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Gift of 

TJ. S. Deot. of Commerce 




Enid Baird 


MARCH, 1^06 




Enid Baird 

MARCH, 1935 


This study of price filing was prepared "by Miss Enid Baird of the 
Trade Practice Studies Section, Kr. Corwin D. Edwards in charge. The 
statistical analyses and' the chapter on Price Structures under Price 
Filing were prepared oy Mr. H. R. Hohat. The chapter on Price Publicity 
was prepared hy Mr. Daniel Gcrig, and Sections B and C of Chapter VI. by 
Morrison Handsalcer, Mr. C. A„ Pearce, Assistant Coordmator of the section, 
worked very closely with the Price Tiling Unit in the development of the 
report, and wrote diapter II on the Statement of the Problem. Appendices 
on the Asphalt Shingle and Hoofing and Steel Castings Industries were 
prepared "by Mr. Prank Stocking and Mr. Walter G. Keim, respectively. 

After indicating the character and legal status of pre-code price 
filing systems, the study considers price filing; as a publicity device, 
as a means of price control, and as a device under which there were cer- 
tain changes in industrial price structures. The significance of price 
publicity is axialyzed, and as effort is made to state the degree to which 
price filing systems achieved publicity. 

Tlie control of prices through price filing is considered both in 
instances' in which efforts were made to convert price filing systems into 
systems of price regulation, and in other instances in which the admin- 
istrative demands of effective price filing systems led directly to 
supplementary price control. The use of price filing as an instrument 
for policing other trade practice provisions is also described. 

Changes in price stiMctures under price filing are described in 
a series of case studies of the movement of price levels, the degree 
of uniformity achieved in prices and terras, and the changes in the 
relative treatment of different customer groups. 

The final chapter of the report gives an account of the character 
of NRA's administrative supervision of price filing activities and of 
the gradual development of iIRA policy toward price filing. 

Appendices contain intensive case studies of price filing in the ■ 
Asphalt Shingle and Roofing and Steel Castings Industries and an ac- 
count of the methods used in developing this report. 

Limitations of personnel and field work have forced the members of 
this study unit to conduct their work on a smaller sample and with more 
haste than was desirable. Their product is mimeographed as a definite 
contribution to the literature of the subject and as a basis for futher 
work by interested- students. Tiie opinions and findings are individual- 
and not official 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 Re- 
March 24, 1936. 

9826 -i- 



Summary ,.,.,.,... 1 

'CHAPTER I ■ • " 


I . The Introduction of Price Piling to the N.R.A 7 

II. The History of Price Piling 9 

A. Pre-Ed'dv Plans 9 

B. The "Eddy Plan" 10 

C. Developments Subsequent to 1912 12 

D. The "Cooperative Plan" of the Department of Commerce 12 

E. The Supreme Court Cases ._ .• 14 

1. The Hardwood Case 14 

2. The Linseed Oil Case. . . ._. .;. .■,,•..■. -. IB 

3. The i.;aple Flooring Case 17 

4. The Cement Case ,. . . . . ., 18 

5. Suraraar;'/' of the Four Cases 20 

6 . The Appalachian Coals Case. 21 

7. Sugar Institute Case 22 

F. The Federal Trade Commission Ee-oort 23 

1. Specific Observations Regarding Information Work of 
Associations 24 

2. Economic Effects Indicated "by Statistical ■ Analysis 25 

3. Recommendations 26 

4. Pre-K.R.A. Open Price Associations 28 

G. Trade Practice Conferences of Federal Trade Commission 28 

III. The Definition of Price Filing 29 

A. ■ Pre-IT.R.A. Types of Price Filing 29 

B. The IJ.R.A. Trpe of Price Filing 33 


I . The Economic Problem 36 

A. Introduction 36 

B. The .Meaning of Publicity in Perfect Competition 42 

1. Purity 44 

2. , Mobility of Resources 44 

3. Rationality and Knowledge ■ 45 

C. The Role of Publicity in Imr)erfect Competition 46 

1. Price Publicit"'' and Ltonopolistic Price Formation 48 

a. The Farsightedness of River Sellers 50 

b. Extent of the Price and Other Data made available.. 53 

c. The Interval Before Information Becomes Available 

To Sellers and To Buyers 61 

9826 -ii- 


2. Price Fatlicity and Accessibility to the Market...... 63 

a. Introduction - historical meaning of "free" and 

"open" market.- 63 

■fa. Price filing and discrimination 64 

c. Price filing and predatorj' .price cutting -.. 67 

P. Price Publicity Under N. H. A. .Codes - The Scope of the 

Present Study ; . . G7 

E. The Control Function of Price Filing and the Present St-udy 69 

F. Tlie Price' Structure Under Price Filing ■. . 73 

1. ' Helative Treatment of Different Customers by the 

same concern ....-.■ 74 

2. Degree of Uniformity in Price Among Competing Concerns 74 

3. The Degree of Complexity, in the Price Structure. 76 

4. The Frequency and Hange of Price Change 76 

5. The Direction of Price , Movements ; . 77 

Price Changes as Evidence of the Monopolistic or 

Competitive Character of .Price Filing. ,,;.-•.; 78 

II. The Administrative Problem. . ' . . . . 80 

III. The Legal Problem .-. 82 



I. Functions of Price Publicity as Ercpressed by Code Proponents. 87 

A.' Maintenance of the Price Level 87 

1. Blanket Statements 87 

2. Elimination of Panic, Uncertainty and Suspicion 88 

' ■ 3/ ■ Elimination of Indirect Concessions 89 

4, Protection from i.iisrepresentation of or Coercion by 

buyer s , . , . 89 

B. 'Elimination of Secrecy in Competition 91 

1. ■ Elimination of Secret Concessions 92 

2. Making Competition Hore Intelligent 92 

C. Elimination of Discrimination 93 

D. Advancement of Bayer I&iowledge 95 

II. Collection of Price Information Under I\i.H.A. , 96 

A. Agency of Collection , 97 

1. Issues and Controversies 97 

. 2. Code Requirements 98 

3. Agency of Collection Actually Established 99 

4. Performance by Agencies 101' 

B. Participants in Price Filing. 103' 

1. Issues and Controversies 103 

2. Code Requirements 105 

3. Code Authority Expansion or Modification of Code 
Provisions 105 

'4. Performance by 1,1 embers 106 

C. Information Included in Filing Ill 

'1. Issues and Controversies Ill 

2. Code Requirements 112 

3. Code Authority Srcpansion or Modification of Code Pro- 
v'ls -ons 113 

9826 -ill- 


4, Performance "by Memters 115 

- • b; ■ Obstacles in the Way of Including Full Price Information 118 

D. Products Included Tithin Price Filing ■. 120 

• 1. Issues and Controversies. . .-, 121 

2. Code Requirements 122 

■ •&. ■ Code Authority Eicpansion or Modification of Code Require- 
ments 122 

E. Transactions Included ".Tithin Price Filing 131 

1. -Issues and Controversies. .............. ., ' 131 

2. Code Requirements 133 

3. Code Authority S:cpansion or Modification of Code Require- 
ment s 133 

4. Performance by Members , 135 

F. Geographic Scope of Filing 138 

■ 1. ■ Issues and Controversies 138 

2. Code Requirements 138 

3. Code Authority Ergsansion or Modification of Code Require- 
ments 139 

■ 4. Performance by Members 140 

G. Mechanics of Collecting Prices 141 

1. ' Introduction. 141 

2. Code Provisions 142 

■ 3. Code Authority E:cpansion or Modification of Code Require- 
ments 142 

H. Adherence to Filed Prices 142 

1. Issues and Controversies ^ , 143 

2. Code Requirements < . 146 

3. Executive Order IJo. 6767 146 

4. Code Authority E:<pansion or Modification of Code Require- 
ments. .;...;. 146 

Adherence o f Member s •. : 147 

III. Dissemination- of Price Information Under l.R.A. 151 

A. Issues and Controversies 151 

B. Dissemination to Members . ■ . .' 152 

■ ■ 1. Code- Provisions '. 152 

2. Performance by Agency (as Conditioned by Code Authority 
Rulings- and Industry Vote) 154 

0. Dissemination- tO' Customers 158 

1 . Code Provision-s. . . ■ 158 

3. Performance by Agency (as Conditioned by Code Authority 
Rulin-gs- and Industry Vote) 158 

IV, Recapitulation of -Evidence Bearing on Nature and Extent of Publi- 
city Provided by Price Filing Plans-.- ' 163 

A. Publicity to Members 163 

B. Publicity to- Buyers. ..,..-.. 183 



I. Introduction. ...■.■.■.•.....■.■..■...•.•.- 184 



The Pattern of Control Established By the Codes 187 

A. Control over the Price Level - Relation of Price Filing To 

Cost Provisions , v . 187 




1. Introduction 187 

2. Prevalence of Cost and I.Iinira-'aia Price Provisions In 

Codes in the Study Sample 191 

3. Code Provisions Conveying Power to Challenge and Void 
Prices 195 

4. Code Authority AoiDlication of Cost Provisions 138 

5. The Piling of Costs and Use of Price Piling in Connec- 
tion with Cost Lists and Cost Manuals 201 

a. The Malleatle Iron Industry 202 

■fa. Marking Devices Industry ' 202 

c. The Folding Paper Box Industry 205 

B. Control Over Price Changes - The ITaiting Period 211 

1. Waiting Period Hequireraents in Codes 211 

■ 2. Use as a Device for Coercion 215 

3. Use as a Period to Puhlicize Pally the Price Offers of 

Competitors 221 

a. To Afford Ample Time for Dissemination 221 

"b. To Afford Opportunity to lieet Price Changes and 

Thus to Promote Stability in Prices 223 

C. Price Filing and Control Over Certain Elements of the 

Price Structure . .' 230 

1. Introduction 230 

2. Product Classification 231 

a. Metal 'Jindow Industr?/ 232 

D. Steel Castings Industi-y 233 

c. Business Furniture Industry 235 

d. Gas Ap'oliances and Apparatus Industry 236 

3. Customer Classification 242 

a. Introduction ; . . . 242 

b. Illustrations of the Use of Price Filing Plans in 
Connection with Customer Classifications 244 

4. Geographic Price Arrangements 255 

a. The Filing of Prices on a Delivered Ba.sis 256 

1). Price Piling and Basing' Point Prices 258 

c. Uniform Delivered Price Zones ' 261 

d. Other Forms of Delivered Pricing 263 

e. Price Filing Zones and Anti-Duunping Zones 266 

• 5. Terms and Conditions of Sale 269 

D. Application of Price Filing Controls to Distributors 272 

1. Prohibition of Subterfuge or Evasion of Price Filing 
Requirement by Members through Use. of Distributors... 273 

2, Elimination of Com-oetitive Disadvantage Arising When 
Distributors are Exempt from the Price Filing Require- 
ments 276 

a. Policy Consideration Involved 277 

b. Code Provisions Extending Price Filing Require- 
ments to Distributors J 278 

1. Distributors Included as Members of the Indus- 
try 278 

2. Mandatory Contracts with Distributors 280 

3. Provisions Permitting ilerabers to Require Con~ . 
tracts from Distributors 289 




4. Provisions Fortidding Members to Sell to Distritu- 
tors Not Conforming to Trade Practice Provisions, 
or Non-Cooperative 293 

5. Req-uests for Code Amendments or Other Sanctions 

To Bind Distri"b-ators to Filed Prices 295 

3. Extra-Legal Attempts to Bind Distrilmtors to Field 
Prices 298 

4. Summary 313 

E. Control Over Division of Business Through Statistical Report- 
ing and Share-the-Business Plans 315 

1. Introduction 315 

2. Share the Business Plan in Corrugated Solid Fibre Ship- 
■oing Container Industry 316 

3. The Envelope Price Filing and Quota Plan 320 

a. Organization of the Envelope Industry 320 

. h.. The Price Filing Provision. , .' 321 

c. The Budget Plan 321 

d. Breakdown of the Price Filing Plan 325 

4,, The Commodity Group Plan for the Candy Manufacturing 

Industry 326 

5. Prevalence of Budget Plans 329 

6. The Eddv Plans and the Budget System 329 



A. The Level and General Direction of Prices Under Price 

Filing 332 

1,. The Concept and Problem of Price Levels 332 

2. Examples of Higher Price Levels 333 

a. Steel Castings 333 

h. Fertilizer 337 

c. Asphalt Shingle and Roofing 341 

3. Other Industries for Which There is Some Evidence of 
Upward Price Trends 342 

4. Samples of Stable Price Levels 343 

a. Laminated Phenolic Products 343 

b. Steel Castings 344 

c. Electric Fans 345 

d. Food Service Equipment 348 

e. Fuse Group, Electrical Manufacturing Industry 348 

5. Industries in Which the Price Level Declined 548 

a. Flexible Cord 348 

b. Steel Castings 355 

c. . Radio Receiving Tubes 35c 

d. Fractional Horse Power Motors 358 

e. Macarnni 358 

f. Domestic Electric Heating Applicances 360 

g. Agricultural Insecticide and Fungicide 361 

h. Builders Sur)plies 364 

6. An Industrv for Which it is Difficult to Determine the 

Price Level 364 

a. Electric Arc Welding Apparatus 364 

7. Intra-Industry Price Levels 367 



B. The Relative Treatment of Oastomers Under Price Filing.... 373 
. 1. Cases in Which the Trend was Toward More Uniform Treat- 

rnsnt of Customers 373 

a. Electric Jans 373 

2. Cases in ^hich the Trend Was Towa.rd a ^Jider Spread in 

Prices to Different Customers ; 375 

a. Fractional- Horse Power iiotors 375 

h. Blectric Arc Vfelding Appp^'atus 377 

C. Degree ■of Price Uniformity Under Price Filing 377 

1. Cases of Failure to Achieve Uniformity ; 378 

a. Candy Manufact-aring : 378 

h. Business -Furniture 379 

■ 2. Gases In Wiich Some Uniformity Was Achieved 379 

a. Fertilizer 379 

t. Valve and Fittings 383 

c. Electric Arc Welding Apparatus 385 

d. Pole Line Hardware Group .- 386 

e. T/holesale Confectionary 388 

D. Sumraai'y of the Cases: The Character of Prices Under Price 
Filing 388 



Introduction 389 

A, Supervisory Administration Action 389 

I. The Administrative Problem of Supervision • 390 

A. Diversity of Open Price Plans 390 

II. Availability of Data on Which to Base Supervisory Administra- 
tive Action ; . 392 

A. Available Records of Code Authority Actions -. 392 

1. Importance of Missing Records 393 

B. The Collection of Price Filings . . 393 

1. Absence of Collected Price Filing 393 

III. Formal Administrative Action 396 

A. Infrequency of Formal Action 396 

B. Amendments Pertaining to Price Filing 397 

C. Administrative Orders Affecting Open Price Provisions of 
Individual Codes 399 

1 . Stays : 399 

a. Stays on Waiting Periods. ; 399 

b. Temporary Stays ; 399 

c. Permanent Stays 400 

2. Interpretations 401 

IV. Corrective Action Through Critical Supervision of Cod6 Autho- 
rity Activities' .'.... 403 

A. Character of K.R.A, Supervision 403 

B. Supervision Required Because of the Minuteness of Code 

-g g Authoritv Regulations, . 410 



C, Administration Supervision and the Protlem of Confusions 
Between Code Authority and Trade Association Functions,,.. 412 

D, Supervision Preceding Action (preventive) 413 

1. , Rejection of Price Filings "by Code Authority, . , .- 414 

2. Mandatory Uniform Terms 414 

3. The Scope of the Code • 415 

4. Standard Price Filing Forms.- 415 

35. Supervision Subsequent to Action (Corrective) 416 

1. Price Fixing Activities .'. . 416 

2. Siuspension of Price Filing Plan .....; 425 

3. Irregular Allegations of Violation • 426 

4. Supervision of Application of Executive Ordei^ No. 6767 

and Administrative Order X-48 '..... 426 

5. Supervision Connected With Cost Formulae • 426 

6. Availability of Filings to Meraters ...'...-. 426 

7. Classification of Customers. . •. 427 

,8. Rejection of -Filings : 427 

9. . ,'iiscellaneous Items , .• 427 

B. Compliance and Litigation Activities ■ '. .". . ' 430 

I. Compliance Activities ty Code Authorities and the MA 430 

A. Code Authority Coraxjliance Activities 430 

1. Code Authority Methods for Handling Complaints 430 

2. Code Authority Compliance Difficulties 433 

B. ¥riL Compliance Activity 435 

1. Volume a.nd Disposition of Cases Handled "by State 

Offices -435 

' 2. Difficultv. of State Offices with Code Authority Pro- 
cedures and with Changing Code Provisions 437 

3. National and Regional NRA Compliance Pro cedxire. 438 

4. The Government Contrafcts Division 439 

II . Litigation Activities ■ 441 

A. Number of Cases Handled 441 

B. Attitude of the Litigation Division Toward Prosecution 

of Price Filing Cases .■ •. . 441 

C. N.R.A.' Policy Relating to Open Price Filing 442 

I. Senate Debated On Price Filing Prior to Passage of the NIRA. . , 444 

II. First NRA Price Filing Period-June 16, 1933 through June 6,1934 

Experimentation and Search for a Policy 445 

A. Six Lionths of Price Filing E:\perimentation .'. . . 445 

1. Reasons for Administrative Attitude ......' 446 

2. The Price Filing Plan in the -Electrical Manufacturing 
Code ■. ■. 446 

3. Early Dissent with Respect' to' Price Piling Provisions. 447 

a. The Code Analysis Division , ; 448 

b. The Division of Research and Planning 448 

c. The Consumers ' Advisory Board 449 . 

4. The Beginnings of Official NRA Price Filing Policy 45C 

B, Six Months of Study and Search for Policy. . ; 452' 

1. Efforts to Ascertain the' Results of Ap-oroved Price 

Plans 452 

9826 -viii- 


2. Special Stadias Undertal-ien V/ith an 'Eye to Policy 456 

a. rtesearch and Planning Division Heport 456 

"b. Consumers ' Advisory Board Report 457 

3. Farther Search For a. Basic Policy 459 

4. Sommary of the First Price Filing Period 461 

III. Second TRb. price Filing Period - June 7, 1934 to May 27, 1935- 

Declaration, Clarification and Application of Policy 452 

A. Office iviemorand-ura llo . 283 462 

1. Background of the Memorandum 462 

. 2. . Principal Points as to Price Filing in Office Memoran- 
dum IJo . 223 464 

3. Differences Between Sa'bnitted and Announced Draft 464 

4. Policy Connected TiTith Application of the Policy 466 

5. Reactions to the New Policy 467 

6. The Confidential Agent 471 

7. Extent to "IThich Hew Policy Was Incorporated in ITRA. 
Codes 473 

B.. , Executive Order Tf6767 - A Concession to Government Purchas- 
ing Agent s 477 

1. Essential Points Involved in Executive Order 6767 477 

2. Relation of Order !Io. 6767 to Price Piling Policy 478 

3. Reactions- to Order rio. 6767 479 

a., Ex-oressions of Industry Opinion 479 

"b. Attempts to Circunvent the Operation of the Order.. 480 

C. Other Orders Affecting Price Filing Policy 483 

1. , .Customer Classification 483 

2. "Free Deals" or Premiums. . . 483 

3. Advertising Allowances 484 

4. Forward Contracts 484 

D. Interpretations and Jidvisory Opinions 485 

IV. Views on Price Filing Policy in the Final Days of ERA 488 

- . A. O-oen Price Folic?'" as Disciassed at the Senate Finance Com- 

. . mittee Hearing on the -ITRk, March 1935 488 

B. Policy Views of Various ' Groups within the Administration.. 489 

1. Consiiraers ' Advisory Board Reconnendations 489 

2. Research and Planning Divisions' Recommendations 490 

3. Other Policy Recommendations. 491 

C. Final Statement of 'lIEA Price Filing Policy 491 

9826 -i::- 



Table I Original and Final Price Schedules Prevailing for 
Eighteen Representative Steel Castings Under 
the KriA Codes 336 

Table II Percentaee Changes in Fertilizer Prices, 1933-1935... 337 

Table III Fertilizer Prices to Cons-umers 338 

Table IV Number of Price Changes, Fertilizer Industry......... 339 

Table V Course of Asphalt Shingle and Roofing Prices from 

March 1933 to End of Code Period. 341 

Table 71 The Original and Final Price Ra,nges for Electric Fans 

Under the NRA Code 347 

Table Vll Price Trend of Type C F Number 18 Rayon Flexible Cord. 349 

Table VIII Price Trend of Number 18-1/64 Radio Wire, Solid Tin- 
ned 349 

Table IX List Prices, Discounts and Most Favorable Net Prices 

for Another type of Flexible Cord 350 

Table X Variation in the Prices to Purchasers of One Tirve of 

Flexible Cord , . ". 351 

Table XI Number of Companies in the Electric Fan Industry 
Offering Specified Qjiaritity Discount Schedules 
To Specified Customer 'Classes 374 

Table XII Trucking Allowances and Actual Freight Rates for 

Zone 5 of the Fertilizer Industry 380 

Table XIII Terms of Payment Filed by Members of the Pole Line 
Hardware group of the Electrical Manufacturing 
Industry. ,' . . ' 387 


Chart I List Prices, Discounts, and Net Prices For Type S.J. No. 

18, Flexible Cord, Sept. 1933-Feb. 1935 352 

Chart II Changes in Treatment of Customer Classes, Large Mono 

Cell-Dry Batter;'- Division .' . . . 368 

Chart III Effects of Changing the Geographical Price Structure 

On Rubber Covered Building Wire Prices '372 



APPEiraiX A 

Price Filing in the Asphalt Shiagle and Hoofing Industry 




I, The Asphalt Shingle and Roofing Association. , 497 

" ' A. 'Size 497 

S. Activities 498 

II, Developments Within the Industry 49S 

A. Patent Rights, 499 

1. Patent and Licensing Corporation 500 

B. Combinations, Mergers and Absorptions 501 

III. The Asphalt Shingle and. Roofing Institute, 1928 504 

A. Institute Activities, 504 

lo Merchandising Plan , 505 

ar- As .Amended in 1929, <, 505 

Co Relationsnip of Patent and Licensing Corporation 508 

E, Position Under the Anti-Trust Laws, , 508 

C. Validi ty of Patents ^),uestipned. ., 511 

lo Patent and Licensing Corporation v. Weaver-Wall ,511 


THE 'lin)USTRY IN 1933^ 512 

I, Size of the Industry 512 

A. Number of Members. 512 

B, Relative Size of I'embers 512 

II, Geographical Distribution. 513 

III. Products and Processes 513 

IV. Types of Distribution .514 

V. Nature of the Marke t 516 

A. New Building. 516 

Vr. Competition 517 

VII, Production, Cost and Price Trends, . 517 

VIII. Effect of the Depression....,., 520 

IX. Pre-Code Problems , 521 



I, Proposals 522 

II. Purposes to be Achieved,.... 526 



I. Between Members of Indastry ; . . 528 

II. Lember and Customer Groups 528 

A. Lumber Dealers , 528 



B. The Roofing Contractors Association 528 

C. Mail Order Houses, ♦.» 529 

III. Between Industry and N.E.A 530 

IV, The Effect of These Controversies 530 


• ■ I, • Prohibition of Sales BelOw Cost 532 

• IL,- ■ Miscellaneous Semi-Related Provisions , 533 

■ • - ■ ■ ■ CHAPTER VI 


I. The Administrative Agency 535 

■ ■ • A. • ■ The Code- Authofity. .....'.■..'..■. 535 

• • • • B. • ■ Powers and Duties of the Code Authority 536 

Ce ■ Rules and Regulations Promulgated Isy the Code Authority, ., .537 

■•• Do Explanations and Interpretations 539 

■ • 1, • ■ Bulletins. . ; 539 

2,- Explanations;... 542 

- • ■ E, ■ Unauthorized Activities 544 

1» Misclassif ication Meetings 544 

2. "Set-Up" Warehouses 546 

3, Industry Advertising Program 548 

F, • Amendments. . . . .' 548 

1. Uniform Merchandising Plan 548 

■ -2, • 'Liquidated 'Damages 'Agreement. • 550 

3.' • Miscellaneous 'Proposed Ameiidnients ._ 551 

II, Administration ty 'N.'R.'A. . . • 552 


- ■■ COMPLIAI^ICE '.■ ' 554 

I, Enforcement- Agency,' ■." 554 

II. Methods- of Gaining CompTiance, . .'.' 555 

III. Number of Violators,..'.....'....'. 555 

IV, Success of Enforcement Agencies 556 



-I, Promotion of Price Stability 557 

II, Price Uniformity 558 

. . A. Merchandising Plans 558 

II I» Price and Price Movements - 559 

IV, Position of Distributors 561 

V. Increase in the Number of Manufacturers 562 

■A« Limitation or Control of Production 563 

VI, Diversion of Sale to Substitute Products 563 



I« Personal Opinions of Interested Individuals ,564 

A. F. J. Patchjll, Administration Member of the Code 

Authority 564 

B. . J, S, Bryant, Secretary to the Code Authority and 

Manager of the Institute , 565 

,, C, Mr. Stegman, Vice-President, Vfeaver-Wall Company 565 

D. Herbert Abrahams, Chairman of Code Authority and 

, . President, of Ruberoid 566 

£, Ralph Muller, Vice-President of the Cooper Company and 
, . Member of, the Code Authority. 566 


Table , . I - List Prices, Terras of Sales and Net Prices for Indi- 
vidual Shingles by Principal Companies Gran ted to 
Wriolesale Carload Distributors 567 

Table II - Asphalt Shingle and Roofing Industry Shipments 568 

, . Prepared Roofing 

Table III - Asphalt Shingle and Roofing Industry Prices" 570 

Chart I - Organizatipn. of, the Asphalt Shingle and Roofing 

Institute '. 572 

Chart II - Wholesale. Prices for, Individual and Strip Shingles 
and plats Surfaced and Medium Prepared Roofing, 
, . 1926-1935. ,.....,.,...... 573 






. " . ' , ' CHAPTER I. 


General Character of, the Industry 574 

A., Bef initio.n and Extent 574 

1, . General Statistics 574 

2, Size and Bistri'bution of Plants.. .574 

,3, Description of Important Companies 577 

4. Financial. Conditions of Industry 580 

5, Failure ,in the Industry. . 580 

,. 6. Relationship of Earnings, Prices and Volume 580 

7. Raw ,Materi^l Prices. 581 

8, Classes , of Products..... 581 

9., . Methods of Manufacture 581 

10, Markets for Industry Products 582 

11, Competitive Products 583 

Trade Association Organization and Activity 583 

A. The Steel Founders' Society of America 583 

. , 1, Membership. 583 

2, Organization , 586 

, 3. . Pi^icing Practices Prior to the Code 589 


a. Introduction 539 

b. Early Forms of Price Listings and Practices 

■ -1912-1927.. 589 

c. Trade Association Activity- 1929-1933.,.. 590 

'CHAPTER II. .- , • . . 


le Proposals for Price Filing Under the Code ■ . . . .,-.595 

Ao Industry Program for Price Filing as Submitted .....595 

B, Op"00sition to the Proposed Provisions 596 

II. The Price Filing Plan as Apxjroved and Amended 597 

A. Analysis of the Open Price Provision as ApTjroved 597 

B» Amendments -Affecting Price Filing Provisions 599 

C, Functional Aspects of Other Code Provisions Integrated 

with Price Filing Provisions as Adopted 605 


I. The Administrative Organization .606 

II. Mechanics of Open Price Operation ■; 607 

A. Classification of Products. 607 

B, • Quantity and Weight Differentials .608 

C. Saggested Schedules Based on "Normal" Price Levels 610 

D, Regulations Concerning Filing of Prices and Terms of 

Sale. 614 

1. General Rules for Filing Prices 614 

2, Quotations. 616 

3. Invoices and Discounts 616 

4, Qjiantity on Order 616 

5o Pattern Equipment ,...■. 617 

6, Machining 617 

7, Inspection- Charges '. 618 

8. Back Charges for Welding 618 

9. Pattern In-su-rance-. •.■.•.•.% . .'. .■ '; ■ 618 

10. Re sponsibill-ty for ramage-s^ . 618 

11» Summary.'. .-.-.■. ...... .■.■.-. . .••■.•. .• 618 

E. Filings for Different Distribution Channels 619 

1, Sales Rep-re sentative, Manufacturer's Agent, etc 619 

2, Middleman. . . .-. 619 

3, Customer-User. . . .■ 620 

F. Dissemination of Price Filings (Publicity) 621 

1. Daily -Price Reports.-. , .•. . .■•■. .• 621 

2, Quarterly -Reports. .-. • . .•••.•. . .■ 625 

G. Filing Methods Employed by Members. 627 

..... / 



I. Compliance and Enf or cement ,•.•. .■.■• .....'....' 629 

II. Attitudes andOoinions of Interested Parties ■ 629 

9826 ■ _^.i^_ 

III. Industry. Reactions, .to. Office Memorandum 228 and Executive 

Order 6767 „..; 632 

IV, Labor. Codp Authority and i\!EA Attitudes 634 

.... .CHAPTER V. 


I, Analysis of Filings Relating to Prices (for Customer-Users) ... .638 
A» Frequency of Filing of New Low Prices and New Classification 
Schedules 639 

B, Extent of Use of "Same as" Filings 640 

C, Extent of Use of "Blanket" Filings 640 

D, Use of Withdrawals 640 

1, The Nature of Withdrawals 640 

a» Removing Classifications 642 

h. Effective Period Before Withdrawal 642 

c. Price Changes Effected by Withdrawals 643 

(1) Lower Price Schedules Withdrawn...., 643 

(2) Higher Price Schedules Withdrawn 646 

. (3) A Sample Case of a Large Number of Items With- 
drawn 647 

2» Purposes of Withdrawals 648 

II. Analysis of Filings Relating to Discounts and Allowances 650 

A. Discounts to Other Foundries (Middlemen) 650 

B. Allowances of Freight Charges to Railroads 650 

C. Allowances to Customers on Patterns and Equipment 651 

III,. Analysis of Filings Relating to "price Extras" 652 

A». . P.escrip^ion of Price Extra Practice C52 

B, Methods of Filing Price Extra Schedules 653 

IV,_ Analysis of Pilings Relating to Sales Contractc 654 


I, Subject Matter and Method of Study Employed 656 

A. Sample of Products Selected for Study 656 

B, Method of Analysis, 657 

II. Analysis of the Tabulations of Price Pilings 657 

A» By Individual Product 657 

1, Aeronautical Castings, N.O.C.B.N 657 

2, Agricultural Machinery - Cwmleine Harvester Castings, 
N,Ot.C.B.N 658 

3, Automobile - Axle Housings (Banjo Type) 659 

4, Automobile Brake Clutch Pedal & Similar Levers (with 

Foot pads) 659 

5, Automobile Brake Brums - 1 to 100 lbs 660 

6, Bread Slicing Machinery Castings, N.O.C.B.N 660 

7» Cylinders - Hydraulic Accumulator Type 660 



8. Dredge Ball &■ Socket Joint Castings, Including Cases, 

Balls, and aiands 660 

9, ' Electrical Machinery and Equipment - Motor Frame 

(Box T:/pe) 661 

10. • Gears - Cast Tooth and Blank.. 661 

11. Heat Treating Farnace and Equipment, Carhonizing 

and Carburizing' Boxes 662 

12. Railroad Locomotive - Driving Boxes (Friction Type).,. 662 
13» Refinery Oil Castings - Sectional "U" Bend Only, ..... .663 

14, Refractory and Brickyard Roller Tires ..,,663 

15o Rolling Mill and Steel Plant - Roll Housing and Caps,, 664 

16, Power Shovel and Dragline Bases - Upper, ,...o664 

17,' Shoes or Treads - Power Shovel and Dragline 665 

16, Valve Bodies 665 

B. General ' Summary of the "Price Data ....;»*.» 666 


Table I I - 

Table II- 

Table III - 

Table IV - 

Table V - 
Table VI - 

Table VII - 

Table VIII - 
Table ' IX - 

Table ' ' X - 
Table XI - 

Number of Firms, Employees and Capital Invested, 1929-' 

1934." '. 574 

Steel Foundries in the United States, Arranged in 

Groups According to Size 575 

Number of Foundries arid Total Monthly Capacities, Ac- 
cording to Geographical Divisions, 1934 ,575 

Companies Operating Two or More Foundries and the Divi- 
sions in Which they are Located .577 

■principal Companies by Size and Monthly Capacity, 1934, ..,578 
Earnings and Capital Turnover for Select Group of 

Companies, 1924-1928 580 

Growth of Number of Product Classifications During the 

Code Period ^608 

Unfinished' Steel Castings-^rice Per Lb, -;. Net, 609 

Changes in Price Between Schedules for Various Weights 

and i^antities of Castings (Price Per Pound) ^ 613 

Average Number of Filings per Foundry, by Divisions .622 

Number of Foundries^ Filing Genuine Withdrawals by Divi- 
sions and by Months 641 

Chart" I - Production of Steel Castings - 1926-1935 584 

Chart II - Malleable Iron Castings., by months, 1926-35 585 

Chart' 'III -Geographic Divisions of the Steel Castings Industry. 668 

Chart' ■ IV - 'Avera'ge Selling Price of Steel Castings, 1933-1935 671 

Chart V - Changes in Production 'c'osts' "of 'Steel Castings, 1933-1935. . 672 

















. • : ■ ■ ■ Page 

- Tables No. I to XVI 672-k 

I-A. Production of Commercial Steel Castings 673 

I-B. Per Cent of Capacity Utilized in the Production 

of Commercial Steel Castings 675 

II. Average Selling Price of Steel Castings from 

July, 1933, to September, 1935. 678 

III. Changes in Production Costs of Steel Castings 
January, 1933 to October, 1935 679 

lY. Price and Production of Malleable Iron Castings 

and Per Cent of Capacity Utilized 680 

V-A. Average Number of Days Elapsing Between Date 

Price was Filed and Date Price was Reported to 
the Industry, Classified by Divisions and Type 
of Filing 681 

V-B. Average Number of Days Elapsing Between Date 
Price Was Filed and Date Price Was Reported 
to the Industry, Classified by Divisions and 
Type of Piling , ■. 682 

V-C. Number of Cases and Average Number of Days 
Elapsing Between Date Price Was Filed and 
Date Price Was Reported to the Industry, 
Classified by Divisions and T^rpe of Piling 683 

VI. Number of Low, New and High Price Filings 

and All Types of Filings Made, by Division 684 

'^H- Number of Low, New, and High Price Filings 

and All T^/^pes of Filings, by Months 685 

VIII. Example of "Same as" Filings: "Rolling Mill 

and Steel Plant Castings : . . . . 686 

IX. Frequency Distribution of Foundries Submitting 
Blanket Filings, by Q;uarterly Reports 687 

X-A. Type of Discounts G-ranted to Other Foundries 

and Effective Date ■ 688 

X-B. Frequency of Type of Discounts, by Months 689 

XI-A. Type of Freight Allowances Granted to Railroads 

and Effective Dates 690 

XI-B. Frequency'' of Type of Freight Allowances, by 

Months 691 

XII-A Type of Pattern Allowances Granted to Foundries 

and Effective Dates 692 


Table XII-B. Freqiiency Distribution of Allowances on 

Patterns, by I'onths 693 

Table XIII-A. Foundries billing Sales Contracts Specifying 
Prices Lo^ev Than Current Filed Prices, Kura- 
ber of Customers, Products Affected, and 

Length of Contracts 694 

Table XII I-B. Frequency of Contracts and Customers Filed, by 

Months 695 

Table XIII-C, Frequency of Contracts, Classified by Length of 

Duration 696 

Table XIV. Price Schedules Filed on Shoes or Trads - 

Power Shovel and Dragline 697 

Table XV. Price S^hedules Piled on Aeronautical Castings - 

1T0C3N 698 

Table XVI Price Sched-oles Filed on Railroad Locomotive 

Driving Boxes, Friction Type 699 

EXHIBIT II - Goumercial Hesolutions 700 

I. Price Filing Procedure 700 

A. Formal "Call" for Price Filing 700 

B. Waiting Period for Price Hevisions 700 

C. Prohibition of Sales Below Filed Prices 700 

D. Status of Repair and Replacement Parts 701 

E. Filing of Sales Contracts 702 

F. "Blanket Filings" 702 

G-. Filing of Prices to Meet Specific Competition 703 

II. Terms and Conditi'-ns of Sale 703 

A. Subsidizing or Financing of Customers 7C3 

B. Furnishing Free Service and Goods 704 

C. Guaranteeing Delivery Date 704 

D. Lump Su"i Bidding 704 

E. Qjiantity on Order 704 

III. Distributive Relationships 705 

IV. Geographical Price Structure 705 

V. Product Classifications 708 

VI. Price Extras •. 711 





Talkie of Contents 


Exhibit I - Methodology and Suggestions for Further Research 712 

A. The Code Sample 712 

B. Selection of the Code Sample.- 713 

C. The Work Outline 714 

D. Sources of Information and Research Procedure 746 

E. Statistical Program for the Price Filing Unit 759 

1. Suhject Matter Outline 759 

2.- Methodology Outline 766 

3, Material Specification Outline 774 

4. Inspection Study Outline 777 

F. Suggestions for Farther Research 783 

Exhihit II " Analysis of Price Filing Provisions Contained in 

NRA Codes 784 

Exhibit III - Alphahetical List of 191 Codes in Over-All Sample 

for price Filing Study 793 

Exhibit lY - Open Price Plan for Folding Paper Box Industry 802 

Exhibit V - NRA Policy Statements Relating to Price Filing 812 

A. Text of Exhibit A of Office Memorandum No. 228. 812 

B. Text of Office Memorandum No. 260 814 

C. Text of Executive Order No. 6767 815 

D. Text of Administrative Order X-48. 816 

Ew Text of Office Memorandum No, 267 817 

F. Text of Office Memorandum No. 316 818 

G. Text of Office Memorandum No. 326 820 

Hi Text of Office Memorandum No. 327 823 

I. Text of Office Memorandum No. 334 824 

J. Administrative Policy, New Series, No. 1 825 






Price filiri;'^- provisions "^ere ariong the most rrefuent trade practice 
provisions in lOlA. In the Conrressionr,! ".eoctes i;hich preceded the 
V^.ss3{:;e of the KIllA, it v;as indicF.ted that price filinv nas expected to 
be permissilsle in the codes. Prior to N3A, there had 'oeen price filing 
plpns in at least I50 indastries. Under the trade practice conference 
procedure of the 7eCe-cl Trade Coranission, G-rov.p II rules for the inde- 
pendent y;u'blication nid circulation of prices had oeen uritten in more 
than 50 indastries. 

Since pre-code price filing, although generally "based on the ideas 
of Arthur Jerone Sdd;'-, took various forms, and since the price filing 
systems under the codes •:ere also various, pre— code and code price filing 
svstems differed to vaz-'ious degrees. In generei, however, pie-code sys- 
tems tended to cover the voluntary filing of pa,st transactions and often 
the circulation of price information -Jithout i dent if ica,ti on of individual 
concerns. NBA price filin;^- systems generall3r provided for mandatory fil- 
ing of prices 3.nd terus of sale helow rvhich menhers could not sell, for 
the circulation of this price information in the form of identified price 
lists, and for prior announcement of any changes, -./ith or without a wait- 
ing period. Usually these 1<BA code systems were accompanied by direct 
forms of price control, such as provisions against srle "below cost or 
provisions for uniformity in some of the terms of sale. 

Although the pre^code legal status of price filing v/as not clear 
because the leading decisions of the Supreme Court vere stibject to dif- 
fering interpret.-.tions, it appears that to be legrl ?- pre-code price 
filing system needed to he divorced from use as a device for raising 
price levels, and that if the system included the filing of future prices 
or the identifice„tion of individual price lists, these chara.ct eristics 
established some Question of its legality. 3j" this strndard, most IffiA 
price filing systens -..-ould have been of dubious legrlity. 

Price filing '.7?.s advocated under KRA as a means to promote competi- 
tion by an increase in information about price, as a means to reduce dis- 
crimina.tion among custop.ers, and as a me.ans to stabilize prices. It is 
not clear that an in price information necessarily has the effect 
of increasing the competitive character of the market. Since modern mar- 
kets are imperfect, rather than ccapetitive in the sense in which com- 
petition is customarily described by economists, there is a possibility 
that increased informa,tion will be used in order to tcke more effective 
advantage of the monopolistic elements in each concern's market position, 
rather than in orde:.- to compete more intensively. There is also a pos- 
sibility that increased information to buyers in the market may promote 
uniformity of prices" not only when discrimination is decreased by such 
uniformity, but also "./hen it is thereby incree.sed. These possibilities 
do not depend upon the character of price filing a,s such, but upon the 
character and play of incentives in the industry to which it is aprlied. 

The degree to -..-hich any result is achieved ''oi' price publicit'.', of 
course, depends upon the effectiveness with viiich prices are made public. 
In more than half the crises studies (a sample of 57 industries), relative- 
ly little effective publicity of prices to members of the industry seems 
to have been accomplished by the price filing system. In a much 


- 2 - 

larger ;iroportio"i of cases, relatively little Dublicity of prices to 
'bn5''ers seens to have resiilted. In aliout a dozen cases, it appears that 
substantially complete publicity vs.- achieved, 

Eie effectiveness of publicit3^ under price filing systems depended 
upon a series of factors. 

1, The agency which collected the prices needed to be effici- 
ent and £?lso to function inipartially. When the collecting agency we.s 
composed of members of the industry, any lack of iinpartialitj'- might con- 
vert the system into a device by which favored individuals secured ad— 
ve.nce Iciowledge about jrices, Diff icu].ties in ^.he establishment of 
collecting a'^;encies elso ap-oeared when choice has to be made between 
local and national centers for ^rice filing, 

2, A second reo^uisite of f-oll oublicity was the filing of 
prices b3'- all concerned i'l the market. In certain cases, difficulty 
arose because distributors who sold in competition with manufacturers 

in an industry were covered by different codes and cou.ld not be required 
to file prices, Fxiere efforts were made to solve this problf:..:, they 
seldom siicceeded. Moreover, non-comp].iance with price filing provisions 
by members of the industry we,s e. significant interference with publicity. 
In nsarl;" half of the cases, almost every one filed; in a.bout 40^ of the 
cases, somewhere between half and 9 /lO of the industry filed; in about 
15/0 of the cases, a majority of the industry failed to file, 

3, A third requisite of effective publicit'/ is full informa- 
tion about prices and terms of sale— technically very difficult to se- 
cure. Terms of sale are so numerous that a full filing of them would 
have beon burdensome to the members of some industries. Moreover, in 
relativel;" fe'j cases did the industry both ■:)lan for a sufficiently com- 
plete filing scheme and win HEA's assent to its plan. Efforts were 
constantly \mder way to extend the scope of price filing either by code 
amendment or by rules issued by code authorities, A peculiarly diffictilt 
problem in securing complete information was the filing of customer 
classificr.tions, since there are .-_;reat dif I'^iculties in the way of estab- 
lishing rigid D^Lstomer classes, and since so long as an;^ concern vras free 
to shift s. customer fro:; one class to another it could use such shifts 

to evade its filed prices, 

4, Conuarabilitv of oroducts was also a requisite of code 
publicity, Difficiiit" arose both in determining how far price filing 
should bo e:;tended in non-standard products and in finding ways of com- 
paring the products of various -jroducers when specifications were not 
uniform throughout the industry, 

5, A full statement of special types of transactions often 
was necessary to publicity. Difficulties arose not only in the effort 

to secure filing of distributor's "orices, which has been mentioned above, 
but also efforts to seciare filing of prices made by s. concern to its 
s\ibsidiaries, made in some industries to Tjeculiarly large purchasers, 
and made in several industries on long-term contracts. Reluctance to 
make public certain "orices and the inherent difficulties of applying the 
filed prices of the present to contracts written in the pa,st, were centra.l 
in this problem, 


_ 3 _ 

5, In locrli?;ed inrlustrieb, tho gGOgrciphic scope of price 
filinf^ r problem in puljlicifc^. ^fnon it rras decided to file 
prices Tar r.rear., question r.roce cis to the ch rr.cter of r.n-"- concern's 
price i:i selling outside its liome rnarkot".s. Difficulty also appear- 
ed in indu-stries in ijhich there 17.- s no uniforn ectatlished practice as 
to A7hether prices vere nuotcd on r, delivered or on an f.o.t, plant tasis, 

7, Essential to rmtlicit-/ is an rdequate distrihution of the 
information filed. ' In certiin casei:, the information uas not available 
to h-uyers, and in other caseg it vas -lot available to the entire "body 
of sellers. Methods of di strihuting information vcjried from systems in 
which it v,-is' Butotaaticaliy sent oat as received to svstems in which it 
was availaole on'l:' upon special request or only hy inspection at a cen- 
tral office. In certain cases, discretion ^xxs exercised "by the filing 
agency in delaying or failing to circixlate some of the prices filed. 
In ptrll other cases, a pro"blen arose ahout the distri"bution of the in-- 
formation 'jy means which would mrlce it availa"ble to all mem"bers of the 
industrry at the spjne time. 

The requisites of puhlicitv mentioned a'oove appeared in widely 
vo.rying decrees in different price filing s'''stenn. At times the o"bstacle 
lay in the wishes of those a.dministering the system, at other times in 
the inherent techiiicrl difficulties encountered. In nearly every, 
a full acco-unt of the system at work requires consideration not only of 
the code as '.rritten "but also of ;.dministrative practices estahlished "b;'- 
the cods authorit'/ and of the degree to which raen"bers of the industry 
conformed to the plan. 

The difficulties anticipated as well as encountered in securing fi^.ll 
and effective -ou'blicity led to a nur;i"ber of limitations on the pricing 
practices of -^articiDatinf": mem"bers. In soms instances they were esta'b- 
lished in the codes as "oarts of the price filing plans or in au::iliar-^ 
provisions. In other instances their status was less formal, represent*- 
ing in part the "body of working rules promulgated "by the industry agen- 
cies in acljiiinistering the plans. They raised, in any case, a central 
issue of price filing n.nder ERA codes, naraely, the circumstances in which 
rigidification or regularization of elements of the price structure was 
desira"Dle in the interests of compara'bilit;'- and of eliminating or rediic- 
ing evasion of the pu"blicitv requirements throUi<5;h various forms of mani- 
pulated and secret pricing, For example, it was frequently urged that 
product classifications v/ith mandatory price differentials hetv/een pro- 
ducts ^,"ere necessary to orevent concessions in the sale of "extras" or 
non-stpjidard or su"b-standard merchandise; that manda^tory and uniform 
definitions of customer classes were essential if the shifting of indi- 
viduo.l "buyers from one classification; to mother for purpose of granting 
more favorable discoiijits wr.s to "be avoided; that it was essential for 
prices to "be" quoted on a delivered "basis if they were to "be compare."ble 
and if secret concessions through payment of delivery charges were to "be 
prevented; that terns of garment, cdlowancer,, quar^Jitee policies, con-- 
signment "oractices, etc., raiist he standardized to eliminate their use as 
devices for indirect -pricing; that the adl-^^erence of distri"butors, not 
under the scoie of price filing lolans, to -^iihlished resale prices was 
imperative if those manti.factii.rers who competed with them for the consumer 
market vrere to "be safeguarded against their coinjietition. 



In the mojority of cr^ses studied, hoTrever, it appeared that the 
interest in such controls extended considerably past their uses as aids 
to more effective and accurate conpr.raliility and publicity of prices and 
terms. Interested code proponents v/ere p'.tently reluctant to place their 
entire dependence for price stability and ether ends of price control 
upon the indirect and uncertain action of nore comiDlete exposure of 
pricing practices. Tliey sought, and often obtained, in the codal charter 
for the price filing plan, soecific linitations, or grants of pov^er V7hich 
would pernit them to place linitations, upon practices which they consid- 
ered pre.judicicl to their individual and corniaon interests. ' Without this 
authorization the price filing agency frequently fouhd it possible by way 
of exercising necessary a^d'ninistrative discretion to impose or suggest 
strategic and complementary controls over price levels, price changes, 
methods of distribution, geographic relations, various elements of the 
price st-L-nictujre, and even the division of business. 

Price filing under KRA codes thus was not merely a matter of promptly 
and full;' broadcasting prospective "oricing practices of business rivals. 
Rather in many instances it was a going cooperative effort wherein the 
devices of publicity- and direct controls were functionally related and 
joined in focusing on certain major group objectives. 

In other cases i^rice filing served clearly in a capacity of policing 
conforrao-ncc to controls established by other code provisions or to more 
or less precise standards of certain interests of the industry. As an 
outstanding example, cost provisions were almost invariably accompanied 
by plans for price publicity and intimately related in their adrainistra— 

Although the waiting period was by no means always a necessary 
element for either the publicity or control prograjn, it had a significajit 
and often strategic I'ole to pl?y in each. 

The relative scarcity of statistical material makes it impossible' 
to present a broad picture of the movement of prices under price filing 
in an adequate s£im.ple of different kinds of industries under different 
••kinds of price filing systems. Nevertheless, sufficient information is 
available to msjce clear that variety, rather than similarity, character^ 
ized such price movements. 

In certain industries, prices rose diiring the price filing period; 
in others, they showed little change; instill others, they fell, some- 
times sharpl;,'', Tliere are cases in vrhich, within the same industry, one 
group of prices declined and even showed the characteristics of a price 
war, while other prices remained the srjne or rose slightly. 

These changes in price levels were sometimes accompanied by a de- 
crease in the spread of prices from one customer group to another. In 
other cases, the divergence of treatment among groups of customers in- 
creased during the price filing oeriod. There are instances in which, 
under price filing, terras of -oavment, customer classifications, freight 
charges, and the like becrme uniform. There are other cases in which 
efforts at uniformitjr in terms of sale broke down and f/ere aba.ndoned. 
In some industries, prices and terms of sale remained unchanged during 



raost of the code pe-'ioc".; in offers, they chr-jije-". -r-jenientW; and in still 
others, an early cIitax'.'g v.t.s fcllorred ty a pei'ioc'. of relative stability. 
It ha.s not been possible to analyze the indiviCual cases to the extent 
necessary to deterr.ine .•l-.ether these varying re s ■r.ia.y be correlated 
TTith particular Izinds o;; price filing systems or v.'itl- particular charac- 
teristics of the indue tries affected. 

The imperfect drafting of price filing provisionsj the lack of clar- 
ity as to the per.-iisLiible scope of price fili:\-: activity, the efforts by 
code adrainis tractive .• r-encies to ezctend their pro,;-rar.i of action beyond the 
limits set by the e;.:rct •.■ordin;^; of the codes, raid the frequent controver- 
sies over the alle£;ed effects of price filin^x plrxi.s u.nited to mal-ce the ad- 
ministration of price filin/-;-- provisions a major problen in the MA. Por 
the most part, in the early period during --rhich riost of the codes -jere 
written, price filing pirns -ere adopted -Tith very brief consideration 
and -Tithout much evidence either as to the probleus to uhich'they rrould 
be applied or as to the aL^-iinistrr.tive niachine-_y they -.'ould involve. 
Even at the end of the code period, the ITRA had collected very little 
information about the opei' tion of price" filing plans and considering 
the number of codes involved, had engayed in relatively little forma,l 
administrative action such as amendments, interpretations and stajrs of 
code provisions or errerrotions therefrom. An increasing effort nas being 
made, ho^^ever, to supervise the activity of coce ruthorities in a^dminis- 
tering open price -oIc^its, p.?.rtieularly for the purpose of preventing 
actions not a,uthori::ed 'oir the code. In certain cases, code authority 
rules had been co"unterr.anded and even the code provisions themselves had 
been stayed, idore fre-uently, however, an ad;iinistrative super- 
vision had developed as a :ie?sure of prevention rgn-inst abuses. 

Violations of open price provisions -jere the most frequent of 
code violations and ,'.e:::.nded a great deal of the retention of the compli- 
ance agencies. About ">:■[')(., of the trade practice conplirjice cases uere 
violations of price filing provisions. 

As experience a.ccvj.ailated, IHIA. began to develop a rather definite 
policy about the purposes and extent of price filing, Op"oosition of cer- 
tain advisory groxips "itrln KEIA, a.nd of co'^plainants ou.tside, first found 
full expression in the price hearings of Januar;', 1S5'-'-' After these 
hearings, a temporary policy of refusing to approve \7adting periods in 
nev; codes wa,s i naugnirated, and studies of che operation of open price 
systems viere unc.erta':en. In June, I93U, Office l.;e:iorancrun Ko. 228 es- 
tablished a definite policy as to price filing provisions. They -jere to 
be approved in a forr. v;\ich was thought to maJie t]ie -. u.seable as publicity 
devices but not as a -.'.ean-s of price control. In spite of v/idespread 
opposition outside the ITIA. a.nd some relLict^-nce to accept the policj'' on 
the part of ad-:inistr ■ tive personnel, this general viev; of the function 
of price filinr: rer.ained the official policy thenceforward. The appli- 
cation of the polic'- to codes already approved, hov/ever, nas relatively 
slight; for it vras decided that existing provisions shou.ld be modified 
only -'hen they sho-.ed clc-r evidence of abuse or of major adninistr'tive 

As it becrve clear that Office llemorandjji ITo. 22S did not change ex- 
isting ^rice filing provisions, the peculiarl"' difficult problem of tie 
bids under price filing in the awarding of contr:,cts bj- ' overnment pur- 
cha.sing ag;:ents '.ras do: It ',-ith by authorizing a.ll bidders to Quote as 



rauch r,s 15jo telon their filed prices u-oon t;uch contracts. In spite of 
very strong opposition, this cMithorisption rema-ined in effect during the 
rest of the life of IIRA. 

In a series of decisions r.hmit various technical difficulties in 
securing adequate puhlicit'^ for terms of 's-Tlej KHA. took the view during 
the winter of 1934-35 that code authority action to require adherence to 
a rigid set of terms of sale was not acceptable, hut that action to re- 
quire fu.ll3" descriptive filing of the terms in use hy particular concerns 
was essential to the operation of irice filing systems, 

■ Shortly "before the Schechter decision., a policy statement by the 
Nation?,! Industrial Recovery Board reiterated the view that price filing 
is acceptable for purposes of price publicity, set forth certain techni- 
cal essentials of a price filing iDlan, g.nd held that, even when properly 
limited, price filing provisions should apply only in industries in which 
price competition tended to be excessive, rnd. not in industries in which 
there was danger of monopoly. 

Appendices to this report contain detailed accounts of the exper- 
ience of the asphalt shingle and roofing and steel crstings industries 
with price filing provisions, A statement of the methods used in pre« 
paring this report is also contained in the appendix. 




The Ma was virtuall/ committed to an experiment v'ith open price 
plans before the national Industrial Recovery Act had been approved "by 
Congress. ]>aring the debate tetFeen Senator Tia^-ner and Senator Borah 
over the addition o'P the words ""orice fixing rnd restraint of trade" 
to the anti-raono-Dol;' clause of the Act, price filing was cited by Sena- 
tor ¥agner as one of the more salutary measures which should be permitted 
tmder the codes, but oue v/hich because of "oast anti-trust decisions, 
might conceivably be denied tc industry i-f the anti-mono"ooly cl-,use were 
broadened to include a rrohiDition of a,ctivitie" in restraint of trade, 


Senator Uagner explained that v;hat he wanted to see permitted 
was the exchange of market information, such as r-as declared ellegal in 
the Ameri r-an Lrnse ed Oil Com-pany Case.(*) Senator ".a-'riner ' s comments 
ignored tlui more liberal decisions of the SuPre'ie Court in the later 
Maple Fleering and Cement Cases. (**) in 1925, in which it hati been held 
that such activities ©f oiDen competition were not -ojila^'ful if pro-oerly 
conducted without agreement or concerted action. The choice of tne 
earlier case makes it fairly ap"oarent that it was his intent to clear 
away all doubts of the legality of open price activities under LTIA by 
placing them within the realm of discretionary suspension of the anti- 
trust laws. (***) 

(*) United States v. American Linseed Oil Com^oany, (1023) 262 U. S. 
371. This decision, rendered June 4, 1923, did not in the opin- 
ion of most commentators declare the exchange of informa- 
tion illegal, but conde-ined the total activities of the Asso- 
ciation as constituting a combination in restraint of interstate 
ccmmerce within the raeaiiing of the anti-trust acto, It did, 
however, tend to such activities by trade associations 
until later decisions covering price reporting and exchange of 
statistics. See Section E below. 

( * * ) Map l e Flooring Ma nufactur ers As socia tion v.- U.S. (1925) 268 U.S. 563 
Cement lAaruf actu re rs Protective As i-o ciation v. U. S. (1925) 268 U.S- 
See Section E bolow. 

(^♦t^cf, Le ^:al D ivisi on "Bul letin. I'o. 14, "Open Price Systems and Illegal 
Price - Fixing ujider the FIIxA with reference to iiono'oolies and 
Restr-vint of Trade''; YTBA Files. 



Congress, in defeating the Borah Ainenament , seens to have 
concurred in this sentiment. 'Ihe way was -oatently clear for industry 
to propose forms of open price activity to "be incornorated in codes of 
fair competition, with every reason to oelieve that these v;ould be accept- 
able to the Adrainistrp.tion. Indeed, one co-nmcntary by an IJEA legal coun- 
sel suggested that a'D"?rova.l of OTJcn "orice orooos.als was almost mandatory 
in the light of the Congressional action reported above. (*) It is appar- 
ent ^toat price fixing, as such, was cli-arly condemned. However, it is 
also quite clear that Congress definitely desired to avoid the former de- 
cisions which outlawed any form of 'orice listing, including the open 
publication of prices. What the authors of the let had in mind was price 
stability to eliminate the evils of ruthless com'oetition. Hei^e open 
price svstems, free from price-fixing, were valid under the ERA.. 

In the writing of the Codes price filing provisions were in- 
serted on a wholesale scale, without show of need or O.ther special" plea. 
The limited suspension of the anti-trust laws in the enabling Act removed, 
the legal restrictions and uncertainties ciceated by the Supreme Court's 
open price decisions. Conseauently , the t^nDical ITR^ price filing plan, 
as discussed in Section III-B of this chapter, represented a marked 
departure from tradition. 

There was, in 1933, little infoimation regarding the economics 
of price filing, whatever the type. The Federal Commission had 
made a study of open price association in 1929, but the results of its 
statistical analysis were admittedly 'father negative". (**) Price 
filing was still an experimental device. The present report adds to the 
growing body of experience regr-rding price filing, the ITOA experience 
during the less than two yea,rs of operation. Efforts are made herein 
to contribute to the londerstanding of price filing in general. Special 
attention, however, is xb id to the type of price filing peculiar to 

Price filing provisions appeared in the codes of four hundred 
and forty-four industries. Three hujidred and nineteen of these made the 
establishment of price filing mandatory, while one hundred and twenty- 
■five left »he question of actual establishment to the decision of the 
Code Authority or to industry vote. The results of a questionnaire 
sent to forifaer co"^' --'*-.>iority sccrel-aries 'iidicatej-that iban;Jr"' ■'ndustria** - 
liever put these provisions into operation, even when the code had made 
them mandatory. Precise information is lacking upon the point, but from 
the returns received, there are indications that in as many as one-third 
of these industries price filing was never sot up. This study has i 

; been confined to the experience in only fifty-seven of the industries 
whose codes contained a price filing provision. The observations and 
generalizations made herein are bnsed upon this "sample", excepting where 

(*) Undated memorandum entitled "iiemorandui.a of La" Considering the 
Legality of Code Provisions Regarding the Filing of Prices" by 
George J. Feldraan, Assistant Counsel of Litigation Division of 
NRA. In NR,\ Files. 

