53,544,000 

1930 56,239,000 

1931 57,365,000 

1932 43,625,000 

1933 39,005,000. 

Inasmach as these t'vo years of declining sales '"ere also years 
of deep depression, it is necessary to incuire how far the depression 
mav have au'Cinented the decline in ice sales due -to electric refrigera- 
tion. VThile acknowledging that the decline in sales "as in iDart due 
to' the d-pression it is the opinion of the ice industry — and appar- 
rently with ample Justification — that the depression was only a minor 
factor. ' Early -in the depression the ice industry '-'as congratulating 
itself that it vas practically depression immune. In the January 1930 
number of Ice and .refrigeration, C. C. Small, president of the American 
Ice Company wps cuoted as saying: (*) 

"The leading ice companies in the present year have handled 
a greater volume of business and at a greater total profit than 
in any previous period. But pside from predictions and specula- 
tions, we know that thfre is always a large and re.-^sonably profit- 
able business ahead of us in panic or prosperity .1 wonder if 

any of vou can recall in these panic years (1921, 1917, 1914, 1907 
1903 and 1896) any disturte'nce to the ice and refrigeration indus- 
try? I cannot. As well as I can remember, these induftries moved 
ahead in each of the panic years about the same asusual." 

A year later, in the January 1931 issue of Ice and Refrigeration, A. 
CraT"ford Craig, Secretrry of the Eastern Ice Aosociatior, was quoted as 
saying: 

"In lookins; back over 1.930, we whose fortunes are committed to 
the ice industry have every reason to congratulate ourselves 
that we are engaged in busineps which is very slightly affected 
by bad times. Wiile business as a wnole declined, our industry 
not only held' up, but made gains." 

Still later, in 1932, when the depression was approaching its lowest point, 



( *) The quotations which follow nave been taken from brief filed by 
Juston Thompson with the National f.ecovery Administration at hear- 
ing April 6, 1934 on pis petition for elimination of first sentence of 
Article XI. In Deputy Administrator's files, in folder labeled 
"Huston TlioiT-Pson Petition for Amendment". 



9827 



-6- 



an editorial in Ice and Refrigeration stated! 

"It is remarkabl','" refreshing in these times of business 
depression and industry timidity to knOY? that at leest one 
of the industries of tl\e country knows no story of distress, 
no strain of blues. ... .'.The ice industry has exDerienced a year 

of excentional volume and satisfactory profits what 

an opportunity all this lays in the laiD of the ice industry.' 
There is literally no limit ^ to its possible increase and de- 
mand for this riroductc"' 



Having made wo their minds that they had nothing to' fear from 
the depression, the ice industry laid decreasing sales in 1932 and 1933 
almost wholly to the electric' reirigerator. The sale of electric re- 
frigerators for domestic use h-^d been insignificant prior to 1920 and 
uptothe end of 1925 only about 150,000 m all had been sold. % 1926, 
ho^'ever, electric refrigerators had been greatly improved as to their re- 
liability, prices hac been reduced, and they begaii to be advertised On 
a large scale. In 1926, ^10,300 are s' id to have been sold. Statis- 
tics on the sale oi electric refrigerators are not com-nlete. But in 
the closing years of the 1920s they rapidly won acceptance ; and when the 
depression came, instead of falling off in volume their sales in- 
creased. The code Authority for the Ice Industry offered incomplete 
statistics for the sale of electrica.' household units during four 
years of depression, as follows: (*) 

Year Sales, of electric household units 

1930 850,000 • > ■ 

1931 965,000 ■ ■ 

1932 840,000 

1933 . . • ■ ■ 1,025,000 

Later, a mimeographed release of tue Statistical Bureau of the National 
Electrical Manufacturers Association dated February 4, 1935, estim- 
ated the sales of domestic electric refrigerator units in 1934 at 
1,372,526. Sales in 1928 were estimated at 560,000. (**) 

At tiie hearing referred to a jove, the Code Authority for the 
Ice industry submitted the following figures for shipments of ice 
refrigerators by members of the National E^^frigerator ilanufacturers 
Association, i^ho were believed to have manufactured about 85;!; of all 
ice refrigerators. (*next page) 



{'*T> Statistics suumitted by Leslie C. Smitn for the Code Authority 
of the Ice Industry in briel suDiaittedto the T'ational Recovery 
Administration at the hearing of April 6, 1934, referred to in 
■ last footnote. The figures b- sed on report submitted to the 
National Electrical ilanufacturers Association, were originally 
publisned in the Electric iieiri 'deration Ne'"s ot Detroit. They 
cover a great majority, but not all sales. 
According to Code History, p, 7.. 



( **j 



9827 



Yerr er6in;j Ice Usin^i Hefrigerators Manufactured by 

July 31 Members of the l^'ational rLefrigerator 
■ Manufacturers Association, about 85fj of total 

1923' 9i7,418 

1924 1,06'''',940 

1925 1,025,947 

1926 1,075,376 

1927 929,625 

1928 . 877,560 

1929 576,021 

1930 461,505 

1931 , 282,420 

1932 . 213,033 
1935 243,617 

It 'TS estimated by the code authority (in this s-^me brief") that, 
allo'.''ing for replact-ments, etc., there •-'ere, in early 1934, not less 
tnan 4,000,000 electric refrigerators in use. Assuming that these re- 
frigerators on the average disDlaced ice amounting to 3-'^- tons annually, 
the Code Authority arrived at 14,000,000 as the total tonnage of ice 
sales lost because of electric refrigeration. By conparison ^ith the 
figures on an earlier pa^^'e it '•'ill be seen that 14,000', 000 tons mould 
account for most though not all of the dron in ice sales between 1931 and 
1933. 

That the 1951-1933 drop in ice sales was due in as large a mea- 
sure as tne above figures suggest to tne irtroduction of electric re- 
frigeration aay be Questioned, ho-Tever, because tne sale of electric 
refrigerators occurred not in these t'-o years onl* (or in these two 
years plus 1931). They nad trken place in aliiiost ;s large volume in 
1930; nor had sales prior to 1930 been negligible. Granting that, 
had electric refrigerators never been developed, the sale of ice in 
1933 mifht have been sufficientlv increased so that the potential (but 
not actually realized) sales in 1933 • oulc" npve acproacned the actual 
sales of 1931, it would still be. true that the potential sales of 1931 
(assuming there were no electric refrigerators) would have been larger 
than the actual sales of 1931. , In other i-ords, though electric refri- 
gerators -'ere progressively affecting the general level of ice sales, 
there would in any case have been quite a drop between 1931 and 1933. 
Ar^oarently, therefore, the deepening of the depression, and i^erhatjs 
other factors i"ere important elements su-oplementing the introduction of 
electric refrigeration. 

It should be noteo that ice sales are affected by the weather; 
and that the sale of manufactured ice is in certain sections influenced by 
the scarcity or abundance of natural ice. No clear anal'^/'sis has been 
made of these factors. 

In-estimating the effect on the ice industry of the sale of el- 
ectric refrigerators, it inu.st also be considered that some of these 
buying electric refrigerators ard using them the year round TOuld not 

ti Brief of Leslie C. Smith 

9827 



-8- 



hpve used refrigtrption for as imich of the year (and some would not 
have used it at all") had it been necessary to buy ice. Also, the 
popularization of refrigerators which was affected by the electric 
refrigerator advertising -c-aused many people who did not have electric 
refrigerators to increase their purchase of ice. It is claimed that 
tne effect of this advertising was of marked advantage to the ice in- 
dustry for a consideraDle period of time and more than offset the loss 
of business because of electric refrigerator sales. From some of the 
statements by representatives of the ice industry wiiida have been 
quoted above, it "'ill be noted that even up to the 1932, the industry 
was optimistic about its future, although electric refrigerator sales 
by this tiuie had reached a great volume. 

When allowance is made ±or all of these factors, it remains 
clear, however, that the competition of the household electric refriger- 
ator prerented in 1933 and 1934, gind does today, a grrve threat to 
the volume of business which can be done by the ice industry. The 
tremendous falling off in the sales of ice refrigerators and the re- 
markable continuing sales of electric refrigerators, as indicated by 
the statistics, presented aoove, -ould alone be sufficient to demon- 
strate the danger, f'eyond this, there yps in 1935 and 1934, every rea- 
son to believe that the cost of electric refrigerators, and of the 
electric current necessary to operate tnem, would in tine drop to yet- , 
lover levels. There seemed almost ( though not quite) no li ait to the 
destruction of the ice industry which night folic unless something 
was done. 

Another threat in the ice industry which had not as yet reached 
such lar=;e proportions, lay in the development oi dr-^r ice — solid car- 
bon dioxide — the use of which had been steadily increas-ng for cer - 
tain commercial purposes, -n-otgh estimates of sales of dry ice are as 
follows: (*) 

Year ^ Tons 

1925 ' 170 

1926 525 

1927 1,715 

1928 7,000 

1929 22,000 

1930 40,000 

1931 45,000 

1932 60,000 'v/ 

A consider'^ble proportion of all ice manufactured is used for 
icing railroad cprs and trucks — ■ probably 20 percent or more of the 
total. This market appears not to be seriously thre-tened as yet by 
mechanical refrigeration or other substitutes for manufactured ice. 

( *) Figures taken from Dewing, Arthur S. , Financial Policy of 
Corporations . Third Editi2n Hevised (New York: The Roland 
Press, 1934), n.p. 869. he original sources of Dewing' s 
figures were Ice and efrig e ration, Janyary, 1932, p. 61 
and Fortune . July, 1932. 



9827 



-9- 

This is particularly true todaj'' because of the rapid development of 
".-no'j ice," Sno'T ice is nade hy i;j;rirLdirj.g can ice (the ordinary ice 
calces) to fine dust nhich is blo^Tn through a large hose over the top 
of the contents of refrigerator cars. The "snow" settles into the 
interstices in the contents of a car and what does not filter dorni, 
remains as a thick 'blanket on top so that all parts of the car are 
brought into direct contact with the source of refrigeration — and 
yet in such a gentle way that no physical danger can be done to the 
most fragile vegetables, Hefrigsrator cars "iced" in this way main- 
tain a more even tejxperature and- do not require re-icing in transit, 
Tlius there are important savings in labor as ^^ell as greater effi- 
ciency in refrigeration. 

As opposed to the inroads on the ice market being made by rival 
means of refrigeration, a certain amount of hope is offered the- ice 
industr:/ by the rapid growth of air-conditioning. A substantial pro- 
portion of the air-conditioning on railvray passenger cars makes use 
of ice, (*) And ice is at least a competitor of mechanical means of re- 
frigeration in the ca.se of cooling systems introduced in public build- 
ings and dwellings. 

Ill, INDUSTRIAL PIAimillG, SELF GOVEPiruEtlT BY 

IIIDUSTRY, AlTD COITTROL OP IlIDUSTRY. BY GOVERffi-.IEHT 

A third reason why the history of the ice. code is significant be- 
j^ond the limits of the ice industry itself is because this industry'- was 
one of the small handfull of industries in v/hich industrial self govern- 
ment under a code was given an intensive trial. As we shall later have 
occasion to note in more detail, the ico code was in no sense something 
imposed on the industry by the government. Long- before the national Re- 
cover;;- Administration \ras prepared to lay claim to jurisdiction over an 
industry'- having as pronounced local characteristics as the ice industry, 
the ice men were clamoring for a code. The original draft of the Ice 
Code was drawn up by the National Association of Ice Industries, 'Je 
shall have occasion to note that as between the draft as originall;;- drawn 
and that finally approved there was very little change. The ice in- 
dustry was sorely disappointed with the manner in which certain fea- 
tures of the ice code ultimately cgj.ie to be administered; but for the 
code itself, the industry from first to last had nothing but intense 
praise and pride, 

Spealcing before a meeting of ice men on Iilarch 12, 1935 (**), Leslie 
C, Smith, Secretary of the National Association of Ice Industries, com- 
pared the kind of government reg-olation which was set up by the NRA ice 
code with the type of regulation which had been set up during the World 
¥a.r, as follows: 

(*) According to a survey- of railroad cars having air-conditioning sys- 
tems i-eported in Ice and Refrigeration for April, 1935, 932 were 
Mechanical; 792 utilized ice; and 197 used the steam ejector princij)le, 

(**) Ice and Refrigeration . April, 1935 



9827 



~1^- 



"We are pgam under ^overnraent supervision, but I beg you to 
mark this difference; the siipervision of 1918 tjps absolute, 
dictatoripl. There ^as none of the partnership — none of 
the permission for incustry torite its own. charter. Tnere 
was nothing of. the self-regulation '■'hich is at once the chal- 
lenge and the appeal of the National Industrial Recovery Act. 
We must not QV'_rlook the fact that the ice code wps 'written 
by ice men. ue have been told frequently that it contains • 
many unusual features.; that it carries the permissions of 
the Act to extremest limits. The provisions we: e put there 
by 'Cur oi"7n peoiDle because ^''e know ti.e ep':nesses and. mal- 
practices within the business as it has developed." 
In the June 1935 issue of Ice and Eef rigeration, a s'tate-nent issued by 
the National Association of Ice Industries, preparer, apparently, Just 
before the Schechter decision, but i-rith a premonition of what was to 
come, stf ted: 

"It must be sair that the industry has found common cause in 
the code and hps worked remarha ly well in its support. If the 
code is to beccne a thing of past experience only, the entire 
industry may well be proud of its brave fignt for what it has 

considered its direct and particular interest The entire 

code experience has brought men tog^ ther as has notning else in 
the history of the ice business. It has led to cooperative 
planning and action to a c>-gree never before discernible." 

Self govern:aent uncer the ice code meant not only a national 
code authority for the ice industry but so;ae forty-four regional bodies 
known as Local Boards of Arbitration and A'opeal, i-hichted a combined 
membership of about five hundred persons. There were also regional 
advisers and other officers. Fr-ctica ly tne entire function of this 
administrative s.ystem, .-^nd also of the code as a whole, was to carry 
out what frequentlv goes by tne name of industrial planning. The bal- 
ancing of production — ; or ratner capacity — and consumption; the 
division or territory into normal market areas; the stabilization of 
prices where these hac been disrupted; the development oi local market 
agreements; the concentration oi the industry's eneigy on combatting 
the common enemy — the electric refrigerator — through introducing ; 
improved ice refrigerators and better service. All oi' these matters 
were gone into with great energy under the code, and most, if not all of 
them, have been pursued since the code, '-ith a degree of pub'licity and 
volume of record which hrve made of this "'hole efiort a perhaps untjara'' leled 
illustration of the aims, methods, Tjroblems and effects of industry 
attempts at exercisi'^ control. 

But besides constituting a laboratory test as respects the work- 
ings of self government by industry, tne Ice Oode was urobably also 
unique among all the codes in the extent to which, in the latter months 
of NRA's life, it came to illustrate the problems of extending govern- 
ment control over industry. 5 or ir tr^e raidcle of the Ice Code experience 
NEA in large degree reV' rsed its policy, and insterd oi practically leav- 
ing decisions in the hands of the in'ustry, both investigations and deci- 
sions were made by the Admmisti ation. 



9827 



-11- 



r fci'.. can "be little question out tlipt the history of tne Ice 
Code became in the end, one oi' the stormies of all KPJl codes. Tlie ice 
coae wrs picked out lor special attrck oy labor; by the ice machinery 
manufacturers; ;y writers in the pufelic rref.£. Hearing ?fter hearing 
•rs held in uTshington. The ice code formed a local point of attack bv 
the D.irrov/- Board and in the h-^lls oi Congress. The NEA. administration 
itself was split wide open on Questions oi loolicy to oe followed. Almost 
all of tnis controversy nin^ed on control of production. And the con- 
flicting vie^'TDOints, plus the f ; ct tiia.t the i.dministration made extraordin- 
ary efforts to obtain iniormation, ano tne industry to supply it, have 
furnished a wealth of information bearing on planning ana control, whether 
by industry or oy the rovernment. 

IV. TFE BOUKIiAFT BET Lii^' F'^Dt-rJOj 
AFD STATE Qh LOCAL COHTROL 

A fourth reason for, special interest in the. ice industry is the 
fact that there w-s here raised in acute form the question as to where 
the line should be dra-n, assuming: that control is to oe atte'apted, be- 
t'"fc;en Federal rd st-te regulation. It irill be recallec tlit- srlit 
decision of the United States Supreme Court on the constitutuionality of 
the Oklahoma Ice Act "as the principal dei^ision prior to NHA on the is- 
sue as to hoF far the government coulc go in reg-alating business. This 
decision apparantly also establislied a barrier in tne way of regulation 
bv strte authority. (*") 

Hecent Supreme oourt decisions, including that on FRA, have now 
aptiarentlv re aovi d the ice industry very far from the realu where federal 
power may tie exercisea to a position '-here st.'^te or ""ocal control , to 
such an extent as may be permitted, f ti.e only control possible. 3ut 
prior to the Schechter decision, the ice industry was verv imich set upon 
securing federal sanctions for control; and some of the local govern- 
mental authorities, as m Nev '-"ork City, wei'e ea.'rer to oolster up their 
own efforts at control with -measures wnich would be administered by WF^. 

The NRA rec^jrd Wj.ll tend to show limitations on the extent to 
whicn local control would be effective. At the same time it '-'ill reveal 
limitations and disadvantages, other than the constitutional ones, in- 
herent in any attempt by the federal government to r. gulate an industry 
having as strong a local characte" m- ice. • • ' 

V. IMFOETAKCS OF THE ICE INDUSTRY ITS..LI 

Although our main reason for selecting the i^e industry for 
prior consideration among industries to oe revie^fed has been t.:e illus- 
trative character of its experience, it should be noted that the indus- 
try is in itself one. of considerable conseoue'^ce in American economic 
life. The function of the ice industry has perhaps been important be- 
'yond its actual size. Tne development of the refrigerator c-r, the 're- 
frigerated warehouse, pnd the refrigerated vessel some '/ears rgo revolu- 
tionized the fool habits oi the American people, and to soi-ie e.-.tent those 



(* ) See belov, Chapter III, Section II (pp. 57-64;, State controls 
over the Ice Industry m Oklahoma and elsewnere. 

9827 



-12- 



o^ countries to Fhich Ainericp shippec oeei pnd other perishpble foods. 
Tiie use of fresh nept throu4.';hout the year, the rider use of fresh av, op- 
posed to salt f^nd dried lish, and;, more recently, the enrich:.ient of diet 
in all sections of AmeriL.p so that hps coiae to include fresh vegetables 
and fruits at all ti;aes of tiie ye-'-n-, "besides fresh milk, repr>..sents one of 
the outstanding; fornard steps in civilizption. In the Ipst t'enty or 
thirty /ears the introduction of refrigeration into the household on an 
even wider scale has also been of al;aOst i.nmeMsura jle importance as 
affecting the health, coifort, and economy of everyday life* 

But besides the enrich.":ient of lite \'hich it hr-s brought, and the 
wide-flung irdustrial activities . in -nroduction, transportation, and dis- 
tribution 'vhich it nas made possible, the imnuf acture of ice is in it- 
self a larger industry tuan i. s usually realized. The code authority 
claimed for it a billion dollars of invested carital; nearly 8,000 
manufacturing slants; 55,000 firms engaged in manui acturing or dis- 
tribation of ioe; and 200,000 employees. (*) 

These figures are greatl''- in excess of thor e contained m the bi-- 
annual Census oi Manuiactures, for two reasons, first, no la^ufacturer 
renorts to the Census unless the value of his production in tne census 
year -as $5,000 or grepter. ' Tnis excludes inany small ice plants. It 
would also pi-'rear that it distorts the effect or tne industry of anv 
serious decl.ne. in tne volume or the value of ice sold. Sa.ch a decline 
automatically caused the dropping of mfeny plants ne&r the borderline. 
As the sellers of !!;5,000 worth of the nroduct, tney reported in one cen- 
sus, but as protucers of less than this amount they i.^ere not called upon 
to report in the next census. Thus the Census of Lpnufactures sho'.Ts a 
drastic decline in the number of -olants bet'^een 1531 and 1953 (from 4,111 
to 3,329); while the reports collected uy the industry shoi" a slight in- 
crease (from 7,t28 to 7,882). The latter, however, no douot include 
plants which had been shut down.(**) ' 

In the second place, the Census of Hanufacturers ' figures for 
wage earners (which reached a veak of 32,184 in 1929 but fell to 21,332 
in 1933) incluf e only em'olo-'-ees in tne manufacturing D^rt oi the business 
(and also in only those plants which re-ported to the Census\ Most of the 
workers in the ice industry are engaged in distriouting ice, either as 
em-oloyees of manufacturing companies, or, more coimonl^, as cealers or 
pedilers, or the employees of such. None oi these are included m the 
Census of Kanufpctures. 

The figures of t.ie code authority are, of course, only estimates. 
\«ithout accepting such estimates as beitig strictly correct (tne situa- ■ 
tion with respect to numoer of employees is of course greatly com- 
plicated by the extreme seasonality oi the industry, and bv the fact 
that many peddlers are engaged, in other lines of work), it is never- 
theless apTDarent that the ice industry is one of the larger American 
industries, both m investment and in personnel. 



(*) Estimate oi capitpl investment ,' fiumoer of firms and employees in Code 

authority's reply to Tne Re-port of Deputy Admiristrator Hobt. X. Straus 
on the Administration of the Ice Code , p. 3, f injure on number of 
manufacturing plants m brief suomittec by Leslie C. Smith to the 
NBA at Hearing held ^pril 6, 1954. (See v. 5 supra) 

(**) For industry statistics see p. 58 below; the Census figures are 
from the Biennial Census of Ivianufactures, 1933. 
9827 



-13- 

Ho\"r -ell tiie ice industry 'will De pble to retrin its posi- 
tion, oring to the comn'etiition of mechsnical refrigt ration, is another 
question. A part of the business appears to be secure. The holding of 
so!0e of the rest may depend on ice i-rices, ice 'service, pnd the manner 
and soirit in which the industry is conducteti internally. The effects 
rhich the ice code and trie post-code efforts of the industry may have 
on some of these factors may have a considerfble bearing; on tne future 
importance of the industry, 

Througnout this report the ice industry v;ill be considered as 
consisting primarily in the -Groouction and cistribution of manufactured 
ice. It should be reco^-nized, however, that tne iiarvestmg and distribu- 
tion of natural ice still constitute a minor part of the inrustrv, which 
cannot be wliolly overlooked in connection ivith the administration of the 
ice code. Hie oercentrge of ic; coiaxn^' from a natural source rather 
t/ian a manufacturing p''.ant, varies with the character of the 'vinter. 
In 1931 natural ice is said to iiave constituted 7 percent of total 
sales; in 1933, 3 percent. (*) 

VI. CKARACTEi- OF THE C0NT:-0T,5 ILrjJSTrJlT D ■ 
BY THL' ICE CG?^E ■' ■ ■ 

As limiting tiie representrtive oaarrcter of t}:e experience 
undr the ice co' e along the lines mentioned in the preceding five 
sections, it should be pointed out that, clthough the history of this 
code gives a clear picture of the working- of certain forces "fiich "'ere 
at v'ork over a "ide range under NBA, and ir the business worlr before 
and after FHA., tliese forces, as ooservec in ti.e ice industry, '"erg 
magnified bevond'the strength '-liich they attained in most other indus- 
tries. That is, the ice industries represent the extreme cr&es. It should 
also be pointed out that the ice industry is by no means illustrative of 
the '.'"hole range of problems and production control devices associated 
with IvTRA. 

The ice code e>.perience relates chief 1/ to capacitv control, 
rather than the day-to-day control of production. The central provision 
in the oode 'was that ''vhich forbrre the installation of ne' capacity '"ith- 
first obtaining a certificate. Ho'-ever, tne nistory of the icL code 
also exempli! ies certain round-about inet.iods of controllin'; the currer>t _ ■ 
production of firms — or, at least, of cividin.r' available Dusi'^ess among 
firms. The code provisions forbiding dumping and establishing normal 
raarhet areas, anc, to a lesser degree, those forbidding selling below 
cost, and those per-iitting the setting 'up of minimuia prices, their in- 
evitable differentials or lack Ox dif lerentirls — a real purpose of 
these was to strengthen the hold of individual producers on volume oi sales 
as "rell as on price. A more direct control of production was im- 
plied in the loc^l marketing agreements; ■■'hich, though never formally 
sanctioned by the code, '-'ere in fact introduced by the code authority 
at i'ort Vi'orth and else'^'here. ( **) 

(*) According to a carefull ' prepared report issued in V.hA to '-hicn 

other reference is, ho'^ever, not authorised. 
(**) See i'ort V/orth Plan, Chapter VII. 

9827 



-14- 

Capacity control, more or less analogous to thnt provided for 
in the ice code, was set up in a substantial number of codes, in many 
different lines of industrv, and indirect efforts to delimit the areas 
of competition were also not uncommon. Hence, study of tne' production 
control devices -01 the ice code is a study, yicariouslv,' oi rDPoduction 
control as attempted over a considerab'' e part of the I'-hole FKA field. 

It should be pointed out, hc'ever, that several of the major 
types of production control devices har no place in the ice industry. 
The chief of tnese other devices vas machine-hcur or plant-hour limita- 
tion. There was no effort to regulate the length of time that ice 
plants could be o-oerated. Likewise, there was in the ice industry no 
attempt (excerit that there wps some implication of thi's'in some of . the 
local market agreements) to limit the total i-uantity' of ice which .could ' - 
be produced. There was nothing which closely corresponded to suchuaj 
system of production ouotas as vas introduced into a fe^ codes ' "■■•:; 
''here the product was 'auch less perishable th-n in the case of ice. 

hen, however, consideration of the FRA experience is lifted' 
from the level of an examination of specific devices to a consideration 
of those more general procedural issues having to do with the rela- 
tionship between the Administration, tne code authority and the industry; 
when attention is turned to the problem and technique of harmonizing the 
interest of those in an inoustry among the;.Tselves, '"ith the public and 
with various soecial groups — as the makers oi machinery; to a con- 
sideration of broad problems that bear on human relations and Indus- 
trial organization on the impact of govern::ient on business, .and on the 
struggles among business firms themselves; the story of the ice code 
exeiiplif ies in an excellent v;ay the cruz of the '-'hole NEA problem. The 
ice code was Ni^JV's most active laboratory for bringing into clear relief 
the issues and also evaluating the rival techniques of control. 



9827 



-15- 
,• CKAPTEE II 

PRE- CODS FAILURE OF COIvCPETI TIOII AS 
A REGULATING AilD STIMLATING FORCE 

I. REASONS FOR TENDMCY TOWARDS CUT-Tr3lOAT COMPETITION 

In our enumeration in the preceding Chapter of forces which are 
likely to "bring ahout cut-throat competition — and, in the end\: monopoly 
— in such an Industry as ice, emphasis was laid on two conditions: first, 
fixed ~ or limited — markets; and second, fixed costs. 

A. Lirtitation of Market _/' ^ *-_ 

Because of the nature of ice and the cost of handling and transpor- 
tation, the market for most ice plants is limited to a radius of about 
twenty or twenty-five miles. An exception exists, of course, as respects 
that 20 per cent or more of all ice v/hich is used for railroad car icing; 
and the smaller proportion which is used on long distance trucks. Such 
ice may eventually travel many hundreds of miles; if converted into "snow 
ice" (*) its journey may possibly be stretched to two or three thousand 
miles. No doubt some latitude often exists as to where car icing or re- 
icing may be done ~ as well as some choice between alternative routes of 
shipment; so that the potential market for ice for this purpose cannot be 
said to be so narrowly limited as is true of the market for ice generally. 

. Likewise, during price wars, when the wholesale price of ice may, 
in a given city, quickly drop from as much as $5.00 a ton to as little 
as $1.00 a ton, manufacturers at the center of (disturbance may ship ice 
a long distance, in their effort to find a remunerative market. Under 
the same circumstances, purchasers of ice may place orders from afar. 
Ice wars in Fort Worth and Dallas are known to have badly disrupted 
piarkets eighty miles away; and one hundred miles is not beyond the radius 
of shipment under such circumstances. 

It is also not uncoranon for ice to be shipped thirty or forty miles 
to some point at which ice is not produced locally. Generally speaking, 
however, to ship ice even twenty or thirty miles into a territory where 
there is local production, would be to invite retaliation and price war- 
fare. liVhere ice must be shipped that far because there is no local pro- 
duction, the community which is dependent on procurement of ice from such 
a distance may usually be regarded as having just ground for complaint 
because of lack of adequate facilities for ice. (*f) 

(*) For explanation concerning snow ice see the previous Chapter, p. 14. 

(**) Edward H. Hnerson and Chas D. Bohannan, field representatives of NRA 
state in a report on The Administration of Article XI of the Ice Code 
they had come to the conclusion that, except in special instances of very 
small and thinly settled communities, twenty to twenty-five miles should 
be the outside limit for handling ice. This report, to which further ref- 
erence will be made from time to time in this report, was never carried 
beyond a rough draft, ^t has been preserved in the Deputy's files, ham^- "" 
ever, in a folder labeled Report of the Administration of Article Xi, to 
be found among the "Classification Files", dealing with the Ice Code. 

9827 



-16- 

In the usual case, wliere ice is loaded from the manufacturer's platform 
directly upon dealers' or peddlers' trucks, the radius of economic hauling 
of ice is, of course, mu'S.h less than twenty miles. Ihe time required to go 
for and bring hack the ice, the cost of operating the truck, and the meltage, 
all operate to make ice manufacturing not only a local hut a more or less 
neighborhood industry — defining as a neighborhood that general part of a 
great city in which a given plant is located. ■ 

This basic fact that an ice manufacturer mast survive or perish, make 
money or lose money, depending upon the market which he can find within a 
few miles; of his plant and the price prevailing therein, makes that manu- 
facturer vitally interested in the business policies of all other manufact- 
urers within that area. The plants which they build, the prices which they 
charge, the business they seek and obtain, are likely to be of immediate 
and inescapable consequence to him. Hence, any major competitive move made 
by any one producer in a given area is likely to lead to a qiiick reaction 
on the part of every other producer who is close enough to be affected. 

• B. Fixed Costs . 

This strict geographical limitation on the market of an ice manufactur- 
er would not, of course, be much of a stimulus to cut-throat competition if 
ibe manufacturing, instead of tending to concentrate in a few of the largest 
plants which the community can support, were a small scale undertalcing in 
which so many individuals participated in a given area that the policies of 
any one producer had a negligible effect on the total; nor would the tempt- 
ation to cut prices be anything like or as strong as it is, if it were not 
for the important role played in ice making by fixed and semi-fixed costs. 
There are many other industries, especially those rendering service, where 
the market is even more localized than that of the ice industry. There are 
few industries, however, where the ratio of fixed cost — or partially fixed 
cost — , to total cost, is as high. 

Both the total and the make-up of ice costs vary considerably from one 
section of the country to another, from community to aommunity, and from 
plant to plant, in part because of variations in load factor, but to some 
extent also because of different sources of power, variations in plant ef- 
ficiency and other conditions. In examining the following figures which 
summarize the actual expenses of one ice plant, selected quite at random, 
the reader is cautioned that none of the figures shown whether for total 
cost or for elements in that cost, are to be taken as necessarily signif- 
icant or typical. Oar only purpose here is to illustrate by this concrete 
Case the general type of relation existing between variable and fixed costs 
in ice manufacturing. Oar more detailed examination into the general level 
■ of ice costs will be undertalcen in Section III -< C - 3, "Cost of Manufactur- 
ing .Ice". 



'fe27 



•' , • -IV- ; 

C lassification of Total Annual Costs of a He w 
Orleans Ice ?lant (Operation at 36fo 
load factor) 

Water.: ■ $ 600 

Bad DelDts 500 

Fuel Oi 1 3, 500 

.Repairs ■ " 1,300 

'.Tages 13, 000 

Administrative Salaries , 4,800 

Other Administrative Expenses.. 3,200 

Depreciation 5,400 

Taxes 1,100 

Insurance l,0OO 

Unclassified...- '. ' 1,700 



Total $ 32,200 



•Tons sold ..10,000 

Average Annual Cost Per Ton 3.62 (*) 



(* ) These figures for cost have "been taken without change, 

except for a rearrangement in order, from a memorandui.i from 
Orton W. Boyd, Chief of the Cost Acco^oiiting Unit of the Re- 
search and planning Division of NKA, to James E. Hughes of 
the same liyision, dated January 25, 1935. This particular 
plant was talten for illustration chiefly because its annual 
tonnage, when rounded, came out an even 10,000. It may be 
noted, however, that the load factor of this plant, 36^, 
though not high as a load factor, "by no means represents 
a condition uncommon in the ice industry. By load factor, 
Uhe ice industry me&ns the ratio between the total con- 
ceivable annual production of a plant (obtained by multi- 
plying the plant's daily rated capacity by 365) and the 
actual output during the year. Since ice manufacturing 
is highly seasonal, a load factor of 1004 for all plants 
supplying a given market would, of course, be impossible 
— even if one were to ignore the fact that some time 
would necessarily be lost during a year oecause of the 
need for repairs. Under favorable conditions, plants do 
sometimes operate on a 60^ or 70^ load factor, or even 
somewhat higher. The industry, however, regards a 50^0 
load factor as constituting as high a figure as is to be 
generally expected. 



9827 



-18- 

Of the total annual costs of- the plant whose break— down is above 
shown, it will be observed that only four items — water, bad debts, 
fuel oil and repairs — automatically vary in close relation to the vol- 
ume of ice produced. And even of those, the last two items, particularly 
that for repairs, would not necessarily increase in strict proportion to 
increase in output. 

Of the second group of Items ~ made up of wages, administrative 
salaries and other administrative expenses — the wage item particularly, 
but the other items also to a considerable degree by the general long- 
time operating program of the plant. That is, they would be materially 
higher for a plant which, at the beginning of a year, planned to oper- 
ate 60 per cent load factor, than if operation were planned at 30 per 
cent. However, over short periods- of time, none of these expenses would 
be increased very much by a decision of a manufacturer to make more ice. 
And they would certainly be decreased almost none at all by failure of a 
manufacturer to produce and sell all of that production which he had 
planned to turn out over a given short period. 

Of the third group of expenses — made up of depreciation, taxes 
and insurance — none (except for that part of the last item which con- 
sists of workmen's compensation or other workers' insurance) would be 
affected in any material degree by the operation or complete closing of 
the plant. Interest on investment in fixed equipment, which is not in- 
cluded in these costs, would also come in this third. group of costs. 

Ignoring that item of unclassified cost which makes up the fourth 
group, it will be noted that of the $36,200 which constituted the total 
annual costs of this plant, only $6,000 — or 60^ a ton — represented 
variable costs; $21,000 represented costs which were serai-fixed; and 
$7,500 represented costs which were absolutely fixed. If interest on 
investment were included, this, in the main, would be an addition to the 
absolutely fixed costs. 

When attention is focused on the day-to-day and week-to-week position 
of an ice manufacturer, as contrasted with his year-to-year position, it 
will be observed that the second and third groups of costs shown in the 
above table (which, once a plant is open and the work organized, will 
have to be incurred almost regardless of the daily output), make up all 
but a small fraction of total cost. To turn out an extra one hundred tons 
of ice having a market value of perhaps $5.00 a ton would, in the case of 
the plant taken for illustration, have cost hardly an extra 60^ a ton. 
Conversely, if because of slack sales, a manager found it possible to 
curtail his production, his savings in cost probably would not run to as 



9827 



-19- 

much as 60;-? a ton. (*) ' 

In other words, the cost of niakinf; ice is in the set-up — ■ physical 
and later. I'his initial e:rpense is incurred by the manufact-orer in the 
confidence that he will "be able to sell a t.iven arao-ajit of ice to his 
trade. This traf'.e he feels confident he can coimaand because of some 
distribution system vi'hich he himself operates, or — more likely — 
controls throuj^h allied dealers or peddlers. 

Of gre?t imnortanco in relationship) to this predominance of fixed 
costs in the ice industiy are the conditions which typically exist with 
reference to use of capacity. It is well laio\Tn that in industry in general 
it ift rare, exce;Tt wliere a given market is ^-rowin^ y.'ith extreme rapidity, 
foi"' plants tj inri to capacity, for any great length of time. Sometimes 
<S?.pactty operations occur when plants are behind in their orders, or 
v/hcn production is carried on in a.dvance for stock. But us'oally, in 
their desire to be prepared for whatever business may come along, plants 
ii3.ve somewlis.t greater capacity than they normally use.- 

This general principle holds, of course, for the ice industry also. 
But in the case of the ice ihdustry it is inroortant to note that there 
is an additional and very important influence which ma.kos for extensive 
non-\ise of capacity. And that iz the high degree of seasonability of 
demand — and, indeed, the marked shift in consumption from day to day — 
ov.-ing to clianges in the weather. 

Some plants which store ice for limited periods may be able to 
operate at close to 100 percent car)acity for a period during and. immedi- 
.g..tely preceding the summer. Most "olants, however, do not store ice 
to. any considerable extent; and they construct capacity which is somev,'hat 
greater than what is usually used even in the hottest month of the year. 
In the balance of the year they have a very large amount of non-used 
capacity. 



(*) 3ven when direct labor is added m, the cost at capacity operation in 
an efficient ice plant (excluding, overhead) ma.y be 80^ a ton or less. 
"It is a fact thiat the prime cost of ice, which includes power, water, 
and the direct labor, ariplied to the pioduct itself, in an efficient 
unit, running at one hondrec. percent of capacity, probably could be 
brought as low as the figure given by the applicant for this permit 
(73 cents). In other words, I Icnow of instances of plant. .. .running 
on a full load fcr a month or t^-o and filling a storage, where their 
actual prime costs are as low as 80c? a ton." Windsor Llewellyn, 
Manager Ice Exchange, Inc., Los Angeles, Hearing on Application of 
A. L. Reaves for permission to build a plant, lia.y 28, 1935, p. 109. 

The hearing just mentioned, and all other hearings on applications 
for permits to which reference will be made elsewhere in this report 
are to be found in the Deputy Administrator's files in folder bearing 
the name of the applicant. Cases are classified as either "closed" or 
"Pending", under the general classification of "gontrol of Production" 
or "Control of Production and Anti-Duraning" cases. Under each of the 
designations, "closed" and "pending", the individual cases are arranged 
first by States and then by the name of the applicant. An exception 
occurs in some of the early cases, however, where there was not a 

9827 scToaratc folder for each case. 



-20-- 

On any day of the year when an ice plant can produce more ice than 
it is producing — and that, for most plants, is almost every day — 
there would, of course, he great profit to the concern if it could make 
and sell this surplus ice. Providing an owner could dispose of it with- 
out breaking his own prices, he could afford to sell this "top Ice" as 
it is called at a great discount or make drastic concessions of some 
other kind. To enlarge one's "business in this way would he almost like 
getting something for nothing. However, the demand for ice at any one 
time is so inelastic, bound up as it is with the habits and facilities 
of people for using ice, that there is at the moment no way of increas-- 
ing the sale of ice very much except by taking business away from some 
other manufacturer. (* ) A slower growth of business coji, of course, ]; ^ 
sometimes be worked up by persuading people to use ice. . ■ '/■ 



But if it is cause for self^congratulation when one ice manufacturer 
whose business is slack gets business away from another, it is cause'. for. 
acute alarm to the manufacturer who has lost. If the loss of busihesB 
is due merely to persuasiveness, there may be little that the despoiled 
manufacturer can do. But, if business has been acquired by making con- 
cessions, that is a game at which two can play. In fact, this is so ob- 
viously the case that one manufacturer does not openly make concessions 
with the view of getting business from rivals. If prices are cut and 
stay cut, it ordinarily means, not a simple business rivalry, but a de- 
termination on the part of one or more firms to drive' others out of the 
business, or so discipline them that they will come to terms. 

C. Standardization of Product 

These factors of limitation of market and fixed costs are even more 
effective than they would otherwise be (in malcing it impossible for ice 
companies each to go his own way, making what ice they choose, and sell- 
ing it for what they can get), because of certain additional characteav 
istics of ice. Ice is highly standardized. It is not indeed absolutely 
uniform. Sometimes ice is dirty; sometimes, due to the method of freezH' 
ing, it is more or less "white" instead of clear. Ice which has been 
stored a while is unpopular with consumers as compared with ice that is 
fresh. Also service may be an element of importance. As compared with 
most comr.iodities, however, ice is not a trade-marked product, and a 
small difference in price is ordinarily sufficient to shift customers 



(*) "In an endeavor to establish whether or not the lowering of the price 
in a very substantial manner would increase the purchases by the public 
of ice.... in the city of San Bernardino, whidi is a relatively self-con- 
tained comiminity, the price of ice V7as dropped from 60(# to 40(#, and it 
was maintained for seventeen months at 40^*, and the records are avail- 
able to show that both prior to the dropping of the price, during the 
dropping of the price, and after the dropping of the price, the trend or 
demand of the market in that area did not vary except with the variance 
of temperature over the temperature in the preceding year. " ffindsor 
Llewellyn, loc. cit, p. 88. see p. 19 supra. 



9827 



-21- ■ 

iron one raaniif a.ctvirer to -nother. This is particularly important vriiere 
. .i.-aroJfr.cturers do not distri"bute themselves, but serve the public throii/j;h 
depjLers. If these den,lers r.re independent, it t^kes only a small price 
differential to shift then from one rarnufacturer to -i.nother. Thus the 
price a manufa.ctiirer ?slcs would quickly "become a decisive factor in 
cor.TDetition — if any nanul^'^.cturer ^'ere so shortsighted as to allou 
hiaself to he underbid 'bj others. 

L, LoniP:evity of Plants 

price vrars once started, or excess capacity once b-oilt, constitute 
more serious probleiiis than they other.'ise ijould because ice plants do 
not easily go out of existence. There is nothing else tliat their equio- 
rient c-n be used for; (unless for cold storage) sjid even the cost of 
uoving plants is great. Ic6 plants do not rear out. Some ca,re paid re- 
|)lacement is necessary; bu.t ''ith a reo,sonable amount of attention an 
ice plpjit -.ill remain in fairly good operating condition for yea:rs and 
years, Eybyi that great advnjice in technology, which, since the early 
lS20s has been of such marked importance in some industries, has not in 
the "ice industry" been sufficient to put the older plants out of the 
rujining. Their costs maj-- be a, little higher ;but in view of their de- 
precia.ted values, they can compete successfully v/ith more recently built 
plants 'dth their heavy overhead charges. Host of such improvements a,s 
have been made in ice manufacturing technique such as the development of 
more efficient sources of power, automatic devices for putting the right 
v.'eight of water in tanks, and systems for pulling ajid conveying a large 
nuuber of c-^kes of ice at once — cexi, moreover, be installed in old 
plants, We sh,all later have occasion to note that one-fourth of the plants 
of that iJew York ice cowoejirf which in 1954 was found to have the lo-rest 
costs, i7ere more than tw^ntj;- yea„rs old. 

II. PPlE code TECHiiI.;,UE POP SUPPP^SSinG COLIPETITICIT 

A, Price w'ars 

The basic raepjis for suppressing competition in the ice industry, or 
a,t least bringing it into line, has aJ.1 along been the price war. These 
are capable of developing very rapidly a.nd foing very fax. If one manu- 
facturer lowers prices, others do too. If price cutting is to be ef- 
fective, it then becomes necessary for the first rar.nufacturer to m?ke 
another cut; and this in turn 111 be met. It m.ay be that a moderate and 
shor1>Ktime reduction in price will be s-'officient to bring those pajrtici- 
pating in the struggle to a working agreement, but if not, wholesale ice 
prices may drop, as they did in several cities under the ITPA to as lovr as 
$l,no a ton — which is iijiquestiona.bly much below the cost of production. 

It is not meant to im.ply here that all or m.ost price wars are 
started with intent to eliminate or tame competition. On the contrar3'', 
thej'' a,re more likely to rise from genuine competitive efforts. But price 
waa-s, once started, are likely to end '^-ith a stronger resolve on the part 
of members of the industiy to i-'orJc aJong together than existed before 
their outbrerJc. And this attitude m?^ be implemented by the setting up of 
some quite tangible stabilization plpji — a,s was true -fhen the Los Angeles 
Ice Exchange was formed following an ice ''ar in the fall of 1932. (*) 

(*) See p* . 53' belo". 
9827 



-22- 

and when price wars in Fort Worth and Dallas led to the introduction in 
those cities of the Port Worth plan. Of course, it is the fear of price 
wars, rather than the wars themselves, which is the major factor in keep- 
ing members of the industry in line. 

B, Plant Purchase 

Another common means used for limiting the play of competition has 
been the purchase, by one or more large companies, of independent plants. 
The purchase of a plant may be preceded by tactics designed to force 
the competitor to sell — such as lowering prices in the immediate 
neighborhood of the plant or the use of other methods designed to take 
away a plant's customers. On the other hand, it may be that the plant 
which is purchased had been originally built and its merchandising 
policy designed, mainly for the purpose of forcing its purchase by com- 
petitors; in which case, the buying out of the plant becomes primarily 
a defensive measure -- though, of course, it may be a defense of mon- 
opolistic practices. 

New York City — .. especially as respects the boroughs of Brooklyn 
and Queens — offers some good illustrations of the extension of control 
through purchase. 

In what was classified tmder NEA as the New York City market area;—' 
including the boroughs of Manhattan, Bronx, Brooklyn and Qy.eens — there 
were in 1934, 110 ice plants including a number which were shut down 
but not dismantled. (* ) Thirty-^six of these plants, credited in 1934 
with 43 percent of the total capacity and producing (selling) 47 per 
cent of all production — were owned by the Rabel Corporation (not 
counting certain so-called independent capacity, the entire output of 
which was purchased by this corporation). Twenty- five plants — having 
in 1934 21 per cent of the total New York capacity and manufacturing 
(selling) 21 per cent of the total output — were owned by the Knicker- 
bocker Ice Company, a subsidiary of the Jtaerican Ice Company, the second 
largest ice manufacturing corporation in the coiontry. (** ) 

In the buying up of independent ice plants, as well as in other 
matters, the aggressive factor in the New York area long has been the 
Rabel Corporation, 



(*) This figure and the others which follow in this paragraph are based 
on Form 2, as filled out for the New York area by the Code Authority, 
correction being made for one plant which appears to have been listed 
twice. See Form 2 in file on Frank Tursellino Case, among pending Con- 
trol of Production Cases in Deputy's files. 

(**) The City Ice and Fuel Company, the cotuitry's largest ice corporar* 
tion, has only two plants in New York City. 



98 27 



-23- 

, At the eaer^ency hearing for New York City held July 19, 1934, 
Milton Ho chmann. Attorney for a large association of Ice Retailers in 
Manhattan and the Bx-onx, said: (* ) 

"^t is a matter of common knowledge in the ice industry that 
one of the largest manufacturers (by whom he meant Rabel) has 
his eyes on several lesser or smaller plants, plants which 
are built and designed to serve the needs of a particular lo- 
cality in the city of New York. If this cut-throat competition 
goes on, the more powerful ice manuf : -cturer can maintain in- 
definitely any nTimber of tracks in the immediate vicinity of 
that goal or object and so force this independent to either 
come to terras which he has set forth or put him out of busi-» 
ness completely; so from the manufacturer's viewpoint, if 
the present condition is allowed to continue, we will ultimately 
find that New York City has one ice manufacturer. " 

Court records — which recount in a more circumstantial waj' some of 
the efforts of Rubel to suppress competition by plant purchase or other- 
wise ~ were referred to at another New York hearing by C. lAirphy of the 
Prick Ice Machinery Corporation. To quote: (**) 

"Two years previous to this time (the witness was speaking 
of a case tried in federal Court about 1933) we sold a plant 
to the Prudence Ice Company, a group of loaders in Brooklyn, 
and we had $25,000 initial payment tke Subel Corpora- 
tion bought out that contract and bought out the corporation, 
the Prudence Ice Company. In order to take advantage of that 
$25,000 initial payment they decided to put the machinery in 

Coney Island after we started erection of the plant and 

had it very necrly completed, I sold another plant to the 
Paramount Ice Compaxiy in Steuben Street. I went around to see 
Mr. Rabel to make a collection of $100,000 which he owed us, 
and he told me he would maJie no further payments because we 
had sold the Paramount Ice Comfjany and he was going to use our 
money to put the Paramount Ice Cor.Tpany out of business." 

The Prick Ice Machinery Corporation was successful in its suit against 
Rabel; and the whole story, according to Mr. IJbxrphj, was in the court 
record. Rabel at the trial did not deny any of the allegations made. 

Later, Rabel apparently gained control of the Paramount Company, for 
elsewhere in the record it is admitted that Paramount' s entire output of 



(*) Hearing on the Ice Industry Schedule of Minimum Prices, held at New 
York, July 19, 1934, p. 90. Transcript in NIA Files. 

(**) Hearing, March 26, 1935, on the application of the State Ice Cor- 
poration for a certificate permitting construction of a plant, p. 75 
(Por location of hearine;s, see note on p. 19 supra.) 



9B27 



-24- 

ice was "being sold iinder contract to. Ratel. And a newspaper clipping 
in the NRA. files (which must have been talcen .from an issue published 
just before Ma^' 23, 1934) notes, apropos of a suit against Rabel filed 
by a stockholder in the Paramount Ice Company, that the complainant 
charged that Rabel had improperly negotiated contracts under which he 
could "freeze out" Paramount stocliiolders, by. buying all of its stock 
at a low price. In the course of this trial, the judge sentenced Rabel 
to ten days in jail for contempt, Rabel having failed to make his ap^- 
pearance after a long series of adjournments which, kad been obtained by 
his attorney. 

However, the best documented plant purchase by Rabel occurred after 
the setting up of NEA, and all details of the transaction have been en- 
tered into the NRA record by the Rabel Corporation itself, even to the 
filing of a copy of the contract. 

In July, 1933, one Saraael Rosoff went into production with a new 
ice plant in Brooklyn. (* ) At this time, the prevailing wholesale 
price of ice in Brooklyn ranged from $3.50 to $4.00 a ton. The Rosoff 
management, hovvever, had quietly contacted various dealers, offering 
contracts for a period of years at a maximum return of $3.00 per ton; 
with the further understanding .that they would at all times guarantee 
the dealer that the Rosoff price, regardless of the contract, would be 
lower than that of <'r.y competing manufacturer. The Rosoff plant (it 
being remembered that this was in the siommer season) was thus enabled 
to operate to capacity. Following Rosoff s entry into the field, there 
was a general scramble for business, a cutting of prices, and by the 
middle of January, 1934, all platform prices in BrookljTa and other 
borqughs had fallen to $2.00 per ton. 

The following month (on ?ebraary 32,' 1934) the Rabel Corporation 
signed a contract for the purchase of the Rosoff plant. Under this con- 
tract, Rosoff agreed not to re-enter the ice business within a radius of 
fifty miles of the City Hall. The price paid was $525,000. (** ) 

Comparison of this figure with the cost of building a plant of 
similar size, as developed in the record in connection with certain 
applications for certificates to build new plants, indicates that the 



(*) All background facts cited in this paragi-aph have been taken from 
a letter from Pendleton Dudley, Secretary of the IJew York Committee of 
Arbitration and Appeal, to Robert K. Straus, Deputy NRA Administrator, 
dated April 10, 1935. (KRA files) 

(**) This and the previous statements in this paragraph taken from 
memorandum of Rabel Corporation in opposition to application of MetropoiL* 
itan Dealers Ice Corporation for a certificate of necessity and convenij. 
ence for the erection of an ice plant in Kings Coimty, City and State of 
New York. See folder on above application Deputy's files as explained 
in note on ;oage :XS supra. 



98 27 



:\'535,0O0 sales price must have included a Tjrofit of about a quarter of 
a million dollars. Direct statements were also put in the record "by 
responsihle -narties to the effect that the transaction involved a profit 
of this amount. 

This transaction was completed in March 1934; and on March 12, 
(*) Rubel closed tne newly purchased and also newly "built Dlant. The 
data later submitted by the code authority on form 2 for New York shows, 
however, that the nlant was reopened and o-oerated for a time during the 
summer of 1934. There was no effort to conceal the fact that the whole 
object of the piirchase of the Rosoff plant was to stabilize the New York 
ice market. As soon as the purchase had been made the wholesale price 
of ice recovered from $2.00 to $3.00. In June, the nrice was again ad- 
vanced to $3.50 for very large wholesale transactions: and $4.33 for 
lesser ones — under 500 cakes (300 lbs. each) per week. (**) 

Very soon, however, there were further changes in New York ice prices 
which included a very general and drastic reduction, as will be noted 
more fully later on in this report. 

In Los Angeles, the purchase of plants whose competition threatened 
stability was carried out on a large scale by the Ice Exchange. In an 
affidavit entered into the record of a hearing held May 28, 1935, on 
the application of A. L. Heaves for permission .to erect an ice plant 
at Compton, in the Los Angeles area, Windsor Llewellyn, the Manager of 
the Ice Exchange, told of the leasing of eleven ice producing plants 
which were then closed down. In the record of this same case, Llewellyn 
said tliat the former operators were compensated at the rate of a little 
under $2.00 per ton of sales at the time the leases were made. Later, 
additional leases were made; and one plant was purchased outright — for 
^750,000, according to affidavit by Mr. Reaves, which was not disputed. 
'The Ice Exchange wps financed, Mr. R. P. McClellan of the Arctic Ice 
Company said, by an assessment of 25>i per ton on the production of mem- 
bers. In partial explanation of the Exchange's plant purchase program, 
he said that "the whole delivery system on the street here was threatened 
with ruin, due to the operation of the plants which we purchased." 
Llewellyn declared that such plant purchase would pay for itself in a 
pcriad pf eigM or ten years. He claimed to be speaking, however, not so 
much of the price situation, as of the larger volume of business which 
could be done by the remaining plants. (***) 

(*) According to Rubel's brief, 

(**) Letter from Dudley, cited above 

(**■*) See Record of Hearing, pp. 86, 113, 139, 140. 



(-\ 1-1 rM-* 



-26- 

C. Purchase of All or Part of Q-atput . ■ 

A third means of keeping com-oetition in restraint in the ice 
industry consists in the purchase in quantity of ice ms.maf a,ctured hy 
competitors. Mention has already been made of one instance of this 
kind in New York City. Ice, of course, may be purchased by one com- 
pany from another, as a purely business proposition; in which case 
it may constitute a wholly desirable means of bringing about a better 
and more economical utilization of capacity and not be open to question 
from any angle. In other cases, however, the shutting down by a large 
corporation of some of its going plants, and the purchase of ice from 
competitors is clearly done in an effort to stabilize the market sit- 
uation and is irraisja-v.artliy or the opposite, according to the view taken 
as to the desirability of such market stabilization and control. 

In New York City, several groups wishing to erect ice plants and 
obtain certificates permitting this, charged that the Hubel and 
Knickerbocker companies, narticularly the former, controlled the en- 
tire industry, estjecially in Brooklyn and Queens, by contracts for 
purchase of ice from com-oanies nominally independent. Apparently, the 
extent of control by this device was greatly e::aggerated, as there 
were put into the record for these cases, letters from various ice 
manufacturers indicating thp.t they were independent — or largely 
independent — in their operating and distributing activities. However, 
ice was bought by Rubel on a considerable scale. And it may be sig- 
nificant that of the 13 New York plants which "-ere shut down throughout 
the entire year, 5 were owned by Rubel and 5 by Knickerbocker, in ad- 
dition to Rubel 's former Rosoff plant which was shut down during the 
greater part of the year. (*) 

An absolutely clear case of intercompany purchase of ice for the 
purpose of market stabiliz'ation, however, exists in the case of 
Cleveland. In this city, the City Ice and Fuel Com-oany, owns 90 per 
cent of total capacity. (**) In the hearing of February 17, 1934, on 
the Ray Ice Com-nany's ap-olication for a certificate of convenience and 
necessity, E. L. Croft, representing the City Ice and Fuel Comnany, 
stated: (***) 

"We are purchasing from comTDetitive manufacturers 15,000 
tons of ice for no other purpose than to attempt to stabilize 
the market. The s-oecific reason for this condition that has 
been forced upon us — became due to ice plants being built 
here in such capacity that the?/ were unable to sell their 
product, with the result that the market was demoralized." 



(*) Data on this subject in many places in a-o-niications of Metro-nolitan 
Dealers Ice Corporation, Kings County Ice and Fuel Corporation, 
in Derjuty's files as explained in footnote on p. 19J supra. 

(**) Computed from the data on Form 2 for Cleveland. See folder for 
Ray Ice Company a-n-nlication. 

(***) Page 50 
9827 



-27- 

Later, it was the finding of the NBA Deputy Administrator that one 
ccnroany in Cleveland controlled 86 per cent of the production and 
92 per cent of ice sales. (*) 

Lest a misunderstanding arise from Mr. Croft's statement quoted 
above, it should he pointed out that tliere was no construction of new 
capacity or addition to old capacity in Cleveland subsequent to the 
year 1929, except for one 80-ton plant completed in 1930 and one 25-ton 
plant constructed in 1934, which were insignificant additions to the 
2,845 tons of manxifacturing capacity existing at the end of 1929 and 
the 2,925 tons existing at the heginning of 1934. The sale of ice in 
Cleveland increased from 504,000 tons in 1929 to 573,000 -tons in 1930; 
and to 630,000 tons in 1931. It seems clear, therefore, that there 
has not heen in recent years any building of excess plants. Such prob- 
lems as may exist have arisen from the drop in sales between 1931 and 
1933 from 630,000 tons to 458,000 tons, from which level there was 
only a recovery to 465,000 tons in 1934. (**) 

D. G-uerilla Tactics 

As a fourth means of discouraging competition or keeping competitors 
within the prescribed limits, may be listed strong-arm tactics which 
fall short of an open price war but are designed to make the carrying 
on of business in certain areas practically impossible. 

In New York City this policy was followed very widely against 
dealers who tried to desert one ice manufacturer for another; or ped- 
dlers or "cellar men" who tried to shift from one dealer to another; 
or where one dealer was extending his routes cr sales at the expense 
of others. Either because of some informal understanding, or from 
the fears cf reprisals for themselves and other dealers, it was common 
for the ice manufactur-^r whose ice was sought to refuse to deliver ice 
to a dealer who "belonged" to another manufacturer or was extending 
his sales at the expense of competitors. 

As a means of getting a good close-up view, let us first note, 
by way cf illustration, a ccmiDaratively mild case, that of Otto F. Bandiero 
who assisted his father, a Brooklyn ice dealer of about 25 years 
standing. (***) The Bandiero's obtained their ice from Hagedorn, an 
indexiendently disposed manufacturer, who was said, however, at the period 
of which we are speaking, to have had some working arrangement with the 
Knickerbocker Ice Company covering distribution of ice. 

(*) Memorandum from Review Officer to the Executive Secretary of the 
national Industrial Recovery Board, Jfey 17, 1935. 

(**) Data in this paragraph from Form. 2, see p. 26 supra. 

(***) Hearing of April 25, 1934 on the application of the Kings County 
Ice and Fuel Corporation for a certificate of convenience and 
necessity pp. 20-28, (NRA files) 



9827 



-28" 

About June, 1933, Mr. Hagedot-n advised the younger Bandiero that 
he could not sell him any more ice than he had received in former years. 
It ap-oears that ohjection had been raised by Rubel (another, and New 
York's largest, ice manufacturer) to the service by Bandiero of cus- 
tomers in the City Line Section of Brooklyn, an area in which Bandiero 
claimed that he had been delivering ice for years. Bandiero, when 
this matter was brought up, told Hagedorn that he was just covering 
his usual routine, selling as before as much ice as he could. Hagedorn 
realized that this increasing purchase of ice would only start trouble; 
Rubel would only make trouble for him. 

Bandiero then aT5t)ealed to one of Knickerbocker's managers. The 
latter asked what the former was doing with all his ice. He remarked 
that it was "not right" for him to sell so much. 

Shortly after this, when Bandiero was delivering ice in the City 
Line Section, representatives of both the Rubel and Knickerbocker 
comr)anies followed him, in the case of Rubel a different man each morning 
for about a week. The Rubel representative was silent, but the 
Knickerbocker representative lorotested against his selling "Don't you 
know that is nrt right, because these are Rubel 's customers. And he 
will only make trouble for you?" Bandiero replied, "Let me worry 
about that;" the Knickerbocker representative said, "No, we won't give 
you the ice from Hagedorn. " 

Now the Bandieros obtained an income from the ice business only 
because they received a discount of about lOi^ or lb(f: from the manufac- 
turer. They themselves sold to retailers, to whom, of course, they 
had to make delivery. At this time, Hagedorn refused to continue 
this discount, making it absolutely impossible, financially speaking, 
for the Bandieros to continue to do business. The Bandieros therefore 
gave up that part of their route at City Line. 

Illustrating another aspect of the situation, Bandiero told of the 
refusal of the Liebman ice plant, another "independent" to give him ice, 
when he called there one hot afternoon. Pie was refused because he 
"belonged" to Hagedorn. 

More common as a means of coercing dealers has been the sending of 
trucks, or ot)ening of ice boxes, which would sell ice to the dealers' 
customers at nrices at which the dealer could not possibly compete. 

A very large Brooklyn dealer named Palermo described a number of 
occasions, extended over a considerable -neriod, when leading ice manu- 
facturers had delivered ice to his customers (ice retailers) at prices 
which took no account of the cost of delivery — or sometimes at less 
than the price which Palermo himself would have had to pay at the manu- 
facturer's platforms. (*) 



(*) Hearing on March 26, 1935, on the anplication of the State Ice 

Corporation for a certificate of public convenience and necessity, 
p._99, (NRA files) 



9827 



-29- 

The strongest Dressures iThich were ar)t)lied in New York City were, 
however, against retailers. The retail dealers of New York (-peddlers 
or cellarmen) testified to innumerable instances when manufacturers or 
wholesale dealers had established in their neighborhoods what they 
commonly referred' to as "Jitney boxes." At other times these, or very 
similar ice stations, were celled "ice docks," or Just "ice boxes." 

A Jitney box is so called because it can be established on very 
short order. It may be a shack set ut) on some vacant lot, a platform 
erected oh some driveway, or a garage or cellar which has been adapted 
for handling ice. Ice boxes are not always coercive devices. For many 
years they have existed in certain poor neighborhoods of Hew York City 
in order that people might be able to buy ice at a price which was 
made possible by eliminating the, services of the delivery man. With 
the depression, they came to be established in more well-to-do neigh- 
borhoods; and the increasing use of the aiitomobile furnished them 
added patronage. Jitney boxes have also been used by racketeers as a 
means of compelling ice retailers to pay tribute. In fact, the ice 
retailers have been prone to say that all operators of Jitney boxes 
are racketeers. A thorough examination of the full record in the 
various hearings conducted in New York City leads one to believe, 
however, that their chief significance lay in the power which they 
gave to manufacturers or wholesale dealers to bring other wholesale 
dealers or retailers into line on prices or customers served. The ice 
manufactiirer Eubel was said to have kept an ample supply of Jitney boxes 
on hand, involving a considerable overhead expense, which boxes he did 
not normally use but held in readiness for use when the occasion should 
arise. 

Michael Fiaschetti, a Deputj'- Commissioner of the New York Department 
of Markets, testified at a hearing on April 25, 1934, that about a week 
before the Rubel Ice Company had sought to obtain licenses for 25 or 
30 ice boxes, which he refused to issue. (*) At a hearing held in 
New ork on May 28, 1934, Mr. Fiaschetti told of investigations which 
his department had made into complaints regarding ice boxes. He re- 
ported that in many places in Manhattan, Brooklyn a,nd the Bronx, ice 
boxes were selling ice at 25 lbs. for b(f; , 50 lbs. for lOi/ - which would 
mean fp2.00 a ton. The wholesale price of ice in New York City at this 
time, for those who went to the manufacturers' platform, was $3.00 a ton. 
Full examination of the record makes it doubtful whether ice was sold 
at this low price to any considerable extent; but such examination 
leaves no doubt but that ice was sold at these boxes at whatever price 
was necessary to destroy an opponent's business, without regard to 
actual ice costs. Ice trucks have been used for the same purpose as 
Jitney boxes. 

Coercion in New York City did not always stop on the economic level. 
On September 7, 1934, Mr. Fiaschetti wrote to Mr. Byrnes McDonald, then 

(*) Hearing on application of the King's County Ice and Fuel Company, 
p. 223. 



9827 



-30- 

s-pecial agent for the National Recovery Administration in connection 
with the New York price emergency, ps follows: (*) 

"Ahraham Chit who is -oast 60 ye^^rs old was assaul-ted 
in front of a synagogue because he could not loay the $200 
demanded of him "by two ice dealers nomed Greenherg and 

G-urinsky James Di Barrie, a wholesale ice dealer 

was also assaulted and stabhed with, an ice -nick by these two 
men. 

"On July 15, 1934, a Mr. Nick Di Rosa who is connected 
with the New Colonial Ice Com-oany assaulted Michael Camraillo, 
with a pair of ice tongs and beat Cammillo so badly that he 
required hospital treatment. Camraillo was assa.ulted because 
he wanted to buy his ice direct from the manufacturer and not 
through a loader. 

"Rella Bros., in the .5ronx hired individuals to molest 
those who did not want to buy ice from them and in one case a 
woman was assaulted by these gangsters. These same Rella 
Bros, have made it a custom to give ice awf^y free in front 
of places of business of all peddlers v^rho do not want to 
purchase ice from them. This custom is still in existence. 

"In one specific case five ice dealers are paying by 
force rent of $30 per month to a Mr. Scarengello to prevent 
him from opening an ice box 

"At the present time in Brooklyn and Queens ice is being 
sold at 60(i per cake retail although the manufacturer sells 
same for 55c!^ per cake. This method has been adopted by an 
association known as the "Ice Dock Associa-tion" and is being 
used as a club over anyone who does not join the association. 

"Vito Spadafino was compelled to pay- Vincenzo Rella $55 
to remove a truck from his route which was serving ice free." 

After .citing some further charges regarding the sale of boxes, 
etc., the Deputy Commissioner concluded: 

"These are just a few of the specific cases and I am 
attaching herewith a resume of affidavits in our possession, 
proving extortion, assault and unfair trade competition. 
I am also attaching complaints made against Rubel Bros, and 
the Knickerbocker Ice Company for refusal to sell ice to 
peddlers and compelling them to go to loaders." 

No doubt it would be easyto overrate the extent to which physical 
violence was a factor in the struggles for and against control in the 
New York ice market. It would be hard for one who was not there or 



(*) In WRA file folder labeled Minimum Prices, Hew York, Statements 
Transcripts re Hearing. 



9827 



-31- 

who had not fully studied the records to ari-Dreciate, however, the 
extreme tension ■tvhich existed. Ninety per cent of the ice wholesalers 
and retailers in Manhattan and the Bronx are said to he Italians. (*) 
The emergency hearing of July 19, 1934, wns an UToroarious affair. Some 
800 or 900 members of the industry attended. (**) The preponderant 
peddler and cellarman element in the audience greeted the appearance 
of their enemies, the ice box and cash and carry men with "boos, jeers 
and other demonstrations, and on one occasion a demand for police 
protection was voiced, though the chairman explained, for the record, 
that no one was heing injured. (***) 

The emotional stress, physical violence, and economic "oressures 
which have just been described were not always phenomenon auxiliary to 
the establishment of monopoly. In part, although -Drobably a small 
part, they represented pure racketeering. Frequently they arose, not 
because of the absence of competition, but because competition was 
proceeding in full violence. But the fact that overlords often fight 
among themselves does not mean that those who are beneath them are 
free. The fact that business groups struggle for a while among them- 
selves does not prevent this leadiiig, after a time, to the establishment- 
based on this very rule of force — of a level of prices and a division 
of business which is very different from what would exist if each 
company were actually free to try to go its own way, increasing its 
business through lowered prices to that maximum volume that its costs 
would permit. 

E. Forms of Agreement 

Assuming that the friendly pressures of purchase of output or 
plant, the coercive devices of price wars or guerilla selling tactics, 
or the moral persuasion that more is to be gained by cooperation than 
by competition, are si-fficient to create a disposition for all con- 
cerned to get together, there remains to be noted the means by which 
such a desire to work together may be organized. 

In this connection, it should first be noted that the mechanism 
of getting together is generally simplified by the comparatively small 
number of producers who need to come to an understanding. There is 
never a very large number of ice plants serving a particular market. 
Hence, there is not the insuperable problem of getting together which 
exists in agriculture, where millions of farmers nroduce cotton or 
wheat for a single market. Ilor is the task of reaching an agreement 
nearly as complicated in the ice industry as in the textile and lumber 
industries, where the producers run into the thousands — and where 
hundreds may be in a particular branch of the industry. 

(*) Joseph Carlino of the New York Ice Leaders' Association, Hew York 
Emergency Hearing, July 19, 1934. Full title given p. 23 supra. 

(**) Mount Taylor, Chairman of the Code Authority to the Deputy 

Administrator, July 25, 1934. In Deputy's file folder labeled, 
Minimum Prices, New York, Statements - Transcripts re Hearing. 

(***) p. 59 
9827 



-32- 

In most cities combination has gone far in the ice industry, 
so that most of the production is in a few hands; and if these con- 
cerns can agree it is likely to be in the interest of others to go 
along. In smaller places, there will "be, in any case, only two or 
three producers, if that many. 

Owing to the small number of producers v^ho must come to an agree- 
ment, it is probable that most of the understandings limiting compe- 
tition in the ice industry are of an informal character. The several 
producers simply charge the same price; and they refrain from going 
more than so far in seeking to take away the customers of others. 
Or the manufacturers get together and agree informally that prices or 
the distribution of business will be so and so. In a considerable 
number of cases there is evidence, however, that more formal arrange- 
ments are set up. These sometimes take the form of the establishment 
of a delivery company which will take such and such a proportion of 
its ice from each of the companies in the agreement. Delivery companies 
may also serve a utilitarian purpose in cutting down the number of 
trucks which have to pass over a given route; but their function in 
reconciling the conflicting sales efforts of manufacturers appears to 
have been the main motice in establishing them. 

The informal and' formal understandings and devices of ice manufac- 
turers for coordinating their respective price and sales programs may 
take a variety of forms. Many of these are illustrated by the following 
excerpts taken from' various issues of Ice and Refrigeration: (*) 

" Kansa s; The Kansas City Ice Company, a corporation 
formed Jan\iary 1 for the purpose of providing a delivery 
service for eleven of the city's largest ice maniifacturing 
plants, was dissolved early in January 1934 following in- 
formation from the federal government tliat the corporation 

was not practicing within the anti-trust laws The 

company had sought to eradicate duplication of territory by 
peddlers and route men of the distributors working for the 
ice concerns. All the output and distribution facilities 
of the eleven companies had been turned over to the one cor- 
poration. The Independent ice companies filed several suits 
alleging that the eleven concerns, by banding together, had 
entered into an agreement to control the price of ice, to 
limit its production and to refuse to sell their products 
to any one not a member of the corporation. 

" Iowa : The All Pure Ice Company of Iowa Falls was made 

defendant in a damage suit brought by the Marshall Ice 

Company who states that a written statement was signed by 

both parties whereby the defendant was to withdraw all 

business competition from the territory served by the Marshall 

Ice Company Plaintiff alleges the All Pure Ice Company 

entered into competition with the Marshall Company. 



(*) Full quotations with citations as to page and voluine available in 
the files of the Consumers Advisory Board (KRA files) 



9827 



-33- 

" California : For the Im-oerial Valley, J. B. Collins 
of "Riverside, said tliat iinder their agreement they had 
eliminated com-Detition on the routes hy dividing the terri- 
tory. Under the old system, a dissatisfied customer ^^ould 
simply change comiDanies, "but now the customers do not have 
this opiDortunity and the result is that they tell the 
company the reason for their dissatisfaction. 