(**) Opon-' Price Trade Associations . Senate Doc. 226, 70:2, 1929, page 355. 
See also Chapter I, section II below, 


otherwise noted. (*). Due to the care taken to select a sample which 
would te, with respect to a numter of diverse characteristics, a typi- 
cal cross-section of codified industries, it is felt that the findings 
rest upon a tase broad enou'^h to provide helpful suggestions relative to 
industry generally. 

The remainder of this chapter is concerned with a history of 
pre-NRA. price filing plans and comparative descriptive definitions of 
price filing before and under N?Jl. Only in this way can a degree of 
historical perspective be gained of price filing under IIRA. 


A. Fre-Eddy Flans 

Although Arthur Jerome Eddy was the first to set forth systematic- 
allj'' the mechanism of price filing itself as a device for the stabili- 
zing of business, certain historical roots fron which he probably re- 
ceived his original ideas regarding the "new competition" have been 
pointed out. These early develcpments are discussed by Milton Nelson 
in his book, "open.Frice Associations," (**). Nelson distinguishes 
three stages of cooperative development which may have led up to the 
associations organized by Eddy; these stages are best illustrated by 
the Iron and Steel IndListry. The first consisted of combinations in 
which competitors formed associations for the prime purpose of fixing 
prices, regulating output, and dividing business on a percentage basis. 
This period ran approxim.ately from 1897 to 1904. These associations 
were significant in the development of price filing because members 
were required to report monthly their output, orders 'talfl3n,and tonnage 
shipped, in order that the controls could be administered. After being 
checked, and compiled by the commissioner administering the plan, the 
compiled, reports were sent to members. Nelson believes that this report- 
ing of statistics may have given Eddy his original inspiration. 

These associations, abandoned about 19i94 as a result of more 
vigorous G-overnmental efforts to enforce the Sherman Act, were succeeded 
by the so-cal?.ed Statistical Associations, which continued until 19C7, 
The reporting of production, orders, and shipments, was continued. How- 
ever, there were no binding agreements rpgarding prices or production, 
backed by a money penalty. The moral obligation to- '.abide by the percent- 
age allocations established earlier may have persisted. The difference, 
according to Nelson was that: 

"the puripose in doing so Ih no longer that of determining what 
penalities or credits may be due members for exceeding or falling 
of alloted. quotas , but of, keeping members informed as to whether 
they have been maintaining the same relative position in the 
inc^ustry that they had previously occupied." (***) 

(*) Sec a.ppen'iix C, Exhibit I for list of industries included in the 

sample and method of selection of sample. 
(**) University of Illinois Studies in the Sociial Sciencss, Urbena,1923; 

see -grarticularly Chapter II 
(***)0p. cit., p. 32. 



The third sta^e was that of the "Gary dinners". These ran frdm 
1907 until 1911, when the Government hrongat s\iit against the United ' 
States Steel Cor^joration. It v;as from these, according to Ifelson, that 
Eddy received most of his stimulus. Eddy was a close student of the 
Gary methods and wns auick to a'oreciate the -nossihilities of legal 
methods of coo-oeration. The t-70 conce-ots introduced ty Gary, v;hich 
Eddy^made the foundation stones for his OTv'n system, were the s'oirit 
of coraDetitive cooiDeration and the free and frnnk exchange of infor- 
mation hetween comiDetitors. 

.B. The "Edd;/ Flan" 

Mr. Eddy invented the name of "o-:)en-^rice association" and exDOUJided 
the theory of oioen -orices ii a hook, "The IJew Corn'oetition" , TDuhlished 
in 1912. As a lsw;^,'-er, he v/as "oarticularlj'' familiar with anti-trust 
cases and accordingl?/- with trade association activities. In advocating 
the use of "oioen -orices" he was s^oeaking oi both a r)hiloso-Dhy and a 
loarticular mechanism. His ohilosoihy of "o-oen cometition" has been re- 
neatedly iDrooosed by later ex'oonents of the olan and survives today, 
almost unchanged. It is described as the r)hiloso":ih7 of honesty and 
o-oenness in business — an oioenness defended on both econonic and eth- 
'ical grounds as one that leads to cleaner con-oetitive nractices, to the 
elinination of deception, secret prices, cuts, and rebates, and even- 
tually to more stable and nrofitable business oioerations. 

Eddy advocated coo'oerative methods for cutting this -Dhiloscohy in- 
to practice through the or)en price association. This mechanism was de- 
'scribed in detail in his book, with instructions for using it in an in- 
dustry such as the Construction Industry, where work is done on contra- 
cts a.warded on the basis of bids. He indicated that with certain modi- 
fications the -olan was adaritable to manufacturing and distributing indus- 
tries as well, but did not set forth these modifications at that time. 
Briefly, Eddy's plan encom-nogsed a procedure somewhat as follows: 

(1) A unanimous agreement by members of an association 
to tell the truth about prices and other com-oetitive 

(2) Selection of an absolutely i-ipartial secret;iry to 
receive information from members. 

(3) ?iling i-'ith this secretary in a centrp.l office copies 

(a) all inquiries; 

(b) all bids; 

(c) all contracts. 

(4) The compilation bv the secretary of a weekly bulletin 
which was to include an accurate estimate of volume of 
work in sight. Eddy opposed the exchange of inquiries 
for fear of collusive bidding. 

(5) The exchange of information concerning bids on one 
of three bases, as .-.cceptable to members. 

(a) After the contract is awarded; 

(b) By interchanging bids as raiiidly as they 
are received; or 

(c) .(Preferable but the most difficult to attain), 
the open posting of all bids as received. 



(6) The re-porting of the contracts as and vihen closod 
to -oermit coma's rison with the tids. . 

■■Certain warnings given oy Eddy in connection with the open nrice 
T)lan were reToep.ted so em-'^hatically that they "became almost narts of the 
Eddy Plan itself. These include: 

(1) Vo tidder should be bound to adhere to his bid 
for one fraction of a second, 

(2) There must be no agreement or imnlied ob'ligation 
not to cut bids or to con:^orm to Fry -orescribed 
methods of oricing. 

(3) The handling of re~oorts should be a routine natter 
with the Secretary's office acting only as a 
clearing house. 

(4) The introduction of tue ouen "orice nlan should 
proceed slowly on the bssis of a gro\7th of mutual 

(5) Improved conditions should not be exnected immedia- 
tely and relief in the form of better nrices was iincertain. 

In the later s-neeches and trade associntion -oractice Eddy 
amplified his ideas so.iewhat, and gave some suggestions as to methods 
of oiDen Torice filing in tynes of industries other than those using 
contracts. The chief chara.cteristic of such methods was to be the 
promiDt filing of list i^rices c,nd all variations from them as made. 

As counsel for various trnde associations, Eddy s"'-; his TJlan T)ut 
into operation and subjected to the test of ex-oerience. As a result 
ofttiis experience, his attitude regarding the disclosing of informa.tion 
about future lorices was an-narently changed from a critical to a favor- 
able one. Vj'ith this • exce-otion, the later ex-oression of his views 
is very similar to the earlier ones. In the constitution of the Nation- 
al Pence Manufacturers, for which groux) Eddy was coimsel, the object of 
tne association w^s sta.ted to-be: 

"The bringing out into the onen of all com^netit ive 
conditions qnd the introduction of the o-oen ^rice policy, 
to the end that vrhatever "orice information is distributed 
will be absolutely accurate and confined to mirely statis- 
tical information regai ding sales and prices that have been 
actually made. • llothing herein stated nermits any member of 
the institute to file any info-mation regarding any orice 
whicti he ex^Dects to or would like to, 

" No ronalties : There are no "oenalties o-f any hind or 
character with the operation of the institute, Ilembers may 
or may not file information called for by the reiDorting vlan 
hereinafter set forth; if they do not file they get no infor- 
mation; if they do file they get like information in return. 



" Ho Secrecy ; There is nothint-j secret atont either the 
meetings or the o-oerations of the institute. All its pro- 
ceedings are reduced to v.'ritinj?; and carefull^^ preserved in 
the minutes and the same will te dul^ filed with the 5'ederal 
Trade Commission UDon their request. Customers may attend 
meetings aiid become familiar with the operations of the ogani- 
zation upon invitation. Members are free to write competitors 
who are not members to attend me^stings. 

" Mo restraint : Nothing in the "olan or oiDeration of the 
institute shall be understood or construed as directly or in- 
directly restraining the freedom of any member to at all times 
quote such -nrices and terms ar, he pleases, provtied he re-oorts 
to the secretary such transaction as herein provided in the 
reporting plan. "(*) 

C. DevelOTpments Subsequent to 1912 

A.S Nelson has pointed out, the open orice movement w.-^.s further 
popularized by the Babson Statistical Organization, which in both 1914 
and 1915 devoted a session to' it at conferences for manufacturers. 
This organization also published, as a part of its services to manufactur- 
ers, a series of bulletins intended as guides to those industries which 
were ready to introduce ^n oien price pl-^n. Many adaptations of the Eddy 
mechanism for price filing were gradually established. Some of these, 
though c-^lled open -orice associations, abandoned many of the characteris- 
tics specified in the Eddy Plan. Some of these cnanges '"ere tne result 
ofthe extension of the plan to a wider variety of industries; others 
were influenced by the intervening co\irt decisions bearing upon price and 
other statistical reporting activities. In 1931 the Federal Trade Cora- 
mission made r-., short survey of open lorice associations, and on the 
basis of questionnaire returns from 1515 trade associati3ns, report- 
ed the exijRtence of one mmdred and fifty open price associations which 
were distributing or exchanging price information. At about the same 
time Nelson listed one hundred ^nd seventeen associations which were 
re-uuted to oe doing ooen price work. (**) The following fourteen in- 
dustries included in the present study, were reported by him to be doing 
open price work at that time: asbestos, met^l lath, copper and brass 
mill products, builders' supplies, Paper rnd puIp, cordage and twine, 
candy manufacturing, steel castings and furniture. 

D. The "Cooperative Flan" of the Department of Commerce . 

During his ye^rs as Secretary of the Department of Commerce, i/Ir. 
Hoover was an active advocate of open price pl;^ns. In 19rl the Department 
of Commerce the "Dublication of the Survey of Current Business, 
based in large part on trade association stp.tistics. A "Cooperative 
Plan" for the distribiition of statistics gathered, by trade sssociations 
was developed. In this, the Department offered to receive, and give 

(*) Federal Trade Commission, orj. cit. o. 10. 

(**) Oi3» cit . . Appendir-, Exhibit I 




T;io.e ^Dublicity to, the iuxor?iation on pi-odaction, prices, shronents, 
capacity, stoc!:s, orders, vaces, etc., collectt.d "by trade asR'^ciations. 
The three principal features of this plrixi '.to re; 

(l) Widest practical puolicity 

( (2) Wo indentification of tht fig-ares "-ith the hLLsiness 
of any individual, and 

(3) The require) lent that the other a.ctivities of the asso- 
ciation "te reasonably far enough renoved fron the 
twilii^ht zone so as not to nal:.e the association an 
obvious tars_;et for lerai attach, in the li~ht of erci st- 
ing court decisions. While there is no legal irxiunity 
afforded to any association nhich enters this coopera- 
tive arrpjigeoent , the department obviously does not 
care to cooperate rith an association along statisti- 
cal lines V7hen the association's other activities arc 
such that raight easily bring about prosecution." (*) 

Pursuant to the point of vie^T e-cpressed i.i this plan, tho Depart- 
nent of Coimnerce expressed itself as not in syiipathy rrith open-price 
rssociations "v/hich are collecting data on prices rjid sales of their 
individual nembers and circulating such individual data again to their 
menbers together nith certain other activities." (**) The enphasis 
in this statement uas ri.pon the questionable character of those open 
price iiilans rrhich included vith the distribution of prices the identi- 
fication of the seller. 

Tlie decisions of the Suprene Court in the Araericgn Colunn and 
Lu''iber Corapan ;/-, and A rierican L inseed Oil Conp an7/ cases (***) created a 
state of ■uncertainty regarding the future of open price A 
series of letters bet'-'een Secretary Hoover an.d At to mej'-- General 
Daugherty during 1922 and 1933 did little to clarifjr this situation, r -: 
except to indicate the divergent viev/s of the t'O correspondents on the 
collection ,and dissemination to trade association nenbers of detailed 
trade statistics, including prices in closed transactions. (****) As 
a result of the restrictive nature of the court decision in the 
Americaji Col" and Limber Comnany case, Secreta.ry Hoover in his annual 

(*) Tl'ie details of this plan are q^uoted in Federal Trade 
Coiar.iission, en . c i t . , Ap:oendi:: A, p. 377 

(**) Statement of Secretary Hoover before trade association 
conference in Washington, D. C, April 12, 1922, quote: 
from Federal Trade Coni.iission, o-n. cit . , p. 19 

(***) See Section 2 below 

(****) See Federal Trade Commission, op. cit., p. 20ff. 



report for 1922, called for a inoclif ication of the anti-trust la\7s, 
v.iiich, Tonder the court interpretation, "in some directions are out of 
tune TTith our econonic development"; he distiniijuished hetueen those 
cooperative activities which redounded to the puhlic iDenefit and those 
nhich v^ere made the occasion of abuse. (*) Following the sweeping 
adverse decision in the American Linseed Oil Co . case, in his annual 
report for 1924 he called for a nevr"legislative definition" of the per- 
missible scope of cooperative activity, and cited over twenty functions 
which cooperative procedure might ••ell be allo\-fed to perform. (**) 

Professor Fetter has siiggested that Justice Stone, who wrote the 
majority opinions which substantially reduced judicial disapproval of 
open price systems in the two subsequent decisions, may have been in- 
fluenced by his earlier years in the ..Cabinet, as Attorney General at 
the timo when Secretary' Hoover was expo'unding his views on open price 
systems. (***) If this is true, the early attitude of the Secretary of 
Commerce exerted great influence over the subsequent development of 
open jjrice systems. 

E. The Supreme Court Cases 

The United States Supreme Court has rendered four major decisions 
which have broadened", the concept of open ;Trices,arid defined their 
position in relation to the 3Jiti-trust laws. These were made between 
1921 and 1925. The cases are discussed below. In addition, a discus- 
sion of the Appalachian Coal s decision of 1933 is included, while not 
concerned specifically vdth open prices, this decision throws light 
on the recent trend of the Court's attitude toward cooperative activ- 
ity. (****) Finally, there is included a brief summary of the issues 
presented in the Sugar Institute case arsgued before the Supreme Court 
in February, 1936. 

1. The Hardwood Case. 

In American Col^omn and Lumber Company v. United States , 257 US. 
377 (1921) , the court was asked to pass upon the legality of the activi- 
ties pursued by an a.ssociation of hardwood manufactui-ers. The members 
thereof, representing one-third of the hardvraod output of the country 

(*) Department of Commerce: annual Report of Secretary of Commerce, 
1922, pp. 29-31. 

(**) Pp. 22-24 

(***) F. A. Fetter, The i.Iasquerade of I.Ionopoly , Kew York, 1931, p. 219 
Harcourt Brace ajid Company. 

(****) The follov;ing discussion of the five Supreme Court decisions is 
quoted in large part from "Anti-trust Laws and Unfair Competi- 
tion", by George J. Feldman, Worl: Materials, No 1, of the 
Division of Review, IIRA, J\ily 18, 1935, pages 25-31 Legal 



for'.7arded to the central office "f the association e.lahorats statisti- 
cal reports of stock on hand, production, shipnents, prices, and nanes 
of pxirchasers. The secretar;^ of the astociation mailed to each con- 
cern simmaries of the statistical rna-tter md of reports containin..^: the 
vie'-'s of each meuber as to nai-vet conditions aiid production for the 
follov7in£; fen months together -Tith e:-mert analysis of the reports, and 
siigjestions as to future prices and production, llemhers of the asso- 
ciation held frequent meetings at Thich nar'iet conditions and produc- 
tion were discussed. The majority of the court, spealcing through 
Justice Clark said at page 41];: 

"Convinced p.s we are, that the pui-pose eaid effect of 
the activities of the 'Open Competition Plan' here- 
under discussion, were to restrict competition and 
thereby restrain interstate commerce in the manufac- 
ture and sale of hardrood lunoer hy concerted action 
in curtailing production and in increasing prices, we 
agree with the District Court that it constituted a 
combination aaid conspiracy in restraint of interstate 
commerce within the meaning of the anti-trust act of 
1890 (26 Stat. 202) and the decree of that court must 
be affirmed." 

The decision in this case was not "onanimous; Justice Holmes axid Brandeis 
delivered dissenting aopinions. The former contended that a combina- 
tion to distribute knov/ledge, notwithstanding its tendency to equalize 
prices, was far from a combination in unreasonable restraint of trade. 
Justice l,Brandeis, v.'ith whom Justice LIcKenna concurred, emphasized 
that there was no coercion, monopoly, division of territory'', or uniform 
prices; tha.t all information distributed under the plan vfs.s made public, 
and all reports and market letters were filed with the Department of 
Justice and with the Federal Tra,de COi.imission; that before the initia- 
tion of the plan the large lu-;'.ber dealers were able to talce advantage 
of the ignorance of the isolated producers; that editorial comment and 
free discussion were essentirfi to rational competition and intelligent 
conduct of business; that the majority had misconstrued the evidence 
in concluding that there was any purpose, to curtail jtiroduction, or that 
such restriction was in fact realised; that 

"there is nothing in the Sherman Law to indicate that 
Congress intended to condemn cooperative action in the 
exchange of information, merely because prophecy result- 
ingffrom comment on the data collected may lead, for a 
period, to higher marl-et prices.... The illegality of 
a combination' under the Shei'maii La^' lies not in its 
effect upon the price level, but in the coercion thereby 
effected. .. .The evidence in this, far from establish- 
ing an illegal restraint of trade, presents, in ray opinion, 
an instance of commendable effort by concerns engaged in 
a chaotic industr;^ to maJ'.e possible its intelligent conduct 
under competitive conditions;" 
and that the court's condemnation of those activities was difficult 
to reconcile with its toleration under the Shermaji La.\j of powerful 
industrial mergers and consolidations. 


•• -16- 

2. The Linseed Oil Cane 

The Linseed Oil Case , decided June 4, 1323, holds a special 
interest for this study because of the reference made to it by Senator 
Wagner in the debates on the national Industrial Recovery Act. 

In United States v. American Linseed Oil Co. , 262 U. S. 371 
(1923), twelve manufacturers of linseed oil entered into an agreenent, 
with provisions for a financial forfeit-ore in of violation, and 
for the maintenance of a bureaxi which gathered and distributed infor- 
mation among the nembers as to price lists. Members agreed to adhere 
to scliedules of prices and terns which they furnished to the ' bureau 
and to give notices of departure therefrom. Thej'- were required to 
report all variations of price, name of prospective buyer, point of 
shipment, exact price, terms and discounts, whether sales were made to 
jobber, dealer or consumer, and to report all orders received, all such 
information being treated as confidential and concealed from the bbiiyers. 
The information thus collected was reported to the members thro'ogh 
statistical surveys made by the bureau. Each member was required to 
furnish the bureau, upon request, information with regard to any buyer 
and might require the bureau to secure similar data froP all members 
under specific conditions. The bureau made industrious efforts to pre- 
vent sales at prices belovf the scheduled lists. Monthly meetings were 
held, at which "matters pertaining to the industry.'" were discussed. 
The Court decided unanimouslj'' that the sch.ame was an illegal combina- 
tion under the Sherman Act, but the lan^raage of Justice McReynolds, 
who spoke for the Court, reveals that the chief consideration was the 
power which the combination was enabled to exercise over a competitive 

"With intimate knowledge of the affairs of other pro- 
ducers and obligated as stated, but proclaiming them- 
selves competitors, the subscribers went forth to deal 
with widely separated and unorganized customers neces- 
sarily ignorant of the true conditions. Obviously they 
were not bona fide comiDetitors; their claim in that re- 
gard is at war with common experience and hardly com- 
patible with fair dealing. 

"We are not called upon to say just when or how far 
competitors may reveal to each other the details of 
their affairs. In the absence of a pui'pose to monopo- 
lize or the compulsion that results from contact or 
agreement, the individual certainly may exercise great 
freedom; but concerted auction through combination pre- 
sents a wholly different problem sjid is forbidden when 
the : necessary tendency is to destroy the kind of com- 
petition to which the public has long looked for pro- 
tection. .. .Their manifest purpose was to defeat the 
Sherman Act without subjecting themselves to its penal- 



3. Tlie Haple Flooring Case 

In Laple jTloorin'^ r.Ianuf ac ture s Association vs. United States , 
268,U.B, 5JS3 (1925) , the association distributed amonc its raenters in- 
formation as to the averatje cost of production, iihich vas "based upon 
reports of individ'oal costs of ra'.7 material and of operation. It 
also compiled and distribiitcd iniorLiation concerliing freight rates from 
"basing points to various mariets, enahling mem"bGrs to quote delivered 

Members reported information as to the quantity and tyrje of 
flooring- sold, dates of sales and -orices received, average freight 
ra,tes, coLinissions, stocl: on hand and unfilled orders, nonthlj'' produc- 
tion and ner? orders. This iniomation, -rhich concerned only past trans- 
actions and did not include names of purchasers or current prices, vras 
summarized by the Association and reported back to the members, rrithout 
revealing the identity of members in connection vitli specific informa- 
tion. The reports pre-nared by the association "ere given nide publica- 
tion through trade journaj.s, and vers communicated to the Department 
of Commerce. Monthly meetings '.Tere held by the members of the associa- 
tion at uhich "problems of the industry" iiere discussed, vdth no evi- 
dence of discussion or agreement upon prices. The majority of the 
Court decided that in these activities no violation of the Sherman Act 
was involved. The Hardv;ood and Linseed Oil cases v/ere distinguished 
on the ground tha„t the facts in those revealed "concerted efforts" 
of the defendants to curtail production and rsase prices. But this 
distinction is by no means convincing, particularly because the lan- 
guage of the Court approving the activities in the present case is vir- 
tually identical in reasoning and point of view with the dissenting 
opinions in the Hardv;o od case; 

"E::change of price quotations of market commodities tends 
to produce uniformity bf prices in the markets of the 
world. luiowledge of the supplies of available merchan- 
dise tends to prevent overproduction snd. to avoid the 
economic disturbances j)roduced by business crises result- 
ing from overproduction. But the natural effect of the 
acquisition of wider and more scientific Icnowled^^;^ of 
business conditions, on the minds of the individuals 
engaged in commerce, and its consequent effect in stabil- 
izing production and price, can hardly be deemed a re- 
straint of commerce or if so it cannot, we thinlc, be said 
to be an unreasonable restraint, or in any resi^ect unlaw- 
ful .... General knowledge that there is an acc-unulation of 
surplus of any market cor.modity would undoxibtedly tent to 
diminish production, but the' dissemination of that infor- 
mation cajinot in itself be said to be restraint upon 
commerce in any legal sense. The manufacturer is free 
to produce, but -orudenco and business foresight based on 
that imowledge influences free choice in favor of more 
limited production. Restraint upon free competition 
begins when improper use is made of that information 
thro-u^3;h any concerted action which operated to restrain 
the freedom of action of those who buj?" and sell. 


- -18- 

.... Persons uho vinite in .^a-tlie rint, and disseninating in- 
formation in trade- journals and statistical reports on in- 
dustry; TTho gather and puolish statistics to the ariount 
of production of in interstate commerce, and ',7ho 
report nariret prices, are not en^a^i'ed in unlav/ful conspira- 
cies in restraint of trn,de merely hecause the ultimate result 
of their efforts nay he to stabilize j^rices or limit -nroduc- 
tion through a hettor understeaidint^; of economic laus and a 
more general ability to conform to them, for the simple reason 
that the Sherman Lau neither re;oeals economic laus nor 
prohibits the gatherin,:;; ano. dissemination of information." 

4. The Cement Cace. 

Tlie fourth in a series of cases involving open price filing 
rhich came before the Suorene Court vras Cement Manufacturers Protective 
Association v. United States, 268 U. S. (1325) . In this the 
Court approved the cooperation of manufacturers in gathering and e:^- 
chrnging information concerning production and prices in so called, 
"specific job" contracts, general statistical information, and informa- 
tion about transportation costs from various -ooints of production. 
A si:5ecific job contract uas a contract which obli:];ated the manufacturer 
to deliver at the stipulated price, to the contraxtor at some futiire 
date, the cement requirec' to complete a specified construction project, 
T/ith the understanding that the purchaser be allowed the advantage of 
any decline in na,rket price, and v/ithout obligating him to ta-:e the 
cement if he failed to secure the bid or if for any other reason he did 
not desire delivery 'onder the contract. The details of such contra^cts, 
including nojiies of contractors pjnd specified construction projects 
involved, were reported by the members to the association; it emploj'-ed 
agents to visit the jobs, and reported bach to the members fi.ll infor- 
mation regarding the contracts and the use of the cement shipped under 
them. These activities were pursued in order to prevent contractors 
in a period of rising prices from obtaining more cement than they were 
entitledtO:?:>y entering into contracts with several manufacturers for the specific job. This was considered sufficient purpose by the Court 
to excuse the reporting of det.ailed information, including na:ies of 
buyers and sellers, and viiat amovuited to espionage by the association, 
lu addition to supplj^ing information about specific job contra.cts, 
members rendered monthly dotadled reports concerning delinquent accounts 
of their customers and concerning production, shipments, and stocks on 
hand. The association compiled and distributed these, thus informing 
each member of the soiirco and amount of cement availa.ble. I.Ieetings 
were held at which minor subjects \jere discussed, but such dangerous 
issues as current prices, production, or market conditions were care- 
fully avoided. Tlie association also distributed to its members freight 
books listing rates from basing point to all markets. Ihc Court foxind 
that the freight rate book enabled the manufacturer to calculate a 
delivered price on the basis of his ovrn mill price to points in nnigh- 
boring territory, and to determine the freight differential which he 
must offset in his mill price in order to compete with manufa,cturers in 
other territories. Tlie Court refused to condemn the distribution of 
credit information, on the groirnd that there v;as no evidence of any 
unified conduct with respect to the persons to whom, or conditions 
under which, credit was to be extended; and further that the credit 


-19- . 

infoiTnation merely anplified the iniividxtal judgment of the manufac- 
turers. The compilation and distril)"ation of generel statistical infor- 
mation .nas ap2Droved on reasoniuc simils.r to that in the I,Ia"ole Flo o ring 
case. The Court declared that the tendency to bring a-bout \aniformity 
in price, apart from anj'- agreement or under ctanding for maintaining 
.prices, vras insufficient to constitute a viola,tion of the anti-trust 
lav^s. Tlie traditional theo™- that uniformity of price is evidence of 
price manipula,tion uas rebutted by the opinions of economists, v;ho said, 
in effect, that in the case of a standardized pi-oduct sold wholesale 
to fully infomed professionpl bu,ycr5, uniformity of price \:as a. sign 
of free a.nd active competition. 



5. Summary of the Four Cases 

In at temp tin,'-; to arrive at an estimate oi" the Supreme Court's 
attitude to- ard open price filing, one must emphasize that the Maple 
Flooring and Cement Cases are far more sij-,Tiif icant than the two 
earlier decisions. In fact certain comment .atorsr<have cohcluded'»that"..ihe 
two later cpses effectually ave.rule the earlier ones. Though there 
may he no need to accept this contention, it is nevertheless true that 
the distinctions advanced hy the Supreme Court itself, and further dis- 
cussed "by commentators, are tenuous. The Court pointed out in the Maple 
Flooring Case that the reports of sales and prices v/ere solely concerned 
with "past and closed transactions" , as contrasted "by the facts in the 
Hardwood and Linseed Cases . Again, the statistics reported by the 
Maple Flooring Association did not identify "buyers and sellers, as was 
true in the Hardwood Case . It is true that such identification was 
present in the Cement Case vzith re-^ard to specific job contracts, hut 
it v/as excused in view of the Association's commendable purpose in pre- 
venting fraud by contractors. Furthermore, the data collected by the 
trade associations in the latter two cases v;ere not treated as confi- 
dential, in contrast to the policy pursued by the Linseed combination. 
The distinction, however, is of questionable soundness, for the 
publicity afforded by the Hardwood Association was much wider than that 
which the Court found, by inference, in the Cement Case . There was no 
evidence in either the Maple Flooring' or the Cement Case of any obli- 
gation or understanding on the part of the membersof the Association 
to be guided in their business policies by the information supplied 
through the Association. The distinction, however, is likewise diffi- 
cult to follow, for the Court found such an understanding in the Hard- 
wood Case , although there was no uniformity of prices, and refused to 
draw the same inference in the Cement Case, where such uniformity 
existed. In the Linseed Case the Court's finding of "concerted efforts" 
was better supported by the fact that the combiiiation was composed of a 
smalli. • number of powerful concerns, and that their obedience was com- 
pelled by means of forfeitures and penalties. It is possible to 
isolate the Hardwood Case , when it is considered that the Court stressed 
the "comments" and "recommendations" with regard to production and 
prices by and official of the Association, In the Maple Flooring and 
Cement Cases the Court emphasized that at the periodical meetings of 
members of the Association there was no evidence that prices were 
discussed. Aiid the Supreme Court has distinguished between reports 
of "past" spies and "current" or "future" transactions. Finally, the 
Court expressed disapproval of the industrious efforts of the bureau 
in the Linseed Case to -j-ecure compliance with published prices. 

Though it appears evident that the attitude of the Supreme Court 
tovrards the reporting of trade sta.tistics underv.'ent a substantial 
change between the two earlier and tv/o later decisions' discussed above, 
and that the distinctions sought to be established between the cases 
are in lai-ge part tenuous and without substantial basis, it is im- 
possible not to conclude that a price filing scheme which is sought to 
be used as a device for the raising of prices v;ill be considered by the 
Supreme Court as a violation of the Sherman Act. 

A recent analysis of the anti-trust decisions relating to price 




i'ili;.,':; xios cl,-<Gsi..'ied the pres-ur.iptivt;lv le.jf.l and illegal elements of 
price filing systmns. (*) : In it are set fcrr/n in parallel coliarans, 
as below, (l) a plan which is prt:;s-i:unptively lawful, (ll) a plan which 
is clearly unla^^'ful, and (ill) the modifications necessary to render 
the second plan of -j.u-ooa"ble le.jality. 

I . F r 3 siimp t i V e 1 y 1 av' f ul pi an 

1. Detailed reports to associa- 
tion of all closed transactions. 

2. Circulation of abstract, 
statistical su/iraaries. 

3. Availability of reports to 
customers and the public.. 

4. ¥o agreement affecting free- 
dom of price action. 

II. Clearly unlawful plan 

1. Filinj-j; current and 
future prices. 

2. Circulation of prices 
of individual sellers. 

3. Non— disclasure of re- 
ports to customer 
and the public. 

4. Agreement not to de- 
viate from filed prices, 
without notification 

of change to associa- 

5. Immediate report by 
association of all 
price changes. 

6. Yifaiting period. 

7. Circulation of inter- 
pretativu com. ents. 

8. Penalties for non- 
compliance with plan. 

III. Changes necessary to render Flan II. presumptively lawful 

1. Detailed r'.-rjorts of all closed transaction and filing 
current and fixture prices. 

2. Circulation of abstract, statistical summaries. 

3. Availability of reports to customers and the public. 

4. Wo agreement Eiffecting freedom of price action. 

5. No waiting period. 

6. ¥.0 interpretative comments. 

7. 'Penalties for not funushing accurate. .■rnforraation. 

8. Use of impartial statistical agency.. 


The Appalachian Coals Case. 

The most recent decision incicating the attitude of the Court 
tov/ard cooperative activity is Apalrcniaii Coals, Inc . v. United States , 
288, U. S. 344 (l933). Com.peting producers of bituminous coal in the 
so-called Apalacnian territory formed a corrjoration to act as their 
exclusive selling agent, with authority to determine the prices at 
which ttie coal mined by the individual member corporations was to be 
sold. The producers controlled 73^j of the commercial production in 
the iiimed.iate region where th.ey mdned, but only 12;J> of the total 

(*) Milton Handler, "Tlie Sugar Institute Case and the Present Status 
of the Anti-Trust Laws", -. Co luno i a Law Hevi ew . - January 1936. p. 9 



production east of the Mississippi River. The Court refused to enjoin 
the combination as a violation of the Sherman Act, on the ground that 
the restraint upon competition was, in the circu-^ stances of the , industry, 
reasonable. The Court erapha'^ized that the question of the application 
of the statute must be determined by "a close and objective scrutiny of 
particular conditions". It then described the ];rave economic conditions 
with which the industry v/as beset, because of over-expansion and over- 
capitalization, diminishing consumption resultin^^ from the use of sub- 
stitute fuels, organized buying and detrimental market practices. The 
Court ei'iphasized the fact that the coal produced by members of the 
combination v/as sold in competitive markets, and thata vast volume 
of other coal was actually and potentially available. In view of these 
conditions it found that the elimination of price competition between 
members of the corporation did not constitute a violation of the anti- 
trust lav/s, saying, si.-:,Tiif icantly, at page 373: 

" But the facts found do not establish, 

and the evidence fails to show, that any 
effect will be produced which in the cir - 
cumstances of this industry v/ill be detri- 
mental to fair competition..." (under- 
scoring supplied) 

•The significance of this decision for open price systems is that 
it indicates. a more liberal attitude on the part of the court toward 
cooperative" activities, particularly when the economic circumstances of 
the industry are taken into account; it is a further application of the 
rule of reason. However, in the Apalachian decree it was significantly 
recognized that relaxation of the anti-trust laws in the direction of 
permitting greater cooperative activity must be accompanied by increased 
public supervision. 

7. Sugar Instittite Case 

On March 30, 1931 the United States filed a petition in the 
Western District Court of ilev/ York requesting the dissolution and en- 
joining of the Sugar Institute, and the enjoining of fifteen member 
refineries and various individual officers from conspiring and violating 
the anti-trust lav/s in the sale and distribution of domestic refined 
sugar. A decision was handed down by Mack, C. J., in United States v. 
The Sugar Institute, et al . D. C. S. D. N. Y. No. E-59-103, March 7, 1934, 
in which defendants were enjoined from carrying on illegal activities; 
but the Institute itself was not ordered to be dissolved because some of 
its activities were proper and desirable. The decision was appealed to 
the U. S. Supreme' Court by the Institute, was argued in February, 1936, 
and the appeal is now pending. 

The defendants refine practically all the imported raw sugar 
processed in United States and supply seventy to eighty per cent of the 
sugar consumed in United States. An elaborate price reporting plan was 
put into effect by the Institute. Members agreed to sell only at 
publicly announced prices and terras and not to deviate therefrom without 
prior notice. Price changes were to be announced not later than three 
o'clock of the day previous to the effective date of change except to 


- --23- 

meet competitors' anno-unced, prices. Members first anndunced prices 
publicly, then notified the Institute, which reported the information 
to menihers and news agencies without comment. Tlie District Court en- 
joined this -plan, upon the "basis that reporting of current or Tuture 
prices and agreeing not to deviate from them until nev; prices wore 
announced were illegal uiider the anti-trust lav;s. 

The Institute's practice of collecting and distributing to 
members statistics on capacities, production, deliveries, stock on hand, 
etc., v/as enjoined because the information was not made available to 
purchasers as well as to industry members. A boycott and blacklist 
of parties who insisted on fiinctioning both as brokers and warehousemen 
was found illegal. Agreements among members fixing commissions to be 
paid to brokers and undertaking not to deal with any broker or warehouse- 
man v/ho die' not sign an agreement to abide by Institute rules, were 
found to be unreasonable restraints. A universal system of delivered 
prices was found to be maintained by concerted action through the insti- 
tute and was declared illegal; likewise an agreement for open announce- 
ment of frei,ght applications. In addition to the practices noted, the 
District Court found the following to be illegal under the anti-trust 
laws and specifically enjoined each of them; prohibition of pooling of 
shipments by customers; agreement not to use truckers affiliated vdth 
warehousemen or brokers; agreement not to absorb switching charges 
from consignment points; agreement to reduce number of consignment 
points; agreement to mal-ce extra charges on less than carload lots 
ex-consighment; implied agreement not to enter into contracts calling 
for delivery more than thirty days ahead; prohibition Of quantity dis- 
counts; prohibition of "tolling", in which members refined raw sugar 
owned by non-refiners and retained part of sugar for their services; 
prohibition of four-pa^'^rnent consignment plans; prohibition of split 
billing; limitation of and agreed methods of computing cash discounts; 
implied agreement to abolish price guarantees; prohibition of allowances 
for used bags or containers; agreement not to sell under private brands; 
limitations on resales for benefit of buyers; and requirement that 
members report sales of damaged or frozen stocks to the Institute. 

The decree of tne District Court was so presented 'that- the 
Supreme Court will of necessity have to render a separate decision on the 
legality of each of the practices enjoined by the trial court (*). 

P. The Federal Trade Commission Report 

A comprehensive report on open price trade associations vras made 
by the Federal Trade Cormrdssion in 1929 ' in response to a resolution by 
Senator McKellar in 1925. (**) The material .contained in this report 
is invalxiable as a background for the present report, both as regards the 
experience in individual industries and the comparative findings recor- 
ded. The summary of conclusions and recommendations have been reviewed 
here as a focus from which to record the experience disclosed in the 
present report, 

(*) See Chapter II, for a discussion of the significance of this case 
in relation to the future of cooperative activities, including 
price filing, 

(**) Senate Document No. 225, 70th Congress, 2nd Session. 


-2.4- . 

1. Specific Observations He^arding Information 
Work of Asso'ciations 

The report states that the compilation and distribution of 
trade statistics resernoles standardization work, and that it can te 
most efficiently and econordcally pgrforined by a trade association or 
similar or;;;'ani2ation. That trade and price information as distributed 
by a trade association can be used to facilitate illegal restraint of 
trade is considered"no more fundamentally an aXtiument against its com- 
pilation and distribution than is the fact that standardization can 
likewise be misused." (*) In support of this the Commission refers' 
to a familar principle of law; namely, that the purpose, rather than the 
implement employed, determines the le>",'ality of an act. These con- 
clusions have been reiterated and confirmed in previous NRA reports on 
price filing. They are paraphrased lier^ to distinguish the contribution 
of the ,1'31A. experiment to the Jcnowledge of the economic effects of open 
price £ ssQciations. 

Txie follovdng conclusions conctjrning the distribution of informa- 
tion were made: (**) . . 

1. Information should be given equal publicity 
whether it records favorable oi^ unfavorable 
trends, and should be dealt v/ith objectively 
and truthfull;". 

2. There is no economic ground for objecting to 
the compilation and proper publication of 
general avera>^^e market' prices, provided the ■ 
average is correct and truthful. 

3. Both cost and price reports are legitimate; 
any undue restraint in connection with them 
is due to their use rather, than their in- 
trinsic nature.. ■ - ■ ' 

4. The tendency to regard information assembled 
as for members only is one of the chief ob- 
jections to the way it is used. 

5. Greater uniformity of prices may be properly 
expected to be the effect of price reporting; 
seller out of line will tend to get closer to 
the, average. ■ ■.■ '<: 

6. Stability of the price level from 'month to 
mqnth may also result, despite changes in costs 
of production; this is due to the fact that 
sellers ai'e discouraged from cutting prices • ■ 
by the l-mowledge that the lower level will be 

met innii^iately. This is most prevalent -in 

T*) Page 351. Ibid. 
(**) Pages 351-366, Ibid. 



raeet competitors' annoiincec?. prices. Mernoei-s first annotmced prices 
publicly, then notified tiie Institute, which reported the information 
to merahers and news at?encies v/ibhout comment. The District Court en- 
joined this plan, upon the "basis that reporting of current or ."uture 
prices and a^reein^ not to d'^viate from them until new prices wore 
announced were illegal under the anti-trust lows. 

The Institute's practiC'i of collecting and distributing to 
members statistics on capacities, production, deliveries, stock on hand, 
etc., vas enjoined because the information was' not made available to 
.purchasers as well as to industry members. A boycott and blacklist 
of parties who insisted on functioning both as brokers and warehousemen 
was found illegal. Agreements among members fixing commissions to be 
paid to brokers and undertaking not to deal with any broker or warehouse- 
man who die not sign an agreement to abide by Institute rules, were 
found to be unreasonable restraints. A univers.^l system of delivered 
prices was found to be maintained by concerted action through the insti- 
tute and was declared illegal; likewise an agreement for open announce- 
ment of freight applications. In addition to the practices noted, the 
District Court found the following to be illegal -under the anti-trust 
laws and specifically enjoined each of them; prohibition of pooling of 
shipm.ents by customers; agreement not to use truckers affiliated with 
warehousemen or brokers; agreement not to absorb switching charges 
from consignment points; agreement to reduce number of consignment 
points; agreement to make extra charges on less than cai'load lots 
ex-consighment ; implied agreement not to enter into co-ntracts calling 
for delivery more than thirty days ahead; prohibition of quantity dis- 
counts; prohibition of "tolling", in which- members refined rav/ sugar 
owned by non-refiners and retained part of sugar for their services; 
prohibition of foiur-pa^inent consignment plans; prohibition of split 
billing; limitation of and agreed methods of computing cash discounts; 
implied agreement to abolish price guarantees; prohibition of allowances 
for used bags or containers; agreement not to sell under private brands; 
limitations on resales for benefit of buyers; and requirement that 
members report sales of damaged or frozen stocks to the Institute. 

The decree of the District Court was so presented that- the 
Supreme Court will of necessity have to render a separate decision on the 
legality of each of the practices enjoined by the trial court (*). 

F. The Federal Trade Commission Report 

A comprehensive report on open price trade associations was made 
by the Federal Trade Cormnission in 1929 in response to a resolution by 
Senator McKellar- in 1925. {**) The material contained in this report 
is invaluable as a background for the present report, both as regards the 
experience in individual industries and the comparative findings recor- 
ded. The summary of conclusions and recommendations have been reviev^ed 
here as a- focus from which to record the experience disclosed in the 
present report, 

(*) See Chapter II, for a discussion of the significance of this case 
in relation to the future of cooperative activities, including 
price filing, 

(**) Senate Document No. 226, 70th Congress, 2nd Session. 



Price series coraoiled "by the /overninent and other agencies 
for various industries, and those ottainahlc directly from 
the re-Torts of opon-'irice associations, ^-ere used. A conrpari- 
son bctv/een wholesale prices of commodities of industries 
witii o-oen price associr.tions and those of commodities of 
industries v/ithout open price associations also yielded 
negative restilts. Prices of open price comiaodities showed 
no ^-reater stability than those of other coinmodities. In 
fact, they showed a trifle less constancy in their movements 
fror.i month to month. 

The output of memhers of open-price associations was 
found to he much less stable than their prices. Recognizing 
the narrowness of the "basis, a comparison "between the sta"bil- 
ity of operation (production, sales, shipments, etc.) of open 
price industries and. induistries v;hich used merely trade statie— 
tics, indicated that the latter group achieved more sta"bil- 

The section closes with the following comment apropos 
the negative character of the results: 

"A negative result is not a meaningless 
or unimportant result. In this case it means 
tha.t open-price vorl; is only one among a 
multiplicity of causes affecting prices that 
are at least .equally important with it, -or 
else tliat there are one or two other causes 
worhing in a direction similar to it that of sufficiently dominating importance to 
swanip its effects. Fro'n this point of view, 
the situatio;: laig'ht well call for further con- 
sideration from a different angle. "(*) 

3. Reccmmendati-ons (**) 

Ehe commission . rocommonded thp.t Congress pass legisla- 
tion requiring all trade associations whose mem'bers engaged in 
interst'ita comiiicrce to procure a Federal license. Among the 
conditions proposed for this license was included the proviso that 
all files, records, -ccounts, correspondence and other documents 
of the association "be av;^ila"ble for inspection of specified Govern- 
ment authorities, and tliat such associations make such periodic 
or special I'cports regarding their organization, business, or 
practices as may be required by such authorities. Duj31icatc 
copies of all statistical reports submitted 'oy members and of all 

(*) Page 358, Ibid, 
(**) Pages 366-373.,, Ibid . 



compiled reports issued hy the associations to members were to'- 
be filed with such, authorities. This recommendation was designed 
to make ava.ilable to the public more informa.tion regarding trade 
associations and to facilitate the suroervision of their activities. 

ITo modifications of the anti-trust laws or none distinctly 
relevant to open price activity were suggested by the commission, 
with, one minor exception. It was recommended that legislation 
be enacted clarifying the legal status of the practice of identify- 
ing the seller in disseminating prices, and ths.t the preferable 
solution was to forbid such identification. It stated that: 

"The general purpose of identifying the seller 
undoubtedly is to enable coinpetitors to verify 
rumors of prices made on particular contracts, 
and especially to check up on thp 'lying buyer'. 
Whether tlrnt is all tliat is intended is the 
critical point. If the information is used in 
any way to bring pressure upon sellers who are 
out of line, so a-s to raarze them conform to the 
ideas of the majoritj'- of the association, in- 
stead of each being allowed to act on his own 
individual judgment, such pui'pose and use make 
the practice illegal. If such employment of 
the kind of re'jortcd data in question is usual 
and to be expected, the type of report should 
itself be definitely branded as illegal. The 
legitimate use it may serve should be provided 
for in sone other way. "(*) 

The alternative method of verification proposed was for sellers 
to communicate directly V7ith competitors. This method would be 
more prompt and to the point, v/ould lessen the possibilities of 
coercion through an open price system, and could be used for 
verifying allegations regarding quotations as well as closed 

A third recommendation v/as tha.t a law be enacted empowering 
the Census Bureau to require monthly reports from individual 
manufacturers, whether or not they were members of a trade asso- 
ciation. This bureau was also to be given the power to pub- 
lish, in compiled form and without identification of individual 
operations, the information received. 

Finally, the necessity for a certain amount of governmental 
supervision was discussed in general" terms. - It was urged that 
supervision should increase in proportion to the degree of achieve- 
ment on the part of associations in stabilizing prices and pricc- 

(*) Page 369, Ibid 



makin^- methods. As far as the nature of this supervision is con- 

"Administrative supervision of the degree and 

kind recormended is priina.rily that the word 

'supervision' in a strict sense means, namely, 
contprchensive and adeqiiate observation :Tnd know- 
ledge of the facts, with only such elements of 
control as enlightenment gives. To carry out 
this conception of supervision, the principal 
need is authority to obtain full laiowled£e and 
to keep the puhlic informed. " (*) 

4, Pre-HEA Open Price Associations 

In Appendix B of the report are listed 101 associations 
which did open price work at some time or other during the 
period from 1925 to 1928. Associations were doing such work in 
the following indu.stries studies in the present report; 

asphalt single and roofing 

"business furniture . ' . 

candy manufacturing 

cordage and twine ' . ' \ \ 
electric manufacturing ' '"■ 

funeral siipply ■ 
industrial alco' 1 ; 

marble quarrying and finishing 
metal lath , ; 

paper and piil-o 

salt producing . - 

rubber manufa^cturing ' ' ' 

steel casting 
' structural clay products' 
ta^^ manufacturing 

G. Trade Practice Conferences of Feder al Trade Commis sion 

Proceeding under the voluntary a,ri"angment involved in' the Trade 
Practice Conferences held under the jurisdiction of the Federal 
Trade CorTOission, a number of industries have since 1919 set up 
nxlos of fair competition as a result of these conferences^ ' An 
analysis of the rules relative to open price systems' which were 
formulated in these conferences was included in a current report 
of the HHA Division of Review. (**) This analysis covered the 

(*) P. 377>, Ibid. 

(**) "Trade-Practice Conference Rules of the Federal Trade Commission 
(1919-193G); A Classification For Compairson With Trade-Prac- 
tice Provisions of ITRA Codes", S. P. Kaidonovsl<y, February 29, 
1926; (Trade Practice Studies Section, Division of Review). 




period from 1919 to 1936 and includod the rules of 143 conferences, 
The rales vjero classified' by the commission into two groups: • 
"Gro\ip I" rules are those approved and accepted "by. the commission 
as covering tuifair methods of competition within the meaning of 
the Act which are violative of law; "Group II" rules are those 
accepted hy the comi;iission covering practices not contrary to 
law hut condemned hy industry opinion as improper standards of 
husiness conduct or approved as desirahle standards to -he fol- 

All hut one of tho provisions dealing with open price 
systems fell into Group II. A provision requiring, independent 
publication and circularization of price lists hy individual 
uiembers of the industry, was approved for fifty-five industries. 
Aprovision making terms of sale a definite part of price lists 
was approved for forty-nine industries. A provision requiring 
the pasting of prices hy distributors at point of delivery was 
approved for two industries. Strict adherence to published 
prices and terms of sale was recommended in one industry. Devia- 
tion from posted prices was condemned in two industries. In a ■ 
third industry, such deviation was condenmed as an unfair trade 
practice, and included among- Group I provisions as contrary to 
law. ■ . ■ 


A. Pre-IIZIA. lynoz of Price Filin;;' 

Any satisfa.ctory definition of price filing must be derived 
from description and example of typics.l plans. It is evident that 
methods of price reporting \ised in the past were d.iverse in charac- 
ter. Those advocated by 3ddy for industries engaged in con- ■ 
struction or other contract work wore described in Section II-B, 
above. The more elaborate "open competition" plans reviewed in 
the Supreme Court cases Imvo also been noted. 

The formal definition of an open-price trade association 
used by tho Federal Trade Commission in its 1929 report was "one 
distributing or exchanging price information. "(*) The commission 
listed the following kinds of price informa,tion utilized by such 

"1. Price lists, whether gross or net, or changes 
and modifications of price lists. 
2. Specific prices on individual transactions, 

including bids en contracts let. 
5. Variation of prices, including frequency 
distribution and range. 

4. Avcra^^e prices or average "". 

5. Indexes of changes in'prices. 

(*) Seo p. 36 Ibid. 


6. Agi^re^ate saleG in dollars v.'hen accorapanied 
'by corresnoh^linj rraai it :l ties, if the "uaiit of 
' quantity is tolerably homogeneoLis, " 

In Appendix E of its report tlie conrnission classified under 
eleven types the open price associations identified during its 
investigation. This classification indica.tcs more clearly 
tlian any other the diverse forus of price filing in operation 
dviring the period preceding the national Industrial Hecovery 
Act. The following different methods of price reporting were 
recognized: ' 

1. Associations reporting or exchanging bids on 
contracts (jJddy type). 

2. Associations reporting or exchanging all 
deviations from net price lists previously 
conirniniica.ted (3ddy type operated by 0. 0. 
Moore, an associate of 3ddy) . 

5. Associations listing individual sales or 
reporting sales with a high degree of 
specialization - i.e., by grade, descrip- 
tion, arigin, destination, etc. - and also 
indicating those cf each member whether by 
naming the seller or by classification or 
distinctive marking of the entires (Version 
of 3ddy t;>'-pe). 

4. Associations listing individual sales but 
so handling thorn that the reports contain 
no internal evidence' of the identity of the 

: sellers. • 

5. Associations reporting sales with a degree 
of specialization, i. e., by grade, descrip- 
tion, origin, destin? tion, etc., but without 
evidence of their identity. 

6. Associations sho'lng prices in the fori.i of a 
list of q;ap.ntities sold at each specific price 
or of a freauency distribution, or showing the 
range of prices high and lov ■''dth some division 
by commodities or districts. 

7. Associations reporting average prices or 
average values for products that are compara- 
tively homogeneous. 

8. Associations reporting quantities scld and 
corresponding aggrega.te prices or values for 
somewhat homogeneous products. 

9. Associations whose members exchange price 
lists through the medium of the organization 
or receive compiled infonnation referring to 
such lists or ciianges in them, 

10. Croups of subscribers to the service of some 
pricG-roporting bureau. 

11. Associations not listed in the above groxips that 



furnish price-information service utilizing data 
BUTmlied ty meTnters. 

This classification should be supplemented Ly a description 
of a typical reporting plan in use "by several trade associations 
in 1929 which falls under the second tj'pe listed ahovc. This 
t;/pe was distinctly of the ZJddy sort, applicable to manufacturing 
industries and based on the reporting or of net price 
lists and all deviations from such lists. The plan wan used 
in the Cash ChecV: Manufactiirers Industry and was organized by 
Mr, 0. L. Moore. (*) The oiitline of this plan, prepared by this 
associate, \~as as follo\7s: 

"1. Z?ch member will file with the secretary a copy 
of his coiTTT'lete price list, of what are commonly 
Icnown among the trade as tear-off and punch 
checks, in force ant" in effect May 1, 1920, to- 
gether Tidth discount sheets and any variations 
and modifications in -oriccs, terras, deliveries, 
etc., it being the intent of this paragraph that 
cacli member shall file not only his current print- 
ed list shov/ing maxiraxim and minimum prices but 
also any ciscoimts or other considerations he 
may offer directly or indirectly to secure trade, 
or any discretion he iTiay allow his salesmen as 
regards de^iarturcs from the list or as regards 
inducements to customers to secure trade. And 
in this connection, each member will state 
;vhethcr or not his cormany or his salesmen are 
permitted to distribute any gratuities or gifts 
for the puri^ose of influencing trade. 

"2. In addition to the forcgoin; , each member y/ill 
file from day to day and as soon 'as made any 
revisions of his price list, in vholc or in 
pax-t, and any concessions from same that may 
be mac-.e, in prices, discounts, terms, rebates, 
allowances, inducements of any kind, or by way 
of qua,ntitics. or in the accepting of orders of 

"5. From the foi-egoing price information, the secre- 
tary will compile the following: . ■ 

"A sheet or report, showing opposite the 
name of each member (which name may be 
indicated \jy n-omber if desired), tliat 
member 'r^, base "orice for each of the 

(*) P. 390, Ibid. Mr. Moore operating similar plans in nine 
trade associations at the time the Commission re-oort vras pub- 



follov/ing stylies:*** 

"This corrrpilation vdll "be mailed to each member 
contrihutin;, his price 'infomia.tion. 

" revision of "irice list and each concession 
therefrom \7ill "be irnrnediately rooorted "by the 
secretary to all members tliat reporting 
their price infon^ation. 

"The secretary will obtain from members 'advise 
as to their norraa.l average monthly production 
(both qua.ntity and value) of flat tear-off 
and pimch chechs. 

'^Each member v.dll report to the secretary monthly 
on blan;:s furnished for tha^t puroose informa- 
tion as to the actual quantity and value of 
his shipments of flat tear-off and punch 
checks for the current month. 

"Jrora the inforraa.tion received from members, 
the secretary will compile a monthly report 

"(a) i^uantity an I value of shiipraents 
reported by all members. 

"(b) Pcrcenta ,c of member's actual 
quantity and value of shipments to 

"IIo fijpares regarding a member's actual produc- 
tion ai-e to be disclosed to any other member." 

Using a fionctional basis of classification, the commission 
divided open price plans into two main types, - the checking type tend the 
market service tyipe,(*) The systematic pooling of price lists 
either by exclmnge or central filin^, detailed price information, 
and identification of the seller v/ere deemed the prevalent cliar- 
acteristics oi the chocking t^rpe plan. The basic purpose \ms 
the checking of biiyers' statements about prices charged by 
competitors. The market service type often confined the in- 
fonxiation to average prices, indexes of price movements, or 
total qiiantities sold and total dollar valties, placing less 
enphs-sis on detail and identification of the seller. The basic 

(*) pp. 41-4 >, Ibid. 



-7ur].D0se was to. throw liglit upon the general price raovements in 
the market. : 

B. The H?A Ty^oe of Price Filinf: . 

The price filing plans established -under IIFlA. codes were no 
more susceptible to precise definition than were their prede- 
cessors. However, they were fairly uniform in a number of part- 
culars, and by combining these a hypothetical but nevertheless 
ty:pical pla-j. can be offered which illustrates the V.M. type. The 
tyi^ical "olan was ma.ndatory as to cstablishnent and particiisa- 
tion by members. It required the filin;,: of prices and all 
terms and ODnditions of sale together with any revisions thereof, 
the code av.thority was designated as the central agency of ad- 
ministration. Adhei-ence to prices ?t least as high as those 
filed was required at all tiues, but sales above filed prices 
i-ere frequently "oermitted. Before revision of prices the plan 
required either prior annouiicment or a v;aiting period. Identified 
prices were required to b c distributed to members. The price fil- 
ing plan was- usually accoraoanied by some ty]pe of no-selling be- 
low cost provisions, or limitations on indirect price concessions, 
or both. (*) 

It is evident tmt the W3A type, when viewed fi-om the 
perspective of previous meclianisms, represented a very special- 
ized and also a previously quite "Oiicommon plan. The two major 
clTa.racteristics setting it a.^iart from those existing before were 
the reporting of present or future prices rather than past and 
closed transactions, and tne complete separation of price report- 
ing of trade statistics. Provisions were included in a number 
of codes for the collection of trade statistics, but they were 
not integrated with the price filing plan. 

'The detailed, price information provided for by the II. H, A 
plans suggests tliat functionally they belon^^- to the "checking" 
type of plan identified in the Federal Trade Cora;:iission report. 

Two illustrative code provisions relating to price filing 
are quoted below. These cannot be described as "tyj^ical" in the 
sense that all of the codes were similar to them; but they do 
indicate the general manner in v/hich the codes provided for 
■oriCG filing. (**) The first provision quoted, is tlmt which was 

(*) See Appendix C. I^xliibit II for a tab-alation of the frequency 
with which the varioiis elements of price filing appeared in 
the 44^1 price filing plans. 

(**) The model code provision, contained in Office Memorandum Ho. 228 
which ap]pearod in about ninety'' of the codes is reproduced in 
Appendix C, 3:diibit V. Other oxai-.iplos may be found in Appendix 
B for Steel Casting, AT)pendix A for Asphalt Shingle and hoof- 
ing, and A;ipendix 0, Exliibit IV for Folding Paper Box, 



in the Ladder Llaniifacturinj Cede: 

"SincG it, im& Tjeen t'le ^^eneral rccognizod practice 
of the industry to sell products on the "basis of 
printed price lists witli discoimt sliects distributed 
to the trade, each: menber of the industry shall, 
rithin ten days of the effective date of this Code, 
file with the Cod.e Au.thority -orice lists and dis- 
corjit sheets, shewing his current prices and dis- 
counts to the various classes of customers as horein- 
heforc defined. pLOvised price lists and discoujit sheets 
may "be filed from time to time thereafter with the Code 
Authority oy any mem'ber of the industry, to become ■ 
effective upon a date specified by such member of the 
industry, which date shf.ll not be less than ten days 
after the filing jf such revised prices at the office 
of the Code Authority. Copies of such revised prices, 
with notice of the effective ilate, shall be immediately 
sent to all knov^n members of the industry, who may file, 
if they so d.esire, revisions of their price lists and/or' 
discount shcetc, which, if filed not less tlian five days 
previous to such effective date, shall take effect upon 
the date v/iien the revised price list or discovjit sheet 
first file:! sh£i,ll.£,o into effect. 

"Eo member of the indtistry slia.ll sell or exchange any 
ladders or ladder products at prices lower or discounts 
greater or on more favorable terms than Wic schedules of 
su-ch member en file at the office of the Code Authority 
as hereinbefore provided. 