" California : Charles Gabriel of San Bernardino said 
that in this city there were two cora-oanies, one large and 
one small. The chief difficulty had "been cut -orices. 
Under a pooling arrangement, -orices went u-n and he con- 
sidered the plan an excellent form of insurance. 

" California ; Hepresenting Pasadena, President Nugent 
said that they had formed their agreement to talce care of 
different -nrobleras from the one at Long Beach, in which 
section an ice plant had "been built primarily to dispose , 
of its product on a cash and carry basis. Under the terms 
of the agreement this plant placed its ice prices on a 
parity with those of other plants in return for a gioarantee 
that it would be able to retain a substantial part of its 
business. The result of this has been very good. 

" California: C. ?. Wallace of Long Beach said that 
one of the distinct advantages of their equalization scheme 
is the fact that under such an agreement members are not 
subject to advertising, rackets. Elimination of non-profitable 
routes and better working conditions also were advantages. 

"Texas: Effective Friday, June 1, the price of ice in 

Waco, Texas, was advanced from ZOd to bOri per 100 pounds 

This action was taken by the ten manufacturing plants of the 
city following a meeting at which permission was requested of 
Mount Ta.ylor, Chairman of the National Ice Code Authority, to 
establish such prices. 

" Indiana : Mr. Fauchier said that their committee of 

arbitration and appeal liad heard about 300 cases In 

practically all instances they were successful in arbi- 
trating the case At the last hearing a member of the 

ComiTiittee suggested a division of the territory under dispute 
which was acceptable to all parties. 

" Tennessee : The Ice Industry Code in Knoxville has 
stopped price cutting and a uniform price has been the result." 

According to a report submitted to the Deputy Administrator for 
the ice code on March 1, 1935 by George B. Haddock of the Consumers' 
Advisory Board (which report also made reference to the items in 
Ice and Refrigeration quoted above) , 



9827 



-34- 

"In Philadelphia, Pennsylvania, the mantif acturers 
belong to an 'Ice Marketing Service, "whiqh a-DParently . 
s-uggests prices at which the man-ufacturers should sell 
and is equippsd to discipline any manufacturei' or dealer 
who does not follow the suggested prices 

"In Louisville, Kentucky, and Nashville, Tennessee, 
the manufacturers have formed associations for the purpose 
of marketing their ice, such associations having the power 
to dictate the amount of ice which each manufacturer shall ■ 
produce, at the snme time setting the price at which the 
ice should be sold, since they are the selling agencies 
for the manufacturers. 

"In Fulton, Kentucky, and the towns nearby, the ice 
manufacturers apparently' have entered into an agreement not 
to invade each other's territory, thus eliminating a,ny 
competition within their own marke-ting areas, the extent 
of which apparently is one of the matters included in the 
agreement. " 

Many, if not all, of the agreements to which reference, .has been 
made above occurred after th3 setting .tsd of the ice code; and some 
of them obviously were stimulated by the opportunities for control 
offered by the code. It is believed, however, tha,t they are for 
the most part representative of practices which ha.ve been of long 
standing in the ice industry »• The actual machinery of some of these 
agreements will be considered in greater detail in that part of • 
this report which will deal with the Fort Ti^orth plan. 



9827 



"35- 



III, EXTENT AND DEGREE OF MONOPOLY IN THE ICE INDUSTRY 

FEIOE TO THE CODE 

Commenting on evidence of the type presented at the close of the 
last section, Mr. Haddock said: (*) 

"The Administration has encountered a great many instances of agree- 
ments betv^een manufacturers relating to prices, service, allocation 
o'f territory, production, sales and routes, and other types of 
agreement in restraint of trade. So many instances of these agree- 
ments exist, that it is entirely possible that they are the rules 
rather than the exception, throughout the country as a whole so far 
as the Ice Industry is concerned," 

A. Evidence Based on Price Structure 

The above statement appears to be conservative. without its being 
possible to furnish absolute -oroof, the indications are that understandings 
as to price are the rule in the ice industry, rather than the exception. 
Ice prices as quoted in Ice and Refrigeration each may have several 
striking peculiarities. One is that very rarely is there more than one 
price quoted for a single city. Another is that prices are almost always 
expressed in rounded figures, the wholesale price usually running in even 
dollars or half dollprs^(**) Another peculiarity is that in most places 
there is almost no change from year to year; and even during the depression 
there has, on the i^hole, been only a slight reduction in prices. Another 
is that prices over considerable areas are much the same. Prices in those 
places where there has been price competition stand out in conspicuous 
contrast to the general level of prices. Finally, these rather uniform 
and unchanging prices do not concentrate around a level which is deter- 
mined by cost; for, as will be developed more fully later, they are much 
above cost. Quite obviously the ice prices in Ice and Refrigeratian 
represent the ideas of ice men as to what prices should be, rather than 
the result of the operation of unthinking forces. 

The prices reported for 1935 in Ice and Refrigeration cover 314 cities 
and towns in the United States; and are therefore too numerous for detail- 
ed presentation here, in such a way as would fully illustrate the 
characteristics noted abeve. The follo^jing table showing the changes from 
year to year in the average price (wholesale price to dealers; and price 
of ice delivered to domestic consumers) should, however, be of some 
help in clarifying the general situation: (***) 



(*) Letter of March 1, 1935 to the Deputy Administrator for the Ice Code, 
Reproduced in History of the Code of Fair Competition for the Ice Ind- 
ustry, from the vie^Tpoint of the Consumers' Advisory Board, Geo. B. 
Haddock, June 14, 1935. 
•(**) However, prices are more rounded than ever during price wars, one 

dollar a ton being the rock bottom to whicn they sometimes fall, which 
suggests that a one-dollar price is just as arbitrary, or more so, 
than a five-dollar price, 
(***) Data taken from NRA Division of Review Statistical Materials No, 43, 
Ice Industry, p. 15. (all prices being converted, however, from a 
lOO-lb, basis to the ton and 50-lb, basis used below). 

9827 



Per 50 Its.) 


31.7 


32.3 


33.2 


31.7 


31.5 


30.9 


29.6 


2S.2 


28.1 


27.3 



„36- 

Avera^^e Uliolesale Average Donestic 

Price- I0 Dealers Price Delivered 

Year (Per ton) 

192S . . ' $5,6S 

1927 3'M 

19 2g 5o-20 

1929 J; ^ -5152 

1930. . , , 5.30 

1931 ., ■ 5.30 ■ ' ' 

1332 ,,,, ■. -^.iG 

1933 U'.S2 

193^ ■ 5.00 ■ 

1935 -^.95 

It is possilDle that the average price of ice "has ve.ried less than is 
indicated "oy this talole, "beca-ase the avereges here sho'jn are the un- 
vjeighted averages of the reported prices, and ine.ny one year many- 
price quotations are nissing; so that apparently- : the averages do not 
.cover identical' localities 'frou year to year. (*). It should also he 
noted that the ic© prices reported are hased on qf.otations of no 
specified date, the only requ-ircaent "being that they refer to sone 
Period :in the first four nonths of the year. ... 

There is danger of course, that the reports of ice prices uill 
sugges.t 8- greater degree of price confornity than actually exists. In 
the records of hearings ' there V7as s one tines considerable diss,greenent 
het'veen the prices as named on one occasion and those named at another 
tine or place. It is also hnovn that dealers uere often given con- 
cessions fron nhat v/ere supposed'to he the regular i&e;prices. Final- 
ly, uhere a company delivers ice itself, hut also has a qtiotation to 
dealers, it nay 'he that the dealer price is of less ; importance than 
might appear on the surfa.ce. The need for care on this last point nill 
ari-se chiefly tuhen we come to consider the margin hetv/een the cost 
of manufacturing ice and the sales price to dealers , it heing neces- 
sary to make price and cost comparisons chiefly on this hasis,' because 
of the inpossihility of making any reasonarhly close and reliable compa- 
rison het'Teen the price of ice as delivered to the domestic consumer 
and the cost of ice so delivered. . v* 

B. Court Records, and Attitude of Anti-Trust Lan Enforcing 
Agencies 

The most authoritative evidence to the effect that competition, 
as ordinarily conceived, v/as long ago virtually destroyed in the ice 
industry, although this evidence relates only directly to a single state, 
^■'as brought out in connection nith the case decided in 1932 by the United 
Stated Supi*eme Court on the constitutionality of the 'Oklahoma 'Ice 
Act. In the present connection, our interest is chiefly in' 

(*) On the other hand, it may be that the averages are steadier than 
• they should, be, becau.se being unweighted, they have been influenced 
only slightly b;,'- the radical reductions during price \7ars nhich have 
occurred in some cities. For further discussion of prices see page 
belov;'. ' ^ . 

3S27 



■BP 



-37- 

the latter part of the follorrins qi-otation from the minority opinion read 
"by Justice Brandeis; but the former part, vrhich exi^lains hovr competition 
came to disappear, is necessary to a full understanding of the passa-^e. 
It will "be observed that Justice Brajideis is referrin^^ to conditions 
Tprior to the passage of the Oklahoma Act, nhich occurred in 1925. 
Justice Brandeis wrote: (*) 

'■ "The relative ease and cheapness nith nhich an ice plant nay 
be constructed exi^oses the industry to destructive and frequently 
ruinous competition. Competition in the industr;^ tends to be des- 
tructive because ice plants have a deteiminate capacity, and inflex- 
ible fixed charges and operating costs, ajid because in a market of 
limited area the volume of sales is not readily e:cpanded. Thus, the 
erection of a new plant in a localitj'- already adequatnly served 
often causes managers to go to extremes in cutting prices in order 
to secure business. Trade journals and reports of association neet- 
ings of ice manufacturers bear ample witness to the hostility of the 
industry to such competition, and to its unremitting efforts, through 
trade associations, informal agreements, combination of delivery 
systems, and in particular through the consolidation of plants, to 
protect markets and prices against competition of any character, 

"That these forces x/ere operative in Oklahoma prior to the 
passage of the Act under revievj, is apparent from the record. Thus, 
it was testified that in only six or seven localities in the State 
containing, in the aggregate, not more than 235,000 of the total popu- 
lation of approximately 2,000,000 was there "a semblance of competi- 
tion;" and that even in those localities the prices of ice were oi^ 
dinarily uniform. The balance of the popula,tion was, and still is, 
served by companies enjoying complete monopoly," 

Reference has already been made to the dissolution, which occurred^ 
in June, 193'i, by consent decree, of the Kansas City Ice Company, which 
the Federal (Government had held was in violation of the anti-trust laws. 
This attempt at monopoly came clearly under the Federal jurisdiction be- 
cause of the interstate character of a market, located as Kansas Citj^- is, 
on the boundary between two states. The Kaaasas City case was, however, 
exceptional. In general, the Federa-l Department of Justice has not con- 
cerned itself with the ice industry, and, as for the states, the situa- 
tion which is Icnown to exist in Texas appears to be tjrpical. It is be- 
lieved by many that the Fort Worth Plan, in operation in Dallas and in 
other places, as well as Fort Worth, is in violation of Texas l8,w. Tacit 
admission of this wa,s made, when, the Texas legislature attempted to legi- 
timatize such arrangements by providing that, if approved by the ITIIA, 
■they would not be unlawful. The ITRA never approved any of these agree- 
ments; and after the Schechter decision, could not. But the illegality 
of the arrangement has meant nothing in practice, for the state of Texas 
has apparently made no attempt to prosecute, (**) 

(*) 285 U. S. 292-293, 

(**) For details bearing on above statements concerning Forth Worth plan, 
see P. 193^,, aO'S:-, below. 



9827 



r 



-38- 

I;i other v:ords, though the layr does not sanction it, coruaon sense 
recognizes that the character of the.,jice industry is such that it rrould 
be folly to expect ice conpanies to engage in full and free competition 
of the orthodox type. It is the conscnstis of opinion among those vho 
kno'7 the ice industrj'- tiat, taking the country generally, state anti- 
trust laj.7s are rareljr applied against ice conpo.nies. It seeris safe to 
conclude that the hreakdonn of ordinary competition as a means of con- 
troll i.vj the ice industry has been general. This does not nean that 
competition does not at tines exist or that its possihility may not be 
a factor of importance. But the -t^rpiGal an.". usuaJ condition has ocen 
one of definite restraint of trade. 

C. S.jread 3etnocn Cost and price 

As the reservations just mao.e suggest, there remn.ins a question 
as to just hov.' significant the inpairnent of conxjetition in the ice 
industr-r maj^ ho.ve been. Monopolj'' and comp'-tition, are nearl"/- alv^ays 
matters of degree. Konopolj^ tod,%y ma^/ not mean a gre.at deal if there 
is nothing to prevent any one v;ho ^Tants to from entering into business 
ne3:t month, and if price and service todav are not much different fror. 
whs,t the;,- rould be if there vere- competition — or if, competition being 
ruled out, prices, etc., were fixed by some responsible public authorit" 

Speaking of nonox)Ol"" in Old-alioma, Justice Brandeis, in the 
opinion previously quoted, added these vords: "T/here there ^vas compe- 
tition, it often resulted to the disrdvantpge rather than the advant- 
age of the public, both in respect to prices and to service." (*) This 
however, is not saj'^ing as :Tuch as might,' appear, because, in the opinion 
of Justice Brandeis, competition in the Oklahoma ice industry led to 
some very bad conditions. 

Looking back a,t the Oklahom.a attempt at controlled monopoly 
from a somevdiat more critical angle, it may bo questioned, hc^ever, as 
to \7hether that further stren.'^thening of the forces for stability in 
the ice industry '■hich the Oklahoma la^r '7as intended to permit, did 
not tend to strengthen ice prices over vhat they would have been \uider 
the somewhat more competitive condition ^rhich would have existed ■ciith- 
out the lav;. For chart comparin ; the course of ice prices in OlJ-clioma 
rrith those in other southwestern and southern cities between 1928 and 
1934 appears to show that in the last ,two years of uiiquestioned appli- 
cation of the Oklahoma Act, prior to the launching of the attack on its 
constitutionalit^r which occurred in 1930 (and promptly met with initial 
success as well as final success two j^pars later in the U. S.' Supreme C 
Court), ice prices in Oklahoma were tendi'i upwai'ds as compared 'Ith ■" 
those in other states. But folloi-i-n.g 1-930, O::lnj:oma ice prices droppec 
sharpl;- dow-nward. (*^ 

One of the most important tests as to how much vitalit;^ and 
significance there was in the pre-code tendency towards raonoply in ice 
lies in the question as to how much spread there was, prior. to the code 
b«^t-w30u ice costs and ice prices. 



((^) ;jS3 U.S. 293 

(ii*) For chart, see Benjamin I,i. Parker,- Control of Production 
Under the ice Code. Harvard Business Review, Volume m, ITo. 4, Sumner, 
1935. 3^^t for cautions against reaching hasty conclusions on this 
..subject sec below p. is*. 



9827 



-3'J- 
1. "NOmiAL" ICE PRICES 

pron tre table of ice prices presontad in the first divii^ion of 
this Sectioii (III-A), it may be uotjd that, e-cept for a little dii 
in 1933 to T'hich, LjecaTisc of the •'■nc^rtr.in character of o-or data, too 
much stress shoulrl not be Ir.id ~ the averafje v/holesale price of ice 
unr'-eif;hted r.vera.^e foi' r^ll coninunities in v,he United States covered 
by the Ice c.nd Sefri;;.ir-.tl ^'ji reports) had never, prior to the code, 
fallen to bclo'^^^.OCr aTtoX" This -..'ps the price to dealers. (*) The 
follo\7ing -jrice quotatior for varioan It'^adin^ cities, put in the record 
of the IIot; Yori: 3ner,-!;ency hearln.-; of JuZ.y 19, 1934 by Pendleton Dudley, 
Executive Secretary of the v;e^ York City Ai'bitration and Appeal, will 
give a more co-'cr-:te picture of the f;enerai prico situation, (**) 

IT noles al o price 
City (per ton) 

Ronton $4,33 

p... ladelphia 4.67 

Balti,joro 4.50 

W'l.ohiiif'ton 4.50 

Clt^velf.nd 5,00 

Atlanta 5.00 

Miami 5.00 

NeT Orleans 5.00 

Eix'pint^ham 5.00 

St. Louis 4.75 

Chicago 4,50 

Milv.ai4:oe 5.00 

Minneapolis 4.50 

Kansas City 5.00 

El Paso 4.50 

penver 5.00 

Siou>: palls 4.75 

Helena 4.50 

Los Angeles 4.50 

San F-ancisco 4.50 

POx-tland 5.00 

In lTe-,7 York City (not listed above) , prices at this tine 
were sonewha.t lower than formerly (which was one reason for the decla- 
ration of a. price emergency) ; but Mr. inidley stated that from 1927 to 
1933, ITeu York prices had during the s-nnmer months never fallen belou 
$4.00 They had usually been $4.33, 

Supplementing the above figures for cities, the follOTriu^r 
passage fron a report by the Mou.nt Taylor, Chairman of the Code Autho- 
rity for the Ice Industry;- to the Deputy Administrator, dated January 
23, 1934, gives posted prices for ice furnished to vegetable growers 
in many r..-.rnl area:-, (***) 

(*) An un'7ei:,h.ttc avers,~.i nay he r- little too high because of 
the un6.ue influence of small co; Aiarities,. 

(**) PP. 2S-4 Transcript in SIA. files. 

(***) In Depnt;^ Adninistrator' s file on application for perm.it 
9327 ''^y pc,rmers Coonerativc Ice Co. ,. Norfolk,, Va,, por ej^jlanation of hou 
■;o find files on applications, see not p. X9 supra. 



-40- 



It is staited that: , . . : .' . 

"Pagaro Valley Cold Stora^ge Company of 7at?onv.ille, 
California receives S3. 50 for ice delivered s.t . 
packing sheds; C. W. Tavjney, Eipon, California, posts 
. for the -same $4.00- per ton delivered and $3.00 at 
\,the plant platform; that tlie Peoples Ice Corporation', 
Fresno, California, ■ posts prices of $5.00 at plant 
platform and $5.50 delivered; that these named scliedules 
reflect ths range of California prices; that in the 
Corpus Christi, ■ Texas, vegetable area, where there is ,-. ;■, 

keen competition, prices are $4.40 per ton less two 
percent for cash to. vegetable shippers, and to vege- 
table trucks $5.00 per ton, and to shippers car icing, 
$4.50 per ton; Central Povi^er a,nd Light Company (and 
the same company quotes the same prices for the Rio 
Grande Valley and the Winter Garden section of Texas, 
all of which s.re areas of keen competition); that 
Chase and Company of Sanford, Florida, car load distri- 
butors, citrus fruits and vegetables, filed prices for 
ice for vegetable shipping of $4.00 at platform and 
$5.00 in bunkers in car or on top of load in car, and 
$3.75 in Carload lots of 15 tons or m.ore; Seminole Ice 
Company of Tampa, Florida, posted prices of $5.00 per 
ton for similar services that Sarasota Ice Company of 
Sarasota, Florida posted for the same service, $4.75 
for ice delivered in the body of car and $5.25 when 
ice is placed in cut pieces on the lading similar to 
much of the icing tiat is done at Norfolk for $3.50 or 
$4:. 00; that East Side Ice Company, East Palatka, Florida, 
posted for ice for top or ca.r icing pur.oses, $4.00 
per ton f.o.b. platform; and finally, that these j^rices 
above mentioned are selected at random from price 
schedules filed with the Code Authority as required by 
the Ice Code, and reflect the trend of prices in the 
vegetable shipping areas." 

The price in the ilorfolk, Virginia area was $3.50 wl'.en ice vifas obtained 
in Norfolk; and $4.00 when it v/as delivered in rural areas. 

It will be observed that these prices tended to be somev/hat lower 
and less uniform than those to des,lers in cities, perhaps in part be- 
cause the shippers in some places ha,d a ^rcater measure of bargaining 
pov7er.. 

2. COST OF LiAMlFACTUHIlIG ICE ■ / .' 

It has not been possible or necessary, s.s a pe.rt of 
this study of production control, to come to precise conclusions y/ith 
respect to the cost of manufacturing ice. Each line of evidence which 
is open seems to xaako it amply clear, however, that thougli exact con- 
clusions as to ice costs cannot be reached, tliey have generally been 
well belov/ the prices which, have been charged — except, of course, 



9827 



-41- 

in the case of some of the price wars. In contrast with the prevailing 
wholesale price of about 15.00 a ton (or even tiie compE,ratively low 
figure of /;4.50 a ton), tlie manufacturers of ice-nialcin£ niachinery, at 
hearings extending from tlie Atlantic to the Pacific, have placed ti^a 
cost of malcing ice and placing it on the inam\f acturer' s platform at 
about $1.60 or ,'!5l.80 a ton. lliu?, C, Liurphy, representative of the 
Frich Ice Machinery Company, at a hearing on March 26, 1935, on the 
application of the State Ice Corpcrf.tion of New York City for permis- 
sion to build an ice plant, testified: (*) "In a modern plant with 
modern equipment the ice should not cost more than fll.SO a ton in- 
cl-uding all overhead." 

Wlien ice inanufacturers and others have taken issue v;it-i these 
claims as to low manufacturing costs, advanced by tlie manufacturers of 
ice machinery, it has comiiaonly been urged that' due account has not 
been taken of tlie element of load factor. For future reference, it 
is therefore irjportanf to note that Mr. Lrariiiy stated that his fig-ares 
were based on an annual produ.ction of 55,000 tons of ice from a 250-ton 
plant — which would mean a IoeA factor of about 60 percent. 

(a) Analysis of Estimates Made by Machinery Man-ofac- 
turers. 

There vrould appear to be four respects in which 
Mr. Murphy and other salesmen for ice manuf picturing equipment, in 
their very hurnan desire to malce a good showing for their wa.res, have 
understated typical ice manufacturing costs — thoug^i in eacu case 
the amount of understatement would appear to be rather li..iited. 

In the first place, Mr. M'arphy' s costs figure of 
ol.oO per ton was for "modern plants"; ajid construction of plants for 
several years past ha.s been small. Mr. liurphy estimated the cost in 
the older pLants at :;2.00 per ton or over (up to $2.25) or a differ- 
ential of 20^ to 45(^ per ton. Of course, it may be said that plants 
having equipment v/hich produces at a higher cost than that of plants 
which could not be installed should be this time be depreciated to a 
point \uhich would malce their total costs no greater than in the case 
of a nev; plant which made adeoxiate depreciation charges. Nevertheless, 
we should perhaps regard the $1.80 estimate as representing costs under 
pretty favora,ble conditions as respects the types of equipment used. 

In the second place, Mr. Murphy indicated th.at 
costs were lov/er for la.rge plants; and a plant of 250 tons capacity 
is, talcing the country as a whole, a large one. In the great city of 
Cleveland, of 24 plants running and not running, only one had 250 
tons capacity. Aside from the one 250-ton .plant , Cleveland has one 
200-ton plant; tv/o 195-ton plants; and most of the otiers range from 
110 to 160 tons. 

In New York City, however, plants of 250 tons and 
upwards were very common; and of 110 plants, there was one having a 
daily capacity of 900 tons; one with a capacity of 750 tons; one with 



(*; p. ?8, For ex-planation on how to find a hearing, or any ether data 
collected in connection v;ith an application for a merrait to build, 
see note P. y^ su-ora. 

9827 



-42- 

fZQ. t::.;--:; t-.;" riL. ''■jO tc:"-?; and three with 500 tons. The 250-ton plant 
was, therefore, a conservative basis to take for New York City; but 
wo'dld net be for most parts of the country. {'^) 

In the third place, a lo3,d factor of 60 percent is higli, as most 
plants operate. As previously stated, the industry regards operation 
at 50 percent as operation at capacity (owing to seasonality of demand 
and other factors). For the co'ontry as a whole we shall later have 
occasion to show that tiie average load factor before the depression 
ran about 44 percent. Tliis last figure, however, could hardly be 
considered as representative, because it must have been affected by 
the inclusion of shut down and obsolete plants, and by any condition 
of excess development or exaggeration of actual pra,ctical capacity 
which may have existed at any point. 

On the other hand, a 60 per cent load factor v/as by no nieaiis un- 
known in the ico industry, even in 1933 and 193 1-, which ^Tcro years of 
lowest volume of sales. Of the 29 plants which one larr^-e ilcw York Com- 
pany was operating in 193'i (barring some which ajjpoar to have started 
or closed during the year), 11 had load fs.ctors of fron 20 ■ to 39^ (in- 
cluding one at 19^); 9 had load factors of fron 'lOfo to 59',o (5 of these 
having load factors of 55^^ or over); and 9 had load, factors of 60';^t or 
over (one running at 85^). On the other hand, of the 19 jDlants which 
another large coinpany had in opera.tion in 1954, one only exceeded 60fo 
(75^); and 6 only were in the 50s. Si:: operated bet'r'ocjn 20^ and 29^; 
the balance (5) being between 30, and ■^9fo. Of independent companies . 
in Hew York City operating only a single plant, there were four which 
approximated or exceeded a 50S load factor (one at 59^0; one at 54^; 
and at 66^; and one at 7lfo) , 

In Cleveland, of 16 plpjits opcr-'^ted by the City Ice and Puol 
Company, four opera.tcd at 5C'fo ca-oacity or higher, one reaching 70fo, 
Of six slants not owned by the City Ico and Fuel Conpany, one operat- 
ed at 75'p capacity and one a.t 59^?.** 

For lloxr Orleans, where the denand for ico is less seasonal than 
in most northern cities, it has been figured that if all nlants were 
run to capacity in the hottest mouth, the average annual lord factor 
would be in the sixties. It would a.'aoear that a. city having npiiir 
steaiTiheated apartments, like Hew York, wotild have an advantage in load 
factor over comnunities where detached dwellin:s a.re more connon, ')e- 
cause of the greater winter consunjtion of ico. On the other hand, 
southern cities with their long, hot surimers and short "inters, should 
have an advantage over northern cities — o::ccpt to the extent that 
there has been in the South a construction of excess Capacity. 

It wo-j2d appear, therefore, that a plant operating at ■ 60 ner cent 
load factor is oocrating under somewhat more favorable conditions than 
most olants could hone to attain. 



(*) Figures in this para.graph on nlant ca.-oa,city based on Porn 2. as 

subnittcd by Code Authority. Sec note p. 19 su])ra. 
(**) For source of da-ta see note p. 26 supra. 

9827 



-43- 

The fourth .reason vrhy r. $1.30 cost "or ice is to lou to "oe t^r^icrl 
has rlmr.dj'- been parti" covered. It relates to the hi -her costs which 
naturally tend to prevail in some places as conprred v;ith others, nainly 
"because of dif :'"erences in size of pla,nts and load factor. Thou-;h it 
•^as claimed in the llerr York emer/^ency hearings that costs in lTe>.' York 
City were higher than almost any place else, this nay be seriously doubt- 
ed. Because of the concentration of 'oopulation, permitting the erection 
of large plants; the more economical adjustment of plant capacity and 
plant operations to demand which should be possible in the largo )narkot; 
and the more nearly yeo.r-round demand for ice, it vculd appear that costs 
in some of the large cities should be less than in many snail places, 
notwithstanding higher wage rates. 

(b) Analysis of Costs as Submitted by Ice Hanuf acturers 



Although for the reasons ncnticned, the estimates 
of the ice costs presented b^r machinery nanufa.cturcrs appear to be some- 
what less than those w]iich would bo practically attainable 0:1. any general 
scale, the evidence which liEA collected on costs in connection with the 
six price emergencies which wore declared in ITew York; Ilacon, 'jeorgiB.; 
New Orlerns; Dallas; Fort ITorth; and San j\ntonio, indicrtos that act- 
ual costs were much below v/hat had been regarded as normal 'orices. On 
more than one occasion the finding of lIEA was that -prices which the in- 
dustry regarded as so low as to c-^ll for emergency nrice fixing were not, 
in fact, as low as man^of acturing costs. (*) 

The :^ost adequate cost drta submitted to 'JRk was 
that for Hew York City. Based on the costs as reported for one of the 
two main manufacturers, the National Recovery Administration set a mini- 
mum wholesale price for Hew York City of 1,2.83 a ton. The costs report- 
ed by the other large 'a.-^nufacturer (the two corroanios together manufact- 
ured in their o\-m plants some SBf'j of the total Hew York City output) was 
only o-\^ greater. (**) 

Although the $2.38 cost figure vr s n.cceptod with- 
out question, and made the basis for the la.st of the several emergency 
price orders in IJew Yor]: City, an analysis of the itcns entering into 
this cost as enumerated by the company makes it very doubtful whether 
the entire $2.88 consisted of nocessarj"- cost. 



(*) This was tru.e of Macon, Georgia, and of the first effort to es- 
ta.blish miniiaum prices in llcw Orleans. 

(**) All fifcures in this section (b) , from cost reports submitted by 
Hew York ice raanui" acturers, contained in folder on Hew York ice 
costs of Accounting Unit, Division of Hesearch and Planning ilPiA - 
exce-ot for that data to which reference is ..lade in next footnote. 



9827 



«44- 



The second largest item of cost amounting to 62(?f per ton was de- 
preciation. It is coromon knowledge that the allowance for depreciation 
claimed by coroorations in re-norting to oublic bodies is often m-ich 
greater than the oublic authorities are willing to accept. A check with 
the Deoartraent of Internal ^,evenue on the denreciation allowance — not 
of this comorny but of sjiother cor v ration which reported almost the 
same amount (67(z;') — showed that in 1934 this other corporation reioorted 
to IIRA. an annual depreciation 18 per cent greater than the figure allow- 
ed by Internal Hevenue in 1929 though there had in these five vears "been 
practically no change in the coraoany' s ice making capacitv and all the 
capacity, erccepting only 4-'^ of which was new, was now five years older. 
In 1929 the Department of Internal Revenue had cut the depreciation 
claimed by this company to less than 40 per cent of the amount then 
claimed. (*) 

On the matter of depreciation it should also be pointed out that 
the company whose figures were accepted by NRA presumably included in 
its allowance — and this undoubtedly would be p.llowed by the Bureau of 
Internal Revenue — depreciation of its entire investment, whether in 
open or in closed plants. The company from which the $2.88 cost figure 
was obtained had 8 per cent of its capacity tied up in plants which were 
completely shut down through the entire yepr for which the cost reports 
were made, one of the plants having been shut down as earlv as 1930. It 
may also be noted that of all the olrnts of this corporation, about one- 
fourth were more than 20 years old and an additional 5''' per cent were 10 
years or more old. Only one-fourth had been ouilt in the last ten years. 

In view of these various conditions and also of the likelihood 
that some of the depreciation was on enuipraent used for cold storage, 
if not for fuel, it would appear that the depreciation charge of 62^ 
for each ton of ice produced was very substantially in excess of any 
necessary allowance for this item. 

To the extent that the items for taxes, rent and maintenance of 
property may have been chargeable against thnt 8 per cent of this company's 
capacity which was completely shut down, it would appear that the company's 
costs for the first two items ran 19^ per ton; and for the third item, l'^<i 
per ton, these two items might also be considered as being somewhat in 
excess of the cost necessary for carrying on the ice business which was 
actually being done d-uring the year 193o-1934. As to whether the item for 
administration expense included salaries or other items beyond a reasonable 
cost, there rpparently was no investigation made. 

An item of 10^ per ton for city tr;jisfer of ice, though not strictly 
a manufacturing cost, may to some extent be admitted on the ground that 
economies may be obtained in manufacturing operations by closing down some 
of the plants for part of the vear and concentrating manufacturing •' 



(*^ Data on which these comparisons .,'ased contained in memorandum of March 22 
1935, from A. L. '^ngle to R. K. Straus, Deputv Administrator, in files 
of Deputy Aaministrator folder "Ice Data en Cost of ";.!amaf acturing Ice in 
the New York Area", Use also made of data on Form 2, see p. 22 supra. 



9827 



in ctliers, or "by shriuin;p- ice tc places cf uliolesale. fiisti-i Ki-tiojQ rtxtvo 
convenient than the raanuf actiirin^r ""jlpnt's iDlatfcrm. To •-.'hat extent the 
lO;} ■n&Y really have re-oresented distributing costs is n<-\, clear. 

3. C ^rf/oariscn cf Cost and Prices 

Prom the above analysis, it \.'o-ald an :ear that srnething more than 
$1.80, but sonethin3 less than $2.88, reiiresented the true cost of nan- 
ufacturing ice in Ne^T York City — as against prevailing wholesale orice 
schedules, orior tc N:;A, of sbi-ut $4.00 or $4.33 ner ton. The necessary 
ice costs in other p'^nrtg of the United States .■ere probably often sorae- 
uhat higher (in soiae casus they nay, however, ly've been sone'That lo-er); 
but it is believed from such rjrice data as ras collected that there iras 
usur-rlly no radical difference in costs. (*). The $4.50, $5.00 and in 
some cases $6.00 arices for ice v.'hich h'>ve been t^.^iical for the country 
vould, therefore, ap-oear to include a very nide margin above cost. (**). 

D. Ice Cora^oany Profits 

AS previously noted, there is a a^uestion as to 'That extent ice may 
have been sold to dealers at prices belon the ijublished prices; also the 
published wholesale prices did not a )-nly to ice delivered directly by 
manufacturing com-janies to the consumer. This difficulty ras;'- in some 
degree be avoided, though, as "e shall see, other fresh difficulties :7ill 
be encountered if as another test as to hor; far limitation of competition 
really affected the "orice and narketing situation in the Ice Industry 
prior to IIRA, ^-re underta^ie an examination int" company profits. 

Before leaking into this subject, it shcu].d first be -ocinted out 
that lc\7 or moderate -irofits in ice manufacturing wo-'old not necessarily 
mean that prices i.-ere near -:hat they '.o^jld be if full but not ton des- 
tructive ccm-->etition, '.-ere in force. The very spread in the margin be- 
tiTeen necess-^ry costs and selling "irices might lead ice companies to.jin- 
neoesssry expenditiores v.'hich rruld cut do-.'n their -'jltimate ;orofits. It 
is knonn that ice companies have s'-nent large funds in their wars rdth 
one another and that com-oeting plants have been bought out at exorbitant 
prices as in the case of the quarter-of-a-raillion dcll-'-rs "orofit xihlch. 



(*) In some southern cities -.vhere plants are operated by diesel "oo-Ter, 
the cost of pOT/er in such plants is materially less than in Ke^j York 
City, i-here electric nov;er is usually used. On the other hand, some 
ice com-oanies having antiquated steam plants, or purchasing elec- 
tricity at high rates, have unusually high po-'er costs. The cost 
of power for the llev; York corroany \;hose costs were taken as a stand- 
ard, was 55,!: per ton. 

(**) In some plrices, at least, the services and costs of manufacturers 

extend somewhat beyond manufacturing, even where ice is distributed 
entirely tlirough dealers. In Los Angeles, according to Windsor 
Lle-'ellyn, llanager of Ice Exchange, "The distributer is given a 
certain territory, certain assistance, telephone calls, route 
service and the company maintains the resale price over that produc- 
tion." Hearing on application of A. L. Reaves, May 28, 1935, td. 
no. (K3A files). 



9827 



-46- 

Eubcl gr.vc Sosoif in IIctt Yorl' Cit/«* It v-ould r;o-T'rr thr-.t in sonc sec- 
tions Qf the country the desire to pArticio'^to in thi -ororits of the ice 
■business, or other iiotivcs, have lord to cxto?i3ivo plrnt constriiction 
nhich, throu'ch rcdiicin--; the lo-'^d;, factor , has rr.ised c<.vorrr--o cost in the 
com^iunity much pJooyc its necessary l-vel. If corapctition or other nofns 
vrere effective in reducing \7h0l0sale ice -orices to p.hout half, or perhp-is 
•a little more thpn one-half, of what the;?- have teen, it v/ould api^ioar that 
ice manufacturers could fairly readily adaot their nsthoas of crrrying on 
their "business so that they could rip.kc an .a,dequato return on this price 
"basis.** 

1., Per Cent of Gross Sales Retained as ":^rofit 

rfctwithstanding the ccrplications involved in turning spread 
"betrreen necessary costs and prices into .actual profits, the evidence in- 
dicates that the ice industry was, on the uhole, quite profitalole prior 
to and during at least the earlier p-^rt of tlie de-;oression. Just hon pro- 
fita"ble is o"bscured "by the fact that Many ice coi:ioanios are also in the 
cos.1 "business; and their reports of sales, costs, and ;orofits do not 
segregate the tiro lines of business. Other ice cojroaniosare also in the 
utility "business. • 

The City Ice axid F-ael Co'ipany is the largest ice con^r-ny in the 
United States, The report of this conpaiiy as pu'blished in '"oody's shOT7 
thrt in 1S27, out of every dollar received for the sale of its products, 
21rf, on the average, nrs retained "by the conprn;/ as not ^jrofit. This was 
rafter deduction for depreciation, and after paynent of interest on "bonds, 
etc. The report in ''oody's did not segregate ice sales fron coal and other 
fuel sales. If the corporrtion was una'ble to retain as '^rofit 21 per cent 
of rrhat the consumer pp.id for coal and other fuel, then the pro-oortion of 
the consumer's ice dollar retained "by the City Ice pnd Puel Coi.ipany as 
•orofit vrould have "been larger tlian 21^. 

He also do not liaon i-hat -orooortion of the gross incorie vhich the 
City Ice ci Puel Conj-irny derived from ice Crane from wholesrle sales and 
wheat proportion from retail sales. 

In 1928 the per cent of City Ice & Fuel Comjr-ny's gross sales which 

was retained as net profit rose from 21 to 22 at which level it continued 

through 1929 and 1930; in 1931 the ratio returned to 21;':.; in 1932 it 
declined to 17fo, 

Similar figures for the j'u.ierican Ice Gomprny, the country's second 
largest m-nufa^cturer of ice, show a sli";htl7 smaller ^:)rofit ratio: 1927, 
l-'.fo; 1923, IGfb; 1929, 17f,; 1930, IS,^; ' 1931, 15',.'; and 1932, 9;!^, 
This comaany also sells fuel. 



(*) See reference page 24 

(**) It is of interest to note that in nort'nern cities, where there is 
some competition, at least potential, "ith natural ice, -ilatforra 
prices as low as $3 "oer ton are sometinos quoted. (Ice and Re- 
fri :eration, ila.y 1935). On the other ha.nd in the South '-'here the 
lon;;er summer should rrl:e for lower manufacturing costs, prices of 
$6 are still not uncommon. 

982? 



-47- 

3o^o ice con jrnins li:3t,el in ;;o'".l-7's have shovm results very nuch 
uelov the levels indie: ted rcovc — not losses heinfj shot-n ns urrly as 
1930. But such GO'iTjanies veie in the lain in a section of the country 
'•^here the ice business hao. oeen t'^ken over by utility corrDanies on an 
cxti-einoly reckl'^ss "basis - -ilrnts heiUi" oou-ht at exorbitant oricos 
(ivith co-ijequent hi"h ovorhj- d chT.'es) and o-pe rations boin^;; cond\icted 
in such a careltSss nanner as to i'.ia]:o a noteworthy contribution to vrhat 
has come to be regarded a a .1 rha;os the most notorious chapter in Aneri- 
i" finance.* 



The ratio of net pr.ofits to ';ross sale'o tells us little about the 
Toer cent return on caoital invested. This, in the case of the comanies 
referred to a.jovo, v/ould be difficult to deterMine, first because of the 
confusion betxreen ice seles and in/estnent; fuel sales rnd investnent; 
and soMetines other sales; and, second, I'ecrusn the croital structure 
of a coriDoration is to so large an extent r^erely based on the ca.ioitaliza,- 
tion of its errnin^j: porer. 

Some interestin-j lijjht on the ratio of ice profits to actual in- 
vestnent, in the years before tne degression, inpy be obtained, hcrcver, 
by an oxp.iination of the returns on investment i7hich characterized 
some of the underlying ice -.-iro ^ei ties at the time they were being taken 
over by holding cor.r^anies. In the 193-1- edition of his Financial Policy 
of Corncratioj.s, Arthur Stone D-^'wing**devotes considerable space to the 

(*) Insxill's lijdwest Utility Cc;ipanv (together rdth subsidirries) was 
the arch offender in this respect. See, for instance, Sowing's 
chpracterisation of this comaiXj'". "the ijost tragic and in a sen- 
se the iiost fa.r re'^ching- in its consequences of the holding comp- 
any failures wrs that of the "'iddle 'Vest IJti?.ities. The colla-ose 
of this holdiu::: coinrn"'' -as n^.t due so nucli to liolding comirriny 
abuses as to r.tuoid confidences in the llev 2rp., Ooerating pro- 
■oerties bought at fictitious valiios were presumed to yield fpir 
return because the continuing and increasing pros^oeritj' of the 
country would presently so increase their net earnings that the :mr- 
chase price woiild be fir.all';'' Justified." Dewing, Arthur Stone, 
t he U'inr'ncirl Folicy of Goroorrtions, (liew York The Ronald Press, 
195'i) :>. 377n. .'bad again: "The third thing evident, from the 
collapse of the "'idcle Vest Utilities was the werlcness of the in- 
dustrial affiliates. In a mood of over-zealous rnbition, the mrnage- 
nent had acouired old-established cotton mills at a tine when the 
cotton industry wrs lean, if not starved, it had built pa-oer mills 
when the production of paper in this country and in Canada far ex« 
ceeded the demand; it ha.d even bou^jht hotels." Ibid, p. 878n. 
See also description of w."^ in which this co i-i-^ny and subsidiaries 
were o-oerating ice plants in the next section of this Chapter, 
pp "50»«9^, 

(**) Hew York, the Ponrld Press, pp. 835-838 



9827 



"46- 

■pronotion "oet'Teen 192'1- pnd 1927 of i-'hat he ter;is Ir/.^ric". utility co-r:ia.nies, 
'Those stoc'is coulcl ")e sold hecause they conijined '"/hrt '"as assirned to be 
the srfety of titility invastncnts r/ith the hi yh i-p,te of rotiu-n on invest- 
nent in the ice industryo- 

AS an , illustration, De^-rin^ takes the Eastern Utilities Cor-porction. 
The oronoter-engineor hack of this had obtained options on electric pro- 
perties, sho^in^- net ea,rnin£s (hefore depreciation) of $331,000, for 
$5,720,000 (ratio 5.7'^); and on ice properties locf'ted in the eastern 
South, sho'^'in;"-: net earnings (hefore deprecirtion) of $661,000, for 
$2,100,000 (ratio 31,j)« The actual investiiexit in the ice proinerties 
(property acco-onts less depreciation) had oeen only $l,73'i,000; so that 
the ratio of net errninrcs (oefore depreciation) to p.ctual investment rras, 
in the case of this ^-^roup of ice ijro^erties, 37 per cent oer annun. This 
is the signif ica2;t fi^,ure for our present purjose. '>ut oecause it is of 
vaJue for other ppTts of our revioi-, the sequel to the purchase of these 
properties should he given. 

In selling the securities of this cor-ooration to investors, onl37- 
a consolidated statenent '7as "oresented. "^uch er.iphasis r'as "olacod on the 
electric properties, rxvl little said p.hoiit the ice oro'sertiese TTithout 
_exiDlicitly stating the fact, the ne-; investor v:as led to oelieve that 
he T.'as investing in -.That vrere predoninantly electric properties, '7ith 
only a slight dependence on the earnings of ice -oroiorties. So success- 
fijl '.7as this schene as a oroaotion that the engineer-pronoter nade a 
cash coianission of 10 Der cent on the purchp.se of the properties, the 
hankers np.Ce a liheral -orofit on the rosrle of the honds and preferred 
stock to the -ouhlic, ? nd the hrrJ:ers ano. engineer-pro:noter wore table to 
retain over 70 per cent of the connon stock of the ncr holding con2oany. 

Lerring gives this conpany, -"hich he calls an ice co:roan;r ^7ith a 
olating of ela.sticit3'", as an illustration of a score or nore of nixed 
utility companies, proraoted in the period frou 192d- to 1929, "for the 
primary purpose of providing hankers '7ith profitable 'Tares to be sold 
to an uncritical public affected '7ith the enotionalisn of the ne-f era 
of 25sychology." 

. The fact that this movement should have taken "jLane on so rride 
a scnle is -.^erhaos the best proof that in the lC20s the ice industrjr, 
though escaping the reg-olation in^osod on utilities, aaid, conversely, 
enjoying none df the loermanent safeguards, as res-;)ects retur:is and in- 
vestment, nhich arc extended to utilities, rps for the tine being, at 
lerst, reaping the profits iThich, e:ccept in the case only of very 
rapidly gro\7ing industries, cannot norially' be obtrincd unless there 
is a substantial measure of jionopoly. 



9827 



-49- 

IV. MAMIFACTURIIIG EPFICIEIICY, SERVICE TO CUSTOlffiRS, AND BUSINESS 
Zr-Z'Ul'illSE III THE ICE INDUSTRY BEFORE THE CODE 

We have seen that fear of the disasters which it was recognized 
would attend a purely free play of competition in the ice industry led, 
many years ago, to the establishjiient in this industry of what virtually 
amounted to a series of local monopolies. The bearing of this monopoly 
condition on price to the consumer and profits to the producer has "been 
examined. It remains to he considered what effect the pre-code set-up ,. 
of the industrj^ had on service, on plant efficiency, and on the business' 
initis.tive of members of the industry. 

A. Conditions in the Oklahoma Ice Industry Prior to 1925 

At- this point it will again be worth to refer to conditions in 
Oklahoma, before the passage of the Oklahoma Ice Act in 1925. When in 
1930 District Court, council for the plaintiff (New State Ice Company), 
argu.ing for the constitutionality of the Act (*) described how consti- 
tutionality of this Act was first challenged in the United States under 
the old order, in which there was competition in theory but a large 
measure of monopoly in practice, the Oklahoma Corporation Commission 
from year to year received a stream of complaints regarding short 
weights and discriminations in price and service amounting often to a 
refusal to serve those whom the ice companj?- did not like. Retail pri- 
ces were sometimes as high as $1.50 per 100 lbs. with an average price, 
where the Corporation Commission had not regulated it, of more than 
80^ perlOO lbs. ($16.00 a ton). Irresponsible peddlers would spring 
up in the hot summer months, buy ice where they could, of good, bad, or 
indifferent auality, and sell it along vagrant and uncertain routes. 
These peddlers made it unprofitable for the concerns manufacturing ice 
to attempt to fully cover their territory, and, at the end of the sea- 
son, they often left in the hands of householders, ice books that were 
never redeemed — which had been sold by someone whom the householders 
often were not able to find. 

These, according to the plaintiff's brief, were not sporadic or 
exceptional incidents to the trade. So widespread was the practice of 
these evils that during the ice season it required almost the entire 
time of the Secretary of the Ice Manufacturers' Association in going 
from one part of the state to another trying to correct them. But the 
Secretary, despite his personal efforts, and despite the moral influence 
of the association behind him, was not able to bring order out of chaos. 

In addition to the evils com„plained of, the ice companies in Okla- 
homa, prior to the passage of the 1925 Act, had completely failed to 
establish ice service to the farmers. It was only after the passage 
of the 1925 law that there were established rural routes extending from 
almost every ice plant in the State to such distances in the country as 
ice could be successfully delivered, where it was used by the farmers 

(*) In the District Court of the United States for the "Western District 
of Oklahoma, No. 1107, Equity, pp. 5 - 0. , 



9827 



"50- 

in preserving their milk, cream, "butter rind fresh vegetables until they 
could reach the marlcet. 

Some communities, it w?s pointed out, were without ice al- 
together, (*) In view of facts which win he dev^loned in the next 
division of this Section, it should 1)'= noted here tnat in Oklahoma, 
prior to 1925, two-thirds of the ic^ Tjlants were owned "by public service 
corporation and operates "by them in connection with their puhlic 
utility "business. (**) 

JB , Recent Conditions in the South and South-west 

In recent years, as prior to 1925, it has "been chiefly in the 
South and especially the Southwest that the monopolized state of the ice 
industry ha.s home its worst fruit in the shape of poor, service. This 
situation is intimately bound up with the control -rhich came to he ex- 
ercised over the ice industry hy utility companies of which mention nas 
already been made, (***) Foremost araong utility companies in the ac- 
quisition and operation of ice plants was one whose mode of operations 
has already been characterized, Insull's Midwest Utilities Company. (****) 
According to Moody's Manual of Investments for 1933, this sj^stem on 
I^ecember 31, 1932 had ice plants in 260 communities, all but 27 (in 
IllinoiSi)heing in the South and Southwest, the gre?.test concentration 
being in I'exas and adjoining states, with a considera,ble number, however, 
in Kentucky and Tennessee, 

According to a report submitted on February 12, 1935 by Edward 
H, Etmnj-jan, Field Assistant I'epnty Administrator for the Ice Code, 
(*****) after spending about two months in conducting field investiga- 
tions and holding hearings in the Southwest and Sonth, chain ice com- 
panies in this part of the country, subsidiaries of the Midwest 
Utilities Conpany, had purchased plants at excessive costs and then 
failed to modernize them or keep them up. What progressive managers in 
other parts of the country would have disposed of as antiouated "junk", 
was here rated as though it vjere true capacity^ 

In many small towns in this part of th'= country, these utility 
companies ?eemed to rely on shipping ice from central points to local 
storap:^ "docks", to as great an extent as possible, instead of manufac- 
turing ice locally which could be delivered fresher and more flexibly. 

(*) 285 U,S. 094 

(**) Ibid, 264, For further review of the Oklahoma ice situation, 
see discussion in next chapter pp. -27— S'l-. and footnote on 
pp. 37-38, supra. 

(***) See Supra, p;. 45. 

(****) See Supra, p. 49 

(*****) Filed in Deputy Administrator's Office imder "Heports Emerson 
and Bahannan." 



9827 



-51- 

Th^y fnilqd to do ^hpt inde-o'^nd'^^nt owners would havp done in the ^^y o^ 
correlating ice manufacturing with the develoiDn'^nt of cold storage, 
inil]^ de-DOts, and ice crearT mamifacturing, or rith the fuel husiness, in 
such a way as to reduce overhead cha.rres and keep in touch -^ith th^ir 
customers and their needs. "The local managers of chain plants' 
according to lir, Emerson "are good men and anyone of them could run 
his own -Dlant to the satisfaction of the public, "but little things they 
could do as owners, they ca.nnot do as emoloyees and they actually feel 
handicapped hy the organization instead of aided hy it." 

Referring again primarily to the South'^est and South, the draft 
of a report summarizing th" joint '^ork of Mr. Emerson and I'r. Chas. C. 
Bohannan, Field Economic Adviser, hut apiDa.rentl:/ never coraoleted or 
formally suhmitted, (*) states: "Single control of production in a 
comrumity rarely maintains the best of service and equitable price. 
In this same uncompleted reT)0rt, a clearer idea of the manner in which 
the quality of ice has freauently "beon found to fall short of standard 
(speaking particularly of th'' Southwest) is afforded hy the following 
detailed enumeration of points to wa.tch. 

The first part of this quotation was apparently called forth 
hy the tendency of utility companies m-ming ice plants to supply cus- 
tomers with stored ice. The writers are, of course, speaking from the 
angle of those wi-p must decide whether to recommend permits for new 
plant construction. To quote: 

"We gave little credit to stored ice except for aid in one or 
two pealc months as the public is definitely in favor of fresh 
ice. We recognized a great difference in the grade of ice and 
favored a permit if the public were receiving ice with excess 
"feather" or core or dirty ice or ice with corners broken or white 
ice. The code authority for the industry argues that ice is ice 
and all has the same thermal value but we felt that if the public 
wanted fresh, clean, clear ice and were not receiving it, a 

Tierrait.... should not be refused The same reasoning was 

used in regard to service, Ava^ilable over-capacity would not help 
the public if it could not get ice as needed with clea.n, courteous 
service. Where meat curing, milk depot, ice cream or cold storage 
was needed and an applicant wished to supply th^m in conjunction 
with an ice plant, available ice manufacturing capacity which 
would not supply the com.bination which furthered public convenience, 
was 'not considered," 

It was ♦iV^'5 vehems'-ntly e-pressed ooinion of Mr, Emerson that, 
judged by standards such as those enumerated above, the whole public 
utility controlled ice industry of th^ Southwest had failed signally 
to give the public proper service. In the first of the two memoranda 
above cited, he sa.id: 



(*) See note p. 15 supra. 



98?7 



-52- 

"Th° chain ulants (r='ferring, however, only to th° South) nre 
doomed unl'^^ss they franlcly write off the atsurd, excessive cost 
of plants, invest money in modernization of pl3,nt, and allow the 
public to have some advantage, if any there he,' in the economies 

of central management The chain groups have had their 

chance and have handled that chance so that they can think of no 
way- out of their position exce-nt autocratic protection and the 
maintenance of prices, commensurate with excessive investment and 

cost of making ice with antiqua.ted machinery; ,The competitor, 

electric refrigerator, has had an undeserved advantage in the 
field "because of the reactionary attitude of the ice manufacturer. 
....... The Southwest Ice and Utility Comoanj'- (a Middle Wogt 

Utilities suhsidiary) makes a very sad -oicture in Oklahoma, It 
"bought old plants a.t exorbitant prices — sold stock based on 
fictitious values — did nothing constructive — hurt the ice 
industry and the investor and the- consumer. " 

C . Service and Business Entemrise in the Ice Industry 
in the Country at La.rge 

As for the rest of the country, service in general seems not to 
have been reactionary and obviously bad, as in the section so far 
discussed. In fact, in some cas^^s, as in Cl<=yeland, where monorioly 
is most complete, the service has been praised in the highest terms by 
the field men. In some cases there has been comDlaint about short 
weight, due to ice melting during transportation, or to the dishonesty 
of distributors. As a._ check against the latter, it is required in some 
places that cakes of ice be scored — marked with deep lines which show 
how much ice should be cut off for a given weight. Trouble also 
arises from time to time from ice which is unclean or not frozen in the 
desired clear form. 

The chief criticism as respects the service rendered by the ice 
industry generally, ' does not relate to a backsliding from old 
established standards but • to • failure to advance to new standards with 
changing times. And the s^^verest critics of the industry have been 
their own leadersc The failure of the ice industry to make progress 
in service would not have been conspicuous if it had not been for the 
clear reyelation of the shortcomings in service, and prices also, which 
attended the development of the electric refrigerator industry, and 
other competing refrigeration. As contrasted with the household 
electric refrigerator, the old-time ice refrigerator was badly con- 
structed, badly insulated, made a poor appear8.nce, and required fre- 
quent fillingc The visits of the ice man were annoying, with dripping 
of water, carrying in of dirt, and other lack of consideration. The 
alternation of high ice prices with very low ice prices, even though 
these latter frequently did not reach the domestic consumer, were not 
calculated to inspire confidence in the industry, 

l^ot only did th^ ice industry not mov" to change any of these 
conditions, but for years after the electric 'refrigerator began to 
invade the market the ice men maintained their self-satisfied attitude. 
In a paper printed in the April, 1935, issiie of Ice and Refrigeration, 
Leslie C. Smith, Secretary of the National Association of Ice 

9827 



-53- ■• 

Industries, spid: (*) 

"T?c! la.'u/^h'^d at th'^ small rr^'^banical anit. It ^Ps a toy and vrould 

soon pass ps a fad , ^e lost our con-iercisl volum'=!, 

millions of tons of it, ■b«^caus'= '-"^ '-'ould not iDftstir ours^ilves pnd 
see to it that =iffioi'=int equi-Dm^nt was on th» narhfit, ^<^- hpve 
sR^n n'^a.rly fiv'=^ millions of our dom'^stin customers d'^s'^rt us 
for the fad. And ■'Thile th^y ware slir)riin,e; a'^a'"' 1 i ■ :=i a torrent 
dciTn grpd=i ^-"^ ev^n OTD"ods'=id «5f forts to imorov^ and merchantHs^i 
a,ttractiv'=! and '^ffiri'^nt hous°hold r=^frig'^ratOrs. "^^ TTqrq 
indiffer=:nt tc^-Tds air conditioning, '^■^ still ar^ so, and our 
comi-)Rtition is ^^-tting; th-^ "busin^^ss." 

In later ^arts of this r^-oort, further r='f='r'^noe '-rill h" made to 
th° f^-asihility of improving ic<= s^rvic^ and getting, or at I'^^ast 
holding , io.P'. "business, as "brought out hy efforts "hich have he^n more 
recently made in this direction. 'I'he "ords of "''r. Smith qtioted a.liove 
will sufficiently serve to ind.icat" the general lac'' of thought ahout 
ice service and. ev°n ahout "building rco ice demands '^hich have charac- 
terized the ind.ustry. As "bcf^'^en th^ ne^- comoetitive mechanical 
refrigerator industry and the old monoioolistically-minded (though 
owca.sionally fi'^rc'ly co?TD°titive) ice industry, th°re ^as no 
cpmparison '-'ith res-oect to the c-nerg^'" c'is'olayec'- in th" effort to give 
service and po-oii.l'^rize the use of refrigeration, 

n . TochRical TJ^ff icienc^^ of Ic^ Plants 

As r°s-neots the t'=chjiical °ffici=ncy of. ice -olants, th^ picture, 
exc^-ot for certain southern and south'"'e stern areas, is more favora-hle. 
It is tr'ie that for ^lany -'•eprs there had heen no radical advance in 
ice manufacturing. And. -"e shall later have occa.sion to note that the 
industry took much the same iDosition to^-^.rd sn.ch rad.icall;/" ne^^ methods 
of mai'ing ice as have he^n in the cours= of develo-om'=nt as it did 
to'^ard imorovement of domeslsic refrigerat'^rs and air conditioning. It 
is not clear, however, as to ho'^ wide may h" the trae usefulness of 
thes" nerr -ways of making ice; (**) and ud to the time of the de-oression 
it '^ould arjpea.r that in most of the cities th'^ ice comnanies were 
reasona.hly active in modernising th°ir •■^lants. 

W"ith the "beginning of th-^ d^ression, ho'-'°ver, the ice comoani^s, 
like the management in so many other industries, l-et do^Ti in their 
•efforts a.t imrirovem^nt, notwithstanding 'the relatively satisfactory 
position, for a, wail" at least, of th'^ ice industry. ^«=n in 1933 the 
Ice Code r-ps s°t up, it loo^'-'^d ^s though the -orogram of. inaction -^hich 
ha.d heen ado-oted as a, t^nioorary e:^roerTi°nt might hecom.^ -Dermanent,' Sy 
many, the code was looked upon as a cha.rter ^hich -'ould -orotect the ice 
men in th°ir iDOsition, and there d^veloned a '-'ides-pread tendency to give 
•up all thought of improving th° ■^f ficienc^/- of Dlants. This, in fact, 

(*) 88 Ice and Refrigeration, "^56 

(**) The t^o n'^w T)roc=3S°s of ic^ i^nufactur'', (?lak-ice and Pak-ice) 
'^ill he discussed later. 



98 ?7 



-54« 

™?as th'=i main source of riontroversy ^hich aros'^ from the Ic-^ Cod^?. TTot 
only did the ice ma.ntLfs.ctureTo put aside almost all idea of ke°pirig 
their plants up and irroroving then; Tiut 'und'^r -the capacity control 
provision of the code they attemoted, ps '■"e shall se°, to prevent 
others, who night have intro ■'uced. no^'ern plnnts, fron doing so. This 
policy roused the wrath of . the nanufacturers of ice making machinery; 
who, if ner^ "olpnts -^ere not to he "built, a,t least '^anted to keep in 
husiness to th° extent that the inprov^ment arid nroper upkeep of ex- 
isting plants T^ouid warrant it. There arose, therefore, a violent con- 
troversy hetveen the ice industry which proceedf^d to oppose practically 
everything in the way of plant " develoTDm^nt, and the machinery manufac- 
turers, who wore equally indiscrirain.-'te in their efforts to build plants 
wherever purchasers could "be found. (*) 

V» Outlets For Suppressed Competitive Instincts 

Before passing on from our cnnsidera.tion of the workings of 
competition and monopoly in the ice industry prior to the code, it 
should "be pointed out that coinp'^titive forces, though larf?:ely "banished 
from pu"blic view, have "been at work to a certain degree and in certain 
special ways underneath the surface. Understandings with res-oect to - 
prices did not completely "orevent manufacturers from trying to 
incr^a'se or maintain the volume of their "business through i;jider selling. 
But these conoetitive efforts usually took the form of concealed con- 
cessions — of chiseling a little here and there, of giving a dealer- 
something e-ytra in order to keep his trade, or siean him from a com- 
petitor. This condition has existed, and still exists, und^r the most 
widely heralded agreements. 

Major "breaks in the systen of agreements — as when one manufac- 
turer openly cuts his TDrice — are most lii-^ly to occur from personal 
rather than purely "business motives. Fro example, Samuel R. Eosoff - 
the uncle of that Samuel .Eosoff (no middle ' initial "R") to '-hom the 
Ru'ble Corporation nad to riay a ouarter. of a million dollars "before it 
cc^nTd elininate'htm from the New York ice "b^isiness - and who immediate- 
ly thereafter himself came forward with a request for -oermission to 
"build another plant on April 2?, 1935, called on officials of the NRA 
in Washington and gave this account of the reason for his action, (**) 
Asked whether Ru"bel ' was the reason why he wanted to go into the ice 
"business, he replied that several years "before he had made a "bid for 
the gar'bage and ash disposal of New York City. ■ In order to satisfac- 
torily consummate his contract, if he obtained it, it would have "been 
necessary for him to acquire g, certain -niece of nrop^rty which was 
owned "by Ru"b''.l, Rnhel held Rosoff up on n-^gotiations for this property 
until it was too late for Rosoff to put in his "bid. Because he had lost 



(*) See pp. 122-123, 156-161, below. 

(**) File Memorandtim of H. J. Daly, April 2?., 1935. In fil° on 

application for a loermit by Metropolita.n Dealers 10*= Cdrooration, 
Hew York, For explanation of how to find folders dealing with 
amplications see note P. 19 supra, • 



9827 



■ -Se- 
this contract, Rosoff stated that, regerdless of wh'^ther or not his 
T)ernit was issued or vrhether or not he received a'P'oroval, he riroposed 
to tnlld a TDlant in Ruhel ' s territor7 in Brooklyn, and as long as any 
rn^Tnh^r of his family lived — or he ■■•'oulcl do it himself, if necessary 
— this ulant ^ould be otjerated in competition with Ruhel's Tjlant. 

So it hac:< "been in other cities. Und'=rstandings in restraint of 
trade in the ice industry, thoixgh niotivntpd hy economic conditions, 
rest for their enforcement .on the riersoitB.! willingness of men to work 
together. Personal motives, the attitudes of wives, the memory of 
injuries received in the ice business in some other locality — or 
■perhaps in some entirely dissimilar line of business or activity — 
nrompt a man to break the bounds of the understanding to which he has 
previously assented - — or to, build ne^-^ tilants, or otherwise invade a 
market, which he has not -cr"viously been in. To obtain some personal 
satisfaction, an ice manufa.cturer will sometimes dedicate a large part 
of his Dersonal fortune, and so throw into chaos the entire carefully 
built structure of industry cooperation. 

Thus, in a. manner, the forces of competition do affect the 
ice market. But as we have seen, competition wor^-ing in this way has 
not been very effective in improving service or lowering prices to 
consumers; nor has the position of those in thf^ inciustry itself 
always been an easy one. 



9827 



-5£- 

Cffl\PT3E III 

PRE-CCDE SPFOHTS AT COUTROL 

Most of the efforts at control of coirrostition in the ice industry 
prior to the code v/ere on a local basis - along lines v.'hich have already 
been described in the preceding chapter. ( *) In this chapter, it will be 
necessary to give additional consideration only to such efforts at control 
as had more than a local character. 

I. WAH-TIIIE CONTROL 

It was the TJorld T/ar and the United States Government which was re- 
sponsible for the first organization of the ice industry on a national 
basis. (**) The absence of earlier organization within the industry it~ 
self would appear to have been due to the fact that the ice industry origi- 
nally consisted only in the harvesting of natural ice. Although "artificial' 
ice had its beginnings before the Civil "/ar, the development of the manu- 
factured ice industry proceeded rather slowly (***) and it was not until 
about 1914 that the volune of man-'ofactured ice was about equal to that of 
natural ice. In years prior to 1917, the natural ice men and the artificial 
ice men had been at odds with one another. 

T7hen the United States entered the "ar, the ice industry was an im- 
portant element in the situation from three standpoints - entirely apart 
from its importance because of the product which it produced. First, 
the industry employed many men of military age. Second, it consumed much 
coal. And third, this industr/ v;as the countr;;r's largest user of ammonia - 
an important war material. All of these forces, human and material, had 
to be conserved: and it wa,s also essential to prevent such a. rise in ice 
prices as would unsettle the public mind. Eventually the government, through 
the Pood Adrainistra.tion, took over full control of the ice industry. It vras 
as a r)art of this system oi control that the National Association of Ice 
Industries was formed, in 1917, for the purj^3ose of assisting the government's 
program. At first made up of ice manufacturers only, the National Accocia- 
tion of Ice Industries was, in 1919, merged v:ith the Natural Ice Association 
of America. 



(*) This discussion of local control was confined to efforts made with- 
in the industry itself. Attempts of mTUiicipalities to regulate the 
ice industry constitute a part of the general industry story; but 
data is not at hand for treating this phase of the subject in a com- 
prehensive vay. In that section of this report dealing v;ith the New 
York price emergency, some reference will be made, however, to attempts 
at control by the New Yoric City government. 

(**) All data used in this sectibn (except statement about growth of 

manufactured ice industr','-, including footnote ) taken from an address by 
Leslie C. Smith, Secretary of the National Association of Ice Indus- 
tries, on "The Ice Industry of Tomorrow," published in the April, 1935 
number of Ice and Ref rif:eration . Vol, BB, pp. 255-6. 

(***)N-umber of establishments producing artificial ice reporting to the 
census: 1869, 4; 1879, 35; 1S89, 222; 1899, '75 



9827 



^57- 

The reorganization of the ice industry to meet war needs was success- 
ful "beyond anything the members of the industry had thought possible. 
On IvTovemher 13, 1917, the first call was made upon the ice com-oanies to 
save ammonia. They were instructed to close down all plants not needed 
for winter supply and to obtain the entire supply through mutual arrange- 
ments with those plants which, because they were more efficient or more 
conveniently located, were to be allowed to operate. Sixty per cent of 
the plants, in large districts, were closed. In plants operating, meas- 
ures were taken to conserve ammonia (most ice plants had formerly made 
their neighborhoods obnoxious because of escaping ammonia fumes); which, 
together with the fact that the most efficient plants had been selected 
for continued operation, resulted in a lowering of a,mmonia costs from 
six cents to two cents a ton of ice produced. The ice industry in 1917 
cons-umed fifteen million tons , of coal. To save coal, they proceeded to 
electrify. Of the 125,000 men whom the industry had employed, they gave 
\vo forty per cent. Many of these men were not replaced. The industry,?- 
had thought that it had reached the acne of efficiency in operation be- 
fore this time. But under the war pressure, they found that this had been 
far from the truth. 

price control vjas not attevn^tec' oy the government rmtil after the 
Food Administration actually tooh control of the industr;/- on March 14, 1918. 
The chief object of "orice control wr,s to close up the spread between the 
price pa.id by domestic consuners and that paid "oy wholesale and corrjercial 
users. According to the -iiresent Secretary of the National Association of 
Ice Industries, for years -nrior to 1918, ice manufacturers: (*) 
"h?.d been giving sway quantit^r loads in an unbalanced and unreasoned ef- 
fort to build up tonnage outpiit. The matter oi costs or profit in these 
transactions was not considered. One dollar ice was not uncommon in these 
sales. And in order to retrieve the loss, the modest domestic consumer, 
with none of the means with which to meet the demand, was being gradually 
raised in price as time advanced." 

It is of interest to note that the ice industry at this period op- 
posed the government in every one of the S5 ^irice determinations. But 
looking backward, the National Association's present secretary,'- evidently 
viewed what then ha^opened with a large measure of satisfaction. 

At the close of the Uar, these controls ended. But they had left 
their impress on the ice industrj?-. And ir. the National Association of 
Ice Industries, they had laid the foundation for what -vrears later was to 
constitute an ambitious attempt at industr:/ control. 

II. STAT3 CONTHOL OVEH THE ICE INDUSTllY IN OKLAhOLIA AND ELSEWHEEE 

Dewing, in his Financial Polic^- of Corporations , states that for 
mar^ years, certain Southern states have exercised effective regulation 
over local ice comiDanies, although none have been su.ccessful in the 
regulation of the distribution of ice over large areas. In aeorgia, he 
says, regulation of ice companies has for many years been even more 
strict than the regulation of electric companies. (**) 



(*) For source see last foot note. 



(**) Dewing, Arthur Stone, Tne Fin ;.' ncial Policy of Corporations . 
(New York: The Ronald Press, 1.934) p. 888 n. 

9827 



-58- 

Littl6 information is available, howuvor, about regulation by- 
States, except in the case of Gklalioma, for which state there is a 
considerable volume of imformation because of the illumunation thrown 
on conditions ana orocudui-es there in connection vsT^.th the passing by the 
United States Supreme Court on the constitutionality of the 1925 
Dklahoma Ice j-,ct . (*) 

In the preceding chapter of this report, thure was presented a 
brief description of conditions in the Oklahoma ice industry prior to 
1925, and some somrncnt on the possible effect on prices of the Oklahoma 
Ice Act. (**) 

In this. place, it should first be not^a that the effort to 
establish state regulation of the ice industry dates back, in Oklahoma, to 
many years before 1925. On June 10,ig'iB, the state ofoklahoma passed a , 
general anti-trrxst act, Section 13, of which read; (***) 

"Whenever any business, by rt.ason of its nature, extent olr the exis- 
tence of a virtual raoncply therein, is such that the public rmist use the 
same, or its services or the consideration by it given or taken or offered, 
or the commodities bought or sold therein are off.->red or taken by purchase 
or sale in such a manner as to make it of public consequence, or to affect 
the cpmmunity a.t large as to supply, demand or price or rste thereof, or 
said business is conducted in violation of the first section of this Act, 
said business is a public business, and subject to be oontrolled by the 
state, by the Corporati-n Com .ission or by o.ction in any district coxirt 
of the state, as to all of its practices, prices, rates and eharge's. Aiid 
it is hereby declared to be the duty of any person, firm or coi^poration 
engaged in any public business to x-endcr its s^^rvices and offer its com- 
modities, or either, upon reasonable terms without discrimination and 
adequately to the needs, of the public, cohsid.j ring the faciliti>;s of said 
business." 

Under Section 13 of thu 19''^8 Act, which, ts will habe been noted, 
did not mention the ice industry, or any industry, by name, the Oklahoma 
Corporation Coraiission early caiue to exercise a limited jurisdiction over 
the rates, practices, and services of ice plants. However, it ?ras nec- 
essary in each case where anything very fundamental was attempted in the 
v;ay of regulation - as the fixing of rates - to estrblish that the company 
corapOiained ab mt enjoyed a "virtual ra nopoly"of the ice business in the 
community whihh it served. (**=f'(=) This often couJLd be done. 



(*) A complete study of control in the ice industry y/ould involve an 

examination of effects on the industry of state anti-ti-ust law enforcement, 
as well as those of state regulating bodies. Reference has been made to Ic 
the attitude towards anti-trust law enforsement in th... state of Texas 
(see p. 59 supra); and mention will be made of a complaint lodged with the 
state of ITew York ( see Appendix A. But, in the main, we have had to be 
satisfied on this point with statements baseu on general belief (see p . 59 
supra) . 