"The operation of the foret;-oin£; provisions shall at all 
times be subject to the ai?proval of the Administrator. " (*) 

As an oxaimle of thos3 I'jrovisions which left more .'. 
detail to the discretion of the Code Authoritj-, there may be 
cited the one in the Set Up Paper Box ivianufacturing Code: 

"Each member shall, on or bofoi-c 30 days after the 
effective date of this code, file with the Code 
Authority corqilete schedules in such form, and with 
respect to such items -as the Code Authority may pre- 
scribe, of prios, terms, a.nd conditions of sale for 
domestic consximi^tion (including all differentials, 
discounts, trade allov/ances, special clTarges, and prac- 
tice re,;ardinf^ sanrples) of all prodxicts offered for sale 
by such member, rnd slmll so file all subseqvient chan£:es 

(*) Codes of Fair Corirpetition . as approved, Govoniment Printing Of- 
fice, Vol. II, page 627. 



therein or revisions thereof at least 34 hours 
prior to the effective time of any such cliangcs or 
revisioiis. The Code Axithority shall, upon request, 
furnish any person concerned, whether or not a memter 
of the Industry, a copy of all such schedules and of 
all changes and revisions thereof. 

"Except in fulfillment of "bona fide contracts existing 
on the effective date of this Code, no mciriber shall 
sell any products of the Industry for domestic con- 
sfu;rption ''.t a price or prices lower tlian, or upon 
terms or conditions more favorable tlian sta.ted in his 
price schedules then on file provided, however, that 
discontinued, lines or daraa^ved goods or seccnd.s or 
distress merciiandise required to be sold to liquidate 
a defunct "ousiness, may he disposed of in such manner 
and on such terms and conditions 3.s the Code Authority 
ma,y approve . " ( *) 

The actual form which the price filing.; provisions took in the 
cedes varied froir: siimlo annotuicmonts tliat prices were to "be mad.c 
public to the most elaborate mercliandising pl^ns. The lack of uni- 
formity in WSA. price filing plans is attributable to several 
factors: The varying demands of tno sponsoring group, the date 
of approval of the code in relation to developing WRA. policy, 
and the expansion or modification of the code provision by the 
Code Authority, 

(*) Codes of lair Cor.TTetition . as a-/Troved, Government Printing 
Office, Vol. ly, V. 250, 



A study of price filing;: xmder IT.R.A. codes involves essentially the 
same problems for initial investigation that are raised "by any other trade 
practice provision - e.g.> to exairiine (l) the nature of the device and 
its variations, (2) the industry situations to which it was addressed, 
(3) the ends it was intended to accorrplish, (4) the machinery that v;as 
devised for its administration, (5) the difficulties enco\intered in its 
application and the way these difficulties were resolved, (6) the extent 
to vaiich the intended purposes v/ere accomplished; as well as any other 
effects not contemplated, (7) the comparative e:cperience and results 
under different codes, and under dissimilar circ-omstances , and (8) the 
issues of public interest involved in the experience and results dis- 
closed. As a "basis for present discussion these have "been more "broadly 
classified as the economic, t"he admir istrative and the legal pro"blems. 


A. Introduction 

Although the voca"bulary itself was predominantly economic, the dis- 
cussion, prior to the IJ.R.A. , had revolved chiefly a'bout the legal aspects 
of the price filing device, and its status in relation to the anti-trust 
laws as indicated "by the decisions in the four Supreme Court cases men- 
tioned in the preceding chapter. Economists in general had given scant 
attention to the economic implications of price filing apart from the 
"a"buses" that might accompany it, or which might arise from particular 
structural aspects of the plan, such as the waiting period. 

The economic status of the device, and its "basic premises, had 
never "been carefully explored. As a result, in addition to differences 
of opinion concerning the usefulness and desirability of price filing, 
and its application in particular forms to particular industries, the 
N.R.A. v?as faced with a complete lack of unanimity concerning the nature 
and character of price filing, its o"bjectives and its intended impact on 
prices and competitive relations. 

Eiis was true, of course, to a lesser degree of other price pro- 
visions, such as resale price mainten;aice, loss limitation clauses, and 
minimum price floors. But such provisions were franivly recognized as 
"regulatory" or "control" measures, meant to restrict price competition 
and to confine it within certain defined "bounds that could "be judged 
"fair". The initial o"'cjectives were clear however much disagreement 
might exist concerning the need for achieving those o"bjectives in par- 
ticular industries, the feasibility of the particular device in question, 
and the ultimate economic results of such rermlation. 



Price filing has bet_.n variously regarded and described as ?;cpro::- 
imcvting price fixing-, or as approximating the ideal of the op:.n ix r ;et; 
as tending to control and limit price competition, or conversely, to 
mal:e corapctition more effective; as designed to protect sellers p^ainst 
buyers, or, again, to protect buyers against sellers; to lov;er prices 
or to raise prices; to accelerate the movement of prices in whichever 
cdrection they arc headed; or as encouraging;; or reducing discriminc.tion 
betv'een buyers. 

Exdmination of the ordinary price filing provisions incor;orated 
in the codes resolves none of these parac-oxes. They stipula.ted only 
that prices and price chajiges should be announced. Publicity \/as re- 
quired as the initial objective — an end .in itself. The ,. expected or in- 
tended effects of sucii publicity on competitive relations or on prices 
.T/erc not stated. 

That there v/as no general agreement on what those effects mi^ht 
or should be is clearly evident from the e:"q:)ressed desires of code 
proponents in submitting price filing proviaions, and from the contro- 
versial and involved discussions that preceded and accompanied the slow 
development cf II. R. A. policy concerning price filing. (*) 

One obvious part of the problem of price filing, therefore, ir^ to 
reconcile, or at least to explain, the diverse concepts about price 
filing and its f^juictions, and to try to integra.te them into a coherent 
statement of the economic role of price filing and its potential use- 
fulness as a device for modilying or regulation competition. 

The IJIKB 'attemijted just such an integration of view on prices 
filing in the statement of Administrative Policy, issued April 33, 1935. 
(**) This v/as written in the light of the accumulated experience vdth 
price filing under the codes, and undertool; to translate that exper- 
ience into a clear statement of the nature aiid objectives of price 
filing, as accepted by the Administration, and to set 'forth specific 
policy criteria for the form and contents of open price provisions, avnd 
the proper field for their application in codes. It was prepared and 
issued as a working guide for the anticipated rcvir.iin of existing 
price filing provisions and hence can not be tahen as a complete or 
weli-roiijided discussion of the ■onderlying economic concepts. 3r.t it is 
by far the most explicit sta.tement available of the NRA administration 
view of the purposes of price filing and the economic function it \'a.s 
orpectcd to perform. Lxcerpts of the statement, as included, in the 

(*) The various sta.tements of purposes aaid the intenaed objectives 
of price publicity by industry members are discussed on p. 79 
Chapter III. The chronolo.jical development of ITRA policy aaid a 
discussion of its effects on code operations is contained in 
Chapter VI. 

(**) These viev^s, of course, were th'^se of various aciininistrative 
officials and did not necessarily include those of industry 
members. See Appendix C Ex. 7. for text of this statement. 



Sumnary of Policy Stat'^T^nts iss''.i"d inMp^^, IQr^F, pr° for that rftason 
reproduced h^rp to normit a clos'=ir "^^xawiinnti on of th° ideas ^x- 
TDPessed. (*) 

The stat^n^nt begins '"ith th=> assertion that "or?en -nrice filing 
is a mere device", '^hose 

"potentialities for "benefit or nischief d°r)end -atjon the -DurDOse 
to '"hich it is put and the nethods ■-'hich attend its use. The 
standard hy '-'hich it should be judged is -orice na^'ing similar to 
that afforded hv an o-pen and corroetitive mar^^et. such as an organ- " 
ized coniriojitv exchange . " 

" The ideal of an on^n and coTrm^titive market can seldom he fully 
atbain^d. It is hoped to aTToroximate its oh.i'^ctives h""" ov°n nrice 
filing under aTDTjroioriate circumstances. It is -Dossihle for the 
ODen file to allc-' huyRrs and sellers to accomodate th^ir activi- 
ties to como°titive conditions, to fix limits on the spread of 
quotations at any given time, and to tend to -price -perform 
its i-ndustrial function . O-pen -price filing should, so far a.s 
possible be made to ftirnish a public record of -price movements, 
provide a check on discrimination among customers, give the small 
enterprise information about the a.ctivities of his larger competi- 
tors, reduce the amciuit of dece-ntion among buyers and sellers, 
give the xjarties concerned a f-iiller knowledge of conditions 
affecting the mar'-et, and nromote and safegiiard the integrity of 
the process of com"oetitive -price n;f)Ving. " (**) 

The broad range of econo'mic ir!°as touched u-pon by these -paragraphs 
suggests the need of a -protracted excursion into the theories of 
comroetition, the industrial function of -price, pnd the intrica.cies of 
■price-making as a. prelurle to our study of -price filing experience 
"under the NRA.. Thq necessity of just such a basic analysis was urged 
by several economists '"ho '^ere asl'ed in February, 1934, by Leon 
Henderson, to make suggestions concerning the proper sco-pe and 
direction of a, special study of open price associations to be conducted 
by the NIA prior to the Code Authority conferences of I'arch, 1934, 

Two authorities "'e^e particularly insistent upon the need for 
linking any study of price filing '"^ith a analysis of the entire 

( ) The stateT^ant ™a.s necessarily a, compromise of the opinions of 
those indivicluals participating in its preparation, and may in 
certain respects balance administrative judgment against final 
economic judgment. 

(**) Summary of Policy Statei-nents, compiled May 1935, bv Alvin Bro-Ti, 
Items 1710, 171l', p. 49. 



pricing system and '^ith the underlying economic nhilosonhies of price 
regulation, either under TDrivate or government auspices. (*) 

(*) Lov^r^tt S. L"on, eyoQ^.tivo vice-president of the Brookings 

Institution, later Deputy Assistant Administrator of Policy in the 
NEA, rvfote as follo-'s in F°"bruary 1934: 

"It '^ill "be imoossill"", he said, "to arrive at a really 
satisfactory decision on oo°n prices unless the data -^hich are 
disclosed "by an investigation ar'^ related to a. clear under- 
standing of the function of prices in our economic organization. 
Open prices hut one phase of a price structure. The open 
price association is hu-t one method of price announcement. Any 
Judgment as to "-heth^r open price plans a,re d^sirahle anri in 
what form, if at all, must he related to more general thought 
on prices. It '-fill b° of primary/ significance, therefore- 
indeed, it '-^ill he essential to a satisfactory analysis of this 
prohlem - to proceed -^ith a thorough understanding of th^ role 
of prices in an economic system... It ^ili he necessary for 
a satisfactory analysis of this prohlem to determine "rhether 
prices are to he consid'=red ' in relation to an economic system 
of private enterprise, private o'Yn°rship, and competition (that 
is, essentially the capitalistic system) or ^-ihether they are to 
he considered in relation to a plan 'fhich ^-m.hodies increased 
'Elements of governmental O'^nership or governmental price 
fixing, cartelization, or some oth'^r form of economic order 
mor socialistic than that to '^hich "7° have heen a.ccustomed. 
The role '-'hich can he assi,°:ned to prices, the effects '^hich can 
he achi'='A'-ed hy th'^m, differ according to the svstem in '^hich 
they operate. ..." (*) 

(*) Exc°rpt of I'-tter contained in F.R.A. Press Releai® Ko. 3473, 
Fehruary ?£, 1934. 

Myron W, Wat^'ins, Professor of Economics at Not., York University, 
and author of s°veral hooks on trade essociation activities, regu- 
lation of competitive practices oiid anti-trust legislation, also 
urged the ne^d of a hasic analysis of th° comiDetitive structure 
hefore any attempt "ras made to examine and evaluate the factual 
ejq^erience of I^TEA '^ith price filing provisions. 

"The first prohlem for consideration in a stud^'' of price 
policies und°r the cod^s s°ems to me to he that of determining 
'•'hat method of price regulation the Ariministration ha.s in view,. 
The futility of proceeding upon a i^oncrete, d^ta^iled study of 
pricing provisions in the Cor'es or upon a fa.ctual investigation 
of he? those provisions have ^^or^'ed out in practice, TT^ithout 
first disposing of this hasic issu°, if not finally, at least 
tentatively, should he apparent, Hot one of th° most common 
t^/pes of price provisions found in the Codes can h^ said to he 
either good or had per se . Wot even th° essential provision 
of all open price arrangements; th° ohligatory filing at some 
common point of th^ price terms upon '-^hich alone each of the 



various ent'-^riDriseG in an industry is preoared to acceiDt orders, can be 
said of itself either to promote or to obstruct the establishment of fair 
prices. It all depenas upon how one is enoeavoring to insure fair prices, 
in the first place, which in turn aeoenas, or should deiDend, uiDon what one 
conceives fair prices to be. That,, finally, is a '^uestion of ethics; the 
nature of the interests or values v/hich one regards as deserving of oara- 
raount consi'cerrtion "(*) ;■ 

In lieu of the critical analysis of . alternative economic lohilo- 
soTlies sug-^^ested bv these 'Titers, it will be assumed that the intention 
of N?Ji was (as cle; rly indicated by the statement on price filing quoted 
above^ to restoie and make effective free and open competition so far as 
possible under modern conditions of economic enterprise. 

Even so it seems necess--ry to define just wha.t is me'^nt bv "free and 
OTDen" concetition as used here and to undertake p'n analysis of the inherent 
possibilities a.nd limitations of lorice filing as a meajis of attaining such 
"free" . nd "open" connetition (**^ before a descri-otiom and evaluation of 
the experience with nrice filing plans under NHA codes is undertaken. 

The need for such an analysis exists auit-^ caoart from the announced 
objectifies of a particular administrative or^aniz tion such as the 'TIA. 
It is apparent even in the original thesis of llr. '^ddy — that knowledge of 
marked conditions is essential to true com-oeti t ion ; hence the supplying 
of that knowledge in the form of -publicity (urimarily of prices and price 
offers'* will contribute a wholesale regime of fair competition based on 
knowledge rather on ignorance F.nd secrecy. 

One writer, Milton i\Tels ITelson, has assumed that Mr. ■Eddy believed 
his conception <^f knowledge, as an essential to competition, was an 
original contribution ot economic thought, when iii .f act it was merely a 
reinteration of a well-known concept of classical economy. (***^ Mr. 
Kelson DOints out that economists, in formulating the la^"' of "perfect" 
competition,, based upon demand and supply relationships-, have predicated 
it upon the assumption that buyers and sellers enough knowledge of 
market factors to be conscious of their \jvra interests as bargainers and 
have the desire and enough freeaom of action to pursue those interests 
intelligently. He then proceeds to criticize Mr. Eddy's theory of open 
prices on the grounds that it leaves out of consideration the buying 
class, and hence is utterly inadequate as a solution to the problem of 
achieving true or "perfect" competition. So long as "knowledge" is to 
be supplied onl^ to sellers and is withJield from b^xyers, it can not contri- 
bute to any neprer aporoach to ideal competitive conditions and will serve 
only "to give redress to one industrial class, .n.-:'mely sellers m^****"^ 

C*'* Ibid. 

{**^ See below, pp. 52-4 for historical significance of the "free" and 
"open" market. 

(***) Nelson, 0£. cit ., p. 196. 

(****"! See, also. Fetter, F. A., '^he Masouerade of i onopoly, pp., 262-263, 
(1931\ Hew York 


This criticism is obviously pertinent and was clearly although, 
some^-'hat belatedly, recognized ov" the iJRA, which sought in later policy 
declarations to insure orice puDlicity to customers as well^s sellers. 
B^t Sere are other eoually oertinent observations that sould be maae 
concerning Lr. ^day's theory if it is to be .nalyzed in terms of the 
theory of "perfect" conpetition referred to ov dr. T?elson. 



B. The MeanirtiT: of Fu"blicity in Perfect Corroetition . 

"Perfect competition" has, during; the past I50 years, "been a 
coranon field of speculation "by those, economists •'■jho are now often la- 
"belled the "pure theorists." Starting; 'Tith certain assumptions a"bout 
human nature and individual li'bert^', equality, and property, that 
'jriters were concerned with denonstra.ting "by a process of logic the man- 
ner in which commodity ve.lues were determined and income distri"buted in 
wages, interest, and profit. The assumptions, frequently not explicit 
or \7ell articulated, were the assumptions of perfect competition. The 
deduction of the reasoning process was that perfect competition, more 
surely than any other organization of economic activity and resources, 
would maximize the wealth of the nation and most justly distril'ute this 

The "end" of perfect competition has "been variously expressed as 
maximizing the national income or individual utilities; securing to 
each the product of his efforts; rewarding enterprise in proportion to 
its efficiency; distri"D\iting resources among different places and occu- 
pations in such a way as to ra^ise the national income to a maximum po- 
sition; and the minimizing of prices to a level vfhich pays for expense 
and trou'ble of product ion--which in turn, therefore, forces the great- 
est efficiency and highest quality. The maintenance of an equili"brium 
"between various industries and lines of economic activity such as to 
make impossi"ble genera.1 or ovexftall depression '/as another "beneficial 
result sometimes pointec" out. 

Among other things, it was demonstrated that in any industry under 
perfect competition prices are uniform (differing only hy amount of 
varying delivery costs) and are just sufficient to return to the most 
inefficient producer hir costs of production. 

It is entirely cler^r that the assumptions of a perfect competitive 
system have never "been identical with the realities of economic "beha- 
vior. This is time, it nay "be noted, if v for no other reason than that 
the assvunptions of perfect knowledge and perfect mo"bility of resources 
from one industry to another eliminate the essential fact of timeliness- 
first "by eliminating the uncertainties of the future and, second., by 
supposing that movement is static. (*) The historice-1 meaning of the 

(*) In a perfectly'- competitive market devia-tions from equili"briu:-i 

price could not occur. "there would "be neither movement towards 

an equili'briiU'i nor oscillations atout it." It (the equilibrium price) 

■_. 1 , -'"Would"" ' coexist -ith the market through the realization of sta- 
hilit;- at a single stroke the market comes into existence. " 
Chan"berlain, Edward, Theory 01 Mono-Qolistic Competition , p. 26 
(1933) Harvard University Press. 

Neo-classical economists, particularly Alfred Marshall (see his 
Frincroles . Sth ed. , ■pp.330-37S) have introduced timeliness 
through the conceptur.l device of short and long periods, conclud- 
ing that the shorter the period of time the greater must "be the 
share of attention to demand; a.nd the longer the period the more 
important vail "be the influence of cost production. This device 


„ 43 - 

concept of "perfect competition" lies not in its use as a scientific ex- 
plana'cion of economic behaviour tut rather in its moaning as a social 
desideratui:!, an "rthical ideal- t^.T^e", a criterion for the control of 
economic jehavior, (*) Frankl/ recognized as such, "perfect competition" 
is a useful concerit — not hecause it is strictly attainahle but "because, 
within the limitations imposed by human nature, it may be possible to 
apprcr/:. more nearly than before this v;idely accepted standard for control 
of econom.ic rivalry and bargaining in a system of private enterprise 
and capitalism. (**) 


while recogiiizing that mobility and production are time consuming, 
conta.ins an important element of static analysis in that it carries 
an assumption of CG_nstancy in the individual's reactions to a 
chan;_:in.,: social and economic environment, McMillan C: Company, 
ITev; ">rk. 

(*) EMcept as it may have been employed for "pedagogic illustration" - 
See Comimons, John?.., I.nsti_tj.ition_a2 _Eco_nomic_s, pp. 724-728 (1934-); 
also his discussion of "ethical ideal-types", i oid . , pp. 741-743. 
McLiillan & Company, Nev.' York. 

(**) Cp.,^j PP« 342-3'18 and 711. The present report has in large part 
been oriented to this end nf public policy — not because the authors 
necessarily prefer it to other possible ends — but because it malces 
e:q")licit a .^oal of rejulation vrhich appears to be the most widely 
accepted anci one n'hich legisla.tors, courts, and the National Industrial 
Hecovcry Board appear to h-wc in mind when they refer to "promoting 
competition", "eliminating monopolistic practices", the "ideal of an 
open £,nd competitive market", "competitive price making", etc. It may 
be called and end r\f "fair competition" in the sense that it represents 
that balancing and conflicting interests which is most widely accepted 
as just a.nd fair. This does not mean; however, that the reader >7ill 
not find in this report evidence bearing on the relation of price 
filing to other specific goals of public policy (v/hich may or ma}- not 
be compatible with the standard of perfect competition). For example, 
Gcatteied through the report may be found material bearing on the 
■ incidence of price filing on the small business man; on the function 
of pricG filing in reducing the social "illth" of secrecy and sus- 
picion; or the social costs of bargaining and negotiating over a 

9 ear. 


In order, to indicate the neajjing of publicity in relation to 
perfect competition, , it, is .necessa,ry "briefly to summarize the essen- 
tial elements or at.tritutes of this competition. They may "be called: 
purity (from monopolistic elements) ; mol)ility (and fluidity of resour- 
ces) ; and rationality and kno'-fled^ ie. (*) 

1- Purity . "Ilonopoly ordinarily means control over supply, -and 
•therefore over price. A sole prerequisite 'to pur3 competition is in- 
dicated — that no one have any degree of such control." (**) First, the 
number of sellers and of huyers must "be large enough that the influence 
of any one of them on the total supply or demand, and hence on price, 
is entirely negligible; or if not entirely so, too slight to malce it 
'.7orth nhile for him to exercise it. A second requirement is that the 
commodity itself he perfectly homogeneous or standardized and ap- 
pear in the same market; otherwise the seller of a "different" product 
nould possess some degree of control over the price of his particular 
species of product. Moreover, the seller must he perfectly standard- 
ized. "Anything that ma]:es huj^ers grefer one seller to another, he it 
personality, reputation, convenient location, or the tone of the shop, 
differentiates the thing purchased to that degree, for nhat is "bought 
is really a "bundle of utilities, of which these are a part." (***) 

Finally, it should "be ^Dointed out that implicit in pure competi- 
tion is the assumption of accessi"bility or of equality of opportunity — 
that sellers and "buyers have an equal opportunity to enter and partici^^ 
pate in a market. The possi"ble ohstacles are many "but may in the main 
"be classified as follows: 

(1) Discrimination "by nhich is meant a difference in price 
"betT/een customers r/hich does not reflect the difference in the cost of 
producing for and selling to them or the value of services rendered 
the seller hy these customers. 

(2) P ■■- p r"*, .q.t nry no m-.i p t i t i o n v/hich is the use of sellers (or "buyers) 
of superior resourced to handicap or ruin 'jealcer competitors or to 
prevent entirely a potential competitor from entering a market. 

'2- Mo"bility of resources . A second element of perfect competition 
is perfect rao"bility of resources to those industries v;hich are nalcing 
a greater return on investment than is enjoyed else'There, and similar- 
ly array from those industries in nhich the rate of return is depressed 
below the level found else-jhere. IJnder such circumstances the net 
revenue of all industries 'vill "be identical, and variations will not 
occur even momentarily. The forces of supply and demand guided "by. 

(*) Other assumptions 'jhich need not he discussed here include the 
absence of fraud and violence and the negotiabilitj'' of commo- 
dities and debts— see Commons, oj2. £it,pp.33S-339.. 775~776. 

(**) Chajuberlain, 0£. cit. , p. 7 
(***) Ibid , page S 


-45« . 

desire for profit and through the nediuii of nobility effect a perfect 
equilibriun betrreen industries, and society is supplied with the goods 
it nost desires a.t prices devoid of elcMcnts other than necessary costs 
of production. 

This ass-oiies that capital is fluid or will move in precisely the 
aaount necessary to equ.alize the revenue of the attracting industry, 
with that of others, whether the amount be one dollar or one million 
dollars. It assui:ies, moreover, that there will no hesitation or 
loss involved in abandoning productive equipment lyhich for the moment 
is failing to j'-eild a return equivalent to that which is enjoyed in 
other places. jTinally, as pointed out above, it contains the contra- 
dictory assumption that movement is statie or without element of time. 
It has meaning only as an ideal which might be approached but never 

3 - Rationality and knowledge . There is assui".ied finally an "eco- 
noEic , man" who acts ^^ith perfect reason in the direction of his best 
pecuniar^/- interest and whose knowle(?.ge of opportunities — all of v/hich 
lie in the future — is complete. Here again time has been left out of 
the picture and again that which is presented is an ideal. 

Applied more specifically to the -mctrket this implied that all ' 
buyers", laiow of the offers of all sellers and likewise sellers are a- 
ware of the prices v/hich each of the individual buyers is willing to 
pay. The opportunities and freedom, for trading or for moving to other 
markets are complete because they are all ]:no\7n. 

IThere this .knowledge exists sellers have no interest in the pri- 
ces obtained bj'' competitors inasmuch as such implies that they have' an- 
interest in maintaining or cutting prices, which is incompatible with 
the assumptions of the purity of competition (*), viz., that the num- 
ber of sellers is sufficiently large so that no one can ercercise any 
control over supply a.nd hence over price. 

It is this element of knowledge which is the specific concern 
of this report. Publicity of price offers is one method of promoting 
knowledge of market conditions; and mandatory filing is a device for 
effecting publicity of price offer's. From this .it might be reasoned 
that because price filing e:cpands the fund of knowledge it ex h:/-po- 
thesi contributes to a fuller realization of the ideal of perfect com- 
petition. This reasoning has been widely embraced, even by critics 
of open price filing, who have directed their opposition to the mech- 
anics of price publicity and its surrounding circumstances rather than 
to the publicity itself. 

Such a deduction involves the technique of static analysis, i.e., 
holding other factors constant except the one being considered and in- 
vestigated. These writers, however, fail to make explicit the jnature 
of the p.ssumptions of constant factors. Specifically, they have as- 
sumed that the other elements of "oerfect competition are loresent and 

(*) Above, p. 44. 


have ignoried conpletely the nature of other "imperfections" that may 
e::ist in a given marlret. 

If these imperfections are forces tending anay from the tru^ 
competitive price and a-re active in character,- there remains the possi- 
bility that price puMicity -7ill enhance rather than counteract their 
effects. Thus to give equal knouledge of prices '.Then there is unequal 
influence or poner to act on that ::no'7ledge might conceivably result in 
a price further from the perfect competitive price rather than closer 
to it. This possiDility -lill "be explored in the next section. 

C. The Eole of FuTjlicity in Irn'oerfect Corflroetition 

Modern industry, uith its concentration of production in large 
units, the aggregation of tremendous capital assets under corporate 
control, and extreme product differentiation ha,cked "by huge advertis- 
ing outlays and other indirect forms of selling competition has so 
hastened the trend array from conditions of "perfect competition" that 
the assuiTOtions of thi p theorj'- have little in common ^ith the facts of 
the present "business norld. Every market is to a greater or less ex- 
tent "imperfect. " Each producer is o"bligated to choose not only the 
amount he \7ill produce, "but also a price or prices at which he vrill 
offer or sell his product at any time. Alvrays he must choose that 
price with regard to the amount and kind of goods others are produc- 
ing and the prices they are quoting, since the pricing and production 
fa"brics of competitors can seriously affect his o'7n volume of sales and 
profits. ' (*) ~ 

(*) ■ As Professor Chamberlain, in introducing his theory of "Monopo- 
listic Competition", states: 

"Because most prices involve monopoly elements, it is mono- 
polistic competition that most people thinli of in connection 
'jith the simple trord "competition". In fact, it may almost "be 
said that under pure competition the "buyers and sellers do not 
really compete in the sense in 'jhich the i-ford is currently used. 
One never hears of 'competition' in 'connection uith gres-t mar- 
kets, and the phrases 'price cutting' , 'underselling' , 'unfair 
competition', 'meeting competition', 'securing a market', etc. 
are xinknovTi.. No v/onder the principles of such a market seem so 
unreal i.7hen applied to the '"business' r'orld where these terms 
have meaning. They are "based on the supposition that each sell- 
er accepts the market price and can dispose of his entire supply 
without materially affecting it. Thus, there is no pro"blem of 
choosing a price policy, no pro"blem of adapting the product more 
exactly to the "buyers (real or fancied) wants, no problem of ad- 
vertising in order to change their want,©. The theory of pure 
competition could hardlj' be expected to fit facts so far differ- 
ent from its assumptions." See Ghar.iberlain, o'o. cit . , p. 10 
Op., Eobinson, Joan, The Economics of Irn'oerfect Competition , 
v-p. SS-20 (1933). 



An attaipt -vill oe :ir.c\e in -.■.'ho.t folio- 's to indicate in summary 
manner the jposci'bilities o;"'fe'rec.' iDy puolicity through price filing 
and dis3e:-iinc4ion. fox* strengthening a tencancy anay frou perfect con- 
petition or, on the other hanc.,' for conti-iTjuting to s, greater 
ment of this' end. TaJi:ing iionopoli'Stic or "inpure" cohroetition as a 
point of departure the approach nill "be to suggest, first, conditions 
under 'jhich publicit:/ of pi-ices (*) nay accentuate monopolistic price 
forna,tion; and, second, circw-istances under \7hich it nay promote or 
prevent access to the narhet. (**) 

(*) 3y sellers. Ko attempt uill "be nade to discuss, the economic im- 
plication of a possil)le system of publicity of Imyers' prices. 

(**) The liearing of price puhlicity of tiie tjroe provided for under IISA. 
codes upon a, third attribute of perfect competition, viz., mobil- 
ity of resources (see above, pages 44-45 ) is too indirect and re- 
note to justify discussion in this report. 


1 ■ price rii " bli c ity and Mono . olistic Price Formation 

By repnon of the fact that "and r rnnnopolistic or "impure" competi- 
tion every seller has some degree of control over supply, the starting 
point of a theory of monopolistic competition is not pure competition 
but pure monopoly. Price under pure monopoly is a calculated, managed 
price set at a figure which will maximize the monopolist's total revenue; 
"he is able to maintain it there because ex hypothesi there is no one to 

cut under him it represents a balance of opposing forces of loss 

and gain, which renders the total profit a maximum." (*)■ 

The monopolist in setting his optimum price must consider two 
things: one, the volume of sales that he may expect r'^ "".y given price — 
which is a consideration of the competition of sufest^ t: ;s goods and of 
elasticity of the aemand for his product; and, two, m costs of pro- 
ducing the goods which he can sell at any price which he settles upon. 

If, however, there are competitors producing the same product {**) 
he may, in fixing upon a price which will maximize his total net revenue, 
take account not only of the elasticity of demand of the product and 
his own proacxction costs but also of the policies which these rivals are 
likely to follow as a consequence of his own actions. 

"If each competitor assumes his rival's price Fill not be changed, 
he can, by setting his own slightly lower command the market and dispose 
of his entire output, increasing his profits virtually in proportion to 
the increase in his sales. His rival making the same assumption will . 

cut still lower, and the do^-Tiward movement '^ill continue until no 

further price change can be made without disadvantage to someone, the 
equilibrium price... (being) the purely competitive one for unly two 
sellers, and, of course, for any greater number. If the full power of 
the seller to alter his price, even to the disadvantage of the buyer, is 
recognized, however, price will oscillate over an area which becomes :'". 
narrower and approaches more closely the purely competitive figure as 
the number of sellers becomes large nj^***) 

(*) Chamberlain, op. cit., pp. 12-13. 

(**) Few enough, however, as to give each of them some control over 
supply and hence over price. 

(***) Chamberlain, op. cit., pp. 3C and 54. For his demonstration see 
pages 34-46. 



A much more, re'-llctxc h3rjOt.heEiE, however, is th-^.t the seller 
will rPco.'--ni?e in detr"iainii\;; his O'/n "oolicy th-'.t his rivals' policies 
will 08 determined at 1& \st in -y-j-t tiy his ov,-n. For example, hefore 
making a price cut to incre~Be his share of the market, he i-dll 
prohahl";/ consider ■ heth'^'r a red.iction 111 he met hy his rivals 
and thus prevent the cccrLL-^.l of -my .profit to himself. To render 
his :3rofit a maximtan, the seller ^Till trke into account "his total 
influence upon price, indirect -,e ''ell rs direct." As long as each 
seller looks to hie ultimate interest and ':nor.'S that interest, 
prices vdll he determined at a level 'hich T-dli maximize the total 
■orofits of 3,11 — the level which would maintain if there were a 
single seller controlling the entire supply. "If sellers have re- 
gard for their total influence uoon price, the price will he a 
monopoly one. " (*) It is this action which hereinhelow will he 
called. "Konooolistic price f orm.ation. " 

Before procedihg -dth this consideration, it is necessarjr to 
point out that the discussion of price formation I'hich has imm.edi- 
atel;- preceded has loroceded ujon the assurmticn that the prod.u^t 
and sellers competing for a given market -ere perfectly'- standardized. 
CircujQstoiices are much different: Either hec^use a seller's pro- 
duct is different functionally or in quality, in aTpearance or 
style, or hecause he possesses a legally protected trade mark or 
trade n?jAe, or hecause of his personality, race, color, or character 
of estahlishm.ent, it may he said that seller enjoys some de- 
gree of monopoly. Yet, even under "ahsolate" monopoly there is 
not can entire ahsence of competition since there are always suh- 
stitLite goods— however imperfect. The degree of competition he- 
tween differentiated products is an ohvious function of the e?-tent 
of the differentiation, 

"A orice cut hy one lutomohile nanuf f.cturer , for instance, af- 
fects especially the sales of those other manufacturers ^-rhose 
prcdtict is in a'apror.imately the same pric^^ class, and prohahly 

causes much less distarhmce outside of these hounds,...., 

Evidentlj^, a (competitive) grouo nay he l?rge or small, depend- 
ing upon the degree of generalitj.^ given to the classif ic^^tion. . 
Cha,ro,cteristically, any individual seller is in close competi- 
.. tion 1-1 th no more than a fe\' out of the group', and he may seek 
to avoid price comi.ietition for tl^e very reason given as apply- 
ing to sraall memhers— tnat his cut -'ill force those in closest 
competition ilth him to follow suit." (*♦) 

Competition is not limited to price. Product differentiation' 
is a competitive device. The quality of the product may he im- 
proved, or deteriorated, its appearance changed, or a myriad of 

(*) Ihid . p. 54; see also oo. 46-51. 
(**) Ihid. . -op. 102-103. 



additionpl services r,nd errtr-s ,'',dded. VJliat is more, it may 'be of ad- 
vantage to e- )end fund;-; in rc'vertisin.^ rnci, other forins of sales pro- 
motion in an effort -to build .l i curtomer ^'oodwill. 

ili3oreticll"'5 'if each seller Tcre fvtlly adxased of the pros- 
pective price, product, and!:; policies of his com-oetitors, 
price, just as in the c of the st-nd,ardi7ed product, woiild be a 
raono:)Ol3'- -one" and product dif f erentir.tion a,nd. advertising would "be at 
the level and of the kind r.'hich woijld obt.: in under loure monopoly where 
the]^^ represent devices employed to attract the consumers' dollar from 
substitute products. (*) But the problem of knov.'ing the probable com- 
loetitive policies of rivals becones infinitely" more com-olex vdth three 
variables to consider instead of the single one of price; and publi- 
city of price offers as a mems of promoting this Icnowledge is mani- 
fest!;" of much less potential significance. 

Proceeding to the Tjroblen — the bearing of publicity of price of- 
fers through price filing on the conditions of monoijolistic price 
formation — there are three factors for consideration: 

(a) The farsightedness and unanimity of rival sellers in 

: acting in the dir'^ction of their ultimate best interests; 

(b) The e?'.tent of the price and other data available, first, 
to riv^l sellers and, seconc, to buyers; and 

(c) The interv il before infornat ion becomefe avadlable to 
sellers aud to biij^ers. (**) 

a - The farsightedness of rival sellers . It has been seen 
abov^ that the degree of mono^;olistiG price formation in any market de- 
pends upon vfhether sellers talte into consid.era,tion their "indirect" 
as v/ell p.s "direct" influence upon orice. Vfliere competitors independently 
determine uoon and idhere to that .single lu-ice '"'hich "ill ma,::imize the 
total net return of the industry'' tney i-ill .lave had regard for their 
_ total influence, upon iDrice — direct and. ind.irect — aad price will be the 
mono;i61y one. Under such circiirastaiices orice changes would be dictated 
only "by such considerations as fluctuating costs and changing prices 
of substitute prodir^ts — the factors v/nich the pure' monopolist looks to 
in d-etemining his prices. These price changes V70uld be effected simul- 
taneously,- and in the same magnitude by tnr ind.ependent movement of com.- 

J*) Ibid. . Qj. 10n-l04j 170-171. It should not be assumed that 

prices under monopolistic competition '-111 al'-'a.ys be at a. level 
above costr. It is true, however, that costs vdll usually be 
higher and production less than under pure com'oetition. Ibid, 
p-o. 17n-176. 

(**) C'> Chrm.berlai:;:, op. cit, , 'i, 51-53. Since he does not mention it 
specifically, evidently Chamberlain minimizes the practical im- 
portance of the second factor a.s a condition to monopolistic price 


This, however, AtrGumes p. def;rer> of i'arsightedness which 
pro"br,"bly is -lot ap^oroxinatec', in oxiy of. the contim, oorary mprkets. It 
meaZLS that each riv^l is -"-re of t;..e ultimate consequences of com- 
petitive price ciitting and will not, theri-fore, initiate any doi.7nwa,rd 
movenent from the monooolv orice. This condition of joint interest 
will he violated when the individur'l i-'ivals see no further than their 
presumed immediate adv-mtage of catting under their competitors' prices 
to enlarge thereby their sha,re of tiie available market. However, even 
though the ind.ividual seller v,-ere fijlly a^""rre of the ultimate results 
of such competitive price cutting — that the immediate advantages to 
he derived will la.rgely cancel out through competitive lorice meet- 
ing aaad prices will work downward until they reach the purely com- 
petitive level where there are no monopoly gains — he may nevertheless 
act contrary to his own hest interest in maintaining his o^rm price 
if he is uncertain ahout whether his comiDetitors are likewise 
aware of the results of their price cutting. If there is a strong 
presui^iption that these competitors have regard only for their im- 
mediate interests it would he foolish for hin to proceed deliberately 
by na,intaining his oy,ti price. (*) 

lionopolistic price formation then as one significant factor de- 
pends upon the extent to ."hich business rivnls are mutually con- 
fident that each is aware that immediate gains from price cutting 
may not be realized becruse price reductions mil be met and that 
each is like-lse awj're that such competitive price cutting will in 
any case eventually lower prices to a level irhich vdll only suffi- 
ciently cover costs to justify remaining in business." The degree 
of such awareness or farsightedness e:;isting in business is largely 
indeterninant. It depends upon a number of factors which them- 
selves are not determinant — .inasmuch o,s it raises essentially the 
question of individiial behavior in highly v?aied and changing en- 
vironiiients. The number of sellers in pjiy market ma.j'- be so many as 
never to raise the question in the mind of any one tha,t his policy 
may so affect the market of liis rivals that they \fill promptly meet 
or follow the price_ which he sets. Or where product differentiation 
and advertising are imiportant competitive devices the seller may have 
no reason to assuine_ tha^t a -orice reduction on his part will be met 
by price cuts from competitors rather than by more energy devoted to 
dressing up attractively their products or to persuading the con- 
sumer of their particulrr merits. Or, again, individual sellers 
may interpret the general market situa.tion — and so their long-run 
interest — quite differently sone feeling, for erajnple, that it is 
best to unload their entire goods on hand whatever the immediate 
cost, whereas others feel and act in directly the opposite manner. 
Or, price cutting on the part of some may be interpreted to be de- 
signed to open up a new market or secure large or special contracts 
of another character to which the others may be, in one instance, 
entirely indifferent or, in another instance, willing to enter into 

(*) See Ibid. . pa,ges 51-53 for discussion of this factor of an- 


coapetition at vhrt.te.veT the ■oossi'ble imracdiate 'sacrifice. 

It is probablj true in any tnat Icasiness rivals are not 
conscious of the ultin^ite inrolications of cojapetitive pricing e::cept 
through long ajid difficult exoericnce. A lesson once lei^rned may te 
entirely forgotten becausr of the apperraxtce of ne'7 ?jid inexperienced 
members orbecaase of major industry upheavals brought about by 
factors out side of the industry's control. In the course of re- 
peated e:rperiences they may have learned that in the long run they 
are best off and most secure-? by follomng the leadership of some con- 
cern in vfhose judgment of market factors they have confidence or for 
whose pouer for damaging retaliatory action they respect. The 
influence of the leader in monopolistic pricing is of particular 
si-giiif icajnce, it may be noted, where price increases are in Question: 
A concern, attempting to lead in a price increa&e, '-hich commands 
little respect or has little po- er may fail in its purpose entirely 
bec'\ure of the immediate gain at its expense vrhich rivals see in 
keeping their price at prevailing levels. In the absence of an in- 
fluential leader or in the absence of collusion or agreement price in- 
creases may be made with great diffic^alty in an imperfect market. 

It is difficult to see ifherein a system of nrice publicity 
throi\gh price filing can in itself con^^ribute to, improving the "far- 
sightedness" of business rivals in looking at the ultimately unfortuna.te 
consequences to them of competitive price-cutting— except through 
expanding the contacts and influence of the more enlightened members; 
or, more probably, in contribiiting to the experience of following a 
leader -'hose pricing policies axe more precisely or extensively 
publicized or who in turn become raore_ fully rware 'of and hence ■ 
better able to act against those who 'jere unwilling to follow. 

It is probable, however, that much the more potentially im- 
r)ortant contributions of price filing to monopoly pricing may come 
from t-.'O other factors referred to a.bove, i.e., (l) by increasing 
the knowledge of competitors' prices and (2) by reducing the in- 
terval or time lag before these prices became kncwi. The 
possible bearing of price filing on these factors will be dis- 
cussed in the tvro sections v/Jiich immediately follow. 

Before proceeding, however, it must be strongly cautioned that 
howe'ver great may be the contribution of price filing to fully^ 
and promptly to apprising sellers of their rival's price policies 
it will not follow that monopolistic price formation will thereby 
necessarily be promoted. To the extent that "farsightedness", 
viz,, the extent to which business men in forming their o"n price 
policies are aware of and consider possible reactions or pric-""" 
which rivals Tlll.make as a consequence of their not itself 
promoted by orice filing, the result may be to intensify com- 
petitive price cutting, ina,snuch as competitors in their eagerness 
for gain will know more precisely what \)rices to vuidercut; or if 
competitors in anotiier indiistry were a.lready possessed with some 
degree of j'arsightedness the result ma;;", on the other hand, be a 
very definite tendency towards monopolistic pricing because of the 
appreciation that price reduction now onenly publicized will be 
TDTom-otly met, 

•• -53" 

The indeterminateness of ,the prolilem raakes it ■narticuD.'^.i-ly im- 
port-nt to cscertnln in -Thp.t 'orr/oonsnt s conceived to Tje the functions 
of price puolicit'/; '■iieth^r for e^^jml? tne7 loo!:pd upon it r.s a 
possible prfvpntive of competitive price cutting or as an aid to 
price stability; 'or ■■hether they ainimired tiie -ouolicity aspect and 
soiight tlu'ough price policy'" plans e. me-jiS to a raore direct control 
over prices. y 

"b - Extent of the ijrice and other dp.ta made ava.ila'ble . 

Econnnists in their r/ritings almost universally have treated price as 
a single datum (*) — a misconception v.'hich perhaps has "been encouraged 
"by the prevalence of index numbers of simple price series. It is of 
douotful propriety to spealv sim-r)!'/ of "price" in the case of anj'' 
raojiof acturing industry tod.?y; rhat erasts pnd what the business man 
faces in determining his ovtcl policy is for a single concern an,d a 
single product a complicated "going" price structure lyhich may be a 
composite of so many distinct and flexible elements that even the 
abstraction of a net price has little meaning, and the list price is 
nothing more than a. point of departure f^nc. of the various elements per- 
haps the le■■^st representative. (**) 

(*) Gr at the most \^hat see'n^ to be a list ;rice to the wholesale or 

retail trrde "dth a fen discouiits thrtt are handled merely as simple 
constant adjustments to be applied to list prices throughout the 
given period of tine. 

(**) As an exan"ole of the price structure of a. modern industry, the 
structui-e for the "standard" com icanies in the original filing 
by the Fr^-ctional horse Po'Ter i ctor Group of the Electrical Manu- 
facturing Industi-y under the code involved the folio- -ing: 

1. Customer classifications and the oiscoimts to these 
cl-r sses. 

2. Terns of sale. 
^. Deliver;- policy. 

4. Definition of tlie customer cla.ssif ications. 

5. "Multipliers" for certain individual purchasers rdth- 
in given customer classifications. 

6. Q;aa,ntity discounts to all classes for 'unit shipment 
of 10 or more motors. 

7. Discount plan for Class "G-" purcho.sers (resale ma- 
cninerj'- manufacturers) based on quantity and shipping 

8. Motor prices (general puraose and special application 
motor prices both subject to disco;mts). 

9. Electrical modifications 

■ 10. Mech.anical modifications. 
11. Motor dimensions. 



¥lia,t hrn given ri;.e to tiiis uoiu^dtous. nethod of indirpct pricing 
has never "oeen t.y<5teni--'.tic',ll7 or:plor--d (*) rltlioivch the sug-^estion 
may "be raade that it reflectt^ i.. rrt the d'^-lib'vr:>tt' confusion hy 
business rivals to conce-^1 frr-'; one -nrtaer the true ns.ture of their 
price ccncessionE. This concf^'lnent '.lay have arisen, however, not 
onl:" r.s a device to reduci: orice '-ithout the knov-ledge of competitors 
but also of buyers. A reduction to jarticulrr buyrrs or cln.sses .of 
buyers is ooasible even vriiere tne seller does not -dsh to go as far 
as to reduce trices to all bryers— if the actual i^rice can be con- 
cealed by such devices as rebates and special allovrances. 

A Eecond errolanaticn of the prevalence of. indirect nricing msy 
be the f.^-ct that b^.^j'-ers vary so groatly in circxojnstance that it is 
more ;:tr"tegic, convenient or more economical to enoloy a orice 
structure fieri ble enough to allor for these variations. Obvious 
cases in point are discounts for csh pa^.inents and for quantity 
purchases and allo'Tances for ndvertising performed by bujrers. Or 
as been frequentlj^ pointed out, the nomina.1 price m-^y become 
custoni^ed pjid the indirect eleiaentr. the function of pro- 
viding flerdbility. A cuntomarj'' price may be estaJolished because the 
product is repeatedly purchased^ ^ as in the case of chewing gum, or 
through nation-\7ide advertising as in the case of cigarettes. Such 
devices or premiums and free deals often a.ccomoany the sale of this 
kind of product. 

The vrriety of indirect price elements ^..nd other means of pro- 
moting a, s-le is well illustrated bj'^ the types of restrictions im- 
posed in NRA codes. A'^nong gener-"! types, of codal restrictions (usu- 
allj'- a;oplying irres-oective of class or locption of buyer) were those 
prip.iaril]'- relating to (1) time of buyer's payment (**); (2) risks 
of buyers (***); (2) giving of .additional' goods or services (****); 

(*) See, however, Lyon, Leverett, S. , Brookings Institution, Free 
Seals (1933) pjid Avertising Allo'-^ances (1932) 

(**) E.g., C'sh discounts, periods o;f free credit, interest beyond 
free credit period, datin..5s, .terms of installment selling, and 
deferred payment , anticipation of bills, etc. 

(***) E.g., product guarantees^ maintenance guarantees, a,llowances on 
defective goods or discontinued lines, price guarantees, resale 
guarantees, a-oproA^al selling, consignment selling, offers with- 
out time limit, ass-'oming liability for non- performance caused 
by non-controllable factors or for error in plans or patent in- 
fringements, agreements indefinite as to time and quantity, etc, 

(****) 'E.g., free deals, premi-oms, coupons, samples, prices, sales 

promotion awards, special containers, display materials, dem- 
onstrating, estimating, inspecting, crating or,p.?cking, ware- 
housing and storing, etc. , 


(4) giving fr.vors or financial '^ssist.n.nqe to 'buyers (*); (5) payment 
or diversion of cojiiraissions or fees to customer (**); (6) allo\7ances 
for pajTiicnts or value rrnderod ty "buj^ r (***), 

More intrinsically secret devices ty v/liich concessions maj'' be 
granted are illustrated oy the folio .dn.:-; devices '..•hicli vrere often 
proliitlted or restricted ty IT:!, codes. (****^ 

Thus the seller in promoting his sales is hy no means con- 
fined to reducing a hypothetical single— unit lorice. He may liher- 
a.lize his terms of payment, make greater allor/ances, a,ssume a greater 
share of the 'buj'-ers' risks, "throw in" additional or sup'olementary 
goods or services; or, if he anticipates that his action would "be 
nullified through Ijeing promptly met "by competitors who ways of 
finding out ahout it, he still may resort to an understanding with 
the l)"d;j'-er vfherehy the latter may avoid full performance with the 
terms of the formal agreement or contract; or he may conspire with 
the "buyer to falsify the terras of the agreement; or he may make no 
formal or written agreement. Puhlicity, if to te completely effec- 
tive, implies, hov/ever, that every element of price and every under- 
standing with the huyer be knoiTn. 

But, as pointed out above, the seller who does not wish to 
make the extensive price reduction \7hich would be effective if 
granted to .all of his customers, may confine it to single buyers or 
groups of buyers. Pricing devices such as quantity and volume dis- 
counts, vario,tion in trade differentials, diversion of brokers' fees 
and particularly any kind of rebate are directlj'' and appropriately 
adapted to the purpose as is the creation or "splitting off" of a 
new classif ica.tion of customers to whom it is desired to grant a 
fa,vorable price, 

(*) E»g»> entertainment, ^ifts, paying buyers' personal exoenses, 
subsidizing, etc, 

(**) E.g., splitting of coranissions, fee splitting, payment of brok- 
erage to otner than bona fide broker, etc 

(***) E,g, , for trac'e-ins, labels, advertising, containers, installa- 
tions, space hired, cartage, etc. 

(****) E.g., departing from credit terras of contract, settlement of 

old accounts at le'ss thaja full value, permitting buj/'ers' cancel- 
lation, retroactive settlements or a.djustments, etc. 

Accepting in paj^ment: Securities, reaJ. or personal property, 
buj'-ers' capita,l stock, etc. 

Oral agreements, offers, orders, false billing, offers, orders; 
misdated invoices, contracts, orders, offers; invoices, orders or 
offers omitting terms of sale, or specifications; split.- billing, 
luiaiD sum offers, etc. 


The cuovc e:--moleK bIioliIcI sal'i'icit ntl^ indic-.te the n-omher ajid 
variety of the d oporttaiities .",v~ilr-hle to the husiness n-^.n to effect 
concessionG hy iv>-ns other thrr. direct or nnminil price reduction. 
The immediate t-sk is to ■ e::p.i.une the prohlens xrhich face systematic 
price puhlicity in hringing to light not only the noniinal price changes 
and changes in other f'^irly ohviouc- price elements "but all of the 
variov.s and devious devices th-it in?y "be emploj^rd tor'ard the same end. 

In the first place, the data must "be filed in such a manner as 
to "be informative pnd repdily intelligihle to competitors. The very 
nature of certain .terms of s-?le may n&ke this difficult. Terms of 
payment vhich vary according to the risks represented "by different 
"bujrei-s, pllouances for services rendered "by various customers, the 
assiii.iption of lia'bility for defective product through product guaraur- 
te*! s or through a policy of accepting or allowing for the return of 
merchandise, the assumptions, through guarpjitees against price ad- 
vances or declines, of the customer's risk of changing price levels— 
thece are examples of terms the e::a.ct raafjnitude of 'Thich may vary froa 
"b-o^'-^x- to "buyer or v/hich cannot he determined precisely in advance of. 
the scles a,greement. In filing, an industry mem"ber grsjiting this 
kind of selling term- may necessarily "be limited to a general state- 
ment that he e.g., mil guarajitee pi';oducts against defects in 
mattria,l or vrorkiaanship or i ill guarmtee against -orice decline; or 
he my e.g., file only the most favora'Dle credit terms vrhich he Trill 
grrnt or the most li"beral advertising or trade-in allowances vrhich he 
will naice. In hoth cases the competitor lacks the information 'jith 
which to ascertain or'^cisely the a,ctual price terras which will 
close 'the transaction. 

A more serious ohstacle is the reluctance of the industry raera- 
"ber to file his pricing policies in an intelligible manner, '.'hen they 
are complex and vo^ried he may deliberately confuse them or he may 
consider it too hindersome to order them in a manner necessary to 
nalie them easy to cOBTor-hend and strictly a.ccurate. This is, how- ■ 
ever, but a part of a. broader consideration of the willingness of the 
indiistry member to adhere to his filed prices and terras. T.Tienever 
there is a prospect of iramediate advantage throug'n price .reduction 
there ^.-ill be a. drive foi; indirect and secret pricing. This urge maj"" 
be intensified by systematic price filing rnd dissemination due to 
the fact that the kno^iedge of cora-oetitors' "orice offers obtained 
from the filing agency mny afford. a. more precise objective at which 
to shoot — -3. level of prices which may be undercut with profit. It 
may be that this v/ill not be carried out by filing the price con- 
cession for fear that competitors will ret-^liate; a more effective 
procedure .may "be to do it secretly without filing the new and lower 
price; or the srne end may be accomplished by a secret agreement with 
the customer that the la.tter 'rill receive a rebate or need not pay in 
full the price openly a..:;reed upon ^uid filed. This is a matter of e 
ev'.sion of filed orices and may "be accomplished by devices so illusive 
in character as to escape detection by the most efficient enforcement 
agencies. It is to be distinguished from other c->ses of non- adherence, 
aiiiounting to complete indifference to the filing requirement, which 
arises from the fr.ct that the enforcement agencies are mthout suffi- 
cient power, legal, economic, or moral, to force compliance with the 

932S e stroll shed for filin..: "nd pdiiPTence. 

A third problen fr.cing rin or:-^'nii?:ed prograjn of -orice puMicitAr 
through price filing ;Tises froa, the divrsitr of products and sellers 
which ere usiially hrou^ht "onder the scope of a price filing system* 
It is a problem of ohtpining informo.tion ■.■.hich describe theproi- 
ducts or services '-.hich are offered in order that there can be a 
significsjit basis for C'-^mparinK the prices v'hich are asked. This 
problem vrould not exist if the price filing plan vrere confined to com- 
petitors selling identical products or services. Bat ±t> has already 
been observed that, in most cases, vendors possess a product dis- 
tin£,mshable in some respect from others either because of difference 
in quality or f-unction, in appearance or style, or in brand or trade 
marl:. In defining an industry for purpose of price filing it is not 
f'^asible to drar' lines according to sellers of identical products; 
there are too few cases of such identity and what is more important, 
the seller is vitally interested in the prices of at least some of the 
most closely competitive products. TJhere industry lines are defined 
without especial reference to price' filing, as they were in most 
inst,?n.ces under MRA codes, it is likely that there will be cases 
of vendors having pn interest in some but not all of the pricing 
policies of other industry members — a situation which vdll depend 
upon the extent of differentiation in the products defined i-'ithin 
the scope of the industry (*) and cases, too, of raem.bers of some in- 
dustries having a .direct interest in the pricing policies of mem- 
bers defined within the r.cope of another industry — a situation which 
will depend UDon the eo:tent to which slightly differentiated but 
closely competitive products are for some reason classified into 
separate industries. This latter situation, it may be noted, may 
cause serious difficulty or render filing without value, where the 
price offers for the 'products of one industry'- are publicized through 
price filing when those of closelj^ siibstitute non-industry products 
are not brought under thp Erme olm. 

Returning to the problem o f requiring information P.bout the 
nature of the products for \7hich prices are filed, one e:aoedient 
which the industry m.ay follow' is to reduce the amount of product diff- 
erentiation by establishing through o rgani -zed control a greater de- 
gree of nroduct stnndardization. It Taay fix rigid or absolute product 
specifications from which membfcrs are prohibited from departing, or 
it may adopt the more feasible approach of setting up minimum stand- 
ards. If the latter, it is clear that only partial publicity of prod- 
uct characteristics will be rifforded. ^Tliere, however, it is not 
possible or feasible to reduce actually the extent of product differen- 
tiation through standardization, an effort may be made to force merar- 
bers to file, together with price inf orna.tion, descriutions of the 
products offered for sale. The need for such information, it may be 
noted, arises particularly where prodirts are going through a con- 
tinued ojid process of obsolescence and discontinuation. Such a 
pr0:'-ran faces the manifest difficulties of obtaining data which are 
informative an.d readily comprehensivle as v;ell a,s the possibilities of 
eva.sion -^nd non-adherence. Practically, this approach offers a solu- 
tion only for those products which already possess many common chaxa.c- 
teristics. Strictly/ non-S'':andard, such as ma,de-to-order, products 

(*) It is indeed quite likely that org.anized price filing will bring to 
9826 light the existence of competitive products of which the competitor 
had not previously been av;are. 

. . -58- 

may never "be 'brougiit, cffectivoly, r-ithin .m o rg.'^Jiized plaji of price 

In short, the industry may hr,ve to rely in large p^.rt -iroon the 
genero,! r.nd none-too-cert \in Imoi/lodge foi'raed by vi.rioiis members of 
the i^roducts --hich -^.re most closel;-" conpetitive "ith their or/n. 
This- meajas that the price do.ta dist;e:iiinated nust be identified hy 
the naiie of the concern filin^: them. Identif ic-.tion of the seller 
"becones an important part of the price information, 

EciV-ally cogent reasons for seller identification arise from the 
fact that even though the product may "be standardir^ed the industry 
memhers may for reasons of reputation, personality'-, race or color 
vary consideratly in their a-hility to attract the bviyer. The com- 
petitor must ]:no-7 not onl3'- \7hf:,t prices but nliose prices he has to 
meet, Similrnxly, identification is essential 'jhere there is e. rec- 
ogni::ed leader or 'jhere there is a dominating member -'hose ill-rdll 
competitors -rill hesitp.te to incur. 

Helated to the problem discussed above, in th"'t it arises out 
of the manner in which industries are defined for piin:)0ses of price 
filing and rorth s-oecific. mention because of the importance "hich it 
assuT-ied. under NHA codes, is the situation faced, by manufacturers 
sellir^ in direct competition with distributors when the latter are 
not '.-ithin the scope of the olan, sjid especially 'iien in sone de- 
gree they havp the benefit of the pvLblicity of the manufacturers' 
prices. This problem mpkes itself felt where some part of the pro- 
ducts of an industry are sold directly to the consumer when enother 
pajrt sold through intermediate channels such as \7h0lesalers or 
jobbFrs, It is sufficient , to sajr, p,t this point, that if the manu- 
facturers cramot force the distributors into the price filing plan 
or are unable to control their prices, they may be sufficiently em- 
barrassed by the competition of the distributors to abajidon their 
plan for publicity. ^ . . 