(**) See pp. 36 , 3S; 49- - 60 supra. 

(***) 285 U. S. Riports 263, 294. 
(****) Ibid. 

9827 



-59- 

According to the Ice and Refrigeration Plufc Boo!: for 1927, of 162 
Oklalioma commiinities containing ice plants manufacturing ice for sale, 
at Itast 112 -Tere served either by a single plant or by several plants of 
com ion ownership. Evidence was also .^ntered in the court record, when 
the Oklahoma Ice Act was under review, showing that it was common practice 
for manufacturing establishments of different ovmeiship to make use of 
a jointly-owned delivery company. Oiit of 217 plants listed in the Blue Book 
as engaged in manufacturing ice for sale, 101 were owned by corporations 
owning or controlling other plants within or without the state. (*) 

Accordingly, by formal orders the Commission repeat:;dly fixed or 
approved prices to be charged in particular communities; required ice to 
be sold without discrimination and to be distributed as equitably as 
possible to the extent of the capacity of the plant; forbad short '^eights 
and ordered scales to be ca.rried on delivery wagons and ice to be 
weighed upon the customer's request; and undertook to compel sanitary 
practices in the manufacture of ice .andtnurteous service to patrons. 
Many of these regulations, other than those fixing prices, were imposed 
in a general order to all ice companies, issued July 15,1921. Informa ly 
the Cominission adjusted a much greater volume of complaints of a similar 
nature. (**) . 

As early as 1911, the CoiTioration Commission, in its annual report 
to the G-overnor, had recommended legislation which would more clearly 
delineate its powers in this field: (***) 

"There should be a law passed putting the regulation of ice plants 
under the jurisdiction of the Com. .ission. The Com .ission is now assuming 
tnis jurisdiction under the act pas.'.ea by the legislature laiown as the 
An^i-Trust law. A specific law upon this subject would obviate any question 
of jurisdiction. " 

In 1912, without waiting for further legislation, the Commission 
issued an order regulating tnc ice business - ir. keeping with such powers 
as the Com ission then ^.ossessed. (****) 

The request of the Com-iis'sion for further legislation was, however, 
repeated in following years in many if not all of its annual reports, in- 
cluding especially those of 1915, 1916, 1918, and 1S19. 
In the first two of the yuars mentioned, the reco -laendation of the 
Commission ran; (*****) 



(*) Ibid , p. 293. 

(**) Ibid , 295-7. 

(***) lbid . 297. 

( 

(****) In the District Court of the United gtates for the 'Testern District 

of Oklahoma, No. 1107 - Equity, p. 6. 

(****>^) Ibid, p. 8. 
9827 



-.60- 

"Thi gsopf of legislation pertaining to those utilities which serve 
the public generally, should te "broaciened. Two conspicuous examples are 
ice plants and cotton compresses. Chapter 93, Session Laws 1915 extends 
the jurisdiction of the Gor^.oration Commission over water, heat, light, 
and power cprapanies, but does not include ice plants. Numerous complaints 
are received by the Commission each year as to extortionate practices of 
ice companies and exorbitant prices charged. The same jurisdictio.i should 
be given the Corporation Com dssion over ice plants as it exercises over 
gas and electric companies." 

In 1918, the Comcission said :(*) 

"The business of manufacturing and distributing ice is as much a 
matter of public concern as is the business of rendering water, electric 
or gas service and should be subject to the same regulation. Complaints 
are continuously being made to the Commission in reference to prices of 
ice, practices of ice companies, or service rendered by such companies, 
and the Commission has frequently been called upon to exercise jurisdiction 
tmder the so-called Anti-Trust Laws. Specific legislation should be enac- 
ted in reference to these companies and the power of regulation should be 
made definite and certain." 

In its report for 1919 the Commission stated that complaints against 
the practices and rates of ice utilities had arisen during the previous 
year from at least a hundred towns and cities throughout the state. (**) 

In 1916, the Corporati'^n Comnission , in interpretation of its 
powers under the 1908 Anti-Trust Act, had treated the ice business as 
affected with a public interest, and ordered an ice company to furhish a 
drug store at the same rate allowed to a neat market. (***) 



U) iFid , p. 9. 

(**) Ibid, p. 10. 
(***) 285 U. S. 263-4. 



9827 



-61- 

ijot withstanding the lib ral interpretation wnich tnt. Corniui&bx'' -i ii^^^ 
placed on its powers, ond the large amount of regulation which was in fact 
teinr undertaken, the Corporation Corxnission, as the foregoing excerpts 
I'rora its re_^.,orts xxave ina.icatja, felt seri--usly hana.ica_yed. It still i-'as 
necessary to prove a virtual monopoly in each sp-cific case where it 
desired to compel action; and, moreovar, it could not compel ice companies 
to give "better and inore extended service ana at the saue time protect them 
against eompetiti'^n wnich night raalce the rt;naerinc-:: of that better service 
impracticable. 

At last the Gklalioma legislature, in 1925, passed the celebrated 
Ice Act, This enlarged thu existing jurisdiction of the Corporation 
Commission by removing the req\iirement of a finding of virtual monopoly 
in each particular case. It conferred upon the Commission the same author- 
ity to compel adequate service as in the case of other public utilities. 
And - what we are most interested in from the standpoint of this study - 
it gave to the Commission the function of issuing certificates of public 
convenience and necessity, uriaer conditions as follows: 0*) 
"That the Corporation Com issiofi shall not issue licenses to any person, 
firm or corporation for the manufacture, sale and aistribution of ice, or 
either of them v/ithin this State except upon a ho^ring had by said Comnr- 
ission to which said hearing competent testimony and proof shall be pres- 
ented showing the necessity for the manufacture, sale, or distrihation of 
ice or either of them, at the point, community, or place desired. If the 
facts proved ?t such hearing disclose that the facilities for manufacture, 
sale, and distribution of ice by some person, firm or corporation already 
licensed by said Commission at said point, comnrunity, or place are suffic- 
ient to meet the public needs therein, the said Corporation Commission may 
refuse and deny the application for said license. .." 

It is of interest to note that just as the general desire tocsxorciso 
control over the ice industry goes well back in Oklahoma hmstory, so the 
id. a of implementing find supporting such control by certificates of public 
convenience and necessity had been developing for some time. 

In 1915, th^ Gklalioma legislature passed an act declaring cotton gins 
a public utility; and at this same time it was rei5uirL;d that gins must have 
a certificate of public convenience and necessity, tho first utility for 
which such certificates were r^,quiiped under Gklalioma law. (**) 



(*) Ibid, 29o; text of Act taken from th^ "First Eeport to the 

President of thi; United States of thu National Recovery Review 
Board" ( Barrow Board), pp. I-IS-S. 

(**) 285 U. S. 263,283. 



9827 



-62- 

In 1916, the Corporation ComnisBion urged in its report to the Governor 
that all public utilities under its jurisdiction "be required to seciire 
from the Connission "vrha.t is knorm as a 'certificate of public conveni- 
ence 2Jid necessity' "before the duplication of facilities. In 1917 a 
certificate from the Connission ras declared prerequisite to the con- 
straction of ne\i telephone and telegrajjh lines'. In 1923, it rras required 
for the operation of motor carriers. In -1925, the year in v/hich the Ice 
Act T,'as passed, the requirement of certificates v/as extended also to 
po^er, heat, light, gas, electric and trater comrianies proposing to do 
"business in any locality already possessing one such utility. (*) 



(*) Ihid 299, ^ith reference to certificates of pxihlic convenience 
and necessity generally, Justice Brandeis in his dissenting opinion, 
uhich has heen the source of mucii of the data uhich has been cited in 
this section, s'aid: "Long "before the enactment of the Oklahoma statute 
here challenged a like requirement had "becoue common in the "United 
States in some lines of "business. The certificate r/as required first, 
for railroads; then for street raalroads; then for other pu"blic utilities 
uhose operation is dependent upon the grant of some special privilege. 
Latterly, the ren_uireraent, has "been vddely extended to common carriers 
"by motor vehicle uhich.use the highways, but \7hich, unlike street rail- 
ways and electric light companies, are not dependent upon the grant of 
any special privilege, ., ...As r.pplied to .utilities, the validity under the 
Pourteenth Amend lent of the requirement of the certificate has never 
been successfully questioned." (ibid, 282-3) Of pertinence, also, is 
Brsindeis' e>rplanation as to the general logic lying back of certificates 
of public convenience and necessity: "The Oklalioma statute rnaJces entry 
into the business of manufaGturing ice for sale and distribution depen- 
dent, in effect, upoii a certificate of public convenience and necessity. 
Such a certificate was .luiknovm to the comraon lav;. It is a creature of 
the machine age, in which plants have displaced tools ajid businesses 
are substituted for trades. The, purpose o.f requiring it. is to promote 
the public interest by preventing waste. Particularly in those busi- 
nesses in which interest and depreciation charges on plant constitute 
a large element in the cost of production, experience has taught that 
the financial burdens incident to unnecessary duplication of facili- 
ties are likely to bring high rates and poor service, Tliere, cost is 
usually dependent, among other things, upon vol-ume; and division of 
possible patronage among competing concerns may so raise the unit cost 
of operation as to malce it impossible to provide adequate service at 
reasonable rates. The introduction in the United States of the certifi- 
cate of public convenience and necessity marked the growing conviction 
that under certain circumstances free competition might be harmful to 
the community and that, when it was so, absolute freedom to enter the 
business of one's choice should be denied," (Ibid, 281-2) 



9827 



-6&» 

Accordins to "brief of s,ppelant (v;lien the constitutionality of the 
Okl-jhoma Ice Act ras carried to the United States Supreme Court), 

"01:l£uiona is the only r.tale of the Union, so far as our inforar.tion 
goes, i7hich has declared the nanufccture, sale and distrihution of 

ice a public iDusiness Arkansas passed a similar act, and the 

Supreme Court of that State susta.ined it as to prices, rates, ^dis- 
criiiination, and other natters, hut held invalid the part giving 
the Coifj-iission the po'^er to deny one the right to ong.-,ge in the 
business in a given cor.imu2ii ty irrespective of the necessity. (*)" 

rnis declaration vas nade in 1932. While the lav7 used the tera "put- 
lie husiness," instead of "pxihlic utility," Brandeis said the tvro meant 
the sane thing. (**) Tlie .appellee, houever, claimed that the legisla- 
ture had not declared the ica industry a "public utility." "A public 
utility is req.\iired to rerve the public, and its rates are fixed so 
as to gu?.rantee a reasonable return on the investment, includin/-; op- 
erating e:menses, Tne ice maimfacturer mas'- sell or not sell or not 
sell as he sees fit." (***) This, ho'jever, seems a fine distinction; 
for the Oklahoma Act did give the Corjioration Commission the po'Ter to 
control service. The intent uas tq maJce it possible to put ice into 
communities which did not have it, and establish rural routes (at least, 
this uas done), jind also to outlav; discriuination in sales, or refusal 
to sell, 

For five years follovdng the passage of the Oklahoma Ice Act, the 
Act v:as acquiesced in and treated as valid by the ice industry, (****) 
In 1930, hoT.-ever, one Liebnann proceeded, rrithout obtaining or applying 
for a license, to construct an ice plant in Oklahoma City, -^jhere the 
Nen State Ice Company, operating under a license, had $500,000 in-- 
vested in the ice business. An application for an injunction against 
such constraction, filed by the lIe-7 State Ice Company, vas the occa- 
sion for the court test on the constitutionality of the Act, First 
the United States District Court, then the Circuit Court of Appeals, 
and finally the United States Supreme Court, found the requirement for 
certificates of public convenience and necessity unconstitutional, the 
latter in Ilarch, 1932, 

The Supreme Court majorit3' held (l) that the business of manufac- 
txiring ice and selling it is essentially a private business and not so 
affected vdth a public interest that a legislature ma:;,^ constitutionality 
limit the number of those '7ho ma;;^ engage in it; and (2) that the 
Oklalioma statute vras rep-ugnant to the due process clause of the Foui-- 
teenth Amendjnent; together with a third point to the effect that an un- 
constitutional sta^tute is none the less unconstitutional because it 
is an "ejqDerinont," 

{*) Ibid, 265. 

(**) Ibid, 283. 

(***) Ibid, g67 

(****) Ibid, 26'1. 



9C27 



^54- 

Justice Brandeis, supported ty Justice Stone, delivered an elab- 
orate dissenting opinion. Justice Cardozo did not participate. 

[Ehere has "been no opportitnity in conneqtion with the present study, 
to malce any original investigation of the of the actual workings and 
effects of the Oklalioma law during the five years in which it was in fr.ll 
force. It may he noted that when the constitutionality of the Act was 
challenged, its supporters claimed that general conditions had been 
greatl3'- improved. (*) A considerable number of new plants had been built, 
and there was a substantial increase -in the total tonnage of ice produced. 
Rural roxites to supply farmers, previously non-existent, had been establish- 
ed, radia.ting from almost every ice .plant; creameries and poultry storage 
houses had been opened in almost every town of any consequence in the 
state; the quantity of farm produce shipped out of Oklahoma (in carload 
lots) to other markets had been more than trebled. It was also stated to 
the court that in the last fiscal year the Corporation Commission had re- 
ceived but one complaint from the citizenship of the state relative to 
the ice business, while in the last year before the passage of the Act, 
the secretary (of the Ice Association) alone handled 269 complaints UDOn 
request of the Corporation Commission. This did not include numerous 
complaints informally settled by the Commission's own force by means of 
the telephone, telegraph and letters. 

Ill the preceding chapter, reference was made to evidence which sug- 
gested that, whatever may have been the beneficial effects of the law 
along the 1 ines indicated above, it apparently tended to raise or maintain 
the average of ice "orices. (**) In another place, hov/ever, reference has 
been made to conditions in 1934- in the Oklahoma ice industr^r, which could 
seem to indicate that the post-ice-law situation has been far from satis- 
factory. (***) 



(*) In the District Court of the United States for the Western District 
of Oklahoma, Ho. 1107 - Equity, pp.3, 5,11, 12; except that the first 
ser.tence, about increase in number of plants and in total tonnage 
sold, is based on data in U. S. Supreme Court opinion. 

(**) See p. 38 supra. It should be pointed out, however, that in the 
absence of information as to how price averages were obtained, we 
have no way of knowing that the p\xblished price quotations truly 
reflected the average prices actua.ll;^ paid throughout the state. 
The figures also throw no light on what was happening to the quality 
of ice, or the extent of service. 

(**) See p. 64 supra. 



9827 



-65- 

In considering the Oklahoma experiment, it should l3e remembered 
that control of new capacity was only one aspect of a regulatory system, 
the main purpose of which was to improve service and prevent abuses, 

III. TEE KATIOWAL ISSOCIATIOl'I OF ICE INDUSTRIES MB OTHER INDUSTRY OR- 
GALjIZATIONS 

The relationship of the National Association of Ice Industries to 
the war-time control of the ice industry has already been mentioned. 
The influence of the Association in the formation of the KRA code and 
in its administration will be talcen up in later parts of this report. 
Here it is only necessary to inquire into the influence exercised by 
the Association over the ice industry 'between the end of the War and 
the passage of the National Industrial Recovery Act. 

Apparently the Association, though eager to-do what it could, was 
not much of a factor in such self-government within the ice industry as 
existed during this interim. The interests and problems of those in the 
industry were too largely local in character. Speaking of this long 
period, the Secretary of the Association said: (*) 

"For eighteen years your National Association has been struggling 
'ag-^inst tremendous odds because hundreds of you would not support 
it." 

The work which the Association did do consisted largely in. "educa- 
tional" v/ork, £-jid public relations. Under educational work, were in- 
cluded research, employee training, cooperative advertising, and educa- 
tion in refrigeration throughout the school system of the country, (**) 
The Association published Ice 'and Refrigeration , one feature of which 
was the publication of ice prices. Other objectives of the association, 
of course, included poiDularization of the use of ice, improved standards 
of service, and increased efficiency of plants. 

In an article on "Control of Production under the Ice Code," which 
appeajred in the Harvard Business Review , (**) Benjamin M. Parker said 
of the National Association of Ice Industries that it "preached price 
maintenance." He also ascribed to its active lobbying the 



) Smith, Leslie C, "The Ice Industry of Tomorrow," 88 Ice and 
Refrigeration 256. 



(**) Vol. Ill, No. 4, Summer, 1935. 
9827 



passac,-e of the Gklalioma Ice Act. It vir-.s, lie said, a jreat trade asso- 
ci'aticn victory. Ilov/ever 'this may l)e, we have loreviously noted that 
the move to lout the ice industry on a puolic utility tasis in OklaZioma 
s-^arted many years earli-er,' in fact before t/.e fcrmaticn of the 
National Association of Ice Industries. 

Wliile no independent invosti^atiolfi lir-s oeen made as to what 
EiC-tuaJ influence the National Association of Ice Industries may have 
exercised, prior' to 113A, on the acts of pu'blic authorities, cr the 
policies of private maimfacturers, such influence can "-'.ardly have been 
cciiiparahl e , in ttrngitle results, with that which marked the efforts of 
trade associations in most oth.er well ori^anized industries. T-icujh 
tho National Association of Ice Industries apper,rs to ha-ve oeen 
pupported "by t.e lai-;:^er units in the industry, most ox' tie rarnufact- 
urer's .(in point of nuinbers) v/ere not L^em'bers. A far larger proportion 
of the manufacturers belonged to ^-l re.i:ional associations which were 
organized independently of the National Association. A considerable 
nu.iiber of ice manufacturers did not belon^ to any association. (*) 
Xiclesale and retail dis-tributors, who mal^e up so larj-;e a proportion 
of the actual personnel of the industry, were entirely out of the 
picture, having no nationa,l orgE>iiiza.tion. 

It would therefore appear that, though the National Association 
i'-tust have had some influonce through its educational activities, that 
tj'pe of industry organization which seeks to shape tie day-to-day 
business policies of finns, vas in tie ice industry, between 1913 and 
1933, a^lmost wholly on a regional - or perhaps it wo'uld be better to 
say local - basis. 7/e shall have occasion to note that, in prepara- 
tion for the larger function which the National Association was to 
perform under the Code, it at once proceeded to bring into cooperation 
with it, the M regiona,l orgaxiiriations. 



(*) Data on association members/iip frbm Ice Gcde history, p. .8,, 

v/hich in turn was based on data su'bnMtted by Vne National Asso- 
ciation of Ice Industries. Of an estima-ted 4330 f^rms in the 
indus try , ( thi s does not include the much i"h.rger number of whole- 
sale and"'retail distributors), only 1400,. or 52 percent, were 
members of the National Association of Ice Industries. 



9827 



"67- 

CHAPTER- IV 

ICE MANUFACTURING CAPACITY AS AN IlIDUSTRY PROBLEM 

In Chapters II and III of this renort, attention was focused on the 
pre-code failure of conroetibion in the ice industry; and of efforts at 
control, first "by the industry and then, in one case, ty a state. In 
these chapters, the Doint of a-i-oroach reflected iDriraarily the general 
puhlic interest in such an ordering of the ice industry as would assure 
reliable and satisfactory service at reasonable nrices. Obviously, 
however, it was not this incentive that caused an Ice Code to be drawn 
up - evpn though it was largely on theoe grounds that the defense 
of the code necessarily rested. 

The Ice Code was promoted by the ice industry primarily because 
the ice men felt that the industry was rapidly losing that measure 
of control over its own destiny which it had exercised in the past^ and 
because, beyond this, it '■'as felt that even in that more orderly past, 
the industry had fallen short of attaining the desired degree of stab- 
ilization. 

In the present chapter it will not be necessary to give a detailed 
description of that change in the whole outlook of the ice industry 
which occurred about 1932, cving to the competition of the household 
electric refrigerator-aided in rather minor degree by the depression. 
This has been gone into at sufficient length in Section II of Chapter 
I. Here our attention '■•ill be focused on the more general subject 
of the construction of capacity in the ice industry, as related to de- 
mand; and the effects of such construction of capacity on the fortunes 
of -the ice industry, both before and after the 1932 turning point, 

THE LONG RUl^ TREND I'-J LGAD FACTOR PRIOR TO I932 

Fri^ra the feeling with whi-fii the ice manufacturers have spoken of 
the "develOTDment of excess capacity in their industry, one would assume 
that this was a problem of long standing, and that year by year, at 
least from the middle 1920' s, conditions had steadily gr«wn worse. 
Thus in a brief submitted at the hearing on the peltlon of Huston 
Thompson for cancellation of the production eontrel -crovision 01 the 
Ice Code, held on April 6, I93U, Leslie C. Smith, Secretary of the Na- 
tional Association of Ice Industries, said:(*) 

The entire industry has long been accustomed to 
over-TDro duct ion. The highest load factor ever 
attainedwas U7.U per cent in l'^2^,,,,i,. As new 
-plants have been added in excess of demand, the 
percentage of load factor has gradually declined 
to well below Uo per cent. 



(*) In Deputy Administrator's files in folder labeled "Huston Thompson 
Petition for amendment". 



9S27 



-68- 



Tlie conception that there 'has "been ia. general long run tendencj'" for 
ice nani-'J'acturers to expand plant capacity, out "oroportion to gro\7th in 
■ demand, does, not, however, accord rdtli the facts, Ko douht there have 
"been instances of individual cor,imunities rrhere, for a time at least, cap- 
acity has oecorae progressively nore excessive bo cause of plant construe** 
tion. Thus it woul'd appear that in some Sbuthern cities, inportani; plant 
additions ha,ve "been made in recent years - as in Nen Orleans in 1933 and 
1^34; trhichj coxipled nith the '-ifa'alcening of demoJidj have "brought load fac- 
tors to considerahly less than vla&t they should have Veen ilnder the- cir- 
cums-tances. Talcing the coiintry as a nhole, however, the aocorapan3^ing ' 
figures show that, up to the time when the whole situation r as .changed 
hy a radical falling off in dem'and, there was nothing that coul'd properly 
be described as a decline in the over- -all 'nati one.! 'load factor,'' 

lH.3,;BEIi, CAPACITY', OUTPUT, AlID 'lOAD FACTOR 
OF ICS PLiJ-TS I'r' THE UNITED ST;-TE3, 1919 - 1933 



Year 


lumber 


Daily Capacity 


AnnuaJ. Capacity 


Annual sales 


•Load factor 




■olants, 


(1) 


(b) X 365 


(2) 


(d) + (c) 




. (1.)' 












(a) 


M 


(c) . - 


(d) 


(e) 


• 




(tons) 


(thousands 
of tons) 


(thousa,nds 
of tons) 


per cent 


1919 


5117 


187,864 


68,570 


31,616 


46,1 


1920 


(3) 


(3) 


(3) 


32,841 


(3)- 


1921 


(3) 


' (5) 


(3) 


3'5,317 


(3) 


1922 


5500 


222, 891 


81,355 


36,429 


44,8 


1923 


5747 


245,616 


89,650 


39,916 


44,5 


1924 


6025 


253,940 


94, 513 


41,292 


43,7 


1925 


6262 


265,759 


97,002 


46,864 


48; 3 


1926 


(3) 


V ^^^ ■■ 


' (3) • 


45,927 


■' (3) 


1927 


7338 


290,012 


105,854 


47,543 


44.9 


1928 ' 


7474 


'318,405 


116,218 


50,994 


43.9 


1929 


' 75J38 


■332,'816' 


121,478 


53,544 


44.1 


1930 


7651 


349,342 ' 


127,510 


. 56,239 


44.1 


1931 


7714 


354,412 '■ 


129,360 


57,365 


44.3 ■ 


1932 


7328 


366,015 


153,595 


43,625 


32.6 


1933 


7832 


367,140 


134, 006 


39,005 


29.1 



(l) Estimate submitted by Leslie C. Smith, Secretary of the National 
Association of Ice Industries, at an xIRA hearing held April 6, 1934 on 
the "oetition of Houston Eiompson, representing the Refrigerating Ilachinerj'- 
Association and others, for the elimination of the Production Control -pro- 
vision from the Ice Code. TJie National Association of Ice Industries be- 
gan its collection of data on ice sfdes in" 1919, basing its estimates on 
a cross section survey of 160 com-oanies representative of every section 
of the country and all climatic c«nditions. Smith's brief is in Depiity 
Administrator's files, in folder labeled "Houston Thompson Petition for 
Amendment," 
9827 



-69- 

(2) Sane source, except for tuo ninor changes to -iialte figures agre,, v;itli 
those Ic.ter submitted "by the Code Authority in its reply of April 5, 1935 
to the Report of Deputy Ac'ifiiristrc tor Rohert K. Straus on the Administra** 
tion of the Trade Practice Provisions of the Ice Code, 

(3) ITot avo.ilahle. 

On the contrary, throu-hoTit the rjeriod covered by the available data, 
plant construction a"opears to hi.ve "been S'o.rprisin/'ly sensitive to changes 
in denand, Eiere are fe*"' industries in vhich the ratio of output to 
capacity has remained as steady as is indicated hv the occurrence and 
recurrence, "between 1922 and 1931 - in 1922, 1923, 1927, 1929, 1930 rJid 
1931 — of a 44 per cent load factor. And nhen, in 1932 and again in 
1933, denand fell off, so also did plant construction, Betv/een 1932 and 
1933 national ice ntuiufacturing capacit3r increased only three— tenths of 
one per cent; and though in the previous year the increase had amounted 
to aboxit 12,000 tons of daily ca"oacity, the Secretary of the National 
Association of Ice Industries exolained this "by stating: (*) 

The chief factor in this ne'-' plant building vras unquestionably inci- 
dent to the failure of the natural ice crop in IJevi England, Northern 
Michigan, Wisconsin, Maine, the Dakotas and the Rocky MoU-ntain states 
during the ^j inters of 1931-1932 and 1932-1933, In this territory 
4,127,000 tons of natural ice rrere sold in 1931 whereas but 1,300,000 
tons v.'ere sold in 1933, 

The fact that conditions became no vrorse hetiTeen 1922 and 1931 does 
not, of corTse, ansrrer the question as to -'hether ice capacity'' may not 
have been excessive at the "beginning as rrell as at the end of this per-« 
iod; and as to nhether there may not all along have been forces, open 
possibly to circumvention, nhich tended to create new pools of excess 
as raoidl3'" as old ones were absorbed. 

Before it is possible to coiie to any conclusions as to whether ice 
capacity has heen habitually excessive, it is necessary to take cogni- 
zance of a niijiber of matters which have a more or less important hearing 
on the extent to which it is possible for ice production to a;oproach 
capacity, 

II. TECIIillCiJL ^HD COiJ/IERCIAL E..CT0RS IlirLUEi:CI13G LOAD ITACTGR 

In order that the sit-uation as a whole may stand out in "better focus, 
it shoijiJ.d first he -oointed out that the national average load factor of 
ahoxit 44 per cent, which was typical of the ice industry in the period 
hefore 1932, was apparentlv a res"altant due to the combination of con- 
siderably higher load factors which have existed in some of the cities, 
with :-.Tuch lower load factors elsewhere. In Philadelphia, for instaiice, 
the lor.d factor in 1928, as coi-aputed for forty-one plants, was 58 per 
cent, (**) 



(*) In brief cited above, 

(**) Unc^.ted I^RA file nGmorrnduin srj-r:ari::ing d'ta in connection with the 
application of I. Cohen for ;oermission to erect an ice "olant in 
Phila.delnhia. For exolrnation as to how to find file relating to 
aaiy given a;o-olica-tion for a perroit, see note on P, 19 supra. 

98 ?7 



In I'levr York City, the load factor in 1S29 tjas an even 50 per cent; in 
Cleveland ituas 58 per cent. (*) Conversely, there must have been many 
places r.'here the load factor vac very much less than 44 -per cent, 

Aj Errors in Hating Hpily Ca-pacity 

As a. first caution, it sho-ild he noted that all figures for loa,d 
factor rest on daily rated capacities, which are only approxima,tely 
correct. Speaking of the capacity of the largest IJen York ice manufactur>- 
er, A, L, Engle, in a memorand'jun to the DeiDuty Administrator dated Harch 
23, 1935, said: "Some fjlants are old and ca.unot deliver their rated 
capacity; others use corraressor cape-city to maintain storage refrigeraj- 
tion, \/hile several of the<ncr;er plaints reach or exceed their rated capa>- 
cities," It mav he-n'^ted, hovrever, that this company had verj'' fe^T new 
plants. 

At a hearing held May 21, 1934, on the request of C. E. Keeton for 
permission t. erect an ice plant in Olclahoma City, Mr. Keeton, the chief 
engineer of ca ice plant, and a man o^ thirty years e^cperience in the 
industr3-j to].d of conditions in Oklahoma Cit3'- which tended to make act- 
ual .output less than rated cipactiy -as follows: "We have a v.'ay to list 
our tons. Some one villi come along end say,thr.t they have twelve cans 
to a ton hut with the water conditions we have here we all know it tcJces 
around sixteen cons (of plant capacity) to malce a ton, I know \That v.'e 
use, and I know what other people do." The condition to v/hich Mr, Keeton • 
referred waj the use hy certedn plants of City water, which made them 
materially less efficient than they would have he en had they used cold 
water from deep wells. Tor this and other reasons, Mr. Keeton named 
several plaints \^hich he said wou.ld make much less than their rated capa- 
city. Occasionally, indeed, they miglit make it, "Tliere are days when 
our margin will reach s. very high point (the plant under discussion was 
evidently that for vrhich Mr. Kieton was himself the superintendent) and 
if yoLi look r.t the record you will find that rating on days that will 
reach that point, but if jrou take the average over the season and rim it 
up jov. will find that ray figures are right." (**) 

It is probable tha.t in actual operation, plants more frequently iDro— 
duce less than their rated capcicity rather than more -• and sometimes a 
great deal less, 

B, Technical Impossibility of Qrjer; ting 365 Da7;-s at 
Maximum Daily Caps-city . 

It nust also be remembered that when daily rr.ted ca-pacity is r.iulti— 
plied b-y 365 to obtain annual rated capacity, as is usually done, this 
takes no acccuit of the fact that ice olants cajinot, for mechanical 
reasons, oper,.ite every day in the year. According to Windsor Llewellyn, 
Manager of thj Ice Exchange- of Los Angeles, ice plants must ha.ve at least 



(*) Based on statistics contained on Form 2 as submitted for these citijgs 
by the Code Au.thority (Local committees of Arbitration and Appeal),.-. 
For location in files see notes on pp, 23 "and 26 supra, •;:, ■ 



(**) Hearing pp. 22-24 
9327 



-71- 

a tvro or three neek period for shut-dovm and repair each year. (*) At 
various hearings, data submitted or observations nade by ice men also 
pointed to the iripossibilit';'- or inadvisabilitj- of operating plants over 
long period.s at rates v.-hich vere feasible for short periods. (**) 

". Tlae Seasoiml Factor 

Hie most ir.voortant single reason T/hy ice plants caamot be expected 
even to approach a 100 per cent load factor is because ice consirnption is 
seasonal, A high load factor, indeed, is not always a brdge of merit. 
It is corr.ion for ice "olants to store a moderate quantity of ice which 
helps on days or "oeriods of extreme demand. 33ut if an ice firm under- 
takes storpge on too eritensive a scale, so that the ice which is served 
to domestic consumers has lost that freshness which is one of the ojaali— 
ties the domestic consumer desires in ice, then the ice manufactiirer is 
not rendering standard service. Of course where ice is used for commer- 
cial packing pur^rjoses, this freshness is not important, 

Tlie ariount of seasonality in ice demand varies materially with the 
seasonal range in temperature, v.dth the way that houses are heated, with 
the buj-ing habits of consumers, and with the character of the non-domestic 
demand for ice. Seasonality in ice manufacturing is further affected by 
the willingness of, or the pressure brought on, consumers to use stored 
ice, as well as by the programs of ice manufacturers in this respect. 
Without e:camining each particular market, it would be difficult to deter- 
mine .just how much allowance for seasonality should be made in consider- 
ing load factor. That is one 'reason why load factors obtained by Bwlti- 
plying daily capacity bj'- 365 have some advantage over factors v/hich might 
contain an allowrnce for seasonality, but which would necessarily be rathei 
arbitrary in character, and sometimes quite unsuitable as applied to a 
given set of conditions. It is important to remember, however, that be- 
fore conclusions can be drawn from any figure for load factors - the user 
of siich figure must himself malre allowr.nce for seasonality - usually a 
very large allowance. 



(*) Hearing of Hay 28, 1935 on ap-olication for permit by A. L. Seaves, 
p7 110. 

(**) See, for instance, monthly operating figures for the Springfield 

ice plants of the Central Illinois Public Service ComT3any, Hearing 
(Decem.ber 28, 1933), on Application of John H. Musser and H. C, 
rischer. See also, statement of lip. Anderson, of the Anderson Artie 
Ice Company, OKlahoma City, Hearing on the Application of C, E, 
IZceton, P,23. Siieaking of his own plants, Mr. Anderson elaid: "I7e 
ccji bring them to 83 or 84 tons at our peak. We are under strain 
when we do that, but it is possible. ¥e could not possibly do that 
for 50 da-rs. ITe never had occasion to do that," The C. S. Keeton 
file folder is placed among "Pending Cases in the Deputy Administra^ 
tor's files, according to the arrangement described in the footnote 
on "0, 19 suora. The papers on the Irasser fnd Pischer case, however, 
are filed tinder "Inactive Correspondence, Liissouri" (from which 
St-te the applicants eame, ) 



5827 



D. Ol)-^,Qlete,Fln.nts. , ■ 

Aiiotiier ver7'- innortr.nt considerntion vYian a'TOraising the load factor 
of a,n e-itire comiTiunity, or the nation - is the matter of obsolete or vsi" 
used -jlaiitG. Failure to alloi; for this is one of the chief defects in 
the m\T3lished statistics oa load factor; and also in the data which 'jere 
submitted b:" the industrj?- in- connection i7ith code administration. It is 
a serious defect because those expjnining the figures cannot, r.s in the 
case of, seasonality, nalce some intelligent allowance of their onn. At 
the hearing in Oklahoma City on the C. S. Zeeton application for a pernit, 
there .a;neared on capacity lists a plant which had never been completed, 
and other capacity which, it appeared,, could no longer be used. After 
discussions, the dail^^ caioacity cls.imed was recVaced from 960 to 840 tons, 
(*) . 

In BJi. incompletejl report on their first field trip, Edward H. Emerson 
and Charles D. Bohannan, field representatives of KEIA, stated that in 
three- or four of the states which they visited on this trip, plants were 
counted ap capacity even after they had been abandoned. 

In all probability, therefore, uuite a few of the plants which appear 
in the statistics published hy the ice industrjr havenctually been aban- 
doned; and, beyond this, there must be a fair number which are so obsolete 
that the;' should not be corjited c.s cc:oacity, where the purpose is to 
detarr.ir-e whether nei/ construction should be perrutted. 

At the s;uae time, it should be pointed out that the mere fact that 
a plant is considerably less efficient than plants nov/ being built does 
not meaji that, that plant shoixld be coixnted as out of the picture. Tlie 
erection of nev; ulants involves the creation of high overhead cost and, 
especiall;'" in this period of uncertaintj^ regarding the future of ice uani.Tf 
facturing, it yaight- be nuch wiser to rets.in some of the older -plants wliich 
can serve a iiseful -our jOse, rather than to hasten to displace them with 
new plants. To a lesser degree, this capplies also to the imDrovement end 
repair of -:'lants. V/e have had occasion to repeat severe criticism of ice 
companies for failure to keep their plants up. If, however, an excess of .. 
ice copacity is available, there ma^'- sometimes be an excuse for postponing 
betternont and upkeen. Even though a plant is not in very intensive' and 
satisfactory operation, as long as it is possible to -out such a plant in':., 
recsonabl;'- good condition (whenever the justification of this expansion 
can be cle.^Tly shown), then such plant might properly be included in the 
total of available capacity. 

Quite di-fferent, however, is the sitiiation when it comes to consider— 
ing load -factor as an element in cost - and -aot as evidence for or c^gaiiist 
permitting ne^r building. In computing- costs which the public should be 
reouired to_ bear, carjscity that is closed down, even thoiogh it be in good 
shape, night T^ith a good deal of fairness- be considered almost as thoxigh 
it were- not in existence. There is risk in fUl business; a,nd when, the 
contraction of an industry makes a portion of the existing capacity sup— 
erfluoi-is, then -this- r,arierf].uous caoacity and, indeiid,- much of the' caoacity 

— — — • , h , , — , , ^- 

(*) Hearing P,37 pjid earlier -jages. 
9827 



-73- 

vhich is c.ctuc,ll3^ used. - should, in accordance nith the general principles 
deternininf; ve,lues be grer.tly written do\7n or rrritten off, 

E» CoLinercial 2Vctors lliti^intinA' Against Conplete Use of Capacity. 

One other consideratio-A of major ij.roortance rmiat alvrays he kept in 
mind in aalcing comparisoc hetvf^en oroduction and capacity in ice maniifact** 
uring. In the easy li' the ice industr;;,^ as of alnost all others, we are 
living itiider a oresu-uahly conpetitive sYsteni, under vhich capacity is 
operated Vj firns each of -hich .lust stand on its o'.7n feet. If ire rely 
on competition, rather tlian high ;..uthority to keep prices i/ithin reason, 
and a,lE0 to supply initiative, must firris he allo\79d to take such measures 
as may he escential to enable then to he effective in competition, ^.nd 
also to defend themsolves against those other firms vrho might seek to 
destroy or replace them. Sven v,-here there is a large measure of public 
control over an indiistry, something of this independence and self~suffi«- 
ciency vrast be allor/ed. 

But if a compan,-' is to build tii or even maintain its business, it is 
necessar;r thf.t it ■■lalre 'sv.tq thf t it ctai talce care of the needs of its 
customers. If e. company receives an order for a given quantity of goods, 
it is not necessarily,' sirfiicient tha.t the capacity to produce those goods 
are somcvhere in e::istence. It ^lay be vital, or at le;..Ft a matter of 
econon;/- aiid convenience, that the company have under its orm oiOTiership or 
control, the c/pacit-"- ?rhich can prodxice those goods. To be sure, one 
compcjiy often obtains goods from another compony v'hich it cannot itself 
produce. In the ice indu-stry, the orodu.ce of i7nich is in most, cases so 
highly standardized, intei'-plant sales are common. However, there are 
sometimes strained relations between members of the ice industry,'', which 
m£5l<:e such a means of obtaining ice hi.glily unsatisfactory. This is parti— 
cularl3'- true where a company is trying hard to erpa,nd. its sales, or where 
qi.iestions of price to the consr^mer or concessions of some other sort are 
involved. 

The jsecords of ITA cover many concrete cases in which it was claimed 
by someone that it was impossible, or undesirable, to buy ice from compe- 
titors. Thus in the aoplicction of the 'G-rocers Ice and Cold Storage Com- 
pany of Louisville for permission to increase the capacity of its ice 
plrnt, it v/as complained that this conrTany had lost a contract because it 
was lot a.hle to prodiice enough ice to take care of the needs of a customer. 

In connection with this ce.se, a letter from the Secretary of the 
Kentuc'q^;- Committee- of Arbitration and. Appeal to the Code Authority dated 
September 14, 1934, stated that the Arctic Ice Company of Louisville h^d 
15,000 blocks of ice in storage at the end of the hot spell •- which vrovJ-d 
indicate that there was no shortage of ice at the time when the Grocers 
Ice and Cold Storage Company liad had its difficulties. To thia claim, the 
latter replied: (*) 



(*) Letter of October 27, 1934 to the As: istant Deputy Administrator, 



9327 



-.74- 

"?Le.3c.i-ding 15,000 tlocks they clir.rged ne 90{# per "bloclc there at the 
plr.tiorn anc refuced an order for 5000 "blocks stating that -,7e could 

have only one load at a tiwe Yau ce.n readily see that if \ie are 

•placed in a position to look to our conpetitors for emergencies ne 
are charged e:±ior"bitaJit prices and aluo liraited down to small ojnoiuats. 
It stops the .nataral growth of ovjr "business and v;e can "be pointed 
out to the "business putlic thrt "e are not in a position to supply 
their orders, which statement has "been made,'' 

¥e shall find that in a nm"ber of cases the WA c^dministration 
granted porn: vs to erect ice plants ivhere there r'as no qtiestion but that 
there T/as adequs-te capacity, "but where that capacitj'' v/as '.ot ovmed "by those 
who needed it"if their "business wao not to "be crippled it lieing tho-aght 
to be in the public interest, as well as the private interests of these 
parties, -that they should be allowed to continue as an effective corapeti" 
tive elenent in the industry, 

F. Difficulties in Transferring CaToacity fron o. ManvJacturer 
Who Cannot Use it to One fflio Csn 

To this suggestion that, if a coinpan.y nust acquire capacity - ai-^-d 
there is other capacity thr.t is not fxiJly used ~ then the needs of all 
should be so-tisfied b"'- plmt purchase, it may be observed that such a 
disposition of the question might often offer a solution; but that it 
cannot be errpected to work in 100 per cent of the cases. In many instan— 
ces, business firms ave seeking to injure one another, if opiDortunity 
offers; or they are battling for advantage in any financial transaction. 
The e::igencies of business warfc?re, the com-olicttions of the bargaining 
process,- 'and also -oerhaps sone real or fancied imsuitableness of the 
equipment of the firm whose business is declining for the needs of the 
firm which is rising - these factors bring it about that much capacity 
which is owned "bY firms whose business is slack does not get into the 
hands of those who coold fully use it. 

Tliu.9, at the hearing on the application of . C. E, Keeton for per- 
mission to erect an ice plant in.' 0klaJ.ioma City, to which reference he,s 
previor.sly been made, Hr. Keeton, a prE,ctical ice man, in reply to an 
offer of the opposition to sell hin a certean plant, exr^ressed interest 
in Icnowing wlia.t orice would be asked, but indicated grave doubt as to 
\7hether siich a deal could be satisfactorily vforked out, (*) 

For one thing, the cost of making ice bj- the equipment used in this 
plant T/oiiid be a drawback - "It is simply too high,,,,, It would cost nc ■ 
too much to prodiice it, I do not v.a.nt to go into production with a plant 
that costs so much. " Then there was the loca-tion « "I am off in a corner 
in the residence district, and have ray ■oropertj.r, ,, , ,that plant is located 
within about eight blocks of the Anderson Arctic, nnd naturally people 
leaving town generally wait iintil the last to load up their cars." Tlien 
there was the plant construction - "The building is not constructed the 
way I v;oTi.ld like to build it and the location I had picked out is ideal 
and unless I could get an awful sncrifice, I would like to have it strick- 
en from the record," The man who offered to sell the plant did not name 



(*) P. 41-4^ 
9827 



-75- 

a price ofr hand, and Keeton e:qDressed the opinion, "I am sure that the 
price he has on his pro-oerty no-.^ld he prohihitive, " 

These diff iculiJies in the v/a;/ of oliroinating pools of unused caprj~ 
city, even nhen an industry'' as a T/hole is grcr/ing, are so ohvious that 
further enuiieration 'rould he superfluous. Individiie-1 firns are continu- 
ally rising, others era declining, Tivne --ho are groviing yant to have 
capacity that vill tcJce c re of their orders, at lear.t hy the tine that 
they cxe received^ Those --hose onsinesp has fallen a^vay often try to 
hold on in the hope that sone of it Cc?ii "be ^on hack. 

G, ?-elocation of Industry as a Cause of ITnn>^Use of Caxiacity 

Beside the failure to use all of cr.pacity --nich is inevitable as 
long i,s there is diversion of o'vnershio in business, it should he noted 
that sone capacity in the ice industry is not fully used because it is 
hadly located. Before the general uc.e of electric porrer, ice plants used 
to he located close to railroad trachs in out of the '7ay places, Chajnged 
conditions of -production and distribution not infreauently warrant the 
building of capacit'^ in a new locrtion even thoue'^ this leads to duplica— 
tion. To a vei-y minor eixtent it na"'" also be iuoossible to use some ice 
mal<:i:ig co,pacitv because it is rdaiited for uaking the u rong kind of ice, 
there still being a fc'-' olants '^hich ere adapted onlj'" for making ice out 
of distilled water. Hie introdaction of such nev forms of ice as i"la':ice 
and Pric— Ice is as yet too limited to hr.'.ve a substejitial influence on the 
general situf'.tion, 

Tlie factor of wrongly located ccpacity is likel;"" to b e a more impor- 
tant factor in the future than it has been in the past in accounting for 
variation between total crpacity and total consumption, because there is 
at present going on a certain rxiount of geographical re-location in the 
industry, Tliough non-used ca-oacit^'- he,s risen to large proportions in most 
places, there are still sone localities in which ice consumption is ini. . 
creasing, end. where satisfactory service calls for new facilities con- 
veniently- located. For instance, in many summer resorts electric refrig*- 
eration is rot likely to mcks rapid headway, and increased ice facilities 
may be reciured. (*) There are- also some climates, as in the Pacific 
Northwest, where it would ropecr that domestic refrigerrtion is not a big 
enough problem to put as much force bad: of the trend to'-'ards electric 
refrigeration as in other rarts of the country. (**) Also there are some 
neighborhoods po-oulated b"''" classes of people whose incomes have not as yet 
permitted cjny considerable ourche.se of electric refrigerators, (***) 



(*) Sec for instance aprlication of Leonardo Lonardelli for permission 
to ereot ,mi ice plant in Honlconona, Long Island, 

(**) See statement in reoort of Committee Arbitrotion & Ap^Deal, March 3, 
1935, in connection T-ith the application of Pacific Refrigeration 
Co:rpar^ for a permit to erect tr. ice rlrnt in Kent, Washington, T.ie 
domestic ice busi;ieras was at best smrll; rnd its tota.1 loss wo-old 
still leave thr.t con:iercial icing which is now the m.ain source of 
dem.erid, 

(***) See application of the 2ry Ice Company to Inrild a 40-ton ice plant 
in a Cleveland neighborhood occ'^oied by people of moderate means, 
Hearing of February 17, 1934, p, 32^ 

9827 



-76- 

Pinall3'', there arc ncny small conmunities vfhich have never had a local 
source of ice su-^rply. 

As respects all these contint\ing ox increasing denands for ice faci« 
litias, it is significant, that, just as theve has in recent years "been 
developed the very snail refrigerating unit used in households, so for 
purposes of c^ iimercirl ice nahin;;; there ho,s h een an increasing tendency'' to 
set -ap coujCT. tively small units v/hich can he scattered among the lesser 
communities - or located in large cori!m.nities, close to the -olace of con- 
STimption, LiiieTjise there has -Tseeh a tendency to develop ice manufactiu-iiig 
in sraall communities as an auxiliar^r ooeration in connection vrith other 
lines of "business, such as cold storage pleiits, creameries, etc, 

Tliis tendency tov/ards decentrclization and relocation was a main 
reason for a large proportion of all aoplications for permission to erect 
new ice plants under MA, But it is also of interest to note that this 
movement w^.s aJ.ready v/ell pjnderwpy "before ITRA ~ a comparison of the numher 
of plants and total capp.city "before and after 1933 suggesting, though not 
a"bsolutely proving, that the plants erected in 19 3 were smaller, on the • . ' 
average, than in any recent yerr for '"'hich figures are availa"ble; and very 
much smaller than in such years as 1923, 1929 and 1930. 

So the shifting of ice production to ooints nearer to places of con- 
sumption hay "be a consider: "ble force in the future - and has "been a force 
of some consequence in the past - in making for divergence "bet\7een the 
total capacity which ha.s "been constiTLCted £ nd the ice which that cp;oe.cit-^ 
produces, 

III, THE A5SEIICE, GENERALLY SPE/iKIITG, OF a PHOBLE'i OF E]iCESS CAPACITY 

PHIOH TO 1952 • ^ . 

A, E-'-amination of Statements Resoectin.g: Excess Capacity 

In an article to which reference ht.s previously "been made, (*) 
Benjamin Li, Parker quotes statements of Arthur S. Deving (also referred to 
earlier) (**) on the suhject of the heavy investments made in the ice in- 
dustry "by sonu.; of the utility companies. And upon this evidence, h'r, Tcxlzev 
leads the reader to assiirne that this sioecula.tive movement was an importoJit 
factor in increasing to an unwarranted degree the productive capacity of 
the industry. An e:camination of Dr/ings's "bool: fails to reveal any sugr'es— 
tion, however, that the utility com ;anies built olants. As a matter of 
fact, the chief complaint against the utility comioanies - especially the 
"uiddle TTest "Utilities Company - v/as that their olcnts were old, and" that 
the new ovmers v/ould neither replace them, nor properlj^ kee-o them up. 

One other major invasion of the ice iadustry occurred when many brew- 
eries, cut off from their former markets "by prohitition, turned to the ice 
field. However, this was lauch earlier, and i-dth the su"bstantial growth in 
consiuaption of ice v;hich su"bsequently took place, it may "be assumed that, 



(*) See pp. 3&, 63 ' supra, 

(**) See p-o, 47_4b supra, 
9327 



-77- 

whatever duplication of facilities nay have at one time occurred, this 
nas later greatly, if not entirely'-, relieved. 

In a hearing on the ice code, Septemher 3, 1933, the chief "briefs 
in support of a provision restricting construction of new capa.city were 
presented bv Col. p. A. V/'eath erred, later General Counsel for the Ice 
Code Authority, and H. il. liohbins, 'President of Union Ice Compan;^ of 
San Prancisco. Eoth spblce of e:;istlng excess capacitj'-; hut neither gave 
definite i-ndication as to whether there was excess in any degree before 
the decline in derarJid caused b;-- the electric refrigerator. The emphasis, 
in fact, seemed to be, not on the absolute amount of excess capacity'- 
created by the new firms, but on the break in the price structure which 
even a small plajit, which disregarded establislied prices, could cause. 

To quote i.ir. bobbins, (*) . 

"There has grown a class of 'racketeers' which prays on the fact 
that each ne'v plant demoralizes the market and thus creates a 
nuisance value. An additional installation, even though of small 
capacity', ea_sily and immediately upsets the normal market because 
the ov/ner, v/ith nuir.ance intent, can go to even a very few 
cxistomers in every neighborhood adja,cent and by inducement destroy. 
His purpose being to force those already established to buy him 
oxit at a racketeering price. Instances of piracy, almost without 
end, and mtxltiplied manj?- times in nearly every state could be cited." 

Colonel 7eatherred, though speal'ing mainly of effect on price, 
gave some attention also to other long-run effects. After starting that, 
even during the depression, capacity was increasing, (**) he continued: 

"The situation is aggravated by the fact that once installed the 
ice plant remains and continues to operate as an ice plant, and 
will finally in one way or anotlier, exact its toll from the public 
and from the prior established ice operations 

"The new plai:it coming into a ma.rket almost invariably builds up 

its load, at small cuts in prices. The builder of a new 

plant usually tries to get a-./av with it v/ithout breaking the 
market, but if the market does breal-, he is prepared to fight it 
out until peace is made and the load built up through price cutting 
is conceded him." (***) 

(**) Lest this statement give a wrong impression, attention should be 
called here to the fact that our table showed that the increase 
in capacit:-"- in 1933 was only one-third of one per cent - and may 
possibly not have existed at all if plants which had been abandon- 
ed had ''aeen subtracted from the industr^y-' s capacity totals. 



(***) PP. 61; '66 



9827 



-76- 
3. Conclu.sions He£:ardirg: the. Capacity Situation Tjefore 1952 . 

As against the above rather inconclusive statements regarding the 
pre-1932 capacity situation, the vairiety and complexities of the con- 
ditions offsetting the use of capacity, as outlined in Section II of 
this chapter, indicate that it. is largely a matter of judgment and point 
of vier/as to whether the ice industry should he pronounced an over- 
developed industry/- in the period prior to 1932. 

There is, however, a very strong suggestiveness about the re- 
currence over and over again of a national. load factor of 44 per cent 
v/hich inclines an observer to the view that the many factors '"'hose com- 
bination lead so consistently'- to this 44 per cent figure, must have had 
some pretty solid foundation; and that, considering the existing commer- 
cial structure of the ice indAistry, with its mixture of competition and 
monopoly, the industry probabl^;'- had a.bout that degree of plant develop- 
ment ',"hich conditions made normal. 

Certri .ly in man^- of the leading cities of the countrv, there is 
nothing in the data on capacity and productibn, collected under the code, 
but relating as respects so;ne of the information, to conditions as far 
back as 1924, to suggest serious overbui''.ding. 

Thus in Eew York City annual ice producing capacity, was increased 
between 1924 and 1929 only b:?- this difference between 9,728,000 and 
10,321,000 tons; and since 1929, it has been going down (*). In 
Cleveland, capacity increased between 1324 and 1929 from 775,000 to 
874,000 tons. But in 1929 the load factor, as has already been stated, 
at the high figure of 53 per cent. It ivould appear that only the exten- 
sive use of storage made possible this high average load factor in the 
city of Cleveland. Since 1329, the total plant constructipn in Cleve- 
land has aggregated only 105 tons of daily capacity. 

Basing our findings' both on such evidence 8.s is available, and on 
the absents' bf contrary evidence in places where it might be expected 
to exist, it would appear that, prior to the decline in the demand for 
ice, the 44 per cent load factor which existed for the couaitry as a 
whole did not represent an over-e:cpansion of ice manufacturing capacity 
- "imless, indeed it be said that it \/ould have been better if, a few 
years before 1932, it had been possible to look aliead and check 
additions to capacity - because of the coming slump. 

The ice industry was a profitable industry'-; (**) and outsiders 
occasionally came in - sometimes by bu;5'-ing plants out (as did utilities), 
sometimes by building plants (as individuals occasionally did). The 
building of a plant by outsiders usually meant a wealcening of prices and 
sometimes a price v/ar. Sometimes the threat of building an ice plant 



( *) In connection with these figures for ilew York the original source, 
howev'?.r, mal-res this notation - that from 1924 to 1930, various 
plants were increased in manufpcturing capacities. These figures, 
however, were not readily obtainable, and so the manufacturing 
ca,nacities of plants o,s of 1934 were used as the basis for 
statistics. For original source see note p. 19 supra. 



(**) See pp. 45-48 supra. 
9827 



-79- 

wa?. sufficient to exact tribute from persons already in the industry. 

Despite tlie profitable character of the industry, and the pos- 
sibilities of extorting tribute, the industry had tvo fslvly adequate 
defenses. 

The first \7as t.'ie strori'-;;-ly entrerched position of those already in 
the field. They controlled the system of distribution. And they also 
had the pov/er, by price cut tin:-: theiaselves, to inflict a severe ordeal 
on the intruder. 

The second Gafe,-?:uard was the fact thp.t t]ie industry vas rapidly 
growing. If an outsider did once in a v-hile brenic into the industry, 
production and capacity'- could in times wor': back towards their old 
relationship. 

All this does not mean that the ice industr;^' could not have operated 
with larger output per lonit of capacity than T/as obtained, if competition 
could have been curbed and the conflicting efforts of firms brought into 
some coordinated system. The comparatively high load factor in cities 
like Cleveland, v;here tnere v.ts almost complete monopolj'', points in this 
direction. Mea-sures designed to foster such tendencies vjould, however, 
have had to be accompanied bv safeg'.iards against unreasonable prices 
and, the other abuses to'.7ards '"iiicli monopolies are prone. As it was, the 
ice industry- was permeated, as v/e ho.ve seen, with the spirit of monopoly; 
and such building of unnecessarj'" plants as occurred was an all too v/eak 
protection against a general price level which was much above cost. ( *) 

Trom the consumer's point of viev?, plant building before 1932 was 
not extensive enoijgh to bring prices to a close approximation of cost. 
From an industry" viewpoint, plrnt construction was not sufficiently 
serious, as respects its effects either on price or on load frctor (or 
the two together), to make the ice industrrf oth'3r than one of whose 
financial success its members v.'ere very proud. (**) 

IV. THE PR03LSM 0? EXCESS C^lPACITY BEGIiiriiJG IF 1932 

Indirect testimony/ given by reTiresontatives of the ice industry at 

the code hea,ring on September 8, 193o tends to confirm the conclusions 

reached in the preceding section that prior to" 1932 the industr^^ had 
no problem of excess capacity, 

"Ice prodixcing facilities thro-ughout the countrj^, " said Colonel 
T/eatherred, later General Counsel' for the Ice Code Authority, "are now 
fifty per cent in excess of what are needed to meet peaJc season demand. " 
An identical st3,tement was shortly afterv/ards made by i,'. H. Robbins, 
President of the Union Ice Company of San Francisco, these, a,s already 
stated, being the tv/o men who presented briefs on control of production 
at the hearing. 



( *) See p» 19 supra. 
(**) See p. 4' siipra. 



9827 



-eo- 

3y reference to the table presented earlier in this chapter, it 
\7ill be noted.! that, in 19S3 (tov.ards the close of nhich year these tvo 
statements xreve made), the national, load factor cams out 29.1 per cent. 
How, a little fi,:mring v;ill shovr that, if there had not existed that 
fifty per cy-^nt of excess capacity to ivhich Colonel '.Teatherred and Mr. 
Robbins referred, if iGe producing facilities could have been spirited 
a\7ay so that- there had not been in 1953 any more than "v;hat are needed 
to meet the peak season demand, " then, there would have been in 1933 a 
national load factor of 43.4 per cent. By reference again to the t-^-hle 
it T7ill be seen that this fig-are corresponded almost exactly to the 
load factor vrhich did exist each year betv/'een 1919 a.nd 1931. (*) 

Accerjting the statements of leaders of the ice industrjr that in 
September 1933 the capacitv of the ice industr:^'- was approximately fifty 
per cent in excess of the needs of the countrj'' as they then existed, we 
come to the aiiestion as to the significance of this situation for the 
ice industry and the piiblic. 

At the time when the Ice Code was under consideration, September, 
1933, there were many industries where a third of capacity was not in 
use. The situa,tion in ice was, however, unique in one respect; and 
unusual in another. 

The position of the ice industrv was unique in that in practically 
no other industry (excepting railroads and other types of business which 
did hot com.e under codes) is there as great a tendency for unused capa- 
city to demoralize price - unless, indeed, this tondenc;' is offset "by 
some form of compulsion or agreement. (**) The ice industry"-' s situation 
was unusual, in that there v.'as no likelihood that general business re- 
covei^r would materiallj'' reduce the amount of excess capacitj''. On the 
contrary, there was a likelihood that the proportion would increase - 
except, of course, as excess capacity was scrapped. It did not seera 
possible that the most drastic price reductions conceivable could 
materially alter this situation, For there was probably as much room 

for the reduction of prices on electric refrigerators and the current 
that supplies them as' in the case of ice. And house-to-house surv'eys 

had indicated that 90 per cent of the women using ice for domestic 
refrigeration were only waiting to b'-oy electric refrigerators until they 
could finance the purchase, (***) 

(*) Indeed, in no j^ear fnr which. drta is available, was the load factor 
quite this low, the nearest being a load factor of 43.7^ in 1924. 
In 1919, with a load factor of 4S.l^, and 1925 with a load factor 
of 48. 7;^, capacity would appear to have been a little short. In 
all other years the load factor was greater by not more than l.S'l 
than the figure which we have computed. Of course, no importance 
is to be attached to fractions of a per cent, or even full percents; 
as the data is not that accurate, and the 50 in excess estimate of 
the industr:/ representatives was only a rounded statement. 

(**) See pp. 15-22 , supra. 

(***) Colonel P. A. ".'eatherred, in brief submitted in opposition to the 

petition of Houston Thompson for cancellation of the production 

control provision in the Ice Code, 'hearing of April 6, 1934. In 

folder in Deputy's file la.beled "Houston Thompson Petition for 
AmendjTient." On the lack of elasticity in the demand for ice over 
short periods, see p. 20^, , supra. 



9827 



i 



-81- 

Stretching as far into the future as anyone could see, the ice in- 
dustry had "before it, therefore, a prospect of great excess of capacity 
- which pointedly raided tne question as to v/hat, if anything, could he 
done about it, and what laight he the effects on the industry and the 
public of action, or a failure to t,al;:e action. 

To understand the possible function of code provisions in this 
connection, it is r.eaess: vy to knov/ something about the v,'hole train of 
events - including the iriduntrj.'' s reactions and programs (and their 
consequences) - which tended to follo'..' the appearance in the ice in- 
dustr^' of heavy excess capacity. 

A statement by Colonel Weatherred at the code hearing confirms our 
earlier finding thrt in the days before the serious troubles of the ice 
industry began, the tj-piical market condition was one in which there was 
a mutual understanding among manufacturers as to what prices should be 
cha.rged. This, on the whole, apperrs to have worked prett^'- smoothly, 
even when considerable temptation v,,as offered to manufacturers to shave 
prices because of the decline in their own load factor due to the 
widening gap between sales r^nd cajjacity. 

Ihen, however, sales dropped belov? a certain point, price mainten- 
ance by manufacturers, backed only by their ovm entirely voluntary self- 
restraint, v/as liable to brealcdovm. (*) 

"This rapid gro'.ring loo.d of surplus ice breaks a constantly growing 
number of our ice markets each season. A?, the load factors decrease, 
the producer and the distributor are under temptation to cut the 
prices to get the biisiness. By reason of uniform st.andard of ice 
and of ice service a small cut will secure the customer. So the 
chi^eling^^tarts snc' or.ce bei^^im, grows rapidly. The lowered prices 
wili. shortly te met by conxjetitors and still lower prices are" made 
in retaliation. " 

Even as la.te as September 1933, when only tv;o thirds as much of the 
ice manufacturing capacity as had normally been emploj'-ed vras actually 
being utilisied, voluntary understandings among ice manufacturers were in 
many localities sul'ficiont to keep prices on their old basis. 

"In other markets production has not yet reached the point where 
stability is not to be had without formal organization. Knowing 
the tremendous cost of broken prices the operators in many of these 
markets make fair success in maintaining stability. However, many 
such markets break every season. The difficulty of maintaining 
them \7ill constantly increase the surplus facilities increase." 

(*) The quotations from Colonel 7eatherred' s statement which follov; 
are from pp.V4iL-^42 of t^-e Code Hearing, 



9827 



-82- 

A practically irmDOssitle impasse vras reached in only informally 
organi zed markets, hor.'ever, uhen decreased Tol'ume of business meant that 
naniifacturers, because of their decreased ratio of sales to costs, \7ere 
no longer able to make money. 

"In many of our markets so great is the surplus capacity that only 
loss is to be realized to all operations vith all in the field and 
competing, even with prices stabilized in nonnal levels. ITo amount 
of good faith agreements will hold such markets. " . 

This survey of the more immediate and spontaneous effects of the 
appearance of erzcess capacity leads us to v/hat may be regarded as the 
heart of the industry's general program. To quote Colonel TJeatherred 
once more: 

"Some degree of stability is to be secured through the organization 
of dis ributing com'oanies or the setting up of Other devices that 
give an increased degree of control and spread the burden of sur- 
plus investments sufficiently.'- to become bearable to the industry 
and to the ice bxxylng public. " , 

As will become clearer 'rfter '"^e have had opporttinity to consider 
the Forth T7orth Plan, and also to give further consideration to the plan 
introduced before nA in Los Angeles, of which brief m.ention has already'' 
been ma.de, ( *) the general idea of the industrv was to forestall in 
toto the price reductions which ordinarily occur in a declining industry 
and save the substance of the investors' equity by closing down unneeded 
plants and charging the cost of this against that production which ras 
allov;ed to continue. Inasmuch as prices had iDreviously been very much 
■above necessary manufacturing costs (and the latter, moreover, were 
tending slightlj^ downv/ards) , there v/as everj^ reason to believe that if 
the plan could be made to v/ork, and further decline in the volume of 
ice sales coxild be somewhat checked, then it was likely that everj'-body 
would be able to get out in a fairly satisfactory manner. Indeed, with 
economies which might be effected in ice distribution and savings in the 
vast sums which had previously been v;asted in intra industry struggles, 
it was possible that the cost of retiring the unneeded plants would 
scarcely need to be taken out of profits. 

The industry, therefore, thought that, if they were allowed to 
make understandir^s among themselves (either with the tacit consent or 
with the definite -permission of the government), and if one area ^7as 
able to protect itself against other areas oy anti-d-umping re.gulations, 
then the indixstry could prettj'- v/ell handle the program of existing ex- 
cess of capacity - provided that they had one other aid, ajid that was 
control ove-.' the entry of new capacity. 

Control over the entry of nev/ capacity seemed essential to the in- 
dustry'-' s program from two angles. 



( *) See pp. 2t supra; and below Chapter VII. 



9827 



In the first place, it nas essential to the success of price 
stabilization and maintenance in a '.leclining marliet that the ■unneeded 
plants, those that would other..'ise 'bj'ea':; the marcet, be bought out. 
If, however, everi'^one entering the ice industry.'- Icnet? that those in the 
ice industr^.'- T;or>.ld be cornpei'.lad to D'ay theu oiit (perhaps at the seller's 
fi/mre, under rjcnalt"'- of suntainijig enormous losses), if ever;;,'- manu- 
facturer of ice ns.hinc -if ohlr'5i'-r l:ne" tart he had only to find a client 
who could tempo rari].-^ fii.arjce the purc'i;ise of a plant in order to make 
a machinery/ sale, there '..o^rlc Lc no li-dt to the cost of keepin.'; the un- 
necessary olants oou,:_;ijt oat. '3.10 only defense r.'hich tne ice manufacturers 
cotild have agpinsb p costly invasion cf i-ev; capacity v/ould be for them 
to charge r>ric3p for ice thr>t ^'ere so lov thot no one could melee any 
mone3'-, so low that the^^ themselvep; v/ould nave so little to lose that no 
one could coimt on boin^ bon.snt out. But this, of course, would destroy 
the whole "ourpo'^e of the pirn. It was essential not only that ice prices 
be ke-ot high enouTh to 'cover all costs, with a isrofit besides - but also 
that T^rices be hi.'^h ej^ioivsh, beyond this, to paj'- for the old plants which 
v/ere bein.<:, retired - or T/hich mi ^ht nave to be retired with fi;rther 
curtailment of demand. 

In the second pirce,' if vcluntan^ agreements regarding prices were 
to be upheld, it v;rs essential to Iteeu peo'ole out who -./ere not prepared 
to work along ''-'ith- the \ rest. The bearing of capacity control on the 
strategic positio^i of. conflicting elements within the ice industry it- 
self, .v/ii"l be ra6ra- fuliy developed \/hen \:e come to consider the actual 
workings of. capacity control under the code. 

In the above sketch of the conditions which led the ice industiy 
to consider, in 1933 and 19M, that it certainly must have capacity 
control (or as it was called in the code "production control") with all 

the auxiliaries in the wa:/ of rn ti-dtun-Ding provisions, sales below cost 
provisions, minimtm "orice orovisions, etc., the rdm of the industry 
to maintain prices and a good lorofit level has appeared as the out- 
standing part of the picture -"as it -.vas, it sliould not be overlooked, 

however, that the alternative to doing something of this sort was ex- 
ceedingly bla,ch. 

As early as the S'all of 1932, that first year in which national 
ice demand fell off, prices in Los Angeles dropped to one dollar a ton, 
(*) In fourteen \;eeks the cost of this war to the Los Angeles ice in- 
dustr^A was said to have been $750,000. Later, at one time or another, 
prices in each of the cities Kew Orleans, San Antonio, Dallas and Fort 
TJorth, -.-ent to as low as one dollar a ton. A price of one dollar a ton 
is, from an industry standpoint, terrible. It would not be justified 



(*) Hearing on May 29, 1935 on the application of A. L. !^eaves for a 
pemiit to construct an ice -olant in Compton, California, p. 132. 
See also affidavit by "indsor Llev/ellyn, manager of Ice Exchange 
Inc., incoi'porated as part of the record of this. For explanation 
as to where material dealing with any application for a permit may 
be found, see note p. '19, supra. 



9827 



-84- 

even if plants coulc'. "be obtained for notliin.'^. Even in liev/ York Citj)-, 
prices at one time rent dovm.to ti.7o dollars a ton, v;liich also is not a 
rerntinerative price. .The 'brec'Jc dovai of the ice mrrket ras no incon- 
sequential factor in the grief vhich came to Middle-""est Utilities, 
and. other utilities." Fot onl'',^ '..ere tliese conditions had for the ice 
manijfacturer, but the ice consurier ap'oears to have rec.li2;ed little 
immediate ;^,sAn. Although a fe\; bought ice temporarily at 1ot7 prices, 
much of the margin lost by the nanufactarers v'ent to the dealers; and 
these, in turn, lost a good. c!eal of their gain because of the multi- 
plication in the ntimber of distributors vhich took pla,ce. 

Gond.itions r/ere not thoroijghly satisfactoiy from the standpoint of 
anj^one. Some change in conddtions badly need.ed to be made* And it is 
only natural that those changes r/hich T;ere proposed by ice manufacturers 
shou]-d h.ave reflected the ends for which the participants in almost any 
lines of businesc have traditionallj'' striven. 

Had it not bei^n the ambition of manufacturers to keep the ice in- 
dustry a iTrofitable one, there v;ould have been no need for limitation 
.of nev; plant capacity. Plant construction in 1933 \7a.s negligible. Even 
under the stimulus of all the promises of the Ice Code, r.'e shall find 
that the actual tonnage involved in a.riplication for permission to build 
ne^7 plants was not large. And a confeid.erable part of this was justified 
hy the need for ice m-aJcing capacity in Tjo.rtiCula.r places. There is-no 
evidence to indicate that people have ovei* tried to go into the ice in- 
dustr;^ on c.-V considerable scale, e:;cept v?here the price level promised 
profits - either because of price control or the strength of consiimer 
demand. 



9827 



CHAPTER V 

TH^ ICE CODE 

I. PRO/.OTION iiND .iRITIrlO 0? '^HE CODE 

In Sections I and III cf Ch.^;cter m, brief statements have been 
made regarding thn origin n id in+t-r^.sts of the "lational Association of 
Ice Industries. It r'^s t^3i-c exolainex tuat this trade association, 
thougti eier jetic, was sa-"-erel7 Lated in th^ r.: ige of its influence bv 
the TDredomiuaitlv loci character of ice ,nar---ets. " est of the intimate 
contracts of memQers of the industry were Fith forty-foijir unit associa- 
tions; miich, tho\i':,h :ia;cing use of the national Association for pub- 
licity jurooses, vevp or.^ni'^^^a on -^n entirely iiideoendent basis. 