A fifth problem which a prograjn of effective price publicity may 
encounter gro^'s out of the task facing the agency in disseminating 
the information recf^ved. It has thus fai' been assumed that every 
bit of information filed ■"'ith the agt ncjr is automatically distributed 
to members. But where there are majiy industry members filing extensive 
and complicated prices and terms on a large number of products, the 
mechanical job of distributing all of the information to all of the 
industrj' members is likely to be too diff icijlt or costly to carry 
out. The ends of full publicit;r '.rill be defeated to the extent 
tha,t such e:rpedients cas the following are adopted: The distribution of 
but pa.rt of the filed infornation as, for ex-ample, the lowest price 
on file; the distribution to -any/ member of data on only those pro- 
ducts \7hich are directly competitive with- his own; or -.the' requirement that 
members vdshing to see the prices filed by rivals must come to the 
offices of the agency '7here the filed informa.tion is made available 
for inspection. The agency, moreover, even thoxigh it were possible, 
may not be interested in distributing completely the information 


■■ -59- 

filed vdth it. Specifically it nwy be more interested in using the 
filed data a,s a me.-ns of determining; the extent of departure from a 
level of prices a;:reed 'fa;'- or iraoosed ■a';)on the industry members. The 
use of price filing as a means of policin;j conformance '-dth standa,rd& 
set up by the concerted action of the group is discussed belov.'. (*) 

Thus fo.r the discussion Ivas been confined to the loroblem of pub- 
lici::ing price information for the benefit of sellers. It has been 
seen that the extent of monopolistic price formation through the in- 
dependent action of competitors depends among other factors upon the 
extent to iihich business men are ai-'are of the prospective price 
policies of their rivals. An organized program of price filing and 
dissemination, while a potentially effective instrument in supplying 
this information, faces certain fundamental difficulties in the way 
of effective publicity which have been suggested. A remaining phase - 
of the problem of extent of publicity afforded and its bearing on 
monpolistic price formation is the nature and e':tent of the information 
made available to buyers. 

Before proceeding to the question of publicity to buyers, how- 
ever, it should be empliasized that price filing plans are limited by 
their very nature to affording information about only one of the com- 
petitive methods em"ployed by business rivals, namely, price com- 
petition. Competition v/here products are differentiated may, as it 
has been seen above, (**) trlie the form of varying the qurlity of 
the product through improvement or deterioration; or of advertising and 
other forms of sales promotion or persuasion. If these latter methods 
are of strategic importance in an industry, price publicity will 
have a limited significance; and price filing plans will fall short 
of erqposing comioletely competitive devices in use if it fails, as 
by its very naiture it 'dll, to bring to light the product and adver- 
tising policies of business rivals. Thus it may be that through 
price publicity prices and terms of sale become completely stable and 
uniform only to result in an intensification of competition inpro- 
duct or advertising. It is perhaps with this situation in mind tha.t 
some industries consider as a necessary supplement to price filing a 
plan for the collection and dissemina.tion of data covering the pro- 
duction or sales of individual concerns in order that they may know 
whether they are preserving their share of the total market. The 
fTjjictions and uses of this supplementary control device are dis- 
cussed in detail below, (***) 

(*) Below, page 71. 

(**) Above, page 49. 

(***) Below, Chapter IV, pages 315-329. 



It remains to bo again enphasized that price publicity through filing 
and dissemination "hile -ootenti-illj- an instriiment for promoting monopolj'- 
price cannot efft^ctuate comjlete monopoly power "because it aids in the 
control of but one of three coriioetitive devices v.'hich are employed in 
man;'" contemporrry industries. 

The customers interf'St in icno-'.-ing tho orice offers of rival 
sellers is the ohvious one of heinA: in a position to malce the most 
advantageous selection among potential opportunities, and, thus, 
raaJce the "best of possible "bargains. It dpes not.follon, however, tliat 
without such knowledge buyers will be completely at the mercy of 
sellers or tha.t any price may prevail in a market. As long as rival 
sellers are aware of each others' price offers they will protect their 
competitive position by making known to buyers their own prices and 
terms; or any buyer can presumably obtain the ;i-3 rices which com- 
peting sellers iTill ask of him by asking for them. But to the extent 
that buyers are not aware of the existence of q.11. sellers in a market, 
those sellers' to whom they are confined by their own ignor-^jice have 
a degree of monopoly control irhich thej'" would not otherwise possess, 
Orgaaiirsed price publicity if extended to bu^j^ers, therefore, has a 
potentiality for prrmotin,"; competitive pricing. The extent of the 
publicity to buyers i"'ill depend upon the amount of informa,tion filed 
• by sellers and their adherence to their stated terms a,s mentioned 
above. It will likewise depend upon the, amount of information which 
the filing agency~nji a.gency of .the sellers — is .willing or his re- 
quired to make available to then.' 

Prom the standpoint of the buyers and for implications res- 
pecting the competitive market, two other aspects of publicity to 
btiyers are significant. One relates to the cuestion of when the in- 
forraa,tion is received by buyers as compared "ith when it is re- 
ceived 'by riva.l sellers — which is discussed in the next section; the 
other is a matter of kno^^ledge by the individual buyer of the prices 
which are being offered to competing buyers—a question of discrimi- 
nation which is discussed further belovr, (*) 

(*) Below, pages 63-57. 



c - The int er val before- inf ornip-tion becomes avpilable _t_o 
seller^ -and -'i.o lir/trs,. If uonopolis:tic r;rices are to be achieved, 
buo^ness men muti : n'ot only be fully a"are of the rricing policies of 
rivals but plso mant iisve this inl ormaticn in sufficient time to eliminate 
the advantage of any one of tiiem in initiating a price cut. In other 
werds, to the .extent there is p Ipf-'. between the time a price reduction 
is announced by a seller anc* time the competitors learn about it there 
is incentive for competitive -orice reduction by the individual to en- 
large his share of the available marlret. Price publicity through 
organized filing vill, depending upon the speed '-'ith which filed in- 
formation is disseminate, shorten this lag. 

At one extreme are those plans "^hich are limited to the collec- 
tion and dissemination of past -prices or prices on closed transactions. 
Uniorthis arrangement soiue time, obviously, has elapsed between the 
original making of a price ana when it beco:aes known by competitors — 
a lag which always exists but which will vary according to the frequenay 
with which these prices are collected and the rapidity with which 
distributed to trade members. 

Price filing undtrr NItA. codes, hovrever, extended in practically 
every instance to the filing ni price offers for a,ll transactions taking 
place in the future until a new price was filed. The lag here would 
depend upon the interval bet^ een the time the price oifers became effective 
and the time they are received by other industry members. Under the rules 
of tiie filing plan, the effective date might be the time the price list 
was mailed, or wired to the agency; x->'hen notification was received from 
the agency that the list had been received; or v/hen the distribution 
of the list other industry raemoers had been completed. The rapidity 
of the distribution of price lists would vary from the case where are 
wired or telephoned immediately upon receipt to the case where they 
are not sent out at all tut merel/ a"aited inspection by the interested 
member in the agency's office. 

liVhere a waiting peroid of several days is provided before a 
price may become efi ective, there is likely to be no lag. Thus, in 
many codes a waiting period of as imicii as ten days was recuired — 
ample time to distribute the lists to all industry members. One 
theory behind the vjaiting period is precisely ti£> t of aifording 
members op'-ortunitv to meet tne rrices filed bv the competitors. 
In this respect it loses imich of its signifacance and meanin:-' if the 
lists are not immediately distributed to members but merely made avail- 
able for ins'Tection or mailed only upon specific request, 

A given lag of time or absence of lag may, however, vary in 
significance as bet'-een different types oi industries and markets — 
depending upon the speed of the buyers' adjustment io a new price as 
compared with that of the sellers'.. To quote from one writer who has 
commented on this point: 

"Kfr, Clark, thinks oi the waiting period as a 
means of permitting simultaneous and uniform price 
change, as compared "ith the delay in the competi- 
tive market between the initiation of price change 


ty one concern and its imitation by others. This 
comparison seems to be b'"sed only upon the new op- 
portunities i.'hich opriear jn the seller's side cf 
the market. In cases involving a considerable num- 
ber Tf siuall producers, douotless it is true that a 
waiting period enables these enterprises t& knOM' of 
price changes and to adjust their own price policies 
much more rapidl.y than they could otherwise do. If, 
however, the prices filed are available to b^'jyers, 
there may be an increase in the speed of the buyers' 
adjustment tu a new price as well as in the speed 
of the sellers' ad.justment thereto. In amarket with- 
out price filing the competitive incentive to reduce 
prices, as described by Kir. Clark, v/ould appear where 
the adjustments of sellers are sufficiently slow com- 
pared to the adjustment made by some buyers that an 
appreciable volume of sales is shifted to the concern 
which initiates the price reduction. In a market '^i th price 
filing and with a waiting period, the question ie: still 
one of the relative pace at ,',^'hich information spreads 
on the two sides of the market. , Granted that all com- 
peti."i"j-e sellers adjust their prices mthin the wait- 
ing period, it Jiay be that buyers who modify their 
purchasing plans when a price reduction is initiated 
do not get their information quickly enough to modify 
their plans again as competitors meet the new price. 
The degree to which buyers' adjustments are quickly, 
made presumablv depends, upon the degree to which 
purchase is laaae by lelatively I'ew concerns in rela- 
tivelv largf quantities. 

-"All this seems to me to rae_an that wrien there are 
large numbers of small tuyers ana sellers the waiting- ■ •- 
period aoesnot automatically d.eprive ouyers oi an- incentive 
to favor tne concern wnicti initiates a price cut and nence 
does not aato:naticall7 Q.eprive stsllers oi' the incentive to the lead. . ';,hen ouyers : na sellers are relatively 
few and transactions relativel/ large, this fact in it- 
self interferes "itii the type of competitive price adjustment 
which ivlr, Clark has in iiiind". (*) 

(*) Memorandum from Coi;win"D. Edwards to L. C, ilarshall, -*',ivlr. Claik's 
Theory Concerning tne V/aiting Period, in Open Price Systems", 
pages 1-2 (October 7, 19bt, ) .in NBA files. For Mr. Clark's fUll 
' statement,' Kee Memorandum from.L. C. Marshall to All Section 
Heads and Unit chiefs, "An Interesting Issue", (August ci*, 1955), 
mimeographed, in FRA files. 


Onl-' one point needs rneution in connection "ith the above: Price 
filin;; W3.y cuant~e a prsvioiislv exicstir:' r'-l.-. ti;tnsiiip in an industry either 
by speeding; up reli'tively the sel.lei's' rvcgastraent • or . by ^^peerlin^: up 
relatively the buyers' a(',iustv-;ent to price ch.-vnges. This, will depend 
upon the ertent and rapidity with wnich inforrantion is dissemin-^ted. to 
sellers' as coxipare'' with buyers. The pres-'oraptionj wher'^ price filiQg 
is administered ty the sellers, is triat cue sellers will m this re- 
spect be favored. 

It, has been sho\m that monopolistic price foi^mation throuti'h the 
independent action of sellers in a market depends upon the three factors 
of f ar's i ght edne s s by business men in acting toward the end of their best 
interests, the extent of the knowleda i possessed about the pricing po- 
licies of competitors and the t ime laff between the announcement of a 
price change by one seller and the laiowledge of this change by competi- 
tors. Conditions under which price publicity throupch price filing and 
dissem.ination rnay contribute to these ends h, ve been suggested. 

Implicit in pure competition and a necessary condition of perfect 
competition is accessibility to the market on the par-t of buyers and 
sellers. (*) In the section which follows an attemp ■ will be made to 
suggest the ways in iwhich price filing may promote or prevent accessi- 
bility oh the part of buyers and sellers to a market. 

2. Price Publicity and Accessibility to the Mar}:et. 

(a) Introduction - historical meaning of a "free" and "open" 


The perfect market is a "free" and "open" raax-ket in the sense that 
veryone has equal oppor amity in or equal access to it. liules fi.overning 
conduct in such a market had their origin in feudalism and early mer- 
cantilism i-here "owinr: to the vreakness of government and the violence 
and perjury oi' the people, it was necessary to encourage powerful lords 
to set up markets and to protect them -from the inroads of robbers and 
liars". (**) These markets Y^ere eventually governed by the decision of 
the coimnon-law courts which developed the principle of the "market overt" 
or the "public,, free anc. equal mai"ket" . In order that all traders might 
have equal access to this market, the principle of publicity of trans- 
actions was developed whereby the sales of goods must be in a place that 
is "overt and open, not iii a back room v/arehouse, etc." and "not in the 
night" but between the rising and setting of the sun. (***) 

Practices and customs preventing secrecy and concealment were up- 
held in the case of one of the modern organized markets by the Supreme 
Court in Chicago' Board of Trade v. United States (****) wher - the rule 
in ouestion prohibited mem.bers from mal<:ing secret sales and purchases 
during the time when the board was not in sess^ th. The Court in the case 
upheld the piirpose of equal opportunity or equal access to the market 

(*) Above, rage 44-. 

(**) Commons, op. cit. p. 775 

(***) Ibid , pp. 775-776 

(****) 246 U. S. 231 (IDIJ"). 



to prevent monopoly and discrimination through "publicity, or as nearljr 
perfect knov'ledc^v; ofaJ-1 the f.-icts oy .-ill parties as ttte circumstances 
will permit." (*) : . . " , 

The 'benrin,;: of publicity throu-A or;.-anized price filing on the 
issue of equal, access to the market must "be ex<-imined, however, with 
■'competitive market situations vastly different from org.anized commodity 
exchanges in mind. Specifically, the bearing of price filing on two 
kinds of interferences prevalent in the unorganized and imperfect 
markets with which W3A. codes dealt must be investigated. These inter" 
ferences may h called discrimination and predntory price cutting . (**) 

(b)- Pi-iC'.. filing- and discrimi.irtion. 

One type of discrimination has already been referred to. (***) 
This practice arises where the seller, to enlarge his share of the 
market, reduces his price to single customers or classes of customers 
without extending the reduction to others of his customers. It is a 
strategic market device whereby the vendor may increase his portion of 
business without the need for changing or disrupting his entire price 
structure. It may be accomplished through any one of a number of 
devices such as lengthening of trade, quantity or volume discounts, 
either with or without the creation of a new customer classification, 
granting mo:'e liberal allowances, extending terms of pa:,Tiient, or as in 
the case of single buyers rel:atin.;' part of the original purchase price, 
or moving the individual buyer from one classification of customers to 
another which is granted a more favorable trade discount. It creates 
a situation in which those buyers who are discriminated against have a 
less favorable access to the market than those in whose favor the dis- 
crimination la .made and gives to the latter a competitive advantage in 
the resale of goods. It is made possible because the discriminatory 
price is secret -a price of which the less favored buyers are ignorant. 
It vdll not withstand exposure to these otlier biiyers because they will 
immediately demand a similar concession, a demand which the vendor will 
refuse only at the penalty of losing his business. 

Price filing has an obvious and important fuiiction in reducing 
this tjTpe of discrimination. The plan of publicity if it is to be 
effective in this direction must, of course, provide for complete and 
effective dissemination of prices and terms to buyers. Dissemination 
of only a part of the pricing policies of the filing sellers, or filed 
prices to which the sellers in practice are not adhering, will make 
questionable the attainment of this end as may such procedures as 
limiting the dissemination to making the lists available in the offices 
of the filing agency for the inspection of the buyers. This becomes 
particularly true if the buyer is given, or is permitted to see, only 
the prices filed for the classification of customers to which he belongs. 
The discrimination may lie precisely between the group of customers 
under which he has been classified and another classification the 
sellers' trade prices to which he may not see. The refusal to concerns 

(*) Commons, op. cit., page 713 

(**) Sc'i above, page 44 for definitions. 

(***) Above, page 55, 


classed as "retnilers" ,,. for example, of information atout price terms 
■to coucernG clnijaoo as "mnil ordnr hovLO-.i-s" or' "department stores", v/hen 
both are compatin,;r for the ;.-..ri.; i/inr." :.:-t , mny in effect entirely defeat 
this function of prict; publicity. The myers' sphere of indifference 
to the price terms granted to iiera'bers of other classifications is not 
in fact, definitely det';;x'miiia"ble in ."dv.;ince. It is conceivahle that 
concerns designated as "whjlesalers" or "joDbers", although notSh'jre- 
tofore in such n position, may as a result of a special price he placed 
in a position to compete directly vdth other esta'blis,hments labelled 
as retailers. Customer classifications do not necesGarily have a 
functional significance; they may for any seller represent a flexible 
and strategic device designed to accomodate a changing price policy 
with respect to individual customers. 

Discrimination may be along geographical lines also. Unless com~ 
pensated for by differences in other elements of the price, any policy 
which forces a customer to pay for more of the cost of transportation 
than is paid by his competitors is a discriminatory one. Where freight 
is a minor element in the cost of placing the product in the hands of 
the buyer, this t^'i'pe of discrimination, of course, is not of great 
consequence. In other cases it may be, and effective price publicity 
to buyers irres2?ective of location may serve to reduce it. 

It should not be concluded that sellers nave no interest in the 
kind of discrimination discussed above or that price publicity 
limited to sellf;rs ?;ill contribute nothing to its elimination.' The 
very incentive for the discrimination, as in the case of other price 
reductions, may not exist if rival sellers are aware of it in time and 
are in a position to meet. it. Whether they can meet it will depend upon 
the possibility of establishing contacts with the buyers for whom the 
discrimination is proposed.- which may be difficult, for example, 
vherri the initirting seller has a long-established contact with a 
large buying establishment. But if the initiating discrimination 
should be by competing sellers through extending similar terms to 
buyers similarly situated, the incidence of the discrimination is the 
more disastrous for those buyers against whom it is practiced. 

Tv;o other types o±^ uisciiraimtion may be distinguished; for these 
price publicity may be a vex'y uncertain fool of correction. One of 
these is discrimination where exercised by a seller v/ho possesses 
complete or a high des^ee of monopoly of the products of an industry. 
The motive is to maximize the total profits of the concern through 
making the best price adjustment to the varying demands of different 
classes of customers. 'Tlie fact that those buyers who are discriminated 
against are aware of this special price given to buyers with whom 
they compete does not place them in a position thereby to correct the 
situation; they cannot effectively demand similar concessions because 
by the terms of the situation they are dependent upon the seller for 
some, if not all, of their merchandise. 

A faiiiiliar complaint by small manufacturers of discrimination as 
practiced by certain of their com.petitors may arise from this situation. 
It relates to a circumstance where a dominant member of a group of do- 
minant members of an industry sell directly to large chain or mass 



distributors vdio compete directly with joobers or wholesalers and in- 
dependent retailers throu;5h' v/hom the complainin>5 nanufacturers distri- 
bute their: products. These sellers do not have sufficient resources 
to meet or enable their distributors to meet coiisistently the lower 
prices of their larger rivals; neither can they afford to abandon their 
precent distribution channels and b-ar^jain for the business of the 
larcje buyers in the s.arne terms as their competitors. 

Price publicity, hov?ever, is not \''ithout some bearing on the dis- 
crimination of monopolists. If through price filing such discrimina- 
tions are brought to li,/:ht, they may become a target of impassioned 
opinions and condemnation on the grouiids of trade ethics - which may 
ultimately lessen consumer goodvi^ill for the products of the monopolist. 
Or if discrimination is illegal, as it is under the Clayton Act, price 
filin-i may serve to call the illegal practice to the attention of the 
enforcriment agency. It is probable that any plan fo:^ making effective 
publicity of such transactions would be forcibly imposed upon the 
industry - without the consent of the moiiopolists and in face of their 
probable sabotage. 

A third form of discrimination raa^^ arise- as a result of coercion 
by buyers - either by single powerful buyers or by smaller buyers 
acting in unison through medium of a boycott. Price publicity through 
filing and dissemination if effective at all would, as in the case 
above, serve as a corrective by exposing these discriminatory trans- 
actions for condemiiation by group opinion or by a public agency 
charged Y\rith the duty of administering a law which prohibits them. 

In this connection should be noted a possibility that certain . 
forms of price discrimination may be increased by price publicity. 
Discrimination consists not only of unlike treatment of similar 
customers, but of identical treatment of dissimilar customers. To 
insist upon uniform prices might be as truly discriminatory as to 
grant varying prices where no special advantage exists. Yet the 
large buyer is often under attack by hig-smaller competitors re- 
gardless of the efficiency of his bu^^'ing practices. The seller may be 
exposed to a tacit boycott if he is laiov.-n to give the large bu;^'er any 
considerable advantage, whoth^-ir logitimatj or not. 



C. Price Filin-- "hd Predator r Price Cuttin" 

The devicer. of ^rn.iatorT coroetiticn are vprious. Of _ particular 
interest here is irice cutti ij," for the -ourBOse of lorevonting the entrance 
of nev member to a na.rlcet or of ruiniiv: or driving out of the market nn 
exi iting coiToetitor. Pi.tbliciiry of 'oredatory 'orices, it nav be spid nt 
once, i-'ill not n'in;" ^n autoiartic corrective. Thnt nhich 'laJnes ore- 
ator^'- COT petition' -oossible is nono'')©!^'' joner'3. Exce'ot -as -nublicity nay 
expose the guilty concern to the effective loral 'pressure of rcrouD 
or.inion or ins-iire p fepr of rrosecution its ef '.'ect '.Till lie incon- 

Q)r^ 'the other hand, there is a probrbility th't in some cases lorice 
publicity '-.'ill intensify or inspire predatory price cutting. A concern 
activel,'- inte:-e3tod i ; elininatin ; its weaker rivals presumably will 
attack their orices nith more precision and econony if it Ioiotts 
soecif ically -^hat they are.' Or it nay be thrt 'orice oublicity ryill for 
the first time brin;i; to tiic attention of a dominating concern the exist- 
ence of sii.a,ll but ef 'ective coiioetitors a,'7r,i:ist r-hon it ma/ oroceed in an 
aggressive c-m-oaign of extermination. 

D. Price Fa bl Lcitv Under lUxa. Code s - The Scope of the 
Present St-idv 

The oreceding section co:!"3leted the sum-iary of 'oossiiiilities 
offered by -oublicity through )rice filin-; rn^i disse'unation for strength- 
ening a tendency a'-':"^y from perfect competition of for co:itributing to 
a greater ,'ittainment of this ideal-. It has oeen seen first that the 
Dublicity of prices '-'ill a.ccentuate mono -lolistic ;i:)rice formation defend- 
ing upon its ret ion on these factors: 

(a.) The farsi -^htedness --ith phich rival sellers 
behave in t?ie di--ection of their ultimate 
best interests. 

It v.?s concluded th- t the bearing of -orice filing on the mutual 
Effareness by business rivols of the consequeiice'? of their o^Tn pricing 
"nL.. selling policies i7as -Drobabl'." negligible exce-ot as it coritributed to 
e-.-^erience in follo"ing an i-idustr:' leader, it '"ns e-iphasi^ed because 
the degree of mutual a'.'rreness or f oresightedness '-'as indeterminate 
orice publicity thro\i-';h irice filing lig.t result either in an intens- 
ification of con-petitive )rice cutting or in monopolisitic pricing. 

(b) The extent of the price a.nd other datr 
made av'i.i 1 a )1 e . 

It was apparent thrt orice filing had direct ^nd obvious function 
in extending to sellers inf ormatioii rbout the lorosoective price 
policies of coiooetitors pnd de jending ujoi the degree of "farsi :hted- 
ness"- possessed in oromoting moio^jolistic )rice formation. It was 
concluded, hovever, thrt 'lost ^lans for ;orice filing and disseninp,tion 
would encounter administration difficulties "hich would almost certain 
defeat in lart the end of com-olete and effective publicitv. 



Price filing' hp.a -ui obvious end, if'/rs seen too, in oromotinr 
publicity of pricBg to buyers anl, ,ca:'"Lseoue::-.tly, in i^jreventin^ in 
some degree noaooolistic orice coatrol; the obstacles in the v.-ry of 
enlrr;ing the publicity to buyers ive-e considere '. to be greater even 
than in the crse of sellers. 

(c) The intervpl be:"ore, the :)rice ii.f or-irtion 
becoiies ava.ilr.ble to sellers and buyers. - 

On the interval, which vjo-'ald be shortened b"- price filin-; and 
dissemination, bet^veen the e-ffective date of the orice list and the 
date it -'as received b- co :')etitors depended the ra:)idit"/ of ^rice 
adjustment cfnC. hence the extent of nono'oolistic irice formatioii. 
However, even under a 'laitinj;; jeriod ^"here the interval night be 
negative, it '-fas found thpt incentive for iuitirtin,-; e price cut could 
be ^resent de Dending uion the s'oeed of the buyers' adjustment to a 
nei^ orice co oared with thr t of the sellers ' ." 

In the second olr.ce, it w-^s observed that ^rice publicity wou].d 
pronote or prevent accosoioility, r necessar"- condition to a "free" 
a,nd "open" market, depehdintj oi the eictent it reduced: 

(a) Discriiinctorv pricing- 
It was ap'oarent that where it deniended ui:>on. secrecy price filing 

had a -^jood chance of reducinig or eliminating discrimination, the chief 
qualif icatio 1 being the . kind and anount of infor;;ation made available 
to biiyers; but that where discrimination wr.s backed ,jy monopoly power 
possessed by either sellers or ouyers the value of price ^^ublicity as 
a corrective device wns limited to affording a target for aggressive 
group opinion or evidence for orosocution. 

(b) Predatory jrice cutting. - 

It was concluded that x^rice filing like-.dsc might be significant 
in ex-posing the guilty concern to moral or prosecution; but 
that, ou the other hand, it might afford a don.inrting concern a more 
precise objective on whicn to focus its destructive tactics. 

Linitatioji of material (*) rnd insxif f icient tine have made it 
imriossible to explore little more thrn a fragment of the functioning 
of -orice filin.;" -olans inder 'JiiJi. codes in terms of the problem developed 
above. Positive evidence '^ith res^Dect to eitlier the ef.^e^.ts of IP-A. 
price filing -olans on mo-io lolistic -irice formation or on the natter of 
accessibility to the market wrs not readily avpilpble. This i"'as 
particularly true of the lat'.er question pnd the irroortant issue of 
discrimination. (^*) Inforn.-tion T'hich indicates the amount of 

(*) See a-opendix C,Exibit I. 

(**) This .'- difficult stibject of investigation in any case (witness 
the-two-yepr investi :ption b •- the 7ederp.l Trpde Conraission into 
the question of Goodyear' s allegedly discriminatory prices to 
Sears Roebucl:) because pmong other thin.-;s of the need for pre- 
cise and accurate cost data. 



■ou"blicit\'' achieved p^nd in,\'crf>nc': eli;iir.n.ted oarticularl"- on the -part of 
buyers ina:'', aorrever, reorRsent i : ;ort nt evidence of an indirect charact- 
er as to tiie eli'iinftion of th-it hind of discrimination ^7hich deiDends up- 
on secrecy. 

Specifically, it 'rs 'OSGiole to collect p. considernble nmount of 
evidence hearing ovi the araount of )ublicity to industry raemhers and to 
custo'ier nhich resulted fron the o aeration of price filing;; plans. This 
evidence is Presented in ChajterHI and covers the code jrovisions for 
puhlicit]^, the adninstrs.tive rulings expandinf; or '.lodifying the code 
provisions, the perf ormrxice of nemhers in filin^; co'i^lete infornation 
about their ;)ricins policies and in rdhering to tli se policies once 
annouTiced, and the manner, the extent of and rabidity ijitl-i r/hich the 
filed inf or-i.iation \7as distributed or made available to sellers ond 
to customers. The laterial "searing: on the dissemination of filed informiri 
atio-i contains much evidence of value on -trie question of the length of 
the interval betrreen the date )rice lists \7ere e:"fective and the date 
they --ere received 03' industr-' menbers pnd custoMers. In the course of 
preseiitino; this noteri-pl the difficulties encountered by the filing 
agency in administerinr" the jlpn ;-;re touched on. 

But even this evidence is wot conclusive since it offers little 
that is definite about the eyti5nt of publicity -r^rior to the ince;-ition 
of the orice filing plans. Some observations on this point are made. 

Because of their importance in indicptin^j not onlv the -potential 
or ho led for results and thus amon ; other thiv;:s the degree of 
"farsightedness" 'oossessed, 'jut also a.s -possible evidence as to the 
actual res-uJ_ts of orice ooblicity, considera.ble attention is "iven in 
Chapter III to the intended functions of price -.-'Ublicit-' both as origin- 
ally expoxinded by code -oro-jonents a-nd as signified in their behaviour 
under the -olans. 

Attention has th-as far been' directed ^ri'iarily at uhat ma:'' ^s 
called the "■oublicit:'' function" of rrice filiu". There remains to be 
discussed '--ha.t has been ter-ied the "control fimction" of -orice filing. 

E, T he control fu'nction of ijricc f ilin ■: and the 
-present s t'lid:.'- 

The Trima.ry and essential air'i of price oublicit:'' imder filing plans 
to rrhich attention thiis far hais been lostly devoted is '^ricisely that 
of marking lmo^7n the -jricing -jolicies of sellers to their competitors 
and to buyers; .ore ^dtiiate f^i'Actio-ns and possible effects of price 
"oublicit-/ ha /e leen su^'-gested. To be distinguished are the control 
f-unctions of price filing -ila-us ^,'hose -.irim-^ry a.i;is are 

(1) As a part of the orice filin; ilim itself to establish 
limitation on the pricing policies of ;-)a.rticipating 
mei'oers and 

(2) To supply infor;iatio-:. '^ith nhich to police the observ- 
ance of mles !ia,de outsio.e of the )rice filing plan. 


- 70 - 

There must first be diEtinguished from thece essentially control 
elements of price filing plans those rules and regulations established 
to malt:e possible effective price •lyj.olicity. Systems of price publicity 
. themselves are in -oart a composite of various working rules designed to 
secure and distribute p:.'ice information. Thus industry members are pro- 
hibited from making sales except at the prices and terms which the.y haTe 
filed v/ith the collecting agency; a.nd thin a; ency is required to distri- 
bute filed price lists to members and "oerhaps to customers, immediately 
upon receipt. As obstacles to effective publicity arise new regulations 
may be adopted. 

However, as soon as these rules cxtend'to the actual restriction of 
elements of the participating members' pricing policies, they cease to 
have the effect solely of promoting price publicity and represent in fact 
a direct form of price control. In brief, that v/hich could not be accom- 
plished through a system of mandatory price publicity, v/here restrictions 
are limited, tp ,. but may not properly, extend beyond, exposing all elements 
of a price policy or structure, is sought to be accomplished by the fixing 
or "stabilizing" of iDrice or otherwise dictating the kind of prices which 
can be made... 


Refjulations then v/hich. in some manner determine the k ind of or esta- 
blish limits to the prices that may be charged by participating members - 
whether these regulations are a part of the original provisions or whether 
they r.r.e issued by fiat in the administration of the system - represent the 
first of the control phases of price filing. The variety which these rules 
may tclce is limited only by t nc variety of the elements which may prevail 
in the price structure of an industry. As examples: Requirements may be 
imposed as to the method of quoting for delivery - that prices shall be 
on a delivered f.o.b. basis; that no freight shall be allowed or that freight 
shall be equalized; that cash discounts shall not be given or shall not be 
greater than a specified per. cent; that product guarantees may not be granted 
or the return of merchandise accepted; that free deals and premiums may not 
_be ^9:iven; that advertising or trade-in allov/ances may not exceed a 
maximum; that discounts for quantity or volume purchases may not be extended 
past a specified fig'j.rc; or the manner in v/hich members may cl8,ssify their 
customers may be rigidly defined as may the discounts which can be granted 
to these customers. Stabilization of the elements of the price structure 
either by the original provision or in the administration of price filing 
plans under the NBA may or may not have been designed merely to make orderly 
publicity and comparability of filed prices possible. The essential point 
is that they represented an integral part of the body of working rules go- 
vcrnin/;^ participation in the filing plan, and may not be disregarded in 
interpreting the meaning and significance of price filing under j^IRA codes. 

As such, these rules have the c'^iect of modifying price competition 
in a manner v/hich is more direct and sure than the elimination of price 
competition through publicitv alone — v/hich as v/as seen above depends for 
its effectiveness on a large number of variables that arc highly uncertain 
in character. 

It is tiuc, of course, that provisions similar to the above v/ere in- 
corporated in NRA codes quite apart from open -oricc provisions and 



'■'ithout air/ ostensijle relation to theii. Although invest! ,-tion of the 
f'onctions, o-oerntion., and effects of thene code ■->rovi::;io:is vrrs quite 
■beyond th'? scope of the n-esent stvicl", s.-^ne ohservatio^^s are nr\cie in 
Chapter IV rs to their functionrO. bera'in;: on price filln/-. 

Another coutro]. as'^ect of ^rico filin.':;, ho'^evor, relates direct- 
ly to the functional be?^rinc^ of price filir.'"; on other code provisions 
or schemes of "orice contro? in effect '-ithin on indixstr-/': It has oeen 
cplled the "^olicin'^ or cor^lirnce fir-'iction of orice filin:";. Under the 
codes price filinf,; ojerrted to sn":nl7 the cnforcerient £ ^ency of the 
induf^.tr-' rith infornation -ith '-'Iiich to cliech the nenhers' conformance 
to other code -orovisions. They -jere nsuall--" raininun ;orice provisions of 
nhich ^rohihitions at^iainst sellin;" helo^; cost re"^resented the inost im- 
portant t-ype; hut in sone instances they ^'ere :.ioTe livited in scoi^e 
a'opl,''inf5 onl'y to irice elenents i:aich as rar::irau-: terns of Joyraents, 
disccunts, or rllov.'ances. 

In so le case J the -jrice reynJations -'ere iiot a.-i^proved throujih 
fornal code "procedure out '^ere estaVilished hy the industry a.- "ency un- 
officially ^nd infornall.y. The decree of ;recision enjoyed hy these 
informal strndrrds varied fron o-oen prorrajl, :^tion ?nd "broad cost hy the 
code authorities to veiled sup ,'estion o.i s ^ecif ic occasion about the 
desirability of raaintrinin, ; price. The sanctions eyrploj'-ed against the 
price cutter in these instances ;.!ight rrn ;e fro:: the :iere f ociisir-.,;; of 
grouo opinion to a-y-ressive srles effort directed toi7rrd his custoners. 

The distinction bet^-zeen these t-'O control f/jicticns of price 
filing plans, -vhile necessary f ro : rz\ anrl3''tical standjoint to dis- 
tinguish clearl;/- the co;;trol fron the molicity aspects of price filing, 
has not ^een used formally in the or .-animation of the evidence presented 
in Chaptei IV. " Price ?ilin': as r Co'itrol Device" . It ^rs frequently 
impossible to distinguish the n,ctivitie'o of the industry agency as be- 
longing to one rather th; n the other category. The irice-f iling agency 
was usiially the code puthority which rdninistered other of the code 
provisions pxid. served as the a 'ency for establishing pnd enforcing in- 
forraal rules and a ;reeraejits. Thus, the -n-ice d?t.-, collected nay 
been used as a check on the conformance of nenbers to restrictions 
im;oosed in the axhninistr-tion of the price-f ilin,; plan or of some other 
code provision. In any crse it seeiaed nost significant to group the 
evidence p.round the objectives of the cintrols to T^hich ;-)rice filing vas 
related or '-'as a -oi'.rt, indicating ■'/here possible the hind of a role 
pla3^ed in the entire going :)la:i of industry control. 

It was found )ossible to strte the role of -orice filing in effect»- 
ing on"!;- so-ie of the main objectives of ind-istry control under the codes- 
control over the "orice level, over irice chranges, over various elements 
of the price structure, over channels of distribution, aJid over the 
division of "business. This grou'rdng of objectives tiiough necessary for 
anal"/tical purposes is, of course, soie-Tiat , rtificiaJ. In each grouo, 
moreover, onl"' sone of the various j.oles of ■ irice filing "ere treated. 
Thus the discussion of co:itrol over th.e nrice level -ran confined to the 
functional relationshi j of 'orice filin.; to cost nrovisions and activi- 
ties; and the control over Drice chrnges to r. discussion of the waiting 
period. It should be noted r.t this ooint that other than nurely control 



•^-^v, . -^^T-inrt"? includin-- the in:)ortant one of af forum:,- 
Sf r:rd-'.rS:S:^nl°' -iS of^e^s .efc. th.. ,eco,.,e ..'ectl.e. 

are discussed in Chapter IV as -ell.^ 


F. The Price Structure Under Price ?ilinig: 

Zy their nature, price filing s/steias "beco.Tie peculiarly rich re^ 
positories of infor^iation about the ch;iracter and iaovement of prices. 
It is -oossible to drav from them an unusually complete picture of the 
price str^dcture of an industry at the time when price filing began ejid 
of the changes in that structure under the price filing system. Apart 
from the rc'driinistrative characteristics of price filing systems in en- 
hancing general knowledge of prices, or in extending control over prices, 
the chti-acter of the prices themselves must be regarded as a significant 
aspect of price filing. 

Of course, it is difficult, and often impossible, to trace the ef- 
fect of -jrice filing systems as such upon prices (not to spealc of the 
separa.te effects of the publicity and control aspects of price filing). 
The price files revealed the joint effect of all code provisions calcu- 
lated to influence prices and, in addition, the impact of the entire 
econouic environment upon the industry in question. If prices rose, it 
may have been because a farm program made customers more prosperous, be- 
cause prospects of an international v\?ar stimulated rearnaraent, because 
a rasjidatorjr cost floor operated to require higher prices, or because the 
gradual depletion of inventories forced replacements. If prices becrjae 
more uniform, it may have been because the leaders in price cutting were 
suffering less economic pressure than at an earlier stc\ge of the depres- 

It is, nevertheless, -iheoretically possible to describe the charac- 
teristics of price change in price filing systems in a variety of indus- 
tries p.nd to anali'ze this information in the light of what is known about 
the purposes and activities of those administering the system and about 
prod\iction, stocks, sales, ;-zid competitive conditions in the industry in 
question. Without strong statistical correlation, one my yet achieve, 
by analysis, persuasive resuJ.ts. The limitations of this report in de- 
scribing the effects of price filing systems upon the price structure are 
due primarily to the short time aiid small staff available for the work. 

Even the most cursory survey, hov/ever, malces clear the varietur of 
price structures and "irice movements which accorapaiiy price filing 
systems. It is evident that no single development in the price structure 
ma;^ be readily attributed to price filing as such. The chai'acteristics 
of the prrticular price filing system and of the particular industry to 
which it is applied are evidently more significant than the mere fact 
that there is price filing. 

The characteristics of the price structure to which attention should 
be paid are as follows; 

(1) Relative treatment of different customers by the same 

(2) Degree of xriiformity in prices among competing concerns. 

(3) The degree of complexity in the price structure. 



(4) The frequency and range of price change. 

■ (5) The airection of price raovenent.'?. 

It has not "oeen possihle to ^'ive adequate treatment to these guTd- 
jects in .Chapter ■'.'', "The price Structure Under Price Piling." The 
there presented are org;.,ni3ed primarily to show the direction and er.tent 
of price novements under price filing. They also give information abou.t 
changes in the tre&traent of different customer classes and about the erJr 
tent to vrhich uniformity developed in the prices filed. However, these 
subjects are not treeited full;/. Lack of time has prevented analysis of 
data to indicate the degree to which the price str'acture became more con- 
ple:: under price filing. 

The complexities inherent in the five characteristics of the price 
structure just listed demand some further consideration. 

1 . Belative Trea tm ent of Differen t Custo m ers by the Same Concern . 

A significant characteristic of an,y concern's price structure is the 
degree to vhich it treats various customers alike — ptirticularly because 
price filing is often advocated as a meo-ns of preventing or reducing dis- 
crimination among customers. The extreme of equality, vjhich is never 
found, r/ould be to charge the same Drice to all, regardless of the date 
of pajn^ent, the qur^tity of purchase, the economic function of the buyer, 
•or ejiy other variable, Fhen price classes aye establislied in recognition 
of these variables, it is possible to enlarge or reduce the price advajn- 
tage given to a wholesaler over a consumer, or thet given to one who bu^-s 
in large quajitities, regardless of his function. Cash discounts may be 
lai'ge or small, as Tdii^r freight allo'Tances, or v.ny other variable based 
upon differences in the character of a " The treatments of the 
most fa.vored and least favored buyer may be corjpared, in order to indicate 
any changes in the spread in prices londer price filing. 

2. Degree of Uni for mity in Prices Among Competing Concerns. 

A second significant characteristic of an industry's price str-acture 
is the variation of -orice from one concern to another. This vrria,tion 
has manjr p.spects. Different enterprises may establish -orice classes 
among customers according to different orincroles of classification. One 
concern, for example, may classify customers by quantity of purchase; 
another mcy distinguish v/holesolers and retailers; a third ma.y raalce Quan~ 
tity distinctions among v;holesalers while maintaining their functional 
distinction from retailers; a fourth may recognize special groups of com- 
mission merchants, brokers, and the like, not separately treated bj- the 
others. Tlie first necessitv of price comparison, therefore, is to exejnine 
the custoiuer classifications prevailing at the be,;:inning of price filing 
and to determine whetner they become more or less sii.iilar duri>ig the 
filing -:ieriod. 

A second range of comparisons is in terras of sale — quantity dis- 
ccants, cash discounts, freight allowances, and the like. Some of these 
terns apply to all customer classes and. so jjay be compared directly from 
enterprise. Other terms, which are not open to all, must be compared for 


the partic-olpr customer classes to whicii they applj^; so that one neces- 
sary question is v/hether a given discount is offered to more customer 
groups "by one enterprise than by another. Still other terras of sale- 
quantity discounts, for ercoraple — may not appear at all in the price 
structure of certain enterprises. Tv70 questions arise, therefore, in 
comparison of terns of sale; First, the degree to v.hich certain terms 
of sale come to oe used by the vai-ious concerns in the market; e.nd, 
second, the degree to vmich the price concession involved in a given 
term of sale is of the seme mt-gnitude from one concern to another. 

A mLich simpler type of uniformity is that in list .prices. By them- 
selves, rniforra list prices mean very little, \7ith uniform terms of 
sale, "jniform list -orices necessarily produce identical net prices. 
There may, however, be net price identity v/ith widely varying list prices 
provided the terms of sale are aa jus ted to compensate for the variations. 

ilet -orices cen be only with diffic\ilty. If list prices sxe 
identical, Fhereas some terms of sale -ra'e identical end some are not, 
uniformity of net prices will exist for certain customers and not for 
others. Q,uestion then arises wnether tne uniformities appear in the more 
significant or less significant prrts of the price structure. To ans\7er 
this question, one needs to know the voluae of sales made to various 
customers and under various spies terms, information virhich typically is 
not available. 

Judgment as to the significance of the degree of iiniformity found 
is beset with difficulties. The usual test for uniformitj'- is to check 
the prices of all raanufactxirer^ of a representative product as of the 
same date. Tf/liere different producers sell to different customer groups 
or to customers located in different pr.rts of the country, et cetera, 
this test may prove to be very misleading. It mey well be that the group 
of customers served by one producer or group oi producers is sufficiently 
isolated from the main market that when these customers are buying, other 
sellers rnd bujrers h;?ve little or no interest in the orices q.uoted to 
them. Later, another group of producers and customers, or the entire 
market, ma3'- become competitively active. This condition is especially 
probable in an industry such as the Fertilizer Industry, where different 
geographic sections of the country groT; different crops, use different 
kinds of fertilizers, ond are interested in buying at different seasons 
of the ycaa". Under such conditions, a new price initiated by a member 
of the group of sellers competitively active at a particular period ma;" 
not be met for vfeeks or even months by the members of other seller groups. 
In fact, it may never be met at all if conditions should change, either 
locally or nationally, in the meantime. 



i.iucli the same condition as that outlined above may prevail in the 
case of customer classif icrtions. It often happens that producers are 
interested in different charuaels of distribution. Under such conditions, 
unless prices are compared for the soiae classes and the saue 
qupjitities, et cetera, the result has little si-^nif icance except e,s a 
test of the range of prices in the industry. ; 

Another consideration that must be kept in ?nind arises from the fact 
as discussed above (*) that competition tahes place not only in price but 
through product differentiation — in the quality of the product, in trade 
marking c?nd use of brands, in su^Dpleiientary services, etc., and in adver- 
tising -rAid other forms of sales promotion. In some industries there iuoy 
be no products v/hich are standeord for all producers. Of if the product 
is ste.ndca-d in terms of its physical characteristics, it may comma,nd a 
varying pinount of consumer preference, due to the good will established 
through v.igxking, branding, p.dvertising, etc. In these cases, it is 
probable that for an identical product different prices may be commanded 
by different vendors. Thus strict ■'jniforrnity in prices for an identical 
product is not inconsistent with the ercistence of differentials, and the 
problem becomes one of determining ./hether tnere has been a tendency for 
the prevailing differentials to narrov; or, on the other hand, to be 
lengthened. A like problem existc. in those industries where the basic 
ph^-sical products, although similar and closely competitive as between 
rival sellers, are enough different to result in price variation. 
Finally, dominant concerns, in soiie instances, may disregard their in- 
medio-te advantage and voluntarily allow to smaller rivals producing the 
identical product a slight price differentials, which becomes a persis- 
tent charc.ct eristic of the price structure. 

3. T he degree of comple::ity in the price structure. 

A separate question is whetaer the trend of the price struct\u''e is 
tov;ard the inclusion of more customer classes pjid more terms of srle, or 
toward reduction in their nviiiber. Insofar as the variou.s price struc- 
tures of competing concerns are pLiblici"ed to buyers and sellers, it is 
conceivable that concern "will make its pirice structure more corrole:: 
by adopting classifications wnich appear in the price structures of its 
rivals; or, alternc\tively, that under pressure the more unusual ciistouer 
cla-sses rnd terms of sale v/ill be ab.andoned, and only those t^npes of 
vario.tio-i maintained which are general in the industry. The first el— 
ternativc would produce a more comple:: price structure, the second a. more 
simple one. 

^■» Th e frequency ana range of price cha nge. 

The characteristics of the price structure thus far discussed are 
8.11 asiects of the net change which occurred under price filing. Q,ues- 
tion also arises as to how often and \.'ithin what range of fluctuation 
changes occurred. This question gains additional interest because price 
filing is often advocated as a means of producing stability in prices. 

An e:;treme possioility would be the aosence of all chcvnge from the 

(*) pLges 49-50, 


initial filing of prices and terms until the end of the orice filing 
period. Only less extreme wo\;ld be the adjustment of the price structure 
V one refiling in which every change is included. Usually, however, 
there -.Tere repeated alterations in the prices and teras of sale. Ulien 
these alterations occurred frequently at the heginning of the price fil- 
ing period, and less frequently at the close, it may he assumed that 
relative stability was developed. T.'hen the changes were not thus concen- 
trated, "but the later variations filed were confined within relatively 
narrow limits, the stability appears to have been different in kind but 
equally real. Absence of 8Jiy stabilizing influence is indicated when 
fluctua.tions ■■./ere as wide in extent and as frequent at the end of the 
filing period e.s at the beginning. 

5. The direction of price novements. 

A further question is whether net prices during the price filing 
period rose, fell, or remained approximately the sa]:ie. Vliere the trend 
of price changes was relatively slight, the difficulty in determing net 
prices obscures the character of the movement, and the price level ma.y be 
regarded as unchanging. Considerable changes in price levels may be 
traced in spite of this difficulty. 

Price movements are more remotely connected with price filing than 
are the internal adjustments of the price structure discussed in the ore- 
ceding paragraphs. The price sti-ucture is sufficiently complicated that 
price filing probably adds to general knoi/ledge about it; and in certain 
cases the play of competitive imit.^tion in the adjustment of parts of this 
structure appears clearly in the filings. The broader movements of the 
industry's price level, however, depend in large part upon influences in 
the market to which price filing may have only a collateral relationship. 
During the EEA period, for example, the trend of prices was generally up- 
ward as a part of the emergence from depression. Hence only conspicuous 
price changes simultaneous with narked alterations of the price filing 
system are even pres-ijmptively traceable to price filing. 



Price Chang-es as Evidence of the ivionorir listic or Cc:n-ietitive Character 
of Price Filing. 

Amonr the tests cf the monoiDf 1 istic cr coranetitive character of a 
price filing svstera have been su?j:estpd (1) the level of orices as 
compared with the levels previcn-siy oreveiling, (2) the degree of uni- 
forraity or s-nresd in the prices filed and (3) the i^ind of price fluc- 
tuation which takes place from time to time. It is argued that a higher 
price level under n price filing systeiD is evidence of collusive action 
cr coercive domination by hage enterprises, and the continuance of the 
same or a l^per level is evidence of coinrie tition. It is argued that 
while the effect of -orice filing sh"uld be to reduce the spre-?d between 
the highest and the lowest "orice, it is unliVely that commodities- will 
be so standard ^-^nd competition so -lerfect as to "oroduce an absolute 
identity of the prices of comoe titers; and th^t such an identity there- 
fore Tirovides evidence of mcnoiolistic urice fixing. It is argued, too, 
that simultaneous price changes filed by q considerable number of uro- 
ducers are strongly persuasive of n^nc jrlistic "orice fixing. When these 
characteristics of imif orraity, simultaneous change, and rising prices 
a-oTjear together, their evidential value is thought to be greatly en- 

These tests, taken alone, apuear to- be highly -unsatisfactory, both 
because the presence cf the so-called symptoms of mon^^nclv may be other- 
wise exTDlained than by collusion or coercion and because the absence of 
these s-'.Tnptoms is not necessarily evidence that monopoly does not exist. 
The increase of an industry's price level after initiation of price filing 
may be due to no more than the termination of a predatory -orice cutting 
campaign undertaken by some large enterprise as a means of coercing in- 
de-oendently-minded small ccra-oetitors. Again, if price filing oromotes 
competition and thereby the establishment cf a more truly competitive 
price, it is as possible tiist the -orevious Drice was lower than the com- 
petitive norm as th3t it v/as higher. Furthermore, the movement of prices 
is the result of a complex cf forces of which orice filing is only one; 
and the new price level therefore may not be directly traced to the es- 
tablishment of a price filing syste-.a. 

Just as an increase of -orice may be consistent with com-netiticn, the 
absence of an increase may be consistent with m'^nc-ooly. If a well es- 
tablished monopolistic group should adf^rjt a -nrice filing system as a con- 
venience, there is little reason to sumcse that it would maintain, after 
the adontion, a -orice higher than before. 

An effort to discover monr-ooly by i-atching the sr)read of -orices must 
likewise be inconclusive. As the fnregcing pages have indicated, a price 
is a comiDiicgted offer to sen , including not only the list nrice quota- 
tion but also various discounts, allowances, delivery terras, and the 
like. Unless all concerns in an industry are quotin? exactlj' the same 
terms of sale, a price change by any nne of them can scarcely fail to 
affect different customer groups in different ways. As a rebult cf the 
change, one customer group will find the enterprise quoting prices more 
nearly like those of its rivals, but another customer group will of neces- 
sity find that the opTiosite is true. She discovery of price uniformities 
is therefore a complicated matter in which there is gre-'t question what 

relative weight to give tc \mifcrinities in various terras of sr^le, uni- 
formities in list prices, and uniformities in the net urice to irnnort- 
ant groups of customers. It seeras oroo-^ble that the exchange of price 
information, even under conditions of the most intense comT^etition, 
would promote at least seme of these uniformities. If this orohftility 
is granted, the question arises whether uniform cpsh discounts or freight 
allowances are any more or less indicative of raonctirly than uniform list 
prices r-r uniform net prices to quantity buyers. Indeed, it apijears that 
in modern markets the practice is often to establish a price equal to 
that of a competitor and to comnete in quality or in terms of sale-. There- 
fore, while the presence of price uniformities is consistent with price, 
fixing, it is also consistent nith various degrees of com-oetition in 
the market. 

If prices are changed by the sira^iltanecus action of a number of en- 
terprises, the probability apoears that these enterprises have acted in 
concert. It is airaarent, however, thpt collusive urice changing need 
not take this form. In a price agreement one concern may readily lead 
and others follow. Moreover, a nrice agreeraent may be consistent with 
a willingness to let certain members of the agreement sell regularly at 
a slight discount. In such cases orice changes may be dissimilar net 
only in time but in extent. Again, certain concerns sell to customer 
groups srme of which are sufficiently isolated from the rest r-f the 
market that when sales are being made primarily to these customers other 
producers have little competitive interest in the price; where,?s later 
when other customers begin to buy the price may be ^f general interest. 
Under such conditions a price change becomes significant to different 
sellers in the market at different points or at different -oeriods of 
time. Hence it may well be that a nen orice initiated by one enterprise 
in Januarjr need net be met by another enterprise, either under competi- 
tion or under monopoly, xintil Pebnaary, at v/hich time the second concern's 
markets become active. 

Statistical tests of the extent of m.cnopoly or com;'ietition appear, 
therefore, to be very difficult. Information about the cb^racter of the 
price structure in an industry under price filing may be combined with 
an analysis of the organization of the industry, the principle influences 
bearing upon its market, the nature cf-the price' filing system established, 
and the apparent purposes of those administering the system. The statis- 
tical evidence may be valuable to corroborate or refute a hypothesis based 
upon the other materials. Except, however, in the case of two industries, 
Steel Castings and Asphalt Shingle and Roofing, it has not been possible 
to attempt to elaborate a siirvey in this report. These two cases will be 
found in the Appendix. • The- 'principal usefulness of the materials which 
are filed is apart from their value as evidence-s of monopoly or competi- 
tion. An appraisal of price filing necessarily includes an estimate of 
its probable effect upon the degree of unifTmity in terms of sales and 
in net prices to various customers and upon the frequencj'', extent, timing, 
and direction of price changes. The character of an industry's price 
structure is significant in itself apart from the degree of monopoly or 
compjetition which may lie behind it. ' ■ • . 


ll. THE ADMI;"I3TR^TIVE ?3.03L'Z'I 

The administr'^.tive oroolem ttcin- WRk in coniection with price 
filing was. essentiallv th-.t of any other substitation of goveriinent 
for private regulation of business, aid the utilization of 'Administra- 
tive rather than legal agencies for sf fee tin- that re:^l~tion. 

It has been stated that "It is a part of the American tradition 
that it is the function of the G-overn-ient to protect and foster the 
public interest. " In 1933 the emergency "'as sufficientlv grave that 
IJRA and the proposed "Partnership bet^^een Sovernment and business, " 
met '^ith almost general acceptance as an instru^ient of the public 

Whether the "partnership" as originally conceived and as embodied 
in the oodes was based upon ^. correct interpretation of the ".public 
interest and its relationship to the conflicting orivate interests, is 
a moot nuestion not vrithin scope of this study, ifhich is concerned only 
with the part played by price filing as one device utilized by that 

The forms of price filiig utilized by "TJl had previously been 
condemned by decisions -onder the anti-tru:;t lar^' as involving "restraints 
of trade" not consistent with the maintenance of a free and open 
market. Their development had been suppressed and regulated by these 
decisions as inimical to com.petitive price determination, and involving 
a degree of price control by cooperative -"eans too ;reat to oe entrusted 
to private hands. 

The admission of these forms of price reporting to idA codes 
involved the partial suspending of the restrictions of the anti-trust 
laws. The NRA was, in effect, substituting a form of administrative 
reg-ulation for the previous legal restrictions. It was choosing to 
permit certain forms of cooperative price control previously banned by 
the anti-trust decisions (including future price reporting) but it was 
not abandoning the ends of competitive price determination whi^h those 
decisions had presumably supported. (* ) 

The self-governnent of Codes of Pair Competition 'sras to be carried 
on only under administrative supervision. Price-fixing and price ■■ 
control measures were to be -admitted only under adeapaate safeguards to 
insure that the prices resulting from them ^-ere fair and served so far 
as possible the social ends of competitive prices, even though they were 
arrived at oy other means. 

(*) 'National Industrial Recovery Board, New policy, Series, No. 1, p. 3 
"The principle of price-making by competition in a i ree and open market 
is established in the common la^j, the anti-trust acts and puDlic policy," 
Cf. also. Handler, Milton. "The Sugar Institute Case ond the Present 
Status of the Anti-Trust Laws." The Columoia Law Review , January, 1936, 
page 7. "Thatever may be the advantage of a regime of acministrative 
price determination it is not the price pattern which the Sherman Act 
presup loses. Even were the Sherman Act to be changed, orice-fizing by 
industry, however accomplished, could hardly be countenanced without 
pervasive public superviaion. " 


Tiie administrative prolDlcin v/as f-andai-.icntally one of maintaining 
a "balance of conflicting interests ;'jnoiig the rncmlicrs of the industry 
concerned, tctv/ecn the industry and its customers (including dis- 
tributors) and hetwecn the ^articular iudustry and other v.arts of the 
eccroiric system. It entailed the most effective use -of approved -orice 
filing plans to "bring a"bout such salutary results as -vere to he oh- 
tained through nuhlicity a„nd accessory controls, and yet the ^irevention 
of undesirahlc results such as price-fixing, high price levels 
or inequitahle competitive riressures. 

The -^rohlem of harmonizing or balancing these conflicting interests 
was comDlicated by differences in the strategic positions of these 
groups, their different degrees of cohesion ana organiz-ation, and the 
resultant econcraic and political pressures vmich each could exert pur- 
suant to their interests in the code-making and in- the adranistratlve 
process . (*) 

The cooperative nature of the -;rice filing mechanism, and the 
avovrcd character of the IfRA and the cjucs of fair competition as 
measures of industry self-govcrnjicnt , led naturally enough to the 
actual operation of price filing plans by ind.ustry bodies. 

The fact tliat ;'-irice filing is a dj-nanic form of cooperative activ- 
ity and not a static trade riracticc prohi"bition vdth well defined char- 
acteristics, made this circurast .aice of self-government far more im- 
portant in the case of price filing t'nan in other price control devices. 
Price filinf ;irovisions T7ere literally enabling orovisions for the 
setting u;o of ''going price filin,, plans." 

Th; ultimate responsibility for the chjar-ctcr of those "olans and 
for their operation in conform.ity with the enabling provision, ..a.nd with 
certain standards of public inttcrcst, -iro-'^crly remained with the admin- 
istra.tive organization conferring tic aut'iority., 

Exnerience with the orice filing device under codes cf.rly indicated 
the need for reexamination of thu price. filing device, both as a control 
and as a publicity raeas-ujre , and a repossessing of some of the discretion- 
ary powers and privileges bestowed in the ca.rly droys of code making. 
Such reexamination led to foiTnation of policy and its progressive modi- 
fication a.nd application throUt:;h code revision and through suoervisory 

A descriptive analysis and an a-'^praisal of the NHA ejqoerience in 
aioproving and in administering price filing -orovisions v/ill be given in 
Chapter VI, "NBA Aumini strati m :i' Price ITiling." This ex;neriencc 
focuses on a prograjn of industry nrice filing under public regulation 
and supervision. It indicates rao.ny of the --.roblcms encountered in such 
a program, and offers some a.- praisal of the of IJRA's approach 
to them, vathin the limitations imposed by the enormity of the task it- 
self, the facilities afforded, the stress and haste of the emergency, 

a nd the a„bscnce of any large fund of ■nrovious cx'oeriencc. (**) _^____ 

(*) The advisory set-up utilized ^oy the HPuA. was a recognition of these 
conf;Licting interests. But final responsibility for administrative 
decisions remained with the Administrator, and la.ter with the HIEB, 
(**) The Chapter deals entirely with the administrative problem from the 
point of vievi/ of public re;gulation and swocrvision. The problem of code 
authority administration and the smooth operation of the price filing 
meciianism to the ends of publicity and of control a,rc treated in 
Chapters III and IV, 


prior to the NEA the legal =spects of price filin.^- Tere foremost in 
the public attention, to the unwarranted exlasion of many of its economic 
implications. Economic experience v/g,s liruited, partly because of the 
questionable legal status of various forms of price filia«^, and the 
reluctance of ind\istries to erperiment or to invite public scrutiny' to 
such experiments as were carried on.. 

But the legal problem is essentially secondary in origin and im- ' 
portance; it arose because the cooperative activity of exchanging market 
information was deemed to have resulted in certain instances in restraint 
of trade, such as was forbidden by existing; law. 