V/hen, however, the passage ox the ■ttional Recovery Act opened a 
possibility of establishing scrie sort ..f order in i-'idustry on the basis 
of Federal sanctions, tne rlaticnal Associatio.i of Ice Industries was 
instantly galvanized into intense anc sustr.ined activity. Even before 
the Act was approved, the Association, in order that it raid^jht put itself 
in a position to spoisor a code with fill industry supnort, invited the 
industry's forty-four unit or i;cni7cr tioas to ijarticioate in a joint con- 
ference. At this conference, which Met in Chicago, on J'me 14-15, 1933, 
the 'lational Association secured the su^oort of all but one of the 
Regional .associations, thpt for Chic go, which held out for a separate 
code, in which effort, however, it was not to be successful. C*"* 

Bac'ced by this suD'oort, on J-\ne 19, 1933, only three davs aft'^r 
the aiDoroval of tiie h'rticnal Industrial ^.ecoverv Act, reoresentatives of 
the Association of Ice Industries ao'cear to nave s.iade their first effort 
to gain a hearing. A bulletin later issued bv the Association stated 
that a "code" was iD.'esented on this occasion to the Assistant Adrainis- 
tr-tor. Ho'":ever, it se ms that the Administration wcs by no means sure 
at tnat ti-ne — or for at least thre' wee-cs -'i^ter this — that it would 
include the ice iidustry within the field of its operations. The repre- 
sentatives of tne industry were advised that no decision had as yet been 
reached as to i-7hat mi ht be the scone of the Recovery A.dministration' s 
powers concerning industries wnich did a major oortion cf their busiaess 
in strictly interstate transactions; and it was suggested that the ice 
industry engage counsel, cone back, und show the Administration that it 
was entitled to operate under the Act. (**** 

There followed a series of vain efforts on the nart of the industry 
to be acceoted as candidates for a code. On July 9, representatives had 
an inter-ie'." with assistant deputy Gates, who Questioned the right of the 
ice industry to operate under the Act and stated that until this Question 
wr-G settled, nothing should be done about filing a code. Pollowin?; this 
interview, the inaustry represent? tives vainly attempted to clarify the 
industry's status throu:?h the KRA le::.;al deaartme.it . It was not imtil af- 
ter an apoeal had been made to one of tne Presi-.ent's secretaries that an 
interview was obtained with Chief Assistrnt Ccuisel Sharo, vfho again suggested 



(*"> Coae History, p, ■ 9 ' 'gs-- ■" 

(**) Data, in this paragr-'^oh an6. the three which follov.' from Code History, 
po. 10, "11, li, n9 



-86- 

that the industry submit a. "bricd in suooort of its contention that it 
should "oe Dernitted to have a code. 

Pinall;-, on July 10 and 11, Sccretrcry Leslie C. Smith and Colonel 
P. A. TTeatherred — v/ho "cs latc^.; to tecoine GoneraJ Counsel for the Ice 
Code Af-bhority — • 'err a^le to "bej^^in di'rucsion -ith Deputy Administrator 
Whiteside iTith re:5:f..rd to thfj -jossible sut.ject matter of an ice code, j'or- 
raal suhnission of the code occurred on Aivxiist 1, 1933 and certain changes 
were sf.-',v-eGted on August 31. 

Paralleling these efforts to obtain a he>.-.ring, the ice industry had 
developed some verj?- definite ideas r?-s to v/hat it 'tranted in its code, ejid 
and eqiae-lly strong disioosition not to acce-ot an'yti'ing else. In particu- 
lar, the industry van disx)0sed Co hang "back from accepting the President's 
Eeemployiiient Agreeneat -artil !■"■ nrx". pome assurance, formal or informal, 
that it v;o-.^ld secure the trade porctice; end partici-larly production 
control, protection v;l:.ic„ it desired. On July 27, 1933, the Secretary of 
the National Association of lOt-- Indr.bLries sent, a bulletin to all members 
of the industr*'' 'jhich eT/iained -he parviose of PlLA. and intimated thr.t the 
industry ought not to sign this agreement because it did not provide the 
"protection'' ivhich v^.s deemed necossary, and '-hich it rras soughi to oh— 
tain through the oroDcsed codec Heiahers of the industry -'ere advised to 
"sit tight o.nd see iThat ha;TpenSc " Sv-entually, horrever, the industry'- did 
agree to go along v/ith PEA. 

On September 8, 1933, there nas a -oublic hearing on the code a,s sub« 
mitted by thp ice industry and on October 3, 1933, the revised draft of 
the code i/as a'oproved by the President. The ice code was one of the ear- 
lier codes to be aporoved, being ilo. 43 in the long list of codes on.d 
supplementar;- codes. Originally prepared by the national Associrtion of 
Ice Industries on Jiine 15, 1933 (*), the day before the signing of the 
National P.ecover;/ Act, it pa'sscd through all the processes of review with 
a !aiai:.rjin of change and may, therefore, be said to be one of the fev; codes 
which most fcdthfull^'- represented an industr3r's idea of what industrial 
self-government should be. (**) 

II. I.Ali: PIIOnUCTION COIiTP.OL PP0-7ISI0N 

The he; rt of the Ice Code, from the ^^.ewooint of those vjho prepared 
it, wrs control of -orodiixtion. The main provision on this siibject — 
named in the code "Control of Prod\iction, '' but really -oroviding control 
of capacit-;'- < — was Article XI, In a brief submitted to the National Re- 
cover;/- Acministration in connection with a hearing on April 5, 1934, of 
a petition of Hiiston Thompson for the elimination from the code of the 
certificrte requiring provision of i.rticle XI, L'ount Taylor, Cliairnan of 
the Ice Codr Authority said: (***) 

(*) Code hearing, p. 4. Hoi/evor, the Code History says (p. 15): "The 
E:;ecutive Committee of the national ^association of Ice Industries 
met on Jrme 12-13, 1933, and -ore-'x-.red a tentative draft of the Ice 
Code i-hich ^'a.s submitted to the corferonco nombers on June 14, (see 
p. -85 supra). After two days of intenaive discussion the conference 
acce-oted the code in aJmost ever"- ;x-.rt by r. 'oreponderant vote," 

(**) Cor.pare also statement b"y leaders of the i'iduc'tr;'-, pp. 15-16, supra. 

(***) Tliis Brief in folder in Deout'-'s files labeled Huston Tlaompson Pe- 
tition for Amendment, 

9827 



TIaere are three corToensatlng provisions (compensations for conces- 
sions made to lator) in the code iThich the Ice Industry accepted. 
They a:-e the Open Price Provision, the Anti-Dumping Provision and 
Control- of Production, "but Control of Production, Article XI, is the 
keystone of the v.'hole structiu'e. './ithout it the effectiveness of 
the other txio -orovisions -^fill "be destroyed and the entire structure 
vrill collapso. ... 

After citing some statistics to shov; the increase im emplo^nnent '^hich had 
Tjeen taicing "olace under t-"e code — all vith virt\aally no increase in the 
price of ice • — • Kr. Trylor continned: , 

Virtuall^,^ the .only com-jensa.tor-'- return rhich the industry hs,5 re- 
ceived or cm eiopect to receive, to offset this tr.enendous increase 
in lahor costs, is the stooilizing effect on the value of ice invest- 
ments "hich Al^ticle XI lorovides f:nd. the insurance against the finan- 
cial losses 'Thich follo'.T the huilding of ne':7 pla,nts in markets, that 
are .-.Iready. over "built, and to the raids of the industrj'' hijackers 
uho "build plants i'or their nuissuce value. 

On the s..:.ne occasion, I-r. Ta:'lor's position nith respect to Article XI nas 
supported "by P. A. Ueatherred, General Counsel for the Code Authority, 

Ai'ticle XI, Control of Production, falls logically , (though this does 
not shov: in the paragrrphing of the Irticle) into tiro oarts, the first of 
v/hich is general and -of iiis.jor iyioortance, the second of lesser iiTportance 
in that it nerely esta"blished additional pricing restrictions applica"ble 
to -olaiT-ts Y'hich for one reason ;Qr another (as rrill "be noted "belo;/) uere 
permicbed to start uo oosrations i.7ithout o"btaining a certificate of pu"blic 
necessit;'' ^rnd convenience. 

The first and more ii:,portrnt prrt of Article XI reads: 

If .at enj time an individus.l, firm, coroor?tion, or partnership, or 
o:ny other form of entei^orise, desires to esta"blish additional ice 
production, storage, or tonnage in Fixy given territory, said partj?" 
nust first est;"blish to the sr.tisfacticn of the Administrator that 
pu'blic necessity and convenience require such additional ice-making 
capacity, storage, or -Droductio?i, 

In order that the significance of the "balance of Article XI mey "be 
understood, it is irportant to loint out that the part of Article XI 
q\ioted e,"bove did not make it necessar;^r for every firm which .vrould in the 
future enter the ice industr;^ to o"btain a certificate; "because it "becrxie 
the esta'blished practice for the Administration to exemot from the re- 
quirement for o"btai'iiing certificftes e.ll firms rhich already iir.d ice plcnts 
in the co..rse of construction. The "balcnce of Article XI reads: 

The ice manufactiured from any plant that ','as not in actual operation 
on September 8, 1933 sh^Jl not "be sold to an^- purchaser for a period 
of t^:elve nonths from the dcto sucsetnient to SeiDtem"ber 8, 1933, upon 
uhich the opera.tion of such plant nay "be initiated or resumed, at 
prices loner than the lov.-est corres-Donding prices in good faith pub- 
lished, a,s reQ;aired "by this Code, in a schedule or schedules governing 
prices to such -ourchasers; 
9827 



-68- 

providing and excepting that this orovision will not apply to the 
sale of ice nianixfactured Td"- the follo-.-'ing: 

(a) Plants installed upon authority, of a certificate of necessit3'' 
and convenience duly issued by the Administrator; or 

(h) Plants temiDora^rily shut dovm for repairs for a. period not in 
e::cess of tnelve months prior to Se^jtember 8, 1933; or 

(c) Plants thrt were ovmed or '"'hose output i7as controlled by com- 
panies or OTierations that were on September 8, 1933 in good 
faith engaged in the business of selling ice to the general 
trade in the market in which the ice from such plants is proposed 
to be sold, such plants being on September 8, 1933, out of 
operation because of the intent in good faith to further the 
economic conduct of the business of such company or operation. 

It will be observed that this latter part of Article XI did not re- 
late to control of production or capacity/ in any absolute sense, but 
mereljr -olaced certain restrictions on the freedom of action of pleaits 
which V,' ore, .on the date of the hearing, either in course of construjction 
or idlfe — ♦ and, therefore, exempt from having to obtain certificates of 
public necessitv and convenience, although their starting up did in fact 
increase effective capacity. Such plants, voiless coming under e:-:ceptions 
(a), (b), or (c), had to go through a -orobationaiy period of twelve months 
during which they couJ.d not ->ost prices lower than thos firms which were 
alreaciy operating in the industr;'-, 

. The latter part of Article XI received practically no notice in 
connection with the aclrainist ration or general discussioni of the ice code, 
and members of the Depxitjr Administrator's staff, to whom inquiries had 
been addressed, had been inclined to the view that, because of its limited 
apolicability, this part of Article XI meant next to nothing. Examination 
of the Administra-t ion's records reveals only three cases in which firms 
were obliged to abide by the special restriction here under consideration. 

It should be noted, ho\7ever, that the restriction did ap;oly except 
as the;- crziie under Exception (c), to some 73 plants which on September 8, 
1933, vrere in course of construction -«- and which were tnerefore exempted 
from the necessity of obtaining a certific;.te of "oublic necessity and 
convenience; and also to that rather large group of ;olants — except as 
they f ell \inder Exceptions (b) or (c) — which were not operating on the 
date of the code heciring, Tliese t?ra groups of plants were just those 
which were nost likely to cut prices, and though cases did not reach 
Washington in any number, it is reasonable to assume that the scrutiny of 
local Coivraittees of Arbitration and Appeal, or the mere presence of the 
provision in the code, may have helped to keep this class of companies in 



9827 



-69- 

line on -orices. (*) It should also "be noted that the Deputy Adininistr£>- 
tor, ill notif-^in^ persons '-ho were being given exenptions from the, 
certificc.te-r'jo^uiring -orovision in Article XI, crll'ed special attention 
to the latter part of Article ,XI -— Y/ith its provision that they coi-ild 
not post lorices helor? those of coraoetitors. 



(*) Thus, in a letter y^ritten on LOvoraDer 17,, 1933, by the Chalrmaja of 
the Vir2i:"iia Gonnittee of Arbitr;.tion and Ap-ieal to the Vil'ginia 
Ice and JTrsezin.^ Co roorc.tio-i, the Conmittee Chairman said:'" '"In 
the interest of yoiu- section, and es3peciall3'' the interest of ilorfoll:, 
■ get all the information possible on the r5e2_2i§£Lt>i^ot in operation 
;')rior to September 8, to determine whether they are acting ijmder 
the Code as posted and filed schedules. Under the law, 'they can- 
not sell belorr the "prevailin;^ IJorfolk prices." After pointing 
of.t that special concessions of any kind v/ere forbidden, the 
Coaiittee Chairman concluded: "It v:ould appear that this plant is 
operating so far es sales is concerned, directly in conflict with 
the Code, I think this is a case that should receive, special atten- 
tion and I T/ould like to have an eo-rly ra-ol",'" . " This letter in 
folder in Deputy's files on Earners ' Coopercitive Ice Corapanj'-, 
classified under Inactive correspondence, Virginia, 



9827 



III. MTI-DUWiPING AND NOffiUl IviAHKET ARMS 

Though emphasis was laid en Article XI, there were several other 
code provisions whicn aimed to establish control over aspects of the 
ice Tj-asiness, control over which v/as o^uite as essential for stahiliza^ 
tion of production and 'orice as ifas tne restriction on new capacity — 
although the coopers tion of the government in the maintenance of these 
other controls was prohably a .■^-ood deal less essential. 

The most important of these other provisions was that forbidding 
dumping. Article XI, Section 2,-1 (letter of alphabet) read as fol- 
lows: 

Diverting from their nor-aal markets into any market ice produced 
from plants primarily operated for scne specific use other than 
the manuf actore of ice for sale in the doine3tic and commercial 
markets, and the pructice of proaacers or vendors of selling ice 
into other than their basic cr normal markets, channels or terri- 
tories, are condemrLud by -one Industry as unfair methods of com- 
petition in all cases in which such transactions are conducted 
otherv\fise tnan in compliance livith the following restrictions: 

(1) Such ice cannot be sold below the lowest published 
schedule of pricts obtaining in the market or territory in which 
such ice is offered for sale, and the price paid for such ice by 
peddlers or dealers shall not be lov/er than the lowest published 
dealer or peddler price in the market into which such dealer or 
peddler sells such ice, regardless of v/hat may be the price to 
dealer or peddler in the normal territory or market o . of which 
su-ch ice is moved. 

(2) Such ice cannot be sold below the average cost of pro- 
duction and u.istribution of all ice produced, sold or distributed 
Idy the producer or seller, plus tne cost of transportation to the 
points of ultimate sale or delivery. 

(3) Such ice cannot be sold lor lower prices than those be- 
ing secured by the oroaucer or seller in his normal or basic mar- 
ket. 

(4) Such ice must be sold under the same service conditions 
as to off-season sals ana as to protection of customers through 
proper storage as are established by any of the ice producers, 
dealers, 'or aistributors in competition with whom ice is designed 
tc be placed 

The determination of what constitutes "normal market, use, r 
channel, or territory" sahll be made by the Code Authority, with ' 
the approval of the Administrator. 

A little reflection on restrictions (1), (2) and (3) above will 
show what very serious nandicaps a 'nanuf acturer would be under who tried, 
uninvited and undesired, to soil outside of his "normal market," Not 
only could he make no price iiuucemcnt wnicn jiiignt encourage dealers 
or consvimcrs to buy from a ne--co:.ior entering tne area from without, but 
he would have to quote prices r-bove his "average" cost of production 



-91" 

and distribution by .-'.n rauch ns the cost of tr.nnsportint^ ice to the 
point of ultimate sale or deliver-.-. He would be both pov^erless to 
attack, and weak in defense of such business as he might have already 
gained. 

The An ti -Dump in.-; r^-ovirion coul be of most conspicuous siijnifi- 
cance in connection v.lt.i price ?/ors; vmich constitute the main occasions 
on which ice moves in ju; ntity to pn;- I'istrjice - or on v'hich, without 
much pctu.al movem-'nt, the mer"; potentiality of such movement causes a 
demor.-lization of prices over .-n extended area. However, it is obvious 
that restrictions on tjij moveia nt of ice of the type oiitlined above 
would tend to set up a division of markets which miii^ht come very close 
to allocation of proauction, fro^i several c.ifferent angles. First, 
the provision obvioasly and intentionally promotes the setting up of 
a vested interest in the' business in a given ,area on the part of the 
gener.'-.l gror.p of firns ••hich are tnere located.. Second, because of 
this protection against serious outside competition, the limited 
number of firms in a given arua can much more securely get together 
and among themselves agree upon the production or s.les quotas 
of individual '"e-abers — or at least maize jirr.angements vhich vdll tend 
to protect each member in the enJoiTnent of a certaia field of business. 
Finally, it is possible tuat, if the areas be made small e^iotigh, the pro- 
visions here under consideration might in themselves practically 
assure to given concerns a monopoly of given business — especially 
where there is only one firm, or a very fev; firms, of importance in a 
given locality — and especially if, to the normal market area, and anti- 
dumping provisions, there be added the prohibition against the construction 
of nev capacity. 

So far as the ITRk was concerned, the normal market area and anti- 
dumping provisions of the ice code were much limited in their appli- 
cation. Tiiere were really only six definitions of normal market area, 
all made in the months of I.Ia,v, June and July, 1334. Three of these 
were for Foi't Worth, Dallas and San Antonio, Te>:r.s, in which severe 
price wajrs viere in pro-p;re3s. The other three, in Pennsylvania, 
Louisiana ajid kassachusetts, respectively, were of minor importance. 
There were, however, ei;:hteen cases in which the Administration approved 
a finding of the Code Aiitnority to tht: ei_"'ect that some specific tovm 
or county was inside or outside of the raavket area of some particular 
city; and one case (the first decision of all - Januax-y 13, 1934) in 
which a certain city was said to constitute the market area for a 
p? a- 1 i cular company . 

Late in the sunner of 1934, the Administration began to become alarmed 
over the possibilities of thwarting normal competition contained in the 
anti-d'oraping provision. In a report on the Administration of the 
trade practice provisions in the Ice Code, mace in March 1935, by the 
"tlien deputy Adi^inistrator , Hobert K. Strauss, a statement vras made as 

follows: (*) 



(*) pp.17 -18. This report, thougn also issued separately, has been 
bound in as Svhitit 7 in Appendix to Code History. 



9827 



-9?- 

■ ' Since the Code w-s transferred to the Food Division, Au^st, 1934, 
no further recomrriendotions of the Code Authority" h->ve "been 
approved,. It is the opinion of ,"o-ar D-r-p-aty, that he laclis, at 
■ present, sufficient knowled^-e of tiie co.v itions of prodtiction 
and distrihution of cji:/ given "nornr.l narhet" to protuct these 
producers, just hecnuse they aro there. On the other hand, this 
provision mi/^-t he helpful to the puolic inter 5st if an agreement 
(like the Port 'iTbrth Flan) hr.d been approved hy II^A in a given 
market. I, therefore, recom'Tiend that the provision be not stayed 
but that it be continued for thb tine being in a state of , 
innocuous desuetude. 

¥laen stating that no reco mendations of the coc'e authority had 
been approved after the food division assuaed responsibility for the 
Ice Code, deputy' Administrator Strauss apparently har' in mind only the 
half dozjn complete definitions of normal market r.reas. There were 
two approvals by the Ad.ninistrator of findings of the code authority to 
the effect that a particular tovm or county vv'as in, or outside, or a 
given market area in October, 1934. Subsequent to October 23, 1934, 
there were, however, no furiiher approvals of definitions of normal 
market areas of even the rost limited kind. 

Aside from the above-mentioned approvals, the Administration 
denied six proposed definitions of normal market areas of greater or 
lesser scope; and ei;;ht cases 'verd ponding at the end of the code 
period. (*) 

When the code authority realized that no a.dditional market area 
dett^rmination \70uld be approved by the Administration, they ceased to 
press proposals along this line. But they dia not abandon the view 
that this was a desirable and important feature of the code. In their 
reply to deputy Administrator Strauss' report referred to above, 
dated April 2, 1935, the Code Authority said: (**) 

The Code A^itnority believes the policy of this provision is sound 
and desires that at the e.a-liest practicable date the Adminis- 
tration's policy be clj-.rified so tiiat the provision in its 
essential features, in their pr -sent or an amended form, ma;' be 
administered with firmness. 

Tliough few of the definitions of the :iar]:et ar aas were approved 
by the Administration, as they had to be, to be legally effoctivo, 
it has been reported that definitions of market areas were generally 
made by the code authority or its local committees of ai'bitration and 
appeal, and that these definitions were generally accepted by the 
Industry, ( ***) 

(*) The statistics on normal market area dt-t jrminations here presented 
are the resulit of a check on March 3, 1936, of records in the office of 
the deputy Administrator, in the coiu'se of which a reclassification was 
made of certain s"ammarit3s previously made and c^^rtain errors corrected, 
(**) P. 15, This r.:port also bound in as Exhibit 8 in Apvendix to 

Code History. 
(***) Edward H. Em-.;rson, Field Assistruit Deputy Administrator, and 
Chas. D. Bohannan, Field Economic Advisor, report referred to in note 
on p. 15, supra, conclupions, fifth paragraph. 
9R27 



-03- 

In practice, therefore, prohibitions f^..-"v'^.inst diunpin,' were of nuch more 
importraice than the above st'^ten^.ut of complications involved in de- 
fining just when dwnping was dtunping v/ould indicate. The anti-dumping 
provision of the code vras ritsHrcied as important by the Code Authority 
becriuse of the \iltimate sanctions which it set up. Failure to exercise 
forcefully the pov/ers .^ranted oir the code in this respect made compara- 
tively littlb difference, becrtuse in most communities the control of 
the local situation was sf^a tii,- t inter-regional shipments of ice did 
not in raiy case tend to occ.u-, on any ap;areciable scale. There was no 
desire (*) oa the Airt of Ri-siiibgrs of the industry -for determination of 
market areas in thinly populated sections, where ice wns at times 
traiisportcd to n oist-jice of 100 or 150 miles. 



(*) According to a statement in tne cnapte.r on "Anti Dumping Measures 
in the Ice Production Industry'',, in the Preliminary PLcport of the 
G-eographic Price Structure Unit, Trade Practice Studies Section, 
Division of P.eviev/. 



9827 



IV. P2CDUCTI01J COUT20L P::^.CVISI01TS PICPOS^D 

But iiOT liicoiTOijiTij III ik: OODZ 

Before aontioning cort-in othev provisions which, rerc in the ice 
code from the d?te oi' its original approvp.l, \;hich to ?. minor degree 
tended toi/rard production control, attention should te called to ccrtp.in 
f ar-ro? ching proposals vhich, after a triof trial vith the ori,;^-inr.l 
code, r,'ore offered 'oy w'^.y of pmondmcnt anc in part incoiTpor:.tcd in the 
code, in part rejected (out nono-the-lesB put into practice ty persons 
associated v/ith the code arlministration) . In the code, as ori^'.inally 
approved, Article XII, Section 4, in part read: 

It is conteiEplated that from time to tine Euoplemontary provisions 
of this code or additional Codes "ill be submitted for the approval 
Ox the President to prevent unf-'.ir comgpetition in price and other 
unfair competitive practices and tu cffectua.te the other purposes 
anr' policies of Title 1 of the ilrtional Indu;:.trial P.ecovcry Act 
consistent vith the provisions hereof. 

This provision wr^.s taken seriously by the industry, and a little 
less than four uonths after the code t-jp.s first put into operation the 
industry came forwrrd vith a cornorehonsive pro:_,rara for strengthening 
price and proc'uction control. (*) 

The tro nov provisions on produ.ction control y/ere not approved. 
One of tiiese v/ould liavo ,;;,ivcn the Administration power dtiring emer^^cncios 
to cstaolish a schedule of produ.ction or a echodule of -ithdrawal from 
storage, limiting for a dcfir-.tc period of time .... the number of tons 
of ice tlia.t shall be manufai. cured by or v.ithdravn from each and evory 
plant by or from storage v.d.ich ice is manufactured or v.'ithdrav/n for sale 
in or into the affected conr.'ctitive area 

The soccnd pro josed, Vut i.ot accepted, provision \70ula hrve feivan 
the Admlnj r^ rator po-'er to I'onter into agreements vith or approve 
voluiitary agi-eoments betve^.n '-nd pjnong members of the Industry selling ■ 
ice er offe:-in^ t^ie s-rae for sale in ar into any corrpctitivo area . . . . " 

Althou, h this last provision was never put into the Code, the code 
authority did, as vs sh^ll see, encourage the setting \ip of voluntary 
agreements of the sort hero proposed,' which agreements were r:adG, and 
ar^ still in effect. (**) 



(*) Amendment 'proposed Jpnuary 2o, 1934, hearing February 5, 1934, 

Code History, 173. The exceritr. from the proposed amendment vhich 
follow ta::en from Coco History :pp. 175 ■-■nc. 179. 

(**) See Cliiipter Viriuolou do"lin^' with Port V/orth Plan. 



9837 



-95- 

V. 2V22C--1]CY PHICI^S 

xhoiifcii the production control provisions of tho code were not ox- 
tended "beyond tho'^.c in tl:e code ar ori.'j;inally ?p:)rovpd (e:ccept for the 
extra-code activity just meution'^d) , the Ao.ininisfcr?, oion did, on April 
24, 1934, accept -s ^.me:icn;ent Ijo. 1. of the ice code a plan r)r6posed "by 
the industry for the ostrbiislmeat of /ninimun prices during times of 
emergency. A3 injo-.poir ted i.i -^ .^ticle ZII of tno ctde (new n-umberlng) 
t.his provision ran: 

1. When the Adininisti"- bor, uior. the recommend-? t ion of the 
Code Authority or rny ot'.or inter^isted party, sliall find that 
an eraerccncy exists ' ithin any coimctitivc area and; that the 
cause thereof .if that the prices, at --hich natural or artificial 
ice is h'^in^' ;^oid tLsroin, nave been redticed through destruct- 
ive price cutting, due to excessive over-production, increased 
r-ViO'^X'J, or for any other reason, to such extent as to render 
ineffective the labor or other provisions of this Code, or 
seriously endantjer thu mi.intenance thereof, the Amdinistrator, 
may in such emergency exercise the following temporary a.nd 
re':tricted remedial rae-rsure: 

He may establish a schedule of minimum prices for natur- 
al and artificial ice, based, upon the lowest reasonable cost 
of a representative oper'".tion located vjithin such competitive 
area as may be selected by the Code Au.thority or as shall 
other'-dse be determined by the Administrator to be represent- 
ative o'ooration anr' direct tliat for a definite period of time 
and v.'ithin the competitive area d.efined and designated, by. him, 
no meuber of the ice indai:-try shall sell or offer to sell any 
ice in or into such area at a price or prices lower than estab- 
lished by such schedule , ■ . 

2. Before establipiiin^ the schedule of minimum prices as set 
forth in Sectii^n 1 of this Article, the Administrator shall 
cause a hearin,^ to be held rithin the affected competitive area 
by such agency as the Adi.:inistrator n2.y dosi\;n^te and upon such 
notice as he shall prescribe, at vhich hearing any party in 
intci'cst including; cons'iaiiier interests, may submit for the con- 
sideration of the Adminipti-ator, an;", in any event the Admin- 
istrator may consider the follovan;-,: 

(1) The prices at vdiich ice v.-ac beint^ sold in the affect- 
ed competitive area before prices were reduced through dest- 
ructive ioi'ice cutting. 

(2) The prices at A-,'nich ice is beinj sold in mar]:ets of 
similar conditions as to "oopulation, consumption and operating 
costs. 

(3) The actual cost of prodxicing or iiarvesting ice, 
including special conditions affecting operating costs. 

(4) L?.bor costs under the Code. 

(5) Facts or representations presented by consumer,' 
labor or indiustry reproreiitativcs. 

(5.) Any other fact^ necessary to a full consideration 
of the issues raised .... • 



9827 



-95- 

The renainiriLJ sections, 3, 4, and i'>, dealt mostly ivitli administrat- 
ive details, the last nojued p.L'ovioinf tl-ia,t tiic A^iministrator mi:;ht desig- 
n-^.te as liis "s"pecial spoilt'' sor^eone rlio v/mild ma'te insiTec'tions, conduct 
investigations, receive reports ard crniplaints, and coordinate his 
efforts with those oi other ^.reA^-'.e» as mi^iht be necessary to secure 
compliance '."ith the schedule of mj.ni:uura prices. 

Although the present sti.i,'.y Icals priiiiarily vith production con- 
trol devices, ve are intcreetec' in \,hat happened in connection v;ith em- 
ergency price fixing from two snglos^ 

In the first place, emergency price fixing and capacity control 
might he regardbd an ,cor.rr>eting devices, iu t^.at a,t least one of the 
acloiov/ledged objectives of both was the prevention of excessive losses 
to those engaged in the ice industry. Emergency price fixing strikes 
at the lowering of prices directly; capacity control — or any form of 
production control — tries to strike at the conditions which make for 
price demoralization. 

In the second "olace, there have been times vhen er:ergency price 
fixing has itself been employed as an instrament for affecting cha.nges 
in the distribution of business among firms; and "ma^y therefore be re- 
garded as being in its own right a kind of production control device. 
Price fixing requires the Gstablishiiient or abolition of differentials 
bet'jeen the prices ^7hich must be charged by different groups of prod- 
ucers. In the case of ilew York City, we shall have a direct interest 
in the whole minimum price episode; because, as us shall later see, 
the m.ain object is establishing minimum prices in ITev/ York City was 
not to hold prices up, but to give to certain elements among ice dis- 
tributors a degree of protection against being eliminated by compet- 
itors. 

Confining otirselves here to a consideration of emci-gency price 
fixing as a competing control device, it may be noted tha.t there were, 
in all, six declarations of price emergencies under HEA. In only three 
of the six however, was the emergency declaration followed by an issu- 
ance of emergency' .price. 's^jSieduft 5s. (=0 

Failure to put- emergency prices into effect was due, in the case 
of Ivkcon, Georgia, to the fact tlvat it was found that the level to 
which prices had fallen was in fact still above the cost of oi-odu.cing 
ice; and in the case of Forth ■,;orth and Dallas, to the fact tliat the 
members of- the industry in eech city had decided to bury the iiatchet 
and get together on the basis of what was essentially a local capacity 



Data in balance of this section, imless otherwise rpecified, 
taken from a carefully prepared report issued within IIRA (but 
to v-hich citation is not authorized), or from vor]- sheets of 
0. A. Siuunes, Trade Practico Studies Section, ^Division of Hevicw. 



9827 



-97- 

and production control device — the Fort ITorth Plan. It appears that 
in all three of these cities — Mpcon, Fort Worth, and Dallas — there 
had Tjeen informal marketing; agrsenients, 'f/hose failure had precipitated 
the price emergencies. 

The first emer,i,cncy price schedule to /be sot up, that for San 
Antonio, Texas (July 2b, 1934), quiclrly proved an out-?nd-out failure. 
The ice industry in this city had previously been stabilized by an 
industry organization based on the use of delivery companies, v/hich 
purchased, excess cppacitj-. Orin^c to the breakdov<'n of this agreement, 
prices nad immediately dropped to a low of yi.OO per ton. It was claim- 
ed that price cutting was to a greet degree caused by invading peddlers 
who refused to file prices and sold ice at a lov/er price than that at 
which the local manufacturers could produce. Also it was said that the 
plants v/hose principal lines of b^isiness were other tiian ice manufact- 
uring sold suiplus ice, during the price war, at lower pi-iccs tlian the 
average prices existing at tha.t time. 

The attempt to irapii'ove this price situation by formulating an 
emergency price order failed to become effective because of non-com- 
pliance. Laclc of cooperation between the manufacturers and distribut-' 
ors caused the code authority and tlie Administration to withhold any 
continuance of the emergency. At the end of the ninety-day period, 
for T»hich the emergency price order had originally been issued, there 
v/as no extension. The May, 1S33, number of Ice and Refrigeration 
reported that the price of ice in San Antonio was vl.OO a ton. 

The establishment of -?n emergency price schedule in lie'-; Orleans 
for a time created a more orderly mavrkct situation; but ultimately 
the of f odt b roko dov/n, and aopears to have had little permanent eff- 
ect. This disor,;aniza,tion in the ice raarket in IJo'- Orleans followed 
the termination in Febi-uary, 19rj3, of a market agreement which had 
extended over several years. Also in 1953, three new ice plants were 
opened; and in 1934- tr/o more were built — in defiance of the capac- 
ity control provision of the Code. Theae now plants, and other pl- 
ants as well, failed to publish price?. As another complicating 
factor, it was s?id tnat manufacturers outside of New Orleans had 
brought ice into the city and offered it for sale at less than pre- 
vailing prices. 

These ni^'iaerous comolicating factors did not, for some tine, 
lead to prices which were in spectacular contrast with earlier prices, 
or below ice manufacturing ccsts. Though an emergency vras declared 
in fey, 1934, it was found that prices were not sufficiently low ?t 
that time to warrant the estaolislTment of an emergency schedule. On 
Jaly 27, however, the code authority advised the Administration that 
a real price war ha.d broken out, with ice being sold at $1.00 per ten 
— with threats to give it away. 

Shortly after this (even thou-Ji it r.-->"i eared that many of the 
manufacturers were agr-in in accord), a minimiun pric _■ order was issued, 
to become effective, August 16. It v-vs soon fovaid. that the order was 



9827 



-98- 

of 

not 'being lived up to, it m-xs srld, to lack/clarity in tlio classif- 
ication. To remedy tiiis defect a new schedule, imposing the sam'3 gen- 
eral level of prices, was promulgated; and this revised price schedule 
Vv'as at, the end of the ori^'inal ninety-day "oeriocl, extended for another 
ninety days to Pehruary 13, 1935. 

In a report dated April 2, 1935, the Ice Code Authority referred 
to the Kev Orleans price emergency order as producing good renoltsJi. . 
(*) Application for a continuance of the emergency order hoyond Foh- ■ 
ruary 12, had hov/evor, been rajeeted "by the Administration, it being- 
felt that the members of the industry \7e re not Cooperating sufficiently. 
A price war immediately resulted. The Ife.y, 10.35, issue of Ice and 
Refrigeration quoted tht3 ilev Orler^ns pricj as $2.00 per ton. Tho 
only other emergency price schedxile established was in Hew York City, 
where the center of confusion was a'voarently within the s^'^stcni of ico 
distribution. As this Liatter will be discussed at some length later 
on, (**) no bill of particu.lar£. need bo ^iven here. The emergency 
order seems, at least, to have liaci a pai'ti^lly c- Iming effect. 

From this brief review of experience under the emergency dec- 
larations, it will be seen, that, though the industry valued this pro- 
vision, and the code authoi'ity in, its report of April 2, 1335, Paid 
"Vie believe the article should bo retained in the code", (**«*), thS device 
could not constitute the -main prop :.'or that degree of order or stand- 
ard of prosperity which V7,- s the ,,o.:,l of the ice industry. 

Tor one thing, emGr^crjcy price minima w.^re, uac.or- the IIBA admin- 
istration, fixed, (so far ar, .iha facts could be ascertained) at cost. 
Cost was bettor tte.n $1.00 a \,cn — but certainly no .,;oal for a bus- 
iness group. In the main, v'loroiore, the industi-y looked in other 
directions for relief; to-„'aT.l the removal of causer; of demoralization 
and towards the making of agreements — rrthor than of governmental 
price minima. " . 

The Administration, on its part, evidenced an increasing inclin- 
ation to demand more and raore-proof of absolute necessity before de- 
claring or continuing omer.;encies, or .ordering minimum nrices. 

VI. POSTIHG AlID PILIIIG OF P3.IC:']S. 

Article X, Section 4, Postint, anc' Filing Schedules, Is quoted 
here, pr'^cticalj.y in full,, princvnally because this -orovision is in- 
timately bovii^d up wibh the latter pa-t of Article XI, Control of Pro- 
duction. The section ret^ired to rc'ds as follov;s: 



(*) P. 16, o-ailablc iv. Ap-oencix to Code Histoi-y -hove it is 
Exhibit 8. 

(**) See Appendix A bolow. 
(***) p. 16 , .: . ■ 



0827 



-99- ■ 

j]very ?iemjer of ths Indv-stiy sIiT'll '..a required to post on tlie 
oifective date of this Code and to file v/itli the Code Authority 
and '-iLh the Coinnittee of Ai'^oitrption and Appeal in his particu- 
lar torritcry -rithin fifteen (IL'O days of the offcctive date of 
thip Code, and thereafter Ic^op :-ORtrd, e.'c c.iCli p^olrt of salf^, a 
couipletc ?;chodule oi pi'i3'.:S uppiic-i.lo to "±1 transactions carried 
on, acc'ordin;: to e-cepted trads cl-^'.ssilications. Ther-c prices can- 
not be clmngcd without notification to the Codo Authority and to 
the Commiotce of Arlitr--tion and Apnocl fifteen (l5) days in ad- 
vance of the cfioctive date of aich changes .... 

It v/ill be noted thct, iu the c^.-je of pl-nts which were in op- 
cr-ticn on SepteiriDcr 8, 1933, their ovrners liad the right, under the pro- 
visions of this section, to pop.t any price 'rhicxi they chose, so long as 
they o.id not violate the anti— VcuiTiiin::; or eraor^^ency price ;Drovisions which 
have "boon cited e?rlicr in this analysis, or the scllinf-bcloF-cost pro- 
vision v.'hich v;ill bo quoted in the last para^;raph; but that the latter 
part of Diticle XI, ccntrol of -o reduction, forbade a plant which had not 
been in operation on September 8, 1933, to post ;nrices during the first 
twelve months after its starting of oTorations v/hich ?;ore lower than 
those posted by its conroetitorr. — subject as lias been noted, to certain 
exceptions. (*) 

Postin;:'uf prices ras, of course, a very important feature of the 
general control plan of the industry. But the wider implifications of 
this provision are svifficiently clear so ar -to require no elaboration 
here, 

VII. SALZS B3L07J COST. 

Two otlier code provisions might tend to heep tje activities of 
given ice conrianies witiiin rcore or Icis restricted spheres. Section 
2 - a, of article Xl, brands at fzif ir practice the selling of ice or 
services below the cost of such production or seivice. Rememborinf? also 
the irmortancc of cost in con"icctio3: with thf> anti-duTiping provision, 
the following:; code, interoretation of \.-hat constitutes cost, contained 
under article IX, section 2 - a, shoiild be noted: 

(l) Cost is defined to include r^w materials, transportation 
thereof, manufacturing, hai-vestin;;, storage, rhrinka-ge, delivery, 
depreciation, merchandising, administrative e;q)ense, insur'-^nce 
and taxes, as determined by standard accounting practice recog- 
nized in the Industry'' and approved, by the Administrator and the 
Code Authority for the enforcement of this Code. 

VI.II.31ITI0Z:vii:T OF ZMPLOYHES. 

The rem.ainin£, code provision which might operate as a brake on 
the tahin^ of business by one firm from another is article IX, section 
2- j , which outlavrs "enticement of a competitor's employees, provided 
tha-t no employee sliall be refused em-oloy;.i9nt for the reason tha.t he 
was cnroloyed by anctncr eiiEiloyor in tiie ir.dusti-;' J' 



(*) See text of Article XI, pp. 87-3*. Supra. 



-inn- 

To the extent that employees have deliv'^ry routes and customers 
which they mere or less perF.onn.liy control, this prohibition against 
one concern's seeking?; to take fi'ay »riOloyees f rora another might be con- 
sidered ^s a safeguard to- the" "bii!iir.n!^.s' of one concern and an obstacle 
to tne ej'pansicn of the other. ' LIos-:; dslivery men, howf=ver, are not 
emoloyees, tut peddlers ou La ir owii ■^ci-oont. 

IZ. LA30P PE'^jVISIONS. 

From the nature of the orovisions -'hich have been described above, 
and the pride rith vhich che ics iricv.stry viei^ed them, it is evident 
that tne incustry was scccessiul in ^-ettinr into its code , almost, 
though not .quite everything that it wanted. The industry also was un- 
asu3,lly successful in keeping out of tne code things ■fhich it did not 
want in it. This applies, oarticalarl;;'- to the l-^bor orovisions. 

The, maxiiirum vork week under tap ice code, instead of bping some- 
thing like forty hours ; w-^y,, for etruloj/'ees other tnan office, clpric^l 
and executive, a we<=k oi fift;>-six hours, providing, however, that the 
average for the year should not be more than forty-eight hours. The pe- 
culiar seasonal character of the ice indastry and the fact that the in- 
dustry vhs operating seven days a -"eek at the time the code was under 
consideration, of course warranted j;ome difference between the treatment 
of hours in this industry and that in other industries. Labor itself had 
been prepared to a.ccept a fifty-hour "eek. Nevertheless, the hours -oro- 
visions of tne code were clearly favor "ble to the indiistry loint of view. 

Likewise as to wages. The code rainiraum was 32-l/2«f an hour in the 
north, and c3^ an hour in the south. (*) This wage minimum aroused great 
and continued criticism in iP-A, not merely because of the lowness of the 
standards, but because of the very large differential between North and 
South. (**) So far as the north was concerned, the minimum wage provision 
was of negligible effect; as in most cses existing rates of wages "'ere 
alread?^ close to or higher than the rates, estoolished by the code. In 
the south, this same condition applied generally in the large cities. In 
some other southern communities, however, the code minim'om, even though 
only 23(p , did involve a substRntial increase in costs. Thus the onerators 
of a cnain of ice comD-mies in the southe.^stern states, discussing the 
situation in advance of approval of the code, stated that a 22-1/2^ rate 
would mean a wage increase of 34.5 per cent. 

The industry could, of coarse, ooint out that becaise of the com- 
petition of other forms of refrigeration, the ice industry could not 
afford the incre-^se in prices "hich high "'ages would necessitate, 

(*) Code of Fair Competition for the Ice Industry, Art. VI. 

(**This statement and others in tne b'lance of this uaragr'irih based on 
Code History, vi. 133-143. 



9827 



-101- 

In view, hor.'evcr, of the price and profit sittis.tion '"hich ;i:enerally 
characterized the industry (*),• it vould a;opear tliat considerable in- 
creases in \7ages could have been absoibed. by the industry without any 
advance in ice prices. 

In any case, it is clear tliat as respects wages as well as hours 
the code was distinctly representative of the industry point of viev;. 



;v:;.ri'vif;' '/^ri. 



(*) S--3 p.p. 35-56^ 39-40:, •15-48 , 



9827 



-102- 

CHAPTliR VI ■ ' 

ADtilNISTEATION OF ARTICLE XI - CONTHOL OF PRODUCTION 



Administration of the control of production provision of the ice 
code is of rpecial significance because the capacity control therein pro- 
vided afforded a volu:/ie of experience which was without parallel among the 
considerable number of NiiA. codes which sought, in one way or another, to 
deal with the capacity problem. 



I. EEPRESENTATIVE CHA2ACTEH OF ICE CODE EXPErJEFCE 

A. Other Codes Having Provisions Similar to or Contrasting with 
that in the Ice Code . 

At least 3? NRA codes had provisions which were aimed, more or 
less directly, at control of capacity. Eighteen - among which was the 
ice code — positively reouired the issuance of a certificate before 
capacity coulc oe extended — subject, of course, to various exceptions, 
exemptions, etc. Other than ice, these codes "ere: cotton textile; 
silk textile; throwing; lace manufacturing; rayon and silk dyeing and 
printing; cordage and tv;ine; crushed stone, sand and gravel and slag (certi- 
ficates reouired in "permissive areas" only"); structural clay products; 
refractories; American glassware; carbon black manufacturing; candle manu- 
facturing industry and the beeswax bleachers and refiners; pyrotechnic 
manufacturing; excelsiour and excelsior products; motor bus (before a 
new interstate route could be operated, eacn of the states through which 
the route was to pass hat to issue a certificate, the NSA Administration, 
however, having the po^er to grant exemptions); Transit (same Quali- 
fications as for motor bus); and refrigerated "-'arehousing. 

Seven other codes, without actually giving anyone the power to for- 
bid plant expansion, nevertheless required parties who intended to increase 
capacity to advise the code authority to this efiect; and empowered the 
code authority, when such advice was received, to make "recommendations" 
on the subject to the Administrator (it probrbly being assumed, though 
this was not so stated, that the Administration might then decide whether 
anything should be done about it). Tliis provision which some of the Code 
Authorities treated as though it did give them po'ier of denial, '"as in the 
following codes: glass container; clay drain tile manufacturing; floor 
and '"all clay tile manufacturing; clay pnd shale roofing tile; feldspar; 
lime (3iolomite division); and tool and implement manufacturing (supple- 
mentary code for the Fabricated Metal Products Manufacturing and iietal 
Finishing and Coating Industry). 

Three codes prohibited — or gave tlie code authority the right 
to prohibit — the construction of certain .types of capacity. Thi-s, 
however, was not so different from a provision requiring certificates 
as might appear; for under these codes, the Administration had the power, 
if it saw fit to use it, to exempt a firm from their prohioitions — and 
v;as so asked to do in one case. Tliese codes were iron and steel, alloys, 
9827 



103- 



and china clay producing ( in the latter two codes however, the prohihitions 
were never actually set up. One code, cement, gave the Cement Institute, 
(the Code Authoritv) the right to petition the President to prohibit the 
construction of new or. increased capacity. Two petitions of this type 
had to be investigated by the NRa Admin i •strati on. 

Two codes (those for the motor vehicle storage and parking trade, 
and the ready mixed concrete industry) empowered members to enter into 
local agreements not to introduce new capacity, subject in the one in- 
stance to Administration a'pproval, and in the other to power of cancella- 
tion by the Administration. The petroleoiin code provided that new oil 
fields must be oeveloped according to an approved plan before petroleum, 
or the products thereof, produced in such new fields might be shipped in 
interstate commerce-. 

In addition to the 32 codes mentioned, otnet codes provided for 
the registration of new equipment (as Trucking); for advice "hich might be 
given by the Code Authority in connection "'ith proposals to install podition- 
al eouipment (book pu"blishing division of the graphic prts code); or had 
other provisions which might possible have some bearing on the construc- 
tion of capacity. 

Bi Significance of the Ibe Cwde .Experience for the Group (of Codes Hav- 
ing Capacity- Control Frovisions)' Taken as a Whole 

Of all the codes on this considerable list, none can compare 
with the ice code for data readily available on the problems and tech- 
nique of capacity control. In- fact many more ar)plications to establish 
lce-niak:ing capacity reached the Administration at Washington than the 
combined total for all the rest of the 32 codes abdre listed put to- 
gether. -"And in the case of meaiy of these applications, fairly, extensive — 
and, in the case of s-«>rae of them, very elaoorate — hearings and investi- 
gations were made. Of course, it does not follow — merely because there 
is available in 'i-.ashington an unusually rioh body of data on capacity 
control PS attempted in this one industry — that the experience of 
the ice industry could be looked to to answer all questions regarding 
capacity controls Each of the 32 industries has its own special condi- 
tions; and in the case of none of the codes, other than ice^, can it be 
said that the procedure'^f ollowed, or the results obtained, even closely 
approximated those which marked the administration of capacity control in 
ice. Nevertheless, beneath the surface differences, there are certain 
elements in the caoacity problem which are more or less common to all 
industries, so that the full story of what happened in one rjlace^ where both 
the effort 'at control and resis.trnce to control went far, cannot faill 
to be of interest wherever thought has been given to the subject of capacity. 

C. Reasons for t he Greater Number of Applications for Permits Under 
the Ice Code . 

The question as to why the' number^ of applications to build new ice 
plants should have been' so much greater than was true o.. other industries 
is an interesting and pertinent one. In the main it would appear that the 
answer is to be found in the small number of applications elsewhere, 
rather than the large number in ice, For this small number of cases 

9827 



-104- 



in otner industries tiiere touV .'f"''Pt'""37 to ';irve -Deen tvo .-iriii. rerscns.. . 

In the first place, serious'' thou'gh the; long -run outlook for ■ the ice 
industry v/as.-many of the other, industries -had actually-f elt . the 
depression more rcutely than had the ice industry.. And- for thiSu.-- '. 
reason, in association with others, very fe^^ tjeo-ole in these other 
industries wanted to fldd catiacity. ■ Second,, in at least one other', ... ,...•,•. 
industry (cotton textile), where a considerable .amount of construe- .,, ',^ ;,,, 
tion was. going on, very few cases came to VaEhin,gton, mostc of thera .....,;■,.„.,. 
being handled on some other bpsis by the Code Authority. In indus- . . .,, ' , ^. 
tries other than' cotton textile, the same general tendency wase. soipetiraes,,. - ■ 
noted, though iri lesser degreee. . • ,. . . . ..-^i-.r. 



As a third factor which would in any case h.^ve made the nujpber of, .appl.i- 
cations in some other industries small, it may be observed that some of these 
other industries had a very much smaller number of Bepar^te. e,ste.b-.i. . ..-, 

* ~ ■■■■■■• v . .1 i 

lishments than did the ice industry, with its almost &,000i plants i..,^. .,,-„,,.. .^ .^,,.^ 
Within the ice industry, a t endency to decentralize production Twas ^'n' ,*,?",. -,IV. 
important factor in the number of amplications receivec^. ', .. ' ' "" ' ' 






If the relatively small number of capacit;v control cases rhich. came 
to Washington in tiie case of the other 31 industries (as oom'pared with 
the larger roiraber which had to be handled uncei; the Xce Code),. was,,--inj. the ,: 
main, due to the effect of the deoression on other industries,, or/, to We' 
shifting of the burden of investigation and decision form Wrshin<-:;ton to 
industry authorities, then .it, .is evident that the magP-itude. of the adminis- 
trative- iDroblem- which, arose in the case ol the ice industry must have 'b.een= .^ , 
very small: as compared: .^-^ith the total problem '"iiich .'"'-uld have . aTisen .in . : .. 
connection' with' the-- administration of capacity control under all code.^,,.. .. . ." 

had these Controls been- -extended, vdth full government supervis-ion, ijn,tQ. ^, ,.„' 
period wner- fircis were, really desiring to construct or enlarge plants . .' , 
throughout- -ithfe length and breadth of the c.ountry.(*) ..,^;. ■ ... - < ■ 

II. I.-iPORTAIviCE, FHOvi i^T -IKDUSTRY ?IEI/F0I1.-'T, Oj" PilOJECTED fuCEEASJiiS IN .'. . ; 
CAPACITY UNrHR THE CODE; Al'ID SIZE Oi^ THE ADMIKIST^-ATIVE TASK "CiiEATEr . ' 
3Y THE-"NECESSI-T^; OF PASSING OK APFLICATI 01^1$ ■ . - - :■ - 

In appraising the strength o,f the tendency toward increase of .ci^pa- ...- .» 
city in the ice industry, and the. size of. .the ad-minis trative prqblem raised, 
by the necessity of deciding' on. apDlications for permits, it will be ne,-.. .. . 
cessary -to base our picture mainly, on the cases '-hLch cprae to -''■ashington. ..]■' 
It must be kept in mind, however, that a larger or similar number,, of,., pro- ■ 
posa'ls must .have been -oresented often informally, to locr^l committees... of 
Arbitration and Appeal. or other Code Authorit.y ai-rencies, and upon''b.§ing 
•refused or discouraf:ed b'/ such a-gencies, .allo.wed'-to drop '^-i^houta for- , 
warding of the proposals to Washin^^ton, 

(*) The task a' administering capacity control would in the' ice industry 
itself, -of course, have- been- raach larger tka.n. it was, had. the. 
industry beer gro"^ing at the- rate which prevailed ,. between .1922 
and 1^30, as 'ill be ' apparent :froia t lie discussion -.in the, next 
section,. ..■,.■• >• •. ,•'...._ ...,.,>,..., ... 



,',t>': 



9827 



-105- 



A. Cases Fondled "b^'- Local Industry Ardenci e s Without Reference to Admini- 
strption 

Thus, in the hearing on the application of the State Ice Corporation 
for permission to erect an ice plant in Srooklyn, Irving A. Feisntein of 
the Dietz Ice and Coal Company said that his comnfny hpd the year before 
made the first PDlication to enlarge existing ice facilities (presumably 
in Brooklyn or Nev York*: 

"Last year the Dietz Ice Company asked, for certificate of 
construction to enlarge their plant. We did so at the 
instance of oae of the ice machinery companies.... The 
price thpt it vrould have cost us to get this ia?chiner7, 
■as I understand it, rould have been in the neighborhood of 
$100,000 which would have raodernizec our plant to the high- 
est degree. But we did not pro-oose to do tha.t unless we 
could get an Increased capacity Decause at our ijresent ca-ca- 
cit^'-, in order to install these machines, wet would have had to 
rip out ceilings and so on. »"e decided we would not gain 
anything in the final analysis so we did not do it pnd '"e 
did not do it becpuse we did not get the permit. Our 
application is still perding. "(*) 

No information regarding this ar)ulication(ot :er that that in the hearing 
above quoted) appears evtr to have reached the Administration. 

Of such proposals as were mace to agencies of the code authority, 
and were not appealed .bv those interested to "..ashington, we have, of course 
no way of knowing as to how strong may have been the intention of the pro- 
ponents actually to build. (**) 

3.- Grand Total of Applications Submitted to Toshington 

Confining our statistics of necessity to the number of proposals to 
build new capacity which were brought to the attention of the Administration, 
we may first note that the total number of projects to extend ice capacity 
• ' ' • • ■ . J- ■ ' 

(*) Hearing, pages 37 and 87-88. For explanation as to location in 
Deputy's files of hearings and other material pertaining to any 
given application lor a certificate, see note on p. 29, supra. 

(**) Further evidence regarding projects to increase capacity which did 
not find a place on the docket is contained in a report of NEA's 
field represent,- tives (see footnote p. 25 supra, and also pp. 2410242 
belo^.") O'- work done in January and February 1955. They reported 
that many applicants to ^. om application forms had been sent 
failed to follow up their applications. This, was in some of the 
cases because the forinality staggered the applicant, in otherr, 
because the chance of using a permit for its nuisance value did not 
look so good if such detpiled investigations were to be made as .■ :. ' . . 
Indicated bv the formal letter and form. 



9827 



-1C5- 

which were docketed was 409. (*) From the standpoint of administrative 
biorden, all of these Y/ere CT-ses; "but from the standpoint of measuring 
the strength of the movement to build nevi? capacity, this f ii^ure , upon • 
analysis, may he considerably cut down, 

C . Duplicate Cases and Exem-otion s 

Of the total of 409 ca,ses, five reioresented a reoi:)enin{; of old 
cases, due to the hope nf those v/hore a^^-nlicf tions liad been denied tliat 
chanf;ed policies of tae Administration mi^^ht lead to a more favorable 
decision (a coiirse which in one of the cases did lead to a reversal of 
the ori£-,inal decision). Of the 40-1- se-^arate cises, 73 were closed by 
the £,ranting of exemiDtionsJ That is, it was fou:id tliat construction 
of capacity had 'already beg-on before October 16, 1933, (**) or such sub- 
stantiL^l cominitments had been made that it vrould be an injustice to re-^ 
quire the a,pplicant , to prove tlmt his building v.as justified. So an 
exemption was granted. The Code Authority and Adininistration both 
appeared disposed to follov/ a liberR.l policy of interrire.tation in this 
respect, though some applicants were raach a,;xi*2ved 'because the purchase 
of buildings v/hich they claimed v.'ere intended to be for use as ice 
plants Viras not recog:nized as ground' for exemption, because contracts 
had not been placed for the eouipmnnt. (***) 

The 73 cases in v/hich exem-iptions '-'ere granted involved Adminis- 
trative reviev/, but they can 'nardly he included v/her. an effort is made 
to gs.uge the vg.lue of proposals to b\iild ice plants in the slightly 
less tiian SO-month ;^eriod between the apnroval of the ice code on 
October 3, 1933, and the lianding dov/n of the Schechter Decision on May 
27, 1935. They v;ere initiated, rather, in some earlier period. This, 
therefore, reduces the number of projects to 331. 

(*) This figure, as well as all other statements regarding the 

n^dmber and t;ype of applications and their disposal, based on 
fresh tabulations made by the Production Control Unit in col~ ' 
laboration Y/ith those formerly in the office of the Deputy Ad- 
ministrator. Because of complications involved in bringing the 
numerous kinds of cases and means of dispnstion under a sajnple 
classifica^tion, it can ha.rdly be hoped that the figaires given 
here and later are absolutely perfect; but thoj will give a 
STifficiently true, picture of the number and character of the 
casds handled, and their disposition. 

(**) ' "In 6very control of " -nroduction case r'hich ve lia.ve i^assed to the 
Administrator up until the -^resent time the ruling has been tiia,t 
where contraxts, eitiier verbal or written, v/ere entered into 
prior to October 16, it vras not necessary for the petitioners 
to secure a' certifica'r,e of convenience and necessity". Letter 
from Mount' Taylor, Clir.,irman of the Code Authority to Frank R. 
Peters, Secretary of 'a Committee of Arbitration and Appeal, 
Liberty, Mo. Novembe'r 25, 1933, In Deputy Administrator's 
Classification Files, in folder labeled "Control of Production", 
and v/ithin folder in binder marked "Policy". 

(***) Ser application of Miami' Crystal Ice Company of Miami, Florida. 
The Ray Ice CouTpanj""' of Cleveland v/as denied an a-iplication under 
sojieYd:at similar conditions as respects purchases of building, 
bu'o on a second application v/as — on other grounds -- given a 
certificate. 

9827 



-1C7- 



D . Wit lid r awal s 



Of these 331 a iplicitions , 66, hovever, '.;ere T/ithdravm, or a.uto- 
ma.ticall^'' dropped "beca-use of failure of the -^.Mplicant to ap'ioear at the 
heari::g. An idea as to v/h'.t lay 'oehind vithdravals may "be obtained 
from an incor:pleted and unpiiblished report ^orepared by Edvard H. Lnerson 
and Clnrles A Eolia.nnon, Field P.e-'iresentatives of IJHA, on the Adr,iinis- 
tration of Article XI.(*) Speaking of 70 cases vhich vere Iiandled in the 
period after v;hicli their wor'.: was be;;!!!!, the field Lien classifiod 1.7 of 
these as v/ithdra- cils . Six of these were vol-imt".rily v'ithdr-."n after 
hearing. Usually, the field men said, this .V7as due to a concession bli- 
the esto.blished -ilants either in the iTrice of ice to the applicant, or 
in the way of avi agreement not to invade some ot?ier field. Six of tlie 
withdra\7als vfere automatic drops for non-appearance of the applicant 
for hearing. This occurred because the ?"i;ilicant lu'.d decideu to build 
without a ^oermit, or the hearing liad been so long delayed tliat he could 
not build in time for the season, ZTivc applications were v.dthdravrn 
after conference nithout hearing, when the applicant vas shovrn tha,t 
his venture v;as "Oi' sound. 

Although it rill nave been observed tlir.t one-third of the 17 v/ith- 
drawals to v/hich a reference -..ns i.vde in the l?st paragraph ap-oear to 
have represented act\ia,l intent to build, in that the .applicant either 
had decided to go ahead and build any?/ay , or withdraw because the time 
required for re^ching a decision had delayed him too much to u.iertalie 
the buildivig_ln time for .the &easor\, it should be noted th'.t this -oar- 
ticular group of cases vere all "landled tovard the close of the code 
jjeriod, when failure in compliance and delay in reaching decisions were 
both becoming serious. So they do not necessarily tyoify the situTotion 
when the balance of the 66 withdrrv Is tool: pl-^iCv?. 171 th a certain 
amount of aua.lificf.tion it is rob'.oly best to subtract the whole of the 
66 cases of vvithdrawii applic8.tions , and bring our number dovrn to 265 
cases, o.s the number of •:;.p'".lications , the "'.iro'^onents of which were suf- 
ficiently earnest so that they carried their petitions through to the 
granting or deviial of the certificate.' 

E * Applications for Ice Stora . ge Only 

Of these rj65 cases, 4' were, however, for stor.age capacity only. 
While the amoui^t ol ice stor~ge av'/^ilable must h-^ve been a. ma.tter of 
some -moment in itself, it lies wholly to one side of the mcin iscue 
as to hovr much-- roducing cap'acity shoulr' be permitted, an', for our 
present "ourooses v;e may, therefore, jaalce a fiu'ther reduction in the 
nuaoer of projects .to 223, 

r. l"et jiu mber of Grenuine Fropos-ls to Construct Ice-liaking Capacity 
Eurin..', Code Period 

Now, this n-jraber of .'^■]Z is in some res'-ects too large and in some 
respects too smr'-ll as representative of the stren;^th of the pressure to 
create additional ice nanufrct\a'i...L,_' capacity diu'ing the appror.imate 20- 



For addition;il information aboixt this re -ort see note p. 15 suora; 
■and for more information about the baclrground see pp, 153—155 belov'/. 



9827 



-108-. 

month -oeriod of the cocle operation. 

It is son^e'vliat too lD.vqe 'because, for one fnin;^, , the same desire to 
build cp,p-:.city v'hich \7as thwarted "by an ec'.rlier decision sonetimes re- 
sulted in' s one one else, representing much the same interest (thou^^'h 
teclmically .a new applicant), hrin^";in£; forward a second ap^ilication. (*) 

Much rjore ir.T[oort'int tha.i this, however, is the fact th- 1 ar.-.onf, the 
earlier denials, where the code a^uthoritj a„.d its loc'.l corinittees of 
arbitration -.ad ap;-e.al a,ssumec -most of tne burden of adminiptr'tio , 
there i.iust n. .ve been raany c;,ses which were formally denied which yonder 
later ;;irocedures would hwe resvxlted in ^■'ithdr-'i/als , Iec:'use the pro'-iosal 
to build. v;as , after all, a rather tentative one which would have been 
sidetrached in ti/.ie throut;,h a reaching of some "greement betvreen those who 
proposed to build and those alread.y in the ice indiistry, wh^se attitude 
in competition or towards prices, etc., had promoted the thon,;^ht of 
building nev/ capacity. 

As to the extent to \.'hich the 222 aj "^plications contained those 
which were not made in good faith, but vrere designed only for pur'-ioses 
of threatening existing plants, so ti:iat the a^v^licnt might be bought cut, 
\7ithout there even being an intent to u:v ertahe construction, it is im- 
possible to s-?ea]r ;,irecisely» The field ren, in th.eir re'->ort on the Ad- 
ministration of Article XX, rreviovisly mentioned, classified 10 a-ir-li- 
cations out of a ^roup of 49 (vmich were not vdthdrav.Ti or granted ex- 
emptions) as having been urde by "rac. jstecrs," who sought pei-mits for 
their nuisance value. This '..oes not i_iean th'.t ro;;ie of these "racl3teers" 
might not actually have' erecced plants, and perhaps hr,ve operated then, 
had their a;v dictions -not been d.enied, rhile cToful exr>-mination hiis 
not been i-iade of the earlier denials of -ermits, made largely on recom- 
mend.ations of tne code .".uthority, it -.fould 'fiToear thit the ,' reat ''oxllz 



(*) Thus after the Farmers' Cooperative Ice Company h^ad been deniedi -oer- 
m.ission to install a fifty-ton pli.nt at "iorfol]-;, Virginf:., one of the 
members of th-^t organization, F.'l/. Halsted, proposed to build a ten-ton 
plant ior h^nself. This v/as never docketed --s a case because -> Isted 
claimed tii't rs p. vcget-'. ble grov;er and packer, he was exempt from having 
fo obtain ". ^lerrait for ice used in connection v/ith his own business and 
that of nis clients; but it illustrates the manner in which one effort 
to build, v/hen thw.arted could easily come up in other forms. In the case 
of tne Los Angeles area, tv?o actual a^Dlicationc" were madeffor^certf ficates, 
the first by the Ice Drivers' and Telpers' Union, to er-ct a plant in 
Culver City, r.no. the secondt, b?- _-., L. Reaves, for - -roposed Consigners 
Cooperativ Association (-^eally an ice drivbrs cooperrtive) to erect a 
plant in Compton, both of which m.ight fairly be said to re-?resent the s-'jne 
effort of dealers to obtain an indevendent source of ice suppl;;, 

■'iaterial on F rmers' Cooperative Ice Corapai^y in se;i:.rate folder in 
Deput;.' files classified under "Inactive Correspondence, Virginia"; 
material on hr Isted in Deputy's Classification Files - Complaints - 
Halsted, P. D, lor lurther infora-Ltion on these tvio cases, see p-i, 
221-225 belov/. Material on the Los Angeles area cases filed in the 
usua.l manner as exrplained in footnote p. 19 



9827 



-109- 

o£ the applic-.tions on wliica the Aeministr-.tion itself conducted investi- 
gations (withdrawals excliided) represented "bon-. fide intention to con- 
s t rue t ice p lant s . 

As a f-,ctor oper". tir.,:, in the other direction, • nc" tending to malce 
our fi£,-urcs understate tne strength of the movement to increase capacity, 
it should he noted, th-^.t , especially in the latter p"rt of the code period, 
there were an increasing nuimter of persons :'ho hailt ice plants without 
applj'Ung for certificates. Reference should also "be made a, ain to the 
fact tha.t some /^eople ■■no ;ni.: ht have huilt capacity went no further with 
their ai" lie thons, af,ter they had "been opposed op local code connittees. 

Keeping alleys in mind, therefore, th;\t fro-a some angles a figujre 
of 223 applications represents an over-statement, and from others and 
under-statement , of t.\e nuTiher of service iroposals to increase ice 
manujCacturing capacity — hut perj\aps ; in the main ,vn over-statement — 
it v/iil ue observed that this voliime of applications received over ap- 
proximately twenty months meant a rate of about lo4 for a 12-raonth -eriod. 

From the standpoint . of the admir.istrative determination of the 
necessity for these installations of capacity, this constitutes a siz- 
able problem; biit for an industry v/hich in 1933 v/as reported to nave 
7,882 plants, (*) this does not indicate an excessive building of new 
plants (or addition to old jjlants) t; oe proposed in one year — unless 
indeed it be held that suing to general over-capacity, no new capacity 
should be Duilt anyv,'here, ho figures have been foxmd on the nunber 
of new plants constructed annually, or the niiJiber of old p]pnts enlarged, 
prior to the code. The figures \Tiich h-,ve been generally used, as re- 
presenting new construction, h-.ve snovrn merely the net increr.se in the 
niMTiber of plnnts, vdiich, of covorse, rcaresents new plants l ainus plants 
scrapped — a very different tning from nev: plants plus old plants 
enlarged. However, it may be noted that the net increase in plants, 
according to the -.bove mentioned table (v;nich is based on industrj- 
statistics), was; in 1953 - 54 plants; in 1932 - 114 plants; in 1931 
and 1930 - 65 pl-^nts eac>i; while in the five years bet'v/een 1923 and 
1927, inclusive tne annna.l increase ran re^jularly auout 250 plants. 

_C-, Com-g, risen of Tonnage of Pro-posed Construction with Tonnage 
Constraction Prior to the Code . 

The -ere numocr of - lants for w'.iicli aplic-^tion for permits v/as 
made, is, however, a ratlier -unsatisf rctory measure, becav.f-.e, .-.s lia.s 
been -^ointed out before, there lii,.s been a ^Tendency in recent years to 
build a com--iaratively large namber of sraall plants v;hich will produce 
ice close to the ])lace of consumption, .and a comparativelj'- small nnmber 
of large plants. The total tonnage v.'hich applicants -roposed to con- 
struct, u.:der the a->"^lications which we h^ave been considering, -was — 
after subti^acting for exeiiijr'tions (because they represented plants 
alreadj'- st;,rted), withdr-av/als , ano. all a; plic;:tions merely to increase 
storage ca-:3r.city - 4559 toxis, or at the r-i'.te of 2723 tons for a 12 - 
month p-eriod. 

Here, again, it is imv>ossible to ;-._.'e entirely satisf:"ctory com- 
■i-iarisons with --previous yern-s , because the requests for certificates 
'i nder the code were for new ca-pacity or increases i n capaci ty only. 
(*) See table pp. 58-69. Suara 

9827 



-110- 

wliereas the er.rlier fiz-jirres o-ught to represent net c:i'j-,';e in co.--acity, 
after allowance for dismantling. It is "ertir.ent to note, however, 
that in 1933, the last .year "before the capo,city control -Trovision of 
the code coxild have h?.d any effect on pla.nt construction completed >. 
during the year, the net increase in capacity v;as reported as 1125 
tons, Leavin;2; out the previous year, in v.'hich a shortage of the 
natural ice crop caused conside^alsle increase in capacity, (*) there 
¥/as betv/een 1927 and 1928 an increase in net capacity amoroiting to 
28,000 tons; between 1928 -nd 1929 an increase of 14,000 tons; be- 1 
tween 1929 and 1930 an increase of 15,000 tons; and betv/een 1930 and 
1931 an increase of 5070 tons, 

From this ejicjnination of a-opli cations for permission to in- 
crease ice capacity and comparison v/ith the growth of the industry 
in former years, it may be seen tlvat , when compared with the record 
of former years, the :iro:Tosals to i:^crea.se ice ca-oacity during the 
code period involved a tonnage wnicn ¥/as insignificant as coniiDared 
with the years of the indtistry's growth a'd prosperity, and not very 
much grea,ter than the low i.hich had been reached the irevious year. 
At the same time, considerin;.: the ay^i^lications , in nimiber and tonnage, 
and the ci"-c"amstances surrouiuling their mahing there was little doubt 
that, if tne Administration or tlie code a,uthority was to succeed in 
placing the ice industry on a firm basis of solvency and profits, 
entry into tno industry, vrould, under the existing conditions of 
lessened dcmano for ice, have to Ittc controlled, 

Illi THE CODE AjjlTJlSl!PA2l\rn SLT-UP 

Under a.rticle XI of the ice code, the responsibility for deciding 
vifhether iDublic necessity and convenience required the establisliment of 
additional capacity was placed upon the Administration. Kovrever, the 
ice code,- like all others, v/as suri-^osed to set up self-government by 
industry, so far as this was possible, and article X of the code, on 
"Administra,tion," prescribed the strxicture for an industry prgo.nization 
which was to pierform idictevev functions c luld be performed by the in- 
dustry in- con:iection with code administration. 

At the base of this structure for industrial self-goverriment , 
there wo,s to be for each territory embr.aced by -^n existing Unit Ice 
Association (of which there v/ere 44) — and for an; other which might 
be feter organized (of \7hich there were none) — a, conmiittee of ar- 
bitration and a-'peal, to be appointed 'oy t]:e code autnority from a . 
represent.ative list of nominees submitted by the 'Jnit Ice Association, 
Each local committee of arbitration anr?. a;'->peal was, subject to the 
approv.al of the Ac'jninistr.ator , to 

"interpret this Code and uiclze application of it within 
its territorj.', prescribe practices for m."l:ing effective 
the intent of the Code in the territory, hear contro- 
versies arising out of the application of the Code 
and to malce recommendations thereon to the Code Author- 
ity, anr after oeing notified of the viol.ntion of this 
Code, investigate the si^j-ne and malja recoi.imendations to 

tile. J>ofLe_ Authority relative to \--hx?.t action should be taken." (** L 

(*) See page 59, supra.. 

(**) Article X, Section 3. ■ . - 

9827 



-111- 

Hex,t ri"bove the locr-.l committees of .arbitration and a--per.l, 

"In each of the ten territorial divisions of the 

jation.l Association of Ice Indu-stries the 

Code Authority sliall desi^jnate some one individua.l 
to act as i-ts territorial assist.-^nt in such c'ivison; 
said individ-cual sh^ll be selectecji: hj: the National 
Association of Ice Ind\..strie? and appointed "by the 
Code Authorit- vdtn the a^^proval of the Administrator, 
rnd shall he oesignated as the Hegional Advisor for 
such division, 

I^ne Re^'ional Advisor shall he tac representative in 
his.'diviaion Q-f the Qode.Mthorit-y. He shall be a 
memDer ex-officio of eaca Corijuittee of Arbitration 
and Appeal, nereinafter described (in Section 3 al- 
ready cited) , of the various Unit Ice Associations 
v.'ithin his divisional territory. All recommendations 
of each Committee of Arbitration and Appea.l within his 
divisional territory shall be submitted immediately 
to the He!':,ional Advisor and it sliall be his cuty to 
transmit such f indin£:s , to£;,'ether v/ith his recommendations 
covcrin;_, them to the Code Authority." (*) 

Finr.lly, or rather first of all, there v/as the code authority,- 

"A iplannin^; and coordijiatini^ conmittec, consistinc of 
ei/^ht members is hereby declared to be the Code Author- 
i'ty to act as a '^lannin ; ar.d fair practice a{'ency for 
the Ice Indr.'jtry to cooper'-.te with the Adj.iinistrator in 
the administration and enforcement of this Code. This 
"Code Authority shr'.ll bo constitiated as follows! 

(a) ITot more tiia,n three momlers v;it"nout vote a.s may be 
"nereinafter jjrnvided by -iny rule or regulation nromul/^ated 
under the autnority of the "."iational Industrial "Recovery 
Act appointed by the Administrator. ¥ho , as is ex- 
plained below, a'^pear not, "bcvevcr, to have functioned.) 

(b) Five mem"L)ers selecte.: by the :T':tional Association 
of Ice Industries and ayiproved by the administrator ...." (**) 

Although Article X, section 1, (a) jvfovided that the Administrator 
mifht appoint three noxi-voting mr.m'Sers of the code authority, and three 
Administration officialr (S, T*, Padd-c't, Clvas. II. Thompson, and J. A. 
Gibson) "--ere nominally Administration Ilembers of the Code Authority 
from October 11, 1P33 to lixrch 6, April 9, and April 23, 1934, re- 
spectively, and Dan S. ."lollen.ja v;as pimilarly rated from July 29, 1934 
to Sept ct iber__5 , 1934, (**^ , after \-.'"nich there v^as no nominal re-;-)re- 

(*) Article X, Secti-n 2. 

{**) Article X, Section 1. 



9827 



-112- 

sentation of the Administration on thetcode aatiiorityX^ it is stated 
on ""'a^.e 1'- of the "Sistory of the Code for the Ice Industry, Outline 
of Hay 29, l'^55" (a first draft of the Code Historj'- ^reserved in the 
De;!vaty's Classif ica.tion ITiles under the title nentioned) th-.t the 
AdminiEtr-.,tion i.Ienioers of the Code Authority a,p:'arently never fimc- 
tioned, and that no reports of any Adniinist:^ation I'em'Der are found 
in the records of the leputy Adxninistra.tor 's office. 

The Ice Code Authority v/as in ;.; r-;',ctice , tnerefore, practically 
identical uivh the ITationcal Associa.tion of Ice Industries, 

The code s:'.;:"s little about the actual functions of the cod.e author- 
ity hut they rxe sufficiently implied hy the fact that the regional 
advisors, and through the regional advisors, the local committees of 
a,rDitra,tion and ?„p-ieal were required to report to the code authority 
on all raa.tters effecting the interpretation, anplic_-tion and enforce- 
ment of tne code which c.-'jne up in tlieir res"iective area-s. 

A co.reful rea.din.'^- of this charter of felf-|°;overni:'ent does not 
reveal a,ny s-^ecific st -.tement to the effect th-.t the code a.^ithority, or 
its agencies, should "bear any responsihility in connection with the 
granting of certificates of puhlic necessity and ccnvea'\ience for the 
erection of additional ice capa,city. 3ut since the code did -orovid^e 
that local committees of arDitra,tion and a-~peal, a,nd then the regional 
' advisors j a.nd then the code a.uthoritj^ should generally interpret a/nd 
apply the code, it vrs reason^hle to assum.e that each of these com- 
ponents in the org\niza,tion of the industry under the code should in 
turn hea.r and weigh a,nd .nake recomincndations concerning a,pplications 
for extension of capa.city — althoTig:h it wa,s clear that only the Ad- 
ministr-^tor could in the last an.alysis a;-prove or disa-^-irove. 

At any rate, 'that was the way in which the Ad-ministration of Article 
XI (after a short period of initial confusion) got under vjo.y — the main 
responsihility for administering the :-^rovision lying, in fact, with the 
industry organiza.tion, and the Administrator usually (though not always) 
'.•■;n'oving as r. mrttcr of course' that which the industry had. decided 
upon. Later, however, very radical changes vieve made in the actual 
conduct of the Administration of Article XI. 



9827 



- ^ -^13- ■• 

IV. ADMIKISTEATION OF PROKJCTIOK (OR, MORE PROPEHLY, CjiPACITY) CONTROL 
BY THE CODE AUTHORITY DURll^ TUB FIRST EIGHT MONTHS' — OCTOBER, 
1933 TO MAY, 1934. . . _ , 

As in the case of most organisations, the procedure follov7ed by the 
government in its administration of the c^iDacity control provision of the 
ice code \-ia.s influenced in loart by exter- d conditions, in part "by ex- 
perience gained in operation', and in part by the personality of those 
who were most directly concerned. 

As has already been explained, it appears to have been the original 
expectation that the industry itself would make the necessary inquiries 
in connection with applications for permission to extend capacity, and reach 
some judgment as to what ought to be done — the Administration doing 
little more than give its official seal of approval. Within the Recovery 
Administration itself, the procedure was the simplest possible. The 
deputy Adrainistrator, and he alone, made the decision. One reason for 
this may have been the strong personal confidence existing be.tween the 
first deputy Administrator and the Administrator, the former being a 
close relative of the latter. , . 

A. Some Early Ap-provals . , . ' 

As an illustration of the simplicity of early procedure, on'October 
26, 1933; '-line treasurer of the Crystal Springs Ice Manufacturing Corpor- 
ation of Brattleboro, Vermont, wrote to Clare ^Parker, a member for Ver- 
mont of the Committee on Arbitratior^ and Appeal representing the New 
England Ice Dealers Association, as follows: (*) 

"The Crystal Springs Ice Manufacturing Corporation desires 
permission .to build an ice plant of 15-tons capacity, on Frost 
Place, in Brattleboro J Vermont. 

The incorporators of this Company have been in the ice busi- 
ness here for many years, 'servin- th? public with natural ice. If 
permission is granted us to ere.ct the proposed plant , we intend to- 
sell one piece of property upon which we have a sizable pond and 
house, and another of our plants has become ,of practically no. value 
to uC on account of the mild winters, and the factory smoke and 
cinders nearly has made the ice of a very poor quality. 

It is our expectation that the output of this pjant,' together 
with the harvest from one pond will make the supply being sold here 
about the same as at present." . ... • ■ 

This -aoplication was first unanimously approved by the Vermont Sub- 
committee of the N-^w En^^land Committee of Arbitration and Appeal, — 
their repprt apparently consisting merely in' the singing of the names 
of the members on the bottom of the .letter of application. Cn November- 
10, 1933, the Chairman of the New England Committee of Arbitration and 
Appeal wrote to "the Regional Advisor stating that at the regular meet- 
ing on that date the Committee had given this application their unanimous 

(*) All material on this case in Deputy's files in folder marked.. 
"Accepted applications - 10 to 15-." 

9827 



-114- 

approval. 0-n. Noyemter 13, 1933, the Regional Advisof wrote to Mount 
Taylor, Chai.-man of the Code Authority, whose office wa.s located at 
Washington", D. C, enclosing the endorsement of the Vermont Sub-com- 
mittee and ihe recommendation of the New England Committee and adding 
his oun recommendation for approval "by the code authority and the 
Administrator. On Novemher 21, the correspondence was aeent by Mr. 
Taylor to Major H. B. Paddock, Deputy Administrator, with the request 
that the permit be granted. On November 23, 1933, Major paddock wrote 
Mr, Taylor: 

"You are hereby authorized to issue a permit to the Crysta.1 
Springs Ice Corporation of Brattleboro, Vermont, for the erection 
of a 15-ton ice plant on Frost Place in Brattleboro, Vermont." 

The assistant deputy Administrator forwarded a copy of this letter to 
the applicant. 

In another early case, (*) the Richmond Ice Company of South Brigh- 
ton, Staten Island, wrote to the Office of the Code Authority at Wash- 
ington, stating that this company's ice plant, installed in 1904, was 
obsolete and in very bad condition, and asking for permission to caxry 
through some plans which had been projected before the code, for install- 
ing a nex^■ plant. "We are perfectly willing," the applicant said, "to 
hold our production to the same tonnage as produced in 1932 or 1933 •••• 
we will sign any agreement necessary to this end for the period of the 
NRA code existence and enforcement." 

The Code Authority wrote this Company under date of November 22, 
1933, stating; ' ■ 

"In accordance with the provisions of the Ice Code it is 
necessnry that all applications of this nature be reviewed by the 
proper committee of Arbitration and Appeal for 'the territory in- 
volved and that the report of this Committee, together with that 
of the Regional Advisor be given consideration in the granting of 
certificates of convenience pjid necessity." ' 

It V7as then stated that the application was being passed on to the Reg- 
ional Advisor* 

On December 1, 1933, the Chairman of the Committee on Arbitration 
and Appeal representing the North Jersey Ice Publicity Association wrot?. 
to W» E, Scott, Regional Advisor, After explaining that this new in- 
stallation would materially increase the capacity of the company he said: 

"This matter was thoroughly discussed at a regular meeting of 
this Committee held November 29, 1933, and the Secretary was direct- 
ed to inform you same are approved by them provided, in judgment of 
the Code Authprity and the Administrator ample protection to the 
manufacturers in this section from additional capacity and sales 
of ice of the above company is fully comprehended in said applica- 
tion," 



(*) Material filed in same folder* 
9827 



-115- 

Supplementing this recommendation of the local commit tee, there appears 
in the correspondence a statement sup-olied by five manufacturers on 
Staten Island under date of November 18, 1933, which concludes: 

"Since we are assured by this company that they do not purpose 
to increase their yearly output be'^^nd the 18,000 ton mark which 
is their present approximate outou.. (during the period of NRA en- 
forcement of the Ice Code) we do not object to this installation at 
this time," ,, 

On December 4, the Regional Advisor wrote the Chairman of the code 
authority enclosing a report of the Committee on Arbitration and J^peal 
and the statement signed by "all man'-ji'acturers" and stated: ''I hereby 
approve said application subject to their not producing a greater ajmoTint 
than their present sales, namely,' I85OOO tons." 

On December 9, 1933, "the Chairman of the code authority wrote the 
deputy Administrator and said in concluding: "Based on these facts, I 
respectfully request that the Richmond Ice Company be given authority to 
proceed with the rehabilitation and increase of capacity of its plant un- 
der the terms and conditions stipulated in its application." 

On December 14 the deputy Administrator advised the Chairman of the 
code authority that he was authorized» to allow the Richmond Ice Company 
to proceed v/ith the rehabilitation and increase of capacity of its plant 
"under the terms and conditions stipulated in its application." 

B. On Early Denial - Forbidding Jolin M. Musser and H. C» Fischer to 
Erect a Plant at S-orin>:;f ield, Illinois . 

In case of denials the function performed by the Administration was 
not (in the early months of code operation) essentially different from 
that which has been portrayed above as aprjlying to ap-orovals. When on 
October 31, 1933, Jolin M. Musser and-H. C. Fischer, wrote to the Ad- 
ministrator applying for a certific'' ':c 0" convenience and necessity to 
build a 35-ton ice plant at Springfield, Illinois, the application was 
(on November 7, 1933) turned over to the code authority, who in turn 
passed the matter on to the regional advisor and thf? Illinois Committee 
of Arbitration and Appeal, (*) The applicant having, on December 20, 
1934, again written to the Administrator outlining various delays which 
had occurred, the deputy Administrator on December 27 wrote a second 
letter to the code authority suggesting that the hearing on the applica- 
tion be expedited. Beyond this, 'the records show no activity by the 
Administrator on this case until February 2, 1934, when a one-page 
letter was addressed to the code authority authorizing the denial of the 
applica.tion, based on reasons which had been advanced by the code author- 
ity itself in a recommendation on this subject dated January 24, 1934. 

Before this final stet) was talcen, the Illinois Committee on Arbitra,- 
tion and Aopeal had, however, gone into the application much more fully 
than in the case of the approvals noted above. Though it will involve 

(*) All material in this case in Deputy's files in folder marked, 

Musser, J. M. and Fischer, H.,C., filed under inactive correspon- 
dence, Missouri (the aptili cants coming from that State) 

9827 



-116- , 

more than a mere consideration of procedure (which is our -irincijal in- 
terest here), it viill te worth our w.-ile to note at this time jsome of 
the concrete facts, gene raJ .issues, and attitude taken by members of 
the Illinois Committee on Arbitration and Appeal in this case, as this 
vrill help to illustrate certain issues and attitutes vhich underlay a 
good many of the decisions which, at one time or another, were reached 
under the ice code,(*) 

John K, Fusser and H. C Fischer \ieve employees of the St, Louis 
branch of the York Ice Machinery Corporation, the former having ''oeen 
'rith the corporation for 11 years (at the time of the arnDlication as 
a sales engineer); the latter (in charge of Order Department aiid Pur- 
chr.sing) for 10 years, but with earlier experience in ice industries, 
aiioniitine: to a total of 20 years. The idea of i.'oing into ice na;iu-» 
facturing had been entertained by these men for some ti^^e, and they 
had been considering various localities. The Yo'rl'. Ice Machinery Cor- 
poration, they said, had no connection with their -olans, though thej^ 
continu.ed their employment there pending their actually getting u:ider 
va3'' in their own venture. 

The ai3'olicants had based their analysis of -ootential market lar- 
gely on figures for ice consumption as published by the State Corpora- 
tion Commission of Gklalioraa, to which all ice plants in that state 
submit sem.i-annual reports covering tons of ice manufactured and sold, 
Kao-.'ing the capacity of the plants in Springfield^ Illinois, and com- 
paring this with the per ct^ta consamption of ice in the sum^.ier sea- 
son in Oklahoma, they had reached the conclusion that Soringfield, 
Illinois, could economically suoport about twice the daily capacity 
then in existence. 

The records. 3how that all the manufacturing capacity in operation 
in the Springfield district was owned by one company, the CentraJ. Illi«» 
nois Public Service Company, This company operated two plants, one 
of which had been bought from a competitor in 1928. In addition to 
these two plants, there was in Springfield a third 65-ton Tjlant which 
ha.d been foreclosed and shut do\ivn; '"'hich both the ^plicants and the 
opposition included in their figure for capacity, although the appli- 
cojit pointed out that this shut-down plant was a steam ot)erated plant 
£/nd a "very uneconomic plant to operate" 

Although no other ice was manuf act lire d in Springfield e:coept ''oy 
the one utility com.pany, one J. P, Dull, formerly an employee of the 
Central Illinois Public Service Company as a travelling ice auditor, 
had, since early the previous summer, been obtaining Ice from B^a-rds- 
to\/TL, Illinois, 45 miles from Springfield, ship dng ice in and selling, 
it in a poor part of Springfield, Distribution v;as largely throiigh ■ 
Den i.diQ, so the Manager of the Ice Department of the utility co'ipaaiy 
stated, had been let out of their employment for cause. 



(*) The facts which follow are tnjcen from the record of the meeting of 
the Illinois Committee on Arbitration and Appeal held on December 28, 
1S53, in file mentioned in last footnote, 

£827 



-117- 

Mr. Dull and tiis applicants for a certificpte hacL been in communica- 
tion and had tentatively agreed Tipcn an arrangement "by vifhich Mr. Dull 
would take ice from the proposed nevf plant instead of bringing it from 
Beardstovv-n; and the applicants, after sizing'up the situation in various 
places, thought that. this offered the best opportunity for them to get 
into the ice business without jeoprrdizing the business being done by 
others. Hence the application for a permit. 

Having received a letter of the applicant dated October 31, 1933, 
and the brief in opposition by the utility company, the code authority 
undertook, at a meeting held on December 28, 1933, to hear both the ap- ... 
plicant and the opponent. The opponent maintained that, due to the dif- 
ference in climatic conditions between Oklahoma and Illinois, con- 
sumption of ice in the former' state ?/as no index of what could be ex— 
pect 3d in the latter state. The opponent claimed that instead of thei'e • Q_.jf:; 
being too little capacity there was already an overcapacity. _: .. " ,■•_:;-. 

Inasmuch as the figures for ice manufactured in Springfield showed, 
a drop from tonnages of 57,000, 57,000, 59,000 and 63,000; respectively, • 
in the years 1928-1931, to 47,000 in 1932, this claim of overcapacity 
had back of it certain prima facie evidence. Hov^ever, it may be noted 
that the load factor at the pefdc in 1931 had been 71 per cetn; and even 
in 1932 was 54 per cent. Tliis is including in capacity the allegedly 
high cost plant which was sliut down, if the capacity of this plant be 
excluded, the load factor in 1932, after the drop in demand, was 73 per 
cent. (*) Production for the first eleven months of '1933 was moreover, 
almost up to that for the whole of 1932, indicating that in this com- 
munity there hnd been, at least as yet, no further decline in the demand 
for ice after 1932. 

A cdmparison of the above load factors with those comn:on in other 
parts of thij United States, (as presented in earlier parts of this re- 
port) (**) will show that the load factor in Springfield, even in 1932 
V/-.S surprisingly high. In fact, nothing like such a high load factor 
would be possible were it not for extensive storage of ice. 

More than 6 per cent of the ice produced in Springfield was trans- 
ferred to out-of-town plants which were branches of the Central Illinois 
Public Service Companye Keeping this fact in mind, it may then be noted 
that the sales of ice in Springfield alone (not counting what was shipped 
out) amounted, in July, 1932, to b853 tons — as against a maximum theo- 
retical capacity of all Springfield ice plants (including the alleged- 
ly inefficient plant v;hich was shut dov\'n) of about 7260 tons — or, without 
y 

(*) The load factor figures here used have all been computed directly 
from data on capacity and production as presented by the company which 
was opposing the application. Somewhat different load factors submitted 
by them or the record have not been used, because of obviously incorrect 
methods of computation. They compared Springfield sales with total 
Springfield capacity, neglecting to take account of the fact that part 
of the ice produced in Springfield v;as sold to branches of the company in 
the areas surrounding Springfield. . 

(**) Compare pp. 68-70' supra. 

9827 



-118- 

this plant, of 6459 tons. In July, sales in Springfield alone were 
7789 tons; in June, they haA been 6572 tons. The record shows that 
storage of ice was begun in January, that production continued on an 
almost even level for many months, and that as late as September, ice 
was being taken ou': of storage in considerable quantities, (*) 

Ho consideration was given by the local Committee of Arbitration 
and Appeal to the question as to whether the public was satisfied that 
a situation under which something over one-quarter of all ice consiomed 
in the course of the year was stored and, in reply to the questions 
about price they appeared satisfied with a mere statement that the price 
of ice in Springfield v/as lower than in other parts of Illinois. The 
record contains no suggestion as to ^-'aat the price was, or as to how it 
compared with cost. It is also of iucoiest to note that the manager of 
the utility company said that during the peak period, Springfield shipped 
as much ice into Beardsto^^Ti, 45 miles away, as Beardstown shipped into 
Springfield. 

The opponents of the applicant maintained that the fact that ice 
was "dumped" into Springfield from Besrdstown, 45 miles away, was 
sufficient evidence that there was ..o":' a ^-'onopoly in Springfield. 

Several issues stand out rather clearly in this case. One was 
the question as to whether ice planbs should have tanlc capacity sufficient 
to meet demand during the peak sea.son. Salesmen of ice machinery manu- 
facturers, according to Mr. Godel, Chairman of the Committee of Arbitra- 
tion and Appeal, had for a number of years been trying to sell ice com- 
panies on the idea that it was more economical to have a greater daily 
capacity and avoid storage. Consiimers, we have noted, seem greatly to 
prefer ice that has not been stored. (**) The owners of ice storage 
capacity, however, had their storage already available, and wanted to 
use it. 

Another issue lay in the background (though it was not a crucial 
point in reaching a decision), and that was the question as to what 
weight in determining whether nev; capacity was to be permitted should 
be given to the fact that a high cost plant \7as shut down. 

Of wide public interest is the question as to whether — granting 
for the sake of argument that one company had sufficient, but not 
much more than sufficient, capacity to meet the demand — this company 
should be protected against the looscibility of comiJetition, with its 
probably duplication of plants, delivery routes, etc. Above all the 
deliberations, hovered the uncertainty as to whether the drop in ice 
demand which occurred between 1931 and 1932 would presently be resumed; 



(*) It is of interest to note, however, that, although production ran 
along on a rather even level for ma-'^- months, a considerably higher out- 
put was attained for a short time in t e .jumer — which suggests that 
perhaps the maximum output on which annual capacities were figured may 
have meant considerably more intense production than the company would 
have cared to maintain over a considerable loeriod of time. 

(**) Compare page 21 supra. 
9827 



-119- 

or whether existing demand night "be ero-ected to continue or inrDrove. 
liemliers of the incustr;' could onl7 guess. 

It is pertinent to note that the hearing and original decision 
in this case ijerc nade "by a con;ii,ttee of ice r.iaiiufa.ct\irers represent- 
ing various cities in Illinois. The represent3,tive for Springfield, '. 
who was the nanagor of the city's e::isting ice plants, did not, how- 
ever, participate in the decision. iLUie'diately follov/ing the hearing, 
it was decided to rPcorT:end refusal of the application; and, as has 
already teen noted, on Jan-o.ary. 2U, If"}^. this decision vs.s concurred 
in "by the code authority; and on j'e^.-v.ary 2, 193^. '^7 the deputy ad- 
ministrator. 

C. Suggestions As to Procedare iiade Tjv the Code Authority in 
January, l'^'}4 . 

From the foregoing illustration, it will "be seen that ;iany of the 
early actions taken under article I'l were simple almost to the point 
of informality'-, I.Ienters of the local co ; .ittee would sii"bmit as their 
normp.l report their names written on the "bottom of an enplicant's 
letter. In the ITEA files it is impossible, in many of the early cases, 
to find a copy of the letter (assuming that there was one) "by which 
the Deputy Administrator signified his consent to the construction 
of capacity. In the case of denials, more care was taken; ou-t "by 
January it '-/as beginning to "be realized that if r'olings were to "be 
recognized in courts, more attention would have to "be paid to the 
form of procedure. 

On Januai-y 12, 153^, the code erathority issued tc regional advisors 
and men'bers of comittees of ar"bitr?ition and appea.l a five page ■, 
memorandum containing "suggestions" on procedure, docixments, e'oc. 
Shortly afterwards, aoparently on Jrnuary iS, 193'', .a pa;';^e-and-a-half 
of additional suggestions was added.- (*). 

In the second of these sets of suggestions, the code authority, 
anong other things said: 

"Si2A is impressing upon us tliat contested cases must show tha,t 
interested parties he-ve had frir opporti-i.nity to present their 
facts, that -dnprejudiced' conclusions of fact and unprejudiced 
recom -.endations have "been arrived at "by all agencies, including 
the Code Authority 

The Legal Division is in hearty support of our control of 
production provisions, "but we rmst assist then, "by preparing our 
cases thoro-aghly in order that they may have "before them dependa"ble 
facts and sound recom;:.endatio-..s_ ui^cn which to "base their decisions. 
Remern'oGr t/iat every contested case is a potential suit for injunc- 
tion or prosecution for violation." 

In the main set of suggestions emphasis was laid on ascertaining 
the names of all parties interested, includi-ng public officials or others 
\7ho might fairly "be considered as representing the pu"blic; on the assem- 
"blage of certain data regarding the proposed installation, contracts en- 
tered into, market to be served, proposed channels' of distribution, 

(*) In De-outy's Classification Piles, in folder labeled "Code Authority 
2g27CircLilarfe.'i 



-120- 

eTisting capacity, previous sales of ice, etc.; and on the order in which 
docujnentG should "be arranged. However, suggestions on these matters were 
in rather general form — as suggestions. And there was no indication in 
the memoranda of policies to "be followed in making recommendation of ap- 
proval or denial, 

D, Summary of Policy Durins; the First Six or Eight Months with 
Res-pect to A pprovals and Denial s. 

For several months there appears to have "been no raidical change 
in the o'bjectives of the administration of capacity control as practiced 
"by the code authority and its local committees; or in the amount of atten- 
tion po.id to cases by the Administration or the measure of approval ex- 
tended "by it to decisions reached "by the code authority. When a memher 
of the industry in good standing with his fellows wished to make some 
change in his plans, this usually went through easily. But if someone 
who was from outside — or some ice manuf r^cturer who had not worked along 
with the others — put in an application, he could get no place. The code 
authority insisted that a purpose of the National Recovery Act was to in- 
sure the fullest possihle use of exi sting industrial capacity. There was 
in the "Qnitod States very little, if any, potential ice "business which 
some existing manufacturer did not feel that he could handle. It was a 
foregone conclusion, therefore, that practically any application made 
"by someone who was not a,lread,v supplying the customers which the new 
plant was designed to serve, woiild "be turned down. And what the industry 
disaroproved was also disapproved hy the Administration, 

"Unfortunately, no classification of cases exists which can be 
readily broken down as to show cases disposed of during the first eight 
months of operation. But it is known that ut) to January 1, 1935, in 
only some four instances — out of total Administration approvals, up to 
that time of eighty-nine — did the Administration approve an application 
whose denials had been recommended by the code ai^thority, (*) In the 
same period the Administration issued forty-one denials, every one of 
which aopears to have been recommended by the code authority. 

It should not be inferred by the fig-ares just given, however, that 
the Administration was, clear up to January 1, 1935, agreeing with the 
code authority to the extent that t'ne statements which have been mado 
seem to indicate. For in the latter half of 1934, there accumulated a 
large number of cases on which the code authority had recommended denial, 
but on which the Administra,tion, being uncertain as to its proper course, 
delayed action. Many of these applications were, early in 1935, ap- 
proved, thus reversing the position talcen by the code authority. Early 
in 1934, however, this policy of long delay on cases where the code 
authority had recommended denial had not yet developed, at least to any 
extent. Up to April or May, 1934, it' may be said that article XI consti- 
tuted an alm^ost iron-clad bar to the entry into the ice industry of per- 
sons wliom members of the industry did not want — unless such persons were 
prepared to violate the code. 



(*) There are twelve cast-o, however, where there is no record of the 

Code Authority's recommendation. For source of statistics here. given 
see p. 106,- supra, 

9827 



-121- 

E. The Pirst Attacks on Production (Or Ca-oacity) Control . 

1. DouTDts E:rpressecL Prior to Approval of tlie Code. 

Capacity control x:s.s vie-jed v/ith suspicion in certain quarters 
prior to its inclusion in the code. At the first serious conference 
tetv/een the code's sponsors and deputy Administrator Uhiteside, on 
July 11, 1933. the latter intimated that the control of production 
provision might destroy initiative. (*). At the fornal hearing on 
the code, Septenher o, 1933 > Harvey P. Vaugh3,n, representing the Con- 
suners' Advisory !Boa,rd, said: (**) 

"I notice one thing tooj which disturhs me a little hit, and 
that is that through your Code, your provision that no nen 
plant or pls,nt equipment he estaolished, unless "by consent, that 
there may he a tendency towards monopolj'." 

Lir. Vaughan then referred to the difficulties which even the regulated 
puhlic utility monopolies presented v?hen it came to reducing rates. 

Follovring the Code Hearing, on Septemher 11, 1933, ^ protest was 
suhraitted hy the Machinery and Allied Products Institute, (***) and on 
the same date, a Piciimond, Virginia, ice manufacturer, who had recent- 
ly hiiilt a new plant, hut had deferred installing the equipment, ex- 
pressed his fears that such a provision would prevent his carrying out 
his plan when the proper time came to do so. 

On Septe.'-her 11, also, William h. Lo-acl:s, and on Septemher 2S, 
L. P. Boffey, hoth of the Consumers' Advisory Board, entered more 
definite ohjections against article XI; The foraer (****) held that 
the provision, attempted to protect estahlished production against newer 
and lower cost agencies, and that this would place on the Administrator 
a tremendous hurden in determining the need for new production. As an 
alternative measure, he suggested that limits on production be approached 
by giving the Administrator power to refuse to permit new capacity, — 
where the code authority had .'demonstrated to the satisfaction of the 
Adninistrator that there was need for such restriction — instead of re- 
quiring the a;pplic.ant to prove his case. Mr. Boffey (*****) wrote depu- 
ty Administrator Paddock «iat the Consumers' Advisory Board recognized 
that there were -cases where price competition exists to a degree which 



(*) Code History, p. 10. 

(**) p. 165.. 

(•»**) Data regarding protests mentioned in this paragraph from Code 
History, -p'c, kf-hS. 

(****) Code History, p. Uy-US. 

(*****) Code History, p.- U1-U2. 

9S27 



clearly and consistently injured the consiamer, and that a soiind 
remfidy for this condition is to replace coupetition "by narrowing the 
sphere of competitive price determination. However, if there was to "be 
any major elimination in any industry, the Consumers' Advisory Board held 
that it must be suoject to the condition of adequate public regulation 
and there should "be a.ccessihle to a public representative all records 
of price and costs of production, • ■ .-■ . ' 

2. The Darrow Board. On April 5, 1935, the National Recovery 
Review Board (Darrow Board) turned its .attention to the capacity control 
provision of the ice code, taking up complaints of several parties repre- 
senting small enterprises in the District of IJew York. The Board found 
that small enterprises were not represented on the Committee of Arbitral 
tion and Appeal for that District. On the contrary, the Committee was v 
composed of representatives of large enterprises. The Board found that 
the code was designed to permit monopoly and monopolistic practices, and 
recommended that Article XI be stricken from the code.(*) 

The Darrow Board devoted much of what it said about the ice coc^e to, ' 
domment on the decision of the United States Supreme Court which declared 
the Oklahoma Ice Act unconstitutional. If the Oklahoma Act, under which 
power to give or withhold certificates was vested in persons having no 
financial interest in the industry was unconstitutional, then the ice 
code set-up, under which applications were passed on by persons who were 
both financially interested in the industry and potential competitors 
of the applicant, must also be unconstitutional. 

3. The Huston Thompson Petition. 

On April 6, 1934, the day after the Darrow Board conducted its" 
hearing, the National Recovery Administration held a hearing of its own 
on the petition of Huston Thompson, representing the Refrigerating 
Machinery. Association, (**)'for the elimination from-the code of the 
fir^t sentence of article XI (that requiring certificates of public 
necessity and, convenience). 

The brief of the complainants at this hearing laid great emphasis 
on the profits made in the ice industry over a period of years, as con- 
trasted with losses recently sustained by maniifacturers of refrigerating 
machinery, owning to the stoppage of new construction. The figures on 
profits of ice companies agreed in the main, though not entirely, with 
data which we have drawn from the same sources and presented earlier in 

(*) Report in Deputy's Classification files, in folder labeled "Control 
of Production," and within folder in binder labeled "Reports." 

(**)Mr. Thomson, a Washington Attorney, formerly Chairman of the Federal 
Trade Commission also represented Joseph Zuccaro, an applicant for a 
license by the Code Authority, and the Cooperative League, a consumers' 
organization, said to consist of 1,400 associations located in various 
parts of the United States with a paid membership of 500,000. Mr. Thomp- 
son indicated that the reason for the interest of the Cooperative League 
in his petition was their status as potential producers in different kinds 
'tf production into which they were branching out. Material on this peti- 
tion in Deputy Administrator's folder labeled Huston Thompson Petition 
for amendment. 
9827 



this report. (*) The losses in sales "by machinery manuf act-orers, due to 
the failure of ice n^amifrctiii-ers to 'bv^r machinery (apparently "because of 
code), were set dov/n as beine; approximately as follows: 



i.iemher No . 


1 


?600,000 


Iwember llo. 


2 


41,000 


Member i'To. 


3 


1,250,000 



The totals for ice machinery sales for a number of years past, and the 
percent of sales realized as profit, had been as follows: 

Year Gross Sales Hation of Profits to Sales 

( Per cent ) 

1937 $29,319,422 7.5 

1928 30 ,'4 39, 224 5.35 

1929 31,417,164 5.1 

1930 29,317,164 (sic) 5.1 

1931 23,107,570 2.5 (loss) 

1932 17,044,174 5.05(loss) 

Speaking of his personal experience as chairman of the Federal Trade 
Commission, Mr. Tliompson said: 

"The vvrriter may say that after an intensive study of monopolies and 
their practices over a period of ei^ht years as a member of the 
Federal Trade Commission he I-oaows of no industry which lends itself 
to a s.^ries of many monopolies in communities as in the ice industry. 

In countless of the ice communities today there is a monopol- 
istic control with monopolistic practices excluding competition 
in production to the extent that the manufacturing of ice machinerj-- 
has come to a complete standstill. This is obvious from the fact 
that with 125 applications for permits since October 3rd only 25 
have been action upon, and some of those "'onfavorably " 

Speaking of the Regional Advisors and Comiaittees of Arbitration 
and Appeal, Mr. Thompson said: 

"Since these Advisers and Committees are made up entirely of 
persons engaged in the ice industry in the immediate vicinity, 
their application immediately comes forth in an unfriendly atmos- 
phere, as is apparent by reference to the personnel of those Com- 
mittees as now established. It should be noted that these com- 
mittee members are chosen from among the largest operators in 
their immediate territory." (**) 



(*) See p. 46 supra. 

(**) It should be said that small operators were sometimes on the 
committees; and that in Hev/ York City there also came to be one or 
more representatives of the dealers. 



9827 



-124-.. 

The Huston Thompson hearing represented somevjhat of a landmark 
in the history of the ice code. Practically nothing; v/as presented in 
the way of concrete evidence as t o hov; the capacity control provision 
was working, or what specific injury had heen done to manufacturers of 
ice machinery or others. (*) The petition was therefore denied. 

However, in tvro respects, the incident was of influence. First, 
the ice manufacturers rallied in strong support of the production 
control provision, presenting hriefs (from which many quotations have 
heen talcen in this report) and maicing statements which helped to awaken 
interest in the KjIA Administration in the production control provision. 
In the second place, as we shall see, this marked the heginning of self- 
inquiry within IJHA as to v/hether the administration of the provision 
was proceeding with sufficient dispatch and in fairness to all concerned. 



(*) The losses sustained by members 1, 2 and 3, as given above, were 
perhaps supposed to stand for tangible losses directly traceable to 
Article XI. But in the absence of more definite information as to the 
basis of computation, their significance is not clear. 

Deniel of the petition was by Aiiministrative Order 43-14, June 15, 
1935. 

9827 



-125- 

V. JOIl^'T AlDi;il^n3..':ElATIC>I 3Y CODS AUTHC5-ITY MD IIRA ADMDTISTEATION, 
JUEE - DECEMHEE, 1934. 

A. Shortening of Time TriTt ai ch Co r ld Be T al-en 'by Code Authority 
and Ap:5n ci3s Before Heportir-£.' Ap ' olicc^ticns to the 
Adininistrsticn 

The AdLiinistrptive Grier denyr".;:^' the -netiticn of Houston Thcinnson 
for elimination frc-n the coce cf thu first sentence in article Xl- vas 
finally issued on J-one 15, Yi^iA, somg tvo months sulisenuent to the 
public hearing reriorted in the Inst section. Taking cognizance of the 
charge of delay in the handling of requests for permits, this order 
directed - • 

That the Code Authority for the Ice Industry and its agencies 
shall conform to the icllcwin;j -procedure in the handling and dis- 
posing cf all c^^ses arising fro;,-, t. --. first sentence of Article XI 
of the said Code of Fair Competition for the Ice Industry: 

1. Within fourteen days from the date :7hen application to 
erect nev; or additionpl facilities is received hy a 
Committee of Arbitration and Appeal, the aiDplication 
shall be considered at a local hearing. 

2. This provided for seven days notice to applicant 

5. Within seven days after the hearing, the Committee cf 

Arbitration and AiTOaal shall certify the record, together 
with its recomnendaticn to the Hegional A.dvisor. 

4. Within tliree d-j'-s after recei-jt of the record by the 
Regional Advisor, he shall certif-''- the same together 
\?ith his recomi^iendaticn to the Code Authority. 

5. Within five da^-s pfter receipt of the record 'aj the Code 
Authorit", it shall certif"^ the same, together '7ith its 
recomnendation to the National H3ccvery Adininistraticn. 

Thus, virithin a total of tventy-nine d^ys following the date of 
any application (plus time required for reports to go through the mails), 
the Administration was to have in its hands the official record upon 
which it might proceed to dispose of a case. 

B. I ntroduction Within IIRA cf the Practice of Consultation with 
Advisory Boards . 

Even before the issuance of this order, changes had begun in the 
proced'ure 'vithin MIA for acting on applications after submission by the 
code cuthority. On liarch 15, 1934, the first denuty Arijninistrator , 
Major Pao.d'^ck, h^d been succ-^^ecied by his assistant depiity, Earl W. 
Dahlberg. In time, de-outy A'dininistrator Drliiberg proceeded to spread 
the burden of res-ncnsibility for making decisions more widely in WRA, 



9827 



by calling on representatives of the Advisory Boards* for their views of 
the cases that cor.e up. 

In sone case?, NEA reversed the oosition tahen "by the code authority 
in recoinriendin.^ denial of an fiuolica tion or, at leact its action on con- 
firmation of denial v/as postponed. 

1. Reversal of Code Authority in '..e Case of W. L. Austin of 
Miami, Texas.** 

Miami, a town of 1,000 in the Texas Paniiandle - the only city in a 
county having altogether less than 1500 inhabitants - lies midway he- 
tween Pampa , a toi^ni of 10,000, t'7enty-five miles to the southwest, and 
Canadian a place of 2,000 approximately the same distance to the nortlv- 
east, Miami had never had an ice plant. But Tnxrms had 60 tons daily 
capacity, and Canadian 12 tons - toth controlled hy interests located 
in El 'Rene, situated over the line in G!:lahoTna. 

The ice usec"^ in iuiami was distrihuted "by J. K. Heothihgton, a. 
peddler, who o'btained his ice usually fro:Ti Pampa, "but sometimes from 
Canadian. Heathington had as the basis of his distri"b\ition in Miami an 



(*) Industrial Advisory, La"bor Advisory, Consmners' Advisory, to which 
might hs added the Division of Research and Planninc; and the Legal 
Division. 

(**) For explanation of location in Deputj'-'s files of data on this case * 
(as on other cases), see footr.c ts,p. 19 supra. 



V 



Note: In his "History cf the Ice Code - ?ro.n the Vie-Tpcint of the' Con- 
sum.ers' Advisory Eoard," (in IJSA files) Geor.je 3. Haddock states that 
during the entire period from the approval of the Ice Code (October 3, 
1933) to the resignation of the first Deriuty Administrator (March 15, 
1934), the latter never consulted the Consumers' Advisory Board, or even 
advised the Board that applications v/ere being received and considered. 
Indeed, "because of the fact that they A?ere handled so informally "by the 
Deputy, no record or information concerning them being filed with the 
Code Record Division, the GAB never knew how many applications were being 
received, or how they were being handled or what decisions were being 
made on them." (p. 4 ) 

However, shortly after the appointment, on March 15, 1934, of Deputy 
Adjuinistrator Dahlberg, the latter held a conference i,7ith representatives 
of the varioxis Advisor^'- Boards, inclr.ding the Legal Division and the Re- 
search and Planning Division, for the ourpose of discussing future ad- 
ministrative orocodure on the Ice Code. "as a result of this conference, 
Mr. Dahlberg comr:.^ncnd the practice of holding fairly regular meetings 
with the advisors, at which time consideration would be given to pending 
matters requiring Adi.iinistrative action. Chief among these were applica- 
tions for permit to construct new ice making cr r;torage capacity. .. These 
meetings were informal, and the advisors at first mtide no formal written 
recommendations with respect to the action to be taken on pending applica- 
tions. Mr. Dahlberg endeavored to secure a unanimous vote of the 'advisory^ 
(Note continued on following page) 

9827 



-127- 

"onref rigerated 6x8 foot tox. A big tarjjatilin wns so placed that when 
the dcor of the box '7as opened it would drop down to protect the ice. 
Heathington hauled his ice from Vpzcna at ni-dit, on an uncovered Chevrolet 
truck pith hurlpp over the ic3. 

The price of ice delivered to dcinestic consumers in Iliami was 80(^ 
a hundred pounds. HcT/ever, this was for a hmidred pomids as scored at 
Pampa , before the 25-mile haul. Her?thing;ton said that the ice shranlc 
300 pounds (or 15 per cent) during this hati.! hut claimed that there was 
not much shrinka-re thereafter. S. T. Hitchey, City Secretary/- of Miami, 
said that some ice which he weighed ^'hen buying it from the dock cost 
him an ai^erage of ten cents for seven -oounds. L. G. Christopher, the 
Chairman of the Roberts Co^mty Eelief Board, placed the cost of ice at 
about l-g-^ a pound. This figures out as $30 a ton - which may be com.- 
pared with the $10 a ton nrice for :' "le delivered to domestic consiimers 
which exists in many cities, and an average price for the entire county 
in 19o3 of $11.23 per ton. * Even with full weight the price would have 
been $1£.00 a ton, whereas citizens cf Lliarai v/ere paying 30i^ a hundred 
(plus shrinkage), the peo-ple of Canadian 70j^; and those of Pampa 65^* 
(presumably without much s^irinlcage) . 

Ice was so expensive in Pf-mpn that little was used. Total sales in 
this town of 1000 had in the previous- .-.; r been 109 tons.** According 



(Npte continued) committee,' and in many instances was sucessfu].." 
(PP- ) 

Pollowing the issuance on June 15, 1934 of a revised procedure for 
handl-ing applications (to which reference has been made in the preceding 
section), it appears that reconmerdations by the Advisory Boards became 
more formal in character. To follow Mr. Haddock's account again, a 
summary of the facts in each case, laade by the Deputy Adjninistrator, 
wouJLd be presented at a meeting of the representatives cf the Advisory 
Boards and Divisi ns. "As a result of the discussion at this meeting, 
ea.ch Ad^visor woula prepare a report or sign a report prepared by the 
Deputy, recommending the action he believed to be proper." Although this 
practice of submitting written reports begrn in Jime, it was not however 
until Au.!^st that formal dockets were nrepared by the Deputy, containing 
the reports of the Advisory Boards, which irere presented tc the Adminis- 
trator together with the report of the Deputy Administrator, for the r)ur- 
pose of enabling the Administrator tc determine what should be done." 
(p. 13) 

The presentation of reports to the Administrator for formal determin- 
ation, referred tc above, was a phase of the development in tirocedure 
which vdll je ta'-^n up in the next secbicn (pp. 209-210), by which re- 
quests for certificates were ap-oroved or denied by Administrative Order 
rather than merely "by action taken by the Deputy Administrator. 

(*) Page 35 Supva. 

(**) Tlu-ee and a half tons per family ■ rr year has been the usual 
estimate of the less in ice consumption, where customers have 
turned to electric rcf rigeratio;!. See p. '7 suxtra,. 



9827 



-128- 



to Mr. Ritchey 



A large part of the people in Miani d'" not use ic" because 
it is too expensive. Thst is my oxra e.rperience and otaers .... 
I tried to use ice ...It cost fron $15.00 to $20.00 per month 
for my home use. Naturall;'" I "boufl^ht a G.3. but if I could have 
bou^-ht ice at a reasonable price, I r-'oa3.d not have paid $200 for 
a G.S. 

The record shows that the supply of ice in Miami was not absolutely sure. 
On a few occasions, so the dealer admitted, breakdowns or other difficult- 
ies had made it impossible for him to serve ice \ihen people wanted it. 
He claimed, however, that these occasions were ver^;- rare and of short 
duration. 

From a civic standpoint, the interest of the people in Miam.i center- 
ed largely around the obtaining of a cold storage plant. The Roberts 
County Relief Board had to find cold storage space for considerable 
quantities of butter, meat and lard; and it appears that they l^ept this 
produce at Amarillo, 70 miles a.way - although there was some other stor- 
age space within 30 miles. Of special interest to the business men and 
community boosters of riiani was the fact that a number of deep wells had 
been drilled, which made possible the raising of vegetables by irrigation. 
The Panhandle Power and Light Gonpan}'- v.'&r. proposing to put in a power 
line \7hich would permit the extension of this system of deep well irriga- 
tion but this industry'' could not devalcp without a local cold storage 
plant . 

Early in 1934, W. L. Austin, for the last six years superintendent 
of the Li"'ht and Power Company ;:t Canadian, and with twenty years of 
experience in the ice industrj'', though mainly in the commercial rather 
than the retail end, made preparations to erect a combination 4-ton 
ice plf.nt and 50 ton cold storage plant in Miami. He did not believe 
that an ice olant or a cold storage plant, seoarately operated could be 
made to pay. But he figures that the two - together v.dth a cream businness 
which he was to handle as a representative of Armour - would make a 
feasible combination. Mr. Austin believed that with lower prices, the 
consumption of ice in Miami ccold be greatly expanded. As superintendent 
of the povfer company at Canadian, he had taken the initiative in bring- 
ing abOLit a 35 per cent reduction in electrical r-^ites and experience ha-d 
shOT,7n that this reduction had increased revenues. Instead of selling ice 
at 80j^, he proposed to sell it for 50^- and, of course, without the shrinlc- 
age due to importing ice from 25 miles a\7ay. 

This project naturally aroused the sympathetic interest of the 
business men and other citizens of liiani. Mr. Ritchey, the City Secretary, 
said he liad tal':ed with 100 people with reference to the plant and tloat 
they all gave it their approval. Koirever, when Mr. Austin's plans be- 
came known, he was advised by the Regional Adviser, H. M. Park (who ap- 
pears to have been substituting on certain matters for the chairman of 
the Texas Committee of Arbitration and Appeal), that it would be neces- 
sary for him to obtain a certificate of necessity and convenience. Ac- 
cordin ly, on March 8, 1934, Austin lilec. an application, and on March 29 
there was a hearing presided over by Mr. Park. 

9827 



There rrere three opponents to the granting of this application - 
the operator of t :-e ice plcnts at Vr.TToc and Cansdisn; the Miami dealer;, 
and the Eill-Ande son Ice Conpany wliica feared that a plant at Miaini 
might affect the ice mai-ket 'vhich it -jas serving at MolDeetie, 18 miles 
from Miami and 25 niiles from the nearest Hill-Anderson operating plant 
at Shamrock. 

The Kill-Anderson Company also had a closed plant at TJheeler, 35 
miles from Iviiami, vrhich had been shut down since 132S. It should be 
noted that in their state-nents regarding the plant caijncity in t he area 
aro-und i»Iiami, both the cciiraittee c." arbitration and anpeal and the code 
authority included this 10- ton ice plant at TTheeler, shut dovn five 
years before and 35 niles nvsay, as a -nnrt of avadlaule plant capacity, 
and used it in cor.iputing the, load factor. Ten tons cf the 60 ton ice 
capacity at Pampa w-s also closed dcr'n. CoiiLiitin^ all the caT)acity 
operating and shut dotm in this radii:.s of something li]^e 35 miles, the 
load factor was fouiid to be 20 per cent. 

At the March 29th hearing, aoe" -^jr^ to a statement later made by 
Mr. Hitchev in a letter to ?.epresent&tiv j Marvin Jones (May 21, 1934-) 

Vfe vjere told th?t the Board -yas rot interested in cold 
storage, and that it did not bnve cn''''thing v.'hatever to do -dth 
this, bub must co.ifine OLii^selves to the question cf ice plant 
only, rnd the need for the plant, regardless of the need for the 
cold storage. Cur application v/as for the two. VJe were further 
told that all the Board v;as intererte.^ in was whether there was 
at this time s-'officient ice facilities to serve the people of 
Miami and its trade territory, regardless of what the ice night 
cost them, and if the plants new in Pampa and Canadian nad the 
capacity to serve r.iavai that was all the Board \ranted to know. 

There was nothing in the record of the hearing, or the later 
course of the ccnnittee cf aroitrfticn and appeal, "hich was inconsistent 
with the above statement. In his letter, llr. Sitchey then went on - 

At the conclusion cf the hearing the ci^ntestants made the 
statement before the Board, that their compnny did not object to 
the loss of what sales they had in Mirrni, but that they were afraid 
that if the plant was pernitt- .". to ODerafce, it wo-old sell ice at 
such a price as to disrupt the prices then being charged in Pampa, 
end Canadian, Texas; and th^t if their company could be assured that 
the plant at Miami wcuD.d not dir-ruot their urices in Pampa end 
Canadian, they wo^Jild immediately withdraw the contest. V.'e told them 
before the Beard that we intended to operate in Miami trade territory 
onl-^, and that this plant would not sell ice to be peddled in either 
Pam-)a or Canadian, but would sell at the plant to sny and all people 
comin , tlvere for ice for their -r ie . Upon this statement being 
made, the Board stated that he could net see m\xch difference be- 
tween the parties in view of this statement, and said the Board 
"culd hold UT) recommendation until April 5th, 1934, for the parties 
to reach an agreement, if possible, again Mr. Austin told the peo- 
ple that he would abide by his statement, and they agreed to let 
him know in a day or t^'O , just as scon .as they could consult with 
their partners in the business. 

9827 



-130- 

Fron the record, it would appear that the Texas Committee of 
Arbitration and Appeal and the code authority were not disposed to do 
anything in this case until they had to. Althco/^'h the hearing was 
held on March 29, it vas not until interested Mipmi parties had communi- 
cated with their Congressman, and ■^...e letter had communicated with 
General Johnson, and General Johnson had, en Llay 2, 1934, written to the 
Congressman that the Recovery Administration had checked the mattej? up, 
that, on Uaj 4, 1934, the coranittee of arbitration and appeal, and, on 
the same date, the refional adviser, made thair report to the code au- 
thority. 

In their report the Texas Conraittee of Arbitration and Appeal, 
after citinr;; the °>2 tons of capacitv -■ Mable in Pampa., Canadian and 
Wheeler, and the local factor of 20 per cent, said referring to one of 
the points of contention - 

"It is thought that the testimony of Mr. Hitchey bearing on 
the fact that due tc the proposed irrigation an increase in 
population could be expected is irrelevant to the title of the 
hearing, since refuting statements were made by the opponents 
tc the fact that irrigation possibilities were very problematic." 

After pointing;; ou.t that only once or twice a season was there a 
failure in ice service, due to unavoidable breakdcjns, the committee 
concluded: 

"It is the recommendation of the Conraittee of Arbitration 
and Appeal that Mr. Aiictin be denied permit to erect the proposed 
4 ton plant in Miami. It is believed that the proponent has not 
sho-'n sufficient reason to believe that there is a public necessity 
and' convenience for this plant in Iviiarai. It is belie-'.'ed by the 
Coranittee that the opponents in this case are amplj' serving this 
small ccm.munity and that any 3d-"iitional tonnage would have a 
tendency tc bring about desiri,,5tive price schedules in the entire 
territory. " 

The regional adviser, in his letter written the sane date, endorsed 
this report. 

On May IS, the MJ'yor of Miami wired his Congressman; and, after a 
further inquiry by the Administra '•ion to the Code Authority, the latter 
on May 2'", submitted its recomaenda\.ioj; o the Deput;;^ Admiinistrator. 

After reviewing the factual as-oects in the case, the code authority 
found that the r:'Op-ulation of Miami and the ccionty exclusive of Miami 
did not warrant the installation of a manufacturing plant. Attention 
was calleo. to the statement of the representative of the Pampa Ice 
Company tc the effect that in the event the territory justified any 
such installation, such company would have erected a plant prior to this. 
It was subiiiitted - 

that the orieration of a 4 ton plant under conditions as 
disclosed bv this record and in consideration of the increased 
cost of opei"3tion imposed by the Code, can hardly be expected to 
result in any profit to the applicant or to the other established 

9827 



i 



-131- 

plants and it viill most certainly resrJt, in the opinion of the 
Code Authority, in a division of siich demand as now exists in 
Miami het^-^een the est^hlished dealer and the ^pT)licant and there- 
"by effect a serious CLU-taiLient of profit or possibly inflict 
loss upon such dealer who, it is ap-oarent from this record, clear- 
ly falls within the ca.te(,yry of siiiall enterprises. 

The code authority then recomnended the denial of the application 
for Tjermission to install ice making machinery, but suggested that the 
applicant receive a certificate for the installation of the 50-ton 
seasonal storage - 

As such a sol^^tion rrculd, it seems, be clearly in accord 
with a system of planned economy and v/oiold furnish necessary 
cold storage to the comr;anity, providing for an ample supply 
of ice at all times and vrould permit of satisfactory arrange- 
ments bet?/een the established operations, the applicant and the 
established dealer which would allow all to survive. 

The above reference to seasonal stora.ge appears to have groT^n 
out of a misunderstanding v/hich must have existed at the time of filling out 
of the original application. Austin wanted to erect a cold storage plant, 
over which the ice code administratirn had no jurisdiction; certainly he 
had no intention of erecting an ice house in Miami, in which .he would 
store 50 tons of someone else's ice in the off season, so that he might 
have it en hand tc meet peak season needs. 

During all this controversy and delay, Austin was not idle. He 
went ri,-ht ahead geeting his plant ready; and on June 8, 1934, the 
regional adviser wired tc the code authority: 

"Have affidavits in proof that 'J.L. Austin, Lliarai, Texas, 
has constructed ice plant, put it into operation, and is now 
selling ice from said plant without permit from Administrator. 
Believe this perir.it should be denied and am requesting govern- 
ment action to restrain Austin at least until AdJiiinistrator 
has acted on application. 

The whole matter was finally settled on June 13, 1934, when the 
deputy Administrator reversed the posicion taken by the code authority, 
and found that public convenience and necessity would be better served 
by allowing this 4-ton ice plant, as V'/ell as the. 50-ton storage, to be 
erected. A recomviendation to this effect had been endorsed by representa- 
tives of the various Advisory Boards. 

2. Reversal of Code Authority in the Case of the Davidson Ice 
Company, of Portland, Oregon.* 

Although it has been noted that representatives of the Advisory 
Boards were consulted in connection xTith the case just described, there 
is nothing in the record to indicate that they did more than sign their 
names to a recommendation that the certificate be granted. At this 

(*) iTor Location of data in MA files, see footnote p. 19 supra. 



-152- 

esrly stage in the development of c'apnq-ed. proceto.re, it vjould appear 
that the collaboration of the Advisory Boards was, in most cases, 
rather perfunctory.* As the stuBner and fall of 1934 progressed, the 
Advisory Boards - includin.f; the Hesecrch and Planning, and Legal Divi- 
sions - came, however, to take an incre>-'Sin2,l3'- intense and active in- 
terest in the administration cf the capacity control provision of the 
ice code. 

This interest in raany cases raav not have heen very effective be- 
cause of the ahsence of facts. But one job of investigation undertaken 
by the Consumers' Advisrrj^ Board proved to be not only of immediate, but 
of permanent importance because of the facts,which vrere revealed apioear 
to have been influential in bringing that reorganization cf procedure and 
shift in Administration policy, which, as we shall later note, occured 
at the beginning of 1935. 

Everett Davidson of Portland Oregon, o\7ner of a 5-ton ice plant,^ 
had on March 2, 1934, apiDlied for a permit to erect a 25-ton plant. 
This application nas opposed by the large Portland manufactiorers on the 
groimd that there was already gross overcapacity'-. Apparently the case 
was strong. A table later submitted (in connection with a report sub- 
mitted October 29, by Blair Stewart to the Consumers' Division, National 
Emergency Council) showed that of 600 tons of capacity, 272 were shut 
down. Pigures reported hj the code author: ty showed the Northwest Ice 
and Cold Storage Company, the largest manufacturer, as having a load 
factor of' 33.2 per cent in 1932, and 26'.1 per cent in 1935. 

Denial was recomiended oy the comnittee of arbitration and appeal, 
by the regional adviser, and on June 2G, 193^1, by the code authority. 

liThen, on JuD-y 24, 1934, the representatives of the Advisory Boards 
gathered in the office of the deputy Administrator, to consider this 
application, question v.as raised about the price of ice, which in 
Portland ranged between 30^- and $1.00 a hundred po-onds. Accordingly, 
on July 26, 1934, deputy Administrator Dahlberg wrote to the chairman 
of the code authority, asking for an explanation of these jjrices. On 
August 17, W. C. Holman, President of the United Refrigerating Company, 
wrote setting forth a number of contributing causes: 

The city of Portland covers a verj?- extensive area, 
approximately seventy-two or three square miles. The districts 
are not densely populated like 'in an eastern city, but are sparse- 
ly settled. We operate the largest ice delivery company in the 
city, and our delivery trucks each travel between sixty and seventy 
miles daily. Our cold nights and our cold water, piped direct 
from snow-capped mountains, are not inductive to the purchasing 
of ice. The driver will go through districts in the forenoon, 3nd 
the housewife will not purchase anjr ice because there is a cloud 



(*) For a detailed account of the rather casual beginnings of consultation 
with the various Advisory Boards shortly after March 15, 1934, but 
the development of more formal pi'ocedure following Jiine 15, 1934, see 
footnote beginning on page 197, supra. Por an accoiont of the first 
use of formal Administrative Orders displacing action by the Deputy 
alone, which began on August 18, 1934, see pp. .134 , belo','. 

9827 



I 



-133- 

over the sxon, but they exi^ect gnd insist upon his returning in the 
afternoon, when the s"'jn is out, and deliver them ice. 

In a letter addressed to the cede authority two days earlier, A. G. 
Riddle, Regional Advisor, had estimated that not 50 per cent of the 
families in Portland used refrigeration of any kind, mechanical or ice. 
He also stated that approximately 50 per cent of the year's domestic 
ice husiness was done in the months of June, July, and August. 

Little, if any, additional information appears to have been 
developed for some time. On October 8, 19o4 representatives of two 
of the Advisory Boards, and of the Legal Division, recommended following 
the recommendation of the Code Authority and its agencies and denying 
the application. On October 25, the assistant deputy Administrator made 
a similar recomnendation. 

Just after this, however, the Consumers' Advisory Board received 
the report previously referred to, of Blair Stewart, on the "Ice In- 
dustry in Portland, Oregon." This report, dated October 29, 1934, said 
in part: 

There is clear evidence of the existence of an ice trust 
in Portland. It goes by the name of the- United Refrigerating 

Company, and includes the follovjing distributors: The 

United Refrigerating Com.pany is dominated by Mr. Hclman and 
A. G. liiddell. An inquiry of the locsl compliance office of 
the National Recovery Administration vielded the information 
that A. G. Riddell is the regional advisor for the Ice Code 
Authority. I understand that lAr. Holman is also a member of 
the Code Authority. 

Out of a total capacity of si:: hundred tons per day, 

four hundred and eirht^.'-fcur tons, or over eight3'' per cent, 
are connected with the United Refrigerating Company. A con- 
siderable proportion of the present capacity is closed down, 
however, and most of the no n-o-oe rating capacity is made up 
of antia^uated and inefficient equii:)ment. Of the three hund- 
red and twenty-eight tons of ca^nacity actually operating, two 
hundred and fifty-two tons or about seventy-seven per cent 
is connected v/ith the United Refrigerating Co. 

A considerable proportion of the ice production capacity 
in Portland is antiquated and inefficient. Some of the most 
up to date equipment seems to be in the smaller plants, such 
as that of the Koldlrist Ice Co,, and the Davidson Ice Co. 
Probably seventy tons of the two hundred tons capacity of the 
Northwestern Ice Co. is really modern equipment. One result 
of the restriction on new capacity is the perpetuation in use 
of obsolete machinery. 

Not by any stretch of the imagination can the ice industry 
in Portland be said. to have suffered from excessive competition 
in recent years. It is possible that with larger capacity the 
Davidson Company could increase the very small amount of competition 

9827 



-'154- 

which now exists in the ice indiistry. It is highly desiraMe 
that this competition should extend to the field of prices as 
well as the field of q-uality. Hot only from the point of view 
of the consuner hut for the ice industry as rell, it is un- 
desirable that the price of ice should he so hi.5;h as to give 
so much encouragement to the. use of electrical ref ric^^ration. 

In view of the ne'.7 light thus thrown on the situa,tion, the In- 
dustrial and Consumers' Advisory Boards and the Legal Division later 
reversed the position which they had taken in October, and on Jan- 
uary 32, 1935, the assistant deputy Administrator submitted a recom- 
mendation of approval, including, in his e:rplanation of his changed 
position, the following; 

The opponents to the application have submitted evidence to 
show that there is considerable over-production of ice in Portland 
and the Code Aiithority has recommended that the application be 
denied because of this surplus capacity in the Portland area. 
However, in view of the fact that there exists a very patent 
surplus of ice-making facilities in Portland at the present time, 
the opponents to the aioplicaticn have failed to exolain satis- 
factorily why the price of ice has remained between 80 cents to 
$1.00 per cwt. These prices are exceedingly high as compared 
with those in other cities. . ... 

This office has made an effort to learn of any data which 
the Portland ice companies might present in extenuation of their 
consistently high prices but they have failed to submit any 
a-dequate reasons. It would seem that the granting of this applica- 
tion might more readily avert any possible monopoly in Portland. 

C . Substitution cf Administrative Orders for Action by Deputy 
Administrator in Granting or Denying of Applications 

Towards the middle of 19o4, while the case Just described was 
still in the earlier stages of its consideration by MA, the deputy 
Administrator, in collaboration with the Legal Division, had decided 
that, in place of a mere letter from the deputy Administrator to the 
code authority, it would be preferable to have the granting or with- 
holding of certificates embodied in Administrative Orders. As in the 
case of the suggestions which had been sent out through the code au- 
thority in Januarjs 1954, urging committees of arbitration and appeal 
to observe all the forms of fair procedvu'e in arriving at their findings, 
so in the case of this change within the Administration itself from 
letters of approval or denial to Administrative Orders, the main pur- 
pose was to establish determinations under the code on a firm basis 
which would stand up in the courts. The first Administrative Order 
embodying a decision on an application for a certificate of public 
necessity and convenience was issued on August IS, 1934. Although the 
change was in the first instance largely a matter of form, it was in 
accord with the general shift in procedure by which the i-JElA, in all 
its divisions, was attempting to assume a fuller responsibility for the 
a.dministrative acts which it performed under the code. 



9827 



-135- 

VI. AS3UI,PTI01T 3Y IIRA 07 ?:.II,i;lF:Y R:]3?0:-SI2ILITY FOI. TIIZ ADMI ill ST HAT I Oil 

05" TT-:3 Pi'.OBUCTIOli (0?. CAPACITY) GOi:THGL P?tOVISI01i OF TH^ CODE, VHilCH 
CAivr: TO A H3iiD lu JAirJAHY, IS 35. 

* ■^ • Ei"aer:-,'ence oi the Pro'^ lern o f Monop oly. 

We liave noted taat in tiie o-^.rly Stu/imer of 1334, the then Deputy 
Ai-'jninistrator, in collitoration with the AL.visory Boards, was feeling 
his w:j tov;ards the exercise of a lar/,er amo-unt of supervision of the 
determinations vmich were being .Tiade - as yet mainly tiy the industry - 
over the entry of new capacity into ice manufacturing. By this time 
there vas beginning to he a realization of the fact tnat control of 
capacity Y;as not merely a question of pl-^ysical "olant ac balanced again- 
st consumer r -mand. Luch more intricate tiian this, there was involved 
the qtiestion a,s to how r.Ta.ny firms should be in t.ie industry, and what 
firms, auid Wii^t Immuiiity this or that group, or this or that industrial 
or conmercial policy, should have against being challenged by those v;ho 
wished t- -Introduce some nexi element or policy intizstthe industry, 

Bcicre attempting to go further with a review, in chronological 
order, cx the development of IIHA procedure and policy, it will be well 
to introduce at this point a classification of the sorts of -oroblems 
which made the administration of production control a delicate matter. 
Considering 'particularly the monopoly acpcct, an effort will be made 
to show hov/ very wide was the rant-,G of this px'oblem, both as regards 
the areas and the persons involved, and as regards the forms which the 
problem tool:. Concrete cases may serve to illustrate the chs.racter of 
the most iiaportant problems. 

1. Strangle for Control Bctv;een ^^.nufacturors and Dealers in 
New Yorh City. 

An examination of -'.ll the amplications for ■■'ermitr, to build new 
capacity which c^me t«) ij^ashin^ton from the beginning to the end of the 
code period (i:_,mring, however, cases in y/hich exemptions were granted) 
shows tha-t there were just 13 which involved nev; capacity in excess of 
40 tons per day (40 tons appearin;^ to be the best dividing line between 
rather sr.all plants and those of moderate or large size). It would 
appe.-'r to be highly significant tliat of these 18 applications, lia.rdly 
one-third represented efforts of outsiders to enter the ice indiistry 
for money-making puriioscs. All of the others — excepting one where 
tiie plans of the applic-'^nt wore unopposed — represented struggles 
Y/itMn the industry, or in one or two cases between commercial con- 
sumers and the industry. 

Perhaps the most sui-:)rising fact is tliat one-third of the more- 
than-40-ton applications, and all but one of the moro-than-lOO-ton 
applications, mi^ht logically bo classified as struggles between labcr- 
sr tliat class of small dealers who come very close to being labor - a,nd 
manuf ac ture r s . 

(a) The Kings Couiity Ice ^nd Fu-ol Corporation and State Ice 
Corooraticn Cases. 



9827 



-136- 

Most of this str-ufifele was in lle\7 York City. It came to a head 
there in Ai^ril, 1934, when the Kings Co-onty Ice and ?uel Corporation 
and the State Ice Corporation, each made up of ice dealers, filed a-rilic- 
ations for permission to erect, the one an ice plant of 123 *-cnn, rmd ' 
the other one cf 250 tons. (*) 

In an earlier chapter of this report (**), attention was, c. Hod to 
the manner in T^hich the stru^-gles of ice manufacturers among themselves 
or with firms trying to enter the industry led to {.nierilla warfare. The 
setting up in New York City of ice "boxes which sold at cut throat pi-ices, 
the use of trucks to follow and tmdersell v/holesale as well as retail 
dealers, was described in considerable detail. VJith the contraction in 
the demand for ice, the suspicion arose tiiat one object of manufacturers 
might be to eliminate either peddlers or wholesale distributors. In add~ 
ition to these special causes of conflict and a-iprehension, it was nat- 
ural that, as a part of the regular bargaining process, dealers should 
from time to time come into conflict with manufacturers over efforts to 
secure ice at lower prices or on more favorable terms. 

Until shortly before the adoption of the code, there was in iicw York 
City, even in the less coivpebitive areas of Srooklyn and Queens, enough 
possibility of setting ice co'iroanies in cc'rarpetition against one another, 
to serve as a kind of safety valve for the feelings of the dealers. 3arly 
in 1934, liowever, the elimination throitgh pui'chasc and closing of a recantly 
constracted independent plant (Hosoff) (***) and other circumstances made 
the dealers in Brooklyn feel that the po'Ter of the Hubel and IZnickerbocker 
coinpanies, especially the first, was closin^j dov-n upon them. They deter- 
mined, therefore, to establish cooperatives and arrrure themselves of their 
own ice s^Toply. 

The Ivint^s County Ico and jTuel Coi^'oration, the earliest of the tv70, 
v;as made up prima.rily of dealers (men v;ho sold ice to rotailers). There 
v/ere, however, soro pedd].er members, including one o'f. the officers of the 
peddlerf, ■ e^.-sociation. . A.ccording to a statement submitted en I.fe.y ol, 
1934, b." thoir attorney, Sa;juel S. Bisgyer, 

This conioration consists of several ico dealers in Brooklyn 
who have been ice dealers for upwui'ds of 15 years . . . Our 
clients have contended tlia.t the monopolistic tendency in this 
industi-y which prevailed in this area before . . . the date of 
the adoption of the Ice Code, have become more j)ronouiiced and 
daring since that date. Price fi:;ing and market discriminat- 
ion have prevailed to such an extent tiir.t ice devlers and ice 
peddlers . , are gradually being eliminated. 



(*) For cxrplanation of location in Deputy's files of dr^ ta on these 
cases (as on other cases) see footnote p. supra. 

(**) See p. 27-31 supra. 

(***) See p. 24-25 supra. 



9827 



-137— 

Tlio-c%-h the peddlors did not play •?. leading part in the organization of 
this conipany, they were sympathetic with it. Charles Sorace of their 
association said: (*) 

Our association is not interested in the ;-:ranting or refus- 
ing of this permit, except in so far as the granting of the 
permit may help to remedy the ahuses tmt exist. If other 
rejsed-ies arc found, wq do nc^t care, "but we feel this way; 
tliat this is one method "by v;hich v;e feel that these abuses 
can "be eliminated, oy the granting of this permit, "because 
ths.t is the only time that the ice companies consider the 
interests of these peddlers, vjhen there is competition. 

The State Ice Corporation filed its amplication on April 24, 1934. 
The "application stated that' the stockholders were "both peddlers and 
dealers. But according to a report from the deputy Administrator to the 
National Ind\istrial Recovery Board, dated Llay 16, 1935, of the 17 or 18 
men who were the jTrincipals in the ccrporation, 15 or 16 were dealers, 
in the sense that they purchased from manufactixring plants and sold to 
peddlers, cellar-men, and commercial consumers. According to a "brief 
su'bmittod by the applicants, their 

sole rca.son in seeking thic license is to relieve themselves 
once and forever from the oppression, intimidation, and 
unreasonable practices that has been their lot for years. 
They arc desirous of securing a regular source of supply, 
divorced of arbitrary interference. 

In the a-oplication itself, they said: 

There is urgent and deep fult need for a new independently 
operated ice plant. Existing conditions are shocking and 
unbelievably reminiscent nf the sordid pre-anti-trust law 
days . 

The backers of this corporation were so afrcid of reprisals that 
they made their applications through a la-yer rather than have their 
identities revealed, and in other respects sought to be secretive con- 
cerning the property which they were acquiring and their other moves, 
feeling that measures would be taken to embarrass them. 

At this point we are more interested in stating issues tlian in 
noting results. It should be said, however, thp.t the applications of 
both the Kings County Ice and Fuel Corporation and the State Ice Corp- 
oration wore disa.pprovcd by the code au-thority and its agencies and by 
the deputy Administrator, the latter in August, 1934-. Both companies 
appealed to the ITRA Industrial Appeals B oard, emphasizing cliarges of 
monopoly. The Industrial Appeals Board, in decisions rendered Se p- - 
tcmbex 12, 1934, Held tlirt the applicants liad not established this charge 
of monopoly, being influenced, possibly, by the low prices and tangible 
evidences of competition 3-nd even warfare which cliaracterized the .. : ' 



(*) Hearing April 25 (a,djournod meeting May 15), p. 11 
9827 



-138—- 

New York ice industry at the time - the price emergency "being then on. 

After the changes in the procedure and policies in the handling 
of production control cases vjhich will shortly "be described, the State 
Ice Corporation, hut not the Kings County Ice and Fuel Corporation, 
under date of Fetruary 12, 1935, filed an application for a permit, with 
with fresh emphasis on the monopoly charges. This second case had not 
finally been disposed of by the end of the code period; though the 
Deputy Administrator had recommended that it again he denied, holding 
that monopoly had not "been shown in New York. 

(h) Amalgamated Coal Corporation Case. 

In the Kings County Ice and Fuel Corporation and State Ice 
Corporation, wholesale distributors were the leading participants. 

A new organization made up entirely of peddlers was formed and in 
March informally, and on April 10, 1935, formally, applied for a permit 
to construct a 250-ton ice plant 

The Amalgamated Coal Corporation was a new corporation designed to 
he the commercial counterpart of the Amalgamated Hetail Ice and Coal 
Dealers Association, Inc., .an orgaiiization of 3,000 Brooklyn and Q;aeens 
ice peddlers, of which Charles Sorace was President. Sorace had been 
made a member of the IJew York Gom^aittee of Arbitration and Appeal. It 
was planned to sell the stock of the new corporation to such of the 
members of the peddlers' association as would subscribe. Ice was to be 
sold only to stockholders. 