In none of the cases brou-"ht before the Supreme Court did the latter 
rule upon the legality of price filing as such, nor on specific elements 
of price filing plans. It has in every instance based its decision on 
the eccnomic purposes and results attributable to the plan, with results 
that have been confusin:; and indecisive to the layman, and offer ho 
rule-of- thumb methods as to the probable position of the courts if faced 
with other types of price filing plms, or the sajne kinds of plans opera- 
ting in a different environment. One recent legal authority summed up 
the situation as follows: 

"It is the elimination of price coTipetition, the curb upon free- 
dom of individual action and the regidity introduced into the 
price structure which have induced the repeated adverse rulings 
of the court 

"The Suprerne Court has never cater {,'oricallv passed upon the legality 
of the Kparate elements of a complicated price reporting plan. 
It has not hold th'^it any single feature in and of itself is an 
unlawfol restraint of trade. The conponent parts of the plan 
. are but evidentiary of ultimate purposes and effects. The 
essential issue is whether the plan inevitably tends to or does 
eliminate price co^rpetition, "(*) 

Under such circumstances it woiild be distincily useless to 
attempt to appraise the separate KELA, price filing experiments in terms 
of the fragniontp.iiry precedents that have been sifted out of Supreme Court 
decisions in the past,(**) 

These more or less defined legal r>istrictions on price filing were 
in abayance under the idA code provisions. Every price filing provision 
introduced into a code represented, in one sense, a separate experiment 
in price filing legislation. These experiments lapsed legally with the 
termination of ISA.. If contimied in use they are liaole to review by 
the Federal Trade Com^.iission and the courts, 

(*) Milton Handler, "The Sugar Institute Case 6,nd the present Status of 
the Anti-Trust Laws", Columbia Law Review , January, 1936, pages 4,6, 

(**) See page 14. . 



The demand for price filing under the codes and the insistence 
upon such regulatory fea.tures as the 'baiting period, indicate that 
business will prohaoly he reluctant either to abandon those plans or 
to prune the^i for the dimensions of assured legality. (* ) ■' 

This situation "rould seem to presa.-e cnc'Ol two possihlc developments: 

(a) ;^lev/ le^^islation relative to price filint', or 

(b) Modification of the present operative law 
concerning the practice, either through new 

• test cases and nevr prono\incements of the courts 
OP nev experiments under the auspices of the 
Federal Trade Commission, 

The Fertilizer Industry included a price filing plan in connection 
with a voluntary agreement submitted to the Federal Trade Commissioner 
on Nov. 8, 1935. That plan has not yet been approved by the commission, 
nor has there been any definite indication 'of the attitude of that body. 

The Sugar Institute Case, nc;- before the Supreme Court, (**) 
offers an immediate opportunii/V to discover the present attitude of 
the Supreme Court, in that it calls for a separate court decision on 
the finding of the lower court that the pri-ce filing plan employed by 
the institute was in restraint of trade through the concerted action 
in the reporting and maintenance of prices and terms of current or 
future transactions. The imminent decision in this case obviates the 
neces.sity in this study for any extensive exploration of the trend of 
legal philosoohy rand technique in the consideration of price filing. 

The depision itself may and should serve to answer many of the 
questions that have confused trade associations in the past, and offer 
positive guidance concerning the permissible for";s of price reporting 
under the law, and the standards that the court will apply to determine 
the legality in any particular instance. 

If the decision indicates thet factual evidence of the economic 
and social results of price filing is to be considered as evidence of 
intent and incidence, and hence of Isgality, there will remain the 
necessity of fonaulating the tests to determine those results, and 
of providing some continuing administrative guidance for applying them 
to going open price plans. The significance of the decision in this 
instance has been excellently set forth by f'ilton Handler, in the article 
previously referred to: 

"The court has two functions to serve in these cases: (l) It 
must determine whether there has been any transgression of the 
statute; (2) It must formulate economic pol:cies reg-^rding the 

(*) Some form of open price filini^- provision was incorporated in 444 
codes and sipplemcnts out of a total of-751 approved to April 25, 1935. 

(**) See above page 2S for d.escription of the case. 



future, consistent with the basic purposes of the statute to 
be ia effect until Congress acts. It is idle to ar^ue the de- 
sirability of 'the court's exercising the second function. The 
fact is that it does. It is not enough for it, sitting as a 
trier of the facts, •'■t'O .find that a plan does not reasonably re- 
strain coripetition. Such a finding necessarily places a stamp 
of approval upon the industrial plan in question. Consequently 
if a program involving future prices is ever sustained, -it is 
not entirely clear that it sho\ild be — the minimum safeguards 
upon ii'hich the court should insist are; (1) the use of an im- 
partial and disinterested .clearing house, and (2) full public 
disclosure of all statistical reports. There is precednet in 
the Appalachian c>ase for qualifying a^.proval of conditions de- 
signed to protect the public. (*) 

It is apparent that "rhichever attitude the court takes, the 
decision is apt to be only a prelude to further action in the direction 
of regulation by legislative action. A relaxation of the anti-trust 
lavs, such as li^ould be entailed by approval of future price reporting, 
"^ifould create the need for effective public supervision such as '"'as 
deemed necessary in the Applachian Cass. In that case responsibility 
for exercising this supervision '.vas lodged -^ith the lo-er court, but, 
as, Mr. Handler points out, it v?ould' be entirely impractical for the 
courts to carry such responsibilities in the event of any general 
adoption of cooperative devices, such as future price reporting. Such 
increased responsibility '^ould entail the delegation of supervision to 
existing administrative agencies or the crea,tion of" a ncT? agency, 

A blanket condemnation by the court of cooperative activity, such 
as that of the price reporting plan of the Suga.r Institute, would 
doubtless create a prompt demand for modification of the existing anti- 
trust laws by legislative action and would create a similar need for 
public supervision. 

Since the legal sta,tus of price filing is thus susceptible to 
alteration with comparative ease—witness the hiatus between conflicting 
decisions of the cases considered above, (**) and the vastly altered 
stri.tus of such plans under NRA codes, it has seemed more profitable to 
focus this study on the economic and administrative, rather than the 
legal, problems of price filing. The judgement as to whether practices 
and their effects are or should be made legally acceptable can well the consideration as to whether they are economically sovind and 
socially desirable. 

The price filing of Wlk experience offers the best opportunity 
to date to test with objective evidence some of the tentative working 
assumptions of the courts about previously tabco-l forms of price filing, 

(*) Handler, 0£. cit . , page 
(**) Page 14, 


.. -85- 

and their incidence on nrices and on competitive relations, and to define 
so fcr as ■oossible the Telati-onshiTO of' these prtce filing devices to 
other coahinp.tions of trade "oractices pnd. to varying patterns of indus- 
trial organization and control. 

• ..i.-:- '■'^.: 




The single requisite of the publicity function of price filing is 
the collection and dissemination of price information. The primary 
ohjective involved is an ejqDansion of the loiovvledge of the prices 
among competing sellers and buyers. This conception of price filing 
was 'basic vdth Eddy and generally has formed the hasis of the formal 
expositions of the theory of price filing by its advocates in industry 
and by others. However, it represents only one of the two main 
functions of price filing under HRA codes. The control function of 
prioo filing is disciissed in Chapter IV below. 

It is the olsje 5t of this chs^pter to consider the publicity aspect 
of price filing experience under NRA codes. It is extremely difficult 
in most codes to isolate entirely the rperation of this function of 
price filing. In many cases the elimination of seller or buyer ig- 
norance of prices was not the m.ain or even one of the exjiress pur- 
poses of price filing. An exiposition of the natiire and extent of 
publicity realized under the codes must, hov/ever, include both the 
cases where this end was uppermost and the cases were it v/as only 

The record of e:'5)erience available is confined for the most part 
to the 57 industries included in the 3<ainple as explained in Chapter I 
above. However, there vdll be occasion to refer to the experience of 
other industries. 

Publicity thro"ugh price filing is a coiTiposite of many variables. 
Among the variables conditionini- the relative degree of publicity as 
between different industries, the following are most significant; 
(1) 'type of information publicized, such as net prices, prices and 
trade disco-ants, or prices and some or all of the n"umerouG supple- 
mentary terms and conditions of sale; (2) types of jDroducts about v/hich 
there is publicity; (3) kinds of transactions with bijyers about which 
there is publicity; (4) extent of participation in filing by com- 
petitors; (5) manner and extent of dissemination to sellers; and (6) 
manner and extent of dissemination to buj^ers. This chapter represents 
in large part an effort to s"uinmarize the code ejiperience with respect 
to each of these variables. Under each is discussed the significant 
issues as they, arose at the time of the writing of codes and later, 
the code requirements, the administrative modifications of the code 
requirements, the degree of performance in relation to requirements, 
and the reasons for non-performance. The material is organized under 
two main headings as follov/s:, 

I. Collection of Pricellnfornation Under ITRA.. 
II. Dissemination of Price luformation Under jIRA. 

Before -undertaking the discussion of tke nature jnd extent of 
pulilicity achieved under the codes it is essential to examine the 
f-jDction of publicity as conceived and expressed by code proponents. 




An examination of the end? which publicity v/as e^cpected to ac- 
coni^lish constitutes n lof:ic-il startinf; f.oint for the development of 
its study. This oubraces the stated objectives of publicity; and 
evidence thereupon is ararai from ejcpressions about the problems v;hich, 
it was hoped, publicity migh.t solve aad from the anticipated results 
of publicity. In most cases the statements referred to "price filing" 
and not to price "publicity"; it was seldom apparent, therefore, 
whether the results were ex^^ected only from the publicity afforded or 
also from the exertion of some type of control which was either an 
integral part of the price filing system or supplementary to it. 
Unless the eiq^ressions themselves or their context were such that it 
is evident tliat the control function v/as specifically in mind, the 
following analysis proceeds upon the assi:imption tmt price filing and 
jjrice publicity v;ere identified in the mind of the author of the ex- 
pression. This is not entirely a rea.listic procedure, as the results 
will indicate, and naturally qualifies conclusions arrived at. 

One significant finding may be recorded at the outset. In many 
industries the price filing plan was put into the code with little 
or no discussion a.t the hea.rings about the reo.sons for including the 
plan or the objectives whicn proponents hoped to achieve. In other 
cases, the need for a,;id jvLsisif ication of a 'price filing system were 
phrased in such terns as to tlarow no light uoon the specific 
objectives which proponents had in mind. Lihevdse, it is reasonable to 
assume tnat in some cases the fori^ial statements made served merely as 
v.'indow-dressing to conceal other ex;pected functions. 

The statements mace by the spokesmen of various industries varied 
widely in their wording and in the extent to which they were general 
or specific. It is possible, however, to distinguish foijr main functions 
to which the statements, with variations , were addressed: (l) the 
maintenance of the price level; (2) the climina.tion of secrecy in 
business -oractices; (3) the elimination of discrimina,tion; and (4) 
the advancement of bu^/er Imowledge, 

A. Maintenance _of t^lie Pri ce Leve l 

1. . Blanket Statements 

A nuaber of the discussions attributed an influence over the 
price level to price filing v/ithout explaining in v/hat vciy this would 
¥/orh out. The most cormiion clcdin of these broad statements was tliat 
price filing vrould "stabilize prices" or end "destructive price cutting." 
In some instances it was clcarl;' stated that publicity alone would 
achieve this result; in others, it is not entirely apparent whether the 
proponent v^as thinking exclusively of publicity or of the combined 
effects of prJblicity and control m.easures; and in still others, it is 
obvious tliat control mea.cures were uppermost in the mind of the pro- 
ponent. The latter statements are not incl-ud.ed here. According to the 
statements miide , it is evident that some code proponents believed tliat 
mere Icnowledge of the prices being quoted by competitors v;ould in some 
fashion exert cert.ain influences over the level of prices. 



As an example of the "blanket statements, there mny be cited a 
brief filed by the code authority of the folding paper box industry 
in which it \7as stn,ted tlist : 

"An o^aen price plan adaped to the needs rfLthis industry 
is essential if the conditions of vindictive price cut- 
ting and destructive competition which existed in the 
past sliall be avoided in the future. . ." (*) 

Likev/ise, the clmirma.n of the code steering committee of the metal 
v/indow 'industry stated at a public hearing tiiat the filing'provisions 
of the code "are intended as a temporiwy means of eliminating the 
ruinous price-cutting tactics so prevalent (in the industry)." (**) 
The function of stabilising prices or stabilizing the market v/as 
claimed 'by representatives of va.rious industries v/ithout elaboration 
of what stabilisation meant or how price filing might achieve it. 

Where the elimination of destructive price cutting was the ex- 
press object in securing price publicity, it is clear tlmt the pro- 
ponents thought of publicity in terms of maintaining prices at more 
"profitable" levels. But precisely what v/as meant by "stabilization" 
is less clear. Stabilization, strictly defined, means the smoothing 
out of fluctuations upward and dovrnward from some kind of a form, 
Periiaps proponents would accept timt definition from a long time point 
of viev/ and contend that their-proposals were for the purpose of 
smoothing out the downward fluctuations. But from a short-run point 
of view, it is probable tiiat , whcro publicity Tfas sought as a means of 
effecting "stabiliza,tion" , it was not solely for the purpose of elimi- 
nating short-term fluctuations in prices, but also for the purpose of 
maintaining them a.t a level higher tlian that at which they vmuld be in 
the absence of publicity. As pointed out, however, it was- not in- 
dicated in many statements how this alleged rcla.tionship between 
publicity and maintenance of prices would v/ork out. 

2. Elimination of Panic ,' Uncertainty and Suspicion 

Among the expressions which advanced some ejiplanation of the 
possible relationship between publicity and price movements a common 
one v/as tlia^t whicn contended tiiat liiowledge 3f conrpetitors ' prices 
v/ould remove "un.certainty, suspicion, and panic, and that the result of 
this would be to check the headlong fall of prices. Sellers hearing 
wild rumors of price cutting by competitors might in turn lose con- 
fidence in the situation and recklessly slash their own prices. 
Factual knov/ledge of precisely v/hat the price policies of competitors 
were, it was claimed, v,'ould alter this fear induced by psychological 
factors. And, as a net result, the price situation in the industry 
would be much firmer. Thus the secretar;- of the marking devices code 
authority stated that: 

(*T'" "BrTe'f daTe"d "janiiaVj^" 10^'T935l^ '("iTl^I^^ ~ 

(**) Transcript of Hearing, October 11, 1935, Metal Window Industry, 
p. 10, IIHA Files. 



". .The real benefit of this :ou"blicity abor.t prices 
is the oanishiiiient of Fear a,nd Ignorance re£.:ai' ding your 
Connetitor's Prices. If he intends to quote a price 
lov:er than j^ours, a.t least you kno?^ his talent, and 
fui'ther, you Irnor/ just hov/ low his quotr.ticn vdll "be. 
You do not feel forced to make a hlind guess at his 
price and prohablj^ overshoot the r.iark." (*) 

Th.e. same tenor mer; "be noted in the speech of thf Executive Director 
of the Fertilizer Trade Association made at the price heejrings held "by 
I'RA in January, 19Z5. 

3. Elinina-tion of "Indirect Concessions. 

Another argi^xaent occasionally advanced in sunoort of the ■ ■ 
effectiveness of price publicity as a means for ma.intaining prices v;f.s 
tha.t the publicity thus given to various tjn'ies of secret concessions 
would actvia.lly end the granting of such concessions. This point of 
view assumed thrt the' grantin^, of certain types of secret, rebates," secret 
services, o"^- secret discounts Vfould -not bep.r investigation, and tlia/t 
the prospect of publicity would entirely discoura-ge sellers from ren- 
dering them - possibly because thsy would eiroect sellers to meet them 
promptly. Since these concessions ax;ioiJ.nted to a cutting of the final 
net price to the customer, their abandonment v;ould tend to bolster up 
th.e price sti'ucture s-s a whole. Closely related to this line of 
reasoning virere arguments tha.t the required fili'ng of f11 of the various 
obscure methods of influencing a sale, even though not as a rule done 
secretly, might 'result in effecting their discontiiruancc. Thus, the 
President of the Copper and Brass Mill Products Association argued for 
the filint- of "prices paid for scrap bought from customers on the grounds 
that otherwise it v/ould be used as an indirect method; of price cutting. (**) 

It v/as occasionally claimed that if members \icre required to file 
informiition about premiums or other free goods given, the effect would 
be to lesEO""- the amount actuallj- .ranted. Such cha,r:;es, of course, 
exert a. ptrengthenin^^ or "stsbilizing" influence over final net prices. 

4. Protection from ;[isre"nresenta.tio"_i of or Coercion by 

Aiiother vv'ay in whic-: it wa.s argued that price publicity would 
serve to ma.intain "-irides T.'a„s by -iroviC-inr protcctio"n from various mis- 
represo"nta.tive or coercive a.ctivities of bvyers which often drove prices 
dovvv.. One 'G;-pe of su: h r.ctivioy frequently mc"ationed is described by a 
traditional phrase — the "lyiiig bu;'"er," The complai"nts v^ere that buyers 
v;ent from one seller to a^nother, inisrer)rcsentir-^ the price quoted to 
them by other sellers; the sellers, thiril:ing to meet competition, 
lowered their. ov;n price to meet the fictitious price, and as a result 
prices were forced to lower levels. Price filing, it wa.s claimed, by 
furnishin^, Iznov/ledgje to sellers of th.eir competitors' prices, would 
su"oply an immediato means of checking the accuracy of sta,teme"nts by 

(*) Letter to members of industry, llov. 2, 1955. (in ITEA Files) 

(*■*)' Transcript of Kcarin,_,, Aug. 51, 1933, Co-pper and Brass Mill 

Procdicts Industry, IJRA. Piles. 

-9C- . .■ 

bujers. Accordin~ly, the practice would be stojToed at once. A brief 
subraitced bv the code a.uthority of the foidiii;!, -ps-'^cr box industry in 
suiport of ." -orice filin^; plan ointed out that: 

"This condition made the i:idustr-^ a victim of rumors 
and misleading inf orjMP.tion rrisin;,. betveen b'jyers and 
salesmen, and the. absence of lrno\rn rnp.rhet levels resulted 
in a condition of uncertainty and the complete lack of 
factual inform£',tion existed to such a de^Tee that many 
shrev/d bn;>'-ers developed a condition where the members 
of the industry were conineting only with themselves, 
and often at prices below cost." (*) 

Lihewise, a spokesman for the -orrner distributing: trade pointed out in 
the public hearinj;^- preceding approval of the code that price filing 
would pjrotect : 

". '.members of the trade from unscrupulous bu;-crs v/ho 
may play one member of the trade a{;ainst the other in 
an a.ttempt to breal: down the whole price structure. 
T/e have had bu;;''ers 1:0 to the extreme of sending them- 
selves telegrams purport in to come from a competitor 
of ours, quoting conditions of sale v/hich were fic- 
titious, misleading and dishonest. We lis-vo had buyers 
chrnge the written quotations of our com~ietit6rs, in 
order to mislea.d our salesmen tlia.t there v/ere better 
terms and conditions than actually existed. I could 
go on and name many more such unethical methods used 
by purchasing agents to tear down a I am 
sure we are all faxiiliar v;ith raan;;/ of them." (**) 

The pro-^onents in some claimed that price publicity might 
further end the practice of buyers -nlaying one seller against another, 
even if tlie element of misrepresentation were absent. In a few in- 
stances, it is at least irrjlicd th£\t price ^i^blicity would afford some 
protection a,_.ainst the bargaining po\/er of verj;- large buyers, who v;ere 
previously able to obtain contracts at extremely low prices because of 
the si 26 of their — prices so low as to cover little more 
than variable costs. Price ;uiblicity might a.ccom]Dlish this was 
inferred, through providing a united front where there would be no 
uncortainty as to what competitors were doing. The "shopping" of 
buyers, they reasoned, was possible only because the competing officers 
of sellers were never directly focuaed against each other. Price 
filing, by settin. up openly (announced schedules of prices to which 
members enga^.ed to adlierc, might encourage sellers to resist efforts 
of bu."ers to brrgain at a lo\/er price and discoure,ge buyers from 
trying to do so; for sellers v/ould know at all times precisely v/hat the 
pricing policies of their competitors vfere. The version of this prac^ 
tice which apperred in the construction industry \;as Iniown as "bid 
sho;T-)ing". It was particularly troublesome there because of the wide- 
spread use of the sealed bid method of selling. Spokesmen for that 
industry proposed a method of bid checking as a substitute for ;nrice 

filin^-, due bo the pcciiliar nature of q uoting methods, in order to 

(*) Submitted Jan. 10, 1935; (in ITuA., Fil.el) 

(**) Statement by L.B.I.Iajon, Transcript of Hearing, Sept. 28, 1933, p. 101. 

iHlA. Files. 

sec-Ci_rn ;_-i-.'ot9ctiG:: iron tnese piT-cticep cf buyers. 

A statement 07 a reu-escr-te,tive of the candj' mrnufacturing industry 
at tlie [-rn-code lie-ri-it: illubtratcs the cjnressions regarding this 
protectio:. a^ Tai;. sho-nin^; D7 lar.:,e Du^^ers. Ee stated that: 

"hy 'lart^-c bvyers' is neanc ciirdn store buyers of large 
nail order house buyers. T^iese buyers are the prin- 
cvirl lieneficiaries of secret prices. These "buyers 
under existing conditions obtain price quota.tions 
generally and under the present plcJi of secret price 
quotations they ri^.ve opportmiity to bring pressure to 
bear on connotitors for the pur-ocse 01 forcing prices 
down regardioss of econouic justification therefor. 
Such bui^-ers r-iay do so directly or indirectly''. The 
usual method employed b" then is to inform the seller 
tha.t his price is out of lino. . . .The secret price 
quotations enable the bo^-cr to force the prices dov/n 
whether honestly or dishonestly to the detriment of 
the entire industry. The secret ;Trice quotations 
operate very nuch on ;;ho line of a, gambling game with 
mar]:ed dechs and the cards are alv;ays stachcd against 
the seller. The does not hnow his comroetitor' s 
price and depends solely on the information he re- 
ceives from the bi^cr. In other vords the secret price 
quotations create v.'Vsu is hnov/n a.s a bv,3'cr's ma.rket. 
Iierchandise is not sold c-ccording to its cost of pro- 
duction and distribution but is sold at r price set by 
the buyer." (*) 

Price publicity v;as urged by hii.i as a means of eliminating this situa- 

Ai.iong the more elusive lines of reasoning inrolied in some of the 
claims r^ for publicity as a stabilizing device v.'e.s that some price- 
cutters simply did not l-znov/ better. Sma,ller m.cmbers, not knowing 
accurately their ovrn costs, might through full knov/ledge of com- 
petitor's prices conclude that i^he;- were selling too low; or the price ■ 
cutter might not be veiling to incur the ill will of his fellow com- 
petitors, whic'.': he might feel as ?. result of dissemination of price 
reductions. Or, an incipient follow the leader ^--olicy might be much 
strengthened by ;publicity; the Icaderless members, formerly addicted 
to price cutting, might desist s.s soon as the prevailing ])rice was 
shov.'n to them thnrough the medium of price publicity. 

S . Elimination of Sec recy in Co mnetition 

The feature common to ,?11 of the other stp.temcnts regarding the 
functions of publicity, so far as sellers were concerned, was their 
erapjiasis on the x~act thr.t publicity brings c.oirrpctition out into the 
open 3,nd eliminates secret and uninformed competition. As contrasted 
with the above when the effect of the eliinination of secrecy upon price 

( * ) Transcript of Hearing, llerch IC', "1934, pp. ?,62 et ff , ITEA Files . 



movements ve-s recoisiiizecl, ir. these str.teraev.ts the sulDstitution of open 
for secret competition T;as set forth as a,n indcpender.t end. The 
varia.tions looted belovif pll re^^rcrent different rays in v/hich this 
general cisjective r;as stated. 

1. Eliirdnation of secret concessions. 

The most conii.ion r.tatcuipnt of tliis function a-';pcared in the 
assertion th.-^t price filinr i/culd end the -iracticc of secrecy in the 
granting- of price concessior.s of one sort or mother, especially of re- 
hates. This practice has lon,;^ 'been refc-rded by maiv' J/siress men not 
only as uneconomic hut also as somev/h„at unethiceJ of its 
vicious and undei'hrjided nat^ai-e. Business custom ha.s tended to stamp 
it as a practice beneath the cii;nity of an honest business rasn. To 
be sure, on the economic side it represented r. form of price cutting 
which proponents rai:3ht wish to checl:. Sut greater emphasis has been 
laid on the secrecy and deviousness involved, implying less objection 
to the concessions if r'a.iie openly. Price publicity, its advocates 
ur.,i;ed, would end this underhanded method of doin^'^ bv.siness and so raise 
the strn.dards of business conduct. Thus, the code authority of the 
vitrified clay serer pipe industry stated that: 

"Heplacint, secrecy v/ith openness tends to minimize 
deviousness and puts the ^ a,nd sale of 
t^oods strictly on the merits of goods fnd services. 
Light destroys iis.rmful .bacteria in business rnd puts 
enrihasis on health end. efficiency." (*) 

2. Ma!:ing Gomnctition Ibrc Intelligent 

One sonievdjat ..oneral r.nd vajv,ue, bat nevertheless independent, 
function occasionally assigned tc nrice nublicity ^7as tha.t of maJcing 
compctition more intelligent. Without Iciov.'ledgc of competitor's prices, 
business men must make decisions more or less in the dark. With such 
knowledge individual decisions may be made on an informed basis and con>- 
petition as a whole mr,;/ become more orderl;--. T]-:c shift from spccula.tive 
guesses to rational judgments, it v;as asserted, is one- of the con- 
tribution of price filing. This argument is ouito similar to the more 
specific arguments often r.dvanced for the dissemination of trade sta- 
tistics of all sorts as a means of aidin , business nev: to plan for the 
future. Knov/ledge of production, stocks on hand, sMpmcnts, unfilled 
orders, etc., may be of great help to business men in -fanning their 
production and making coiTudttmonts for the futm-e. Knowled^:e of pre- 
vailing prices cf competitors has a far more tenuous connection with 
plannin^; for the futm-e. Probably these strtc-ients were concerned 
chiefly \rith the increased intelligence of business mei in raaicing de- 
cisions as to their i' pricing policies. This .is a different 
function from tliat of providing a fpldc to -iroducers in formulating 
their long-ruri policies. 

Those ar^mnents for -irice -lublicity which cite as one of its 
functions th.e -.iromotion cf conriarability of prices and terms belong to 
this saxic category. By bringing the orices and terras of each seller 

(*) Brief submitted October "0, 19^3; (l:- IIRA Piles) 


into direct focus agsAnst those of other sellers, husiness men are en- 
aoled to cor.Tparc item hj item the variances as oetv/ecn sellers. Thus, 
all differences will stand out in clear light, whether they he of 
services rendered, or discounts or allov/ances ^ranted or interest rates 

In defendint: price filing as a means of insuring intelligent 

manai;;cnient, a representative of the paper distributing industry stated 

that "it will permit members of the trade to compete intelligently in 
the light of all the facts. (*) 

A E-ochesman for the Fei-tilizer Industry pointed out similarly tlia.t 
the -purposes of including a price filing provision in the code 

"v/cro to bring out into the 0;"ien the prices and 
terms ashed by different iiroducers; to require each 
producer to issue e. schedule and mail a copy to his 
competitors so that competitors c-r. hnov? vjhs.t his 
prices and terns are at a:^' given time....; con- 
sequently corfipetition will be met \'iilh full ]mowlcdge 
of 'the fact."" (*♦) 

The executive direct or of tho code authority of this same industry 
stated at the price hearings of Jpiiuary 9, 1935 that 

"Open pricing is a device v/heroby producer, dis- 
tributor, and consuraer may act intelligently in 
mahing business decisions, particularly as to all 
ma.tters that involve price." (***) 

Statements of similar import were iTijide by proponents of a number 
of other industries. Their central theme is always, however, the in- 
creased intelligence which price filing affoTds to the conduct of 
business without specific indication, however, of the benefits expected 
to accrue from such. 

C. Elimination of Discrimina,tion 

One of the functions most commonly assigned bj;- code proponents to 
price publicity was the elimination or lessening of the rjnount of dis- 
crimination betv;een buyers. Generally there v/as very little definition 
or clarification as to the exact nature of the practices which the pro- 
ponent liad in mind. From the vievrooint of buyers for resale or for 
furtherindustrial utilization, discrimination is objectionable because 
it means that certain of their own competitors arc cble to buy their 
merchandise more cheaply and accordingly are enabled to luidcrsell all 
other buyers. Thus, v/hose who do not receive the lower and discrimina.- 
tory prices have a direct interest in securing the equitable treatment 
of all buyers. Most of the statements, as ma,de by code proponents, 

(*) Sta-temeiit by L. -E.' ■Me-hon-,. Transcriit of "earing,. Geytcmbsr 2^, 
19S3, p. 101,, IIBA Piles. 

(**) Statement of ■ 1.. J^.. Strob^.er, Transci; of Hearing, September 6, 

193S, pp. 187 ff, itRA Piles. 
(***) Transcript, "Vol. I, p. 131, IJEA Piles. 



citing the elimination of discrimination as one of the major roles of 
price publicity, stressed the benefits \7hich buyers T7ould thereby 
receive, A typical state;acnc v/a? that contained in a brief subraittcd 
by the code committee of the riachinc tool and Porgint^- industry subse- 
quent to the public hearin;!^; on the code on October ?., 193C, which de- 
fended the price filing provision by stating that it: 

"assures to all th? custoners of the industry, 
exactly equal treatment in negotiation with a. 
given mp.nufacturer covering the prices, terms, 
and conditions of sale of the particular type of 
machine. " 

Aside from code proponents, the elimination of discrimination has 
long been regarded as one of the major contributions of price publicity 
by representatives of consumer interests, by organization of trade 
buyers and by non-partisan stijjd.ents of price filing. 

A possible explanation of the importance which code proponents as 
sellers r.ttached to this function of publicity is found in the fact 
that sellers often inake price reductions to individual buyers which 
they would not be willing to make if it were necessary to offer them 
to their whole market. For b. time after these reductions rre made it 
may be possible to con-fine them to a few bv^ers. But eventually the 
pressiire from other buyers ma^'- turn these limited reductions into 
general reductions. Thus, if in some fashion the entering wedge of eai'ly 
discriminatory i-eductions can be checked, a general reduction to all 
buyers may be prevented. Similarly, if one member discriminates between 
his customers, the competition of those custoners receiving the lower 
prices with the distributors of other sellers of the industry may force 
the latter to reduce their prices. Thus, the sellers' advocaxy of 
price filinri becaixse of its effect upon discrimination may be a matter 
of maintc,ining the industry price lovol. 

Price publicity, a-ccording to its proponents, eliminates dis- 
crimination either by irarr.cdia.tcly discotiraging sellers from further 
granting these concessions which will not stand the light of day; or 
by informing buyers for the first time as to the prices at wMch 
competing buyers purchase, so thc.t they in turn may den£,nd sindlrx 
prices. Discrindnation then itiay be ended either 'oj the granting of 
similar low prices to all purchasers or by the withdrawal of the 
abnormally low prices extended to t!vo few. It may i.iake little difference 
to buyers - particularly those bu^--ing for resale or for use as ra,w 
materials - jur-t wliat price they Liust 'o^'-l't so long as they Imow that 
none of their competitors are paying less. This point of view has 
often been expressed by purcha.sing agents. (♦) 

It inay bo noted in this connection tha.t certain classes of buyers 
op-)Osed the mechanism of price publicity by means of v/hich others 
hopes to end discrimination. The Mail Order Association of America 

(*) Letters received in answer to questionnaire concerning price 
filing r^nd uniform bids; see Coasui.iers' Advisory Board report, 
" Ex-ierience with IJRA Qioon Price Plans . I'ay 1, 1954, IIEA Files. 



in one connection stated that: 

"A confidential relationship is created when a retail 
mercliffjit goods from a mp-nufacturer or dealer 
and "business ethics and the v/elfare of industry and of 
general business require tlirt the details of such 
transactions should not bo made public, nor come to 
the Icnowledf^e of their ccranetitors. ... (Price Publicity) 
simply places in the hands of the competitors in- 
formation with which to embarrass and lumper the or- 
dinarj'- flovj of trade." (*) 

They proposed that the price filing -^lan be modified to provide for 
the excliTjige of price infornation only pmong mc.nuiacturers serving the 
same distribtition ch^miels. 

B. Advancement of Bu^yer Know ledge 

The other main functic/. rhich it v/as claimed price publicity 
would perform was to meize buyers generally more informed, so that they 
could buy more intelligently and not be mislead by inaccurate state- 
ments of competing sellers i-.s to the selling prices of others. It was 
asserted thrt pricn publicity v;ould mal:e it possible for bu^^ers to 
obtain at e, given raoment an over~all picture of the prices and terms of 
sale of all sellers. Again we find this point being advanced by in- 
dustry proponents. Thus, a brief submitted by the cordage institute 
of the cordage and t?/ine industr^^ defended a proposed price filing 
provision bjr stating that it would "result in riirplicitj'- of comparison 
of conditions, enabling a consuracr without difficulty to determine that 
quotation which is to his best advantage." (**) 

The executive director of the national Fertilizer Association, in 
a statement at the price hearings of January 9, 1935, said that open 
pricing is a device whereby producer, distributor, and consumer may act 
intelligently in making decisions. Again, consumer representatives and 
impartial students have Ion;; recognized that t-ic dissemination among 
buyers of the inf orms^tion assembled in price filing plans would make 
them more skillful bujccrs and enable then to obtain greater value for 
money expended. This is especially true of relatively smaller buj^ers; 
large buT,'ers, such e.s federal or state agencies or very large corpora- 
tions, have the resources necessary to acquire a coraj^^lete picture of the 
price situation in an industry themselves. The small buyer on the other 
hand inay have great difficulty in assembling by himself the necessary 
comparative information sjnd mast rely uJ)on the statements of a few sellers 
v.'ith whom he comes in contact. 

It is obvious thrt neither of the functions discussed imiTiediatcly 
above - elimination of discrimination and advancement of buyer laiovledge, 
have a.ny meaning unless widcs-iircad dissemination to customers is in- 
cluded in the 2:>rice filing plan. 

(*) Volujne B-2, document by 0. il. Kile: (in IffiA Piles, Cordage and 

Twine Industry). 
(**) (in WA Piles, Cordage and Twine Industry), Volume 3-2. 


-95- ' 


Price fil.infi: in which initlicity is "n avowed TDiirDOse consists of t^^o 
processes. The first includes the collecti'^n or'=>Tn'bling of data, "by 
soTie agency; the second includes the disseiiiination or distrihution of the 
data hy this agency. The adeoioacy of codal and adrninistrativ'=' reauireraents 
is ■Dertin'=nt to "both rihases. But the success of the first deijends ulti- 
mately uTDon the actions of industry menhers and their nerfomance in ac- 
cordance with these reouireTnents whe^ea.s the success of the second depends 
upon the performance of the central agency. This section is concerned 
with the first Torocess and accordingly is confined to a consideration of 
matters relatin.'j only to the collection of -orice information. 

The subject is treated under the following main headings? 

A. Agency of Collection 

B. ParticiiDants in Filing 

C. Tyoes of Information Included 

D. Tyrjes of Prodticts Included 

E. Typer of Transactions Included 

E. Geographical Scope and Other G-eogratihical Factors 
G-. Physical f'techajiics of Collection 
H. Adherence to Filed Prices 

Discussion under each of these headings has, wh-^n -oossihle, "be'^n 
organized around the following Doints: controversies and the issues re- 
flected; code reouirements, e>rpansion or modification of code require- 
ments hy code authority or ■ irid.u3try vote, together with portir.ont 'T^A 
action thereto; performance hy memhers in coirroliance with coda.l and 
administrative requirements, and reasons for non-performance; and si.enifi- 
cant principles emereing from the discussion. 

The codes of fair competition contained the enabling -orovisions under 
which the price filing; systems were established and iDrovided the frame- 
work within which they wR-e suoTDOsed to operate. They also sought to 
establish the limits of a.dministrative discretion. Since, in practice, 
many of the price filing systems developed in a manner not contem-olated 
"by the codes and since the inability to include all details involved in 
the administration of price filing left a certain field for justifiable 
administrative discretion, a restatement of code -Drovisions does not throw 
great light unon what actually took -olace. Howeyer, it does indicate uiDon 
what matters industry and JHIA. agreed as of the time the code was ap-oroved, 
and sets forth the mandatory rales under which price filing was intended 
to operate. The administrative rulings took the forn of e^cpansion of code 
provisions either in connection with certain discretionary functions 
snecifically delegated by the code or in connection with certain Tirocedural 
and other matters upon which the codes were silent; or they were d.esigned 
to modify the original code -orovisions after problems developed which were 
not foreseen or adequately provided for when the code was written; or when 
the code authority or industry regarded a change from the code provision 
as desirabl"!. 

Though a discussion of codal and administrative requirements should 
reveal the actual plan of collection as eventually set up by the adminis- 
tering agency, it does not ordinarily do so. Only where general compliance 



was r^ood, do th°r/ throw li-t^ht on th'=- av.°stion', for TDerfdrna.nce then ^^ould 
approxiraatp thft. annoroicRd r^^q ■■iren'^nts, ?o the ext'^nt that this is true, 
an analvsis of administrative r'=.nniri^'T--nts s'=irv'=s as a substitute for a. 
prolonged and detailed analysis of actual >^rice filings, for the purpose 
of ottaining infor-iaticn as to -Dnr^^nrnarn" u-ion the asnects of price 
filing enumerated aTaove. Th« evidence avrviTahle for the sa'nple as a 
whole, which deals ^ith what indi'.stry •len'b^rG actually c'id under price 
filing, is largel;r confined to th« questions of whether they filed at all 
and whether they adhered to their filed -orices. Evidence hearing upon the 
more detailed matters of nature and exf^nt of infornation filed, nroducts 
included, transactions filed, etc,., is fnr 'nore -fragmentary except in the indus- 
tries for which intensive s+atistical studies were made. In cases where 
such detailed informati'^n is lacking hut "he-e general compliance, with 
res-pect to filins" and adherence was good, it is fair to assume that the . 
actual performance api>roximat°d the codal and administrative requirements 

A, Agency of Collection 

1. Issues and Controversies 

The central agency with which filings were made occur) ied an iraoort- 
snt place in the scheTT]':. of -nuhlicity, for a great deal of success of the 
■olan was dependent upon the technical proficiency with which the agency 
set i^p and put into operation a wor'icahle plan, handled the mass of infor- 
mation as it came in, and organized it in intelligitle form for dissemi- 
nation. An incompetent or diffident agency misrht defeat the ohjective of 
price putlicity irrespective ' of how wrU th^ memhe-rg nooperated. The ' 
prohlem was essentially one of administrative detail- rather than of tech- 
nical statistical method, siich as might have "been the case where trade 
statistics are filed instead of prices only. In addition to possessing 
the necessa.ry administrative qualifications', it was of course, necessary 
that the agency its-^lf he sincerely- interested in furthering puhlicity 
and that it not regard puhlicity as incidental to or a. necessary evil 
accompanying: other functions of price filing. There was little discussion 
regarding the technical qualifications of a central agency during the 
period of code writing and no particulax policy was ever formulated "by NEA. 
upon the point. 

Considera.hly more discussion took place on the matter of the impar- 
tial and confidential character of the central agency. Fairness requires 
that the puhlicizing of information filed he accomplished simultaneously 
for all memhers. If one or a, few mi^mhers receive the henefits of price 
publicity "before the others, they receive ohvious competitive advantair^s. 
This means that the character of the agency should he such that filed, in- 
formation is not available to any members of the industry before it is. 
available to all. This issue did not crystalize to any decree during the 
early period of code formulation. Some protests were made, however, at 
this early date by non-members of trade associations which were designated 
by thn code a^ithority and thus the central agency for price filing.(*) 

(*) See Code History of G-as Appliances Industry, pp, 7-9; such complaints 
were also made by the circular knitters in the underwear and allied 
products industry and by members of the Ca.rbon Dioxide industry who didl 
not belong to the Carbon dioxide Industry, 

. These protests,- honever, rfid not ffen°ra]l7 oiiesti^n specifically the in- 
t.e'nt of the trade assoclatipn to r^^^"! '=^,'^ne -orinos to its TTemhers tireTiaturely, 
but laid greater stresn upon, the do-ainatinf; position of the association 
in''the industry and the r)0s?il:ilities. of o.ontrol resulting, 

-''. The other issue involved in, th'' ^^r'-ta,"..! i-hii'^nt of the a,gency of col- 
lection was whether refrional a.-^e-':cien sho'-;ald he established, Wh°re there 
were a lar^^e 'nunber of s'lall nrociiioer i scattered over the entire country, 
and '^here the--conp==titive market of .each •^as localized, it was felt that 
regional agencies receiving- fro'a and diss'=minating infor^iation to members 
in a given district would "orove more efficient., (*)' In other industries 
with fewfjr members, those members '"ho w^r^ located at a considerable dis- 
tance from the, central office occasionally requested a sexjarate agency for 
filing pur'^os'^s; that was ^larticularly true in the case of Pacific Coast 
members. (■**■) The time involved in sending reports across the continent to 
a Ne-f Yoik, Washington, or other Eastern off ice and then in receiving them 
from the East was claimed to place them at a substantial disadvantage. 
This reauest was frequently opDOsed, however, by other members who wished 
to maintain the =^ntire industry within the sco-oe of a single filing system. 

2. Code Requir'=ments 

Of the total of 444 codes ^hich contained -orice filing provisions, 
about three-fourths named the, code authority of the industry as the agency 
with whom m,embers w^re to file, their t^rices. (*** ) Part of these provided 
that the code authority might, if it chose, designate some agency other 
than itself .for -this r)urpose. In an iraoortant part of this group the 
code, at the same time, designated the existing industry trade association 
as the code au.thority. .'?ost of the remaining fourth of the codes required 
that the central agency be. nn "i-ipartial and confidential" agency. Ho 
elaboration of the qualif icati;^r>s necossarv to make the agenc3'-. impartial 
and confidential were customarily given. S^ven of the codes themselves 
-designated th*- agency to serve in that ca-oacity. Sixty-five of the others 
provided that the code aathority. r^hould select the agency thus specified, 
■ or if it^ failed to do this, that the V?X shoul.d make the selection. In 
twenty-nine .codes the code authority alone wp,s given the responsibility of 
selecting the impartial agent. 

Twenty- two codes -orovided th^t -irice filing should be handled by 
regional .'ag.en.cies. The following codes- among others contained such a 

(*) E. g, , See. Bulletin to Members of Mavonnaise Code Authority from 
Mana£-ing Ag<=.nt,.Ar)ril 20, 1934; (in ,I^Jl Piles, Mayonnaise.' 
■ Industrv. ) . . 

(**) .Minuter of Code Authority of Stn.ictural Clay Products Industry, 
March 12, 1935; in NEA files, Also, Resolution cf Code .Authority 
of Agricultural Insecticide and Fungicide 'Industry, February 20, 

.,..,.1-935, , , 

(***) See tabulation in Apr^endix' C, Exhibit II. ' '■ '"' ^- ' ' 



provision: Baking, BottlRd Soft Brink, G^nDsui, LimR, Criished Stone, 
Structural Clay Proa.ucts, VitrifiRd Clay Se^^fir Pip«, Clay Drain Tile, 
Bituminous Eoad Material, and a nun^ber of the codes for the vrholesaling 
and retailing trades, • 

3, Agency of Collection Actvially Et^tahlished 

In forty-six of th--^ fifty-seven industries studied the codes re- 
quired that orices "be filed ^-ith the "code authority". In ten of these, 
national code authorities (as distinguished from trade associations) 
were established rrhich functioned as price filing agencies. These indus- 
tries and th(3 agencies which received and disseminated the filings were as 
follows 5 

Industry • Ap-ency 

Business furniture National Emergency Committee — executive sec'y 

Canvas goods Canvas Goods Industry Code Authority 

Coffee Coffee Industries Committee 

Cordage and twine Cordage and T-vine Code Authority — managing 

Funeral sun-oly Funeral Supply Code Authority — secretary 

Macaroni Macaroni Industry Code Authority 

Sci'=ntific apiiaratus Scientific Aprjaratus Code Authority 
Shovel, dragline & crane Shovel, Dragline and Crane Code Authority — 

"Valve and fittings Code Authority for Valye and Fittings Manu- 

facturing Industry 
Wood cased lead pencil Code Authority for Wood Cased Lead Pencil 

I-anufacturing Industry 

In addition, in five industries the national code authority apnointed 
regional agencies to handle filings Miicli were pither regional code 
authorities or agents other than "confidential and disinterested." 
These industries were crashed stone, ready mixed concrete, retail monument, 
salt -oroducing, and wholesale confectiona.ry. In the "baking industry, 
raem"bers wore instructed to file two" coT)ies of price lists with the region- 
al agency, one of which was sent to the National Bakers Council, the 
national cod<? authority; if no re.q-ional agency was set up in any region, 
filings were to "be made directly ^ith the National Bakers Council. (*) 
Thus in sixteen of the industries studied, prices were filed as the code 
required with the newly formed agency set up to administer the code. 

In seven industries in which the code named the code authority or 
some agency designated "by it as the filing agency, distinctly different 
types of agencies were actually set up. In four of these, folding paper 
"box, floor and wall clay tile, envelope, and the kraft paper and sulphate 
"board divisions of paper and pulp, the firm of Stevenson, Jordan ahd 
Harrison servad as the central filing agency; this is a firm of management 
engineers. (**) 

\* J Lette r from Eugene Lipp, Acting Chpirma.n of National Balcers , Coun- 

cil, to meraljers of industry, July 9, 1934; in NRA files, "baking 

(**/ See Chapter IV, xi. Ji30ff for a partial acco^mt of the activities 


In ■^•he gas ar)-clianr,p, irA-u.^tvy, fi.T^ p^e.ncy spI <=^r:t«=!d -^a.s ths firn of Fraz'='r 
and Tortet,' certified 731113110 acconntnnts, ^hose officers served as ex- 
ecutives of the code authority fi,lth'^U:P'h tlie-r rrore not nemlDers of *the 
industry. The candy "!?)nnfr"-.-'-'Tr:n.-7 ir/^nr-trv Ge^-^ct^d Eun and Bradstreet 
as the central afenc"- i:o r"--- •-'• r-i'': ''ic^^ri'? it=' filine;3. Reference is 
made in the structural clay Tjro'iucti^ fi^es to filings i"ith the Consol- 
idated Filing Bureau, Inn., of Cl'=v'=iand 'but the na.ture of this agency 
is not clear fro'n available "laterifls. 

The tyne of agency most commonly set up as the filing agency in the 
industries studied in ?3 of the 57 codes -^as the trade association. In 
most cases this was nont^mnlated in the code where the association was 
s-oecif ica] ■'y designated as the price filing agency or was named as the 
code authority, which in turn was so designated. In a few instances 
Trices were filed with the trade association although th^ code did not 
clearly designate it as the code authority. 


■A-gri cultural insecticide & 

■A-STjhalt shingle cS: roof ing 
Carlon Dioxide 

Carpet & rug 

Cast iron soil pipe 

Copper & "brass mill -oroducts 

Electrical manufacturing 

Farm equipment 

Fertilizer . 

Fire extinguishing a-pTjliance 


Machine tool & forging ' ' 

Marking devices 

Metal window 
Nottingham lace cxirtain 

Paper & pulp 

Plumbing fixtures 

Rubter manufacturing 


Agricultural Insecticide & F-ungicide 

■ AsTDhalt Shingle & Roofing Institute 
Carbon Dioxide Institute (first part 

of -Deriod) 
Board of Trustees of Institute of 

CarDet Manufacturers of America 
Cast Iron Soil Pipe As so elation" ciAcr*©- 

Copner & Brass Mill Products-Executive 

Committee • 

National Electrical Manufacturers Ass'n. 

and subordinate supervisory 

National Association of Farm Equipment . 

^Manufacturers and its successor, 

Farm EquiiDment Institute 
National Fertilizer Association 
Chemical Fire 'Extinguisher Associa- 
American Ladder Institute-board of 

National Machine Tool Builders Asso- 

ciation-e'vcocutive secretary 
Mayonnaise Institute 
International Stamp Manufacturers 

Metal Window Institute 
National Associa.tion of Lace Curtain 

Subordinate associations of Americaji 

Paper and Pulp Association 
Exectitive secretary of the four con- 

stitxient associations 
Rubber Manufacturers Institute 


Set up panf^r "box 

Ste°l castings 


Underwear & allied r^ro-r-.-cts 

National Pax)T Box Ilan-ufacturers 

Association— executive coninittee 
Steel F'o-uJiders Society of America 

Tag I'an-'j.fant-ir'='rs Institute 
'■nder'^'^'=r Institute 

Six of the industries examined '^ere required "by their codes to set 
up "confidential and disinterested" arencies for filing iDurDOs^s: "build-" 
ers supplies, ca,r"bon dioxide, cen°nt, copi^er, industrial alcohol, and 
lime. In two of these, "builders suiD^lies a.nd lime, such agencies were 
to "be regional. In the "b^iilders sixp-olies industry, the national code 
authority instructed its local reioresentatives that local filing agents 
must not "be raerahers of the trade, a.nd that where the local representa- 
tive himself was a meraher, he must designate some one else as agent. (*) 
The chairman and secretary of the national code authority designated 
themselves as filing agents for certain territories, although presuraahly 
they were raera'bers of the trade. (**) In the Ca.r"bon Dioxide Industry, 
where the requirement of a confidential agent was set up in an amendment 
incorporating Office Hpmorandura Ho. 228, (***) the code authority pro- 
ceeded to ap-ooint the president of the Car'bon Dioxide Institute as the 
agent. In the cement and industrial alcohol industries, the filings 
seem to have "been mailed to the office of the code authority; informar- 
tion is lacking as to what segregation was made of the confidential 
agent function and other code authority functions. Prices were filed 
in the copper industry with the Sales Clearing A^ent, Mr. R. R« Eckert, 
who also administered the sales quota iDrovisions of the code. In the 
lime industry, where filing was on a re^^ional "basis, local confidential 
agents were selected "by the district control committee in each region. 

4, Performance By Agencies 

Detailed evidence Toearing unon the degree of technical proficiency 
achieved "by the various a.gencies is lacking. Without question there 
were wide differences "between the efficiency Mth which price filing 
systems were operated as "between industries. Some agencies aggressively 
faced the tjro'blems of setting up an efficient and smoothly operating 
system '^hile others made little or no effort to effect some degree of 
organization made desira"ble "by the immense amoiint of data that had to 
he handled, (****) The pro"blems involved centered around such malfters 
as instructions to mem'bers regarding mechanics of filing, classification 

(*) Code Authority Bulletin No, 2, To All Code Authority Representatives 
and Piling Agents, Novem'ber 9, 1934; (in NRA Files, "builders supplies 

(**) ReiDort "byAdninistration Hem'ber C. S. Long to Deputy Administrator 
F. A. Kecht, Decera"ber 10, 19^4; in NRA files, "builders sup-olies 

(***) See Appendix C, Exhi"bit V for content of this memorandum, 

(****^For an example of inefficient administration, see the Code History 
of the Retail lionuinent Industry, p. 9 ff. 


■■. *-102-. 

of products, Tiniforn r'=nD(>rtincr forns, niaintf^nar.ce of filRs and the ' 
distrilDution- of ■ irifor^iation. 1'h'=i diff Rr^nc^! "bRt-^e"!! desirable efforts 
for the elirainatioA of cohf'i.sin^ and rOij^gs Thich conceal some kind 
of control measure is _verv sli;-:;:i.t in -nan^'- irista-nces, 3-n.t there is a 
considerable field "i'thi-n -rliich' a oejitrnl a'^^enc'T- may dperja.te' to iDro-duce 
a smoothly fxmctioninp;'i for miTDlicity "itho-at trespassing upon 
•the question&ble domain of'-ofic^' control'. The fragmentary evidence 
yields th6 general impression that ranny of the a.?encies might have done 
a good deal more 'toward estahli&hihg sn -efficient system of puhlicity 
.■■■than they did. There 'is no co'-aht, however, thp.t mechanical shortcomings 
of 'the puljlicity n-lans in practice were often due more to a lack of' 
interest on the part of the agencies in the publicity function of price 
■filing than to an- inherent lack of ability. Protests from memters' that 
■■■.filings were never' received or that they were frequently delayed in .. 
di^'seraina:tion a-e examples of such short comings.' ('*) 

v" ^ The t-jn^e of agency selected is, no douht, an imiDortant factor in 
:■ -determining the technical success of the nlan. The newly formed code 
- authorities, whicrh were engaged in- administering and enforcing all of 
the othfer. Provisions of the c6des, were frequently too pre-o.ccupied with 
other matters, to' give ■adequate- attention to the mechanics of- th% iDrice 
filing pl'anr 'and in those cas'es where a nemher of the trade served as 
secretary' and handled the -orice filings, little experience was "brought 
to the joh, From the single sta,ndpoint of technical 'proficiency, the 
. old estaolished trade associations "brought to the task a. high degree of 
organization and a staff trained in cooperative activities such as the 
price filing Plan -involved. The same observation is pertinent to firms 
of management' engineers, such as Stevenson, Jordan, and Harrison. It 
was the other ohjectives "beside T^u"blicity ^hich certain trade associa- 
tions and management engineers read 'into price filing whidh raised 
question a"bout their usefulness as central filing agencies., . The use of 
a qualified statistical firm, such as the candy manufacturing industry's 
selection of Dim and Brads^reet, asciired an afi-ency wtich was techjiically 
competent to organize and handle a price filing plan. 

■ Although there is no positive evidence that discrimination was 
practiced in the esta"blishment of priorities in the tine of release of 
information as "between mem"bers, in various industries the individuals 
who actually handled' the filings were mera"ber5 of the trade and according- 
■ly had ^ advance knowledge of the p"rices reported "by their competitors. 
■Lhig situation existed in the -crushed stone, retail monument, "builders 
.supplies and shovel,- dragline .and crane industries, among others. It was 
thus possible for the filing agent or mem"bers of the Codq Authority to 
use the information filed to their own advantage. Much opposition de- 
yelope.d among members to filing in such instances and in some cases they 

(*) See letter from Natio"^^ Poimdry Co." to'Xs't Deputy. Freund, 
Decem"ber 1-1, 1934, for complaint against the Code Axithority 
of the Cast. Iron. Soil Pipe-. Industry t-hat- it- delaved or -f ailed ' ' ' 
to fnail out price lists at all. Similar complaints from other 
,__.^^,, .mem"bers of this indTa,stry a-re in the files. Letters f rom menv- 
bers of the business furniture and shovel, dragline and crane 
industries attest to the same situation. 



refused to file as lonf; as the filin-r' a^ent was one of their competitors. (*) 
In certain other industries, nota"bly cprlion dio^-id^", nnn-memhers of the 
trade association objected to -filin-?: -ith the association on the ground 
that it would he to their disadvanta.'^e, (**) 

The discri-ninntory activities of central a-^encies in administering 
the -Dublicity features of -orice filing ^er°. pnnng the factors "hich 
prompted I^^EA to formulate a rii-'id -oolic:/-, as of June 7, 1934, that 
prices should he filed only '-'ith a "confidential and disinterested 
agency," (***) 

3, Participants in Price Filing . 

1, Issues and Controversies 

A central prohlera existing in -orice filing plans arises from the 
question as to' what -oarties should file prices', once it is determined 
to establish -orice publicity for a given -oroduct. If particiiDation is 
erpressecL in terms of "industry members", there remains the. issue of who 
shall be regarded a.s industry members. .Four main issues may be distin- 
guished in the problem of -narticipation -^hich call for decision in the 
setting up of a prico filing plan. The first of these is the question 
of whether all producers of a given nro duct shall file i^rices or whether 
there shall be a selective plan in which some comt)etitors are, for one 
reason or another, exemoted. The second is whether filing of "orices and 
general participation sha"" 1 be mandatory for each member or optional 
only. The third is whether or not distributors of the industry should 
be reauired to file i^rlces as well as the manufacturers. Finally, a 
problem ap-oears ^^ere the ijroducts of certain, producers fall chiefly 
in other industries but where a part of their products compete 
directly with the industry concerned. 

Unon the first two points there was little argiiment or discussion 
during the code writing period, Tha.t the price filing^ requirements 
should apply to all members and that the -oarticipation should be manda- 
tory was never subject to particular question. 

A great deal of controversy occxirred over the definition of enter- 
prises which should come under particular codes, and the scope of the 
price filing requirements entered only a.s one of a number of considera- 
tions pertinent to the issue. Factors peculiar to each industry precipi- 
tated the discussion and determined the ultimate solution. It is 

(*) See letter from administration member of Crushed Stone Code 
Authority to Deputy Janssen, October 15, 1934; in NM Piles, 
crushed stone industry. Also Min^Ltes of Retail Monument Code 

Authority Meeting, November ?4, 1934, p. 271 in NEA files. 

(**■) Report on Ca.rbon Dioxide Industry, A. F. O'Donnel, Division 

of Research and Planning, IIEA, May 1935, NRA filns. T ■■■•' 

(***) Poli^cy Memorandum No, 228; see Appendix C_, Exhibit V, See Chapter 
VI, p. 451-474for discussion of the application of this policy. 



imiDOssitle to allude here to the issues involved in each of these dis- 
cussions; the end result, hov^e^ver, r^s that the scope of the codes 
varied widely, some 'ap-olving to a very Tjroad industry definition -'hile 
others ap-lied to a ver^r narro-l-^ r.efined and circ^irascribed industry. 
These jurisdictional r..ontrov°rsies ovnr the ' scope of the codes presaged 
future proljleras as to the scope of the ^;)rice filing requirements. 

The issue as to Vnether distrih-'i.tors of the industry should he re- 
quired to file under the sane plan as' that under -rhich manufacturers ' 
filed reflected far more than a mere administrative isroblem, A ^riumher 
of industries claimed that the very success of snj kind of nrice -puh- 
licity yas determined ty -hether or not distrihutprs were required to 
file prices. This was most comnonly asserted in industries I'^here some 
of the manufacturers competed directly with johhers and wholesalers. 
Advocates of the inclusion of distributors in ^rice filing s'tressed the 
relation of this to the publicity function of rjrice filing as well as 
the control function. Thus, .the Mayonnaise Code Authority said: 

We feel that there cannot "be open priqe competition for 
a part of the Industry unless there' is open price compe- 
tition for all... The wholesaler can sell either at the 
manufacturer's own r,rice or fiT- his own price and such 
TDrice becomes effective with the wholesalers. The sole 
purpose of the amendment to be brief is to establish 
^ OTDen price competition all the way through, which we 
feel tends to carry out this -)rovi-sion of the act in 
all particulars." (*) ' 

The requiring of' distributors to file -orices, according to one of the 
largest members of the same industry, the Kraft-Phoenix Cheese Coroora- 
tion, was only designed 

"to carry to the logical conclusion this oi:en -orice system. 
We want to. know what jobbers, who are competing with us in 
selling to retailers or comiDetihg with our distributors 
in selling to retailers, have as a -price." (**) 

Efforts were alr.o made by manufacturers to include distributors under 
the same code as themselves in order to bring them within scope of the 
ll^'il ■^l''^ requirements and other code provisions. The distributors, 
on the other hand, were usually :mwiiling to file prices with any agency 
wherein they had no re^r-^sentation and were averse' to coming in under 
the manufacturers' code. The UM acceded to the wishes of the distribu- 
te^: i" ™^s^-f these early controversies and did not, as a rule, urge 
them to i^articipate in the mblicity plan provided for the manufacturers. 

grans griTDt of Heari ng on Amendment, statement by'W. F. L.' Tuttle. 
Managing Agent of Code Authority, April 12, 1935, p. 94, NRA files. 