Tlie lines along which this new organization vms preceding reflected 
the changed conditions in the New York Ice market by v/hich peddlers 
had come to be separated by a more distinct cleavage of outlook from 
the wholesale dealers. The development of ice boxes and cash and 
carry stations v/hich could be served by wholesalers or directly by 
manufacturers made the peddlers feel that, in the declining ice market, 
an attempt was being made to eliminate them. In seeking to secure 
their own source of supply, they were engaged, therefore, in what they 
thought of as a fight for their lives.. The question as they saw it 
was whether the manufacturers and their allies v/ould talce over all 
distribution or whether the retail distributors would take over manu- 
facturing. In this struggle, the requirement that people could not 
build an ice plant without obtaining a certificate might easily throw 
the power into the hands of those who already ovmed ice plants. 

It should be pointed out, however, that the peddlers were equally 
ready to use the power of government to tie the hands of their opponents. 
The dealers were implacable in their opposition to, and effort to root 
out, the storage stations laiovm as ice boxes. Though the record is not 
very clear on this, the Commissioner of Markets was disposed to go 
about as far in this direction as he could. 

Much of the consciousness of injiiry on the part of the ice peddlers 
rose from changes which had been taking place in the merchandising and 
pricing policies of ice manufacturers. Until about the time that NEA 

9827 



was getting xmder way, the leading ice manufacturers in New York had 
eoTd only to wholesale distri"b\itors4 Unable to "buy ire directly, many 
of the peddlers (particularly in Manhattan) had been victimized by deal- 
ers or out-and-out racketeers, who levied tribute under the threat of 
depriving them of ice or setting up ice boxes in competition. 

At the hearing on the Kings County Ice and Fuel Corporation Appli- 
cation, (*) William Fellowes Morgan, Commissioner of Markets in New York 
City, said that the first complaiiits had come only a few months before. 
Morgan's deputy, Michael Fiaschetti, placed the beginning in March. (**) 
First there was a group of about 50 or 60. The peddlers said they could 
not make a living, though they worked from four o'clock in the morning 
until nine o'clock at night. lee was being sold from trucks at prices 
whiph were ruining them. They were told that if they did not buy from 
certain persons the racketeers v/ould come in and open eellers and ice 
boxes and sell ice for nothing, or would sell it at 25 pounds for 5 
cents and 50 pounds for 10 cents. Tnis group was from Manhattan; but 
a little after this, a "couple of thousaiid" came from Brooklyn. 

Mr. Morgan said that there were two main complaints. The first 
was that the small peddlers were unable to buy ice even for cash from the 
manufacturers; and the other was that they were in rompetition with these 
ipe boxes, which went into business apparently purely for cut-throat 
purposes, to creatj a nuisance value and to be eventually bought out. 

Mr. Morgaii ordered an investigation. This ponfirmed the complaints 
of the peddlers. Mr. Morgan, feeling that conditions were at bottom 
eaused by what he called the ice trust, had a number of preliminary 
meetings with representatives of the manufactm-ers, and then in order to 
get a more complete attendance and cooperation refused to issue any per- 
mits for ire boxes to the manufacturers. That brought them all to his 
office one morning. As a result of this meeting, the manufacturers 
understood that the city of New York v/ould not issue any more licenses 
to manufacturers if they continued to refuse t'^ deliver ice to any 
peddlers or others who might appear at their docks and offer cash. 

That was the begining of the open i?e market in New York City. But 
it quickly raised many problems. The manufactiirers proceeded to sell ice 
at one prire to dealers (wholesalers) and at another to peddlers; then 
they tried to establish a differential based on quaJitity of ice purchased 
alone; thep. they abolished this differential. (**♦) These changes in policy, 
this dilemma as to how the peddler might be protected without injuring 
the dealer, or the dealer without injuring the peddler - or did the 
manufacturers want to eliminate certain of these people, or would they be 
eliminated anyway as the ice market contracted? » kept New York in a tur- 
moil for many months, and lay close to the root, both of the emergency 
pri<5e situation and of the most important applications to build new ice 
manufacturing capacity which arose under the code, v/hether in New York of 

T*) Apr. 25 (continuation May 8, 1934), pp. 207-212. 

(**) Hearing, p. 219 

(***) ~Eov further comments on this situation see Appendix A below. 



5827 



.-140- 

the country. ■ ■ 

Biit to return to the. j'imalgaraated Coal Co.rporation, expressii\5 the 
deterrnination of his pecpLe. to maJce themselves independent of the price 
policies of ice manufacturers, ,and to obtain ice for themselves at such 
a cost that they vrould he he'iter ahle to compete with the ice "box 
operators, 'i-ir. Sorace, in the hearing of May 1, 1935, said: (*) 

"I would like the record to shovf this, too, that 
in the event we are delayed in our obtaining an ;inswer 
■ or permit for such application, the Association without 
any doubt will im.iediately start the operation of building 
such a plant regardless of whether or .not we are in possession '■ 
of such a decision of the board by giving us the right to 
build said ice plant as we desire in -Brookl^/n " • 

Half of the cost of this plant was to be 'financed by the ice ' 
machinery manufacturers. (**) 

This application was still pending at the end of the code period. 

(c) Frank Tursellino Case. 

- ■■' 

At the same time that' the peddlers in IfewYprk were seeking to •-' 
buiid capacity because, among other things, they feared that the manu- 
facturers c-md wholesale dealers would run them out of business, the 
wholesale dealers were themselves perturbed over the abolition by the 
manufacturers, supported by the government, of the differentials by 
wiiich the dealers (for the short time since an open market had been 
established) had bought at the dock at prices vfhich were enough below 
those paid peddlers to give dealers a margin. The theory of the aboli- 
tion of the differential was ap-oareaitly that th3 function of the whole- 
sale dealer was simply that of a truclcraan. If by bringing ice to the 
peddler he could save, the latter sufficient inconvenience, and cost so 
that the latter would voluntarily pay a sufficient advance over the 
dock price to support the wholesale dealer, then the dealer could main- 
tain himself and surviv.e. .But he was not to have any discount because 
of the size of his purchases, or the commercial, financial, or other 
services rendered. 

On May 14, 1935, ?rank Tursellino, an ice dealer of 25 years eJcper- 
ience in the Bronx, applied for permission to erect a 120-ton plant. 

Tlie end of fhe code period found this application also undecided. 
The Deputy Adiiiinistrator had, however, recommended its denial. It was 
pointed out that the ope'n ice market and the conditions with respect to 
lack of differentials against' which there was complaint and fear were' 
in the first place due to acts of the I'teY'i York City government; and 
second to the ITRA' s price determination. (The latter, however, had at 
this time expiied.) 
__ _____ 

(**) Sorrice, Hearing, p. 41. 



9827 



-141- 



2. Commercial Gonsiuriers versus Producers 

(a) Denial of application of Jarr.iers' Cooperative Ice 
Compajiy of Horfolk, Virginia. (*) 

!For some years truck farmers about Norfolk had used large 
quantities of ice for the shipment of vegetables.'. The principal crop was 
spinach, "but they also produced kale, coll.ards, cabbage, cucumbers, 
mellons, green beans and peas. Accordiuf; to a letter from C. C. Wood- 
v?orth, secretary of the Virginia Truck G-rowers Manufacturing Corporation, 
to F. A. Weatherred, dated December 14, 1933, the price of ice to truck 
growers until a fev; years prior to the date of his writing had been 
$3.00 a ton or less. (**) Beginning a few years ago, however, a syndi- 
cate, which included as one of its members Mr. Fred Beasley of Portsmouth, 
made Icnown by its activities that it intended to purchase or control all 
of the ice producing plants on the Atlantic Seaboard (presumably in this 
part of the country). In Eastern Virginia, at least, this project was 
largely completed. 

A number of plants, many of them obsolete, were purchased by 
this comp.any at a price which we think was all out of reason, 
;ind by these purchases a very large figure must have been 
created as fi::ed assets, and we have reason to believe that 
at some time the truck growers of this section \?ill be called 
upon to pay interest charges on this unwise investment and 
ail amortization charge on obsolete equipment. 

Jiist follovfing the organization of this holding company the 
price of ice to truck growers in the iJorfolk section was 
raised from ^3.00 or less to •+'4.00 over night vdthout notice 
and continued at that price and v/ould have held had it not 
been for the activities of organized farmers in this section 
who made arrangements to constrij.ct a plant at once. 

In further description of the same struggle, according to information 
furnished to the ComTiittee of Arbitration aiid Appeal and forwarded to the 
Regional Advisor December 1, 1935, 

In I'lovember, 1932.... the Truckers Ice Company, an independent, 
offered ice for S2.25, the ilorfolk Ice dealers met the price, 
the Truckers ice not being able to sell reduced to $1.50 per 
ton, which price prevadled uiitil about April 15, when advance 
to $4.00 was made for delivered ice. 

(*) Folder containing data on this case is in Deputy's Files under 

"Inactive Correspondence, Va." 
(**) According to information furnished by the groi/vers and transmitted 

on behalf of the Committee of Arbitration and Appeal to the .Regional 
Advisor under date of December 1, 1933, the price from 1920 to 1931 had 
been $3.00 per ton delivered to any railroad siding which had been in 
use before 1920. 



9827 



-14-2- 

Having this ■baclq^TOiind of e:qoei-ience in their rnincls, the truck 
growers were alarmed when the iloriolk Ice nnnuf acturers proceeded to file 
prices. In a letter to deputv Administrator Faddock dated Octocier 27, 
1933, the growers' association srid that the; •m.derstood tnr.t the code 
price to truckers would 'be'vS.'^O per ton. This was a niistake. The price 
was to te 54.00 at out-of-tov/n sidings (>p3.50 in h'orfolk) . (*) However, 
the truck farmers v;ere distrustful of the future tactics of the ice manu- 
facturers. Also the^ felt that the s^3.50 - >1.00 price for ice was too 
much, considering the fact that their main use for ice was in the off 
season f6r cit^ use. Their estinated schedule of their ice consumption 
during the season ran: . ■■, ■ 



Month 



Tons 



NovemlDer 


1,500 


Decemher 


1,500 


January 


1,000 


February 


800 


March 


2,000 


April 


2,000 


May 


800 


June 


800 



For a number of years the Norfolk truck growers had had an organiza- 
tion for manufacturing fertilizer, laiovm as the Virginia Truck Growers 
Manufacturing Corporation, by which "a tremendous saving iias been made 
by practicing measures of rigid economy to wnich we have become accustomed 
in order to save our farms - --'hich are our homes". (**) Some 13 men, all 
large growers, in many if not all cases members of the old association, 
obtained a charter from Virginia and incorporated as the Farmers Coopera- 
tive Ice Com.pany. Tney asked for a certificate to put up a 50-ton manu- 
facturing plant and also to establish ice storage at four places. (***) 

The application was opposed by the Norfolk ice m.anufacturers, who 
said that conditions in the ice industry were deplorable. One plant had 
been sold at foreclosure, and another was closed down owing to inability 
to sell. The Virginia Ice and Freezing Corporation, the leading company, 
was said to have operated at one-third capacity d.uring the peak of the 
1933 season. (****) Of special worry to the Norfolk manufacturers was 
the disposal of the product of the proposed ice plant during that part 
of the year when vegetables were not being shipped. While the applicants 

(*) Hammond to John Overbey, November 13, 1933. 

(**) C. C. Woodv/orth, Secretary Virginia Truck Growers I'lanufacturing 

Corporation, to F. A. V/eatherred, December 14, 19331 
(***) Information supplied to Com. littee of jlrbitration and Appeal, and 

repeated in letter to Regional Advisor, December 1, 1933. 
(****) Mount Taylor Chairman Code Authority, to Deputy Administrator 
Paddock, January 23, 1934. 



9827 



claimed they would ]iot sell in ITorfolk, their ch;irter gave them pc'er 
to engage in the -general ice business, and the Code Authority that "the 
plant being once installed, it will he on a losing basis if it is attempted 
to confine sales to ^'vinter vegetable shippers, and that by force of 
necessity, it will either greatly increase its prices to the vegetable 
growers or it will have to enter the general ice business within the 
territory." 

Hammond, reiDorting to Col. I'/eatherred under date of January 6, 
1934, went so far as to say: 

"laiTi confident after a personal investigation in ITorfolk.... 
tha.t there is no real demand by tru.dl^ers for a permit to 
construct an ice plant but that the application was made for 
and in the interest of certain persons, who have only a 
pecuniary interest in such a venture and which are to use 
permit, if granted, for the purpose of creating unrest among 
the ice dealers, with a hope of aai uiistabilized market, 
thereby reducing the price of ice below ,-• reasonably profitable 
basis. The above conclusion \7as reached by me, after hours of 
conference with the three leading Norfolk producers." 

In a letter to Mr. Caldwell, dated December 7, 1935, F. W. Beasley, 
the promoter of ice plant consolidations, declared that he did not ovm 
half of the capacity in the territory. 

Each a-Sency of the code authority recommended denial of this 
application; and such denial was ordered by depiity Administrator Dahl- 
berg on April 13, 1934. In issuing the denial, the deputy Admini strait or 
wrote the applicant: 

"If the farmers Cooperative Ice Conpajiy feels that this 
ru.ling does them an injury, they are privileged to petition 
the Administration, through the Code Authority, for an 
exemption froia the provision of the ice code." 

^That Y/as in mind here was the fact tnat parties vv-ho could prove that 
ice was manufactured for their own use might be exempted from the certi- 
ficate requiring provision of the Act. 

Such exem.ption probably could not, however, have been secured. 
For the following winter P. D. Falstead, a i'orfolk farmer who had been 
a stocloiolder in this company, proceeded on his o\rn account to erect 
a 10-ton plant. ( *) At first the code authority -vas inclined to the 
opinion that he was exempted, but later changed its position. To quote 
from a letter from iio-unt Taylor, Chairman of the Code Authoritj;-, to 
H. J. Daly, Assistant Deputy Administrator, September 15, 1935: 

".Fr'im the information presented to us at our conference on 
Febriiary 5, it am:e<ii's that 30 per cent of the total ice 
out-put in this particular m^arket is cons'omed by farmers 
and in the refrigeration and preparation of vegetables and 
other farm produce for shipment and sale to distant markets. 



(*) See -If wilder in Deputy's files Hal3tead,_f- .D, filed tuader complaints. 
9827 



-144- 

Tlie ice tiint vill "be produced by Mr. Halsteaci. . . .v'ill be 
sold to the cons-umer to whom the vegetnhles belong, and 
will not be used solely and exclusively by I'ir. Halstead 
in his ov/n business. It is the universal practice of 
those owing vegetables which^ they deliver to the packer 
for preparation and processing to pay for the icing of 
such vegetables as a separate item, a.id at prices based 

upon the amount of ice used Also Halstead will 

not retain title to the ice that- he places in the bunkers 
of railroad cars for the regrigeration of vegetables, but, 

according to the invariable practice in such case'^ 

■ will sell such ice either to the railroad or to the fruit 
growers express company. T'nis is aai arrangement that is 
nation-wide, and constitutes a handling of this phase of 
the shipping business that Halstead must comply with."' 

Halstead' s attorney, hov/ever, insisted he was not subject to Article 
XI of the code. Halstead proceeded to build his plant, and threats of 
the Committee of Ai-bitration' and Appeal to force compliance led to 
local notice in the iloriolk, Virginia Pilot on I/.arch 17, 1935, and to a 
vigorous attack on production control by Mark Sullivan in the New York 
Herald Tribune of April 2, 1935, v/hich was also syndicated. 

(b) Reversal of Code Authority and • Granting of Fermit to 
Goetz Ice Company of Tolleson, Arizona. (*) 

The application whose denial was described in the last section 
occurred in April, 1934. A year later under the revised procedure of 
the Administration, the USA (March 8, 1935) granted an application which 
affected the truck growers about Tolleson (near: Phoenix) , Arizona. 

At Tolleson, the truck growers were already rioing business with an 
independent ice manufactijirer . According to a letter written ^ay the 
regional advisor to the code authority on December 7, 1934, the price 
of ice to truck growers in the Salt Hiver Valley of Arizona (Tolleson) 
until 1932 had been $4.50 a ton delivered at the shipper's platform. 
For several years prior to this date, however, a price war had been in 
progress in the Salinas-Watsonville territory in California, in the 
course of which ice was sold to vegetable shippers at "ridiculously low 
figures" . Shippers who were operating in that territory also operated 
in the Salt P-iver Valley of Arizona. Having enJo;'ed the lovi prices in 
California, they had been anxious to see competition in the Salt River 
Valley. 

With this in mind, a Mr. Goetz had been prevailed upon to construct 
a plai:it and was given assurance of the patronage of a number of the 
shippers provided he would bre-jk down the existing price, structure. The 
applicant had agreed to construct his plant and sell his ice at $4.00 
a ton delivered. However, before his pl.ant was completed this price had 
been reduced to $3.50 delivered. 

According to the PLegional Advisor, this had been 

(*) Data on this case in folder filed in usual way. See note p. 29 supra. 

9827 



-145- 

the same old storv of a group of tujers agreeing 
t'j support a competitor pi ait v/hicii will "break down 
the price structure and vhich naturally benefits the 
buyer regardless of the effect on the ovmer of exist- 
ing facilities 

Goetz had orginally plaiined to build a 150-ton plant. But opponents 
had thrown so many barriers in his way that he had only put in 75 tons 
of capacity. Much of the fundainental work that would be required for 
a 150-ton plant had, however, been done. In 1934 the plant had not been 
able to take all the business that came to it. Ov;ing to water shortage 
in the Imperial Valley it was expected that there would be a large in- 
crease in the production of lettuce in the Salt Hiver Valley in 1935. 
Goetz therefore desired to bring his pliant up to 150 tons capacity and 
requested a permit for this, purjjose. (*) 

Tliis application was op. osed by tho ice raan'iof acturers of Fhoenix, 
10 m.iles-away. Their load factor was sr.id to have been 34.6 in 1933 
and 26.6 in 1934. They lurtherm.ore claim.ed that the increase in the 
lettuce business due to a Trater shortage in the Imperial Valley was 
temporary. The truck business had been declining in the Salt River 
Valley for some time. ("'*) 

All agencies of the code authority recommended the denial of this 
request. All the Advisory Boards of ISA recommended its approval, a step 
which, as above noted, was carried out by Administrative Order of March 
8, 1935. : , 

3. Ice lianufactiirers V'hose Business Was Growing- 
Versus the Group. (***) 

(a) Shenandoah Abattoir Company, Shenandoah, Fenna. 
Of the eighteen a"Dplications for certificates which would have in- 
volved increases in capacity of more thaii 40 tona, some foiir may be 
classified as representing efforts of a manufacturer to add to his 
equipment so he can serve customers whom the grov/th of his business 
has already brought him. All four of these applications were approved 
by the NRA. One only v;as ap'oroved by the code authority. This one 
was the application of the Shenaud.oah Abattoir Company, vdiich had been 
operating a half-ton ice plant, fox' permission to build a 50-ton plant 
at Shenandoah,' Penna. The ice plant which had formerly served this 
community had been shut down. iJo one objected to the jiroposal of this 
com.pany to annex this business aiid install tiie equipment necessary to 
take care of it. 

(b) Grocers' Ice and Cold Storage Company of Louisville. 

( *) Charles Goetz to Comj-iittee of .Irbitration and Aopeal of the Ice 
Industry of Southern California and Arizona, Oct. 11, 1934; and 
memorandxim of H. J. Daly to the JIational Industrial Recovery 
Board, np.rch 1, 1935. 

(**) ilemorandui'i of Daly. 

(***) Material on all the cases in this section "3!^', filed as explained 
in footnote p. .1^ supra i 



3827 



-146- 

It was over the opposition of tlie industry, however, that the 
Administration approved the reouest of the G-rocers' Ice and Cold Storage 
Company of Lo-aisville to exiTand their capacity from 110 to 170 tons per 
day. The difficulty vhich this comprmy hai in ohtaining ice from its 
competitors has already bee-i noted elsevfhere in this report. (*) 

(c) Pacific Hefri,_5erating Compajiy of Ilent, "nshington. 

The Pacific Refrigerating Co;',r any, whose main ice /lanufacturing 
business was in Tacoraa, had first erected an ice storage and then pur- 
chased a 25-ton ice plant (already huilt) in Kent, Washington, a small 
toifm located in the V/hite Hiver Valley eighteen miles nortli of Tacoma 
and twelve miles south of Seattle. The Seattle ice manufacturers had 
not "been disposed to enter into oiisiness relations with the newcomer, 
and had refused to tuy his surplus ice; though the Seattle ice majrket 
had teen importing ice iron as far av/ay as Portland, Oregon. Tliis led 
the Kent trai'ich of the Tacoma concern to ohtain customers for its ice 
among shippers; and apparently it proceeded to extend service to the 
truck growers of this area v/ith an enterprise \Thich the Seattle ice manu- 
facturers had not shov/n. At the peal-- of the season, the Pacific Refriger- 
ating Company was unable to meet the demands of its customers, hut the 
Seattle ice manuf actiirers refused to maice satisfactory sales arrange- 
ment s and ice had to he brought from Portland to Kent. (**) 

The Pacific Refrigerating Comp;iny therefore asked for a permit to 
install a 50-ton tank in Kent. 

To this proposal, the Seattle ice manufacturers nade strenuous ob- 
jection claiming that there was already sufficient capacity in the area. 
According to the Board of Arbitration and Appeal (***) 

The Ice Delivery Company, Seattle, was formed in 1913 for the 
purpose of cartailing duplication of service, elimination of 
unfair competition, stabilizing conditions in the industry 
and for the purpose of giving the consuiier a better service 
at a fair price 

After reviewing the general situation with respect to market and 
price, the comiiittee expressed itself further as follows: 

At the present time, inducements are offered the vegetable 
packers in the form of packing machinery, crushers, storing 
and transportation of same, giving of discounts, and other 
concessions; and if more ton..iage was present an unfair con- 
ditioA of com.petition far beyond control would become the 
rule and not the exception. If more production were granted, 
a price .war vrauld inevitably result and the present wage 
structure would most certainly be the first to be affected. 

The Administration v^ras unvdlling to place handicaps in the way o'f 
a manufacturer who had developed a market which others had neglected', 
and accordingly granted the application. 

(*) See pages '73—74 svpra . 

(**) Data from -emorandura of I'iay 8,1935 from. H. J. Daly to tlie various 

Advisory Boards. 
{***) Report to Code Authority, Mai-ch 8, 1955. 
9827 



-147- 

(ri.) C. S. ITylie of Oklahoma Cit^'' 

C. E. Wylie, proprietor of the Capitol City Ice Cream Company of 
Oklaiiomp. City, operated a 25-to 30-ton ice plant. He claimed to have 
difficulty in making or olitaining from other manufacturers enough ice 
to satisfy the demands of his customers and applied for permission 
to erect a 50- ton plant. 

In the case of almost all applications for permits under the code, 
those who were seeking to justify the huilding of nev; plants labored 
under a handicap introduced "by the tromendous decline in the demand for 
ice which had t.al:en place in the previous tvro or three years. In Okla- 
homa City, however, though there had been a big fall in demand in general, 
the year 1934 had subjected the ice plants to certain emergency calls 
which they could hardly have anticipated. The summer of 1934 broke all 
records for heat in Oklahoma. P.ecords shov; that in this year there had 
been in June, July and August a total of 45 da;:s in which a temperature 
of 100° or more had been reached, as compared v?ith a previous record of 
28 days in 1918. Furthermore, the drought which occurred at this time 
placed on meat packers a demand for ice to care for cattle slaughtered 
by G-overnment direction, which made it impossible for the packers to 
supply all their own ice, as they normally did — thus imposing an 
additional load on the regular ice producers. (*) 

Tliis situation disruptad somewhat the production plans of ice 
manufacturers; and, having closed certain plants because they did not 
expect to need their product, they had to do some shipping of ice from 
place to place. 

In addition to this difficulty in getting ice, especially from 
people whom he was willing to deal v.dth, Wylie said that he had to pay 
$4.00 and $5.00 a ton for the ice which he needed beyond his own pro- 
ductive capacity. ( **) 

3y the time Wylie' s application was being considered by the Advisory 
Board, NRA field investigators had found in the Oklahoma ice industry 
inefficient plants and a disinclination of holding companies to give 
satisfactory service. They also believed that, considering the high 
degree of seasonality in the ice demand, there was not nearly as much 
excess capacity as the industry had maintained. (***) In part, probably 
for these reasons, the Administration overruled the Code Authority and 
granted Wylie a certificate. 

The deputy Administrator was somewhat embarrassed, however, when 
the day following the issuance of the certificate, new information was 
received from the code authority to the effect that Wylie had more than 

(*) C. E. Simmon, Regional Advisor, to Code Authority, October 14, 1934, 
(**) Application dated August 20, 1934. 

(***) See memorandum of G-eorge 3. Haddock of the Consumers' Advisory 
Board to Deputy Administrator Strauss, February 26, 1935. 



9827 



-148- 

a month 'before teGn found c-niilt7 "b^ the 3er;ional Gor;pliance Council of 
violating' the laoor provisions of the code. Though claiming to have 
paid more than the rainim-um wa^e , '■'rlie had vrorked employees in excess 
of the maxirron hours pr cvidod for the pealc sess^r-'. and had not fully 
p.-'id for overtime as required by the code, ]?ound (guilty, he had re- 
fused to return a lahor certificate of compliance.- The compliance 
aiithorities had directed thac Wylie's 31ue Eagle he removed. Hovever, 
it appears that he had never displayed it, 

4. Attempts hy llewcoraers to Unter the Indui-jtry {'-') 

There appears to have heen from four to six a'Ti ligations (ovit of 
the group of eighteen ivhich vre .have heen considering) v.'hich vfere mnde 
"by persons in the ice 'hiisiness Y'ho wanted to come in as nevr enterprises 
rather than to serve their own need as consiomers or to protect themselves 
as dealers. All of these applications whidi reached a decision., v/ere 
denied "by the jidministration. Several were pending vhen administration 
of the codes came to an end. 

The applications .''ailing in this, class included an aftempt hy the' 
owner of an uiiused garage in Philadelr.hia to puo in an ice plant 
(I. Cohen); exi effort hj^ the i iani Crystal Ice Jomp^any of Kiai'na, Florida, 
to put up a com'bination ice and cold storage plar't; the application of 
the I Metropolitan Deale.rs Ice Corporation of 'Jt^-' ":;'crl: tc put xrp a 2-50-ton 
ice plant; ajid the rerpaest of C . 2, Keeto-i cf O'-.la.hona City, an ice 
superintendent, for permission to g^-i into hn.siness on his ovm account. 
The Peddlers' Ice Comtpany ap'oiication in Hew Orleans was for increase 
in the capacit;^ of a fi"--m already in "business; "oat as this company had 
not entered the field vaitil 1933 it m;jQ,r 'be classed as a nevrcomer. 
This company was said to "be outstanding as a price cutter and code 
violator. (*=*=) 

In connection with the first ohree of the a"bov£ nained. applications', 
the question of monopoly y/as raised. As advanced in "behalf of the iv.iami 
Crystal Ice Corap.my, Miarrii, ."Florida, the .-.laim was directed largely to 
sympathy for the small man or grotip of small investors, against the "big 
companies in power. Tlie Executive Vice President of the G-reater liiaini 
Board of Trade virote to Senator Tramell on July 10, 1934, naming fox^r 
companies which he said dominated, the ice "business cf Southeastern 
Florida. The Cohen case in Philadelphia raid the lietro-oolita;-! Dealers 
Ice Corporation case were c-^ach hrought "before the Administration twice, 
and every effort was made to lorove that the ice industry in Phila- 
delphia cJid i:ei" York wap raonopcii zed. Bo bh cases were pending (as 
respects the second application) at the end. of ^he code period. In 
considering the ejirlier applications in these cases the Administration 
had "been unwilling to declare that monopoly existed "because it could 
not he shown that any one company had practically all the husiness. 



( *) All data on casc-s mentio?aed imder this tiblc is arranged in 

Deputy's files as explained in footnote j). 19 supjra. 
(**) H. J. Daly "'"'O i'ational Industrial -^-ecover;-- Board, J".nuary l 
1935. 



9827 



-149- 

The Deput;;; Adjuinistrator felt that, n.s respects ITew York, the low prices 
which were in carretit effect effectively disposed of the charge of 
monopoly. 

In Cleveland, however, the Adininistration did take the position the 
that a monopoly e.dsted, althoiigh aoout 10 per cent of the ice was 
produced ty plants other tarn those of the City Ice and Fuel Conpany.(*) 
The application of the Say Ice Corapany, after having teen denied once, 
was on reapplication approved, apr-arently hecause of this charge of 
monopoly. (The Hay Ice Company, vhich desired to set up a capacity of 
just 40 tons, is not on ou^- list of 18 large or raediuiij sized appli- 
cations and should not he; for in a city like Cleveland, a 40-ton plant 
is distinctly in the small plant class). 

B . Unpreriaredness for Handlin;' Frohlems of Administration , 
In the Period Precedint=-' Ja::uar?^, 1955 . 

In the preceding section, attention has heer. directed to the ex- 
treme complexity of the issues which proved to he involved in the grant- 
ing or withholding of certificates of puhlic necessity and convenience. 
Near the "beginning of this chapter, attention was also called to the 
large number of separate cases which arose. Tiie following discussion 
will he devoted largely to exariiiing the efforts made by the Administra- 
tion to ex-pand its personnel and develop its methods to a point where 
it covld come closer to dischargi..g the heavy responsibilities placed 
on it by the Code. 

About Aug-j-st 1, 1S34 there was a basic change in the ice code 
Administration in that the code was transferred from the Chemical to 
the Food Division of ITIlA.. 

For a while after the new assistant deputy .•i.dministrator first 
assumed active administrative duties in connection with the ice code, 
he vrorked practically alone. (**) Tlie work, however, soon proved to be 
far beyond the capacity of a one-mai:i organization. This was true 
whether one considered the number of cases, or the elusiveness of the 
issues raised, or the lack of sufficient knowledge. An outstanding 
feature of the code administration towards the Fall of 1934, was there- 
fore, a tendency for cases to pile up. Whereas before, cases had tended 
to pile up vdth the code authority they now tended to pile up in Wash- 
ington. (***) Secause of the obvious accumulation of cases to be de- 
cided, the staff assigned to work on the ice code — particularly in 
relation to article XI, control of production — rapidly grew. In time 
it reached thirteen, most of the vrark being on control of production. 

( *) See pages 36 supra. 

(**) Statements in this paragraph based on conversations with members 
of staff corroborated as regards essentials by the record, viev/ed 
as a whole, as well as by various specific references. See for 
instaiice, p. 27-177 J)e,lx)W. 
(***) In som.e of the other cod.es parallel situations arose for in the 
latter part of 1934 the whole structure of IBA was in a state of 
traiisition and new standards were being set up.. 



9827^ 



-150- 

At its maxi'"mam size, this lii-ou}) must have constiovted one of the greatest 
concentrations of adninistrative effort on c sinfje code — especirlly on 
a sint;le provision in a code viiica covild oo foi.aid in the v/hole of 1I?JI. 

Sven after this e^itension of st-.ff, the deputy adninistrator in 
charge felt that the personnel for dealin;^ vrith the code was entirely in- 
adequate. VJe hal^e noted his declrJation with respect to the Anti-Dunping 
and iJormrl Karket deternination features of the code, that the Adminis- 
trator' s knowledge w..;s so inadequate that the v;hole provision should "be 
alloAved to rest in innocuous desuetade iintil more knov;ledge could he 
obtained. (*) 

On pa^^'e 58 of his report on the Administration of trade practice 
provisions of the ice code, ne rocom;:iended an annual budget of 
$110,050.00 to cover field eroenses . Apparently this did not include 
administration in '^'ashijigton. {*'') 

C . The Drive to Q-et Pact s 

One of the weakest points in the administration of Article XI, es- 
pecially in 1934, lay, according to the deputy Administrator, in the lack 
of adequate and reliable information. About December, 1934, there were 
drawn up t"0 forms -.■/hich from January, 1930 y/ere used in connection with 
all applications. 

Form. 1 was the application blank, to be filled out by the applicant 
himself. It called for data on the experience of the applicant as an 
individual and in the ice business; the facilities planned; the invest- 
ment plan; th-3 character and ranount of the anticipated trade; estimated 

costs; reasons v/hy tiie fipplicant wanted t'-i go into the ice business, etc. 
( ***) 

Form. 2 wns to be filled ort by the Con littee on Arbitration and 
Appeal. It called for a map and accompanying data shovdn;,- the extent 
of the market rnd the location of all ice pl-^nts and population. Then 
there were to be statistics on quantities of ice produced and sold; 
prices for each classification of customer; special data on shut dov/n 
plants, on compariies operating more than one plant, and on operations 
outside of the area by companies operating in the area. The total number 
of plajnts and total capacity in the area were called for by years from 
1924; Sales aiid production data from 1929. S'or each plant in the area, 
the for.m called for the name rnd address, first year of operation, year 
acquired, capacity — and for each of the last tv;o years, the total pro- 
duction, total sales, loroduction in the month of maximum production and 
sales in the month of maximum sales. Frodi'.ction and srles were to be 
furnished by months for the last two years in the form of aggregate 
figures for all plants. 



(*) Fp. 91-92 , Supra. 

(**) Available as Exhibit 7 in Appendix to Code History. 
(***) Forms 1 and 2 criii be found in tne folder for any of the cases 
vrhere applications v/ere ;iade in 1935. 






9827. 



C 



-151- 

In ."•ddition to its use in conr.ection vdth future applications, Form 
2 vriis F-erit out to coimitte' s if arlDitr-.tion and appeal for filling out in 
connection v;itli tlie -I'^rge nuiiber 'rf pending cases on which the Adminis- 
tration had not as yet been a'blo to reach a decision. As a rule, it was 
not fo\mrl necessary to send out 5'orra 1, to conipo.nies i/iiiich had already suh- 
mitted ■',;•-.; -lic'tiO'-s, 

L . Intr oducti-ju of F ield Ir^ves ■'Aga t ions , and the 
Ass tmption "oy the ' Adini n istr:^ t ion of Direct 
Responsibility for C onduct of H e^'.ring s _ 

Armed ^fith this ne'v plan for getting frets and sup-'-^oi'ted by the de- 
cision of the Administration to put men into the field, the Aa-mini strati on 
on J-jiuary 17, 19'35, set u.-. 'the follovdng new procedure, for lir.ndling 
production (or c'pT'city) co'itrol cases. (*) 

1, Procedure for Handling Control of Protluction Cases 
Issued by the Adrainistr^:'ti:n on January 17, 1935. 

(1) All apjilicaticns for the establis'nment of additional ice production, 

storage or tonn;\ge, or for exemption from the requirements of Article 

XI of the Ice Code, should be made direct or forwarded to the Deputy 
Adirdnistrator. 

(.2) Apiolicati jns filed with the Codn Authority, or with any of its 

agencies, vdll be promptly transmitted, through the Code Authority, 
to tlie Deuiity Adninistr-tor and the applicant vdll be advised by 
the Code Authority, or its 'Lgencies, of such action. 

(3) Upon receip.t of an applic .tion, the Deputy Administrator will 

(a) Send "j/c-lic-nt Form ;'--l , requesting that it be filled out in 
triplicate and ret-uorned, 

(b) Upon recei t of Form ^^1 fron the applicant, a serial number 
will be assic-ned andaco"-^- of this fonn A^ill be sent to the 
Code Authority. 

(4) Upon receipt of advice fron Deputy, the Code Authority will 

(a) Send Form #2 in triplicate to Clxairman of Comidttee of Arbitra- 
tion and Ap-^eal requesting that s-me be filled but and original 
.and duplicate be retiurned irmiediately. Should the Chairmin of 
the Comrrdttee of Arbitration and Appeal recoim-nend in Item 17 

of this questionnaire a denial of the ap:aication, he should 
furnish the following information: location, giving name of 
building and room niunber, v;hich Y/ould be the logical plr.ce to 
hold a hearing on this application. 

(b) On receipt of Form #2 properlv filled out, Code Authority will 
analyze same and •:5rorn:ntly forward original to Deputy with such 
recom]:iendation or conclusion tliat it may obtain from this 
information. 



( . , ■■ ^ . . ■■ - ■ - 

X*') To be fouiid in Deputy's cl -.ssiiication files, in folder marked control 
of ProHucfioh, and within foldel- in binder narked Procedure. 



-152- 

(5) Upon recei-t of Jorm #2 'uid I'ecor; ;end'\tio7i from Code Authority, Deputy 
vrill deteiTiiine -mietlie:" '^ "aeirine: is "'xlvisr.'ble. 

(6) If it is fo-uaid tint a lie-'iring is not necoss'irj^, -p-ipers '/ill be 
prep-^-red for Advisory 7, o \rd reconunend .ti'ns r.nd docket, 

(?) If it is found -. he;\ririg is desiri^Lle, Deputy will 

(^) Schedule ':',pplic'^,tion for he"/rin^', 

(b) Advise field nen of date axe pl'^cc of her.ring ■^nd forYr.rd 
to them d-qolic te copies of Form #1 c>.nd Porin =1-2, 

(c) Advise Codr Authority ^i dn-to :v.id pl".ce of her.rin,;;, 

(d) Arrange vdth Chief Cler:: for Btenogra;;?hic tr- nscri'^t of hearing, 

(8) On recei-'t of notice of he",ring from Deputy, the Code Authority will 

(a) ilotify Chairman of Coix.iittce of .-i-rhitration and Ap'^eil instructing. 
him. to 

1, notify all interested partier^ of time, and pi ".ce of hearing, 

3, Arrange for suit:','ble he^.ring room. 

(9) The he -ring viil "be conducted "oy the .Field Assist nt Depuuv Adminis- 
trator in accord-'nce rjitii the follovdng procedure : 

(10) The CoFuiittee of Arbitration and Appe 1 will assist the Field Econonic 
Adviser and the Field As'r-istant Deputy Administrator in sxich manner 

"s they may direct, 

(11) Upon completion of the hearing, the Assist-nt Deputy Administrator • 
will 

(a) Instruct rhu stenographic reporter to forward transcript in 
duplic'-.te to the Deputy Administr".tor. 

(h) Forv/ard to the Deputy Achiiinistrr tor; 

1, His re^Tort and reco^^mendations in duplicate, 

2, Report 'ind i-ec-oCTicndations 'in dui:)licatR of the 
Field Dconomic Adviser, 

3, All documents in duplicate constituting a part of the record 
of the' case, 

(12) Within three d.o.ys after the hearing, the Com.-.ittee of Ar'L;itr'\tion and 
Apixal vdll for^7ard to the Code Authority its recomiiiendations of the 
case, 

(13) On receipt of the field report, trinscri/.t of the hearing and records, 
tlie Deputy Adiiiinistr-tor will forwr-.rd one co-oy of sPine to the Code 
Authority, 

9627 m 



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(14) Within ten d",ys after the receij-;t of the record ^:a6. transcript in 
•vny c se, th-^ Code Authority vdll propr-.re and transmit to the 
Deputy Administrator its Drief and reco:'n:nendations on the case. 
Upon request of tlie Chairman of the Code Authority opportunity 
\Yill he ai forded him or his co imsel to appear "before the Advisory 
Brard in advocacy .'f its reconnnend-.ti ns, 

(15) Upon receipt of Code Authority recoinmendations, the Deputy will 
liavt"; a di£;est prepared and distrihuted to his Advisory Boards. 

(16) ■ Advisory l^card meeting? subject to call of the Deputy will consider 

and memhers v/ill individu'd ' y report or vecoi.ir.end on each case. 
Frequency of meetings to 'be uet, rmined by n-jmhor of coses on ho-nd, 

(iV) After pro]:^er consideration e';,ch case wili,'be doclreted, incorporating 
order, letter of transmi ttal, Advisory Board members' reports or 
re commend" tioo.s r.nd o.l^ other -oertinent d,atp, and submitted through 
cliannels for approval, 

(13) The Code Authority will be advised uy the Deputy Ati'jKinistr.ator of 
his decision in each case whero the recomn.endation of the Deputy 
Administrator is contrary to the recoraraendati jn of the Code Authority 
v/ithin forty-eight ho-oxs prior to the issuance of any Administrative 
Order granting or denying an opplication, r/ithin which time the 
Code Authority may, if it so elects, file with the Deputy Adminis- 
trator notice of ap;Deal for reconsicJer.- tion of ohe case, in v/hich 
event the Deputy Administrator vdll withhold the iss\v::.ncc of such 
Administrative Order for a period of one weel:, during v/hich time 
the Code Authority mo^y, tliroxigh written brief or tlirough personal 
ap]"iearance, of its Executive Chdrraan or Counsel before the Deputy 
Administr-^tor or his Advisory Boards, be he-^rd in its ap'ie.al, 

(19) Upon the iss-oajice of an Adniinistr .tive Orcer approving or denying 
amy ap'olic ticn, the Deputy Ad^ninistr lor will 

(a) notify the Code Aiithority of :he issuance of such Order, 

(b ) iMotify the o^pplicant of the issuance ox such Order -^nd in 
co.ses where .airplico.tion is granted issue Certificate of 
Convenience "■nr' ITccessity to the ap^ licant, 

E, Results of Conduct of Jield Investigations and Hearings by 
Admi ni 5 1 ro. t i on 

It v;ill be observed th\t n outst-.nding fer.ture of this new lorocedure 
as set up in Januo,ry, 1935, was the fact that applications for permits 
were to be made in the first instance to the Deputy Administrator, The 
Deputy Administrator was then to send to the applicant Form 1, v/hich com- 
bined the fvuictions of an op lic^.ti^n blank, anc" det-lled que s t i onn.ai re 
covering the experience, "olans, etc., of the o.p-.->l leant. Form 2 was to 
be filled out in the first instance by the committee of o.rbitratim and 
o.pperl; then forwarc'ed to the code authority; .and then transmitted by 
the code authoritj^ to the de'outy Ac'jninistrator, 



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In the event tiir.t this y;ritten infor:nn,tion should indicate to the 
deputy that a hearing should "og ;iel ., tte Deputy v/as to schedule a hearing, 
n,nd the hearing itself was to he conducted by the Administration ' s field 
representative (Assistant Deputy Administrator) . 

One of the pi\rposes of transferring tlie conduct of he.^rin^s froa. the 
coiTiJiiittecs of ■^rhitration and ap-'eal to a represent '.tive of the Government 
was to guarantee tha.t the liearin^^s '.Toiild not he conducted by parties v/ho 
at first had a keen interest in ^he o-^tcome, usually hostile to the appli- 
cant. Another purpose of the field trips v/as to ohtain data v/hich v/ould 
not he moulded "by the special interest of those vho collected it. 

On the first field trip, the Administration representatives (tv/o 
went together) foxuid that the committees of arbitration and ap'ieal haxl 
recommended denial of all hut one of the applications considered, although 
the field men felt thrat even on the ; asis of the preliminary data, it v/as 
evident that four of the ap lications should have oeen gr-^ntcd, (*) 

As might have heen anticipated from the description of the cases vfhich 
we have noted earlier in this report, the field men foimd tlia.t the do-ta 
v/hich the committees of aroitration and appeal offered ?/ere to a large 
extent misleoding. It was f o\ind that the committees were es^iecially prone 
to obscure differences in the quality of ice; to put an entirely exa-ggerated 
emphasis on storage ca^ar-city (v/hich frequently they did not use or intend 
to use); and to list as capacity pl-mts, some which were incapahle of 
production. On their second trip, hovreve - , the field men foimd that this 
attitude i.7as greatly im;.iroved, the tendency to mahe strtements for effect 
having given place to a more realistic presentation of facts. 

At the root of the whole difficulty, said the field representatives, 
was the deiinitel:/ partisan attitude taken hy the code authority and its 
agencies.. 

To quote: This partisan attitude was evidently deemed necessary by 

the Code Authority in order to hild the established industry 
together. This might well have been true, but it decidedly 
mitigiited against the value to us of the sxgDposed cooperation 
of the comnitteeso The Code Authority took the same atti- 
tude and atteiirpted to prepare briefs^ in opposition to the 
field recommendations basing its arguments on tlT transcript 
of the hearings and the joartisan rerjorts of the committees. 

From the introduction of the revised -n-ocedure to the close of the 
code period, the deputy Adiainistrator and his field represent" tives handled 
in all 70 cases in the field. Of these, th-y reported that 4 were proper 
cases for exemption (because of contracts :for construction ante-dating 
the Code or installment for private use only); 17 were vdthdravm - five 
after field conferences without the necessity of having a hearing; six by 



(*) Data in the balance of this section based on draft for report on 
Administration of Article XI, pre-oared by Edv/ard H. Emerson, Field 
•f • '.st-^nt Deputy Adjninistrator and Charles D. ' BoMnnon, Field 

mic Adviser, ap"oarently„ liov^ever, never put into final form. 

9827 



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non-appsarance at hearing; a.nd six b;," voliintary withdrav^al^ after hearing 
(*) The field men recommended tiiat 19 of the remaining 49 applications 
"be approved; and tliat 30 he denied. 

Of the 30 whose denial was recommended, 10 were classed as attempts 
to obtain permits for their "niaisance" value; 20 were l-umoed together as 
falling -under one or rr.ore of the following heads; no necessity or con- 
venience shown; over-huilt unstable market where large investments may 
he endangered cigainst the public interest; ap'lication made by code vio- 
lators or -price-cutters; apj'licant shows inexperience or poor cha.racter 
or lack of ca.-iital. 



(*) For ex):.lanati:n of field men coverin.'? what lay behind withdrawals of 
these three classes, see page 106^-107. . supra. Some additional data on 
failure of persons considering erecting ice capacity to mplze formal 
application is contained in a footnote p. 105 supra. 



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VII. POLICIES RSSPECTIKG- THE ISSUAIIC:;] OR DEIJIAL OF C^.STiriCATES, 
AITD THE COITIHUAWCE IN FORCE OF ARTICLE Xl, Fr.OM THE LATTER 
PART OF 1934 TO TH7^ CLOSE OF THE CODE P']RIOD 

A. Pressures Brought to Bear Against Article XI From Out- 
side tlRA 

1. Renev/ed Attacks by I'anufacturers of Ice-Making Ifachinery 
in an earlier section, we have noted tli'>t the first serious attack 
on the capacity control -q revision of the Ice Code T^ra.s made by the 
manufacturers of ice-ma]-:ing ina.chinery a.t a hearing on Aioril 6, 1934, 
who, supported a petition to liave this feature eliminated from the 
code, (*) This led to in"Tortan.t changes in administration, hut in 
no wise weakened the position of the provision in the code. 

Several months later, ho'^ever, the NRA as a whole appeared to 
he on the verge of fundnnental chan.'^es, both in organization and in 
policy. It -lay be cfilled to mind thf^t on Seotember 27, 1934 the 
Na.tinnal Industrial Recovery Board was set uo, to 'discharge the 
resDonsibilities formerly concentrnted in the ^lerson of 0-eneral 
Johnson. Prior to the completion of this change, the HRA had for 
some time been endeavoring to evolve a more clear-cut set of riolicies 
which could with propriety be applied to all the codes,- subject, of 
course, to variations due to differences in conditions. 

In one of these attempts, there had be^n s.npointed, about 
May 1, an assistant administrator for "oolicy, and four deputy 
assistant administrators for policj'', one of whom had been assigned 
to trade practices. (**) it was as a part of this effort that, 
about September 1934, the deputy assistant ad'ainistrator for policy 
responsible for Trad.e Practices, Leverett S. Lyon, in ;°olicy Recom- 
mendation ITo. 14 made the one recommendrtion TThich was issued on 
production and capacity control. 

The report dealt loainly with rjo.chine-hour limitations, and 
its brief discussion of capacity control was of capa.city control 
as an accompaniment of machine-hour limitations (which had no place 
in the ice code.) Ho\'rever, the recommendation with which the report 
closed was in its form general. That it be contrary to policy to 
permit code restrictions on ''capacity. " 

Lyon's Policy Recommendation T^o. 14 was never given official 
apriroval. (**) 
_____ . 

(**) This organization was created by Office Order Mo, 83, dated 
April 9, 1934; but owing to delay in a'-pointment of personnel, this 
staff did not begin to function until about ]'3.j 1, 1934. (l>Totes of 
A. L. Cox, who made a study of IIRA policy on Production Control for 
the Production Control Unit, Trade Practice Studies Section, Division 
of Reviev,', irf' folder on this subject in files of Unit, P. 55 
(***) According to page 66 if Cox' study, referred to in the last 
foot-note, no reason can be found for this failure of approval, "and 
it appears that it was killed by what might be called a 'pocket veto,'" 

9827 



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However, it was l-novn that the recorinendation had been nade; and whether 
for this or other reasons, there appears to have heen a general imiDres- 
sion ahroad at about this time that ICIA. \7as rilanning to establish a more 
or less general ban on ■nroduction and ca-oa.city controls. 

So the general situation w^s such as to encourage the manufact- 
urers of ice-mal<:ing equipment to malre a nerr and determined drive against 
Article XI. Proceeding to the attack from a fresh angle, on Ser)tember 
19, 1934, D, Norris Benedict, Vice-President and General Manager of the 
Frick Com"oany (*) i^rote to President LRoosevelt as follows: 

I ara taking the liberty to bring to your notice one of the many 
appeals of ray Comr)any has received from its Sales "^gineers concerning 
the effect of the oijeration of the Code for the Ice industrv."' 

The effect of this Cod.e has been extremely damaging to our busi- 
ness and to that of other concerns engaged in the manufacture of ice 
making and refrigerating eouipment, of whom there a.re no less than four 
importa,nt ones in the Sta.te of Pennsylvania, and has necessitated pro- 
gressive reduction of our working schedules, number of emxiloyees, and 
pay rolls. 

Our Industrj'-, due to the o-oeration of this Code, is now at its 
lowest point of employment for many years, although before its eyes 
moves daily a -nrocession of opportunities for doing business from 
which it is, through Government interference, absolutely barred. 

The Refrigerating I'achinery Industry has, without success, 
sought relief in every quarter where it seemed likelj'" to be found, 
except an a.pneal' for Executive consideration. On that account I have 
presumed to address you directly on the subject. Is there anything tha.t 
you can do for tnis sorely ajic' artificially depressec^ Durable Goods 
Industry? (**) 

In the same folder, a clioTingfrom the TTaynesboro, Pa, Record 
Herald of October 13, 1934 re-oorted remarks made by Mr. Benedict the 
previous evening before the Frick Oomxtanj Boosteers Club - which will 
serve to indicate the general line of argument advanced by the 
machinery manufacturers at this time. 

From 1930 to the advent of the Ice code, "r. Benedict said, 
the total refrigerating machinery business of his comnajiy was 65 to 
75 -oer cent. However, with the signing of the Code, this proportion 
dro-pped to 22 per cent, Mr, Benedict read correspondence from many 
pros'oective customers who d esired to install ice -nlajits ra.nging in 
crTjacity from 10 to 100 tons, Tiie majority of these parties were old 
customers of the com-"ia.ny, and who were rea/y to buy machi-.ery, and 
asked for the com^iany's a.dvice and assistajice in seeking permits. 

In several cases where the circumstances were such that it 
was thought that, from the -loint of production and consumption in the 

(*) Adv President Refrigerating Machinery Association, see p,251 below 
(**) In Deputy's files, in folder marked "Ice - Protests - Article XI." 
All the documents to which reference is "lade in the balance of 
this section may also be found in this same folder, 
9827 



-158- 

territory rhere the "ororiosed -olant vas to be located, the Code Admin- 
istrr'tion '-'ould certainly grant a pernit, the con'oany presented the 
case to Washington ^dthout success. 

The ?rich Company, according to Kr. Benedict's remarks, lost 
at least half million dollars noi-th of husiness in the 1933 season, due 
to the ice industry code. In several of these cases, the would-lie 
purchasers were so sure that there was a demand for more ice -oroduction 
in the territory T^here they planned to install ne^'f ice xilants, that 
they vent ahead ajid put U'o or secured their hui"! dings. 

It is the o"oinion of the manufacturers os ice machinerj?-, ^'r. 
Benedict said, that until the tine of the signing of the ice industry 
code, the electrical refrigerating husiness had not affected to an;'' 
appreciable amount the ice manufp.cturing industry; but that rrith the 
restrictions in the code, rs veil as the '^rice-fixing allorred, and 
the rpisiiig of "orices for ice by the ice la.nufacturers , the customers 
vere buring more ho^isehold units, and in time the ice manufacturers, 
through the code restrictions and hi;^h varices, vou"' d dive their cus- 
tomers away, thus ruining both the ice business rnd the ice ^lachinery 
business. 

By waA'' of coment on Hr. Benedict's statement ps noted in the 
Irst paragraph, it shoiild be --jointed out that in the table -oresented 
earlier in this reiDort, (*) the growth in ice-making carDacity in 1933 
was shwon to be- insignificpnt as co'Toared with the construction of 
Tjreyious years. But as the code was not -^^jproved until October 3, and 
contracts for new machinery signed before October 16 "ere exem-ot, (**) 
it is clenr that the drop in the capacity of rilants co'i-nleted in 1933 
was most mainly, if not in its entiretj'- have been a pre-code drotj; un- 
less, indeed, the ice lanufacturers themselves, seeing the code in 
"orospect, had voluntarily decided not to enlarge or modernize their 
own 33lants. However, ' r. Benedict anpears to have been si3e?king 
primarilj;- of new construction rather th?n modernization, 

Our data on "orices also does not indicate that there was any 
great incre-'se in -orices luider the code, e::ce-jt, indedd, as &. measure 
of success was attained in a few -olaces in ending lorice wars, (***) 
It is -orobabl^, however, that the code was of material help in keep- 
ing prices from falling as might otherwise have occurred. 

Mr. Benedict's letter of September 19 ^.-'as only the first of a delU(.<;e 
of letters which were written directl]'- to the National ?tecovery Ad- 
ministratio'i, 'lainly by the -lakers of ice :achinerv, or of equipment 
of one kind or another used i- ice -ilajits, bit also to a small ec- 
tent, by persons who wished to oper-'te ice plants. Support in the 
attack "as extended by O-eorge H, Houston, Chairmain of the Diirable 



' " (*) P. 107 supra. 

)( '' (**) See P. 167 supra. 

(***) See P. 56 supra. 

9827 



-159- 

Good| Industry Committee, who said in a letter dated October 15: 

The Durable Goods Indantr^- Committee is oi" the opinion 
that restrictions of this c;-i?racter are contrary to the 
public interest and oarticula^rly to r-'^cover;,'' in the 
Durable Goods Induptrios, ^-fhich a,ro still suffering; 
from depressed dei^and a,nd consequent unenT)lo3'^ent. 

This flood of -orotests a-^ainst article XI alarmed the code, authority 
for the ice ind-\stry. ijnder date of October 24, 19'34, the Chairman rrote 
to Clay Williams, Chairman of the national Industrial Recovery Board: 

TTithin the past few weeks I have received many letters 
and telegrams from resiDonsible members of the Ice In- 
dustry throuj^hoo-t ■■ the country expressing grave concern 
regarding the future policv of l^Rk toward Article "Eleven 
of the Ice Code. . . . Much of this at)prehension, I am 
sure, is due to misinterpretation of newspaper reioorted 
which follo\Ted the appointment of your Boa.rd. The effect 
on the morale of our Industry however is most serious. . . . 
Article Eleven is almost universally regarded by the sir^ty 
odd thousand members of the Ice Industry as the keystone 
provision of our Code. ... It will be most helt)ful to 
us if we can have the definite assurance from you that be- 
fore any change is made in Article Eleven of our Code we 
will be given the onriortunity to present again to your 
Board the facts which we believe fully justify this "oro- 
vision, 

October 29, 1934 was set as a date on which the opponents and 
defenders of article XI wotild be heard. A suggestion tlia.t the Ac'jnin- 
istration might be willing to remove the lim.itation on new construction 
seemed implied in some of the correspondence written at this time. A 
letter from Assistant Deputy Administrator H. J. Daly to the Crystal 
Ice Company of I^angujn, 01:lahoma, feted October 23, 1934, said: 

I am unable to give you written assurance tha.t the nroduction 
and price fixing clauses in the different codes are to be done 
away with, but I can aspure you that they are being given very 
serious consideration at this time. 

However, it soon appeared that the conference had been caJled pri- 
marily for the pupose of receiving views; and that no attempt would be 
made to a.rrive at a definite decision at any early date. (*) Indeed, the 
new Denuty Adjninistrator, Robert K. Straus, in a letter written to T, L. 
Putnam two days after the conference of October 29th, clearly indicated 
his sympathy with the continuance of article XI, though hinting that 
changes should be made in its administration: 

(*) As indicated in letter from H. J. Daly, Assistant Denuty, to 
Baker Ice I'achine Company, November 8, 1934. 



9827 



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Prankly, article XI of the ice code is still on trial and 
the industry is well aware of that fact. If it is on trial, 
however, it is not so much "because of the principle involv- 
ed as because of the protlem of effective administration 
in the Duhlic interest of the provision. 

Mr. Straus then referred to the fact "that the ice industry approaches 
the status of a nublic utility," and to its "being "beset r-ith over- 
capacity of production which leads to price wars and. unnecessary des- 
truction of investment." 

Having failed in September, October, and November, 1934 in what 
might be regarded as their second drive to get 'capacity control out of 
the ice code, the machinery manufacturers started a third effort in 
January, 1935, This time they carried their fight to Con{:;ress. On 
January 11, 1955, Wm. 3. Henderson, Executive Vice President of the Re- 
frigerating Machinery Associatiori,* acidressed a letter to Senator T7m, 
E. Borah. Among other things this* lettex" laid emphasis on improvements 
which had been made in ice-mahing machinery: 

As a matter of fact, i t is necessarj^ for the preservation 
of the Ice Industry itself that the throttle of monopoly 
existing in Article XI of the Ice Industry be removed. The 
progress m.ade by machinery manufacturers in designing and 
producing more efficient machinery for naJcing i ce in the 
past four years, little of which has -been sold, haa been 
largeljr ignored by those now engaged in the manuff^cture 
and sale of ice. Replacement of worn out equipment has been 
at a minimum during the nast few years. The natural result 
has been the keeping in operation of o'bsolete, high cost 
production equipment. The competition of low-cost-producing, 
up-to-date machinery, either in new plaiits or as modernization 
of existing plants, has been practically barred by Article XI 
of the Ice Industry Code.. Consi-mers of ice are of necessity 
being driven to mechanical household refrigerators and away 
from, ice. Thus the ice manufacturers, londer the soft shelter 
of Article XI of .their Code, are digging their own economic 
grave. That this is realized by some leaders in the Ice In- 
dustry is shown by the attached editorial from the November 
13th issue of "Refrigeration Daily," a -oublication for those 
engaged in the Ice Industry. 

It v/ill be observed that in this letter the machinery manufacturers 
practically withdrew from one of their former contentions and admitted 
that since early in the deioression there ha,d been a slump in the pur- 
chase of ice-making equipment. On^January 22 a copy of this letter was 
forwarded by D. Norris Benedict, signing himself as President of the Re- 
frigerating Machinery Association, to H. P. Kendall, Chairman of the 
Business Advisory and Planning Council. 

As we shall notice in sections which follow, the presistent op- 
position of machinery makers to Article XI, though hitherto ineffective, 
was soon to produce more visible .results in Congress, on public opinion, 
and in the shaping of, NRA policy. Ov/ing, however, to other forces which 
were now gathering strength in opposition to article XI, it is no longer 



9827 



-161- 

easy or necessary to trace the independent opposition of the niachirt«ry 
manufacturers. It need only he said here that this group continued 
to fight capacity control-hoth directly and in alliance xrith vhoever 
tended to take the same sid6. 

2. NeTTspaper Attac]:s "by Hark Sullivan 

Frpn time to tine Mark Siillivan v;as accustomed to pick out the new 
capacity ban of the ice -code for attack in his syndicated newspaper 
articles. He uould take one case of denial, or delay, or threatened 
prosecution, and devote the whole of a lengthy article to it. , On page 
226 above, attention has been called to one such article which aprieared ._...- 
in the JJevj York Herald -Tribune under date of April 2, 1935, and no doubt 
was vridely printed elsewhere. Other articles by Mark Sullivan which ap- 
pear in the- file on "Protests" include ones which appeared on September 
19 and October 16, 1934, and on March 12, 1935. 

The dates of these articles were well coordinated with dates on 
which others were attacking the ice code. 

3. Attacks at Hearings before Senate Finance Committee 
and Defense by Industry 

It would a-D"oear that the ice code was one of the principal points 
of attack on the ^lart of -oersons both in and out of Congress who were 
hostile to FEA as a ^hole. 

Questions rodsed by Senator Black at a meeting of the Senate Fin- 
ance Committee on Anril 4, 1935 (*) indicated concern as to the hearing 
of capacit;'- control on ice prices. "Do you know," he asked a witness, 
"whether or not the IJEA made any investigation of the price at which ice 
was being sold to the consumers in that particular district, and made any 
effort to rega3.ate that price and get it down to a normal basis and a 
fair basis to the public?" Later. the Senator queried: "So that the resTxIt 
is that if someone wants to nut up an ice business. . . they do not m^ake 
any effort whatever to find out whether the riublic can get its ice at a 
fair price, and whether competition is needed in order to Teduce it so 
that they would not make an exorbitant profit?" And again he asked - 
"If we are going to have certificates of convenience and necessity like 
we have in reference to the railroads or anything else, do you believe 
that we can simply depend upon the philanthropy or patriotism of the 
men engaged in business to sell their goods and commodities at a reason- 
able rate?" • 

Along the sane line, Senator Clark, at a session on April 11, 1935, 
put the question: "In other words, what this code set out to do was to 
set them.selves uo as public utilities and m.ake the code authority a public 
service commission for the purpose of granting certificates of necessity 
and convenience? " 

(*) All quotations from the hearings before the Senate Finance Committee 
taicen from excerpts sent by Robert K. Straus, Deputy Adj^iinistrator, 
to Lawrence J. Bernard, under date of Anril 12, 1935. In folder in 
' ' Deputy's files on "Ice - Protests - Article XI." 



9827 



-162- 

It will have Taeen noted froi'i some of the cases which have been 
described in preceding sections of this report that "by the time these 
critical questions were raised "by mem"bers of the Senate Finance Com- 
mittee, the IJRk Administration was to a certain extent giving weight 
to questions of price, partic^olarly where prices were above the general 
level of those in other ice markets. However, the industry was very 
much concerned over possible unfavorable action which might be taken 
by the Senate, and was determined to keep all matters concerning the 
administration of the ice( code as quiet as possible until after Con- 
gress had renewed the National Recovery Act. Thus in a brief pre- 
sented to the national Recovery Administration on Aprol 15, 1935, Mount 
Taylor, Chairman of the Code Authority for the Ice Industry, protested 
against the calling, of a hearing by WA to consider the advisability of 
retaining article XI in the ice code, saying: (*) 

Realizaing the serious effect which such a hearing, at 
this time, would have both upon the ice industry and upon 
the general Recovery Program, I requested tha.t no hearing 
or other action be talcen on the provision until after Con- 
gress shall have acted upon the extension of the NIRA. In 
this, I believe, I was joined by the Division and the De- 
puty Administrators, 

While trying to avoid fresh cause for controversy, the National 
Association of Ice Industries lost no time in seeking to offset the 
unfavorable impressions which had already been created and to build up 
a backing for continuation of article XI and the whole NRA by rallying 
to., the support of these institutions the ranlc and file of the ice in- 
dustry, Mr, Taylor, in his brief referred to above, significantly point- 
ed out (p, 12-13) that: 

The ice industry is one of the few major industries having effective 
representation in every toATn and hainlet of the co'antry. 
Every one of its leaders, and most of its 55,000 members, are 
also leaders of public opinion in their respective towns and 
communities. Unlike most far-flung industries, it is organ- 
ization-minded. Most of its members are members of their lo- 
cal, state or National Associations, Unquestionably, it is 
a major factor in our National thinl-:ing. This Industry is 
solidly supoorting an extension of the Recoverj'" Act and the 
Ice Code, in substantially their -oresent form. The policy of 
the Industry, in voicing its desires through letters and tele- 
grams from the individual members to their Congressmen, is just 
beginning to become effective. 

Amplifying Mr, Taylor's account, Leslie C, Smith', Executive 
Secretary-Treasurer of the Code Authority, and, for the past eighteen 
years. Executive Secretary of the National Association of Ice Industries, 
in a brief also presented to the National Recovery Administration on 
April 15, 1935, said: (**) 

(*) Pp, 1-2, This brief incorporated in Ap'oendix to Code History, 
as Exhibit 3, 

(**) Pp, 11-12, Bound as Exliibit 5 in Appendix to Code History, 



9827 



-163- . . 

That you may further reali:^e the sincerity of this 
attitude on the part of the industry, I invite your at- 
tention to the activity of the Fational Association of k 
Ice Industry since the President presented his apioeal 
to Confi;ress for renenal of the Industrial Recover^'' Act, 
On I.Iarch 4th the secretary'- of each of tiie forty-four 
unit associations ri.s la'-^od to ir rjodiately instruct 
his raenhership toth to vire and write their respective 
senators md. re'irf -;entatives in C'mgres? tha,t the ice 
industry is in ypvor of 'II-lA a,s noT7 u'ritten, and of the 
Ice Code as a,pproved, and nc' 0;Terative. 

On Ilarch 14th, the folloi^ing resolution anri f\c- 
companj'-in^ letter were sent to each 'nenher of the 
Seno-te Finance Comnittee and to the TTays and I'eans Com- 
mittee of the House . . . 

The letter of liarch 14th (rhich ilr. Smith here inserted), after 
referring: to the size of the ice industry, the representative character 
of those T/ho wore presenting this plea to the Senate, and the increase 
in nunher of employees ojid payrolls tmder the code (r.-ith less than 2 -oer 
cent increase in ice prices "all due to correction of completely demora- 
lized markets - known to us as price wars"), then ajioted the text of the 
resolution, ^'hich read as follows: 

At the conclusion of a three day conference held in 
the city of T7ashin™ton and attended "by ninety-six men chosen 
"by forty-four unit ice associations of all classes - manu- 
facturers, harvesters and distributors, a.nd covering every 
section of the United States - to inquire carefully into 
the workings of the Code of Fair Competition for the Ice 
Industrj'', after one aiid one-half years' e:^:perience, the fol- 
lowing resolution wa.s un.aninously adopted: 

"'B3 IT RESOLVED: That the Ice Industry of America 
heartily aporoves continotijicc of the national Industrial 
Recovery Act practically without change, a,t least for in- 
dustries the grrat majority of the components of which de- 
sire to continue operation under codified reg^alation, 

"'BE IT FUilTHSR HESOLVED: Tliat the Ice Industry is 
preponderantly in sup-oort of the National Recovery Admin- 
istration and the Ice Code with its present provisions 
intact, and herehy authorizes the National Association 
of Ice Industries to make such use of this resolution as 
its executives may deem proper,'" 

Continuing, J.Ir, Smith then concluded his hrief: 

On iferch 18th 54-000 menhers of the industry were 
again directly urged to insist to tLeir ccn.'^ressional 
representatives that this industry demands retention of 
IffiiA and the Ice Code, Copies of literaJ.l:/ hundred of 
wires and letters carrying out these importunities have 
"been received at the office of the Association, in Chicago. 

9827 



A num'ber of tlie ^jnit grouTjs, meeting in conventions 
since this agitation "began, have passed resolutions 
of the same import. 

Since the ice industry, numerically, is composed of 
72 per cent small, or individual, plant operators and dis- 
tributors, only today a call has teen issued to hundreds 
of them again urging frank and fearless telegraphic ap- 
peal to their representative in Congress to support the 
Government's position and preserve the lorovisions of the 
Ice Code. 

Please note that all this has teen done ty, and in the 
name of, the National Association of Ice Industries, not the 
Code Authority. \ , . Kovj, hc^ever, since repeated attacks 
before the Senate Fir.ance Committee have heen aimed directly 
against the Ice Code, the Association has asked for, and 
heen granted opportunity to, a.r)-^ear "before the committee 
to present its position. This Tvill "be done earl"/ this week, 

Jlay I again insist 'that there is negligible c'issention 
in the ranks of the ice industry in regard to its Code. They 
are for it and for the Adjiiini strati on, so long as they feel 
the covenant they made with the Government is mutually bind- 
ing upon both. There is no more loyal group of men among 
our citizenry. 

From a member of the staff of tlie deputy Administrator it is 
learned that these messages from the rank and file of ice pien were re- 
layed in quantity from members of Congress to. the WEA, and that the man- 
ner in which the sentiments of the senders was expressed bore such a 
stamp of sincerity as to strenthen in no small degree the hands of those 
who were pleading that Article XI should not at this time be disturbed. 

B , Q-pnosition to Restrictions on "ilew Ca-oacity vfithin HRA. 

1, Consumers' Advisory Board 

Judging by statements made in the History of the Code of Pair 
Competition for the Ice Industry from the Viev.rpoint of the Consumers' 
Advisory Bo6,rd, prepared by George B, Haddock, under date of June 12, 
1935, (*) the Consumers' Advisory Board was never' rea.lly in favor of 
having a capacity restriction provision in the loe .Code, Although, 
earlier in this report (p. 192), it has been pointed out that tiie Con- 
sumers' Advisory Board conceded the possible justification of capacity 
control, and insisted only on certain safegiiards, particularly that ade- 
quate knowledge shoiild be accessible to some public representative, Kr, 
Haddock indicates that the Consumers' Advisory Board was reallj'- strenu- 
ously -.opposed to the restriction against the erection of new capacity 

(*) The cover of this report, in KRA. files, bears the date June 14, 
1935. 



J827 



-165- 

(and also that on market areas) and it uas only "because "it was evident 
that Deputy Administrator R.IB. 'Baddock was thoroughly in favor of these 
provisions and that it was extremely likely that he rould "be ahle to 
secure the code with these provisions included regardless of any protests" 
that the representatives of the Consumers' Advisory Board "made attempts 
to include as many safeguards for the consumers as possible." (*) 

THaep., however, Messrs, Boffey and Haddock, accompanied hy the In- 
dustrial Advisor (at this time Leslie C. Smith, who was a re-ore senta.tive 
of the Ice Industry), went to Deputy Administrator Paddock and proposed 
the apoointraent of a public representative on the code authority, charged 
with the duty, and having the power a.nd the money, to examine records of 
production, profits, costs, prices, etc., "Paddock first asked if our 
proposal meant that the CAB didn't "believe that he woijld adjninister the 
code properly." Assured that his integrity was not questioned, Paddock, 
however, "becaxise sonewhat incensed at what he considered to "be a re- 
flection on his failure to consider what we termed the public interest 
in the negotiations on the code to date, and informed us in no uncertain 
terms that although the CAB could offer any advice it saw fit, it had 
no right whatsoever to attempt to dictate to him, to General Johnson, 
or to the President how the codes should "be administered or by whom. 
He emphatically rejected our proposal, and then ordered i!r. Boffey and 
me to get out of his office." 

Having 'failed in attempts to get the administrative set-up of cap- 
acity control modified in the manner advocated, the ConsiMiers' Advisory 
Board, for a number of months, had nothing whatsoever, to do with article 
XI (see note beginning on p. 197, supra), excer)t that on February 21, 
1934 an unfavorable recommendation was made on certain amendments to 
the -code which had been proposed by the industrj^ and on April 25, 1934, 
the Board recommended the granting of Huston Thompson's petition for a 
deletion of that part of 'article XI requiring certificates of public 
necessity and convenience. (**) * 

Beginning about April, 1934, however, the second Deputy Admin- 
istrator for the Ice Code, Earle TT. Dalilberg, began to inform the 
Advisory Boards of pending matters and to ask their vciws. This raised 
a problem as to future attitude. (**'*) 



(*■) P. 3 Quotations in next paragraph from pages 3-4, It 
will be observed that Ivir, Haddock was himself associated 
with Hr. Boffey in the negotiations reported. 

(**) Haddock, pp. S and 12. For data on proposed amendments, 

see vv. 148-150, supra; and on the Huston Thompson petition, 
pp. 193-195, supra, 

(***) Haddock, pp. 14-15. 



9827 



-166- 

The CAB was opioosed to the production restriction, the 
market protection, and the "emergency" price fixing pro- 
visions of the Ice Code. If the GAB advocated the grant- 
ing of all applications for permit to 'erect ne'.7 capacity, 
opposed the .estahlishTiient of any marketing area, and op- 
posed all minimum price 'fixing in "emergencies," the De- 
puty Administrator inveitahly would come to "believe that 
it was not necessary or worth while to consiilt the CAB. 
On the other hand, the CAB had dont ended .that the Ice 
Code co'uld not "be properly administered, and its parti- 
cipation in the adjninistration of the code would be in- • 
consistent with, that contention. '■ 

■It v;as finally informally decided that the CAB could ac- 
complish more for the consiuncr "by participating in the 

• administration of the code than hy maintaining an at- 
titude of complete disapproval. It was' "believed that we 
should attempt to assist' the administration of 'the code ^ 
as written, thus keeping the ' CAB in a position to ad- 

, vocate refo,rms in procedure, and to secure information 
. necessary to a successful direct attack on the undesir- 
able code provisions. Consequently, Mr. Martino (and 
after Mr, Martino' s resignation from the staff, l) 
participated in the administration of " the code as writ- 
ten, occasionally recommending the denial of applica- 
tions, or the esta"blishment of market areas. »;■£.. 
Iiahl"berg and subsequent deputies continued to ask our 
advice, and to give it serious consieration. 

By the pursuit of this policy, the Consumers' Advisory Board was . 
instrumental in bringing about some radical reforms in procedure. Ear- 
lier in the present report '(pp. 205-209 above), attention was called to 
the application of the Davidson 'Ice Company, of Portland, Oregon, in 
which case a recommendation of denial by the. code authority was reversed 
by NEA primarily because inquiry undertaken by the Cons'umers' Advisory 
Board showed that the Committee of Arbitration and Appeal which collected 
the -facts and made the original recommendation, and the Regional Advisor 
who passed it on, were linked with a monopoly v/hich had almost complete 
control of the ice industry in Portland and which was charging almost 
twice the price charged in other cities (which appeared extreme even 
granting, certain differences in conditions). ;. , 

In the Code History it is stated that this Portland case repre- 
sented the turning point in the whole procedure for collecting inform- 
ation and making recommendations. (*) However, even after the setting 
up of a system which involved the filling out of detailed questionnaires 
and later, field investigations, hearings, and recommendations by KRA 
personnel (**) - Mr. Haddock, who during December 1934, and January and 

(*) Pp. 312-313. For fur'ther details on the steps taken by the 

Consiimers' Advisory Board in this case and others, see Haddock's 
"History," pp. 17-19. 

(**) See pp, 236-243, supra. 



9827 



-167- 

I'e'bTuarj , 1935, attended a number of conferences on pending applications, 
felt that (*) 

even rrith the assistance' of the information contained ^ 
in the questionnaires returned by the local committee, 
there still was insufficient information available to 
justify adjainistrative action. Although I made re- 
commendations on each case, I repreatedly brought to 
the attention of the Deputy the necessity of having more 
information, and franl:ly endeavored in every case to 
.'find defects, inconsistencies, or outright misrepresenta- 
tions in the information presented by the Code Authority 
and the local committees. On many occasions, in compli- 
ance with my request, Linfavorable action would be delayed 
until further information could be secured. Even after , 
the field staff of two commenced to hold hearings, in- ■ 
sufficient factual information still was available. 

a fundamental as this lack of data, in Hr. Haddock's mind, however, was 
uncertainty as to the criteria for reaching decisions. (**) 

Of perhaps as great importance as the lack of inform- 
ation v/as the fact that -no policy ;<?:aides-had been es- 
tablished to assist in the interpretation of available 
information, or to assist in the evaluation of inform- 
ation and the reaching of decisions in many cases where 
full information was available. The CAB repeatedly re- 
quested an administration definition of the code phrase 
'public necessity and convenience,' in order that a de- 
termination might be reached, on any given set of facts, 
whether or not 'public necessity and convenience required' 
the erection of new capacity. Such a definition was never 
made, or even seriously attempted, by any agency of the 
IIRA empowered to meJce policy determinations. 

On the issue last referred to, it should be pointed out, however, 
that the field men drew up a two-and-a-half page definition of their 
own as to what constituted "necessity and convenience," going into such 
matters as" to vrhat was neant "oy "lack of ice" and "monopoljr, " besides 
defining what entered into "convenience." 

This definition, which was contained in a report of Pebroary 12, 1935, 
from Edward H. Emerson to H. J. Daly on "General Kotes on Administration 
of Article XI of the Ice Code," is available in the Code History, pr>. 
331-335. In an unpublished and incompleted report by the two field men 
(see note, p. 25, surora) , it is stated of it: "ITo approval or disapproval 
of this definition was ever handed down and the field men continued to, 
malce their recommendations based on the above interpretations with 
any definition of policy from the Board." 



(*) Quoting from his History (see p. 256, supra), p. 24. 
(**) History, p. 25. 



i. 



X, 



9827 



-168- 

The field men, however, apparently regarded the definition, as., 
satisfactory. "Under the atove definition of necessity and convenience 
the field men encountered very few •'border-line' cases. Where the cases 
were conducted "by two or more field men there was never a disagreement 
after all the data were collected. This is significant, as the field 
men had not worked together "before and had normally different points of 
view, due to widely divergent previous training and experience, and in- 
dicates that once the real data are at hand, the equitable decision is 
evident." (*) 

To return to the Consumers' Advisory Board, 1935 foujid it frankly 
opposed to denials of applications, and to the continu3,nce of the pro- 
vision in the code. To quote again from Haddock, (**) 

A strenuous attempt was always made to find some convinc- 
ing reason why the application should he granted. 

During the months of January and February, 1935, I 
started to gather and compile information for use in an 
attempt to secure the amendment of the Ice Code by the 
deletion of the production control and market Torotection 
provisions. In connection with this work I was very 
ably assisted by Mr, Paul Aiken . . . 

A review of the principles governing public utility 
regulation was the first step in the program. The pro- 
visions of the ice code and their operation were contrasted 
with true public utility regulation, and this contrast 
assisted in bringing to light matters on which we needed 
more information, (it also confirmed my belief that the 
KRA was not designed in such a manner as to offer any 
hope for proper regulation of industry along public utility 
lines, A month of research, conducted at odd times when 
other code duties were not urgent, aided materially by the 
National Refrigeration Machinery Maniifact^irers' Associa- 
tion, resulted in the gathering of sufficient information 
to permit the preparation of a report to the Deputy 
Administrator recommending the amendment of the Code and 
giving reasons in support of such recommendation. ... 

Deputy Administrator Straus was exceedingly interested 
in this report. About two weeks later, he completed a 
report to the NIEB on the Ice Code, in which he quoted the 
CAB report in full. Mr. Straus agreed with many of the con- 
tentions of the CAB, but reached a different conclusion. 
He was convinced that the NEA had not exhausted all of the 

(*) It should also be pointed out that the NUA. Advisory Council, 
in the last few weeks of NRA, started an attempt to define 
"public necer;sity and convenience." See pp. 175, 17.7, 180 "^ 
below. ■ .1 

(**) Pp. 27-29. 



r'- 



9827 



-169- 

possilDilities for proper regulation of the Ice Industrj'- 
along pulDlic utility lines, and recoirunended the amend- 
ment of the Ice Code in raich a manner ara to permit agree- 
ments "betT.-een ice r.anufactarer'-j. TThereh7 production and 
sales territories could Le allocaced, llr, Straus wished 
to increase the field £:l;.',ff to ahout fifteen nersons, to 
maintain a con-tpnt .^np^. '"-vis ion over the operation of such 
local agree^ientsj If iDrices vent too hi,*:/;h, Hr, Straus 
proposed to '-.'ithr;:;rr. ac'-iinintrrti-^-e aporoval of the agree- 
ments. Because of the fact that his proi^ocals failed to 
include any of the puhlic saf e{-uarcls '-hich the CAB helieved. 
were essential, they v/ere definitely distasteful to us . . . 

After referring to actions tal:en shortly after this time liy other 
"branches of ISltV and to a discussion "before the Advisory Council as to 
how "puhlic necessity and convenience" could "be deter-iined and measured, 
Mr,' Haddock concluded his re^oort: (*) 

It ap-^ears evident, from a reviev of the entire 
history of the Ice Code, tlis.t the contentir>n of the CAB, 
consistently reiterated over a period of nearly twenty 
months, was correct - that the production restriction 
provision of the Ice Code could not possi'bly "be properly 
administered with the machinery provided or availa'ble under 
the Code. It is iny personal "belief, which appears justi- 
fied "by the' experience of the ITRA on the Ice Code, that 
this provision could not possi"bly have "been properly ad- 
ministered "by any agency oiDcrating within the "bo\mds of the 
authority conferred upon the president "by the National In- 
dustrial Recovery Act, 

Before leaving the rubject of the Consumers' Advisor;'' Board, 
it should "be pointed out that in following one authority as much as we 
have, we may have oversimnlif ied the attitude tal'en within the Board to- 
v/ards ca;oacity control in the ice industry. 

Thus Berjuty Administrator Dnhlberg felt t/iat the recommendation of 
the Consumers' Advisor;/- Boprd for a granting of the Huston Thompson 
petition, which asked for elimination of ca-oacity control from the code, 
did not represent the views of I-'r, Hartino, -^ho attended this hearing fro 
the Consumers' Advisory Board, "but did not write the report. (**) 
Dahlberg, in a memorandum in the file on this su'bject, (***) declared 
iiartino was convinced that the petitioner had not established his claims. 

It iaay also "be noted that at a meeting of the Conference of Code 
Authorities and Trade Association Code Committees, Group Conference Ho. 
Ill, held on March 6, 1934, Paul Douglas, outlining the policies of the 
Consumers' Advisory Board, announced that the ice indixstry was a good 



(*) His tor;.; pp. gO 

(**) See pp. 193-193 and 357, sapra. 

(***) In folder in Dev.uty's files, marhed Huston Thompson Petition 
for Amendment, 

9827 



-170- 

example of an industry in 'jhich control of capacity wa.s warranted. (*) 

Also, on January 5, 1935, in the last general state'aent of the 
Consumers' Advisory Board which can he found, (**) the Board declared: 

Under exceTjtional circiiinstances it may appear wise to carry 
a code heyond simple labor, quality, and fair pra.ctice minima. 
Business may make out a case for the establishment of standard 
cost accounting systems - - -or even for the teraporarj'- imposi- 
tion of output and capacity controls. Each of these devices 
substitutes central control for active competition. Each 
may be used to establish.' something other than a competitive 
price. Each achieves legal status only by public consent. 
None .can be made completely effective without public supnort. 
If anything is granted to any business in a code, therefore, 
beyond the simplest labor, quality, and trade practice minima, 
it must be granted not as a right but as a privilege. 

Commenting on the exceptional cases' which the Consumers' Advisory 
Board was willing to allow. A, L. Cox (in his notes on MA Policy on 
Production Control (***)) ventured the suggestion, however, that the 
"requirements of the Board for an 'exceptional case' were so rigid and 
so extensive that few fell within the classifica.tion, and that those 
that were classified in tha.t category were 'exceptional' indeed," 

2. Division of Research and Planning 

Owing largely to changes in its directorship, this Division's policy 
towards capacity control viasj in the latter part of the code period, 
the direct opposite of what it ha,d been at the time the code was adopted. 

On September 16, 1933, Donald K. TTallace, writing to Deputy Admin- 
istrator Paddock, gave the unconditional apwroval of the Division of 
Research and Planning- to the Ice Code as it then stood. And on September 
29, 1933, Mr, Wallace again wrote declaring that the ration which existed''' 
in the ioS'^industry between capital investment and annual sales volume 
represented an excessively abnormal condition; and that following 1931 
there was a 36 per cent decrease in sales and a 1.5 "oer cent increase in 
capacity. In furtherance of article XI, this letter stated, it is quite 
logical to assume that from an equipment standpoint, some plants will 
gradually be forced to dismantle and it would be uneconomical to further 
burden an already over-burdened condition, (****) 

(*) Transcript, in IT3A files, p. 208. 

(**) Memorandum to the National Industrial Rccoverj Board on the sub- 
ject of the revision of the Act (published as Ptelease No, 9508), 
available in NUA files. 

(***) In files of Production Control Unit, Trade Practice Studies Section, 
Division of Review, see p. 18. 

(****) Code History, pp. 67, 68 



9827 



-171- 

A memorandum written on April 13, 1934 "byllax Kossoris, who had 
succeeded Mr, Wallace as Economic Advisor for the ice code in December, 
1933, shows how considerahly the viewpoint of the Division of Research 
and Planning had oy this time shifted from the attitude of -unqualified 
approval which had "oeen ta]-en ty llVo ITallace, In this memorandvun, 
written on the suhject of tl.i Huston Tliompson petition, Mr, Kossoris 
started off - "Much as this Division would like to have the ice code 
reopened ,,»"(*) 

Being a research agency rrthev than a "pressure group" like the 
Consumers'' Advisory and other Advisory Boards, the Division of Research 
and Planning did not press for any special interest. However, under the 
last Director of the Divisron, Leon Henderson, who served for more than 
a year,' and was also ex officio a memher of the HIKB, the Division of 
Research and planning came to have some very definite economic ideas 
with regard to the advisability of forbidding additions to ice manu- 
facturing capacity. Going even beyond the Consumers' Advisory Board, 
the Division ap-oe.?rs, by the Spring of 1935, to have taken the position 
that under no circumstances should an application for permission to 
construct ice capacity be denied. 

Thus, on page 84 of the Code History, it is paid that the Director 
of the Research and Planning Division required members of his staff to 
disregard the anti-dujnping and control of production provisions of the 
code; and that he recommended the granting of all applications for peiv 
mits under article XI, regardless of the circumstances in the case. 
On this subject, Robert K, Straus, Deputy Administrator, writing to W, 
A. Harriman, Adjninistrative Officer, under date of March 13, 1935, 
complained (**) 

I wish to comment that the degree of coo-oer.ition received from 
this Division has been most ims^tisfactory, I ■ am informed that 
the Economic Advisor to the Board does not approve of the con- 
tinuance of article XI in the code. If my information is cor^ 
rect, it seems to me that it is unsoiond for the Research and 
Planning Division to refuse to coo-nerate urtil when and if the 
National Industrial Recovery Board, through you, has stated 
what the policy is, . . , I cannot ujirierntrnd how a staff 
division can claim to have a separate poli.;y from the Recovery 
■ Board. I-v.-as told by members of the Research and Planning 
Division that this was the situation, " . 

Spealving of the specific case concerning which he was then 
writing, Mr, Straus said: 



(*) See folder in Deputy's file, Huston Thompson Petition for 
Amendment, 

(**) Code History, p. 85, 



9827 



"172- 

In this particular case I do not agree rith the 
Research and Planning Division's recommendation that 
a permit should "be granted to the applicant, hecause 
not to grant a permit would 'tend to retard construc- 
tive competition.''' In my opinion, i t is ridiculous 
to say that there is ?ny lack of competition in the 
■ New Orleans, area when we ourselves hnving recognized - 
the existence of -destructive price cutting in this 
area and have, in fact, approved an emergency to in- 
terfere with it, I do not tahe the oIdj actions of the 
Economic Advisor very seriously, however, as I know , 
that he is prevented "by the policy of his Division 
from giving- any real thought to our prohlems in con- 
nection with this Code. 
; . ' ■ 

In part- heoause of Mr. Henderson's dual position, 
it may he said that this Division of Research and Plan- 
ning was one of the NEA' s most influential agencies in 
■bringing about the changed attitude towards capacity 
control which marked the latter part of the code period. 

G. Attitude of Other Divisions and Boards of ERA. 

1. Legal Division 

The Legal Division early ex^iressed its "belief that article XI, 
Gbntroi of production, war legal. (*) Its su"bGequent activities were 
chiefly centered on t'ryli-if: to develop a procedure which would raalce de- 
' terminations stand up in the courts. (**) ./ 

■ 2. La"bor Advisory Board ' ' ; : 

The La"bor Advisory Board, in princiiaal, viewed -oroduction control 
with misgivings. In t)ractice, however, -the Boa.rd appears to have heen 
too much interested in the more iinmediate o"bjectives of lahor to take a 
positive stand one way or the other on production or capacity control. 

The principal, and indeed the only, declara,tion of policy ty 
the La"bor Advisory Board with reference to control of prodtiction was that 
mado on Iferch 5 and 6, 1934, "by Rev, Francis J. Haas, a memher of the 
Bsard, at the Conference of Code Authorities and Trade Association Code 
Committpes, Group Conference No, III. 

Father Haas (Transcript, p. 22, in NRA files) stated the posi- 
tion of the Board in three major ioroi;)ositions as follows: 



(*) See Memoranda of T, B. Cantrell, Assistant Legal Counsel, 
Legal Division, dated Se-oteTn"ber 13 and Septem'ber 14, 1933, 
referred to in Code History, p, 63, 

(**) See pp. 188 and 209-210, supra. 



5827 



.. -17 Cr- 

1. Labor has a direct. ip.terest in the reg^ilation of prices and 
production, ^ ■■ ■ ' 

2. ■ Later has a policy nhich opposes the restriction of production. 

■ 3. Labor holds that certain excepti'ins on broad social grounds 
are to be made to the policy of non-restriction. 

Among other observations made by Father Haas with respect to the 
third of thc_ above propositiong , he said: 

Only {a) emergencies amounting to national crises and 
(b) emi'nently desirable and clearly proveable social 
results can justify the application of such restric- 
tive measures. . '. . l!he farming industry. . . . pro- 
bably falls under this description. In the same eater- 
gory belong industries whose product is definitely on 
the wane in popularity because either of cost, quality, 
or kind, 

Father Haas emphasized the fact that ~ 

overcapacity is not to be defined in terms of income to 
an industry. The claims of overcapacity must be examin- 
ed with an eye to the potential htuna:! needs of the country 
and possible future development of the industry in question. 
Overcapacity is not to -be described in terms of the uncer- 
tainty of a capital structure or inadequacy of returns on 
investment. These are the risks of capitalism. The Govern- 
ment cannot be expected to 'pull the chestnuts out of the 
fire' for risk takers. 

Emphasis was also laid on the hearing of code controls on the 
functioning of the capital goods industries; and on investments avail- 
able for liquid capital. Reference was made to their effect on capital 
values in the industries subject to control, on prices, freedom of com- 
petition, efficiency, and stimulation of technological and managerial 
improvement. Stress was laid on the importance of looking beyond one 
industry to see wliat effects the proposed controls would have on other 
industries - on talcing the wholes national economy into account. At- 
tention was called to the importance of looking ahead to see what would 
happen when the restrictions were removed; and great emphasis was laid 
on the necessity for knowledge and publicity. 

Father Haas' statement was, indeed, an elaborate one; yet it seems 
to have meant little in practice. According to Mr. Cox: (*) 



On Dec. 24, 1935, Mr, Solomon Barkin, formerly Assistant 

Executive Director of the Labor Advisory Board, advised that 
the statements of Father Haas ?/hich have been outlined herein 
remained the policy of the Board throughout its existence. 
It is noteworthy, however, that this policy was not aggres- 
sively promoted. On every -question of control of production, 

(*) Notes on l^ERA Bolicy on Production Control (in files of Production 
Control Unit), pp, 36-37. 



of which the writer has knowledge, the report of the 
lahor advisor was merely a creptic statement to the effect 
that the Board did not desire to comment on the matter. Mr. 
Markin feels that this attitude was due to two factors: (l) 
that the advisors had neither the time nor the facilities 
to intensively investigate the industry's -oosition or claim, 
and (2) that it was not thought politic to antognize in- 
dustry or those members of the Administration by the exer- 
cise of more or less dOj^atic op-oosition ■ to restrictions, 
which would endanger or v/eaken the possihility of effecting 
more direct gains for labor through imnrovement in the 
wage, hour and general labor provisions of the codes. The 
Board apparently felt, and with much justification, that 
the combined scrutiny and op'oosition of the Research and 
Planning Division and the Consumers' Advisory Board would 
adequately cover its ovm. major objections, and that by 
refraining from malcing more or less redundent protests, its 
bargaining position for direct labor gains would be im- 
proved. 

While these comments refer to the attitude of the Labor Advisory 
Board towards production control generally, it should be stated that 
Mr. Cox was aide to the deputy administering ice code , from March 
15, 1934 to August, 1934. " ■ . 

While he was probably not in a position to speak with assurance 
of policies followed after Aiigust, 1934, such of the record as has 
been examined has not indicated the exercise of any marked influence 
on Ice Code administration by the Labor Advisory Board or its re- 
presentatives. 

3. Industrial Advisory Board 

No special study has been made of "oositions taken by th-^ In- 
dustrial Advisory Board with reference to the granting or denial of 
applications for certificates of public necessity and convenience, but 
it is believed that the following excerpt from the report of Mr, Cox 
fairly represents its attitude tovfards this provision in the ice code, 
as well as towards restrictions on production and capacity in other 
codes: (*) . 

The Membership of the Industrial Advisory Board was 
■ constantly changing during its existence and hence the one 
. expression of policy on control of production by that group 
which can be found cannot be said to be exactly reflective of 
its attitude at all times. The statement to. which refer- 
.. ence is that made by General R. E. Wood at the Conference 
of Code Authorities and Trade Association Code Committees 



(*) Notes on MA Policy on Production Control ( in files of 
Production Control Unit) , pp. 38-41. 



9827 



-175- .. 

Mr, Wnlter Wliite, for some time Executive Secretary of 
the Board, advised on Dec, 26, 1935, that while the state- 
ment, might apt be exactly correct, it was a very fair ex- 
position of the policy of the Industrial Advisory Board 
during the entire code periodo 

Pertinent excernts from the statement follow: (*) 

" , , .1 think that the majority of the Board, includ- 
ing, myself have subscribed to the prihci\-)les envmciated by 
. . , Father Haas,. Dr. Douglas, and Mr. Edwards. 

"... while . . .the general attitide of the Board has 
been rather opposed to the principle of the allocation of 
production, limitation of machine hours and restriction of 
new facilities, nevertheless we have all recognized that 
like every general rule or principle there have got to be 
some exceptions. 

"Among the first exceptions, of course, are those 
dealing with natural resources, oil, coal, and lumber, and 
I think there has been general agreement, both as to bus- 
iness management and as to labor, that the conservation of 
our raw materials is so essential that the exception 
should apioly. 

"There have been other particular industries - I think 
there are those present who heard the paper from the ice 
man - who have a very good case. Therefore, when these 
three subjects have been considered oy the Board we have 
borne in mind that there may be some exceptions and have 
tried to listen to these . . * , 

" , . I repeat again we believe it (control of production) 
is a dangerous principle; we believe that it should not be 
embodied -permanently in codes and tl;iat when it is embodied 
there shou?d be ample safegiaards around it." - • -- • 

Although it cannot be stated at this tirae as.,.nore t?Bn 
opinion, it is believed that in actual operation, the pol- 
icy of the Industrial Advisory Board was far less drastic 
in the degree of optiosition to control of prodtiction pro- 
visions than that outlined above. It is probable that fur- 
ther study of individual cases will show that the Board was 
prone to recommend approval, or at least not recommend de- 
nial, of the great majority of provisions earnestly de- 
sired by industry - including those concerned with control 
of production. 



(*) Transcript, Group Conference No. Ill, March 7, 1934, p 
423, in MRA files. 



9827 



•-176- 

4, Industrial Appeals -Board 

The InduGtrial A-pneals-Boai-'d-'nas ' created on July 16, 1934 ■by- 
Office order No. 105 to consist of three menhers . a-^^-JOinted hy the 
Administrator. Its duties irere- to- hear complaints concerning small 
enterorises and others and to conduct any special investigation di- 
rected "by the Administrator, Whe^n in August, 1934, the applications 
of the Kings County Ice and Puel Corporation and the State Ice Cor- 
poration, two organizations of ile'-'/York ice dealers who sought to 
build ice plants which they \70uld^ themselves control, were denied, hoth 
cases were carried to the Industrial Appep.ls Board. For. the^ re- 
fusal of the Board to reverse the action previously taken, see page 'Sl'3 
above, ... . . , ■ 

5. Advisory Council , ' , 

The most important' action of the Advisory Council bearing on the 
administration of article XI O'? the ice code .was a ruling contained 
in a meraorandiun addressed by William C. Thorp, Chairman, to L, C, 
Marshall, tinder date of February 15, 1935, ' In this memorandum it was 
stated: (*) ■• 

The Cotincil also cohsiderd to be inescapable the conclusion 
that applicptions for new capacity cannot be denied in a commu- 
nity competently served by only one member .of the industry. 
Denials in such cases would clearly violate the anti-monopOly 
provisions of the Act itself, ' 

This position bore practical fruit in the reversal on Hay 18, 1955, 
of action taken some tine previously denyin;^ application of the Ray 
Ice Company to build an ice plant in Cleveland. (**) In an industry 
where there is often in a given toi.m, only one plant, it is obvious 
that the principle above stated would have wide implications. It also 
put the mono"-;oly issue on a new basis in large cities, th? Deputy Ad- 
ministrators having previously inclined to the viev that the test of 
monopoly vras not so rauch the form, as the fact, as respects prices. 
Had the Ice Code continued, this ruling would undoubtedly have been 
further contested. 

.A.t the very close of the code TJeriod, the Advisory Council, 
owing to new responsibility placed on it for passing on proposed de- 
nials (see pp. ;i7fi-277 below), was actively considering the question 
as to what information the Administration should have, and what stand- 
ards of judgment should be followed,' in determining Virhen .public nec- 
essity and convenience required the establishment of additional ice 
capacity. At the first session on this subject - 



(*) Code History, p. 88. 
(**) See p. 254, supra. ■ 



9827 



-177- 

IIo decision Tras reached, and the same -orotlein was discussed 
the next da/ for' several hoi.irs, until it "became o"bvious that 
it v;as one not susceptible of a hurried or casual solution. 
The Council decided not to estalilish any policy to guide the 
administration of the Ice Code until it had had some practi- 
cal e-roerience in -orssinti' on applications, so it -established 
a subcommittee (com-Dosed of the same advisers who had teen 
working; on the ice- code) to make the necessary investigations, 
sujmmarize available information, -ooint out to the Council 
what • additional information it considered necessary, and re- 
coraiaend tiie action which it believed should be taken. (*) 

Before anything could be accom-olisned, however, the Supreme Court 
had acted, relieving the Advisory Council of the necessity for inter- 
preting the phrase 'p^iblic necessity and convenience' or determining 
what information was necessary to enable the Administration to reach 
a decision on individual cases. 

D. Over-Al l tIKA Polic y Touching Article XI in 1955 

On page ^335 above, it was indicated that in the Fall of 1934, 
unsettled production control cases had tended to pile up in Washington. 
Referring more specifically to this problem, the Code History states(*) 
that in October, when Robert K. Straus became Deputy Administrator, 

there was an enormous collection of pending applications 
consisting of cases dating back to the inception of the code and 
involving problems of policy and interpret.-ition that had not 
been settled. Deputy Straus made a review of all pending appli- 
cations and came to the conclusion that a change of procedure 
must be instituted immediately. 

This. was the beginning of the move which, by January 1955, had 
led to the complete change in procedure which has been described on 
pages 256-245 above. In the- office of the Deputy Administrator, 
capacity control cases are classified in three groups - "C" (the oldest 
cases); "B"; and "A" (the latest cases). "C" cases represented appli- 
cations filed before the new procedure had started to function - and 
on which there was no later resort to the methods then coming in. "B" 
cases represented, applications filed before this time (and of course 
not yet settled), on which, however, the Administration eventually 
sent out Prom 2 (see pp. 236-237 supra), in order that it might have a 
better basis of knowledge uoon which it could come to some determina- 
tion. "A" cases v/ere those on which the new procedure 'was followed 



(*) Account of George B. Haddock, who had suggested, that the 

matter -be taken up in this way. History of the Code of Fair 
Competition for the Ice Industry from the 'Viewpoint of the 
Consumers' Advisory Board, p. 32 

(**) P. 312. 



9827 



-178- ■■ 

from the start, "both as respects forms and as -restJects field investiga- 
tions md he'rin.'/;s b:/ mehibers of the Deputy's r,taff. 

In Beceraber, 1934, and the first tT70 months of X935,. strong -oress- 
ure was brought to bepr to clear \vp some 100 nending cases. : Form 2 
was sent out (thus nakinr; thei-1 "B" c-ses); and in about 60 Ins-tances 
it was "ound possible to tal:e definite action - the majority of the 
aunlications being granted. (*) This iieant that , for the first time 
since the adoiotion of the Ice Code, the Administration, in. a large ' 
number of cases where the Code Authority had recommended .denial , re-' 
versed this determination and granted certificates. (**) 

It has Toreviously been noted, (***) however, that , in .early 1935 
op-DOsition to the retention of capacity control in the ice' code "■ in 
any form was rabidly mounting. In a brief submitted to the National 
Recovery Admirnistration on A-pri'l 15, 1935, (****) Llount Taylor, Chair- 
man of the Code Authority for the ice industry, observed: "Last week, 
the code authority for the Ice industr?r was advised, informally, that 
the national Ind-astrial Recovery 3o-,rd wa.3 about to call a hearing for 
the "ouriDOse of determining whether or not article XI, control of pro- 
duction, should be deleted from the ice code." 

As we have -oreviously noted (*****) the ice industry at once 
entered its vigorous protest against this matter's bein'g considered 
at this time. I.n lolnce of an innediate general hearing, the code 
authority secured permission to lay its objections to following such 
a course before the ]tra. This was done on Aoril 15, 1935. 'Quotation 
has rireviously been made (vv, 253-255 supre) from two of the three 
briefs which were submitted at this time. In the present connection ■ 
it will be appropriate, hov.rever, to make the following additional quo- 
tation from Mr. Taylor's brief, i-rhich gives specific reasons why the 



(*) Haddock, loc. cit. p. 272 suora , p. 

(**) As notea on liage .. supra, it appes,rs .that up to January 1, 
1935, in only some four cases had the Administration actually 
granted a certificate contrary to the recommendation of the 
Code Authority. 

(***) See accounts of renewed attacks by nanufaptarers of ice-making 
machinery, pp, 244-251, particularly p. 250; of newspaper 
attacks, p. 251 ; of- criticism before the Senate Finance Com- 
mittee, pp. 251-256; and of opposition b.v the Consumers' Ad- 
visory Board, pp. 256-563, particularly pp. 260-262 and by 
the Division of Research and Planning, p. 265 

(****) Bound in with Aiopendix to Code History as Exhibit 3. Quota- 
tion from page 1. 

(*****) See p. 253 siipra. . ' ' 



9827 



-179- 

code authority 9id not want the IIRA to touch the car)acity provision of 
the code under existing circurnr'tances. 

To quote Mr. ^la'j'-lor : (*) 

the men in this Industry are becoming 'jittery,' They are 
viewing,: v/ith much concern, the uncertainties of future Adminis- 
trative policies and legislation affecting article XI vrhich, 
right or 'vrong, they now regard as the only provision in the 
code '7hich o^^fers them anything in return for the heavy finan- 
cial burden v/hich the other provisions of the code impose 
upon them ,(**) ... I think I know wliat these men are think- 
. ing, and how they feel, and if I do, I know thn.t thousands 
and tens of thousands of t hem are looking over the fence into 
the otlier field - they are wondering in their o-'.vn minds if 
they would not be" better off if there wex-e no codes. They 
are feeling this way because they are doubtful if the G-overn- 
ment will sontinue to mal^e Article XI effective. 

How it may be that this industry needs, and after sober 
and deliberate consideration, will accept a code from which •■ 
article XI has been deleted. But the Industry is not a de- 
liberative mood just now,. The very slightest disturbance of 
article XI at this time will touch off the pent up, explosive, 
: emotions in the minds of these nen. It will be an open and irres- 
tible tempta.tion for many of them to jump over the fence into 
the other cajap - to join the open opposition to any form of 
extension of the NIEA. It v;ill break the code morale and split 
this industry into factions devided against each other. I can 
think of few things thpt would be more harmful to our industry. 

We submit to you that no good purTiose can be served by 
calling a hearing, or in any wa;,^ disturbing article XI, until 
after the Congress shall have determined upon the form in which 
the Act is to be extended. The damage of the critics has 
already been done', nnd no action which may be taken between now 
and the time the Congress acts can remedy this. At most, there 
can be only two more months under the present Act. The pro- 
vision can be fairly pjid effectively administered under the pre- 
sent procedure. After the new act becomes effective, it may 
or nay not be desirable to reconsider the advisability of re- 
taining article XI. ~Eut, if it should be desirable at that 
time, the effect uPon the morale of this industry will be en- 
tirely different from. what it would be today. The Act will 
have already been passed. There will be no inviting field 
of opposition to the passage of the Act in which to jump. 
The law, for at least another year or two, will be definitely 
fixed. The industry can them be brought to a sane and reasonable 
acceptance of any changes in the code, infinitely easier thaji it 
can at this time. 



(*) Brief, pp. '13-14. . 

(**) For intimations that these burdens may not, in fact, have 

been very heav:y'^. see pp. 258-259 supra. . 
9827 • ■ 



-180- 

Mr. Taylor closed '-.'ith a plea that article XI "be administered 
fir;"il7 Mid a;,j,'Ci'essi''"el7 for at least the remainder of the duration 
of the Act under which it nas originally approved and later con- 
firmed, " 

Follo'ving the presenta.tion of these briefs on Arpil 15, 1955, 
there arose serious misunderstandings in VIBA. as to whether a general 
hearing on the code was or wrs not to be ca.lled. No hearing was in 
fact called; but it ao-pears that a decision to call such a hearing 
was at one time made, and late in April a telegram was sent out by 
the ComiDliance Division to all Regional Directors instructing them 
to sus oend action for violation of Article XI, control of Production. 
Shortly thereafter, however, the Administration apioears to have chang- 
ed its mind, R,nd field com-oliance and litig-ction officials were told 
to disregard the instructions to cease rji-osecution of Article XI vio- 
lations. The tele.'^ra'ohic instructions to suspend action on viola- 
tions had been issued without any -orevious intimation to the deputy 
administrator or the code authority; Mid it would ari"Dear that the 
protests which were received were araong the reasons for the change 
in instructions. (*) 

Articie XI, therefore, was not stayed. But during March, April 

and May, the National Industrial Recovery Board would not tjass on 

cases which the De'outy Adrainistr/'.tor had recommended to it for denial, 
the last apT3roval of a denial being on March 2, 1935. 

On may 13, 1935, the entire -orocedure for granting and denying 
applications, \Tas revamped. For the period from this date until June 
16, 19S5 (when it was expected that a new Act would go into effect), 
requests for permission to construct ice "olants were to be handled as 
follows: (**) 

The findings and recommendations of the Division Ad- 
ministrator on such reqiiests are to be sent directly to 
the Executive Secretary of the Board, provided these find- 
ings and recomnendations hr-ve been initialed by the Legal 
Division and hR,ve received tne approval of the Review Div- 
ision. 

If the recommendation of the Division Administrator is 
to the effect that permission should be given to construct 
the plant, the Executive Secretary may, in his discretion, 
act for the Board without further counsel. 



(*) This paragraph based on Code History, pp. 87-68; and - 
Haddock, loc . cit ., p. 272 supra, pp 29-30. 

(**) Memorandum from L. C. Marshall, Executive Secretary of 

the National Industrial Recovery Board, in Code History, 
pp. 89-90. 



9827. 



-181- 

If the recommendation of the Division Administrator is 
thr.t the request for construction be denied, this recommenda- 
tion will ^>e referred to the Advisory Council for further 
analysis and recommendation. 

By this raep.ns it v/as ho-oed to expedite action on .all cases 
where the deDUt?/ administrator had foiuid in favor of granting the 
aiDplication, On patjes ■374-27:-:: of this report, note has 
already been made of the mnnner in which the Advisory Council ap- 
proached its new task of making recommendations concerning cases 
which tile deputy, had recommended for denial. 

An immediate effect of the change in procedixre set up on 
May IS was, of course, to further delay all denials, of which there 
had been none since March 2. What the final ef-^ect would jave been 
will, of course, never be loiown because of the handing down two 
weeks later of the Schechter Decision. 



9827. 



-182- 

VIII* A"'TITuDES T \'a:T.S CAPACITY COr^HOL AT THE CLOSE OF THE CODE -r?.IOD 

The eroeri-'ent '-itli ca'io.cit;- co 'trol ••uider the ice code, -"n never 
Lrovigp.t to com-iletion. Yet the code eriperience '' ith this nrovision 
'ould ti "ocar to h-'^.ve ■,;een nearer to jeiiv' con/ilete, th->ii \7as true o± the 
r?A. ;irO;::rai'. sep-erally. 

T'-'O ".onths before tJie Schechter Eecision, there ca:ie to a hco.d a 
..rp.ther heated co;:troversy hetrreen th^e' De-;uty Ad:^.inistr"tor and the Code 
Authority. I:_ . arch, 1935, De mty Ad^iinistrator Straps had addresr.ed to 
tlie ITationrl Industrial Ilecover;.^ .'..oard .a report on the"Ad].unistr.tion of 
ti=.e Trade Practice Provisions of the Code of Fair Conpetition for the 
Ice I.-dxistr-y. " (*) This 'ms his princi;oal report as de-mty A linistrator. 
On April 2, the code ai-thority caie ;acl: vrith a "Ileply to the '".e-'Ort of 
de ro.ty Administrator io'oert li. Straus on Adr.iinistration of the Ice Code." 

So far as opslc MOlic^'' '■ as concerned, deputy ..diain is orator Straus 
s:ad the code authority ooth -orofessed to oe in con^ilete" agree: lent, iJcth 
nere stron^^iy in favor of c pacitv co/.trnl, <?:id also of voluiitarj'- rvarket- 
ing agreer.ents to '"'hich the Administration had refused to give its s^ic- 
tion, But r;nen it ca:-!e to the ::ethods of o,diuin i st rat i on i^iich had "ocen 
iollO'-ed, (rnd ^hich 'ere a-o-oosed for e::te::sion) , by the de-outj' Adainis- 
trata: , the code auth rity fo-und ".rny things v,'hich r/ere'' distasteful, T;.\e 
;ioints e.t is:\ie nay most clearly be brought out b shetching certain 
principrl contentions erfoodied in the code authority's "re-oiy," 

JToting firot the viev errDres^ed .3" the cocie authorit3'' concerning 
a basic issue ^7hich -onderlay ■ -uch of the surface tension, it '■'ill help 
clarify the issue to quote; 

"Fhether the ■irices for ice in oji''rave;:i r.o.rhet are t 'O high is a 



, f -1 



lo.tin ; to anti-cVi,ir.;->ing, a?.d control of production. T}ie Consuners' 
hoard, and t: a so-ie'"'hp.t les' degree, t;ie de"out" \choinistri.toi7, see 
great diff icolties in the ^-aj" ox detemining --ha-t are fair prices for 
ice, oaid p.re incli:ied to clieve that no -orovision of the code, "here 
23riee or control of production is involved, eho-old be iiaintainod un- 
less t:ie indv.strj- is to be treated as yaiblic utilitj"-, an." so adriinis- 
tered by ITEA. " 

The code ai'.thorit-,'- then piroceeded to -loint out certain conditions --'lich, 
in their view, made public utility regulation unnecessary; urging that 
competition- au.'^mented, so they declared it was, by an abundant and, in 
lAost cases, excessive supply of ice - vras in itself a sufficient regula- 
tory force, 

"The forces of comoetition and over. i redaction have resulted in adjust- 
r.ent of prices of th.is st ndard iroduct to levels that are ai>pro::i- 
r.ately standard in the various sections of the country and in" the narkets 

(*) Available in ITRA files separately, or as E-liihit 7 in the Ap endix 
to the Code History, The Code Authority' s reply, nentioned belov;, 
is" .availo-blc as Eidiibit 8 inC'tho Code History Appendix, 



9827 



-133- 



of coTspe.rsible si-e and location. These levels have 
ottained for many years v-ith no apprcciahle change ex- 
cept price \7ars. 

"This fact simplifies the ac'ministration of any of the 
Code provisions that call for determination of the question 
of vifhether or not prices in any market are too high. If 
the prices arc atove the levels prevailing throtighout the 
section or in markets of similar size and location, an 
investigation can then he made or the particiilar admdnis- 
trativo action ^iven such direction as vdll protest or 
check the situation. Such cases v.dll he exceptional, and 
their occasional existence should not cloud or color the 
entire approach to -the ar'iministration of the essential 
ice code provisions. 

"V/e helieve that immediate check should be ::iut on the 
thought that the forces of competition 'vithin the industry 
and from substitute sei-vices, together •;7ith the pressure 
of excessive Eu;'Toly, are not to be considered as the 
best possible deterrents to unfairly hiji prices. It 
seems to us that elaborate and expensive efforts to 
determine valuations of properties and costs of distri- 
bution and from these to determine whether or not pre- 
vailing prices result in more tlian a fair return, v.'ill 
add nothing to the forces that liave a.lways been thought 
of by the people as their sa.fest protection against price 
abuses. Valuations of properties and dctennination of 
costs, in the absence of corapetitive forces, have failed 
to afford adequate protection to the consumers. The meth- 
od was abandoned by the railroads \?hen bvis, truck and 
private automobile competition became severe. Reductions 
secured through the Courts in rate cases have been excep- 
tional. Tne decreases in ga.s and electric power rates 
have been made in the effort to b'oild up business and 
to meet competition of sxibstitutc fuels a.nd po\?cr. The 
distrust of the Government in the securing of fair rates 
throtigh valuation and determination of costs is amply 
demionstrated in its present efforts to secure lov?er rates 
through the establishment of its own power operations in 
order that it may secure a dependable yardstick, 

"'.Te believe that in this Industry, marked as it is by 
severe competition from within and without, and by a 
permanent and constantly increasing over-production, 
the disregarding of the- natural effect of the forces of 
competition and excessive supply, and turning to the 
discredited methods of valuation and cost determination 
in the effort to determine v.'hat are fair ice prices, it 
is not a wise or a justifiable pi'ocodure. V;e believe 
tliat such procedure will entail expenses and delays that 
are unnecessary, and that v/ill make unworkable eventually 
the essential provisions of the code." (lO-H) 

It. is of interest to note tliat in later passages in their 
"Eenly" - in a -oart which dealt specifically with production 
9,827 •-■■-.. ■ ' \. ■ ■ ■ 



-184- 



control - tlie code autliority sought to show that there was no 
difference oetv.-eGn the interests of the industry r-.nd the putlic. 
Having first jointed out {-o-g. 31-26) the many reasons making for 
severe - and, in fact, cut-throat - competition in the ice industry 
(most of which have "been discussed in Chapter II of this report) - 
hut failint:. to observe tha.t the industry had in ore-code times taken 
soiue very effective measures to control such competition, and under 
the code itself was obtaining assistance in that direction - the 
code authority (p-o. o2-3G) seemed to take the position that the 
public, even more tloan the industiy, had reason to "be concerned 
about overproduction. To quote one passage on this subject: 

"The public pays the bill for the support of the emitt- 
ing and usa.ble investment? in ice manxifacturing facilities, 
whether these be actually used or not .... There is no 
other source of support tmn the ice bill paid by the con- 
sumer. The price of ice, lias, therefore, shown no decline 
although during the last several years, tho^lsands of plants 
have been built and have entered into competition with 
existint, jlants. The cost to the public of the support of 
investments inroosed beyond all possibility of need, and 
the cost of supporting the consequent inoconomies of the 
operation at peak season of ejrpensive facilities at only 
part capacity, have more than nullified wliatever small 
decreases in costs of prod^iction may hs.ve been realized 
by the more modern plants." 

The code authority then reviewed (pp. 37-41) tne original and 
amended procedures for handling production control cases. After 
declaring tlia.t the industry had at no time assumed to pass upon the 
question of whether or not "the public necessity and convenience 
require" proposed additional installation, the code authority express- 
ed the industry's entire willingness to be relieved of the criticism 
to vifhich industry mombors might be open under the original procedure 
of being in a. position to exercise too ^^reat inflxience upon the 
course of cases. The code authority had therefore agreed to the 
establisiiment of the procedn.re outlined in the deputy's report, as 
respects both the field check by reioresentatives of the deputy ad- 
ministrator and the use of forms. 

■""While we believed that the forms suggested called for 
much that was not essential to a determination of the 
siirole issues involved in the question of whether the 
supply of ice in a market was adequate to meet peak 
season demands and whether ice service was I'ood and 
prices fair, vv'c, nevertheless, exerted ourselves and 
our agencies to the utmost in pi-eparation of the elabor- 
ate data called for in (Form 2) and we ha.ve otherwise 
lent our full cooperation to the end that this procedure 
may be made effective and expeditious." 

However, the code authority was opposed (pp. 41-42) to further 
hasty changes in adxiini strati on; and was sevei-eiy critical of the 

9827 



-165- 



manner and extent to which the Administration had relied on its 
field representatives, anc". discarded the opinion and representa- 
tions of industrj members. There then followed (pp. 42-58) sharp 
criticism of a reriort which the field men had tentatively prepared 
(see p. 242 above) setting forth their view on how industry mem- 
bers had been afjninistering the code (in v/hich the code authority 
attached to some of the stavtements made by the field men mean- 
ings which had not b:een intended) ; (*) and a long and detailed 
discussion of issues which entered or should enter into a decision 
as to whether a certificate should be granted. 

In touching on this last named phase on the subject, the code 
authority said tliat they were endeavoring 

"to show tliat the question of whether or not the members 
of the industry in any ina.rket are in compliance with these 
, standards is subject to determination thro"ugh procedure 
that need not be the cause of undue effort, o:cpense, or 
concern on the part of IIPJL." 

It will not bo necessarj' to present in this connection any- 
thing a;oproaching a complete sumr.Tarj." of the report by D.cputy Admin- 
istrator Straus against which the above reply was directed. Apparent- 
ly one of the principal objectives of the Straus report v/as to ob- 
tain ITHA sanction for volimtary marketin.j agreements of the type 
which had been introduced at Fort Uorth (see Chapter VII below). 
He also argued tliat article XI v>'as soiuic. in theory, and expressed 
his belief that the an ti -dumping, and normal market area provisions 
iiad a. proper function to perform in the ice code. However, the 
point v/hich is of importance in' the present connection is the 
fact timt the deputy administrator firmly maintained throughout 
his report tliat none of these provisions should be employed unless 
their administration could be greatly improved. "I therefore 
recommend," he s3.id, (p. 29), "tliat unless article XI is to be 
properly administered it be stayed." Ho recommended that until 
more com^plete lui07/ledgc could be obtained, the norma.l market pro- 
vision of the code be continued in "innocuous desu.otude" (pp. 17-18). 
Straus asked for the appointment of seven Regional Administrators, 
each with a complete staff, and for an appropriation of $100,000 
to provide for field adjninistrative expense alone (pp. 56-58). 

From what has been noted above concerning the code authority's 
reply to Straus' report there VTould a,ppear to have been a considerable 
gulf between the procedure which Straus was tr^.'ing to build up and the 
kind of administration to which the code authority was Tailing to 
give its a.pproval. This, however, ims only the small end of the 
difficulty which was bound to arise in any attemrDt to keep capacity 
control as a vital force in the ice industry. For though the ice 



(*) See rejly of field men in report cited on p. 15 svipra. 



5827 



-186- 



icaders clTafed p.r;?i±nst what they ret;;arded as Stra.us" tendency to 
go too far in efforts at regulation, most of the personnel of NHA 
outside of the deputy's office (biit interested in the ice code) 
felt that Straus' program was inadequate to safeguard the pulilic 
interest. ' 

Indeed, from our review in the last section of the attitude 
toward article XI v-hich was developing in the Advisory Soards 
and Divisions, in the Advisor^' Coujicil, and in the national In- 
dustrial Recovery Bo3.rd itself - together with ou.r examination 
in tne present s.jction of the viows to'ward public regalation held 
by the code authority - it is hard to see how it would have hecn 
possible for the Administration ana the industry to agree on any 
common capacity control program, and common procedure. For it is 
clear tliat many in ilPA wei'e prepared to insist tliat if capacity 
was to be controlled, inquiries concerning costs, prices, etc, 
would Imvc to be conducted in so thorough and effective a way as to 
constitute almost the equivalent of price regalation. But if the 
ice industry was-in effect, if not in theory-to be subjected to 
price regulation, there can be little doubt that the ice men would 
have held that this ¥?as too high a price to pay for capacity control. 

In addition to these difficulties in the way of reaching a 
working agreement both witMn NBA, ana between UFA and the industry, 
the prospect of going on with capacity control v/as weakened by the 
iniplacable opposition of the ice ma,chincr;/ manufacturers, and by a 
wide public sentiment in support of those who might be denied the 
right to construct ice plants. Also, there hung over all the shadow 
of possible adverse court decisions, which, regardless of the con- 
stitutionality of codes in general, might v;oll ha.vo struck down 
this particular code, with its predominantly local markets, or this 
particular capacity control provision, which limited in so uji- 
precendented a manner Yd:iat ha.d previously been regarded as private 
rights. 

Ifey, 1935, therefore foiond article XI in a thoroughly precarious 
position. For some time there load been no issuance of denials; and, 
for the reasons given above, it seems doubtfu.1 v/hcther the provision 
could liave been retained in the code mu.ch longer, oven had the Schech- 
ter Decision been of an entirely different tenor. (*) 3]ven at this time, 
however, the ice manufacturers, and also the Deputy Adm.inist rater and 



(*) Haddock, loc . cit . p. 272 sirpra, p. 2Q, states tmt it was gener- 
ally expected tliat Article XI would be deleted from the code 
after Juno 16, In the meantime. The national Industrial Re- 
coverj-' Board was postponing reaching any decision one way or 
tne other. On ifciy 6, 1935, the Board took action as follows: 
"It v/as agreed that, pending Congressional action on tlie IT.I.R.A., 
no further administrative action would be taken with respect to 
Article XI of the Code for the Ice Industrv.n Code History, 
p. 337 

9827 



-187- 



his p.spistants, appear, to have Tjeen as firm believers in the 
principle of capacity control as ever; and in these two ;^roiaps 
there V7as disaay over vhat v/as ref,arded as the failure on the part 
of the Board to "back up tne article ^ (*) 

One incident v/hich occurcd ahout I'&y, 1935, will perhaps 
illustrate better t'jian an^rthing else the tsnaciousness y/ith which 
the Indus tiy held to article :;.I and at the same time the question 
mark wiilch the AuJiUiiis ;ratio-i (GxcoMtirg the deputy's office) 
came more and move to p]acc Leside it. On Iv5a.y 17, 1935, \1. S. 
Martin, Chainuan of the Inciana Coniiidttee of Arbiti-ation and 
Appeal, wrote to Mount Taylor, Ghaiinvan of the Code Authority, as 
follows: (**) 

"Tuesday, fey 15, a hearing was held in the city 
of Anderson, Indiana, on a petition for a permit for 
Marlin and Al^nso Gibson to erect an ice plant in the 
city of Anderson. The hearinc was imdcr the supervi- 
sion of Mr. E. 'H. Bmcrson, Assistant Deputy Pield Adminis- 
trator. The Couns^el for the petitioner was 3x. U. S. Sena- 
tor, Arthur Hobinson. 

"During one of the discussions which cane v:p, Senator 
Robinson made a statement, which dumfounded not only tho 
Dpputy Administrator, but every man in the room. The 
Senator stated tliat he ha.d wpAe a trip to 'Washington about 
two and a half weeks a^p and another trip last week, and 
iiad taken v:p the qu.estion of this permit with Dr. Leon 
Ife.rslmll, Executive Secretary ITliA Board and that Dr. lar- 
sjriall had told him, "If I were you, I would go ahead and 
build the plant ' 

"ITow, to us fellows who have j;iven our time and money 
to act as a Board of Arbitration and Appeal for our Industry, 
who have tried to comn:)ly vith all the rales and regulations 
as laid down in conducting cases v/hich hjp.vo come before us 
and have used our best endeavors to follov/ to the letter 
the rule in the onductiug of hearings on Control of produc- 
tion cases, it comes li^:o a th'ondcr clap to be infonned 
thP.t a case lia.3 beenprejudged by the powers that be, without 
submission of evidence, without a hearing, without any pro- 
cedure at all, as laid dovm for the Industry to follow, and 
thiit the advice of Dr. Marshall to an Attorney in a case of 
this kind is 'if I were you, I would go ahead and build the 
plant. • 

"It has just taken the starch out of us " 



(*) See the unptiblished report by JSracrson and Bo'ianrian referred to 
in the footnote on p. 25 supra, and also numerous places in the 
Code History. 

(**) Code History, p. 91 

9827 



-188- 



V/hat was actfially paid on this occasion, and ■■ondor vhat circiimstances, 
doGs not further appear in the record; for a reply written hy Dr. 
I'&rsliall after the SchocLtcr Df-^cision i:.dicatGd that the whole 
question liad ooco.'io a tiiin;^ of the last, 

Althoufjh it v;a3 Th^.t-or-al that ice uicn should thinlc of the 
difficulties which they were having with article XI in terms of the 
opposition or diijappointrr.ents which thej met v/ith at the Imnds of 
this or that indj.vidiml. , or f^rou-o - a,s, for instance, from the Dir- 
ector of the Division of Hcser.rch and Plannint-, or the m.anufacturers 
of ice-making machinery - it is oelicved that most persons who examine 
the whole exporionce with article XI as outlined in the preceding pages 
will feel tliat the obstacles in the path of connletc success with the 
provision were too deep to "be overcome, for any great length of time, 
no matter what course ^articular persons might "lave sought to follow. 
It wo^ild appear, indeed. tha.t before the Schochter Decision, a dis- 
cerning observer could have decided that this attempt at capacity 
control h^ad not, and hardly could iiave, succeeded. 

This does not mean that article XI may not, under the peculia-r 
conditions of the national emergency, have served some useful pur- 
poses. But as a permanent program for the ice industry, there 
seemed to be no prospect that it caild be made to work. 



9827 



-ISO- , .. , 

ice -olant in Conmton, California. (*) Por the ourpose of our present 
re;Tort, it will "be -onnece^sary to add juiything to the Gtatement of facts 
contained in the pages ahove cited, e::ceot that it rill ho loortinent to 
exEinine here thgt special caspoct of the Los Angeles e:q)erience trhich re- 
lated to the effect of the narketin^' ai^reoiieiit on ice peddlers. 

A. L. Reaves rvas an ice drive.,.- uhose source of supply ha.d heen 
brought under the control of the Ice Exchange. In coLtnensation for 
depriving hira of ^-'hat hfd heen very I0-7 coct ice, the manager of the 
Ice Exchange hrd -lut hin on a retainer - vrhich for a rriiile had effected 
his retirement from the ice business. Oring to "budget complications, 
this retainer rps, hovrever, cut off; a:id for this or some other reason, 
Reaves became the leader of a, group of ice drivers rrho had lost their 
routes and \7ho proposed, under the name of the Consumers Cooperative 
Association (3oraoTTha.t of a misnomer) to construct an ice plant. 

In the -aresentation of this case, there rere submitted a consid- 
erable number of affidavits r/hich had "oeen made out by ice drivers or 
cash and carry station operators vrho had been obtaining ice from the 
Diamond Ice Company, the one concern in the Los 7'Jigeles area which not 
only r/as not in the Ice Exchange - (there trere a fer otner non-menbers) - 
but would not cooperate with it. D-aring the busy season, this concern, 
a small one, had not been able to meet the requirements of the dealers 
who came to it. Its former patrons had then gone to other manufacturers 
for ice; but as soon as the managers learned that they were old customers 
of the Diamond Company, they would ha,ve no ice for sale. The record 
shows that the Di'^.mond Company, alone -runong Los imgeles ice manufactur- 
ers, made no effort to fix the prices at which peddlers (and cash and 
carry men) could resell ice on the street. Its dealers therefore under- 
sold. Hence the boycott by the Ice Exchange aJid the companies affiliated 
with it. 

In addition to the dealers referred to above, Reaves' group also 
contained men \rho for some tiae past, had not been selling ice at all, 
because of having lost their routes through consolidation of routes 
effected by members of the Ice Exch-:inge, Indeed, a similar loss of old 
routes probably explains why many of those who were now selling "inde- 
pendent" ice had t8,ken this course. 

The group led "oy Reaves was vociferous in its condemnation of the 
Ice Exchange with its big executive salaries and hea.vy outlays for buying 
and closing plants - so that the comr)anies could make money, while the 
drivers were being thrown out of Jobs. And it wa.s to get away from this 
that the dealers asked -"lermission to build their own plant so tha.t they 
could obtain ajad sell ice. 



(*) Com[3ton is, in effect, a part of Los Angeles, The folder referred to 
is in the Deouty's files, placed under pending cases according to the 
arrangement described on n, 15 supra. All the references which follow 
are also to material in this folder. 



9827 



-139- 
CHAPEH VII 

THE FOET UOfiTK PLill: AIID OTHITt LOC-i :i;LRia:TIKG i..C-?a]E:L;iMTS 

At several joints in ths preceLJ.ng ciirpters of this reDort, it has 
been noted that restriction on incrorse of ice-mal:inc cr'oacit^ was regarded 
by the ice industr""' as tho nost vital feature of the ice code. This pro- 
vision ta,ken alone could not, however., '^ivo to ice prices cmd ice markets 
the stability rrhich the industry soUtiiito For "hat most plagued the indus- 
trjr vras not new plants, out only pr:-'"!-'^ ''.y \itilized old pla.nts« Even be- 
fore the dedline in ice srles ^.'hich iir-:G showed in the national totals in 
1932, it ::'a3 conmon for competing ice plants to enter into production or 
sales rgreenentSj often they 'jould bajid together to distribute their .tiro- 
duct through a comraon delivery systen, or enter into joint arrangements 
vjith a view to a^bsorbing ice coming on the market as a byproduct of the 
activity of firms engaged primarily in some other line of business. (*) 

TThen, however, ice sales fell off beti-een 1931 and 1952 by 24 per 
cent, rnd. between 1932 and 1933 by another 11 per cent (see p, 5 suira) , 
with no prospect of recovery (due to the loss of customers to mechanical 
refrigeration) 5 the incentive to taJre some step which would bring the 
"fifty per cent" of newly created surplus capacity (see p. 80 supra-) 
under control, wr 3 m?-ilti:olied many fold - at the saiiie tine that, owing 
to the complications of the situation, such action becazie in some respects 
more difficult. It will be observed that Colonel Vea.therred (CJ-eneral 
CoTonsel of the Code A'lthority) took the organizatio'i of distributing com- 
panies , or other devices for giving an "increased degree of control" and 
spreading "the ourdon of surpflus investment", as a matter of course 
(p» 83- ■■ supra); ajid that in almost all of the oities in \7hich the IIRA 
declared price emergencies, the dibturbed situa.tion represented a lapse 
■from iDrevious efforts to o-nerat-: ;-. cketing agreements (p.'.97 sipra) », _. ,. 
Some other marketing agreements have been mentioned on prgec 32-33. above. 

I. THE LOS iuIGELSS ICE EXCiLUTGE 

In earlier passages in this report, reference ha,s been ma.de to the 
more outstanding fa.cts concerning the formation in 1932 of the Los Angeles 
Ice Exchange. For the conditions out of which it developed, see page 33 
above; for its general structure and f-/ ..tioning, pages 25-.2.6'; and for an 
account of a pra^ctical experiment by which the Exchange sought to determine] 
how demand would respond to a lowering of ice ;vjirices, see loa^-e i''^ above. 
Anyone who wishes to read a i\ill and candid accoLtnt of what the creators 
of this marketing agreement hrd in mind when they found it, will find this 
in the brief submitted by T7indsor Lle-rellyn, liajiager of the Exchaaige, in 
the folder deali.-?.g ^ith the anDlicrtion of A. L, Reaves to construct an 



(*) Sec reference earlier in this report to formation of the Ice Delivery 
Company of Seattle in 1913 (po 46.^); to the existence of informal 
agreements ;:nd delivery systems in Oklahoma prior to 1925 (p. S'i); 
and to the ilew Orleaiis market agreement which broke up in 1933 pi"ter 
several years of operrticn (o. 'iZ..^), 

9327 ; - 



-131- 

When these complaints are rnea.surGd apainst statistics pi'esented 
"by the Ilanager of the Ice E.-nihrnge, it t;ou1cL ap-oes-r, however, that the 
Ice Exchange and its ir-emherc, instead of ruthlessl;/- disregarding rrhat 
happened to their dealers; had gone to rather surprising lengths in 
the op-DOsite direction. There had, indeed, been 'some consolidation of 
routes, hut the reduction in the nuiaher of routes ^jas very snail com- 
pared with th3 reduction in demandt Although the qiiantity of ice sold 
in Los Angeles had fallen to 40 per cent less thrn it liad heen in 1931 
(hearing, po 113), the nunher of drivers had "been reduced from 1931 to 
1934 only by the difference between 1912 ajid 1784 (supplementary data 
furnished by Llewellyn after hearinr;)o 

It was further stated .-at the hearing that, when a general increase 
in ice prices was made, at the time when lEA come in, advance had been 
made only in the p. -ice to c.ie cons'araero The price to the dealer had 
stayed down. Thus the margin of the dealers had been increased; and the 
members of the Exchange had not pnsed on to anyone else even the 25 
cents a ton a.ssessment which each rae:.'.,io. paid to the Exchange as his 
contribution to the cost of buying and closing surplus plants (see page 
40 above). In Ilr. Llewellyn's words. 

"The street price of the prod^icts was raised. The dock price 
remained at $4.60, which had been the price charged before , 
that. The raise went to the distribiitor on the street, in an 
endeavor to keep as many of them employed as possible. That 
sounds rather ridiculous, perhaps, that biisiness men shoiold 
have been cr-rried away that wry, but it was a matter of fact 
that i-e did hold, at that time, a very solemn session as to 
whether or not it was our duty to try to keep as many men em- 
ployed here as possible," (Honring, p» IIS) 

Just before this, Ilr. Lle-jellyn had said of the general situation ~ 

"There has been, and will continue to be, a redaction in men 
engaged in the distribution and manufacture of ice in this 
business. IJow, that will either be almost as painless as 
possible, or there will be an upheavclo" 

While the statistics and e:q3ro3sion of attitude just presented emanated 
from one side in a controversy, it uay be stated that there seemed to be 
no real conflict between the facts of the Los Angeles situation as presented 
by the contestants. Accepting, therefore, the above statem.ent of intent 
at its face value, the sitiiation in Los Angeles presents an interesting con- 
trast to that '-■hicii has been described earlier in this report with refer- 
ence to Hew York City. On pages 27-31 above, we have noted that under con- 
ditions similarly inviting liquid; '-ion of dealers, the New York City ice 
manufacturers pursued a radically dii^ei\--nt courf-e, and there was, indeed, 
a tremendoiis "upheaval- o" 

tifhat light does the record in the A. L* Reaves case throw on how 
matters worked out when this group of employers (manufacturers selling 
to small dealers, who hatd many of the attributes of einployees), made their 
conscious effort to "painlessly" liquidate part of the oersonnel engaged 
in distributing ice? The record shows that, in reducing the scope of the 
liquidation, the Ice Exchange did not rid itself of the problem. The 
mere fact that they were relatively few in number, seems not to have made 
9827 



"192- 

the groiap of men ^7ho did lose their routes feel any more kindly totrards 
the "system#" They rehelled a^'^ainst having tnoir mepjas of livelihood 
destroyed, against seeing the route'^^ 'jhich they had "built up taken a\7ay 
without compensation. (*) Pirst ti. rj flochod to pn inde-oendent ice coin- 
pany, and sought by price cutting to reestohlish thenselves in "business, 
Frustrated in this, they prODOsed to "build their o-.vn ice plant. 

To this proiDOsal to duplicate fa,cilitie3 which were already in 
excess, pnd to keep in an industry more persons than were needed, IffiA 
with its ice code would presuna'oly have "been a "barrier. However, the 
hearing on the A. L. Eeo.ves a^Dplication was scheduled for I!ay 23, the 
day after the Schechter Decision. 1. '■■ 1 .-■.ring was held just the sane. 
But after the session, the attorney for che applicant advised the ilEA 
representative who had conducted it that, in view of the Supreme Court 
devision, his clients would go ahead and huild the ice plant at Cornpton.C**) 

I ■ " ■ 

It must he remem"bercd, of course, that results might have heen 

different if the attemot to reduce personnel in the ice industry had not 

occurred 8.t a. time when there was lack of opportunity for employment 

elsewhere, 

II. THE PORT I70RTK PLi\lI (***) 

Aa Relati c n of Port Uorth Plan to the Ice Code,, to Actual and 

Fro-josc, Administra t ion Policies, to Activities of Code Author- 
ity, an d to Pre- and Post-Code Plans of Industry 



(*) Reaves himself had for a. while "been compensated for the loss of his 

route (see p, 19C ' suora) . But this had "been done in only a few cases. 

(**) I.Iemorajidun from iIa.rion H. }3orden, who conducted the hearing, to H, J. 
Daly, I lay 28, 1935. 

(***) The principal sources of information concerning the Port Worth Plan 
are (l) a letter dated Scpteraher 7, 1934, addi-essed to H. J. Daly, 
Assistant Deputy Administrator, and signed "by Iloijint Taylor, Chairman 
of Code Authority Igj Industry, hut also "bearing the name of P, A« 
Ueatherred, General Counsel (ava,ila"ble in the Deputy's files in a 
"Port Worth" folder, among "closed" production control and anti-dump- 
ing cases); (2) a renort on ''Iho "iarketing Agreement of the Port 
Worth, Te:-as, Ice Indiistry," prepared hy Charles D, Bohannan, Pield 
Economic Advisor, xvhich was pu'blished within IIEA as Exhibit 7 of the 
rei-)ort "by Deputy Administrator Ro'bert K. Straus on "Administration 
of the Trade Practice Provisions of the Code of Pair Corrpetition for 
the Ice Industry," issued separately in Ilarch, 1935, and also hound 
as Exhibit 7 in the A;^-ipendix to the Code History (Bohannan's report 
in thus Exhibit 7 .under. Exhibit 7 in the Code Kis tory Appendix); 
and (2) a rough draft report entitled "Supplementary ReiDort of Study 
of Ice Industry," prepared by J. 3. Iloore, of the Trade Practice Studies 
Section, of the Division of Review, after a field trip to Port Worth 
in December, 1935, (availr.ble in files of Geographic Price Structure 
Unit). Those three documents will hereafter be city as Taylor, Bohannan. 
and iioore, respectively. 



9827 



1 



-193- 

Over a period of sever.il yerrs prior to the estalilishraent of IJUA., 
Fort V/orth, Texas, ice mrnuf -•.cturers had or en attempting to sta'bilize 
the ice market of that city by conbinationo of one hind or another (often 
two or more rival combinations at the same time)o For one reason or 
another, houever, each of these attcnrots hj'd broken dorm, and in 1933 
there ensued a very bitter price rrar. in the coiorse of v.^hich the whole- 
sale price of ice dropped to $1,00 a tor. (*) 

The prevention of ice wars, whether by minimiin lorice determinations, 
anti-dujnping rest.aints, or other means within the comjaa.nd of the Adminis- 
tration and code authority, was, of course, one of the principal objec- 
tives of the tra.de -oractice phase of the ice- code. Colonel ¥eatherred. 
General Counsel of the Ice Code Authority, had himself been associated 
with the ice industry in the SouthvTest for a number of yearso Possessing 
high skill as a negotiator, hd went to Fort Worth during the ice war (**) 
and spent considerable time trying to straighten things out. As has been 
noted on page 91.' abovej a normal m.-rket area was established for Fort 
Worth (and another for neighboring -rllas), ao as to put a definite founda- 
tion under the anti-dumping provision of the code. Also there was issued 
an emergency price declpration (see p, 35 above). The emergency price 
declaration was, however, never fol?.owcd by the promulgrtion of an emer- 
gency price schedule; for before ma,tters went that far (or in place of 
handling the situation in that way). Colonel Weatherred was successful 
in developing and getting the previoiisly discordcnt elements in the indus- 
try to adhere to - a voluntary mar'-etin.'' agreement. 

In negotiating this rgreement, it v/as hoped to secure for it IffiA 
approval. On October 23, 1935, twenty days „fter the president approved 
the Ice Code in Washington, there had 'aeea approved, in Texas, an Act(***) 
which provided that agreements of the character which Weatherred later 
was to work out for Fort Worth, when an^'-roved by the lEA Administrator and 
filed with the Attorney General of the State, were to be relieved from the 
prohibitions and penalties established in the State Anti-trust laws, (****) 
On January 22, 1934, when the ice industry proposed to the IIRA Administra- 
tion a series of am.endraents to the ice code (all listed, however, as sec- 
tions of a single amendment), Section 7 of the proposed amendment (see _ , 
page 94 supra) wonJ-d have em;oowered the Administrator to "enter into agree- 
ments with or appi'ove voluntary agreements betweeen and among members of the 
industry selling ice or offering the same for sale in or into any competi- 
tive area©" 

This part of the pro-iDOsed amendment to the ice code was not approved. 
Nevertheless the Fort Worth ice manufacturers entered into their marketing 
agreement on August 1, 1934. And on September 7, 1934, Mount Taylor, 
Chairman of -fehe Code Authority, addressed to the Administration the long 
letter referred to in the footnote on page 192 above. In this letter, the 



(*) Bohannan, pnd, as respects the $1,00 price, Tayl r, 

(**) Bohannan, loc, cit . . vr, 192 suprr,, 

(***) House Bill ITo, 10, First called Session of the 43rd Legislature 

(****) Taylor, loc, cit e, p, 192 supra, 

9827 



-194- 



Code Authorit7 Chairjncn reviewed the conditions nhich had existed in 
Fort ITorth, descrited in great detail the Port Worth Plan and how it was 
expected to \70rk, and closed 'dth a ' >lec for Administrative action which 
ran as follov;s: 

"(1) The President hns ^lor/er to ap Drove a:;^reements of 
this charpcter "by virtue of Section 4 (a) of the national Re- 
covery Act. 

"(2) Section 2 (b) gives the President power to dele- 
gate to the Adi.iinistrr'tor the authority to approve this and 
similar agroenients. 

"(3) Whether or not tlie Prer.-.dent has. actually delegated 
to the Adninistrptor po^er to a?Trove this P'^i-eenent is a 
Question for the Administrator to antjwer. This crse and the 
policies involved are of major im-nortance to the Ice Industr;"/ 
and the Code Authority req^uests that such Executive or Admin- 
ishtrative Order ."s may be necessary be secured ap iroving or 
leading' to the approval of this and similar ac^eements. 

"(4) Cases involving agreements between groxips of ice 
manufacturars are before the Code Authority and as others will 
be presented from time to time, the Code Authority again re- 
quests anc"- urges that the Administrator approve the pending 
amendment to the Ice Code that was presented as Section 7 of 
Article XII of the Amendment, hearings upon which were held 
by the Admi.iistrator on February 5, lP34i Section 7 was not 
rejected, b^at v/as held in abeyance -oending further consider- 
ation, . . . 