(**) In loco cit.. p. '99. 

(***)See Chapter IV, p. 272-313 for full 'discussion of this t^oint from 
•the aspect of r)rice filing control. 


-1 5- 

2. Code Require,: i(-nt^? 

Mandatory filing b^ lutLibti's of an industry was provided for in prac-- 
tically all of tht 444 open prict coqch. Tv.'tnty-f ive c-jdes providea that, 
in lieu of filing, a :..tiuDt.r i:ii.;;jjt acct-ut an nis own tht lov/er^t price on 
lile for other luenioero, A;v:..nv; tho coae ■ CvntainiiV-' such a provision were 
Iron and bteel, Inr-riCEn G-lassware, jj'olt'inrC Fapt-r 3ox, Taii, Envelope and 
Glazed ana Fancy Paper. All A the other coac; made filin2; by the indi- 
viaual member ooligatory wnenever price filing '"as actually set up. Only 
three codes requireo that certain types of aistributors file prices with 
tne CHntral agency of the laanuf acturing industry: the Agricultural In- 
st-cticiae ani. i\angiciae, Cjrk Insulation Livision of Cork, and Piece 
Gooas Selling Division of Wool Textile Codes required thf t members enter 
into contracts with their controlleci sales representatives binaing the 
latter to lile prices v/ith the industry agency. (*) 

3. Code Aathority Expansion or Modification of Code Provisions 

Because of the fact that ICIA price filing systems were typically 
mandatory, insofar as filing by incividual laembers was concerned, the 
field for adi:iinistrative discretion with respect to participants in the 
price filing was small. C*"^) That is, tnere w=s little range for ex- 
emotion of members manufacturing a particular product. Conseq"' .ently, 
in the code authority ruling'-; examined, almost universally the instructions 
were that all members should file. In the case of four paper codes 
studie-^, Invelor)e, Folding Paper Box, Paper Listrib\;ting, and Tag manu- 
facturing, the code provided that members need not file their own prices 
if they chose to indicate that they woxild not sell below the lowest price 
on file for some other I'lember, ThU'^. , in a simple ihysical sense, the code 
itself permittea some members to abstain ir:.m filing their own price 

Asside from genuine members of the industry, the question of filing 
by certain non-:.iembers causea much diif ic-.l ty. This was only a part of the 
larger ana more fandamental .rcbl'em of classification of members into in- 
uustries fcr code making p\-rposes. A non-incustry memoer for example, 
mignt aevote a small prrt of his efforts to proaucing ■ goods classified 
undei the ind-..2try in question. It was important to this ino.ustry tha.t he 
file prices v/ith them, since hid product would be in airect competition 
with those of inaustry memoers. On the other hana, he was under the jur- 
isaicti:,n of another inaustry. This problem presented itself in the 
scientific a.pparatus iriaustry ainong others and a ruline was obtained from 
MRA that non-members of the industry must file prices with the code auth- 
ority- of the industry ii and wh^n they sold industry products. (*-'^, The 
p robXera b ecame more complex fi\en it wjas a qiaiest ion of ,9Ubst itute bUy no t 
i"^) See Chepter IV, pp. 580-293 for aiscussion of other methods of 

securing filing oy aistributors. ' ■ • -, 

(**) It should be noted that in some .industries the only sanction applied 
to members who did no.t file v/as the witiiholding of price informiation 
filed by other m.embers. Thus, in actual practice, these plans really 
0])ei?.ted as voluntary ilans despite code provisions to the contrary. 
{*** jMem.oranduni from ass't deputy chief. Government Contracts Division, 
April 17, 1935; i_n J^'^.A Files, scientific apparatus industry. See 
p. 2cO concerning ruling thpt hardware wholesalers must file on 
fai'm eouipment products. 


similar products. Althou.!e;h this sitxiption presented serious difficulties 
in cstf blishin,;^ and effectively oierRtine; price filing systems, it was 
simply a part of the larger aoi.iinistrative problem of classification and 
jurisdiction faced in the adiaini^trrition of all trade practice and labor 


j^fforts were laaae oy r nu.ioer .,f cude auta'jrities of industries whose 
codes aid not cover clstriDutors to r;ccui'fc a rulin.^ from KKA that dis- 
tributors must file pi'iccs with them; tnis occurred in the floor and wall 
clay tile, uia^yonnai se, ana vitrified cia^ sewer pipe industries among 
others. IIEA g^enerr-lly refused to grant such requests, however, and many 
inaustries subsequently asss rteo. that the effectiveness of their price 
iilin,^ system wrs seriously i.iipaired tnereoy. (") 

^. Perfori.iance By Members 

evidence pertinent to the question of the br-sic participation in 
price filing, that is, the proportions of industry membership which 
fileo some kind of information, is largely qualitative in character and 
gathered 1 roiu a variety of sources. The evidence obtained permits a rough 
three-fold classification of the proportions of members of industries 
in the code sannle W'^o filea their prices at one time or another. The 
first group includes those industries in which almost all members of the 
industry had prices continuously on file for an extended period. On the 
basis, of available evicence about one-third of the industries in the 
sample apparently fell into this category. The C-ide Authority of the 
Agricultural Insecticide and Fanfl;icide Incustry reportec on May 8, 1935 
that ninety-nine percent of the industry were comilyins; v/hile the status 
of the other one percent under the code was d.oubtful. C*"^) In the Fertil- 
izer industry, where mem.ber';: excl-ancTecL prices directly, oar ticipation 
in such exchange of schedule;-- ^""as rcnortec to be practically 1'>'''S. (***) 
The Administration Lieraber of the Code Authority of the industrial alcohol 
industry reported to NFA. on May 6, 195;.. that all members of the industry 
had filed prices. In the minutes of a meeting of t.'ie machine tool and 
forging industry of October ,', 1934, it wa • reported that 259 out of a 
total of 272 members hac. filuO ,jrices. The secretary of the Code Author- 
ity of the Metal Window Inci.'Stry reported in a questionnaire sent to him 
in January, 1936, that, while only 36^ of the members of the industry 
(both by numbers and volume) filed curing the first half of the code period, 
this grew to 100^5 in the second lialf. The administration members of the 
selt prooucing industry reported to N:iA on May 15, 1935, that all members 
of the industry had filed prices. The Code Authority of the Scientific 
Apparatus Industry reported on iJecember 7, 1934, aoout 95^i comoliance with 

l^fe-j'-ea[y-j-j'ftg'>nt t o file price:;. {*'<'**) The ma nr^ger of t he Vitri fied 

(*) Exceptions to this policy are noted in Chapter IV, pp. 278-281 

ana the significance of the problem from a control stanUooint 
is aiscussed at length. 
(**) Letter to C. N. Liaued, (in NRA files, agricultural insecticiae and 

fungicide iridustry. ) 
(***) M&rioi-a^ndmi from Simon Wiitnoy Chief of Fertilizer Price Filing 

St'.c.y to L. Baird, January 15, 193^t; basea on statements of offi- 
cers to National Fertilizer Association, NiiA files. 
(*""'') Lgtjters to Ass't Deouty Hand; (_In NHA files, scientific apparatus 
inaustry, ) Repented comdaints that filings could not be obtained 
fror.i resellers (suoposculy cubject of price filing) suggest that 
this estimate does not include all of these, 

-1 1?- 

Clay Sewer Pipe Code Aut^iority ;t-"tec ~in November ,?7, 1934, that all 
me.iibers of the Spstcrn r'-iii n hp-a filbd urices. ( " ) Almost all of the 
memoirs of the copper and brr-ss r.iill products iiidustr;S' filed prices with 
the exception of the Tew Yorlc distri batorij ii] the brass division. A high 
degree cf participation wa;? '•c[-iii\rc.'.: in the various divisions of the 
paper and pulp imuiitr;/- e:':ce..tiug: tne ti.'HU-. paper ana bogus wrapping 
paper divisions. About all cooe nieiJibi^r;;; of tho cjTC-e.P^e ana twine industry 
filea but eventually the oi ti n I'r i.i ji'i lon-ijade ')roc.u.cts aria from 
the Philippines aentroyea tiis li1 ictivcnc-ss of price liliry^. (**) In 
the crusnea stone inaustry, stateiaents Dy tA".'enty-one regional code auth- 
orities to I'IRA field staff uieiiioers inaicate that in all but two or f-ree 
of these regions between ninety-five and one hunarea percent of the mcmhors 
filed. Otner ino.ustries in which practically all members filed prices 
v;ere asbestos, asphalt shin^^le ana rojfing, cement, copper, electrical 
manufacturing (in aivisions v;here estaclisnea) , farm equipment (***) 
mayonnaise, plui.ibing fixtures, ('f***), steel castings, lime, metal lath, 
nottingham lace curtain, and the mechanical rubber goods division of the 
rubber manufacturing. (*'f**'f) 

Included in the secjnd -grouping of inoustries are tlx) se in which 
compliance with the requirement to file was substantial but only fair - 
V'.'here rou^^hly from fifty to ninety percent only of the aembership filed 
prices. About forty otrctnt .:f the industries in the saiiple fell into 
this category. In the builders supplies inaustry a substantial volume 
of filings were received by the middle of 1934. After the issuance of 
Executive Order Fo. 6767 permitting quotations to goverruuents at 15"?^ below 
filed price, the code authority raled tha.t the code did not require price 
filing anc returned all pric-s filed in an effort to end price filing; 
filing by members practicgllj. ceased thereafter. (=f*>f^**^ In the baking 
Industry an important share of the rhole-ale bakers filed prices but 
several stays postponea the requirement that retailers file; a consider- 
able number of them aid, however, continue to post prices as required. At 
one time during the ni story of the Easiness Furniture Code, as much as 
eighty percent of the member^hiii filed, 'out the failure to secure approval 
from NEA of a resale price iii;d ntenance plan causec. a prcgrtssive abandonm.ent 
of filing. In the coifee indvisti'y, with a. total membership of about 
twelve hunarea, lOSo r'embers filed one or more price lists, 601 memoers 
lilca two or more, i^87 fiiea five or more, and only 125 members filed 
10 or more price lists auring the year and a quarter of code operatioii,(-''T'^'^-'' 
('') Minutes of regional code autnority meeting; in WixA files for 

vitriiieu clay sewer pipe inaustry. 
(*'') Code History of anu Twine Inoustry, p. 12. 

(*"**) witn the e--:ception of inaepenaent wholesalers, nominally 

subject -to the code. See Chapter IV, p. 280. 
(****,* With the exception of indepienaent wholesalers, nominally 

subject to the coae. See Chapter IV, p. 274. 
(^f^^^>f) Sources of inf on^at ion regarding percentage of industry filing 

prices in t.;ose nine industries were either the respective 

coae histories or the verbal statements of FRA staff members 

who were in clos^: touch j)'{itli_t_h_e industry daring the code period. 
{"■'f-fff) Code history for Builders Supplies Industry, Exhibit y. therein. 
(*=''*^^^) "Price Control in the Coffee Industry," February, 1936, p. 53, 

(Trade Practice Studies Section, Livision of Review), a study 

by Harry S. Kantor. 


In the canrly ino.u'^.try r. re -ort by I'o.n =:nd Bradstreet, the central agency 
for that induF.try,' for th; three ni-nths jeriod ending October 1, 1934, 
indicated that 457 me.:ibers out of a 'tot^l :i 75 ■ h:d filed prices. (*) 
Certain members :.f the carbon r'.ioxide inr. -^.try consi'^tently refused to 
file prices with f'^ 'v rbon dioxide institute; the administration member 
in 8 report to ITitA on April U , I2.:b, t :-t i.aet'jd t'lat ci.^hty' percent of 
the industry were wiliinc; to lile prict'j. 

In the invtlo le incustry, a svibdt"ntir-l 'jait of the membership did 
not file [jrices of their own, out in accordance with the peculiar pro- 
visions of the code, they were automatically deemea to have filed the 
lowest price and the most favorable terms on file. 

A brief filed by the Code Authcritj- of the Folding Paper Box In- 
uustry on January 10, 1935, stated that 212 out of a total of 292 members 
were complying with the open price plan on made-to-order business. (**) 
The funeral supply industry first set up its plan on a national scale 
ana received over li!,uOO filings; it was then fo^ond administratively 
expedient to set up re-^ional agencies with which large nuiibers of 
members continued t: file. Houghly one-half of the gas appliances members 
filed prices during the latter half of the code period. A number of the 
smaller members of the ladder industry refusec to file. A bulletin 
issued b.> the Code Authority of the Macaroni Industry on May 17, 1934, 
stated that 291 members hacl filed nrices; the tjtal membership of this 
industry wrs some'Vhat over three hundred. A questionnaire answered by 
the former secretary, of the Code Authority of ■ the Markirg Devices Industry 
in January 1936 stated that, during the first half of the core period, 
rixty percent filed while durin.z the second half of this figure rose 
to sixty-five percent, A console er.-^ble volume of filings was received in 
various regions of the paper distributing industry but since members could 
adopt the filed -nrices of others, it is not possible to appraise accurately 
the degree of coiapli ance. In the retail mommient industry the degree 
of compliance with the filin.; requirement varieo widely with regions 
but inspection of figxres' for ciffcj ent rtgicns tends to confirm the 
reasonableness of the esti;.iatt of sixty oorcent quoted in the Code 
Fistor^. ('**) A bulletin of the Code A-jthority of the Shovel, Dragline, 
and Crane Industry on Oct'Oer 30, 1934, stated that tv/enty-oneoxit of a 
total of tnirty-thi? e Companies had filea prices. Most members of the tag 
industry did not file prices of their own but were (according to the 
Code provision) deemed to have filed the lowest priceon file. By i^ebruary 
19, 1934, 123 members out of s total of 247 members in the valve and 
iittings inciustry were reported to have filed prices. The refusal of 
circular knitters In the undervrear ana allied products industry to file 
prices aecreaseu the compliance fig-ares of that industry sijibstantially. 
In the wnolesale confectionery ind'astry .vbout 75/c' of the straight-line 
confectioners- an<i about 6(Jy of the allied-line confectioners were reported 
to have filea. ('^*»'^) 

In the tnira group, which CQiJViJrises about fifteen percent of the 
inuustjies in the sajnple, raemj).ejfs ^id not, file prices to any important 
(*) Research ana Plannin-/, Division oi NRA, code adraini strati on report, 

April 1935, pp. 47-^to NHA liles. 
(*") The plan did not require filing on all transactions, 

(***) P. 35 

(****) Code History of Whole;^Rle Confectionery Industry, pp. 35-36. 

. "1 : '. n_ 

extent. In the crnvp.^-. ■■j:,K.r in(.a-.ti^, mciuoc r", -f the i"holesale div ls ion, 
foui'teen in nwauer, electee not to file pi'icea at all; ictailers, con- 
sisting of three thousand to trirt^-five hiuidred mei.ibers, made an 
attempt to ooerste their y^:^-,teh. cut .. il,; e :-;.apll proyorticn of the total 
ever filed prices. T' c for.-::c- "ecret? x„ o.;, ti.e Code A;it ority of the 
Marble v^uarryiii; ano. iii"»i;tiiug Inaastr^ r.tateu that price filing was 
never operative in that inaastry. (*) Relatively few of the l-iL ,>:''■') 
units in the .uetEil Tire gnu oattery Jnci rjtry ever file', prices; filing 
Vi/as attempted in only v itvv of the i.iotrOjj.jlitan areas and only durii:g 
a period of foar months when the eLier_i,ency minimum was in effect. 
In the rubber footwear ana heel anc. sole divisions of rabDer mrnufactur- 
in^ tne smeller meiabers _.f the industry consistently refusec to file on 
the ;j;rounds that their customary aifierentisl under the selling prices 
of the better-known brands would soon disap.-ear unaer price filing, 
thereby depriving them of their accustomed shai-e of business. The failure 
of ¥RA to approve a mandator^ cost estimating manual for the set up paper 
box inaustry, which was for a time in use in lieu cf price filing, was 
followeo. by general n^^n-observance cf the price filing requirements. 
In the structural clay products industry lack of product standardiza- 
tion ar.d failure of IffiA to giant a zoning plan greatly retard.ed filing 
of price-.'. (*'') A letter frora the former secretary of the wood cased 
lead oencil industry en ^''an'oary 2' , 1936, states that oarticiDction in 
the price- filin-; system "'as ne=cli :;ible because of the failure of IJBA to 
a.pprove cortain supplementary control previsions requesteo. by the 

Scattering returns to a questionnaire sent to former secretaries 
of coae authorities' of industries whjse code contained a price filing 
provision secured the follovdng uata for industries not included in 
the code sample. 

(*) Bid filing was, on the other hand, well observer out sid.e 

Metropolitan Hew York. 
(**) Minutes of National Cot.r Authority Mcctin..^, March 8, 1934; 

(in LIRA files struct^"ral clay proaucts indiistry. ) 



_ of^ K'e mbers Filin.'^ 
I'ot 'hrlf of Code 2nd half of Code 
I naus t ry _ 'criod p eriod 

Asphalt < mastic tile lo-t 100 

Concrete mixer • ' 9; 100 

Household ice reiriger&tor 8o 15 

Metal tank 65 85 

Motor fire apparatus ?8 90 

Pulp & paper mill wire cloth 96- 97 

oheet luetal distrioutors 15 

Talc ana soapstone 80 16 

Transparent materials' 25 . 75 

Waru air furnace -90 95 

V/ater met-^.r I'JO 100 

Car d' clothing 10' ■ ■ 100 

oliae lastener ■ 100 . 100 

Unit heater i: unit ventilator 100 ■ • 1' '0 

Commercial refrigerft or 50 ' 30 

Boiler manufacturing "'BO , 95 
Cutlery, Manicure implement, etc. -95 .75 

Cutting die 89 

Perfume and Cosmetic — 85 

Power S' gang lawn mower ' 80 . 80 

Road machinery manufacturing 97 97 

Tile manufacturing 81 81 

Tool ^ implement mfg. " 94 ■ 96 - ■ 

The evidence upon the f-tcnt to which distrihutoi^s filed prices with 
the central agency of the mamafacturers is most negative. In various 
industries where the codes orovidca that jobbers or other distributors 
file prices, such as asbestos, farm equipment, carbon dioxide and the 
automobile fabrics division of rubber m'^nufacturing few independent 
and multiple-line distributors tiled prices. Voluntary filing b;y dis- 
tributors was achieved in few ino.ustries. In none of the twenty-five 
industries whose experience with respect to tuis ooint was included 
in the questionnaires returned was it rep,jrted that distributors filed 
prices with the industry agency. These remarks apply only to manufacturers' 
coaes. It is apparent that price filing in nuiaerous distributing trade 
cedes cov(;red tlie resales of many of these manufactured products. 



C . I nformation Included in Pilin ;^ 

1. Issues and Controversies 

The term "prices" when used in connection with price 
■QulDlicity is not a simple concept, as hreif examination will make 
apoarent. Instead of there heing only one variahle in the case of the 
price of a given prodact, actiially there are a great number of "oossihle 
varia'bles all of which constitute a part of the actual price of the pro- 
duct. In the first place, different prices are charged to different 
types of tuyers "by one and the same seller. These may take the form 
either of net prices to each class or of varying discounts from a' list 
price or a master or gross price list in use "by the entire industry. 
In the second place, there are in any industry a great number of con- 
ditions of sale respecting which sellers can V8.ry the favorableness 
of their -berras. A change in any one of these affects to a greater or 
less degree ihe final net cost to the bu;;'-er and thus becomes a signifi- 
cant factor in 'orice com^ietition. Some examples of these supplementary 
pricing factors are quantity discounts, cash discounts, free credit 
periods, product guarantees, pries gua,rantees, supplementary services 
rendered and allowances for services rendered the seller by the buyer. 
TYithout price publicity these supolementary terms of sale may remain 
relatively stable, so far as individual members and group practice are 
concerned, or they may serve as the nost active regions of price change. 
Price filing malres changes in the nominal price a matter of more common 
and more prompt knowledge tliroughout the industry, so that members 
could, unless the-r were obliged to file such terms, resort to malting 
one term after another more favorable to the customer in an attempt to 
find a tool of price concession which might be kept secret from competi- 
tors. Thus, theoretically publicity of prices requires that all of the 
supplementary'" factors be included within the scope of price filing. 

The concrete problem, then, which faces those administering a 
system of price publicity is to design means of bringing all significant 
factors within the scope of the publicity nlan. One element ^of'-tfeis 
problem is the question of whether nominal prices shall be filed in the 
form of net prices or of discounts from a list price of some form. 
Another relates to the degree of detail necessary in order to make the 
filed information significant. A part of this, also, is the question of 
what t^Tpes of information, short of ever?/thing, are most important. 
Finally, if it is deemed necessary to require the filing of all pricing 
factors, how possi"ble is it to achieve this end? These are the important 
considerations in determining what precisely should be included in the 
filing of ''prices". 

No particular contro-versies appeared during the code-writing 
period with respect to the scope of price filing so far as information 
was concerned. In a few cases where the filing either of net prices 
or of list prices and discounts was made mandatory, members accustomed 
to quoting in other ways were not especially anxious to chpjige to a 
new method.- In many cases the immensity of the iiroblem ahead, that 
of secioring complete publicity of terms, was not fully realized at 
the time, and so the issiies were not crystallized. In cases where 
it was realized, some members were dubious about the cost and effort 



involved in reporting detailed information, and the complexity of the 
price files vhich would was also a soirrce of dismay. But in 
general, there arose very little op-i:)osition to the inclusion of all 
terms and conditions within the scope of tne price filing plan. In 
some industries efforts were nade to dispose of certain types of con- 
cessions as competitive factors "by sec-oring provisions in the codes 
either prohibiting certain co.icessions or limiting their amount. The 
ERA granted these readily in the case oi a limited numher of terms, 
such as cash discounts or rebates, but became progressively reluctant 
during the period of h'RA. to permit such artificial rigidities to be 
introduced into the price structure on any extended scale. (*) 

2. Code Requirements. 

The inadequacies of a scheme of publicity in which only nominal 
prices would be publicized was generally recognized in the codes, as 
is evidenced by the fact that only thirty-two of the 444 codes required 
simply that "prices" be filed. Even in these instances, informal code 
authority and WLk intcr-oretations usually expanded this requirement to 
cover pertinent tei--m.s of sale. Tlie remainder of the codes prescribed 
in either general or more specific terms for the filing of additional 
information pertaining to the individual, pricing policies. Three 
hundred and sixty-two codes required the filing of "terms and conditions 
of sale" along with prices; in al.most no case was there further elabor- 
ation of just what scope was intended. Two hijndred and seventy-nine 
codes required the filing of discoimts, ninety-six the filing of allow- 
ances and fift3^-one the filing of rebates. Aside from these more 
general items, the following items were specifically included in the 
filing requirements of one or m.ore codes; cash discounts, periods of 
free credit, guara:itees, produ-ct guarantees, price guarantees, firm, money-back agi-eements, gratuities, premiums, sample policy, 
prizes, accessories included, any unusual services rendered, installation 
services, warehousing services, gifts, "ourchase of bu^'er's capital 
stock, commissions paid to buyers, trade-in allowances, advertising 
allowances, container allowances, caxtage allowances, label allowances, 
form of contract, definitions of customer classes, classified list of 
customers, trade discounts, q-cumtity discounts, eqijalizations of freight 
rates, prepayment of freight charges, freight allowances and freight 

Three codes left the decision as to what information should be 
filed entirely to the discretion of the code authority. In this con- 
nection, it should be noted that fifty-nine codes empowered the code 
authorit;;' to prescribe the reporting form to be used. In practice, 
at least, this privilege gave the code authority direct control over 
the types of information within the filing requirements. 

As has been discussed elsewhere, the "prices" to be filed were 
almost without exception present or future prices. Only one code, 
that for cotton textile, provided for the reporting of past prices 
only. This is one of the important features in which price filing 
plans under WHA differed from those existing prior thereto. 

(*) See further discussion, pp. 269-372 and 483-484. 


3. Code Authority Ex^mns io n or M o dification of Code Provisions 

The tj^pes of price infornation which the administering agency, 
within the framework of code provisions, required to be filed influenced 
directly the effectiveness of filing as a means of securing publicity 
of the price structure. As has been pointed out, most of the require- 
ments in NHA codes were very broad upon this point; this observation 
applies with eq-ual force to the codes in the sample analyzed. Sy far 
the greater proportion of the codes in the sample stipulated that 
"terms and conditions of sale" should be filed. Some enumerated cer- 
.,tain specific items in addition to orices that must be filed out such 
as discounts, quantity discounts, cash discounts, allowances, etc., 
and then added the catch-all phrase, "and all other terms and conditions 
of s.'ilo" . In a rainorit;/- the requirement was confined to the filing of 
"pricc;s" and "discounts", while in one oti.tstanding case, the Machine 
Tool and Forging Code, the filing of "prices" only was required. It is 
evident that in most of the codes the range of information required 
was almost unbounded. 

An examination of code a,uthority bulletins and letters to members 
indicates that in most cases the administrative instructions to mem- 
bers simply repeated the wording of the code. Members T/ere instructed 
to file "current trices and terms of sale", or wliatever phraseology 
the code had used, and presumably it T/as left to the judgement of the 
member to interpret these requirements. A number of the uniform 
reporting forms drawn up by code authorities contained large blank 
spaces lagelled "terms and conditions of sale" with no eicolanation as 
to shat should be covered there. 

There were, however, noteworthy exceptions to this. Some code 
authorities specified s. few items which they considered the major terms 
of sale and required their filing; cash discoimts, qij.antity discounts, 
trade-in allov/ances, and transT3ortation terms were common items thus 
specified. This specification was accomplished either in a bulletin 
of instructions to industry members or by including blanks so labelled 
on the uniform reporting form. A far more ambitious effort was made 
by certain other code authorities v/ho found it advisable to require 
the filing of a very long list of specified terms of sale. Once em- 
barked on such a program, it seemed to be nocessarj^ constantly to add 
new items to the list as members used new types of allowances, services, 
or credit term.s to effect price concessions. Tlie standard form in 
use at one time in the carbon dioxide industr^^ contained blanks calling 
for the following information: terms, contracts, deliveries, country, 
territory, cylinders, freight equalization on full cylinders, freight 
on empty cj'-linders , privately ovmed cylinders, other equipment, cartage 
allowances, shipments on consignment, additional terms, description 
of free delivery zones, description of coimtry territory and ann\aal 
purcha^se volume of each class of buyer quoted. Bulletin ¥o. 11 of 
the Macaroni Code Authority instructed members to file the following 
information: whether prices list or net, discounts for each class of 
buyer, delivery conditions, quantitj' discounts, territories to which 
TDrices an-ol-^'-, classification or grade of product, raw material used 
in each grade or brand of product and pric<^ thereof, separate price 



for each style or iDroJid of product, separate "orices for each size of 
carton, case, or package, differential DetiTOen wood box and corrTigated 
package, and exact character ajid v?eight of package and niomher per case. 
Bulletin No. 2 of the Asphalt Shingle aaid Hoof ing Code Authority, in 
addition to a numher of other itews, reqnli'ed the filing of commissions 
paid, freight eqiialization, product guarantees, completing materials 
supplied without charge, tine finance plans, ard price guarantee policj'- 
in suDsequent explanations on April 16, 1934, and June 4, 1934, they 
added among other items cooperative advertising plans, and free train- 
ing of huyer's employees. The fertilizer and gas appliance industries 
provided other examples of such detailed instrxictions . 

Efforts to influence the actua.l prices and terms of sale are a 
part of the prohlem of the control function of price filing V7hich is 
discussed in Chapter I¥. However, there are certain borderline matters 
as between these two functions which should be noted here. Certain 
types of requirements ostensiblj'- concerned simply with furthering the 
ends of publicity may actually reoresent control m.easures. For example, 
the requirement tliat prices should be filed on a delivered basis, such 
as was made in the business furniture, crashed stone, sand gravel and 
slag, fertilizer, and funeral supply industries, among others, may 
exert extensive influence over the price level where shipping costs 
bulk large among the total costs of production and discribution. 

About a third of the code authorities in the industries examined 
set up uniform reporting forms upon which members were required to file 
prices. Such forms have certain admitted advantages from the view 
point of mechanics; they facilitate phj'-sical handling by the central 
agency and b^/" containing blanlcs to be filled out, they help insure 
that members will not neglect the re-ocrting of desired items. But they 
caji easily be manipulated in a way that is open to criticism. For. 
example, members mo,y thus be required to file prices by zones although 
such a procedure wa,s not contemplated by code. Likewise, some of the 
forms set up in various of the paper industries contained in small 
print on the back a wide variety of regula'.ions or "trade customs" to 
which members assented by using the form; these contemplated a tmiform- 
ity of a wide range of selling practices which was entirely unauthorized 
by the code,. V/lierever such uniform reporting forms are used, they be 
subjected to careful scrutiny if they are not to include restrictive 
features that will serve to limit individual freedom in pricing practices. 

Certain other variations may be noted at this point without being 
discussed in detail. Some code authorities insisted that net prices be 
filed rather list prices with discounts. On the other hand, in the 
metal windown industr* a master price list was imposed upon the entire 
industry and accordingly it was 'required that only discounts from this 
list be filed. In the business furniture, copper and brass mill pro- 
ducts and coffee industries, among others, the prices required to be 
filed were base Tjrices, ap"olying to base nroducts and to stated 
base quantities; extras and deductions covering other products and ' 
other quantities were formulated by the code authority and used "by the 
members in conjunction with base prices in computing their selling 
prices •(* ) 

(*) The control elements of such orovisions is discussed in Chapter 
IV, pp. 231-242. 


In some cases filing was accomijlislied simply by mailing a catalogue 
to the code authorit;-. In the machine tool and forging industry, where 
a customary policy had "been tmlt up of quoting only one nrice to all 
■b-'o^^ers with no further discouiits, only list prices were required to he 
filed. (*) Efforts made in some industries to secure the filing of 
costs in addition to or in place of price data are discussed in Chapter 

4 . Performance by Members 

A complete quantitative aporaisal of the degree of performance 
of industry members with respect to the detailed aspects of information 
filed, is almost impossible. Such an appraisal v/ould involve an in- 
spection of the filings of each member, industry by industry, and item 
by item, which would be a monumental task even if all filings were 
available. In general, the codal and administrative requirements taken 
in conjunction with the general complia-uce data as set forth above 
throw the greatest available light on the question. Thus, in industries 
where general compliance was good, one could expect to find the closest 
correspondence in details between requirement and performance , so that 
the statement of req-oirements also indicates pretty well what was filed. 
However, there is presented below the fragmentary information available, 

No generalization can be made regarding the precise form in which 
prices themselves were filed. In some cases net lorices were filed for 
the different classes of customers and in other cases discounts; 
numerically the latter were more important. There would, at any rate, 
seem to be little deviation from the requirements set up on this point. 
There is considerable evidence that great difficulties were met with 
in attempting to have members file a substantial number of their terms 
and conditions of sale. In the electrical manufacturing industry such 
information filed was largely confined to cash and q-oantity discounts, 
with payment plans, trade-in allowances and delivery terms being in- 
cluded only in some few cases. (**) In the fertilizer industry con- 
siderably more success was obtained along this line, for a wide variety 
of terms, as prescribed by the code authority, v;ere actually exchanged 
among members. (***) 

In the gas appliances industry the information varied widely among 
members from very complete price lists to mere notices of change. (****) 

{*) Bulletin 1-Jo. 10, Supervisory Agency, February 28, 1934, To 

members of the Industry. 
(**) Study by Albert Caesar, Price Filing in the Electrical Industry, 

Trade Practice Study Section, Division of Eeview. 
(***) Simon Whitney, Trade Practice Studies Section, Division of 

Review, Fertilizer Indiistry Price Study, Dec. 15, 1935, P. 7 
(****) Inspection of small sample of actual- price filing of this 
industry in^ l^RA files. 


•• -116- 

In the mayonnaise industry many of the discounts and terms. of sale were 
omitted despite the instructions sent -out-. Many of the small memhers 
of the retail monument industry had never crystallized terms of sale 
into definite practice, a fact ^"'hich made efforts to file their complete 
pricing policy difficult. The dissemination sheets of some divisions 
of the ruhher manufacturing industry indicate that some merahers , at 
least, were filing changes in numerous and qu.ite detailed terms of sale. 
In the shovel, dragline, and crane industry the administration memher 
reported to NM on December 21, 1954, that the majority were filing all 
of the types of information requested, including extras, deductions, 
special accessories, etc., 'out that the remaining minority filed the 
"basic nominal price on a standard raachine and nothing else. In the 
tag industry filing of component lorice elements and required adherence 
to the comhinpd total of this "lowest prices and most favorable terms", 
resulted in the "building up of very detailed and all-inclusive terms 
and conditions of sale mandator^^ upon industry mera"bers. . This was not 
accomplished, however, "by the filing, of complete individual pricing 
practices. It was renorted that filings in the vitrified clay sewer 
pipe industry were quite incomplete in many cases. (*) In the agri- 
cultural insecticide and fungicide industry, cash discounts, net due 
dates, and F.O.B. ooints were filed. (**) In the marking devices 
industry, the secretary reported in response to a questionnaire that 
no information was filed other than actual prices. Tlie suggested cost 
and estimating maniials circulated to industry members indicated that 
little information could be conveyed by filing of nominal prices. (***) 

A questionnaire sent to former code authority officials in January 
1936 for industries whose codes contained price filing provisions 
supplies some evidence regarding the tj^pes of information filed by mem- 
bers in those industries. Reproduced below are answers to the question 
of the form in which -or ices were filed and the terms, conditions, and 
other information ordinarily filed: 

Industry Form of Prices Files ' ' Information Filed 

Paper & Pulp mill Net price (one iprice for Cash discounts 
wire cloth all customers) ^ 

industry _^(****) List prices with discounts Down pajonent require- 

Installment periods 
Special quantity 

(*) Minutes of Eastern Regional Code Authority, February 12, 1935, in 

NBA files vitrified cla^/' sevrer pipe industry, 
,(**) Letter to C. Soixthworth from L. S. Hitchner, President, January 

23, 1936, NRA. files. 
(***) See below, pp. 202-205. 
(****) Requested that reports be confidential. 



Vater meter Mfg. 

Porn of Prices Piled 

Information Filed 

List prices with discoionts Cash discoionts 

iiotor fire ap'oaratus List orices with disco^mts Cash discount schediile 

q^xantit,"' discoimt " 
trade in allov/ance " 
Deferred -pay' t " 

Warm air furnace 

List prices with discounts Discounts 

Freight allowances 
"All" other conditions 
of sale 

Lietal tank 

List prices with discounts TTarrpjities 

Industrj' B(*) 

Discounts from Industry/ 
fross or master price 

List price witli disco^'onts 

Indus trv C(*) 

Slide fastener 

FOB points 

Conditional sale terras 
Quantit]^ discounts 
Freight eq\ialization 


Terms of contract 
Packing practice 
Delivery terms 
Terms of paj-'ment 
Charge for "broken 


List prices with discounts Cash discovjits 

FOB points 
Engineering data 

List prices with discounts Complete schedules of 

terras, discounts, & 
conditions of sale 

Sheet Metal Distributors Base prices with extras None 

Talc and soapstone Base prices with extras Terms of ua^/ment 
Transparent Materials List prices with discounts Differentials 

Trade allowances 
Special charges 


Card clothing 

TTholesale monumental 

Hoad machinery mfg. 

Industry D (*) 

List prices with discounts Cash discounts 

Freight allowances 

List prices X7ith discounts Cash discounts 
List prices with discouT'ts All terms & discounts 

to consumers 

List prices with discounts Terms of payment - 

short and long 

Power & gang lawn inower List ^irices with discounts discounts 

Terms of sale 

Cutlery, msjiicure, implements, 

& Painters and paperhangers tools List prices Cash discounts 

with discounts or Freight allowances 

Minimum net prices Terms 

Household ice 

refrigerator List prices with discounts ITone 

(*) Hequested that reoorts be confidential 


Industry Fo rn of Prices Piled Information File d 

Base Prices with extras 

Asphalt & mastic tile List prices with discovuits Discoijnts 

Frei'ght eq^oalization 

Concrete mixer List prices with discounts Hone 

Air filter List -orices with discoutits Cash discounts 

This experience in industries outside of the sample tends to con- 
firm the impression vdiich emorges from an examination of the evidence 
in the industries studied that the supplementary information filed in 
addition to nominal prices was quite limited in scope. This indicates 
that where the requirements regarding information ran in terms of "all 
other terms £ind conditions of sale", mem.hers chose to construe this 
phrase very narrowly and failed to report more tiian a small part of 
the variables which made up their pricing policy. 

I'lote should he made at this point of certain t^ypes of filings in 
which the information actually filed was rendered practically meaning- 
less "by the nature of the information. In some industries, notahly in 
valve and fittings, many members adopted the practice of making condit- 
ional or qiialified filinga, in v/hioh they included that they would sell 
certain accounts below filed prices if necessary, or that they would 
sell any buyer below filed prices under certain circumstance s.(*) 
The National Fertilizer Association was also forced to issue a rule 
forbidding such a practice. (**) Likewise, in some industries members 
persisted in filing wna.t they described as minimum prices whereas both 
the code and the code autliority instructions called for actual prices. 
In other cases where only the filing of minimum prices was required, 
some members proceeded to file extremely high discounts or extremely 
low prices. These were intended to "^e nominal, those filing them never 
expecting to sell as low as the prices indicated. Through the ability 
to sell above filed prices, the member thus might sell at whatever 
prices or terms he chose and accordingly he was able to defeat the 
whole function cf Thrice filing. Such practices appeared in the ladder 
industry, in certain divisions of the electrical manufacturing industry 
and in the canvas goods industries, among others; in the latter industry 
minimum prices as low as 99^!^ off list v/ere filed. 

5, Obstacles In the Way of Incliiding Fu 3.1 Pr ice Information. 

It is evident that any plan for publicity which nlaces sole em- 
phasis upon price information, will face serious difficulties with 
respect to the scope of information included. The very natiire of such 
a kind of price publicity mal;es it essentieJ. to include substantially 
all of the factors vhich affect tne final net cost to the bu^/er; other- 
wise the significance of the partial information that is assembled is 
greatly lessoned by unreported price concessions, which by altering 
the net cost to the buyer, will determine his ultimate decision as to 

whose product he v/ill b uv. 

(*) Minutes of Code Authority Meetings, Sept. 5, 1934, and Oct. 16, 1934, 

In YRA files, valves and fittings industry, No. 21. 
(**) National Fertilizer Association, Hegulations covering the filing 
Open Price Schedules, Section 4, July 11, 1934, NRA files. 


O"oposed to this 'btsic requisite are tlie difficulties involved in 
secjj'ir.g complete coverare , and the factors which lead to non-performance 
"by memters. In the first place, aside frou the qixestion of general 
trillingness to participate in a price filing plan at all, nan;'- pro- 
ducers and particularly the saaller ones tegrudge the time, effort, and 
e:rpense involved in prepari- g a very detailed filing schedule and. in 
reporting each minute change in such a schedule. Protests from industry 
menioers were frequent uoon this score. The 'burden Mnon meraters nay be 
tremendous when separate filings are required for different products, 
for different classes of customers, for different areas, etc. Ulti- 
mately, the possibilities of any system are rigidly limited by what the 
"oarticipants will willingly do. 

Aiiother difficulty encountered which varied in degree s^s between 
larger and smaller members v/as the failure of iienbers to have a clearly 
fomulated axid consistent policy with respect to each of the variable 
price factors. Accordingly?-, the.;' found it difficult to set them down in 
the explicit fashion which the systen contemplated. The smaller members, 
for example, might lack a consistent policy with respect to the accept- 
ance of retiorned goods, s-oecial services rendered, or transportation 
terms. Thus they x^o-old find it impossible to formulate the er-act nature 
of their policy. Closely allied to this difficulty was the intangible 
nature of many of the suiplementary factors vrtiich defied the efforts 
of any member, large or snail, to make explicit their ;oricing policy. 
Such matters as special services rendered, training customers' employees, 
practices with respect to Uiipaid accounts, etc., caimot be covered with 
a few words. Since, under the publicit:^ fimction, this information is 
filed so as to apprise corpetitors of siich -policies, it is valueless 
unless it is in such shape that competitors can co;T)rehend the matters 

It is evident from the experience under IaRL that complete inform- 
ation cannot be obtained by the central a^enc;^, simply through a blanket 
request for the filing of "all terns and conditions". Instead, it was 
fo-ujid necessary to request specifically item by item the types of in- 
formation wanted. This precipitated a race between the code authority 
and certain members — the former attempting to discover all possible 
wa3''s in which indirect larice concessions could be made and to include 
them specifically in the filing plan; the latter to discover new v/ays 
to shade net prices to customers which the code autnority hr.d not yet 
discovered nor brought under the searchlight of publicity. The macaroni 
industry faced the problems of premiums, open-end contrcacts, and the 
diversion of brokerage to trade buj/^ers — all devices to make concessions 
from the prices publicized by the price filing system. In the floor and 
wall cla:,'- tile industry and certain divisions of rubber manufact-ioring, 
first grade products were sold at a reduced price by calling them 
"seconds". In the valve and fitting industry, sellers supplied free 
"missionary salesmen" to buyers. In the gas appliance industry free 
deliveries, and crating and carton allowances vrere methods used to 
attract customers. There are, as a matter of fact, almost an illimitable 
number of ways in which such indirect concessions may be made; and this 
fact almost predestines the code authority to be the loser in its race 
with industry members determined not to reveal all of their pricing 
elements to competitors. (*) 

(*) Other examples of evasive practices are given in Chapter IV, 
pp. 230-272. 


G-rajiting that raenliers are atle and v/illing to siroply full information, 
there remain in any case the difficulties resulting from the great com- 
ple::ity of detailed pricing information. This complexity 'Tould "be a 
mechanical factor in the assemhling of information, in its compilation 
"by the central agency, and in dissemination. The conplexitjr would also 
tend to impair its usefulness to memters, for the greater the number of 
items, the greater presunabl;-- the difficulties of comparison. These 
considerations are al'.7aj'"s present when attempts are made to include more 
than certain hasic items rrithin the price filing plan. 

There a'cparently v.'as never any marked conflict between industry 
desires and HRA policy regarding the scope of price information which 
was includ.ed in price filing. Jrom the start IIRA approved codes which 
required the filing of all terms and conditions and in its authoritative 
statement of policy in Office Ilemorpjidum To. 228, issued June 7, 1934, 
it was provided that filing shoiild embrace prices, discounts, rebates, 
allowances, and a.ll other terms and conditions of sale. This was re- 
affirmed in the s:dministrative policy amiouncenent of April 23, 1935, 
"New Series No, 1", in which it was stE.ted that in industries where all 
the factors helping to give identity to lorice could not be reported, 
"it is questionable whether axi open price system can be effectively 
Used". Industries proposed, however, on numerous occasions that some 
of the difficulties cited above be eliminated by prohibiting entirely 
or by limiting the amount of certain indirect concessions. In some 
cases code authorities actuallv set up rul.ings prohibiting certain tj^Des 
of concessions in an effort to remove them as competitive factors. KRA 
especiallj'- during the latter part of the code making period, refused to 
sanction the rigidification of otherwise variable elements in the price 
structure and insisted that they be reported through the mechanism of 
price filing rather than being outlawed or severely limited. (*) 
Office Memorandum No. 228 req\aired that information filed "shall com- 
pletely and accurately conform to and represent the individual pricing 
policies of said mem.ber". Tlius, there was a definite conflict of views 
here with NBA stressing publicity as opposed to regulation. 

D . Products Included 'Jithin Price Filing 

(*) This policjr \.'as specifically stated vdth reference to free deals, 
prizes, and premiums in NRA Policy Llemorandura No. 316 on December 6, 
1954, and with reference to advertising allowances on No. 326 on 
January 5, 1935, NBA files. 



1. IsMier: and Controvc i-fiicr; 

TI:c range of products \'por! v.-hic prici i^iling wa ■. tstpblished -rs 
another important fact-^r -vliich conditionGt the. dcgrte cf publicity ulti- 
matel;. realized. It wa/-, fo^-uid t.'Bt some t./pey of ijroducts were not adap- 
ted to n'ice filin';, fTi" one i-cr on or another, anc accordin^,-ly their 
prices '"ere excliu ^ d — either by t/e cooe, by the a minirterinp a:";enc , or in 
practice by the :nembers themselver. The central problem in this connection 
relate;: to tie kinds of products v/hich lend ■ themselves to price publicit_ 
throu'h ;;ricc filing. 

The q'^estion of vliether ])rice filing can be a -plied to all the 
proc-.'.eo;: o:: rn indiistry is the other site of tho question as to vha-o pro- 
ducts shouli.. bt excluded from the filiiV-]; requirements. One issiie t .en 
was vjhet: er filing shoulc aHpl„ to all |)roc ucts or whether it sho.u.c. be 
confincG. onl; to "standare" prooux tr. with tlic omission of nnn-stan a.rd 
procaictr... There roducts v/ere m".d^- to order on customer specification or 
custom biilt, it y-a.- sxp-eC. that price filing could not be usee, beca.use 
nf the impossibility of settin^:: up bases of comparison. Likevrise, there 
individual producers made prouxicts of t-oiusiial nature, size or tjqje, it 
was 3ometi:;!cs felt that ijrice i;ublicity wo"o.ld pcriorm no usefu.1 finction. 
But o;,! posec- to tnesc viev;s V'bre those which insirjtea Lipon includinj; all 
prodi-.cts of the ine.ustry \7ithin the scope of price filing because of 
the possibility- 'that products not inclucied ?/ould be urcd av a means of 
prico-e\ittin^- in joint crders. Also in those indr.stries where there v:a.s 
a ver^- ;;reat number of proeuctn, the. question of v'hether or not it v/as 
feasible to induce all j^./roduct3 arose. This wa.^: resolved in a fev cases 
as in pa,i„r cistributin^ by limiting; price filin,, to the most competi- 
tive pro' -acts. 

Di r a/-; r cement occasionally arose as to how iai" an indu-stry shoi^lc'- ^;o 
in e^ttenptin to include sub-standard prodv.cts. It wa'^ felt by some that 
the filing of all the different prices at which seconds, M';cC. goods, 
"bsolcte gooes, etc. , v;ere sole, vroulu unduly complicate filing ?/itlaout 
contribii.ting a, great deal to price jublicity. On the other hand, it v/as 
p«intec. ev-t that the sale of thcst goods was oftentimes in competition vdth 
the sale of first cp.i.ality gooe.s an' t' a.t the prices of the former e zert sn 
influence over the general price rtructure. A similar problem existee'. in the 
case of 00 3 which were sold in so-calleel non- competitive channels, such as 
for ezqjort or for cons'ujaption, further fabrication or distribution oy an 
Integra tec. concern. 

A further problem arose from the competition of similar er su'jsti- 
txiteproch ct "proeuced by othe r industries. In some cases it was felt that 
if price publicity could not be secured for all jroducts which competed 
directly or incdrectly with ine^ustr prncVo.cts, it vrould do more har:.'. than 
good hy ...a];ing filed prices a ta.rget f»r price cutting. 

The ...ajor difficulty fatCcc".,, m e.eti. rmining U:jon vifhat proaucts filing 
shoule. be vr.c.o., resulted from the diversity of orodv.cts made by different 
members the difficulty of securing aoeciua.te a. ijcs of co.uxje rison. T:iic 
neces':itated, in the fir::t plaice, the supplying by filing member'- of fv.ll 
descriptive data in ord.r that comparisons cov.ld bv. meut. In some industries 


elaborr?,tc and detailed information v/ould "be necessary in order to 
accomplish this. The other need created v;as for a comprehensive svstem 
of product classifica-.ion or of prodi.ict standardization. Where such was 
not possible of achievement diversity of nrnducts with respect to phj'si- 
cal f-^rm or quality easily could render i^orthless efforts at price filing. 

2. Code Hequireraents, 

Ahout one- third of the price filing Tjlans, or one hundred and forty- 
four, provided that ririces te filed on all products of the industry. In 
forty-five the requirement was confined to the "standard" products, vvhere- 
as sixty-si:: included sta.ndard products and such "non-standard" products 
as the code authority should designate. In a part of these, "standard" 
was defined as prod-ucts which were ordinarily sold upon the "basis of 
printed pries lists. A few cod's specifically named the "kinds of products 
to be included v/hile a small num"bcr of others nair.ed the products to "be 
excluded and required that all other industry products "be included. The 
responsi"bility for designating the products for which prices were to "be 
filed AYas placed in the hands of the code authority in ninety-six codes, 
while in forty-five others this rpspnsi'bility was left v;ith industry 
mem'bers on the "basis of majority vote. I 



The codes for the industries in the sample crramonlj^ required ei'ther 
that prices "be filed for "all products of the industry", or that a member 
file "his prices" Y/ithout specifying for what products. A fev/ of the 
codes incorporated KRA Policy Memorandum No. -228 w?iich limited the policy 
to "standard" products and such non-standard products as should be design 
nated by the code authority. Only the Canvas Good^s C/ode enumerated ca'tsifi' spe- 
cific products for v/hich prices should be filed. Thus, in all instc-nces 
tlie ultii.iatc responsibility of determining what products should be brou£_Jit 
under price filing was shifted from the period of code writing to subse- 
quent code aathority and industrv decision. The requirement that all prices 
or prices for all products sold be filed v/as specific in a sense but 
failed to provide for those cases where filing was not found to be feasible. 

3. C__cde__Authority J3xpa;ns_io^n_or J^^ _o_f .Code _Re_Quiremen_ts_ 

In some of the industries it was attempted to cover all products in " 
the price filing plan originally set up. In the asphalt shingle and roofing 
industry, in accordance v/ith the code, filings were required on all pro- 
ducts; no major obstacles were encountered relative to this point, due 
perhaps zo the fact that products had been quite standardized for some 
years under the influence of patent controls, and other factors. (*) The 
scope of the candy manufacturing plan was all inclusive, the products .' 
having been classified by Dun and Brads trect into eighteen classes with 
a miscellaneous class for all other?;ise uiiclassifiablc items. (**) Prices 

(*) See Appendix A, .Pric^c_5^iliji£_in _Aspha.lt_^Shin£le and RopXin^ 
(**) Cod^e Administration B-uHctin, No. 1, Code Authority for Candy 
Manui'acturing Industry, NBA Files. 



in the Cf.roon dioxide industry \/cic filed under tv,'o divisional groups, li- 
quid. f:it. solit.. (=^) As l£ tc ra a year aitor the coae v/ent into effect, 
the e; corxdttee of the copjoer ind brass mill prodiicts industry 
requirec. its ncjnbers to file prices on all pirducts which they sole; '^re- 
sumsil,--, e: ceptions had not proved necessary droxing the first year of 
operation. {*'-) Tht F'^rtili^er Code req-aired the filing of price3 "for 
all .'jrcvc.e' or kindT of mixec. fertiliz<_r, sLiperphosphate, and for other fer- 
tili.Ter m; serial sild or offered ''or sale". In pursup^ncc of this, it wav; 
reqairec. thr t prices be fileu for all prod-CLCts sole., regardless of vhether 
or not a spiecial type or formula; this policy v/as supported b^- YJik ralings 
to that effect. (*♦') iiember:-, of the fire ^rcti V;;uishin,g appliance irmraTac- 
tLiring ind.-stry v/ere instructed that: 

"The filing of prices should include generators, 
generator poiver, extinguisher brackets, repair 
parts, recharging date tags, etc., — it being 
the sense of tlie meeting that ever.yonc wa,s expected 
to file a price on every iteiu which he manufactures 
(or has mace for him to his own specifications or 
formula) v/hich ccraes within the d.efinition of the 
Code." (****) 

I.i the steel casting indiisti-y members v"ere required to file prices for 
all t^^jes of casting; this was ma.c.i. possible by the product classification 
set up in that industry just prior to the codti r,nd assid.ucusly refinee. 
during the period of code operation. (**^=f*) Similar instructions by code 
authorities as to pro&ucts inclucied w ere issued in tlje gas ap )liaiices, 
lad.dcr, marl'ing devices, mayonnaise industries and in certain regions of the 
retail monvrnent industry. 

The field of adirdnistiative discretion entrusted by the code V";;. 
pf covir-c, considerably broaclt^r v.-hen it provide-J for the filing of prices 
en "stmdrid" .jroduct" only or expressly em)ov\fered the code authority to 
prescrihe the proc^ucts. The B~asiness furniture Code Authority tried to 
include custoia- built "specials" vdthin the scope of "current standx.rd lines" 
but this v/as held unauthorized, in en rIPA. interpretation. (**=fi<**) jt vas 
decic'.ed by the electrical manitf acturing ineustr^ that prices need, not be 
filed lor "" proo.ucts. (--^^y^^**) rj>-i^jj machine tool andforln-; 

(*) Prcrjcribed reporting form in JIRAi files. 

(**) _.v.lletin Issei.ed Uvv ember 7, 193-.:, IIEA files. 

(*** jLe'oter from deputy a.ojainistr? tor to Fertili^.er Recovery Committee, 
April 193^.; (in irtlA filus, fertiliser ind.v.stry. ) 

{*-■>'**) Letter dated October 1:-, 1'93- froja A. 0. Boniface, Secretrry 

of Cede Authority to Mcmb<.r of t..e Irnusti-y, (Rdletin !To. 80) ; 
(hi IjTA. files) 

(*'*'''**) Co Jiiercial Eosoli^tion i\Io. 7 of Steel Cpsting Code Authorit}-, I'.TA 

(*-^**'-*) AtViiinistrative Order Fo. 88-Z/, ITovemb'. r oC , 1934, FRA li les 

(*-'^' '■'••''0 hirutes of Extcutive CoiTimittee of 11. E..',. A. , F»v. 23, 193^.-, ITlA Files 



induiitr„^ hex. c difficulty in foi-mul?ting e v/orka.tle definition 
cf the jhre-.c "standard procuct, acci/:-, sorios , rnd/or attachments" :.z used 
in the -orice filing jrcvision of the cocuc. Svcntr.slly the follorin ■; de- 
finition v.'r;j arrived at: 

1. "A stf.ndard product is r.ny machine, or eny accessory or 
attacl-iiacnt to vvhich a -n^nuiacture-r aoplies a ecsignated 
nvmber, or si:-;e, or na-i e, t?j:it :iiight or should indicste 

to ail informed •person, a specific t^';jc of machine, accescory 
or ttachriKnt; or 

2. Any machine, accefjsory, or atta.climent T/hich is offered to 
a ciistomer a comijctitive style, type or dcsi.^n to 
ei.ta'olir.hed produict on vhich procaict a price has been 
filed 'ath the Sapei-vidory A^^ency by any member of the 

S. The addition to, or elimination from :.ny machine of an;' ' 

special feature slipll not, ipso ircto , he considcrec. as 
DXCiOjding any machine from Ita clacoificetion as a 'jtaiidard 
product." (*) 

The Lirrlreting Devices Code Authority seems to left the final detenni- 
nation to the c'lscretion of each member, for it required members to file _ 

prices o.';ly for products "customarily" offered for sd. e; for other i| 
they ;/ere simply lt.quir^c' to file their "pricinj formula.". (**) In the 
heel and sole division of the ii;o"l;er man\ifact\xring industry, for viiich 
the code prescribed filini2,' only for standaid products, a controversy arose 
concerning; quality stanfi\rds 'vhich rras partially responsible for the final 
abandoixmLnt of price filing in tnc cocc. The Ka^gcrstomi Rubber Compaoi^' 
maintp.inec that its i.iro.-uctr' v.'cre inferor in "jrccc to those of the so- 
callec. "1,1-j 5" £ind refused to file prices, contencin^-; that thej' v.-ould 
be met by the laryer com^janits, ho thtis wofld effecti- ely destroy its mrr- 
ket. The Valve and JTitting Coce required the filing wf price'i for | 

"prodv.ct; normally available to the trade." Const; que ntly, the Code Au- 
thority eyemptec'' frcm filiiijTs procv.cts of special dc'.-.ign but re-qrar .. c ilia.t 
the prices ; "O-otcd for such s]iecial vjrocdict"; be not less than prices on 
file for "similar" products normally avrilaole to the trade, (^f**) The 
main proble.i which wa.s confronting the code authorities in each of these 
industries vac to exclude, in some ray, special items from price f ilin; 
without ud:in; the definition r-o br~iaf-tha.t certrin genuinely competitive 
items v.'otLl-d be excluded alse. 

I.Iore Gignif leant , 'perhaps , are the stt. eific prncucts which were 
exempted from .rice filing ai e. the reaso ns ther efor. The Cast Iraq Soil 
(*) Supcrvisorv Agency Bulletin ho. 2^ to Llembcrs of the Industry, Oct- 
ober 10, 193-'::; (in'lilRA files, machine r nc tool forging industry. 
(**) Letter , from the Code Authority to Members oi Industry., dated le- 
ccuibcr 7, 19"-.., (in l-JRA files for marketing deviess industry.) 
(,***)Le^tcr, dated April 20, 1C34, from the Coc.e Authority to Members of 
lndusti„. ^(_la kE^a. files, valve anc. fittings industry.) This inter- 
pretation v;r.s later objected to by the Ad'iU.niy tration. 

9826 ■■ • 

- 125 - 

Pipe Code required 'clie filing cf prices on pipe fittiiii^^c and service 
valves, and roadway or meter "boxes. The code aiithority called for prices 
only for pipe and fittings and failed to require them for the other items. 
ComiDlaint v/as made by members prodiicing only the latter, items that various 
manufacturers of all inaustry products v.'ere supplying, the latter items as 
free goods, aiid that that fact explained why filings were never required 
on them. Tlie KEIA. pointed out these facts to the Code Authority and asjied 
for an eirplanation. (*) The follov/i-ng exemptions from price filing were 
made at one time or another in the crushed stone, sand, gravel and sla^ 
industry; chemical, metallurgical and similar products; products made from 
State ovrned or controlled materials; products sold by a railroad from its 
own quarry; and ground limestone produced as a by-product. In the farm 
equipment industry materials and parts v/ere not included in price filing , ' 
when used for further manufacture, for assembly replacements or for repair, 
(**) The removal of tennis footwear from the price filing plan of the 
rubber footwca,r division of rubber manufacturing was explained by the fact 
that three members of the industry refused to participate in price filing. 
(**=♦=) The Code Aiithority of the shovel, dra.;.linc and crane industry 
exempted some of the very lar:-;e3t products of the industry from price . . 
filing while including all others, namely, machines of three cubic yards 
of capacity or more, three motor electric m,achines, steam machines and 
locomotive types. (****) After about six months rf inclusion in the pricjc 
filing plans, septio tanks v.'ere vithdrawn by the Code Authority of the 
Vitrified Clay Sewer Pipe Industry in Resolution llo. 5'^ dated May 24, 1934; 
no reaso:: therefor was assigned. Price filing for school jev/elry in the 
Mediura and LqW Price Jcvrelry Code was never put into effect at all. 
Finally, a shift in f'shion may be credited for the eventual inclusion of 
mono-tone covers in the price filing plan of the nottingham lace curtain 
industry after it had once been excluded in favor of tv/o-tonc covers. 