"... The Code Authority for the Ice Industry believes 
that favorable action by tho Acu^inistrator upon this request 
vdll h-^ve a wholesome effect for the advr,ncement of IIRA in the 
permissive, as distinguished, "rom the coercive -phases of Govern- 
mental control over and cooper- ti on with industry. The public 
interest is thoroughly served through rea.sonable organization 
within ice markets that vdll make possible compliajice by the 
Ice Industry with tho labor a.nd other provisions of the Code, 
and will place the Ice Industry in position to serve the small 
users, upon whom it must depend for its sustenance, at prices 
at which such users C'n afford to purchase ice in sufficient 
abundance to serve their neoa.' t/ to support necessary ice 
investments and necessary service^;. The competition between 
■ ice and raechanicaJ refrigeration, together with such restric- 
tions a.nd conditions' a.s may be ap;oended to the Administrator's 
a)wroval of such amendments within themselves give assurance 
that there will be no imposition upon the public as far as are 
concerned prices pjid services. Iloreover, this agreement and 
other agreements tha.t may from ti;ne to time be ijresented by 
the Code Authority will not eliminate active ajid wholesome and 
bona fide competition for tho -iiatronage of the ice users. 

"As the season is at hand during which, re-adjustments 
will be necessary in several of the large markets, in order 
to prevent such disasters as that which occurred in Port Worth 
9827 



-195- 

and in other markets durin.;; this year, the Code Authority 
respectfull7 urges that this petition he given as early 
c""-.3i ^or- t Ion -r^, i'l c ')matlhls vdth a study of the puroh- 
lem loresentcd, " ' 

As has been noted, the ICIA. had, early in 1934, declined to ap-:3rovG 
the proposal to sanction voluntrry narheting rfreenents. However, deo-uty 
Administrator Straus, r/ho served fron October 1934 to May 1935, rras a narn 
advocate of the adoption of such a policy. Pa^es 42 to 55 of his report 
of l!arch,1935, on the "Adrainistration of the Trrde Practice Provisions of 
the Codeof Pair Conrpetition for the Ice InduGtry" (*) devoted exclusively 
to this subject; and, indbed, it,-70uld appear that the promotion of volun- 
tary agreements of the Port TTorth type - together with the administrative 
ms.chinery which t]ie ado-jtion of such a "oolicy would make necessary - repre- 
sented the core of the whole progra':] for establishing order in the ice 
industry which Straus envisaged in this, his lorincipal report. The plan 
was also warmly recommended by Charles H, Bohojinan,, Pield Economic Adviser, 
who, about six months after the plan's first setting up, made a. study of 
it in the field, and subjaitted the report to v;hich reference has been made 
in the note on nage 292 above. 

There wa.s nothing to indicate that the llational Industrial Recovery 
Board, would in 1935, have 'ooen any more disposed to accept such an amend- 
ment to the code than was the Adjnlnistrator in 1934. However, the fact 
that this arrangement — in the view of both the Code Authority and the 
deputy Adrainistra.tor — represented the ideal instrament for production a.nd 
price control (kee^oing in mind, of coujrse, that restrictions on new capa- 
city arid prohibitions of 'du:iping --^ould still -have to be maintained); the 
fact that the "olrn was actually put into o-^eration, and on the initiative 
of the code authority (in how many places is notkiomi); the fact that the 
plan may be regarded a.s the heritage of many attempts along the sajne line 
before ISA, that it is still 'f sanctioning, and that it ma,y well serve as the 
protot^nDe similar efforts at self govern;.ient by industry in the future - 
£.11 these considerritions make an examination of what is known as the Port 
TJorth Plaai essential to anyone who wishes to understand the organization, 
actual and orosucctive, of the ice industry. 

E. General Orf'raniza.tion of Plan 

Since the details of the Port T7orth Plan are available in iir. 
Bohannan's re-oort, it will be only neccessary here to touch oh the main 
features. 

There were in Port Worth in 1933 some 21 ice plants (there may possibly 
have been one or two more^ a.s the listing in different places does not quite 
check), owned by some 15 (or 17) separa.te coLTpanies. (**) These figures, 
hov;ever, include 3 "olants, owned ^oy one company, ''hich O'oera.ted in Horth 
Port Worth, which iioore says had no direct concern with the Port Worth Plan 
except as it continued, by a gentlemen's agreement, an arrangement which 

(*) Available as S;diibit 7 in the Ap )endi:-: to the Code History. 
(**) Taylor, also Bohannan. 



9827 



-196- 

T7as 01 Ion™ steaiding, 'hj which the jlfutG on opposite sile;; of t^xo rivox 

kept o\xt Q-" one another' r; t-'ri-itorr. The. 'load factor for the entire area 

O.rcT-'i'^i-i- ITorf" ?ort ITorth) -'T-.s in 1933, ."SI per cent. (*) Sales had 

u.rop joa iro 1 lc:v,./-/J ti-as: in IJul to 7.50,000' in. 19S3, and 138,000 in 1934,(**) 

As has alre-^.dy heen noted, the coi.ipaniea '-ere in 1933 in hitter rrarefare. 

Under' the Port TJorth Plan, (***) 15 coniiMaios ^jere divided into three 
groLips, Group III conpanies, seven in n-uinher(.****)-nade up principally of 
the larger corapF.niGs - -r^ere to continue to r.lanuf ac ture ice (within certain 
quota liaits), and to sell as much as Viiev- chose. Group II conpanies (four 
in nu-foer) -.'ere to continue producing ice, hut not to sell- (although in 
certain cases exceptions vere made)- other than to an organization rcting 
for the Group III companies, nhich organization g'uaranteed to talcs from 
each Group II conpai^y a specified amount of ice. The four Group I com- 
-panies uere to he closed dov/n (except that one xir.s to continue in the car 
icing husiness). \ 

To implement this arrriigement, there t/.-.s set up a, ne^ corporation, 
the City Ice Co?ipajv» the whole stock of v.Hiich was suhscrioed for hy the 
seven companies falling in Group III, This corporrtion was to buy from 
the comiajiies in Group II the pgreed quoJitities of ice at $3.85 a ton. 
The ice so hought wrs to he distrihutod to ice consumers hy the City Ice 
Comnany itself (-.-hich, of course, v,'as simly the Group III corapanies 
cooperating as ,a conDOration) . Should the City Ice Com;oany fail to dis- 
tribute all the ice for which contrrcts had been rarde, the unsold balance 
was to be taken over oj the Group III compmies acting individually, each 
company tai'ing a pre-arranged proportion. As an aid to the City Ice Com- 
pany in distributing the ice which it was suir-^osed to sell, the Group II 
and Grou;p I companies v;ere to turn over to it (with, certain exceptions) 
their old sales outlets and facilities. As respects the conpanies in 
Group I (which were to be shut down), the arrangement v.'as technicall-^ 
one in '^hich the City Ice Company agreed to purchase certain quantities 
of ice, but with the proviso that it need not actually make the purchase, 
but could wa;'" liquiated dajiages amounting to $2,00 per ton. 



(*) Taylor. 

(**) iloore, Taylor, however, had given the sales figures for 1931 as 
190,000 tons; for 1933 (for which year "loore says that no records 
are available) at 160,000 tons; and for 1933 at 152,631 tons. 

(***) All statements in the balance of this sub-section (b) based on 
Bohannan. 

(****) One of these seven, however, was the comnany with plants in ilorth 
Port ITorth, mentioned above, while Iloore, writing after the close 
of the first ye.-r, indicates was not involved in the detailed 
v/orkin.';: of the Port TJorth ^lan. We will continue to speak of the 
'^' seven" companies, however, b.ecause this ITorth Port TTorth comipajiy 
is included in all the figures used b:-- Taylor and Bohannaji, includ- 
ing those with regard to allotments. 



9827 



i 



-197- 

As has been noted, the companies in Group III Trerc left free to 
sell all the ice they cotild. However, r.'hen it caiae to rnpnufacturinj^ 
ice, each of these conpanies ',:as mt on a strict quota bs.sis. If a 
Group III compaiiy Gold Ijcyond its nanufacturinf^ quota, it had to buy the 
necessary ice fron the City Ice Conpany at $4.50 a ton. Conversely, if 
a conrpany manufactured less than its quota, the City Jce Conrp,nny gave it 
sufficient orders, at $4,50 a ton, to brin;'^ it wi to its assigned ratio. 

To ap-oreci;ite just hou the plan -iTOrked, some further explanation 
will be necessary. Ice snles in 1933, to take the fi,^ures fro;.i from ilr, 
Taylor's letter, had been 152,631 tons. The Port TTorth ice manufacturers 
proceeded to plan -"or the August 1, 1934 - Aug-ast 1, 1935 period, for 
L'hich their fir^t af°'reement v/rs to rmi, on the r^ssunijtion that the market 
v/ould r.bsorb, during this t'Telve-months period, about 140,750 tons, (*) 
The Group III corrpanies aj'^reod to take 31,250 tons of ice from the Growo 
II cono£-unies, (C-roup I companies wero to be paid $13,100 for not produc- 
ing 9,950 tons,) This meant that the Grouir) III corai.v-iJiies thought that they 
could sell about 109,500 tons of ice beyond what they had obligated them- 
selves to take fron the Groun II conrpanies. Of this total of 109,500 tons, 
each 01 the sov.-.n Group III companies was given an allotment based on that 
compr.ny's relative im^ortrJice in the Port Tforth market in the past. 

Though each comrjaiy's quota wr-s thus set forth in terms of the 
total niamber of tens wiiich it would be permitted to manufacture during 
the year, it would appear that the number of tons, as such, y/as of no 
special consequence (exceot p.s it may have helped in computations and 
thinking). What really counted in controlling manufacturing operntions 
was the -per cent which each com;3any's quota wrs of the total quota for 
all companies. Drily records were kept of the production of each ice 
company. Daily during the summer, nnd periodically during the vdnter, 
the City Ice Company compared the proportionate "oroduction of each of the 
seven companies with the -oor cent' of annual production which had been 
allocated to that company* If, on ex,ai.iining the record of Com.pany A - 
to which, let us say, had been .-.llocatod 10,27 -oer cent of total a.nnual 
production - it was found that this con-pany had on a given day produced 
10 tons more than 10,27 per cent of all ice produced on that day, then 
Company A was required to buy 10 tons of ice from the City Ice Company, 
at $4,50 a ton - which x-r^s one way of bringing it about that on some 
future day Company A would have to produce 10 tons less than its quota,, 
thus bringing its agrTegate production as curanulated from the beginning 

of the year back into line with the quota originally 
set. But if Com-orny A produced 10 tons more than its allocated per cent, 
then other corTpa?iies must hp.ve produced 10 tons less than their allotted 
per cent, Pron those other conpanii- s, the City Ico Company would b\:iy, 
at $4»50 a ton, the ten tons of ico which it woiold in turn sell to Coli- 
pany A. Thus the oroduction of each company was kept up to its allotted 
"ocr cent. 



(*) A figure of 150,000 tons given in Bohannan's text is evidently in 
error, as it does n^^'t check with other figures on the same page, or 
the detailed nuotas by com"oanics which he later -orcscnts. 



9827 



„ -198- 

Prom this explanation it 'Till tc scon that the method of allocation 
used at Fort T/orth did not limit the total quantity of ice r/hich coiild bo 
produced. TJhat it did do v/as to provide (l) for the eliciination altogether 
of certain capacity (Group I companies) J (2) for stabilizing at a specified 
tonnage the T)roduction of certain other companies (Group II); and (o) for 
production h;^ the remaining companies according to strictly proscribed 
ratios, one to another, but Trithout limit as respects the production of 
the group taken as a uhole. 

There was nothing to prevent a Grouio III company from selling a 
greater quantity of ice, in both quan.tity and ratio, then -had been allotted 
to it. But if it sold beyond its ratio it had to buy this ice from other 
companies at $4,50 a ton. 

Each of the seven conpanies in Group III contributed to a penalty 
fund, 

Co 3carin;: of Plari on Gomr)etition 

In the letter from liount Taylor, Chairman of the Code Authority, 
in V7hich the Fort Worth plan v/as explained. (*) It was claimed that the 
arrangement which has Just boon described assured active competition. 
No limit was placed on the quantity of ice which the seven concerns in 
Group III, or the City Ice Cora^^jany, could sell. After a manufacturer 
had exhausted his mojiuf acturing quota he could buy as much more ice as 
he wished at $4.50 a ton. As this ice could be sold at a gross realiza- 
tion of $6.50 a ton, (**) and its handling should involve little or no 
additional expense to a corjpany which was already mp.intaining a selling 
organization, ca,ch maXLufactiirer would hrjvo an incentive to sell as much 
as he could economically distribute. 

The a-bove recsoning appears to be well founded as far as it goes. 
But it stops with the assumption that the ends of competition arc suf- 
ficiently served when one or more sellers are 'jloasod to sell - without 
inquiring into the question as to the terms upon vrhich the goods are 
offered for sale. Under the Fort TTorth Plan, a manufacturer seeking to 
win now customers must pay approximately twice o.s much for the necessary 
additional ice as it would cost to manufacture ice in a reasonably effi- 
cient plant. Indeed, considering the fa.ct that the Fort Worth manufactur- 
ers undoubtedly ha.d a good deal of unused capacity, most of them probably 
could have manufactured such extra ice as they might have sold through 
sales extensions, at out-of-pocket costs of less than a dollar a ton, 
rather than the $4.50 per ton which they were charged under the Fort 



(*) Sec p. 192 supra. 

(**) Presumably this is an average figure, lioore says that when the 

Fort TJorth Plan was introduced, manufacturers oosted and maintained 
prices of $5.00 per ton wholesale at platform; $8.00 per ton retail 
at 0§,sh and carry stations; and $9.60 per ton retail delivered. 



9827 



r-199- 

Worth Pl,?n for an;'' ice sold 'beyond thoir nturofacturing ouotas. (*) 

O^viouslj- an incroas? in the cost o." ico to the seller fron $0.00 
or $3,00 a ton ( or possToly frou oven loss than $1,00 a ton) to $4.50 a 
ton, should have a tronundous "boaring on the inclination of the seller 
to cut prices, or otherwise offer soiio natorial, as opoosod to sone 
■psychological, induconont to a consimcr to take ice, I3ut in addition 
to i.nposing this cost penalty, the Port T7orth Plan, in reducing the 
number of cojjpanies distributing ice fror', 15 to 17 to V (plus the Citj^ 
Ic- Company) should tend to make it easier to maintain a policy of ad- 
horing to agreed upon jorices. Better control over the number ajid poli- 
cies of small sales outlets, because of the consolidation of the sales 
facilities of eight or ton comijanies \mdcr the City Ice Company, must 
also have constituted a. force rrorking in the same direction. 

To the above observations it might be replied that an admitted 
purpose of the Port TJorth Plan nas to modify com^jctition - to prevent 
rate wars, i7ith their $leOO ice and general ruin. G-ranted this objec- 
tive, ho'.7ever, question arises whether or' nottho ;olan may go so far in 
the opposite direction, as practically to remove the pressure iThich a 
wide gap botvroon costs and prices should exert tor/ards lo^,7ering of 
rates. 

These points have been raised here, not ps preliminary to pji attempt 
to arrive- at some judgment concerning the Port Worth Plan - because our 
task here is in the; main descriptive; but mainly for thejourpose of making 
sure that in vic^-jing the record of agreoracnts of this type, they bo thought 
of in' their true light as devices for limitation of competition, ajid be 
appraised - vrhother favorably or imf rivorrbly , or noutrylly — on that basis, 

(*) Sec dato on ice costs pp.19, ,40-45, supra.. I.Ioore, loc . cit . p»192 

supra, ras unable to secure definit? data on the ccst of manufacturing 
ice in Port Worth, the m,?nuf acturcrs contending that no such thing 
could be determined, since ireathcr conditionri and various other un- 
certain elements uere constantly changing results. Bohannan, loc« cit . 
p. 192 supra, tells, hoi-'ovcr, of a Port TTorth dairy company which, 
having some available space, and considering that the poorer required 
would be on the lop end of the P0'.7cr price schedule, figured that 
they could raaJcc "white ice" (for commercial use only) at $1.00 a ton 
or less. The City Ice Company'- agreed to sell this company their ice 
requirements at $2.50 a ton, an.d then arranged for individual ice 
companie.s, menbors of Group III, to actually manufacture pnd deliver 
the ice to tiio dairy cit $1.50 a ton, thus givin,^- the City Ice Corar- 
pany a profit (on the $2.50 ice) of $1,00 a ton. As to whether the 
individual ice companies oxiDocted to make a profit out of this busi- 
ness, or voluntarily offered to tolzo a loss in order to contribute to 
the revenues of the company riiich they jointly owned, can only be 
surmised. 

However, the, f?ct thrt fo^ar Port Worth ice companies ( Gro^^p II) 
were so plea.aod \7ith a contrrct to sell ice at $3,85 a ton that they 
wore willing to tui-n ovor their sales lists and facilities to the City 
Ice Company indicates that $3.85 was well above cost. On this point, 
I Bohannaji, o:; plaining that the Group II coriPcinies appeared to be well 
' satisfied "ith the arrrngement, said: "In fact, it would be strange 
9827 ^-^ they were not, , .,\mdcr the markating agroomcnt they are guarautecd 
the sales of a definite laaown tonnage of $3.85 per ton, which is well 
above cost of manufacture.". 



• r20Q- 
D. ' Adaptation to Special Circun stances' of In&ividiial Plants (*) 

A noteworthy feature of the Fort TTorth agreement was the fact that 
within its general fYaraework, as outlined in suosection 3 above, the details 
of the plan were worked out and Administered with a good deal of flexibility, 
so that the plan as a \7hole could he and v/as adapted to raeet many special 
circumstances affecting individ-'oal ice plants. : 

Of the comnanies in Group II, which continued maznafacturing - "but v/ere 
supposed to give up their sales outlets - plant 1, a dairy, was allowed to 
manufacture such ice as it needed for its -dairy products, over and above its 
tonnage contract with City Ice. It could also sell ice to milk producers. 
This ice was, however, deducted from that \7hich the City Ice Company was 
required to b-uy from it. Plant 1 turned over to City Ice its lists of pedd- 
lers, dealers and wholesale customers. 

A second of the Grouno II companies had run' a combination ice and cold 
storage business. This company did a car icing business, v/luch had, however, 
been much reduced from its former large size, because Fort Worth, had lost 
most of its car icing to points farther east - because of the speeding up of 
trains. This corapanj'- v;as allowed to retain the remnant of its car icing 
business; but the amount of car ice sold wa,s deducted from the quantity of 
ice which City Ice was, under contract, bound to take from it. 

Company Uo. 3 had in recent years been doing a larger business in fuel 
than in ice. It lea,sed to Citjr IcS its ice storrge vaults, docks, and other 
plant sales facilities; but was allowed to continue to supply not more tliar. 
10 routes for cons"umers only (with the exception of tv/o customers v/ho did 
resell). Ice for this purpose was sold to City Ice at $3.85 a ton and pur- 
chased back at $4.50. Company Ho. o also had a contract to furnish a dairy /I 
with ice at $3.00 a ton. City Ice took ice for this purpose from Company ifoi ' 
3"at $2. CO a ton (outside of the q;uota of other ice bought at $3.85 a ton), 
and made delivery to the dair;^ company. (it was this dairy that Cits'- Ice latei 
agreed to supply with ice at $2.50 - see note page 302 above - thereafter ob- 
taining the ice, however, not from plant 3, but from companies in Group III 
at $1.50 a ton.) 

Plant 4 in Group II, formerly owned by a dair;;,'-, had been bought at 
auction by a, group of ice men, and came into the new plan without anj^- side 
line arrangements. 

In the selection of plants for shutting .down (Group I), and the policies' 

followed with respect to the vrithdrawn plant and personnel, the creators of 
the Port Worth agreement also adapted their course to raeet special circum- 
stances. 

The plant which we may term ITo. 1 in Group I was the smallest plant in 
Fort Worth,- having a capacitj'- of only 12 tons daily. An old plant, its 
proprietor also was an elderly man, who prefered not to run his eqiiipment, 
provided the agreement v/o.rked. Under the terms of the market agreement, he 
manufactured no ice. But he nevertlieless remained in the ice business. For 
the City Ice Companj' supplied him - and at a price which gave him a profit, 
not only on that part of his business v/hich he took care of directly v^ith 
his own tr-icks, but on other ice which he sold through a peddler. 

(*) All statements of fslct in this subsection based on Bohannan, 
9827 " loc cit. page 192 supra ' - • 



-201- 

Plsnt llo. 2 of Group I, though shut down, also obtained ice from the 
Ice Companj'", which it sold at its dock, principally to the domestic cash 
and carry trade. Plant ITo. 3, a sna,ll one previcasly operatied "by S^7ift & 
Co., was entirely sl'iut dov/n. A contract which it had formerly had with an- 
other ice company v/as shifted to the City Ice Company, Plant iJo. 4, though 
mainly in the railroad icing business, had sold a small amourt of ice in the 
general market. Tae large unused capacity r-f 'this plant ha.d made it a 
threat to the stability cf the market. This company retained its railroa-d 
business, but withdrew from the local market. 

In further illustration cf the flexibility of the Port Worth plan, 
Bohannan points out that, aside from the plants which fell clearly in 
Groups III, II and I, .there were some intermediate arrangements. 

Tlie Vandevoort plant, wliich sold a-bout 50 per cent of its ice on the 
market - and cither used the other 50 per cent itself, or sold it to its 
milk producers - was left free technically to sell a,s many tons of ice as 
it desired, orovided . however, that it had to pay $10. O^ a ton for all that 
it sold that it coiold not manufacture - a thoroughly effective limitation. 
Under the 'terras of, the agreement, this compan;^'- was to contribute 25 cents a 
ton on the ice which it manufactured, exclusive tf that used on milk routes 
and in its o\^n plan.t, to help maintain the City Ice Company - besides making 
some other small contributions. 

Hie Diamond Ice Compare could sell a raa:cimum of b,OOC' tons of ice to 
the City Ice Companj^ at $4.00 a ton, to be bought back at $4.4C a ton (thus 
contributing to the City Ice Company's support); and beyond this, could buy 
other ice from the City Ice Company at $4.53 a ton. This ccmpar^y also agreed 
to confine its sales to 3 refrigerated stations, 4 company routes, and 9 
peddlers. 

Tliese details have been given for the p\-.r]pose of illustrating, by a 
picture of the ice business in one city, the variety of circumstances which 
exist among plants, aiid the 3na,gnitude of the task which must be confronted 
in anjr rttem-ot by an administration, whether thro-igh a government bureau or 
code authority, to set up a system of production control which would not be 
too unaccepta,ble to individual interests, or to dectractive of local values, 
material and personal, as well as financial. 

This phase of the situation might be considered as an argument, assuming 
that one is determined on establishing production control, in support of 
that decentralizing policy T;hich deputjr Acijninistrator Straus sought to pro- 
mote, both by seeking code pjnendm.ent, and by changes in administration. 

On the other hand, it may be pointed out that the development and carrj''- 
ing through to acceptance of a plan which would reconcile and weld into one 
harmonious whole the many different interests which are sometimes engaged in 
the ice industry had, in the case of Port Worth, proved to be bevond the 
power of the local group (as was also true of San Antonio, ITew Orleans, and 
!Tew York - see pages ' '^'7—96 above). In Port Worth, it took the hard labor 
and abilities of the genera,l co^'onsel of the code authority to v/ork the arrange- 
ment out. However, a general counsel cannot personall;;- organize every local 
marketing agreement, or keep it functioning, once organized. 



9827 



-g62- 
E . Finding by Bohannan aft'--r Six ?'!6-.tfas ofQ-perat ion 

At about the 'beginning of 1935^ Chas. D. Bohannan, Field Economic 
Advisor, made a field trip to Texas, in the course of which he made a 
study of the organization and operation of the Fort TTorth Plan. (*) He 
reported that, with one or tvTo exceptions, the proprietors of the plants 
in all three groups were well pleased with the operation of the plan. One 
proprietor - he whose sales had, by a considerable margin, been the largest 
in Fort ¥orth - made some complaint concerning his tonnage allotment. How- 
ever, he stated that, b3'- and large, he liked the plan much better than 
having the market in continual danger of being disrupted by a price war. 

Mr. Bohannan found no evidence that any of the Group III companies 
had slackened their sales efforts since the agreement went into effect. 
"There t/&s in fact evidence that each of the companies is making an effort 
to expand its individual sales as much as possible. These efforts have 
included attempts to work out a coiiimission basis for delivery men, such as 
will stimulate them to sell more ice; the training of delivery men in 
sales and service; improvement in equipment and adoption of uniforms for 
delivery men; and the pushing of sales of modern refrigerators." 

Prices had increased much beyond the verir lo\7 ones in effect during 
the price war. However, the domestic price delivored, 48 cents per 100 
poimds, and 25 cents per 50 pounds, "is not out of line with prices else- 
where throughout the country and considera.bly less than we found them to 
be in Oklahoma. " 

Ml. Bohannan thought, however, that the marketing a.greement idea might 
be improved liy the "esta:bli siiment of centralized delivery systems, say tv/o 
in number. This should operate to materially reduce delivery cost. More 
than one such system is considered desirable both from the standpoint of 
providing enough competition to keep service standards at a high level and 
because of the psychological effect on the public," He also favored an 
interplant agreement, vhich would "enable some plants to close down entirely 
and thus let other plants run more ner.rly to full capacity." The combined 
effect of these two measures, he thought, "would probablj'- so reduce total 
costs as to enable the making of a lower domestic price and still make poss- 
ible as large a return to the companies as at present." ■ 

F. Findings by Moore 'rfter about a Year and a Half of Operation 

About a year after the investigation by Mr. Bohannan, J. B. Moore, of 
the Trade Practice Studies Section of the Division of Review, made a second 
study of the actual workings of the Fort Worth Plan. (**) At the time when 
Mr. Moore visited Fort Worth, in December, 1935, the plan v/as well advanced 
into its second year, having been renewed at the expiration of the first 
year on August 1, 1935. Most of Mr. Moore's findings apply to both Port 
Worth and Dallas, the latter city, only 32 miles away,' having adopted a '■ 
marketing agreement identical with that which has been knovm as the "Fort 
Worth" Plan, on the same date. 

Mr. Moore reported that the norma,l price in the Fort Worth and Dallas 
areas had been 50 cents per hundred domestic and $4.50 per ton wholesale at 



(*) See loc . cit . p. l92 supra. 
(**) See loc . cit . p. 1-92 supra. 
9827 



-203- 

the platform. As soon as the rarrket agreements v/are adopted, prices (wliicli 
had fallen exceedingly lor) v;ere immediately estahli shed and stabilized at 
48 cents Toer hijinured ooainds delivered domestic, 40 cents per hundred at 
platform cash ?.nd carry stt>tions, and $5.00 per ton v/holesale at platform. 
Thus the manufacturers had heen successful in maintaining^ prices to domestic 
consumers at practically v;hat they had regarded as "normal," in those daj'-s 
when periods of "normal" --irices altern^itec 'rith "-orice rars"; OLit it vfill 
bo observed that they ]iad considerably cut the margins of dealers. 

The manufacturers advised l.Ioore that to date there had been (*) 

"no protest v;hatever frorii any source against the operation of their 
market agreement except that in tue beginning a number of independ- 
ent ice peddlers organised by tro individual peddlers protested 
a^-^ainst the smtill margin of profit bet'Teen the $5 v/holesale nrice 
v/hich they \,'ere compelled to poy rnd $9.60 per ton which they were 
compelled to sell to their domestic trade. Tliey (the man^ofactur- 
ers) maintain, however, that this margin of profit is sufficient 
anc' fair and that certainly the ice industry'- is not grovring rich 
at this ijrice and the doraentic customer must hove as lov- a price 
as possible to prevent a greater volume of sales of the mechanical 
units. There ./as not a single peddler in all of the markets v/ho 
was denied the purchase of ice or tiie right to sell in any dis- 
trict within tiic area, but they strenously refused to permit other 
peddlers to further overload the f-rea v/ith any greater excess of 
delivery service and v"erc successful in all cases in peaceable- 
persuading fijiyone from enterinjg t;ie business as a peddler ^7ho 
might have contem-olated going into the business." 

Lir, Moore found that there had been notning that could xjroperl.j^ be 
called disorganization in either the Port "'orth or Dallas markets. However, 
there had been some chiseling. The managers of the Cits'- Ice Company in JTort 
7orth and the Union Ice Company'- in Dallas both re-oorted that some members 
affiliated v.'ith tliese' companies '..'ould in a fen instances "kick over the 
traces and chisel to some extent on tae market, generally granting some 
favor or in a round about way effect a slight discoujib to the larger and 
more favored custom.ers. " In another olace, ivir. I.Ioore indicated that it was 
conceded thet in these cities as elsewhere, there were few ice men who did 
not occasionallj'- slip' over the line of the terms of the agreement in their 
effort to increo.se their sales and thus their load factor. However, the 
fear of what would hapoen in the event of a breoirdovm had kept these lapses 
from being of more th-jn rairior character; and also operated to prevent other 
ice men from attempting severe measures in retaliation. 

Uo new pls-nt had been built in S'ort ^7orth or Dallas, but Dallas had 
had a close call. A certain uanvifacturer in another Texas city had become 
so enraged during several price v/ors which had prevailed in that city to- 
wards a manuf.acturer v/ho had operations both there and in Dallas, that, 
even o,fter prices had been stabilized in both his home town and Dallas, he 
determined to retaliate by building a plant in the vicinity of the other 
mamof acturer' s Dallas plant. This gentleman Vfas around 75 years of age. 
"He had made a fortiuie in the business of manufacturing ice and had stated 
that regardless of his ]-nov,-ledge of the tremendous loss and turmoil and 
mutual agony that would surely follow the building of the proposed new plant, 
that he was thoroughly determined' to unload his animus in this manner. He 
was, ho\.'ever, finally persuaded after many months of patient coaxing to 

abandon his radica l program^ 

(*) Mo ere' s word's. 
9827 



-204- 

In spite of the generally smooth sailing so fa.r, Fort TJorth "began to 
experience diff iciilties by the close of the first year over the question 
as to who should pay for the cost of suhsidizing idle plants. Ice sales 
which, as T;e have noticed, had decline.d from something like 137,000 tons 
in 1931 to 138 tons in 1934, sustained a further drop which it was estimat- 
ed would hring them down to 127,000 in 1935. (*) Ahout half of this fur- 
ther drop was estimated as having "been due to the \7eather; hut as 1934 had 
heen a year when the weather called for more than normal ice consumption, 
whereas 1935 was more nearly normal, this consideration gave little comfort. 

It became necessary for the City Ice Company of Fort TTorth to retire 
more capacity from the market, and for this pui-pose the amoiint to he paid 
out in liquidated damages was increased from $19,100 to $63,550. Those 
hack of the City Ice Company felt that this increa-se \;a.s unecessarily great. 
They claimed that the ice companies in Group I, to whom the $19,100 in 
liquidated damages had been paid the first year should have been willing 
to talce more than the 8.6 per cent rediiction in this amount which v;as the 
farthest they would go. Reporting to its sponsors, the City Ice Compan;;;- 
complained that it was manifestly unfair for seven members of the industry 
to assume the financial obligation of stabilizing the business of all mem- 
bers of the industr3'' witiiin the area. It was also reported that the City 
Ice Company had suffered a loss of between 40 and 50 per cent of its paid 
in capital of $12,500. 

So Mr. Moore reported that the inequitable arrangement of coordination 
among the several plaints and groups of plants would have to be replaced with 
a plan which would not be built on the predicate of seven companies gviaran- 
teeing a profit to the remainder of the market regardless of profit or loss 
to themselves. "Some sort of participating plan should be evolved v/hich 
will allow all companies in the market to share proportionately in either 
the increases or decreases of the market. " 

Should the ice industry continue to decline, it is hard to see, however, 
how it would be possible to avoid such a growth in the size of the problem 
just described as to make the possibility of success with a Fort ¥orth plan 
extremely doubtful. 

Mr. Moore, disagreeing on one point with Mr. Bohannan, thought that 
the promoters oT the Fort Worth and Dallas marketing agreements had done 
well to confine their efforts largely to the matter of allocation of pro- 
duction and stabilisation of normal prices. 

"llo effort whatever v/as made toward direction of operation of any 
particular plant or in any way attempting to reorganize the dis- 
tribution sj'-stem of ice. They are full;*- av.'are of considei-a.ble loss 
in duplication of the delivery system \7hich in many instances finds 
a half dozen or more peddlers making delivery in the same block each 
day, but they feel from their keen knowledge of the human element 

(*) Not too much v/eight should be p^ttached to these exact figures, as 

they do not seem to check very well with some other parts of the story. 
However, there was no question about there having been a further con- 
siderable decline in ice sales. 



9827 



-205- 

that it v.'ould be practically inpossible to attempt to dictate or to 
promote any progrpjn that vjoi^ld restrict deliver3;- of any one -oeddler 
to sT)eci:["ic stations or areas for the reason that those peddlers are 
generally the sole contact of the industry v/ith the j^ublic, that 
peddler develops his list of customers b3^ various and sundry influences 
and consequently suffers a loss of occasiona,! customers for reasons 
that could not be adjusted or harmoni^ied b^^ r^.ny outside a,-enc3''. A 
certain peddler in many cases is enabled to acquire the business of 
a certain customer because he buys his groceries from this customer, 
or he patronizes his barber siiop, or they are a member of the same 
Sundaj'- School class, the sfuie lodge, the same Ku Elujx: IQan union, or 
the wife of the ice meddler meets the v;ife of the potential customer 
in the meeting of the missionai?/ society, at the Red Cross Drive, or 
on the comm.ittpe selling poppies for the disabled vetercms. On the 
other hand, the pec'dler mi.^ht lose a customer because he 'Cickcd a dog 
on his way up the bach stairway, or was dilatory in delivering tiie 
ice on scheduled time or was prone to' overturn the tomato juice, or 
failed to replace the butter in the ice box. 

In other words, the promoters of this a^sireement fullj'- realize that 
there are many things in the ice industry thot could be done in the 
direction of reducing costs at the plant and saving much cost in de- 
livery service and in various minor features that enter into the bus- 
iness as e. whole v/hich in total would accoun.t for a substantial por- 
tion of the ultimate 'orice to the cons^Jmer if the;'' were empowered 
with the authority of a dictator and fully exempt from provisions of 
anti-trust lr:i7s and the minor whims of public opinion snd the pecul- 
iarities of ;;orae of the housewives who have not d.eserted the ranks 
and joined the armjr of ucers of mechanical refrigeration." 

With regard to the legality of the Port TJorth plan, Mr. Moore said: 
that "these people realize and frequently pomit that under the anti-trust 
laws of Texas they are operating illegally, but contend that they are not 
operating in o-p-oosition to the public interest and are satisfied to let 
well enough alone as long as the Att.orney General of the State does not 
protest against it." 

One other -ooint of genera,! interest in connection v/ith the whole ice 
industry problem is the question as to how much success the Port '57orth and 
Dallas ice manufacturers met with in efforts to combat the inroads of elec- 
tric refrigeration. One of the main ar^mments which has been advanced in 
fB.vor of limiting com-oetition within the ice industr;-' has been the idea 
that, if the ice men co'old avoid useless battles among themselves, they 
would have more strength with v,'hich to meet this competition external to 
the industry.'-. 

According to estimates which were cited by Boharjian, about 30 per cent 
of the fejTiilies of Fort Worth had already installed electric refrigerators. 
As the fsjnilies maMng this change r/ere, in general, the larger, and most 
nearly year-round users of ice, the li-iss in custom to ice manufacturers was 
probably in excess of the 30 per cent figure. 

The report of i.Ioore shows that during the first year under the Port 
Worth Plan, the ice manufacturers of Port f/orth did achieve a rather notable 
success in retarding the substitution of electric for ice refrigeration. 

9837 



-206- 

Tr/o thousand ice boxes had been sold as against 700 mechanical "units. In 
their program for the future, the Port 'iTorth ice industry was jjlanning to 
finance a purchare of 2, 500 of the mor.t modern ice boxes, which they intended 
to sell on especially easy terms, with no down pa;;,'-ment and three years time 
without interest. In this connection it should be said that I.Ioore hae, Vorb- 
rlly stated that b'^ a modern ice ref rif;erator, is meant one which holds 
enough ice and ir. \-ell enough insulated so that even in the hot Texas summers 
it need be refilled onlj^ about once in four da'/-s. In appearance these ice 
boxes look very much like electric or gas refrigerators. In Moore's report 
he states that in at least 100 instances the Port Worth ice men were able 
to reptce a mechanical unit v/ith a nev/ "air conditioned" ice box. 

The Port Worth ice mn,nufacturers, said I.ir. Moore, "are car^JJ-ing on a 
campaign of educating all their ice deliver.^'mien in salesmanship of modern 
ice boxes and rev.ard them with a commission of ten per cent on all sales 
effected. They constantly remind them that the life of their employment in 
the ice business is affected verj' largely in their ability to fight back the 
oncoming wave of sa-lcs of mechanical refrigeration. " There was a good, deal 
of featuring of a gadget for cutting ice cubes from a cake of ice - this 
consisting of a container for hot wpter with a criss-cross of blades below. 

The Port Worth ice mamofacturers were, therefore getting some results. 
However, said I'r. I'.iooro, "those manufacturers fiiLly realize that regardless 
of all they raay do to sustain the volume of their sales against the inroad" 
of "electrical units that these units are nevertheless being sold and will 
no doubt continue to replace the production of rasnufacturnd ice. " 

In Dallas, the ice manufacturers v;ere somewhat less successfijl than 
those in Port Worth in holding down the sale of mechanical units. 



9827 



"2C7- 



■ APPT^IOIX A 

USE I:: !-Tj^;^ YOnf. CITY O^..KI?I!-fJH PPJCES AS A DEVICE 
FOR GOT'TROLLIITG T?IE OiLAifi'ELS OF ICE MSTRIT^UTION 

Mnst of our consirl^rrtii^n of ti-o flue t ion control in this report 
has h=?en in t^rns of ic laaniif ?ctnrin.'^. lc<^- mnmifpctiiring; is, hoi^^v^r, 
the smaller .=nd of th-^. ic° inc'ustry — ■"'heth^r neasur'^inent he in terns 
of value added,, -nersonn^l en,='Eged, or de,j^r°" of contact ■^ith the 
■Dirhlic, The .larger en^' of the ice industry, ps d'^fined "by th° ice 
code, consists in ice cHstrihution, (*) 

Th° thousands of 'T=n '--ho ts^-'= nart in ice distribution are many 
of th^T husky ■'"orkinr 'T^n, y^t th='"' are usually huGin^ss men too. 
There vjp.s- p time i^'h^n ice ■^as, to a lareor e-.:tent, deliv'^red ty 
em-oloyees of ice manufacturers. Today, ho^ev^r, th" nrn '^ho sup-olies 
ice to the consumer is usually a..suT)'nosed]y independent loeddler, or 
ca.sh and carry station c^ierator, or oelL^rman (the desijprnation us'^d. 
for, many dealers on Manhattan). 

S-c^aking ^s'neciall;'- '"ith refsr^nce to N^'^ Yor-' City, the good 
^ill of an ice route or locni,sal°r, outlet formerly had. considerahle 
cash value. Charles Sorac°, rer3r'=senting' the Amalgamated Ice and Coal 
Dealers Association, Inc., d'-'cla.red at the IJev; York Emerftency Hearing 
of July 19, 1934, (**) that "four or five y^ars ago" "th= D^ddlers had 
their routes, th^y -oaid thousands of dollars for their routes," At 
the same hearing, (***). iiiltcn Hcchmann, representing the United Ice 

(*) Ag resp°cts "value add.ed, " it ^ill he noted from the tahle sho^ring 
average ice -orices on T3age2.'""'7 ahove, that ici^ d°livered to the domestic 
consximer has iiniform?.y solo a.t a, little ov^r t'^ic° the ririce comma,nd.ed 
hy ice sold to dealers. Since d''a"''=rs fr^ouently hi^y ice at l°ss than 
listed, prices, and consumers rar^l"', ™e cannot he ahso].utely sure 
hc^ev^r, that the domi^stic d^liv^r^d -nrice is actua,llv t^ice the other, 

•A-s resTD^cts -personnel ^ng8..<^ed, ^^e hav^ noted th° Code Authority's 
estimate of ^00,000 for th-^ industry (u.^'''^ sunra). Th^- C^nsTis of 
• 'anufactures showed only 4r^,184 ^-'b^^- earn'^rs in ice factories in the 
month of highest "moloyment in 19?9, An.o'-'inr for the fact that there 
a.re some oth°r -oeoiDle ahout ice ■olr^nts hesideg Tr^ge earners, and that 
the Census of Ma.nufact'ares rloes not r^ceiv^^ r^^oorts from ice -olants 
th° value of ^hose -oroduct in th" census ■^'"ear '^'as less than $5,000 
(s°^ T). " 6 suT)ra) , it is still oiiito cl°ar that most of the -oeo-nle in 
the ice industrv pt^ not in icp -Dlarts, 

(**) P. 34 of record. In fold°r on H°^ Yor''- Price Emergency in 
Deputy' s ' files, 

(***)P. 83 of r-cord. 



9827 



-208- 

and Coal Eetailf^rs Association, said, in d^scriting th<=; ^Whattan and 
Bronx cellarmen, that th^y "hav^ no tracks , . . They o-o^rate from the 
cellar, usually in the "basement of a tenement. They x)ay at the rate 
of $5,00 to $7.00 -oer month for that hole in the street." "Thfire are no 
fixtures there, there may he an ice toilg a^nd a little wagon, hut yet 
each man has paid on the average $3,000 for that cella.r."' 

Without attempting to decid-e to what extent these figures may have 
represented an exaggeration made in the heat of argument, it is clear 
that hoth p-^ddlers and cellermen regarded themselves as having quite a 
stake in the business which- they had hought or "built utd. In other 
words, they each hs.d their own "cariacity" to think of, their own 
problems res-oecting the volume of "production" which was carried on 
by themselves or others. 

In earlier passages in this r'^-oort (rjp. 27-31 anci 135-140 above), 
there have be^n described the encroachments which -^ere being made on 
the trade of peddlers and cellarmen — sometimes by racketeers, sometimes 
"by persons actin,^ for leaders or maniofacturers who were merely trying to 
force the dealers to do certain things, -sometimes, it was feared, by 
persons who planned to stay -oerman^ntly in the field. Permanence was 
clearly the ain of a certain number of cash and carry stations; and it 
came to be more and more susTjected by th-^ peddlers and cellarmen that 
loaders, or manufacturers, or both ho-o°d to extablish cash and carry 
stations, which "ould enable them g°n°rally to- short circuit the whole 
system of peddler-cellarraan distribution. ■ ■ 

One defense against such disTjlacement — or annoyance in lesser 
ways — which was contemplated by the dealers, was the building of their 
own ice rjla.nts, a move which has be^n d-^scribed above on pages 
More generally, however, their reaction, and that of th°ir friends, wa.s 
to try to force their competitors out through what might properly be 
regarded as various t;\'pes of ca-oacity or nroduction control. 

Prominent among the friends of the peddlers and cellarmen was 
the New York City government, re-presented by Mayor La Guardia, and the 
Bureau of Markets, of "'hich William Fellowes Morgan was Commissioner, 
and Michael Fiaschetti, a Deputy Commissioner. It '^as natural for 
city officials to be - s;;'Tnpathetie with a group who '-'ere having as much 
trouble as these men, in part from racketeers. What political flavor 
may have also entered in, if any, because of the considerable number of 
men involved, 7,000 or m.ore (mostly Italians) (*), or th= popular 
interest in favor of such a group (or against their enemies)-.-is beyond 
the scope of this study. 

The first move in the effort to protect th° business position of 
the New York retail ice dealers consisted in efforts to break down 

(*) Hochmann, hearing p. 91, put the number at 8,000 to 10,000; but 

this was in excess of the number having licenses, ""hich was nearer 
to the 7,000 fig-are (6,542, according to He Donald, p. 93), 



9827 



-3C9- 

contz-nla v/hich \iere operating against them. Up to early 1934, rftto.il dnalnrs 
had been a.ble to get' ice only from whosesalers (loaders) , the platforms of 
raanufc.cturers being closed to them. It was' thrii^ht that if all dealers covld 
get their own ice direct, they would be les' Open to attack. 9n paoPl39 'above, 
we have noted the steps by which .the CoLimissicner of Ltarkets forced the 
establishjnent in l-Ie • York of an open ice market. 

This move did not, at least for a long time, procmce the good res" Its v; ich 
wei'e anticipated. According to statements by Morgan contained in newspaper 
clippings sent to ERA on June 15, 1954,. (*) even after the mamifacturcrs had 
agreed to establish an open market, there v/as a great voiujne. of complaints in- 
dicating that in many instances they refused to siipply dealers v/ho. souf;ht to 
obtain ice from them. Also, in the effort to retain control cf the situation, 
the mcJT.ifa.ctu-rers took tvo' nev; ai"icl disturbing steps. 'They set up a price dif- 
ferential, 01; v/hich the loaders corld obtain ice at a lever figiare than the 
retail dealers. They em.barked on a policy of establishing ice boxes at which 
ice wa:; sold at drasticplly cut rates. (**) ' ■ 

The situation, therefore, v/as worse thpn ever. For now rot only v.-ere the 
retail dealers handicapped in getting ice - by refusal cf manufactures to sell, 
anu b; the 23.rice differential; they also had ner cut-threat com.petiti on. 

The first KRA hearing called to decl v/ith these conditions vi,'as..helc. :lr,-y 
28, 1934. (***) There Tcre t-vo main subjects for consideration. One was the 
question of differentie-ls, the other ice boxes. On neither of these did ITEA, 
as sf.ch, have any authority to do anything. As this was before the ti^ne of the 
price emergency, the filing 3f prices, including differentials, was entirely 
up to each company- so .long a.sthey did not violate code provisions. And of 
coua-se ITRA had no authority over ice boxes. Hov/ever, at this meeting it was 
talcen for granted that the manufacturers vroidd jointly agree on the prices and 
differentials wli.ich they wonic individually post; so the meeting was called to 
give the m.anufacturers a chance to decide wliat they would do. And o.s respects 
the ice boxes, it v;as assumed that the raarrJaacturers could easily eliminate theit. 
if they waJited to. 



nr-^ 



he position of the leaders of the ice retailers at this hearing was that 
there shor-ld be no differentials between the price paid for ice by loaders and 
p-iddlers rr cellarm.en. The smallest retailer, if he went to the ice mexivr- 
facturer's dock, shnild buy ice at the sarne ^.rice as the largest wholesaler. 
The ice manufacturers, however, would not accept this principle a.t this time. 
Wlien on Jv.ne 4, 193^- they, seit lU' their prices, they made no difference between 
loaders and peddlers and cellerruen as such. But they provided that the man 
who bought 5,000 or more 500-po"and cal:es shoidd pa.\ -,.3. 50 a ton; \vhile the man 
who boi'-ght less sh:>uldpay , 'J:. 33 l/3 a, t ^n. On the ice box proposition, it 
was generally agreed at the hearing of l,ia;> 23th that they should be eliminated, 
but after the heaj'ing nothing Avas dene to bring this result, s^bout. 



(*) In File on New Y irh liuergency Prices, Deputy's files. 

(**) Ice boxes were alsi opened 'by loa.ders. 

(***) I n Deputy' s files on I'ev.' York iim.er::ency Prices. 



9827 



"210- 

At the herring of May 23, Co;;i..ij F,sio.iei- of iiarkot ■ i;orp;eJi had jut IVi-elf 
on record as hoi di n;; ' that , in principle, a price oiiierential based on quaiitity 
of sales was sound. Ilovever, }ie ap ears not to havt, liked the dif f erentiaJ 
V; .ich th.e ice inanixf actnrers did set \\-, and i."i the cli';pings before referred 
to., sent in on June IE, i.ior^^an is quoted as holdin,; that the differential t.'o Id 
laake for monopoly. The sit-i.ation on ice boxes also bein;^ unchanged, !,Ia,yor La 
G-urrdia and CoETinisioner Morgan now threatened tx/o noves. Pasinj our states 
meno c/;ain on the nevspaper rejiorts, the Mayor wrote a letter to Hor^'aii In- 
striicti:;..; him to p\.-.t the nn,inici ,al ice plant in re?dines ■ to produce ice, in 
the event that it mij";ht be neces :ar,j to u-se it to oring relief into any section 
of the city \7. ich n.ight be the victi.i of an vmlawfu.! ond monopolistic con- 
spiracy. Lh re;an niso threatened ti x'evoke che licenses of some of the ice 
inanuf act'i.-'rers . 

O:."' J^Jie 2< , 1P34, the ice v.ionafacturers abolished the differential in icej 
prices based ^n quantity sold, rnd t!';.encei oith t ere was only one posted .irice, 
for both lsr;^'e and small dealer. (*) lIov;ever, the wh:)le market wes nov/ 
becoming demoraliKed, so that the price,: actually being paid were irrcf^'Jar 
and low. Also the ice box iroblem" coi.tinu.ed mthout imjirovemient. 

I c was under these circumstances tnat a hepriny on price emergency v/as held 
in New York City m July 19, 1034. (**) At this hearing, the main facts aJ.- 
ready noted Vi'ere brjught nu.t, but the record also sliows tha,t there wao another 
side to the ice box issue (and of . course t'vvo sides to the ped-dlor-and-ccller- 
man v, loader issue). 

is might have been ?ritici;mteo., the rocird shows that ice boxes atic cash 
BJid c a.rr3/' distribution were not wholly coercive and racketeering. To some 
extent they had existed even before tke depression. Israel G-rossman ap^.'Cared 
as the representative cf 10 to 12 cash ar.d c,?rry dealers, every one of v/ho:,;, 
he said, had been in the ice bxisiness for 2.V yearn or more. They haiL been 
conducting this business in the neighb^riiooa 1, iny between 14th Street and 
the Ba^ttery, aaid ■^liird Avenue anc the East Eiver. In tiiis poor section of ilew 
York, the patrons of cash ano carry dealers had been accrLstomed "to call 
personally/ for their ice in order to save the extra 5 cent'", per oiecc of ice 
charged by the coal cellar man for delivering the piece of ice to their home'i(** 



Similarly a. girl inm anothe:' po ir sectio.i of the city told of how her 
father, recentl, deceased, had years before built an ice dock on their lot, 
"Our profits v;ere not large en each cake . . . but we sold a good deal because 
we have poor people ii, our section. . '. . I do not see h^w you can be ;-;erving 
the poorest sections and chaa'ge 1.50 an^. upwards a cake. ... 17e never found 
it necessary to charge more thaxi ninety cents. " TJiis witness described hov; 
she and her brother cut the ice for v/omen who came with their little ;;o-carts, 
v/rapped the ice in a towel and thus took it home to their ice boxes. (***♦) 



Louis Bernstein a,ppeared in behalf of aaiother group of 100 ice dock owners, 
c-erating close to 2C'0 bcxes, w}io constititeda part of the g roup whhch the 



I 

I 



(*) Testimony of Pendleton Dudley at Emergency Heai'ing of July 19, 1934, p, 33. 
(**) Transcript in FHA files. 
(**°^) hearing, p. ISl. 
(****) Page 154 of hearing 



9827 



-211- 

cellarmcn and peddlers re^-rrded ss racketeers. Bernstein claimed that sor.ie of 
his rjeo:~.le had oiTcned ooxer, becav.se they were tbromi out of certain ter- 
ritorie;r ,:nd had x.o o .tion but to open ice ooxes i':\ others. Many of Ms people, 
he claimed, were ph, sicali;, -mable to deliver ice, with its carrying of her.vy 
weights -a.) stairways. The ice boxes were fble to sell ice cheaply because 
tliei/ turnover wf n nmc'n more rapid than that of thr^ peddlers and cellerraen; 
they ^Ti.ve no credit; the;.' '.'id not delive., f^r ..nve to render the service of 
cutting ice' exactl to fit t:ie customer's ref il^'erator. Bernstein's us-:, of 
fi/^^ujces v/as very erratic. However, he claiaed that 60 per cent of his meuibers 
had bee:: in business over 10 years, the othei' 4 .; per cent havinfj entered the 
hasiuesa iii the last three yeprs. TiVhen boxes were firr.t installed, tl;.ey were 
in the poorer neighborhoods; but, due co the depression, he said many of the 
so-called richer neif.;hborhoods hrd '.:eeii e:itered by ice boxes. Sales were also 
made to persons passin.<:: in automobiles. (*) 

ur. Bernstein appealed for rcco, nition of his association and co:i- 
stit\.-.e:ats as a factor in ice distribution, "The present adninistration of our 
city £-overni:ient, " ":e said, "hrs decide-i anc. is aboixt to throw the box men out 
of bx^siness. " Later he said, "T>.is is the xirst time I have been present or 
liave been called upon at an UilA. aeetin;?;. They have always disregarded our 
existence." In con::ection with this ..mention of not having been called i:i a,t 
previov-G lu-Jl meetings, it should be recalled that one of the principle ob- 
jectives at the hearin:_^ on l.icv 28, about two months before this date, had been 
to come to some uridersttuidin"; and work out some technique by which s 11. ice boxer: 
and C8.sh end carry people co'ild be tliiainated. 

The emergencj' prices set ip for hew Yorh City en September 17., 193-J: are 
significant fx'om the rioin'o of view of our , resent inqxiiry in two respects. 
First they provided for no differential betv;cen the prices charged by manu- 
facturers to lociders (?/hole.sale dealers who mvist resell to ret;ulers), and those 
chaj.^2;ed to the smallest retailer. In this respect they constituted a device 
which, tended to talce bisinei-s away from loaders. (Compare oage 140 aboveX 
In the second :jlr.,,ce, the .irice:'. fixed for doiiestic co-stomers were .,1.50 for a 
300-lb. ca!:e, c'elivered (..0.0. '.'0 a ton); pnd ^1. '^0 a cal:e (:>&. 00 a ton) cash 
and carx'y. This ■ 1.20 a c. he for crsh and carr^/ ice was very nrich higher than 
the prices that had been charged in the -nost (see testimony >. 210 eJoove) , aiid 
ha,d the ca.sh and carry vieo le co:.; lied with it, it would liavt teadea to destiry 
tliem, 

Biit the September 17, 1934 emergency price schedule was not observed. At a 
hearin;; called on !>Ioveml)er 19, 1934, it v;r-s ■-enerall;,: admitted that there ..t.s 
v/liolesa] e violation a:ic. evasio:: of t;-e mirLiuic set, though it wa.s hard to get 
evidence because neith-cr those v/hio viere selling below the schedrle, nor those 
who were benefitting b^.- f'lese i. rices, were illing to testify. One statement 
of special significance from the sta:idpoint of our present analysis wa.s made 
at this heciring. Bj, rner. i.icDor.aad, who had charge of a^drainistering the enei»- 
gency for IJHA said: "The laadn objet^t.on the pa,rt of that emergency was to 
elh.-iin.'..te these illegitimate boxes that everybody was r.slng to acqrlre more 
volume. " 

B"'" January 22, 19o5 aJ-i entirel ne^" sch.ed.:le of emer{;ency prices had been 
set wo for hew York (following some intennediate schecl-ul es) . The 0"anu.ar3' 22 
schedule v/as to run to April 22. It .-,ct up domr.'^tic prices of 1.02 a cake 
(ii)6. SO a ton) d elivered; fii'.d_Jp.^l a cpJ:e ($5.40 a ton) cash ajid carry. 

(*) P. 101 of hearing 
9827 



As to what hapoened \uicer the final schedule of emer.'rency prices, in 
effect from Janiiary 22 to April 22, 1335, (*) there is in the ISA in Washington 
no definite lciiowled;;6, either v/ritten or in the minas of the De ;uty' s staff. 
At the beginning of the period, .hero appeared to he a genuine effort on the 
part of the ice marnxf acturers to restore peace, the tv-o largest agreeing to 
abide by the schedule. The Code Aut. ority has in various ways conveyed the 
impression that it considered tha.t the emerjenc;/' arrangment was stabilizing the 
market. However j reports have been conflicting, ancL the Deputy's staff si\rmise 
that there continued to be a good deal of interned strife, price cutting and 
racketeering. 

To the extent that tlie maiim acturers refrained from price cutting tactics, 
the movement towai'ds the setting tip of ice boxes solely for this purpose m.ust, 
of coixrse,' have heea c^iecked. On the other jiajid, the greatly reduced mini rnxm 
for Cash and carry stations, r-s fixed by ohe revised schedules, must hp.ve large- 
ly removed the earlier threat to legitimate cash and ca.rry business. To what 
extent the continiiance -)f a single ;.iinim\ua price for both loax.ers and dealers, 
operptcd to talce biisiness away from the former is uiilcnbwn. It may be doiibted, 
however, vAether adiierence to the minimiui schedules was sufficiently strict 
to rroducea revolutionary change in the character of mairofacturer-loadei^ 
retailer relations. It must also be remembered that the emergency order v.'as 
in effect only in the off season; and that the .eriod during which there could 
have been anything approaching generaj compliance was short. 

(*) The last period of emergency prices cxpii'sd April 22, ancl though its re- 
newal was asked, this was not granted. 



9827# 



OFFICE OF THE NATIONAL RECOVERY ADMINISTRATION 
THE DIVISION OF REVIEW 

THE WORK OF THE DIVISION OF REVIEW 

Executive Order No. 7075, dated June 15, 1935, established the Division of Review of the 
National Recovery Administration. The pertinent part of the Executive Order reads thus: 

The Division of Review shall assemble, analyze, and report upon the statistical 
information and records of experience of the operations of the various trades and 
industries heretofore subject to codes of fair competition, shall study the ef- 
fects of such codes upon trade, industrial and labor conditions in general, and 
other related matters, shall make available for the protection and promotion of 
the public interest an adequate review of the effects of the Administration of 
Title I of the National Industrial Recovery Act, and the principles and policies 
put into effect thereunder, and shall otherwise aid the President in carrying out 
his functions under the said Title. I hereby appoint Leon C. Marshall, Director of 
the Division of Review. 

The study sections set up in the Division of Review covered these areas: industry 
studies, foreign trade studies, labor studies, trade practice studies, statistical studies, 
legal studies, administration studies, miscellaneous studies, and the writing of code his- 
tories. The materials which ffere produced by these sections are indicated below. 

Except for the Code Histories, all items mentioned below are scheduled to be in mimeo- 
graphed form by April 1, 1936. 

THE CODE HISTORIES 

The Code Histories are documented accounts of the formation and administration of the 
codes. They contain the definition of the industry and the principal products thereof; the 
classes of members in the industry; the history of code formation including an account of the 
sponsoring organizations, the conferences, negotiations and hearings which were held, and 
the activities in connection with obtaining approval of the code; the history of the ad- 
ministration of the code, covering the organization and operation of the code authority, 
the difficulties encountered in administration, the extent of compliance or non-compliance, 
and the general success or lack of success of the code, and an analysis of the operation of 
code provisions dealing with wages, hours, trade practices, and other provisions. These 
and other matters are canvassed not only in terms of the materials to be found in the files, 
oxii also in terms of the experiences of the deputies and others concerned with code formation 
and administration. 

The Code Histories, (including histories of certain NRA units or agencies) are not 
mimeographed. They are to be turned over to the Department of Commerce in typevvritten form. 
All told, approximately eight hundred and fifty (850) histories ftill be completed. This 
number includes all of the approved codes and some of the unapproved codes. (In Work 
Materials No 18, Content s of Code Histries . will be found the outline which governed 
the preparation of Code Histories.) 

(In the case of all approved codes and also in the case of some codes not carried to 
final approval, there are in NRA files further materials on industries. Particularly worthy 
of mention are the Volumes I, II and III which constitute the material officially submitted 
to the President in support of the recommendation for approval of each code. These volumes 
9768—1 



ft 



J 



set fortb the origination of the code, the sponsoring group, the evidence adveuiced to sup- 
port the proposal, the report of the Division of Research and Planning on the industry, the 
recommendations of the various Advisory Boards, certain tj-pes of official correspondence, 
the transcript of the formal hearing, and other pertinent matter. There is also much offi- 
cial information relating to amendments, interpretations, exemptions, and other rulings. The 
materials mentioned in this paragraph were of course not a part of the work of the Division 
of Review. ) 

THE WORK MATERIALS SERIES 

In the work of the Division of Review a considerable number of studies and oonpilations 
of data (other than those noted below in the Evidence Studies Series and the Statistical 
Material Series) have been made. These are listed below, grouped according to the char- 
acter of the material. (In Work M aterials Na- 12' Tentati ve Outlines and Summaries of 
Studies in P rocess , these materials are fully described). 

I ndustry Stu dies 

Automobile Industry, An Economic Survey of 

Bituminous Coal Industry under Free Competition and Code Regulation, Economic Survey of 

Electrical Manufacturing Industry, The 

Fertilizer Industry, The 

Fishery Industry and the Fishery Codes 

Fishermen and Fishing Craft, Earnings of 

Foreign Trade under the National Industrial Recovery Act 

Part A - Competitive Position of the United States in International Trade 1927-29 through 

1934. 
Part B - Section 3 (e) of NIRA and its administration. 
Part C - Imports and Importing under NRA Codes. 
Part D - Exports and Exporting under NRA Codes. 

Forest Products Industries, Foreign Trade Study of the 

Iron and Steel Industry, The 

Knit Ling Industries, The 

Leather and Shoe Industries, The 

Lumber and Timber Products Industry, Economic Problems of the 

Men's Clothing Industry, The 

Millinery Industry, The 

Motion Picture Industry, The 

Migration of Industry, The; The Shift of Twenty-Five Needle Trades From Ne-,v York State, 
1926 to 1934 

National Labor Income by Months, 1929-35 

Paper Industry, The 

Production, Prices, Employment and Payrolls in Industry, Agriculture and Railway Trans- 
portation, January 1923, to date 

Retail Trades Study, The 

Rubber Industry Study, The 

Textile Industry in the United Kingdom, France, Germany, Italy, and Japan 

Textile Yarns and Fabrics 

Tobacco Industry, The 

Wholesale Trades Study, The 

Women's Neckwear and Scerf Industry, Financial and Labor Data on 
9758—2 



I 



I 



- Ill - 

Women's Apparel Industry, Some Aspects of the 

T rade P ractic e St udies 

Commodities, Information Concerning: A Study of NRA and Related Experiences in Control 
Distribution, Manufacturers' Control of: Trade Practice Provisions in Selected NRA Codes 
Distributive Relations in the Asbestos Industry 
Design Piracy: The Problem and Its Treatment Under NRA Codes 
Electrical Mfg. Industry: Price Filing Study 
Fertilizer Industry: Price Filing Study 

Geographical Price Relations Under Codes of Fair Competition. Control of 
Minimum Price Regulation Under Codes of Fair Competition 
Multiple Basing Point System in the Lime Industry: Operation of the 
Price Control in the Coffee Industry 
Price Filing Under NRA Codes 
Production Control in the Ice Industry 
Production Control, Case Studies in 

Resale Price Maintenance Legislation in the United States 

Retail Price Cutting, Restriction of, with special Emphasis on The Drug Industry. 
Trade Practice Rules of The Federal Trade Commission (1914-1936): A classification for 
comparison with Trade Practice Provisions of NRA Codes. 

Labor 'Studies 

Cap and Cloth Hat Industry, Commission Report on Wage Differentials in 

Earning-s in Selected Manufacturing Industries, by States, 1933-35 

Employment, Payrolls, Hours, and Wages in 115 Selected Code Industries 1933-35 

Fur Manufacturing, Commission Report on Wages and Hours in 

Hours and Wages in Ajaerican Industry 

Labor Program Under the National Industrial Recovery Act, The 

Part A. Introduction 

Part B. Control of Hours and Reemployment 

Part C. Control of Wages 

Par!, D. Control of Other Conditions of Employment 

Part E. Section 7(a) of the Recovery Act 
Materials in the Field of Industrial Relations 
PRA Census of Employment, June, October, 1933 
Puerto Rico Needlework, Homeworkers Survey 

Administrativ e Studies 

Administrative and Legal Aspects of Stays, Exemptions and Exceptions, Code Amendments, Con- 
ditional Orders of Approval 

Administrative Interpretations of NRA Codes 

Administrative Law and Procedure under the NIRA 

Agreements Under Sections 4(a) and 7(b) of the NIRA 

Approve Codes in Industry Groups, Classification of 

Basic Code, the — (Administrative Order X-61) 

Code Authorities and Their Part in the Administration of the NIRA 
Part A. Introduction 
Part B. Nature, Composition and Organization of Code Authorities 

9768—2. 



i 



Part C. Activities of the Code Authorities 

Part D. Code Authority Finances 

Part E. Summary and Evaluation 
Cede Compliance Activities of the NRA 
Code Making Program of the NRA in the Territories, The 
Code Provisions and Felated Subjects, Policy Statements Concerning 
Content of NIRA Administrative Legislation 

Part A. Executive and Administritive Orders 

Part B. Labor Provisions in the Codes 

Part C. Trade Practice Provisions in the Codes 

Part D. Administrative Provisions in the Codes 

Part E. Agreements under Sections 4{a) and 7{b) 

Part F. A Type Case: The Cotton Textile Code 
Lab3ls Under NRA, A Study of 

Model Code and Model Provisions for Codes, Development of 

National Recovery Administration, The: A Review of its Organization and Activities 
NRA Insignia 

President's Reemployment Agreement, The 

President's Reemployment Agreement, Substitutions in Connection with the 
Prison Labor Problem under NRA and the Prison Compact, The 
Problems of Administration in the Overlapping of Code Definitions of Industries and Trades, 

Multiple Code Coverage, Classifying Individual Members of Industries and Trades 
Relationship of NRA to Government Contracts and Contracts Involving the Use of Government 

Funds 
Relationship of NRA with States and Municipalities 
Sheltered Workshops Under NRA 
Uncodified Industries; A Study of Factors Limiting the Code Making Program 

Legal Stud ies 

Anti-Trust Laws and Unfair Competition 

Collective Bargaining Agreements, the Right of Individual Employees to Enforce 

Commerce Clause, Federal Regulation of the Employer-Employee Relationship Under the 

Delegation of Power, Certain Phases of the Principle of, with Reference to Federal Industrial 
Regulatory Legislation 

Enforcement, Extra-judicial Methods of 

Federal Regulation through the Joint Employment of the Power of Taxation and the Spending 
Power 

Government Contract Provisions as a Means of Establishing Proper Economic Standards, Legal 
Memorandum on Possibility of 

Industrial Relations in Australia, Regulation of 

Intrastate Activities Which so Affect Interstate Commsrce as to Bring them Under the Com- 
merce Clause, Cases on 

Legislative Possibilities of the State Constitutions 

Post Office and Post Road Power — Can it be Used as a Means of Federal Industrial Regula- 
tion? 

State Recovery Legislation in Aid of Federal Recovery Legislation History and Analysis 

Tariff Rates to Secure Proper Standards of Wages and Hours, the Possibility of Variation in 

Trade Practices and the Anti-Trust Laws 

Treaty Making Power of the United States 

War Power, Can it be Used as a Means of Federal Regulatiot; of Child Labor? 

9768—4. 



fl 



J 




THE E VIDENCE STUDIES SERIE S 

The Evidence Studies were originally undertaken to gather material for pending court 
cases. After the Schechter decision the project was continued in order to assemble data for 
use in connection with the studies of the Division of Review. The data are particularly 
concerned with the nature, size and operations of the industry; and with the relation of the 
industry to interstate commerce. The industries covered by the Evidence Studies account for 
more than one-half of the total number of workers under codes. The list of those studies 
follows: 



Automobile Manufacturing Industry 
Automotive Parts and Equipment Industry 
Baking Industry 

Boot and Shoe Manufacturing Industry 
Bottled Soft Drink Industry 
Builders' Supplies Industry 
Canning Industry 
Chemical Manufacturing Industry 
Cigar Manufacturing Industry 
Coat dud Suit Industry 
Construction Industry 
Cotton Garment Industry 
Dress Manufacturing Industry 
Electrical Contracting Industry 
Electrical Manufacturing Industry 
Fabricated Metal Products Mfg. and Metal Fin- 
ishing and Metal Coating Industry 
Fishery Industry 

Furniture Manufacturing Industry 
General Contractors Industry 
Graphic Arts Industry 
Gray Iron Foundry Industry 
Hosiery Industry 

Infant's and Children's Wear Industry 
Iron and Steel Industry 



Leather Industry 

Lumber and Timber Products Industry 
Mason Contractors Industry 
Men's Clothing Industry 
Motion Picture Industry 
Motor Vehicle Retailing Trade 
Needlework Industry of Puerto Rico 
Painting and Paperhanging Industry 
Photo Engraving Industry 
Plumbing Contracting Industry 
Retail Lumber Industry 
Retail Trade Industry 
Retail Tire and Battery Trade Industry 
Rubber Manufacturing Industry 
Rubber Tire Manufacturing Industry 
Shipbuilding Industry 
Silk Textile Industry 
Structural Clay Products Industry 
Throwing Industry 
Trucking Industry 
Waste Materials Industry 
Wholesale and Retail Food Industry 
Wholesale Fresh Fruit and Vegetable Indus- 
try 
Wool Textile Industry 



THE STATISTICAL MATERIALS SERIES 



This series is supplementary to the Evidence Studies Series. The reports include data 
on establishments, firms, employment. Payrolls, wages, hours, production capacities, ship- 
ments, sales, consumption, stocks, prices, material costs, failures, exports and imports. 
They also include notes on the principal qualifications that should be observed in using the 
data the technical methods employed, and the applicability of the material to the study of 
the industries concerned. The following numbers appear in the series: 
9768—5. 



- VI - 

Asphalt Shingle and Roofing Industry Fertilizer Industry 

Business Furniture Funeral Supply Industry 

Candy Manufacturing Industry Glass Container Industry 

Carpet and Rug Industry Ice Manufacturing Industry 

Cement Industry Knitted Outerwear Industry 

Cleaning and Dyeing Trade Paint, Varnish, and Lacquer, Mfg. Industry 

Coffee Industry Plumbing Fixtures Industry 

Copper and Brass Mill Products Industry Rayon and Synthetic Yarn Producing Industry 

Cotton Textile Industry Salt Producing Industry 

Electrical Manufacturing Industry 

THE COVERAGE 

The original, and approved, plan of the Division of Review contemplated resources suf- 
ficient (a) to prepare some 1200 histories of codes and NRA units or agencies, (b) to con- 
solidate and index the NRA files containing some 40,000,000 pieces, (c) to engage in ex- 
tensive field work, (d) to secure much aid from established statistical agencies of govern- 
ment, (e) to assemble a considerable number of experts in various fields, (f) to conduct 
approximately 25% more studies than are listed above, and (g) to prepare a comprehensive 
summarj report. 

Because of reductions made in personnel and in use of outside experts, limitation of 
access to field work and research agencies, and lack of jurisdiction over files, the pro- 
jected plan was necessarily curtailed. The most serious curtailments were the omission of 
the comprehensive summary report; the dropping of certain studies and the reduction in the 
coverage of other studies; and the abandonment of the consolidation and indexing of the 
files. Fortunately, there is reason to hope that the files may yet be cared for under other 
auspices. 

Notwithstanding these limitations, if the files are ultimately consolidated and in- 
dexed the exploration of the NRA materials will have been sufficient to make them accessible 
and highly useful. They constitute the largest and richest single body of information 
concerning the problems and operations of industry ever assembled in any nation. 

L. C. Marshall, 
Director, Division of Review. 
9768—6. 



.0 G:;.'ii.;Bvoc,.-.