"In a, Jiiuriber of cases code authorities brou:^ht various types of sub- 
standard products v/ithin the price filing plan. The motivating factor 
in these cases v/as the fact that these products threatened to enter into 
direct competition with firpt niality products; complete publicity re- 
garding all price factors in the mar'^ct was thought to necessitate their 
inclusion. Thus members of the steel office furniture division of the 
business furniture industry were required by the coae authority to file 
proposed price lists v/ith quantities cf sJl de-standardized 

(*) Le/cter dated March 13, 1935, from the deputy administrator to the 

Code Authority, (in IMRA Tiles, iron soil pipe industry. No 

record of the reply of the Code Authority can be found in the 

files. ; 
(**) GA'ie_l!iej'/s_Bul.le_tin, Sept'^-mber 4, 1934, issued by Parm Equipment 

Institute to Members of Industry, NEA files. 
(***) hSJ^^PLt dated Au,_ust 20, 1034, from Ch-iirman of the Code Author! V 

A.L. Yiles, to members of the Code Auchority. (in NEA files, 

rubber manufacturing; industry). 
(*.t:H=*N Lette_r> dated November 13, 1934, from the Code Authority to 

Members of the Industry, (in NEA files, shovel, dragline and 

crane industry). 


- 12Q -^ 

and olDGolpte mprchandisc. (*) In the electrical manufacturing industry it 
was required that prices on ol^solete ctcc^c should be filed tut not distri- 
butcd. The executive coniraittec of the farm equipment industry required ' 
Jthe filing of prices for obso-ctc, shopworn, and ""bar^iain" goods v/hcre 
their que^ntitv or manner of disposal were capable nf demoralizing the 
market for new goods. (**) The eastern rt^^ional committee of the vitrified 
clay sewer pipe industry en OctoDcr 0, 1934 recp-iv*d filings from a member 
covering 25 carloads of culls; they decided not to accept-this for fear 
that it vrauld affect market conditions unfavorably. On ?!ovember 13, they 
again refused to r,.ccppt the filing of a price f-^r culls,, stating that the 
use of such pipe for sanitary sewers was not recommended due to the doubt- 
ful qaalit- nf cull pipe. (***) 

Another difficulty related to. the types of products included is one 
that will inevitably face any program for mandatory price publicity. It 
resulted from the fact that certain products of a given i ndustry were 
also produced in part by sellers v;hose major production f''ll in another 
industry and who, therefore, • VYcre under the jurisdiction of that industrji 
The same situation existed when closely substitute products were produced 
in other i nc^.ustrics. Unless publicity of prices apnlicri to all producers 
of the "oroduct or closely substitute products within or without the in- 
dustry, full publicity cannot be realized. A fav; examples taken from ex- 
periences under I^IBA will suffice to illustrate the point. The cordage an.d 
tv/ine; industry was forced to ^^xcmpt the International Harvester Cnmpariy 
from filing its prices on binder twine, beca.use it was not successful in 
inducing prison operated -plants to file prices. T^c fann equipment indudry 
had difficulty v/ith the lumber manufacturers who made farm equipment and 
who did not v/ich to file, Thiers was a considerable amount of direct compe- 
tition betv/een products of the fl'^or and wall clay tile industry and 
those of structura-l clay products and terra cotta industry, Th«> industrial 
alcohol industry insisted "n delaying the operation of its price filing 
on one form of anti-frcczc until price filing for the same product was set 
up in the hardv/ood distillation industry and provisions were made for an 
exchange of price lists bctv;'"en the tivo industries. The metal window 
industry had similar difficultiec in its relations to the all-metal insect 
screen industry. Other industries in the code sample which facrd similar 
difficulties were the paper distributing industi-y. which could not secure 
price filing by wholesale grocers; scientific a-pnaratus in relation to 
members of the chemical industry; and wholesale confectionery 

(*) Bulletin issued by Code AuLhority to Members of Industry, August 
7, IOo'l; (in NTLA files, businesp furniture industry.) 

(**) Minutes, January 24, and March li^, 1934; (in WA files, farm 
equipment industry). 

(***) Minutes ef Eastern Regional Code Authority, January 17, 1935; 
(in l^IRA files, vitrified clav sfwcr pipe industry). 



conf ectionary in relation to allied line \/holesaler;.;. These diffi- 
culties '-ere of clasp.ificrtion, iux- is diction and definition of pro- 
duct, raid necessarily nrast lifvc been settled upon factors peculia- to 
each ca'je. Begardless of the fact that no general nile can "be inr de 
applicr jle, they constitute one of the greatest aifficulties faced in 
establishin; .:? successful system oi rnf.ndatory price yablicity. 

Pro'-.i-cts. v'hich went into non-conipetitive channels nrv;hich from 
their nature v;e,re non-coiupetitivc were frequently exem.ited fran 
price filin, requirenients. Sales of carbon dioxide in small con - 
tainerr to t,-e mxdical fielc. were exciiptec. i rorn filing by the Cr; rbon 
Dioxicc Co..... Aiithority. (*) The CorcU ,v anc T\7ine Code Authority 
exempted 3T-ns, tv/ines, rnd o&her proeu.ts v/hen ■ased for the manu- 
factu-re of cj.roetr,, nj.g-;, anc furniture. (■*) 

ITote 'iuoulc' be taken at tni?. .oint of a ma.ttcr closely re- 
lated to the ty es of mf on nation thp.t rliould o. filed':. luany coco 
authoritierj reqiiircd the filinjof c-escribptions of .iroducts along 
v;ith )riC'„n and sometimes set forth cetailec rule:% coverin,^ the point. 
The A';;p:^^lt Shingle and Eoofing Code Aiit] ority required the foil o\/in-.: 
data descriptive of products incliu.ed: rvei'.v :c • ' ci ^ht per sqtiarc for 
unit of sale, niimber of '-jqu'" r^. feet suppliec. at imit sale price, di- 
mensions of shingles, number of shin-^'lei: per scA'are, and number of 
bune.lcs jlx scuare. (***) Likovvise, in the funcrrl supply industr;/ fxill 
descriptions of jDroducts were rcqiiirec". v/ith the proviso tha.t samples 
or illustrations must oe f orv:arc.ei.. if tnc ru'ture of the product rac/.e 
descriptions impractical. A similar requirement v/a.s made by the 
Markin^, DLviees Code Aiithority. In tlie retail monxijiient industry, 
it A/a.", provii.ed tliat v/here a full description of eacii type of mon\\- 
ment '..'a.s impossible, raembers shoulc. file ruiit ;u'iccG for the consti- 
tuent .recesses of suj.i :lyin.7: material, cuttin;;, polishing, letterin;, 

One 01 the major c.iff iculties in selecting products upon 
which filin, s should be made wli- the cdvcisity of procucts a • bet'Tcen 
different members end the rerultin, lack of comparability of informa- 
tion filecu Unless some coj;auon bcSiS'Of compa,rison betv/een products 
is pO;j':-ible, .rice publicity is v.l tl out meajiin^:. T]-,e lack of similar- 
ity betv/ecn industry prodiicts in ix^me ine.ustrief; discouraged efforts 
at price publicity from the start and no provisio- wa placec. in the 
codes 01 these indtis tries. Otn; r industries tried price filin-; but Oi ::t nclardization forced its abandnrunent or at least caused 
grave diff i^^i.lties. The remaining industries e.ither v/ere fortimatc 
enough to ha.vo a customary or we] 1-establishec^ formal plan of staaid- 
ardiza.tion before their codes were -. eo up, or the^ succeeded in devis- 
ing a vrorka^ble plan during the code pericd. There i;; summarized belov/ 
the experience of the indixstries examined v-lth respect to this problem. 
It should be emphasized that "standardi;:ation" here refers primaril 
to definitions and classifications for tic piij-pose of filing and only 
incidentally to standards of quality. 

(*) Minutes, August 13, 1934, NIUi files 

(**) iiinutc;;, Itaj- 15,18, 1^:M, .'HA fil^^s 

('^=^*):^xpia.natiin irsucd by codu tuthorityi April t„ , . 12Ii_- ..hTtA. files 


I:i the csphalt shin^-le i-nc. roofing inc-.ustr , ; system of jrou- 
uct clD.';.':i±iC£ tion and. c.cfinition 'v,-;,^ Cjp.itc r/cll established bjforc tlie 
code ^.'aG a -'proved, due pertly to the f&,ct that a considerable oropor- 
tion of t.:.c inaustry Vi' ere -working imc er the same basic patents. The 
bal-cin;; inc.ustry in its ■ujiiform reporting foiiri broke dovm its products 
into th. following classea: 

1. Bread 

(a) White; (b) Pullmaxi; ( c) viennn; ( d) Frencn 
(e) raisin; (f) v;hole wheat; (-) rye; (h) speciaJ. 
and other, 

2. Kolls 

3. Swett dough goods 

<;. Cakes 

(a) poimd; (b) loaf; (c) layer; ( d) cup. 

5. Cookies 


Dout^iinut s 

Crcain gooes 

(a) puffs; (b) eclairt 


Other products 

All proc:;.ct' were to be clkssified \inder one of these _>,-roups or sub- 
grouoG r-.< c n-icc was fileo. for the class onl:, ; however, provision 
was mrx'.e for indicating the ^vtight of the item cljssified, th unit 
price, t..e jrice per poiind, A set of symbols were used to indicate 
whether the roduct v;as in v/rapped wax papur, in wrapped cellulose, 
sliced, or packaged. Thx^s, a vnrkaole ela sific. tion of procacts b" 
t^'pe \rcAZ ojtained, but there vr:-. still lackin ; a clar sif ication by 
quality hc/;ed on ingreddents used. 

The candy manufacturin,'; industry dele.;3atcd the Job of classifi- 
cation to Dtui and hradstreet, which eventually established the fol- 
lov/in/;; ei^jhteen classes of products: 

rive ten-cent Units 

(incliiding bar goods and- ccllo- 

jheyic packages) 
co'LiJiter goods 
penny --oods 
packa.^;c go ^ds 
butter cream goods 
cst.1 aiiicl s ( wrappe d) 
chocolate (bulk) 
cocociiut vi/ork 

cream work 


a.nd jellies 

hard crndy-solid , filled, mix- 
mar shmal lows 
pan work 
iced '^oods 

chocolate mouldedL ;;oods 

Thus, instead of attempting to have crch member file prices for each 
of his dif:.ercnt prodTi.cos, it v/ss requesteo that he classify his proc.- 
uctr; imder the rbove groups end file one price for each group for which 



he cold ,roL:o.ctE. C"^) 

A ^oroc.-act clasoif icttion ;.- t v:o by th.. steel c^r^tings industr;'- 
in conjraiction with r cost st-icy i acilitctuc. uhe smoo'tli operation of 
price lilin ±i\ tl^at inJ.ustry. Although the r^ arc some 120,000 .io;siblc 
pattern-, ro.ichare sole;., these were Ton-ped into onl. 1,200 cla- f^e^: rnc 
prices v/ere filed onl;,' for these cla s-s. Thus, the avera'_';e nwaoer o;: 
actual iro^ucts re_fjrescnted by each cla.s ■'£.: one huaidrec. In the icr- 
tili::cr ii.t.ustry an est-blishca list of ::rade' v- s approved, but cMffi- 
culticn re ult^di f ro,.i t'le miring of ^.rades the Irbellinf; of such 
mixtLU-es r "snecial forrails.e" ; oj.'en fertiliser could be sold 
only if u; schedule file set forth price clenrl enou^^h so that an, cor- 
petitor cr.l'd comjuite exactly ^:-hat tie filer''": .jrice woiil; be for ?jiy 
coiabinr bior. Detrileci rules v;cre i'-.'-;uei'. by the hrcaroni Code A. thority 
settiri\; v.p ycality st&.ndards and iabelin-,, ano. these were utilised in 
the classification of procucts for filiny: .urjose , \ith such grrdes 
as "senolina", "farinf", "flour", tr.c' "subrtandc rd". A gross price 
list u: :. icvclcped in trc metrl v/indow indu t.y over a. period of ye. rs, 
from '"'hich members quoted their c'Liscounts; a, t ..o rough system of p^o - 
uct cla;rif iuation vie.s thereby achieved. Ilov/ever, filing on non-fcrrour; 
windov.'s \rc abandoned as impracticrl bee-use soiiO manuf;:ct\\rers in tjiat 
brancli rofused zo p^rticiprte in f;i::orta to i^rt .r^ product strndardi- 
zation, (**) A. "Book of Standards" ■■eems to have been in xnde use in 
the vitrified clay sewer pipe industry, which luidoubtedly providied 
measure of standa.rdi;:ation of prot.ucts. 

In a n.i.iber nf otiier incux; tries, however-, pxlce filing wa. 
haraxDered by the lack oi product cla.-sif ications or strndari izatio:.. 
Thus, in the cast iron soil i/ipe ind.ustry, the service va.lves ani- ropd-- 
Way or meter- boxes procxiceci by c.ifferent i;.emb;.rs v/ere qirdte- dissinilri , 
and. d.ifficulties of settin._,: ■■p t _.lan- of dization which could, ne 
correlateu with the system of pi'ices a.nd uniform- differentials in 
effect msA.e filing on these jjrodvcts vsr; v.ifiicult^ thoU(gh s^^jecif icrl Ij-- 
reqe.ircd b^ the code. The It ck of u.niiorrait3/- m .roc.uct-s- made - price 
filin,' conpletel-y rmpra.ctical in--nuineroi.-.s "prod-r.ct divisions" oi the" 
electrica.l "manu.facturir.g industry. A corr.^; bit ro,)ortion of t'.c 
folding pa.per box industry v;c" •; mac.c-to-orv.^i to -p-, cif icr.tions o± e c:. 
indivic.ual customer; standarels: tion war; ^jraotic?! ly impossible for 
these, a ftict which led the indaistry to pro ;ose a system of filing 
costs insteau of prices. This \/t r. also true of the set ui, "paper bo;: 
industry. Certain regional committees of the j"japer cistributing trad.e to cla.;sify products a filir^gs came in, but their lack 
of success ca-xised. consicercble cifiiculty i"n the o era.tion of yrice 
filir.":. It has been pointed, ou.t c.bov^ in crnother connection that price 
filing in the heel' and sole Civision of rubber "raan"ufa.cturing was ren^.-f red 
virtually rmworkable by the absence of quality standa.rt.3. ^he Coi.e Ar- 
thority of the Shovel, Dragline rnc. Crane Ineustry attempted, to achieve 
a degree of "oroi.uct classification through listing certain product 
groups on the 'uniform reportiniS: form devised;^ this met with opposition 
{'*) Code Acmini strati on Halle tin ITo. 1; (in ITIIA. files, candy man'afac- 

turin_ incustry). 
(**) Resolution of Code Av.thority, Janua.ry 23, 1954 (in "Eule Book", 
page 1) , ERA files 



fron vrrious Menliers on the -rorjiJ, tiirt it -t.s unruthorizec". "07 the 
code, r. fret '/hich i rar.iroc. its ei^fecti^'-cness. Price Lilin:; in vrrious 
regions of the structural clry T'rocucts inc.ustr-;' ':'r.s hrripered 
"by 01 classifications of 'iricl: r^or filing purposes. Other indus- 
tries in '-hich Irch of product standardization :'ade a snoothly -Torlcing 
price filing systcn iMpractical inducted retail .:onuient, scientific 
rpppratus, rnC- crnvas /;:oods. 

One of the greatest di:^f iculties rrising fro:; lack 0" specific 
grading on 'oroduct classification in soie ind-j.strics -as the possihility 
of evasion "by the seller in supplying a pror'uct of a higher grade at the 
price filed for a lo-er grade. The various divisions of the pr^er ?-nd 
pulp industry cevised very ela"borate grading systcns for industry pro- 
ducts rjid atteinptod to secure approval for :ia.ndatory dif:"erentials for 
size, -reight, color rxi^'- othor variations in specification. These dif- 
ferentials "vere c'isppproved "by Y.TA out -'ere in large ^leasure irde ef- 
fective by price filing anc coc authority regulations. Even so, 
the possihilities of evasion rer.rined. This difficulty ■.•as enhrnced 
Tjy the provision thr.t r.ienhers coul'" justify filed prices as "ueeting 
the conpetition" of soue other zorrjC-a-j, It -^ari not feasible to deter- 
riine ^hen such filings actually ::.e't coj.rpetition unless conparability 
of grade could he ascartainec-. The code ruthority in a proposed 
revised code soiight to include the reruirenent thr.t "GPuples" "be su"b- 
Tiitted ^-ith each filing. 

It is clear fro;-i the cvic'.3nce presented tlirt tl'..e agencies ad~ 
ainistering price filing installed it - ith losc success and frequenc:' 
for indv.stry products that vere Cirectly co^ipetitive and --here the na- 
ture of products r.iade conpara'bility and classification foasi"ble. In 
industries -.-here the nu:-i"ber of products is great rnc' natural groupings 
do not e;;ist, it dou"btful -hether a nerjiingful degree of price 
publicity cm be secured through a price filing sy.sto"i -onless a s'.'-steri 
of product clrssification and strndr rdization ir. put into e-''f ect. (*) 

h, Ferfor^nance oy le'ibcrs. 

As -.light be expected, the degree of co:.r::li'^nce "oy le^ibers '.':ith 
codp.l rnd administrative require^.ents regarding products included '-as 
grerter than in the case of require: ;ents regarding in"or:iation, thr-.t is, 
aside fron refusal to file ?ny prices. There is little evic'ence thr.t 
nenbers arbitrarily refused to file prices for certrin types of products, 
"hile at the srrne ti;ie filing then for other types. This is probably 
due to the fact that code authorities generally ("id not institute orice 
filing in the first place '-here r"if "iculties of description, coj.iparison 
or classification '-fere insuriountable. In those industries in --hich the 
Code Authority' required filings on rll products, there is no available 
evi6.ence to inticate that ner.ibers re.^ul.r rly rnd c eliberatelj'' onitted 
certain ite:is. Kovever, in sone cases the filings i".pon standp,rd 
products only '-'ere satisfrctory, --hile those on non-strndard proc"- 
ucts '.7ere not in a fom \-,'hich --oii-ld convey the price :!"or this type of 
product. This situation e:-:isted in the uachine tool -ni foi'ging, sliovel, 
dragline and crane, and agricult-or-l insecticide anc". fungicide industries. 

('') The possible rigi:'.itic:s resultin': fro;', each nethods rnd their 
in conj"OJicti",n "ith fired price dif:': erentirls is discussed in Chapter I"V, 
pages 231-242 . 


Be-yonc. tliis evidence, only :. ccmprricon of ell products upon 
v.'hicli r/iemLers actually fileu a ■ reveoled by tncir actual filings with 
a comprehen:-.ivG list of industry procaicts woulc. reveal iiroducts or.cludet.. 
from filinj. 

The ohscurity nf meajiing in individual filin{,;s and tlxc lack of 
comparroility in the filings raacie "by different mGinbere causee. far more 
diificvJt:_. In some industries no descriptions of products vxre requested 
or sup .lied and, as a resiilt, che publicity of prices rcflizi,. 'vas of 
little vclr^G, since membt rs foiond it difficult to compare their ovm 
pride vith others. In other cr.Gcr., descriptions were reque^ too. and 
filed, but frequently jroved tn be too brief to be of ,~rcat help. 
V/here no roeuct clast.if ications cr plan of st- ndr.rization were es- 
tablishee., the filings tuat were nirde - althouL;h frequently mc de in 
ful accore.ance v/ith requirements and fully c'dsseninated - often failed 
to convcj to members the prices at which their comjje titers were sellin.; 
competing prodiicts. Thin deficiency x.'sz of i set in soiie cases v'here 
the attaching oi the maker's na^ie or brane". to hio filed prices was 
sufficient identification for his fellsv; com-ictitors in the industr?/ 
or perhaj-: even for customers. 3u.t where there v;ere a Iprge n'omberc of 
industry products or a large number of producers this f rctnr did not 
exist. Other industries in addition to th-^se cited in which filings riaex- 
were unintelligible because of the absence nf )ro>-uct cla,ssifications 
were str^aetiaral clay products, scientific apparatus, and retail lionu- 

In conclusion, it seems evident that, in determining upon 
what iproebActs price filing may be fe^ ible, there must be a. certain 
Bmorjit 01 'ojiiformity or standardizr-tion of proc.ucts, or a practical 
scheme of classification nu-t be devisea fnd full characteristics of 
the proc-i.ct be includec. along with the uricc infoimation filed. 



E. Trpiisactions Ir.cliided Within Trice Filing. 

1. Issues and Controversies. 

Unless prices are filed for all classes of tuyers, full pu-tlic- 
ity crjmot he achieved. And if orices to certain classes of tuyers are 
not puDlicized, the effects of such exeimDtions may "be to render the par- 
tial TDUolicity realized for other tra.nsactions meanin^sless. Consequently, 
the requirements and TDerformance ^^ith resoect to this matter are of 
vital import in evaluating the degree of "oublicity o"btained. The general 
theory of puhlicity, as pointed out above, raised a presumT)tion in favor 
of including all buyers. Bat opposed to this v^ere arguments for the 
exclusion of Tjrices to three types of buyers. Unlike some of the other 
controversial Tjoints, these issues generally crystallized before per- 
formance b5- members became a reality. This was because they involved 
definite conflicts of interest rather than more purely difficulties of 

The first type of buyer whose prices it '•-•as frequently desired 
to exclude was the very large buyer who was receiving an extremely Mgh 
discount. The arguments advanced in favor of such exclusions were that 
they would lead to agitation by smaller buyers, not really entitled to 
the lov/er price, to receive the same prices as given to the larger buyer. 
It was argued also that an agreement with the buyer, that the price be 
kept confidential bound the member. Thus a member of the plumbing fix- 
tures industry, in =!xplaining his failure to file his contracts with 
mail order houses, stated that: 

"Our contract with the mail order customer predates the effective 
date of the code and we must comply with contract- ':ire-exi sting 
the code. Our -"jrrajigeraents with this mail order customer go 
back as far as 1904; the selling price under this contract is 
based on all costs plus a fair profit; also ties in with a con- 
tract and Trust- Indenture for a one Mllion dollar .bond issue 
due August 1, 1939, or as long as any of these bonds are out- 
st anding" ( * ) 

Like-'ise, the Universal Sanitary Manufacturing ComT).any stated, in 
connection v;itk the s^^me . issue; that: 

"Tliis com-oany has .gone on record as to its entire willingness to 
file with the Administration member of the code authority or with 
the H2A certain contracts of a hi,-'hly confidential nature, en- 
tered into in writing prior to the effective date of the code. 
This company does maintain that the filing of such contracts, 
thereb^r making them available to- the insiDection of comDetitors 

(*) Letter dated May 1, 1934, from Bundle Ivianufacturing Com-oany to 
Assistant DeT)uty Jacoby, filed along with brief from five manu- 
facturers, (in files, plumbing fixtures industry. Volume I-a) 



mi-^lit 170 rk a hardship -anon the comnany and interfere in an un- 

T/crranted manner with the merchandising and sales nrogram of 

the company as to matters wholl.y teyond the -our-oose of the code."(*) 

Opposed to the exemption of such buyers was the argument that 
such an omission would destroy the value of publicity of- other trans- 
actions; and that it would defeat one of the major functions of price 
filin.i;, naj^iely, the elimination of discrimination. 

The second type of transaction '''hich it vras often desired to 
exclude were .transactions between industry members and with buyers 
owned or controlled by members. The motive here was to preserve the 
competitive advantage of the integrated concern. 

The third tyoe were transactions with buyers where these buyers 
also purchased goods from intermediate distributors who sold in direct 
competition with members and did not file their prices. It was argued 
that members who sold directly to these buyers vrould be at a competitive 
di sadvejitage if their competitors, the intermediate distributors, were 
not required to file. 

Another issue provocative of considerable discussion centered 
■ aroujid the problem of giving meaning to the classes of customers for which 
prices were filed. Excepting in those industries where the classes were 
firnlj/- fixed ajid defined by customary ussige, the uncertainty aa to i.7hat 
buyers or tyipes of buyers were included within the classes for which 
each member filed prices lessened the corap-'ira.bility of prices from the 
standpoint of publicity and permitted wilful evasion of filed prices. 
Not only was there lack of kno'-^ledge regarding the tjipjes of buyers inclu- 
ded within each class, but different members classified their customers 
differently in filing prices. For example, one member might file prices 
for distributors, jobbers, wholesalers, and retailers; another member 
might file for wholesale distributors, brokers, mail order houses, chain 
stores, and dealers. Prom the names of the classes it was not clear '-'hat 
customers vere included in some of those classes, and accordingly prices 
filed Idj t"o members could not be compared. When, as was a common prac- 
tice, members filed different prices for different sub-groups of a given 
class-such as "large", "mediiim", and "small" wholesalers or "special" and 
other jobbers, the boundary line between one gro\ip and another could not 
be determined from the filings. Even where prices were filed for iden- 
tical classes, there remained the difficulty of inhere any given buyer was 
included. Was Chain Store X a mass distributor or a retailer? Was Mail 
Order House Y a wholesaler or retailer? Was Company Z given the distrib- 
utor, jobber, or wholesaler price? 

An apprecia.tion of this difficulty led to proposals to maice cus- 
tom classif ica.tions comparable. Various methods were proposed and some 
found their way into the codes. A simple listing of classes for which 
members were required to file prices was proposed in some instances. 
In others it was argued that there should be included with such a list 
mandators'- or suggestive definitions of each class which incornorated 
the qualifications necessary for the inclusion of a buyer in any given 
class; these definitions were sometimes written into the code -^nd some— 
times promulgated by the code authority. The most extreme meaoure was 

(*) Letter to Assistant Deputy Jacoby, May 1, 1C34, NRA files. 

the proposal that the code authority "be ehvc^y^evsd. to classify all of the 
individual "buyers of the industry into such classes as it deemed proper. 
The other general method of securin?; corfloa.ra""bility ¥/hich v;as proposed 
was for mem"berG to file the definitions of the classes of customers for 
which they filed, or to file the nai.-,es of their customers to whom each 
of the various prices or discounts were to be given. 

Some of these methods were oiyiosed "by representatives of "buyers 
and "by the NRA. The NHA, while sympathetic with the efforts to advance 
compara"bility of prices, foresaw the possi"bilities of control over prices 
and channels of distritaition, and was accordihgly reluctant to- aporove 
most of the proposals.. (*) From 'the vie'^point of 'lublicity, the problem 
is analagous to problems raised in connection with information and 
products included in tha,t comparability of information filed is without 
doubt advanced by requiring uniformity of certain terms of sale, by class- 
ifying products, or by securing uniformity of customer classifications; 
but the advantages for price publicity must be balanced against the 
price control which such measure may implement. 

2. Code Requirements 

The codes, as a rule, were fairly ercplicit upon the matter of 
transactions governed by. the price filing provisions. Generally they 
included all tjrpes of buyers and transactions within the scope of the 
price filing plan . .Out of the 444 codes, only fifteen enumerated cer- 
tain specific classes of buyers for whom it was re.gaired to file prices. 
The question of whether or not these enumerations omitted certain 
classes is -a factual question which depended upon the total number of 
classes in each of these industries and accordingly, is not capable 
of definitive answer. However, there is positive evidence that in some 
of these fifteen industries, the prices'to certain large buyers were 
exempted from the filing requirement. Five codes " specif ically excluded 
prices to governments and a few other codes made other specific exclu- 
sions. Aside from this group of codes, the code filing requirements • 
embraced prices to all types of "buyers. . 

3. Code Authority Expansion or Modification of Code Requirements, 

Generally in the industries studied, the instructions of the 
code authority simply restated the terms of the code with respect to 
transactions to be included. Instructions contained in bulletins and 
letters .to members issued by the code authorities for the following in- 
dustries required the filing of prices for "all buyers" without particu- 
lar qualification; asp'halt shingle and roofing, builders supplies, cor- 
date and twine, electrica.l manufacturing, floor and wall cla.y tile, 
macaroni, machine tool and forging, marking devices, baking, funeral 
supply and valves and fittings. 

(* ) The problem of customer classification is discussed in Chapter I'V 
pp. 242-255 . with especial reference to its control aspects. 



'The code authorities of a 'number of other industries issued 
rules enuiiierating classes of iDuyers for which prices shall he filed.- 
The degree of comiDulsion ur)on' members to ohserve' these 'groupings or 
uniformly to classify s-oecific customers into certain clpsses varied:, 
some \7ere intended to he only suggestive while others provided complete 
code axithority supervision over the classification of specific "buyers, (*) 

Thus the agricultural insecticide industry required thfe'filing. .. ..: 
of ptices to consumers,' dealers, and jobhere, ' and alsQ of commissions; ;.->.:m;o3 
paid to brokers. A resolution of- the- Asbestos Code Authority required .'o Lns 
prices to consumers, dealers,' "and jobbers. Godfe 'Administration Bulletin d-aon 
No. 2 of the Candy 'Manufacturing Code Authoity required pri-ces for ;-:".--lX'; si 
wholesalers, wagon jobbers, f'et"Aiiers, large, medium and small chain ■.••JOJ'^fiotcf 
stores, large, medium and Small 'syndicate Stores,' coo-oeratlve "buyers," • -^fj/c"" 
concessionaire, and vending "machine operators. In. the canvas . goods . ■"■■.•,'.■:./ 
industry the filing of prices only to retailers and "'hoiesalers wa-s . '■.■.■-• 
required. The uniform, reporting fdrm of the carbon dioxide, industry ■' ■ ' -r 
contained blanks for consumer, chain store, and retail prices. The 
envelope industry in Bulletin 17 c required the filing 'of prices to 
wholesale distributors , wholesale-retail distributors, commercial print- 
ers and other retail distributors and consumers. The Farm Equipment 
Code required filing of prices' tb" jobbers and dealers", but the code 
authority informed a member "that he imist file his 'prices to mail order 
houses, t;**) ■ In the Fertilizer Industry, prices were required .for 
consumers, dealers,' and agents. ' 

RdliAg' ITo . 2 (Revised) of the fire extinguishing appliance in- 
dustry specified distriau.tors, jobbers, very large users, dealers 
and general consumers, with elaborate definitions for Rule ,"• 
Ho. 7 of the Gas Apnliances Institute required lorices for exr)ort sales, 
large purchasers, wholesalers, jobbers, brokers, retailers and consum- 
ers. il)he' ga,s water heater branch of this industry varied the list 
somewhat, as' follows: exports, utilities, "jobbers, mail order houses, , 
direct-to-you, plumbers, and consumers-. It was also soecif ically. re- 
quired in this industry that prices for private brand or s-oecial label 
saleS' be filed. The Mayonnaise Code Authoritj'- required, to> " 
wholesalers and retailers oiily but made majidatory the classification of 
certain la,rge mass distributors as retailers . 

There is not much evidence that code authorities granted' formal 
and positive i^^xemptions of prices to certain types of buyers, altho-ugh, 
as pointed out above,' this may ha,ve been done indirectly by oiftitting 
cej;;tain types from the lists issued. Specific rulings exe.m-Dting prices 

(*) See Cliapter IV, pp 242 - 256 for full discussion of problem of 
custo'/aer cl-issif ication. 

(**) Letter fpniti the Farm Equi-oraent Institute to David Bradley T.ianu- 
facturing Works, dited Pebrun,ry 1, 1934 ( In NBA files. Farm • 
equinment industry. 


charged- felloe nanufacturers in the in^Aistrv •='ere nade in the agri- 
cultural i.-isecticide and fun'jicide, carton dioxide, floor and wall clay 
tile a.nd viilve and fittings industries. In the plunhing fixtures in- 
dustry", \7here such sales "ere quite imnort?.nt, the code authority attempt- 
ed to set up a plan "by T'hich trices to fello^^ members were filed separate- 
ly. Prices for products ^:^oin£ into ex-oort channels rrere sr>ecificall"/ ex- 
empted in some cases, notahly in the farm equiixient, the mechsjiical . . 
rubber goods division- of rubber mpnufacturing and the co'prier and brass 
mill products industries. Specific exemption vras made in some for 
prices at -./hich affili-.tes or branches '-ere billed. In the fertilizer 
industrj'', filings on sales to wholesale coooeratives were not required 
of members but these coooeratives i;i turn were required to file their 
prices. Efforts were made in the fractional horse-ioower motor division 
of electrical manufacturing to S'^cure the exemiotion of prices of sa.les 
involving 51CC,000 or more but this was denied by HM. 

Tlie evidence examined in the iniistries included in this study 
indicates that filing of -orices ',7as generally required for all ty^es of 
buyers and tra,nsactions, '-ith only a. few isolated exce-otions. G-entiine 
nrice publicity could hardly be secured otherwise, for where there was 
agitation for exemr)tion, it w?s concerned generally with -orices to 
buyers of the greatest volume. 

4. Performance by Members 

Code requirements for customer classification in most cases 
were either vague or general. Code authority rulings tended by enumera- 
tion Bjid definition to make, them specific. In industries where the 
code or code aut,hority definitely nre^cribed ajid possibly defined the 
varuiys ckasses if buyers, filings were made on this basis. In indus- 
tries where no list of customers was set forth, there v/as some varipjice 
as to the practice. In some cases a considerable uniformity of classes 
was observed as the result of customarj' and well established selling 
channels bc-ing in use by the industry. In other cases competition led 
to the creation of new cl'^sses for the purpose of quoting lower prices 
to certain tyoes of accounts. In the food service brance of the elec- 
trical manufacturing industry, for exom-ole, at one time -orices were on 
file for fourteen different classes of buyers — including hotels, 
educational institutions, etc; one member having filed p. price for b. 
new class, other members would folio-' suit shortly thereafter. 

Prices to fellow manufacturers ^-rithin the sane industry were 
generally omitted. Not infrequently -prices to the government agencies 
were also omitted. In industries where manufacturers selling directly 
competed with those who distributed throiigh jobbers and wholesalers, 
difficulties were often encountered in securing the filing of consumer 
prices by the direct sellers since the distributors with whom they com- 
peted were not required to file. In some industries members selling 
to mail order houses absolutely refused to file their prices to these 
accounts. In the plumbing fixtures industry members refused to file 
the terms of their forward contracts with mail order houses, even in 
confidence; they stated that there were clauses 'irhich nullified the 
contracts if their terms were di-vulged to a third -oarty. Members of 
the code authority accused of failure to file such contracts gave the 
further explajiation that -nublication of thi* very low -orices would com- 
pletely wreck the price level for the industry. As a technical de- 
fense against charges of code violation in failure to file, they In- 

dicatecl -that the contracts nere on a cost-plus "bas.isand that the transac- 
tions TJOMld not really "be coimoleted until the end of, six months, ''hen re- 
bates -viere given to the mail order houses concerned. In the candy manu- 
facturing industry memters were very reluctant to file prices for certain 
"^et" p.ccounts to nhom they had teen in the habit of giving suhstantial 
concessions. Like-'ise, in the wood cased lead pencil industry, the vir- 
tual refusal of memhers to file special discounts given to preferential 
customers V7as one reason why price filing in that industry was ineffec~ 
tive. Finally, prices to johbers were frequently omitted upon the basis 
that they were under contract to one member and therefore not a pa.rt of 
the regular competitive market. However, despite all of the exceptions 
noted here, the evidence indicates that most typically members included 
prices or discounts in their filings for all classes of customers to 
whom they sold. 

The replies from a o^uestionnaire sent to former code authority 
secretaries confirm? both the observation that all classes were generally 
included and indicates the nature of the infrequent exceptions that were 
made, .These replies are tabulated below and represent experience in in- 
dustries other than those included in the code sample. 

The imnortant factors accounting for failure to file prices for 
certain classes, or for at least a reliictance to file such prices, are 
of two kinds. In the first place, the fear that other buyers would in- 
sist upon receiving similar prices led to a dislike of making -oublic 
the low prices granted to the most favored buyers. Also, no doubt, in. 
some cases pressure was brought to bear by the recinients of these low 
prices to keep them secret. In the second Dlace, members were un- 
willing to file prices to consumers or, to certain intermediate classes 
when, they were in direct competition with distributors who were not 
themselves filing their prices. 




Customer Classes for T7hich Customer Class for Which 
Prices Ordinarily Filed Prices Ordinarily Omitted 

Asphalt (?: mastic tile Cuntra-cters, dealers, consumers None 
Concrete mixer None 

Household ice refrigerator All classes None 

Metal tank Joh'ber,v7holesa.ler, dealer A consumer None 

Motor fire ap'oaratus Consumer (chiefly municipalities) Ilone 
Fulp & paper mill vfire clothConsuner None 

Talc & Soapstone Customers( chiefly man^ifacturers) None 

Transparent materials Consumer, jother, agent , broker, 

Warm air furnace Johoers, dealers 

Wholesale monumental marhle Wholesalers 

Card clothing 
Slide fastener 
Industry G 

* Industry A 

* Industry D 
Cutlery, manicure, 

implement, etc. 

* Industry B 

Cutting die 
Perfume & cosmetic 

Dealers, users 

All classes 

User, contrr^ctor, johher 

Wholesaler, consumer 
Consumer & intra-industry 





contract to one 




Jobbers, manufacturers, catalog 

houses, retailers, consumers 

Retailers, drug stores, de-oartnent 
stores, beauty -oarlors, chain 
stores, syndicate stores, mail 
order.wholesp.le houses 
Power & gang Mower Jobbers, dealers, retail 
Road machinery manufacturer Consumers 
Tool & implement 

manufacturers Wholesalers 

Air filter Jobbers, contractors, users 

All others 


brands not 
by member 

Dealers and 

(*) Requested to be kept confidential, 


-13 o- 

I-'. C-GOCiT.pliic Scooc of ?ilinf,\ 

1. Is'-ii..3 rnc". Co.itrovorsii..p, 

rro'olcns frequently r.roEc in connection ^itii the r.vco. to -^hich filed 
prices slioulc' r^pply. V'licn filings ■Tcrc uac.c 'Titli one nr:tionr-l rgcncy, 
r. oucstion r.rosc r.s to ■-'hcthor p. single price :.nist lie "ilcc. to r.pply to 
the -rholc country or -hcther c.iffcrcnt prices night "be filce for dif- 
ferent locations, Sonc prrties r.rgucc. thnt filcJ. prices should rpply 
■ujiiforiily throughout the country. Others f.rgacd for locr.lized filings, 
in order that -.-lenhors night sell r.t c'ifferent prices in different 
regions r.s cor.roctitivc conditions night necessitate, ".nicrc filing rir-s 
'■'ith regional agencies, the pro"falen of the relationship ■bctTTOcn the 
price filed hy the seller in his hono zone r.nd hir, selling prices in 
"foreign" zones "resented itself, Shoulc" a seller oc. pcrnitted to 
sell in foreign zones without filing a price there? Ii he is not 
reqxiired to file in the foreign zone, nust he observe his loc^l price 
'^-hen selling outside of his o-'n zone? If ho is required to file in 
foreign zones in 'iiich he sells, "lust he file the srnc price as he has 
filed in his hone zonj^C*) 

A far nore heonly dchatcd issue centered around the question of 
'-hcther it should he nrndatory for filings to he nado only u-on a 
delivered "basis as opposed to an JT.O.B. nil", "basis. Tron tho stand- 
point of puhlicit"' it vT-s argued thrt the filing of delivered prices 
was necessary to secure conp.^rahility cf filing;;. It na& ascerted 
that in industries '■here shipping costs '-cro large relative to other 
costs, the filin- of IP. 0.3, prices, to -Thich large "but varying ship- 
ping costs had to "DC finall;- added, -rovld provide puhlicity of linited 
value. And, alternatively, if shippin," costs --ere added in filing, 
the result "ould "be as nany prices 'a-s there -^-ere destinations - a 
filin:^ rhich "ould "be too conple:; for practicrl handling or use.(**) 
Opposed to those arguincnts -.'as the contention thrt the use of a nanda- 
tory c.olivered "or-sis of filing voulc. -'orh to the detrinent of nany 
nearhy custoncrs , and fv.rnish a device "hich necessarily controlled 
inportant geographical differentials in each conpany's price stracture^ 
and -'hich night he used to estahlish collusive price unifornity, 

2., Code ?Lequironents, 

The price filing provisions of the codes usually did not nention 
the gcographicrl scope to I'hich filing should apply. T'-'cnty-tvTo of 
t?ie UUU codes provided for regional price reporting, nith fourteen 
prescri"bing the re'-ions to ho set up. Tvrenty-f ive codes specifically 
pcrnitted regional v.ariations in price. Only four codes e::pres3ly re- 
quired that filed prices "be uniforn for rll regions. Onl;'' six codes 
contrinec\ regulations of sales in foreign zones hy producers fron other 

(*) The cuestion of the relationship "'oot'.ccn tho prices "'hich aji out- 
side procucer nay file or quote in a foreign zone to the filed prices 
of nen"bers of t"nrt -one is discussed in Chap.I'V, -p-p. 265-270. 

(**) Sec ninutes of code authority neetin;: of structural clay products 
industry, Ilarch S, 193^; (li"^ '^"^ files structural clay pre. acts incustry.) 



Lil:e'.7ise, onl"/ a. ver-/ li'^iited na'ioer oi coc'es re'iuired the filing- of 
iriccs on c. delivered ''oasis onl^'. 

Z. Code Av^tliorit^'" lJ:nrnsio;i or '^odii'ic.-ition of Code I'.e- 

As to the q^uestion of t3^e ",reo, of price "OJiif ornity, in the in- 
due tries in the code sc^role, -.lOst cor.i::only region...! vr,rir.tions '"'ere 

oer'.itted either oy strtinrj; in instructions that filin;i;s 

specif^'- the territory to "hich they aroply or "by acGe;.ti:v2 locliaed 
fill:', s. Thus, a resolution of the code e.uthority of the at:jri cultural 
insecticide and fungicide industry on June 4, 1534, acce?ted filin 's 
i^or locrliE;ed territories but required that the territories or •:on?s 
ecitr.olished "by each riien'oer not corix'"lict nith those "based upon "natural 
trade conditions". Tlie reportin;:: lor:: set up "o^;- the Car"bon Dioxide 
Code Authority contained f, space for enterin,:^ the ret'^ion to r/hichtlie 
prices sp:lied. A code authority "bulletin of the coffee industry ex~ 
"oressl^"" sta,ted tliat different orice lists light "be issued for dif j.e:.'ent 
territo:."ies. Various discussions of the Timeral Su-rily Code Authoritj- 
as recorded in the :iinutes indicpte that they conte-ro] c.ted and acceded 
to the filin;; of different irices in different regions. The hacaroni 
Code Authority instracted vien'bers to specify regions, states, or sales 
territories to '-hich t.l-ieir "orices a.pplied. Tlie nachine tool and forging 
ind'o.rtr3'' -oer .itted regional vr.riations;" to the extent that r.iei'oer'^ 
'■light file s'oecial Pacific Coast -irices. The executive authority- of the 
oo "'rapping and ppchin ■ division of the prper and pulp industry'- re- 
quired tha.t jprices filed sliould he designated as to the zone or zones 
in which effective. The Valve and Jitting Code Authority'' at one tine 
lulled agaiiist locali7,ed filings "but subsequently a inenoer asse.i-ted t"hat 
the code axithority .'-as a,cce"oting ther-;. (*) 

In contrast to this '.-love corr:on iractice, in p, fc industries code 
authorities required fili . 's to "ije u.iforn for the entire countr'/. The 
Pluibin ri:;tures Code Authority took this -TOsition and ch3,rged Pacific 
Coast jianuf rcturers who filed different ^Trices in the East than in the 
'.Test '-ith violating tne code, (**) The I'ertilizer Code Authority per- 
mitted the filing of different schedules for different zones but an 
en-j"i.;.'r.'^.tion issued 'u"' '.'PA. required that orices for a given class oi b'ojrers 
nust be uniform for all such buj.-ers uithin the saiiie >area. (***) 

\'ith respect to the ruertion of inter-zone relationohips, no tm- 
ifor-ity is evident in t'he mlin.s establis'iaed by code authorities \.inon 

(*) Letter dated Dece;:Ljer I'J, 1934, fron Pittsburgh Valve rnd Pittings 
Co'iprny to G. V. Penny, secretary-treasurer valve and fittings nan- 
•ufactiaring industr;,^. (In "...A files, valve -^id fittin.;? industry''). 

(**) Pe^-iort of ad' linistrc-tion r.-'eiiber, Po. 12 to Pivicion II, P.PA, 
Octo'oer 17, lb'34, (In PPPi. files, pl'onbiiig fi":tures inc'^usti'^'-, ) 

(***) De-outy aordnistrator to Fertiliser Recoveiy Coiir.ittee, A'iril 1934, 
(In "Pa files, fertili'.;er inductr",") 


this point. In none c-.pc: it ' ■-■:8cif icrll:- st.^.trd th-t each ne-,bei' 
m selling m pjiotner zone :n-t file .- nev irice in tlv-t zone •■ nd in 
each i^one in T^fcich he sold. (*) Tuiere tiiis "as done the code autho-.^ity 
GOi^eti:;es ruled that prices thus filed in fo-ei,.jn zonas imst not oe 
belor the :-iroducei-' s price in his hone zone; tlis ^.'as connonlv the 
attitude of the regional code a^ithorities in the retail nonunent incustiy. 
In some maustrics -here filing '.ms u.)on a region ,1 b-sis, members -ere 
allo' ed to enter other -o.ies end sell there -ithout filing a price in 
that zone; but it -as indicated that they rm-t observe the "irices -hich 
they filed in their o-n zone in that case. 

The codes vested little c.iscretionsry ^jo-er -ith the code authority 
on the cnaertionof P.0.3. vs. delivered basis of filing and auotin- -prices. 
DesTite thiF xact txiese a,,'encies frequently endeavoured to secure filin-s 
uniiorily on a delivered basir, either throu ;h f or^ial -ralin- , infor^-1 ^ 
mstnictions, or by devioing a reporting fonj in -hich such r method -as 
calleo. for. (**) I'RA, though neve-.- having aiino-onced nrTr-fon-Pl ooi ic- 
state-:er.ts uiion this natter, usually OT,T^osed effort c to" limit the -.^reedo- 
01 mcividual sellers --ith i-e-x-ct to -hether they -oi.ud file -\0.1. or 
delivered prices, vhis -as trae -liether the r-iethod -oro-oosed -as to -^ro- 
hijit an ?.0.:j. basis ( or delivered basis ) 07 to na :e' a-ndptor-"- r 
delivered basis ( orZ. G..--1. brsis ). ^ ' 

-4, PerfoiTiance by Menibers. 

Little evidence is avrilrble concerning co-iDli?jice qr nenbers -ith 
cocal rna administrative -.provisions regarding the area of lorice unifor-ity 
cj^a mter-zone relationrhi ,3. ^Tliat Indirect evidence h-s been found 
mcicatf-s that localized filin -s by menbsrs nere quite prevalent brt ^iot 
more so th.n the filiv.;; of . .i.-i. unifom ..rice for the entire countr^r. 
Li-rer-i'-.e, as night uave -bce-^ e-.ected, the filing of ^irices on a relivered 
oasis -as q-aite con; on, re- -.rdless of the action or l.-ck of action b-r the 
coce authority on th:t point. In the cast iron soil ,i^e indnstr^^ no-t 
nen.ers actually filed on a Biminciian basing -,oint. (***) A basing .voint 
S3 3. en -as alsom operation in the cenent incustry, rl though not -orov'iced 
lor in the code jor that industrj^, 

Tliere is tabulated belo- the replies from forner code authorit- 
ofxicials in ans-er to a questionnaire reg rding the ;eogra-ohicr2 scOT^e of 
prices fiied end be sis upon -hich the;,.- --ere ordinarily filed. 

(*) 1 iiiutes of 17th neoting of Administrative Gomuttce of Pertili-er 
Industry, JanuD.r;r 9, 19 SI). 

(**) See Ciir .iter IV, p. 256-266 for a disc-as-ion of the control as-.^ect- 
of mr:i6.£tory filing of -)rices. 

/ ^ ale ^ \ 

..^ {. ^'^.V'O^^s V .-.o-nini St ration lervoer to l-.TA, la'or^irT}^ 18, 1935. (In 
-.?A liles, cart iron soil r^ine in-.ixstx-'-. ) 



:.asis on ""l-.ic;.. Sco-;e of Prico'^ ."'ilec., 

Inc.ustr;^ OrCinLU-ilr Piled If on r.O»B. 3".qiT 

^ivoii'-lt cz vi;-.ctic tile r.O.::;. • IT^tion^a 

Concrete nixer ?.0.B. "."ation.I 

Hou'",eholc ice refrigerator IT.O./j. l'Iatio:i\l 

.c,rl:in;: devices Be live red 

.letal t£?iil: T.O.B. "ation 1-1 -ice r 

jie loers 
ile^io'i J.-s: 'cller 
vie '.'oers 
;>jtor fire ap_jpratus delivered 

Pulp & prper :\ill Tire cloth Delivered 

Sheat r.etal di&tribwtors P. 0.3. Ilesion-l 

Trie lie. so .-istone P.O.::. lTation-1 

TrcLiir-irr-ent n-^terials Both (depending on 

T-e i t':ht o f sh ip H . ) rat i on - 1 
7ar:i rir f-u.rn.: ce I'clivered 

TnoleR-le nc:i-ui:9nt.-^l narble P.O.: . I'ation.l 

Card clothing P.O.L. lla.tionAl 
Slide fr stener Delivered 
Ind-a';- C(*) Delivered 

Inda&tr^^ A P.O.";. :^oth 
Industry- D Pelive-^ed 

Cntlerp, -nicxire i:v".. etc. P.O.:;. lTationr-.l 

J die P.O.:;;. :"ation:.l 

'e rf w ■- e c nc c o sn e t i c I . '" ■ . :^^ . ilr t i on -1 

Po-er CT.C. Q?'ixc lo-er P. 0,1;. ilation^l 
lie ad machine —.'■ Delivered 

Air filter Both Hejion-1 

G-. hechanics of Gollectir.': l-:"ic3s . 

1 . I rx t r dac t i on . 

.,_ v riety of decisions cof'.Gc.rnin;^ "ules Oj. ::.;-ch;-niGrl procedure had 
to je y-ade in "outtin,- the -Trice filing &j.-stens into o;ieration. hoot of 
these reflected no conflictr; or ir.siies over f-ondai cental principles out the 
erztent to '-tiich snoothlj'- f-'.Tiictionin:r pl.jJis of procedure "ere estahlished 
and corralled vith hy rienhers 'rent a Ion;-; ^8Z' toi^-ard influencin';; the vJ-tirvte 
effectiveness of the -juhlicit;- plr^jy as a ':4iole. Anon^' the nore inportra-^.t 
natters relatin;- to raechrnics --hich ^ere Jhe suhject of codal or aiiinistra- 
tive ction '-ere the follo'-in.'j: I\tnoer of copies of price lists to he 
filed oy Lie;:herE, viethods of cop-in -irice li^.ts, ih^-siceJ fom o^. filings, 
procedure --'hen revising part of filin:;s, raid netiiods of corrrunicatin' ;'rices 
to central agency rnd of s.c: hj^ the latter. 

^4- J- 

(*) :iecuested to he he;-)t cor.f ic eixtial» 



2. Core Provision^. 

It ^.'ar:. o'^viously i;rorectic: .1 to :-,tte:nt to iia-.lude v"ithin the 
detr.iled rales Govei-i:v; tlie lUltitude of ;:echa.iiGo,l .mtters involved in 
the collection of orice drxt",. ' no t.efinitc r^rrnt of authority" ^'t.s 
t^iven, it T,TaG probabl:/- . ssr. ed. tbat such i.U'tters'OLild "be left to the dis- 
c:.;etion of the acninisterin^ a^enc^, Pce.'^i-.rdleso of the ;oos-'i"bili ties of 
at'dse, it 1-as entiixl^ irapos^iole to avoid leavinj a considerable field 
for administrative discretion. Aside iron natters discxissed in the 
earlier sections of this chaiter, the onl;' natter of pLire nechrjiics in- 
volved in the collection of cata -'iiich '7ar. covered to pn;'' degree in the 
codes ■Ts tha.t of the number of 2)rice lists to "be filod, Fortj^-f o-ar 
codes required that the nu^iber of price lists filed be equal to the 
nu:noer of the nenbers in the industrj'-. Onl^ t'jo recf.ired a nxuiber 
sufficient to su^mly a copy to all reuoers and custoners of the indu.strjr, 
ZTifty codes specif icelly erroo'-erod the code autliority to -jroscribe the 
nu;nber. The re:.iainder of the four hundred and forty-four codes '^ere so 
irorded rs to inply that only one or r ver;' fe'-' lists needed to "oe filed. 
It should be noted th,at seve^ity-ei'^ht codes 'orovided that conplete ne'^ 
"orice lists should be filed whenever any kind of a revision ^'as made, 

'6, Coue Authority Ercornsion or hO(''ixicrtion of Code Heo-iiire- 

The absence of spocific code provir-ions iilaced uoon the ad:ilnister- 
ine agencies the responsibilit^r for f ornulatin^li necessary'" rules of pro- 
cedure. In tho-;e indu'jtries ^^here thousoi''.ds of filings '^ere h^jid.led 
each "Onth b^- the centrrl Et'^^'cy, it vras found necessary ^o prescribe 
quite rigid and also very detailed rules. In other industries rrhere the 
nujTiber of members r-s snail raid ch.aii^jes '-'ere less frequent, less foiTia.! 
and coraijlicated orients sufficed. 

One kind of ralin^, related to the nonber of co-oies of price lists 
th?t had to be filed. In sojie industries the code authority took Lvjon 
itself to reproduce the prices bj- mimeograph in'; or otherwise, disseminat- 
ing either enact copies, a suiLnary thereof, or notif^^ing member of t'ne - 
receipt of filin.js oj'- letter; in such crses members nere required to 
file only one or a very fex^ copies. This -as true, also, rrhere price rere not distributed beyond tne central ofiice. Bxit more cov.only 
members v:ere required to file enough copies to supply all of their 
direct competitors; this resulted in requests for as Qrjiy as- tjne hiindxe^ 

I'ore or less detailed rales T.ere laid dor-n concerning the physicrl 
forr.i of the filing, A frequent recuirer.ent 'vas that 8-j'' :-: 11" paper be 
used. It '■'as unifomly requii'ed that filin s be either printed or tj^ije- 
'.rritten. It ^jq.s often required that sheets filed be nu'-foered serially 
throughout the year and, in some cases, naragranhs and sections also be 
serirlly numbered. The fertilizer industrj'- sjiecified the minimum size 
tj-^oe to be used, '-'hether printed or t;me"ritten. In some cases it y'e.z 
recuired that pa.ijer belovr a certain •lininun weight should not be tised. 
Prices "ere generally to be r-roorted on the letterhead of the firm filing. 
In some cases prices for different claspes of bu^j'-ers ^■'Jid for different 
products rrere required to be listed on separate sheets, kechcmical pro- 
cedure for revising prices "as prescribed, such as indicating for 00".par- 
ison ne^Y prices and previous prices: The fertiliser industry found it 



ezr-'et-icnt to reojaire the "ifilin ■ of c ;} -ilete nov r.ciiedules eve:y tivie the 
sli{i'htcst chca ;e ^^os n?de in -Miy ter.! or -::'ice, rec-'.rdlesG of the lr,"bor 
involved. On the other iipnc" , the industri.xl alcohol indaGti-j'- recuired 
on].;' that ever7 three -months leriherB file co-rjletel^ -nev schedules, 
rhile ch:ji.;^es nrde in the intevi;.! '-ere^ entered az correctionc on 
the -schedule. In rone crs.-s o;-l/ catalo:;aes nere acce-ited as the filing' 
docvjient; in others only nrice lists. The asphrlt shin-'le eJid roofing 
industry per: .itted the filing of .■ , ncrchcndising pl'n to cover sorae of 
the tei'is of s'-Je. ("') 

Ilore si,T-^-iiit;;^ri.t e;:ce itions as to foni -ere nade in the paoer 
distri jutin;-; anc retail nonvxient tr/.des r.iiere the code authorities in 
E0''ie regions or districts Ter-.itted ^'oint or jrou;ii filin.'^s, neaninj; 
that a sin£:le filing could he si/^ied oj a number of nenhers; •moreover, 
in the paper distributing traoe nenhers needed only to si^gniiy their 
acceptaiice of the Icest price on file "by nnother ne-:"ber. The- valve 
ond fittin:;;;s industry allo'-ed rienhers to adopt list prices of rjiother 
ne.:"ber oiiC file only di3C0"ants» 

Cenerally, it ':.-as required that I'ili:'. s he trana'-itted to the 
central are:. 037- 07 firr.t class :iril. In rone instances, ho'-evcr, it iras 
provided that chan -es tr';ns'utted hjr telpgraiDh and even ov teleoho:ie 
'.Tould he acce-oted. Hours of filing- '-ere usu.allj'" specified, '^'ith the 
precise o.rte of filin™ hein;:: the ti;no of r^cerot hy the r ":e:".c3'- r.ther 
thrn the tine of ntdliii';,'. Yrxie:."e prices did not hecoTie effective iritil 
the filer received ackno'-lod'-enent fron the a'enc;", certain r^.iles of 
Troce.'ure rere ecta'olis.':ed, 3;)::etlies achno'^led: enent '.'as to oe "oj 
telegraph, ^rhich in the fertilizer ino.ustr'^ ■''as to he sent collect. 
On the other h-'.nd the aij-'UJiist:.\ation ne;nher -'p.s forced to critici-e a 
ro.iin • in the ./ailders si.'.p ili . :; iad'istr^'- '-hich 'vovided tha.t filing 
agents should tal:e at least fo:.'t'-ei.pht hours to ox.'Jiine, nre-iare, and 
record filed prices hefoi^e a.chno" ledrin.i;; thein; the code provision in- 
cli.ced no ''.aiting pe .'iod. 

The vjiifom fer'.is for re lortin^ of prices, disctissecT at various 
places in this re-nort ',.'ere of co\i:."",e, th.e 'lOst si:.':nii icant of all of the 
nechaaiical factors concerned. In ^orae they oecaioe far nore than 
pxirely lorocedural r.ids. At Ic '.ft one-third of the industries in the 
code sa.^ple xised then, thou h in r:ome c-ases their use \"r;is siigcestive P2id 
optional rnd not rnrndcatoi-y. '/raether or not used as r. oart of a control 
necha:'-isn, they 'vere helpfhil in f-.cilit.atin^ the nechruical operation of 
"orice f ilin :■. 

H. Aolierence- to h'iled Prices . 

1. Issuer; ,?,nd Controversies 
The cuestion of adhe're-icd to filed irices involves the '-'hole 

{*) Tor further enanle of the settin,'' up of elaoorate end Go:''ile:: 

r"Liles of procedure relr.tive to the nechL-nical ope:'ation of ;orice 
filin-T, see the oulletin iss icd to rienhers hy the Poldin.^ 3o:: 
Authority in A;o-oendix C, E:-;iihit IV 


ciiiestion of the r,ccT.r; o± th.^ inf cmation filed. If the sellin^^ 
prices of nein'bers bear no relationr^hiT to the prices vhich they hcwe 
reported to the central r.;;ency for distribution to nombors, the 
collection and disne/.iination of such ^^i-ices fails to throv light on 
actual pricin;;^; policies "Jid the end of -otL'^licity is thus defeated. 
It is not too much to scy that the filin;;; of prices then is actually 
hamfiil, for the absence of infor.iation is better thfjiii copious infor- 
na,tion rhich is nisleadin^ to coiroetitors and others. 

It is necessaij' at this point to dro;^ a distinction between 
"performance" a:i6. "adherence". !.'y the fo"jT:ier term is uerxit con^^li^^ice 
vith the codal and :admini' requirements established, rhether 
they prohibited only those sales vrt-tich ;fere belor filed prices or pro- 
hibited sales either a.bove or bel o-.- filed j^rices. "Ach^ei-erce" refers 
to the selling belovr filed -nrices — re£;ardless of requirements or per- 
formanc3 relative to sales above filed prices. In a f;ood. many cases 
members sold above filed prices; in some cases thic, represented a 
violation of req^u-irements and in other cases it did not. Quantitative 
evidence bearin>^ upon the jjrecise extent of s'ach practice is lacking of the fact that less emphasis '■.'as placed upon it in ai'.inis- 
tration th?ji in sales belov.' filed prices. Movever, from the stand- 
point of the 25ublicit;'- function of -i^rire filin'^, tlie.same inaccuracy 
results rrhen sales are made above filed iTriccs as '-hen made belo'7. 
The fact was recognized, in I'M -oolicy racking, for Office i^emorand-UTi 
l.'c.y28 forbade sr.les at -orices not in accordcnce ■-ith those filed.. 
The discussion in this section is chiefly concerned, rrith the question 
of n,dherence to filed prices, that is - vl^ether or not members sold. 
belo\^ filed prices. The;:ion of e:-roerienc8 rela.tive to so.les 
above filed prices, is of course, less significant to the e::tent that 
'minimum "orices is practice b'''Cor.e actua.1 prices. 

Another issue centered arovjid exemptions grr^ated or requested 
from the rea_^uirements of adherence. These 3."e::iitions T'ere not fre- 
quently concerned 'Tith sales of certain sjiecial goods, generally of 
sub-standard q^uality. The manner, of meeting comj-ietition of enother 
member vho vap. selling at lo'xr ">rices — r '••hether bj- filing a ne'.T 

price or by selling beio'7 filed prices also vo.s the siibjcct of 

controversy nnd ralin;;s. 

It should be noted that the question of adi-erence arises only 
v.'hen prices -.rero e^ctue,lly filed. ''.Tliere there ra,s no conplicnce -'ith 
the basis requirement to file in the first -olace, the c^uestion of the 
degree of adJicre/.ce rras non-e"i,-tant. The disci'.ssion belo-: thus 
apiolies only to those members uho filed, regardless of the degree of 
original participation. 

The practice by members in various indactrios of selling jy mec^is 
of "firr.i" contracts created ,"Ji issue '.TUich ca'csed much cont rovers'''. 
These contracts involved the {ruai'ajitee by the seller of a strralatcd 
■irice for purchases made over an e.xtended period, of time. In some 
cases, as in the so-called "open-end" contracts, no limit nas •olrced 
on the duration of the offer or unon the volvuie of purchases '.7hich 
could be mrd.e under it. In erit.n-'ing into these contracts, members 


o'oli'jr.tDc. thcnsclvcs to su;ppl;' ^-oocs r.t the contrrrctual ovicc tqqctC-Icss 
of suliscqucnt chrji'^'cs in their other prices. Th'j.s, r.lthoiifjh the 
contr-ct rir-;' ori^-inr.lly 'been trJ;cn r.t the current price on file for 
the ncnlDer, ivhcn "ilcc. prices '.rcrc changed shipv.iunts -.liic'.c iinc.or this 
contrr.ct -'crc still hilled r.t the previous price. ".Aicn the filed price 
'T.s raised, shipyn^nts at such prices thus represented a t-.^oe of non-ad- 
hcrcncc. The situation prevailed after the estahlisluicnt of price 
filin.r; plans 'Tith respect to contracts •••hich •"'ere in ertistance hefore 
the code, This fr^iTare Oi actual prices char^'cd to correspond -Tith 
filed prices lessened the puhlicit;- -'hich :'.i£,-ht other-.'ise have "been 

Considcraole controversy hct-een nonhcrs in c^rtrin industries '-as 
en";cndcred over this point, TJhose -lei.ibers I'ho sold on a lontj ten: "basis 
or "ith price guarantees 'vcrc un'-illing to aoandon this practice, as- 
serting that they "ould lose custoiicrs if they cOLild not .-/rant such 
inducop.ents. On the other hand other ne:foors -ere cquall" iaisi stent 
that -the prt^cticc should he restricted because of the indirect conces- 
sions involved '-hich prevented full inforr.ation regarding pricing 
policies. It ^-e.s proposed "by the latter ne/ibers that there should he 
vrritton into the codes linitations on the length of for-^ard contracts 
v-ith fixed prices or on the furrtion of price gu.arantccs. This '7as 
cone in a nunhcr of cases, "..ncro t'.iis solution 'jas not available, an 
effort to secure the filing of such contracts end their c-isscnination 
along -"ith other price infornation filed. In those crses -'here the 
contractual price v.'a.s a ;.ia:cir.'m: i price only rnd ''here there ';;as a provi- 
sion "or rebating later to :'ir]:o rtjustucnts for price declines, even 
the filing of such contrrcts dif not rrovidc full ptiblicity. ilenbcrs, 
too, --ore of ten. reluctant to file such contracts for the rop-son that it 
'".•oulc" reveal the n^.nes of their custoi.icrs and other intinatc '".etails of 
the transaction. (*) Price publicity is lessened -'hGrcvcr long tern con- 
tracts ore in uae by sone nonhers or "^herovcr it is co:inon to eritend 
price g-u-aiTnteos, unless provision is .lade for the filing of such con- 
tracts and g-uarantccs rnd of p.11 rchatcs grrnted thereunder. 

The problon of aclicrence to lanuf acturers ' filed prices 'oy vdistribu- 
tors, arose in those industries ••here different chaiinels of distribution, 
nerc used side 'o-j sic.e "o'j le-nbers in the sane ind\-_stry. (**) In sone cases 
part of the :!enoerB sold directly to cVcalers -d^ilc others r.old to 
jobbers or to --holesalcrs •fho rcsolC to f'ealers; the co.:pctition of 
jobhcrs or 'wholesalers then p-^'csentet" a pro'olc"! to those :,ierfoers 
selling directly to dealers. In orther iridustrics part of the nenbcrs 
sold directly to co'nsu:crs -rhilc others cistributcd through .-.liddlciricn 
of sone sort; here the prici'ng policies of all i-.idclcnen including re- 
tailers -.'ere -latterc' of concern to c'irect sellers. Thur , the issue 

(*) Sec Section S of this cliaptcr for a cincussion of thi-, issue fron 
the stnndpoint of the filin'- of contrrct'- t.^hen at a very Ic: price. 

(**) The rucstion of •'hethcr or not distributors shoult rdhere to the 
filed resale oricos of ianuf rctvircrs shoul" not be confused '7ith that 
of '-hcthor c istrib-ators' thensclves should file prices •'ith the Manu- 
facturers' code ruthoritj'', as disci\sscd above in Section II B. 


ivas :.'hcther \ c.istrilj-o.torn should l)',; required to e.dhcro to the filed re- 
ceJo or list price's of rei'i'bars. Direct sellers of course ucro the nost 
vocal in oroposinr; such r-dhorcncc. Their arrjuLicnt -vac tha.t publicity 
of their oricos for direct snles \7?s to then if the- prices of a-11 
conpctitors in their nar'cct -'cr-> not rr^TDlicized; unless distributors 
filed prices, such puhlicity could "be achieved only if they adhorcc". to 
the reaale or list prices filed "by nam.ifacturerp, 

2. Code Re orients, 

T'70 hundred and forty-four corlor! required that ncnhors sell at the 
prices and terns 'vnich thoy hrd filed rnd prohihitod dcia'iations ahovc or 
■bclov,'. On the other hrjid, one hundred end. slxty-olfih-t codes prohibited 
nenhcrs from sellinp^ "bolo / their filed prices or upon iiorc favorable, e^nd- thus by implication pcrnittcd spIos f b^ve their filed prices 
or at less favor'^blc There arc no codes nhich pcrnittcd ncrabers 
to sell at pny tine bclo'.' their filed price, since such a provision ob- 
viously ~ould render the price filing syste.i ncanin£:lcss. Ho'.'cvcr, t-'jcnty- 
thrcc codes pernittc(j, sales as lov; as the lo'vcst price on file, even 
thou^'h this price v/as belo-' the filed price of the rionbcr himself; i.indcr 
the provisions of the other codes, in order to achieve the sane end, it 
"ould lip\-Q been necessary to file nc\7 prices. Likovrisc, fifteen codes 
pefnittcd the sale of certain specified types of substajidard goods below 
filed prices, rrhich -under other codes could only be accomplished by fil- 
ing separate prices for such roods. 

As for the m.attcr of adherence by distributors to the filed prices 
of manufacturers, five nc^nufacturing codes prohibited sales to buyers not 
a^Jierihi:; - to -ip-nuf acturcrs' p-ablishod prices; seven nanii-facturing codes 
required numbers to enter into contracts -.rith buyers vrhich bound, the 
latter to adhere to the nanuf .'^cturer' s published prices; seven codes 
-prohibitcel sales to controller sales representatives (agents, brokers, 
affiliates, etc.) -dio did not so adiicrc, rjid four codes rccuircc^ contracts 
nith thom 'vhich -'ould forcu- them to rdiicrc. Finally, five distribution 
codes prohibited sales by mcm.bcrs at other than the nanufa-cturcr' s pub- 
lished prices, 

3. Ereecutive Order No, o'jS'J. 

On June 29, 153"^ '^■'^^- Executive Order i-'as prorTalgated which provided 
that sellers in any industries "vith price filing could quote rjid. sell to 
federal, strtc, or municipal fovcrnmcnts at 'oricos as low as fifteen 
percent below filed prices. Provision wr.s aJso mad.c tliat if this 
resulted., in the judgement of the Administrator, in destructive price 
cutting, said administrator might reduce the tolcrrmce to as low as 
five per cent. This order thus effected a limited exemption from ^d.hcren- 
cc rtouirGmcnts, rn exemption traceable to the fodoral' eovcrnncnt, rather 
than the administering pgcncy of the indeastr^^. (*) 

h. Cod- Authority Expansion or i;odif icrtion of Code Hequirc- 
mc nt s . 

Little evidence was found, that code autnori^ics varicdi. to any 

{'*)'FoT a longer discussion of this order, see Chap. VI, pp. 477-4B3 below. 


i,vaoit.::t o.ejree tlie coda require; ie::ts Go::cerninj acucrence to filed 
■rrices. --he nost frequent c^.se "as thr.t in -iiich the code uthorit" in- 
struct icnr/, see-iln 1:^ required the reporting of ,;_ctual prices --herer.s 
the code celled for the lili;:;; onl;- of nini-ju -i prices p.nd the no-st f, ,voi'- 
a^le lor e::a;v.-ile, tho Corda-e end T-dne Coc"e Ar.thorit7, '^hc-e 
code crlled for -.ctual -^rlces, specifically reu-aired its nen.ljers to file 
-. no' o'ice if the;- -iahod to sell a certrin curtoner aloove their pre- 
vrilinj filed "orices. (*) As a rale the code authorities similj^ traiis- 
r.iitted in their instractions the adiaerence requirenents set forth in the 

Aside fron re^uJlations co-icernin.,- j;ene±'al aoiiprence "oj ne.ioers to 
filed jrices, various ralinijs vere made oj- code authorities relative to 
adherence J under certain special circiijistarces. One {^toup of these 
ruliiijs pen-iitted the sale of t^^es of suostsridard groods oelo-r filed 
-orices; occasion' lip it '-;:.s required that such -sales had to "os reported 
to the code authority after tlisp '-ere consvo-iated. 

The Plviiioi.v': Tiritures Code Authorit;;- pemitted salec oclo-.: the 
raeriher's filed irice to iieet cometiticn; out in lost industries Lien^ers 
\Tere instractod to file nc-- rnO. lo-er pri^-es if they vrislied to raeet 
lo'rer 'irices of co'r )etito:.'s. 

Aside fron intem-etationr. of Ere^utive Order ho. S767 permit tin.'r: 
sales to ,:overnnents at fifteen -percen.t oelo-- filed price, no cases --ere 
found in "hich code r.uthoritit s ar'bitraril;'- raled that certain s-oecial 
hr^'-ers ^-ithin a given class could he sold helo-r filed prices — excluding, 
of course, those classes of hrr^ers prices to '-hon nay have heen e-:e:inted 
originall" fron tho filing require: ients. 

The field in 'h.ich code caithorities ;.ost covr:onlp atte-rpted to 
erroojid the code require-. eats -as th-at of adherence oy dir.trihutors of 
the inc.ustries. Coc'^e authorities in r manoer of industries nore or less 
ag,/ressivel3^ tried to teciire adJiercnce of distrihutors to the filed 
prices of mmiufacturers or attenpted to secure ^-hat is More conmonly 
]aao--n as resale lorice naintenaJice. (**) 

5. Adhierence of j.ieiibcrs. 

Tf-pes of e-vide.-ce lead to a cl,?,ssif ication of incustrios into x'ov.r 
groups, hased on the relative degree to -^'hich nenbers ad^iereo- to filed 
prices. The first group includes those industries in --hich adlierence 
T:as -ractically one hundred percent. Thus in the agric\iltural insecticide 
ojid f-oaigieide industrj'", the adjiini strati on :je;iber on hrp 2, 19o5, i^e- 
ported to ESAthat all out one neiiber of the indxistr;? ^rere ahiding hj 
their filed ;'-)rices and diacoiaits. The ad- ministration nemher for the 
carhon dioxide industr;.^ repoi-ted to hrA on ..a;- G, lGo5, that all Jie-r.hers 
had been adiiering, althoa^'^h there 't^s .a tende icy on the part of siiall 
uBMoers to hreai; aray as tilu extension of the code hecane uncertain. 

(*) Letter dated Au I'J, ISL'l to Cordai^e eaid '.'rapping T'-ine 
Division. (In VIA. files, cordage and t^-'iue indrstrj'-. ) 

(**)This suhject is discussed fiaiy in Chaoter IV.p.p. 280-313. 


Similar reports on about tlie sane dates nerc made oj the adi'jinistration 
members of the i:\du3trial alcohol and salt producing industries, althoUj^h 
in the latter industry a lev; exceptions v/ere noted. The mana,ger of the 
Vitrified Clay Sev;er Pipe Code Authority stated in a code authority 
meetinjj on ITovember 27, 19c4, accordia£; to the minutes, tliat there v.'ere 
practically no cases './here mer.ibers had refused to observe their filed 
prices. Tr.e other industries in v;hich virtually one hundred percent 
adherence existed v;ere: copper, copper rind brass mill products, cement, 
electrical manufacturing, ladder, mp.cliine tool and forging, metal lath, 
metal v/indov;, nottingham lace curtain, aiid the mechanical rubber good.s 
division of rubber manufacturing. (*) 

Under another group mfy be classified slightly more thiar. one-fourth 
of the industries studied. In these adherence v/£'.s fairly general, 
ranging from fifty to ninety percent, v.'ith those not adiiering 
representing a minority. Thir v/as true in tlie fertilizer industry, for 
exajiplc, where long delays in merting p.rice cha:iges of competitors, as 
noted, in cm intensive studj-" of actual filings, r/ere errolained by the 
fact thrt nemberr, went ahead and sold below their ov:n filed prices 
without bothering to file nev prices './hicli .net the competition. (**) 
A letter from the administration member rep'Orting e. code authority meet- | 
ing in the cast iron soil pii5c;- on ilarch 20, 1935, states that 
the code authority believed thct s. i-Ujnber of conr-^anies were selling 
belov; filed prices. Adjierencc in the business furniture industry 
was quite good v/ith the exception of a minority group, until the 
com-oetiLion of 'distributors led to general non-adlierence and ultimately 
a stay of the adiiorence requirements themselves. Lihewise, in the 
cordage End twine industry, adherence was good until competition from 
prisons ?.nd from the Philippine Islands led to a complete breahdovm. 
Other industries falling into this main category were: asbestos, 
asph?,lt shingle and roofing, 'build^ers' supplies, carpet and rug, 
crushed stone, farm equipment, fire extinguisher, folding paper box, 
funeral supply, gas appliances, pa;oer and pulp, scientific apparetus, 
shovel, dragline rnd crsjie, steel castings, tag, ?;id. vaJve -and fittings, (*** 

A third group of industries includes those in which adlierence was 
quite poor, somewhere belov; fifty percent, on the part of those who 
filed initie.ll;'-. in the bricing industry posted prices were, of course, 
closely followed when posted jmblicly; but adherence to schedules filed 
with the national balrers council v/as poor. The secretary of the coffee 
industries committee stated in an interview that towards the end of the 
code period at least seventy-five percent of the industry could have 
been cited for non-adherence; this he ex;olrdned by the failure of IHA 
effectively to prosecute the early violators. In the macaroni industry, 
and prrticularly in the Hew York area, large numbers early in 1935 were 
failing to abide by filed prices; this was accotplished in ma,ny cases 

(*) The sources for this statement are chiefly xIKA code histories 

and verbal statements of I'lli staff members intimately connected 
v;ith the operation of the in these industries. 

(**) THiitney, Simon, Fertilizer Industry Price Stud;--, Trade Practice 
Stucdes (Division of Review, December 15, 1935). p. 58. 

(***) The sources for this statement are chiefly ITPA. code histories 

and verbal statements of hPA staff members intimatel.y coruiectcd 
with the operation of the codes in these industries. 



throu:-;h tlie ^ivin;7 of prerAi\ims, freqr.entlj- of co:isidera.ble value, al- 
thougl-i the code coiitaincd a provision restrictirit; the use of -premiums. (*) 
In the -ilurnoini^- fixt-jj-cs industry, non-p.dlierence was most widespread 
in the ■'orrsE group, Sut in other groups as \7ell, the effort to meet 
the cor.ipetition of wholesalers who did not file prices and the pro- 
visions "lermittin:^ ss,les belov: filed price to meet prices of other 
members sellin::: "belov; filed prices, eventually led to a cu-.iulativc dis- 
re^rjrf. of filed prices which culminated in c coOTilctc urealrdov'n of the 
plan. Other industries in v.liich acJierence was poor v:ere: envelope, 
mayonnaise, paper distributing, rej.d'^ mixed concrete, retail monument, 
footwear and hoal and sole divisions of ruhtcr nnnufacturing, set up 
paper "uox, structural clay "jroducts, and wholesale confectionery. 
Coriplijincc with the initial requirement to file prices was poor in 
these inC-ustries, a fact which . discouraged those meraters v;ho did file 
from crreful olaserva-nce of their filed prices. 

The fourth group comprises industries in which there was little 
or no c.dherence, reflecting; chiefly the fa.ct that very for; menliers 
ever actuaJly filed their piricos. This ^roup includes canvas goods, 
marlilc quea-ryin. a.nd finishing, (**) markiut, devices, medium cjid low 
priced je\:elry, retail tire and Ijattery, and w'ood ca,sed lead pencil. 

The f'oove classification is cased upon the de.::ree of variation 
between prices cjnd terns reported and the prices and terras at which 
sales v;ere maxle. Thus, there is omitted the entire field of evasion — 
T;hcre nerabers reduced prices to buyers through granting indir:^,ct or 
secret concessions which v;ere not embraced by the price filing system. 
The \iays in which sellers could effect indirect and secret concessions 
are Imost limitless and there is evide:ice tha,t many of them v/ere re- 
sorted to. Varying one of the credit terms, e:xe;;sive product gusxan- 
tees, open-end contracts, conditional sales, givinjs free goods and 
premiu:^s, specipl accessories, equipment, or services, diversion of 
brokerage or conT.dssions, eircesr-ive a.llowances, selling.; of first 
quality products as substand^ard, acccjiting securities in paj^ment a,t 
excessive valuations — each of these constituted in effect a method of 
reducing -prices which, Uiiless spiecifically included in the open price 
system, night render the iniormaotion filed and the adherence thereto 
of limited vpluc. Where there was c- real desire on the part of in- 
dustry members to evade the filing requirements by resort to such 
methods, the adxrdni strati ve agency ha,d little recourse except to extend 
the filing reqiiirements to t>ie :"oint of liomeless conTilexity. ITo factual 
sumr.ia.ry can be made of the r.mount of such evasion, but that it was 
general in some industries is borne out by the very considerable exten- 
sion of filing requirements by code ruthorities to cover various forms 
of indirect pricing and. by the frequency of reference to secret 
rebating and price' concessions. 

With respect to perforiiic/nce under Executive Order To. 6767, there 
was a tendency for competition to cj:-ive quotations to the government 
down to the full fifteen perceiit tolerance allowed. In some industries 
tacit a,greeffientn not to take of ,:he tolerance succeeded for a 
time but eventually broke down. Full publicity was of co-orse defeated 
to the entent tliat there w-as uncertainty as to tlic tolerance granted in 

(*) Llemorandum dp.ted J;-nuary 1, 1955 from Assistant Deputy E.S.Scott 

to Deputy W.M.Stevens, (in IIKA Files, macaroni industry). 
(**) Thi: indu;:.try operated a successful bid checking systera,hov;ever, 


-150- • 

quotations to governmcvts. In industries v/here governinenta,! units con- 
stituted t::e i^-rer.ter -op.rt of t?ie market , a ;5eriod of time after the 
issucjice of tiie order elapsed during which filed information v/as of 
limited value. Ty'hcre actual ouotations eventually settled uniformly 
at fifteen percent belov/ filed prices, T/hcther or not new and higher 
base prices v/ere filed for :4;overriinents, the informa.tive chro-acter of 
filings v/ere restored rnd price publicit;-- ras again possible. There 
remained, hov/ever, the sane limitatio;is that existed v/hen members v.'ere 
required tc file only iainimu-,i prices; nainely, that members might at 
any tine sell obove the figure of fifteen percent below filed trices. 

Fall adlir-rencc of distributors of industry members to filed prices 
of manufacturers was not very common in the industries studies. The 
issues of price control raised by this problem exc treated critically 
in Gl'iffpter IV. ITote may be nirde of the fact, hov/ever, that non-ad- 
herence of distributors to manufr cturers' filed prices v;as prevalent 
and caused difficulties in the follcv/ing industries falling in the code 
sample: asbestos, business furniture, farm equipment, floor and v/all 
clay tile, copper and brass mill products, fire cxtingu-ishing appliance, 
plumbing fixtures, auto fihrics division of rubber manufacturing, 
valve and fittin^.s, and vitrified claj'' sewer pipe. 




The collection o"' '■"^t- is the first b-sic stex) in acco^i-nlishing 
price oublicity, but extent to ^:.'hich -enuine •ouolicit^'' i? uT tinntel"'- 
secured :de.peri'-"s more cirectl-- uoon the actual extent and nature of the 
dissemination of such d^ta, ^'o I'-^tter nc"' thoroughly rnri conpletel;"' 
information is assernhled in a central point, if it is not dirtributed in 
intelligible form over a suff icirntly cxtenc'ed pre-, the objective of 
publicit3'- are defeated. The thoroughness vrith 'iiich information rip-^ be 
collected depencis lin.a.ll'^' upon the cooperation furnished bjr all of the 
members of the inoustry. But the res'ionsibility for the success or 
failure of dissemination r-sts upon the centra.l a":ency, for this con- 
stitutes- the chief fvmction of such an agency, "ailure to secure the 
fulle'^t disse-i.inrtion, at least as :ecrairec" by the codt=, may be rue 
either to an' incorapetent agency, to a lack of interest in iDublicit-'^ or 
to a, deliberate effort, to sabotage the ob.jectivcr of nublicit^'-. 

A. Issues and Controversies 

The main Issues relptin^ to disserain-'tion center pround (l) 
the Drocedure, (2) the parti'-s vilio receive tue informrtion, pnd (3) the 
inf ormatio 1 l isseninated. These issues existed in tlie both of 
industry members and customers. The is'^ue ':ath regp.rc' to the "orocedure 
for (" isse'iin-tion ras "'hether it should, be putonatic, in v.'hich cpse in- 
formation VT"s sent out ■'"'it.hOwit cost as soon as it ras received.; whether 
it should be sent onl}/ u;>oon reouest or pajnnent of the costs of disseminp.- 
tion, or vnether it should be confined to ins-o"-:tion of the -orice files 
of the central a'^ency. The second issue involved the oriestion of '-'hether 
information should be '" isseninpted I'l) to -■^1"'- members or customers, (2) 
to -oroducer" or b lyers of Produ ts similpr ro t^ose on uhich fii.inp- t^p.s 
made, (3) to orod.ucers or customers loca.ted in the s^me recrion as the 
fil-r, or (4) to producers selling' the sam.e customer cl.ass or buyers in 
the same class as thpt for \'7hich prices ^-ere fi^ed. 7in 11"'", ther- is 
tne question of '"hether pll filed information snould be riisseminpted- or 

whether onl'- certain partial, informatio-^ s'lould be re"! eased such" r.s 

the loi"'est price filed., prices to pn.rt of the customer classes, a list 
of cnan.jes vithout d.etails, etc. 

The menner in ^nich thece issues r^ere rrorkcd. out in the dif- 
ferent industries studied is discussed in this section. Thece actions 
reflected the attitude of the code e.r.taorit-,'' of the industry to'"'ar' the 
issues cited above. Aside from the occasicnal objections to dissemina- 
tion to customers, few formal pre-cod.e statements were made which revea.l 
earl" attitudes regarding the forra of disseminption. "ith rf=s-oect to 
buyers the president of the !'''ationa"^- Confectioners Associp.tion stated, 
at the code hep.ring, that 

"(it "as) of no s;oecia"' value to the "reat number of buyers 
who, from the^oint of curiosity, like to know what 
prices sup-oliers are furnishing them with. It v.'ould create end- 
l.^,ss controversey', I shifting of bu.j'^' .beti:3un rholespJiors, ajad 
■\ endeavours to chisel wholesalers. ... Enc'lng retailers, the 
benefit would be cancelled by bic'cerin."^ a,nd disturbpjice 'by 


■ • -152- 

custoners to get ti.e '"■lioler,rlers to reduce nrices." (*) Lil':e- 
vise, the Coo.e Authorit-'- of the Ladder Industry o'cj acted to 
includin:'^ Office "e'-^ora'idu-i "o. 228 in the Code rrith its pro- 
vision for oisse-:i:T tio:i to casto'iers, stotin^ thpt it "ps 
not "one clistritutor' s oiisinesr; vhat -Drices '-^ere ouoted to 
other distributors"., and that coifusion pnc dissatisfaction 
rould result if -orice information rere su-oplied to "buyers. 

VJith reference to one issue frequently raised in connection ^ith 
dissenin^tion, there uas no variety*- of exi^erience unfer the ITRk. This 
is the qiiestion of v/hetner or not the member filing information should 
be identifier' in the disseminption of that infomation. It '^as argued in 
support of such a practice that, unlrss products rrere con^iletel"'' standard- 
ized, publicized prices v/ould have little value vrhere membe- s did not 
knoi"' to rrhat member's products they ap-olied, PJid that buver nisrepresenta- 
tion of -prices could not be prevented if members cou^ d not ascertain nhich 
were the filed prices of the various comDetitois. On th- other hand., it 
vas arsrued., chiefl^r b.^' the Consumers Ad.visorj'' Bo-^rd, that ic entif ic^'i'ion 
facilitated coercion of sellers: nho filed, orices vfhich were ree;arded as 
being too lov. The I'ederal Trade Coir-iission had tahen a similar posi- 
tion in regard, to dissemination of past prices and trade statistics. (**) 
In practice, /lO'-ever, this issue vas lar:'";el3'' ignored since no r-strictions 
on identification ^-'ere written into the From the available evi- 
dence it appears that filing members vere a].va"''s identified, except in 
the paper industries, waore onl-'- the lowest filed, price r-as d.isse'iin^ ted, 
a-.d in the nottinghan lace curtain ind.ustry. Consequentlj'', this issue 
is not pursued further in the discussion of publicity. Identification 
of filers xie.s an. integral part of the type of price filing estab"'. ished 
under FRA codes. 

3. Disseminrtion "^o "embers 

1. Code T'rovisions 

Code provisions defining the members of the industry 
to ^"'hom prices should, be released '"ere of major i^.portance. One hu-^,- 
dred and. sixt^^-four codes, or somevhat- over one-third of the price filing 
codes, reou-ired, without further qualif icrtion, that the central arency 
send out the filed information to all memjers of the in^'ustrj''. <^ne hun- 
dred and ten other codes limited such distribution to ^i^nufacturers of 
products similar to those for '■'hich prices --ere filed; that is, if a. 
member of ti^e industry did not prod.uce certai: products on mhich fellotr 
competitors filed, orices, he was not eligible to receive these filed 
prices. Ten codes specifically restricted the '"istri jution to members of 
the same re^'ion". ""^iighteei codes provid.ed that li i':'tri jution '"aB m^ to )e 
automatic ..ut only uoon a specific request made in each separate instance. 

(*) Statement b^-- :'r. '7illia^Gon, President of "."ation-^'^ Confectioners 
Associ-^tion, Traiiscript of Hearin^:. pp. 2S7 ff . , ^^^A files 

(■**) Open Price Trade Associ'-ti o ns. (1929), page 3S3. 


rina-lTy, ten coces required thL,t prices oe clstx'i'buted to .e.foers mon the 
pa;-ne:it :^f the cocts involved in pr epcr in,:; ^^^ lailing the inforr.iation. 
Thus about seventj percent of the price lilin^'^ plans provided for sons 
tjje of distribi?.tion of filed data to the competing nenbers of the in- 


Of the renainin-; thirty -icrcent of the codes, one-half, or sixty- 
eight, required the agenc;^ to ..irl.e price filings available for insoection 
hr' leifoers at the central office. Eight codes left the matter of dis- 
se-.iination to lemhers entirely to the discretion of the code authority'-. 
Finally, cir.t]^ codes failed to provide for any type of disseinination to 
rnenhers. It is evident that if the code provisions \7ere exactly adhered 
to, price filing i-uidei- tl.ese sixty codes need not nave produced any pub- 
licity of prices whatsoever. The effectiveness of the price filing plans- 
as instririents for securing price publicity -.-as also limited by the scope 
of disseuination, as noted above, a:id q-j various obstacles plaxed in the 
uay of full ■c.isseuination, such as distribution of prices only upon f or- 
rac'.l request, requiring prepc^nnent of costs, and permitting inspection 
only at the centrrJ. office (perhaps hundreds of miles distant). 

A fer: codes provided for certain substitute nethods of effecting di^-- 
semination either in addition to or in lie^^. of filing '::ith a central agency. 
Tv,'o codes required, in addition to filing, that viembers send copies of 
their price lists directly to all fello\.' merabers. Zight codes specified 
that ae..ibers must "post" prices in addition to filing. Likewise, eighty- 
eight codes required that prices be "published" in acdition to filing. 
Pour codes which conteaned no provisions for the filing of prices required 
that members post their prices in a conspicuo^j.s place. One code without 
price filing required that members exchange prices directly, and one other 
specified that prices must be published in 8, trade periodical. 

Despite the complexity of code provisions concernir^^ information to 
be filed, little detailed instmction v/p.s specif icallj/" given in the codes 
as to v;hat information was to be disseminated, presumably, in most cases 
it wcs assuiued that inf ormtotion wcs filed should be disseminated, 
not in suniaary form but so as to include all prices sn.d terras of sale filed 
by ecch and every member. T^/o codes orovided that only the lowest price 
on file for each prodiict should be disr^e -.inated. iline codes specifically 
xorohibited the adaition of cOiimients by the centre! ogency in the dissemina^ 
tion process. 

The codes wei-e typica^lly silent upon thoqtiestion of whether or not the 
party filing the information shoiild be identified in dissemination. Ho 
codes providing for the filing of current prices prohibited the identifica- 
tion of filing members. Sevrntj^-f ive codes apparently made such identi- 
fication meiidatoryi while eight codes lade it optional .'ith the code 
authority. The rest of tiie codes, well over taree-for.rths of them, did 
not allude to this matter at all. Presumably the central agency, at its 
own discretion, laight release the names ''ith the data or else compile an 
unidentif i3,ble summp-ry as it chose. 

Considerably over half of the codes required tho.t the central a-gency, 
in distributing prices to ..lemliers, send them "imneddately" or "prora^Dtly". 
On tl.e other hand, eight proviccCd that tht dissemina- 



tion "be by nail. Th^ r-'r.B.ind er of tl.e codes contpiipc' no -Drovision u-oon 
this babject. The presence or absence of such TjroviFions ras of pp.rticulnr 
si;'j;nif icance There members of a hi^hlj?- co-raetitive industry '"ere rldely 
scattered, so that a r'iff ereiice in tir:e of receir^t mi.'^it ''ork to the- 
disadvanta,ge of distant "lerabers. Se-^'-enty-pix codes prohibited the re- 
lepsin'- of information to any 'iemher or mevabers Lintil relersed to ^.11 
members concurrently. 

2. Perforrcmce by Agency (as Conditi-^ned by Code 
Authority Hulin.'-,-s tnid Incustr-r Vote) 

A discussion of the ^^erf om.''iice by the central a;^encies 
of the disse-iination function should round out the factual ans- ■ r to the 
o_uestion of the amount of lublicity i- "lized under '"PA price filin.'ic pl^ns. 
The anou^.t r-jid. nature of the infon:ation actuall'' filed b" members and 
assembled •ith the agency, of course, renresented tne u^o^er limit to the 
ajnount of inform.ation that central agencies could ciisse-iinrte. Conse- 
quently, the discussion follo-'in-; relates to the f issemir'/^tion of such 
information as -as successfully asae ibled. In this c^se the formal rul- 
ings of the code authorit.y anc its actual peri ori-nce ar-' ^r?ctically 
indistinguishable; the evidence, recording'' y, is b-^sed partially on 
announced rules and in other cases u-^ion concrete perfomance. A"^ though 
in several instances agencies c' id -not al''a'''s acJiex-e entirely to their 
anno'onced policy, this '■•as too infrequent to "'arrant separate treatment 
of rules and iDerfornance. 

In sone of the industries of the code sample, full 
price infornrtion '"as ao.toraatical"', • se~Lt to all members of the industry 
•."ho had filed prices, ::itho'.it charge and '."ithout re -airing specific 
requests. In the astjhalt shingle and roofing and the ladder industries, 
the code authority sinpl",'" mailed out to all members the actual ph;-sical 
price lists submitted by members. Also, in the industrial alcohol and 
nottingham lace cirtain i";oustries, copi'^s of nil inforna.tion filed vere 
automatically" sent to all i-idustr";'" members; in the former industry-, 
members received co"Dies of the "orice lists of raembers of the ha.rdrood 
distillation ind\?.strv as T""ell. Co"Dies -ere rotoprinted in the envelorje 
industry and sent out to all members. In the sto;:l crstin'^s industry, 
the code autliority sent out c'ailj'" a oullctin to nil members notif""ing 
th;m of cxiang.s n.-^r c oy any producer, '"ith s"'T"ibol rrfrrcnccs to a master 
industry price list v.-hich convie-ed the na,ture of the chan-'^re; quarterly 
summaries '."cro pJso issuot rhich rr caT)itu] --^ted "orcvai'^-inr' -orices for 
each of the products. The sal s clearing -gent of the cop"oer i"'.euptry 
distributed prices to pll raom.jers. In the fertilizer inc'ustrj'' mem ors 
mailed pric lists c'ir^ ctly to all otli^-r members in tlic sa.-u. zone, 'hile 
filing one cop'/ at the sane ti'ne -"itu the !'ationpl "ertili'^or Association; 
the aspocintion also sent rail""" to each icraber a list of all revised 
schedul-s filed. The codes for carpet vric rug and lot^^'l lath industries 
required that al!^ c'ata filed bo se"''t to a''! members; but no e'^'^idtncc is 
available concerning the extent to T'hich this vp.s done. 

Fu].l and autom-tic r'isse--'.i i-'tio-a ^as also provided in 
other industries but onlv to members producin"^: i^ror-ucts simil-^r to those 
upon rhich "oric^s rere filed. This '"as the genorn''. oolicj'" in the electri- 
cal manufactariag inc'ustrv but the c'ive"sit''" of "■■iroducts often marie such 


limitatio-"! difficult to a"o^-ll:;'•, so th^t sc.iCdul- s ^."cre often scit to nem- 
■b-. rs not -oroducin';^ the '-;ivcn -products, /pjiy 'boa-id and ^onoioened fi^.in^s 
"erj founc in the fil g of the nr.tional elect- ricT n^ ^v.f return i-p p.ssocia,- 
tion ii tiL' course of ti.c :TA price filin^^: r-tad:/- for that incustry "hich 
indicates that disscni-iP'tion did not alra"''s te'^e ■ The cor'e author- 
ity of the fire extinguishin/; aoplipnco i'^.dustr"'' -.'ired rJ.l r)roducors of 
sinilar products regarding cha.n;^r s of any nemter. I'enbers in tlie folding 
paper box i:"dustry ver; reruired to "rc.^-ister" for "oroducts and 
customers, 'hen registori-d, received all revisions of iiricc.;; and terns 
fil^.d by other "acrabGrs in co.nnection ''ith r^uch products. In the gas 
appliance industry, proo.ucerr; of heaters, boilers, furnnc^s, co'^version 
ourncrs, rariators and thermostats rec-ived fron the code autnorit^- 
duTolicate copies of all ;orico list-' for s'lch of those T^roducts as tiiey 
produced; dissonination on othe- nroducts of the inciustry '."as not 
matic but 'as onlj' uj^pon requ^; t. In the Taachinc tool ano for.="ing industry, 
actual price lists filed by raembers rerc sent to all direct romretitors, 
the list of such coiraetitors beinT subnitted b"^ the "leraber • iio filed. 
In the auto'^-obilv, fa.brics division o"" x-ubb.:r n^'nufacturing the code 
^uthorit^r sent to producers of similar prc-ucts a letter tr^Jisnitting 
aJ 1 details of s as soon' as the'^' v:.-rc filed. In addition, in the 
pa.T3er « pulp, tag an.d farm equipment industries, dissemination I'a^ re- 
stricted oy the cod. s to ;'iroduc -rs of si-iilar products. 

I)iss< -ii\"tion in so-ie c^s.s vas CTvfincr onl"-' to members located 
in the sane region a,s the filer. In the fertilizer, crushed, stone & 
cement industri3s full information "as s'nt to members selling in the 
same r.gion; statements made "oy t'cnty-one regional code authorities of 
the crush r- stone industr*" to ITPA field staff nem-bers indicate that in 
all but one rc^-ion, the OmaJia district, prices • re smt out regularly 
and promptl - to a^ll n.ejnbers of the region. P-artia] dissemination to 
members of t_ie region existed in the funeral su^ool", retail monument and 
vholesale confectionery indiistrics. The codes for ca.rbon dioxide and 
reacy nixed concrete -orovide-' for ful'' riissenin- tion to all members of 
the re -ion but evidence is lnc''ir.'^ as to perform-iance. 

In three industries stuc^iod, it ':'a3 t ..e announced nolicy of the 
code autiiorit-- to senc; full inform.-ition to all n^v-mbers, but occasional 
complaints from members indicate that at least some of the members ivho 
filed prices did not regularly receive the filings of others. Ther-e 
industries -ere businers furniture, cast iron soil pipe and shovel, 
dragline and crane. In the second industry/- the ^ ora-olaint --as made that 
prices ''cre not sent to those viio failec to us a prescribed uniform 
filing form '-hich ras not sanction-.-r" by "'PA. 

In a, large group of industries, there -.-as automatic dissemination 
to all members, but the infornation f o rvarc' ed "as not as complete as tha.t 
filed. In the asbe'-tos industry nric"s filec to eriui-om.ent --laniifacturers 
rere not d-istributed. In tae fimei-a.l su'rol:" ind-ustr^r, -here over 10,000 
filinH:;s v:ore rec^. ived on the original price call and members comri"'.a.ined- 
of the volr-Ji'-^ of data received, it "as decidtedt to distribute onl-'- 'orices 
on statile and highly corraetitive items. However lerabers 'ere permitted 
to ins-oect al'' filings and • ould be sent unon specific request any data 
required; "fPA a-n-orovod charging for such additional d-B.ta. vhen the ser- 
vices requested exceeded sn anoimt aigreed. u^on b^^ the code authority. 



The Code Auf.iorit-- of the i aycn-opiso Industr-^ sont out letters sunnariz- 
ing changGs filed •.•ithout giving details; noreover, IocpI chajir^es rere 
not thus distributG'-'' but loc^l -rroducers cnuld ins-iToct the^ at re^^ional 
offices. In the -letal vindor i i.dustrv initial revisions of disco'ai^.ts 
vere distributed but not thorje filed to meet revisions, and no atten-ot 
vras nade to distribute day-by-ds.y discoiait schedules ar.- received.. The 
code a.iithoritics in the paper dirtributin^r trade sent out onlv the lovest 
filed price and a repr- centative rnedinji x)rice to all nembers vho h?c paid 
their assessnent; a six dolirr annual charge \7as rapde to vholcsale groc- 
ers for continuous service on such O-issenination. In the plumbing fix- 
tures industry all dat:^ ■•ere sent to all rncmbers excent the special c^is- 
counts to special buyers. In sone regions of the retail monunent trade 
it T.'as decided not to c isseminate prices •.Iiich '"ere rnore than fifty per 
cent off list. In the tas; industr'^ only the lorest price and the most 
favorab''.e terns filed by pny member on a given product v.'ere sent out. 
The Code Aiathoritjr of the Valve & Sittings Industry distributed a bulletin 
notifying iieiibers that changes had been nrCe but giving no dct.^i"! s. In 
the vitrified cla^'' sp-"er pipe industry, the code authority distributed 
condensed analyses of erch m-'mber's filings. 

Another tyoe of procedure used in sone industries involved auto- 
matic notice to t.11 rae-ib-. rs if changes, vith the op'portunity of getting 
further inronaation ivoon r^-'cuent. Thus, in the aaricultural insecticide 
& fungicide industry a letter '."as sent to rJl -leubers listing schedules 
filed; members could then notify the codo authority as to ■'"iiich on-'s they 
■ranted and it ^'ould mail them out or ■. ire the data as rcnuested. Like- 
vise, members in the mai a.roni industry vere notified of changes and could 
obtain desired data, by request. A bulletin v;as periodically sent out to 
all members in the vholcsale confectionery trar'e listing; all revisions, 
copies of Thich rere available to members at ten cents a copy. The "arm 
EquiToment Institute issued vreekl;'- to all :nembers a "Price Chan.^e "'lulletin" 
v:hich listed members, d-tes, and products involved in revisions during 
the v/eek but rrhich contained no price data; it ^:as stater" therein that 
nroducers of similar products could inspect nev schedules at the institute 
office. A ten dollar annual subscription price ras charged for this 
bulletin v;hich v;as included in the institute's dues. 

This concludes the list of industries in v;hich information or 
notification Vas sent to al^ or some of the members r'.utomatical"'.y excerpt 
v:here the central agency deviated from ite an^oi-tnced policy. In a num- 
ber of other industries information -as sent out only U'-^on reauest but 
rithout notification of n-- ■■•• filings. This '"as true in the coffee industry 
vrhere filings vere suoijlied by nail, telegraph or tele-ohone, as re- 
quested; the secretary of the code authority stated in an interviev that 
fev requests vere ever made since changes "-ere rapidly com'iunicated by 
salesmen. In tlie co-ooer & brass mill products industry in addition to 
sur)-olyin~ filings on request, inspection of filed data '"as permitted. 
Prices vere sent out in the retail monument trade only uiDon request and 
U'oon iDayment for costs of copying; the cod*^' authorities reported that 
fe'- inquiries '..'ere made. The Set-Up Pa-oer Box Code required that prices 
be furnished members on reouest biAt no evidence is available as to per- 
fornance of the code authority on this ;ooint. 



Similar arr--n-c !e:^ts •--i-e "ird.e i-n. cortr:in other in."ustri-s, ex- 
cept in,3; tliat the requests aad to be for a specific fiTin-T "o-j r particular 
-irnufrcturer on a cl .-si-j^nated -orocTuct. This -ps t..-: situ-tion in the 
builrers' 5u-D"-?.iGS ind'.ist::"''-, -here t^ie locrl "'.c-ncips "STr confidential 
a:,'ents; inspection and orr^l c isscnin-^tion -ere forbidr'en in favor of 
'lail End telegraphic disse--i.ination. A chai--:;o of ten cents per pa.'^e Tas 
made for filings requested. In the candy industry, memhers cou.ld obtain 
frora Dun & 3radstre^--t filed prices only for the classes of trs:' e to '.-hich 
the Fiembers sold and all requests had to the fijings of specific 
raanufacturcrs. • A charge •vas na'"'.e for sucxi infornation, either at so 
!mich per ■oa,f:e or on a flat rate per manufacturer for continuous service, 
regardless of the number of itens. Telephone requests --ere granted uoon 
proper identification. A reoort made hj Dun & '^radstreet at the end of 
the first three months of orice filing st -tod that 162 .members had made 
inquiries in three months for prices of onl" thirteen firns, s.n6. that 
sixty T);rc:nt of the r-.-qu-.^st^ 'ere for full lis s and the renainder for 
partial lists or si^ecific items, ""o ins23ection of the fi^es '""as Derraitted. 

SiInil^r li'-aitatiO'-'.s c-'vie to e.-iist in the nacroni industi-y, --here 
members had to s-occify the m?:mfacturer t.'io product and the graoe in re- 
questing "orices; this" ^"as made necessary b^- tl.e large volume of general 
requests '-hich o^'-ertaxod the facilities of the code autiiority. In the 
scientific apparatus industry, "oroduct and nanufacturra- had to be siieci- 
fied in reauests and a five cent -oer: -oag: "as -ia''"e f'^r photostatic 
conii/s; data uere given onl^- in --ritinj^: and not transnitted by tele- 
phone. In the under"e?r incustry, nenbers hr"" to stpte the ■^r-'^son for 
the reojiest and no specific "oric;,? -rerc given out, the agency only stat- 
ing '"hether the particulrr price in auestion '.as above or belc the one 
stated by the inquirer. Ho infornation ":ar regular? ^r dissenina.ted by 
the Code Authorit^r of the Salt Producing Industr;r but a f o' ■ special re- 
quests '"cre supplied. 

Prices -x-re not distributed in any of the other industries studied; 
insncction "?s pemitted in a fe", no- ever. In the canv.'^s goods industry 
the code auth.ority onl"^ pemitted ins-oection of -oric's at its office. The 
structura!', cla;"' products coc'e reouired that "oric.s be "ava,ilable" to mem- 
bers, but there is no evidence as to ho* the-- -ere '■■ir(Xo available. The 
^■fational Tipl^evs Council oermittec! i is-oectior of its files ^oj member'^ halv- 
ing a "le'^-itima.te intrrv-^t" therein and re")orted that very fe^' inouiries 
rere made oj members to the filings. It should be noteci , ho^'ever, 
that oosting of -orices ''as reqiiirer- of ."lombers -^."hich provided some -oiiblic- 
ity to other memjers. Tlic Cordage <?; T'"'ine Code required prico^ to be 
"p.-i-ailable to ajiy one in interest" "hile the ITloor o "a"! 1 Clay Tile Code 
permitted "inspection by inter- sted -oarties" but evidence is lac]:iny as 
to the manner in "hich these lorovisions "ere carried 

Fo release of filed data, either through distribution or inspection 
"as effected in the remaining industries s'.ud-icd. ^his ""s true in the 
mar^-i ~ ■■ devices industry "here it "a,i! statec'' that disserunation "oiild be 
too exT)ensi-"-e; members "ero, ho^'cver, required to -oost iirices. In the 
P.otail ''^'ire & h'attciyCodc no provision "r-s made for dissemination to 
members, and no evi:^ence ""s found that the central a-'^encies did re- 
lease any filed inforr.-.ation. I'o 'f issenin-tion '-a.s effected in the 


-1 SB- 
marble quarrying & finishing, nediiri <?- lo" "nriceu jevelry and vood cpsed 
ler.d "oencil industries beco.usc no '. orth-- liile amo-.^jit of data '■•as ever 

Thus it may he seen that in half of the in^'ustrios studied, fairly- 
effective ouhlicity to ^'^mhers "a:-- achieves", through comlete dissenina- 
tion or throu^^h the ■oossihilit:' of ootaini.i;'^ d.pta "bj'' request. In some 
of the other industries, price "ou'olicity ^.us oartiallv defeated hy the 
rithholding of certain tj'pes of information from memhers. In other in- 
dustries, ohstacler 'olacod in the '"a"'" of '"idesprepc dissemination inter- 
fered 'vith price "ouhlicity — the inahil it",'- to request any hut verj'' STieci- 
fic data, the eicpense of disseminr.tion involved, or the need to go to 
the agency office, perhaps in o. distant city, to ohtain the information. 
Of course, the objective, of price puolicity r;as absent in those price 
filing system.s ^'here there ■^.•as no disseninp.tion. 

The fe— requests for inforr^.tion reiDorted in those cases rhere in- 
formation ras dissenina.tGd on the basis of requests or insnection is of 
significance to the qucptiou of the ultimate value of orice publicity 
and is discussed further in later sections of this chaDter. 

C . dissemination to Customers 

1. Code Provisions 

True price publicity requires that filed inforriation be re- 
leased to bu^z-ers of the industry products as '-ell an to sellers. Code 
provisions, hovever, did not effectively provide for this t'^'Xic of pub- 
licity. Only tvo codes required that filed data be sent regul-arl"- and 
automat ica,lly to all customers. Ahout one h-^^ndred codes required such 
dissemin-^tion upon request ard u'Don opynent of the cost involve''"'. T^'O 
hundred and eleven reou.ircd that th': filin-'^': be made available for the 
inspection of all custoLiers in the central office. T''"enty-three other 
codes perm.itted such ins-:)Gction but expressly stated that each custom- 
er might see only thorje prices for the customer class to 'hich he be- 
longed, yleven codes left the inatter entirely to the discretion of the 
code authority. Finallj,'-, one hundred and fiftv failed to maJ-'e 
■orovision for any kind of risse'unation to birders. 

■^ighty-eight codes required that tlie filed infoiTiation be 
released to custom.ers at the s-^rie tiie thrt it vts released to members 
of the industry. Onl" -t\'o specif ica.lly provided for release to 
customers at a date later thpn that of the release to members. On the 
question of ti'ie of release to customers the other codes vere silent. 

2. Performance by A^^ency (as Condi '"ioncd b' Code 
Authority Ra"' ings sjid Industry ''''ote) 

Althou;h'-- not uiiiver^all-^ conceded, one of the prime func- 
tions assigned tn iDriC'. f il i^" is th?t of incre-sing buyr?rs' ':no':-ledge of 
■oriccs to the end that they may ouy -lore intelligentl-"- anc" that dis- 
crimi'iation nay be lessened. TJ'ic codes, ho-;ever, fai!'.ed to require full 
publicity to buyers. In t)ra;ti c, as is e-virencrd belo", o'l.l" a very 



limited decree of disse-^in-^tion to ".ra'/evB '■■^s acliieved in the industries 
included in the code sanple. 

^here v."ere no insta^nces fhore the centra,l agency autonr'ticallv 
forv.'arded filed drta to all customers. In a fe'" i?idustries, intona- 
tion ras, horever, nailec to custoners u^on reou.'st. The carbon 
dioxide a'^ency, according: to the adninist ration member, responded to 
the fev in-'Uiries from buyers that came in. The Code Authoritjr of the 
Copper 8z Brass Til] Products Industry stated th-^t infornation vou"' d be 
sent u'oon reauest to custoiaers or others "having need for such informa- 
tion" and that inpoection of files r.'ould be "oerraitted uncier similar 
circu'istrnces; it also instructed to notif3'- their ovn dis- 
tributors innediately of chan;^es in -orice. Code authority minutes for 
the industrial alcohol industry indicate that prices "^ere furnished to 
customers u-;on reouest. A cuestionaaire ans'"ered b^ the former secreto.ry 
of the scientific eppe.ratus code authority?- stat s ths,t prices '-ere mail- 
ed to customers rhen renuested and upon pajiaent of the costs thereof 
and that inspection of the files I'as -Ter'litted but that very fe'" such 
requests '.vere over mp/.e. 

The codes of certain other industries required th.'^t filed price 
data be furnished customers on request but adequate evidence is lack- 
ing as to hov; er.tensivel;;-- this r:as c'.one. In the envelo;oe, paper & 
TDulp and paper distributing incustrif s the supplying of inforraation v-s 
limited by the code to "persons concerntd"; in folding •oa^^er box to 
"non-iembers"; and in the set-up paper .'>x and vfhol.cs^''- e confectionery 
to "buyers". It '."as reouired that ouyers pa;r for the cost of ans'"ering 
reouests in three of thece: envelope, fol^'ing paper box and rtiolrsale 
confectionerj'. Inspection of filing -ras also provided for in the latter 
code. Fragmentary evidence indicrtes th-t the code authorities in the 
paper iv'ustries '""er= gener;-ll"' v'illin'^ to release information to custom- 
ers but tnat TThero only the lo^rest fil-ed prices vere dissemin- ted even 
to m.embers, the custO'-Ters readily obtri'-.ed the infor-.ation elsewhere. 

In three indwstries information ras sent to customers on reouest 
but it v;as confined to prices filecj for the class of buyer to rhich the 
inquirer belonged. Thus, the rc'^-icnal confidential agents in the 
builders' supplies trade rere instructed bv the national code authority 
to restrict disser.ination in this '."'a'^ end then onl^'- ■■hen the request 
named a specific filer; a charge of ten cents per npge ras prescribed. 
Inspection and oral dissemi:ia.tion ras prohibited, Li'':e-'-ise, ir. the 
candy industry '"here dissenin-tion ras confined to "eirect buyers" re- 
quests to Dun & Bracstreet had to specify the prices of a particular 
manufacturer, and prices applying to the inquirer's classification rere 
sent; a charge ras made, either por page or a, flat rate for continuous 
service, on the filings of a manufacturer, regardless of the m-unijcr of 
filings. The Dun. C: Bradstreet report, issued after tlie first three 
months of op-._ration stated that onJy three direct bu-^rers had renuested 
infornation during this pcrioc' . In th.e copper industr-/ onl-- the signers 
of permanent buying agreements ';-ere upon re uent given the basic prices 
of a specified member. The clearing agent published the avera.^e rei-^ht- 
ed prices filed in ne'.spapers daily. 



Sorie a-enciec -oor'iittod iispec^ion of the lorices at the office of 
tae central ae-ency out '"oulrl not son-'. o'j.+- orices on reouest. Thus the 
National I'erti"' iz^r Asroci-tiou errihasized that its -nricG files ^'ere onen 
to a,n7one "bat various r-''fi;ioJi'-T offices ro'-^orted t'^mt fe- reoucsts for 
inspection --ere nade. The ;'etal 7inoor Code Authorit"^ "oemitted in- 
spection 1)-; interesteri oarties hut th-_ forner secretary, in re-il-'-ing 
to a questionnaire, stat c thpt vory fe'- pnrties apr)liec" for i-"S:oection. 
The crushed stone filing-j r'ere availaole for iAsnection "bj custoners at 
the offices of the rei-^'ional code aut-inritios; statene~t" hy t^ e-'ty-one 
re;;ional code authorities to FrJA field staff memhers i^'dic^te that in 
about half of the re -ions cuctoners made frcoiient use of this privilege, 
rhile in the rest there '"•as little or no i 'spection. The '\eadjy I'ixed 
Concrete Code reauired that filed Catp. he "availaole for ouhlic informa- 
tion" "but there is no evidence as to ho'- full''' this vas carried, out. 

The rational Bakers Coi"aicil permitted 'oersons ?.iaving a "le.'='itin'''te 
interest" i'n the filin,":s to have access to their price files "but noted 
that there v/ere onlv a fe:' inouirios Made. I'any len'oers, in addition 
posted co^iep of their "orice sche ^'ale'? in their plrces of biisiness, as 
reoue'^ted "by the, 'hich presuMphly resulted in some r'egree of 
pu"blicity to custonors. The codes o'f four other industries, cordage 
and t"ine, floor and rail cla,y tile, met'^1 lath and retail monument 
riro'"'idec that prices should "be availa'ble to air^one "in interest" or 
"interested" "but there is no evidence as to the degree of inspection 
actually i^emitted. 

Limited inspection oj customers of prices ai3pl-'in.5 to their or.Ti 
class ras aJlo'^ed in a sraall group of industries. The members of the 
asbestos industry voted, as the code prescribed that .iobbers mic'^ht in- 
spect all jobber loriccc: filed anc?- that dealers might insiocct all de'^ler 
prices filed, but thr t consj-'ier"^ shoulri n^t be "oermitted inspection; 
this limited inspection ras granted despite the plea of the largest 
member of the Industry that all ijrice ;oublicity should be deferred. 
Regional offices rere set wo in the ma^yonrialse industry for the express 
puroose of permitting "trace buyers and loc-l manufacturers" to insioect 
filed -prices, but the files rere not open to Sa tual consumers. The 
structural clay products indu^'try mrce consumers nrices available to 
the district representatives of the builoers' s'a;onlies industry rho r-ere 
ucalers in the industry loroducts. The ""acaro^i Code providec' that lorices 
should be avaalable to all tra/e buyers anr specifically prohibited 
ins-oe.'tion by consu icr buyers. 

The onl;''' dissemi'nation to custon-rs effected by the Code Autnority 
of the Afiri cultural Insecticide and. Fungicide I'ldustr" ras the ree'':ly 
publication of ".^'oing nuotations" rhich summa."i2ed the current filings 
in the Oil, Paint and Drug Reporter. 

In almost one-fourth of th- inc'urtries studied, the centr-il agency 
dissemina.ted no data to buyers, but the members themselves rere reqiiired 
by the code to secure r)ublicity for their nricc changes, "'ach member 
of the asphalt shin^'-lc and roofing industry ras required to "publish" 
his prices to his trade, each bu'^or to receive the prices for his class 
only. Tlie "^.usiness Code Authoritjr refused to release in- 



formation to cust.oners, but the code rer lirod nembors to ""oublisli" 
prices. Other inclut^tries in '-hich the centrrl n.^encj lasde nn in- 
fornr^tion available to non-nemoers but in '.aich the code recaiired mem- 
bers to "oujlish" prices rere: carpet and rug, plumbing fixtures, 
salt producin.'^, shovel, dragline a,nd crane and valve and fittinfrs. 
There in little evir'ence as ':o the nature or de.^^rre of cot"-. iance 'uth 
this codsl requirement. In three ot.-or indu'-, tries, funeral ru'O'ol"'", 
retail xTibber tire and batterj- and rari-in^r devices, cn-stoners could 
not obtain data from the code authorit-^- out, ODcratin-^ uic'er a codal 
requirenent, freat numbers of members "Toor.ted" their prices in con- 
s"nicuous xila.ces and thus effected so'.Te publicity to buyer?. Li^-^e- 
rise, in the na.chino tool p.n^'' for^ring inOustry, nembers vere re- 
quirec"! to "announce" -oi-ices a.nd in the cerient industrj'- to "broac'cast" 
prices; co^ipliajice rith this by members constituted the only price 
;oublicity available to customers. 

In eight other inoustries there is positive evidence tha.t the 
central a.gcncy released no filed data to buyers. In only one of these, 
the cof-'ee Industr?/-, did the code require that orices be available to 
■lurchasers; the secretary of the code authority stated in an enter- 
vie", hcever, tnat custoiior" ma/ e no effort to obtain infoma.tion be- 
cause nev s of price changes traveled so rapidly through salesmen and 
otherrise tha.t dissenina.tion b;'- the a'^;ency '^a.s imnecessary. The codes 
of the other industries max.e no nrovision for availability to buyers. 
The ■ ational Electrical " anuf a.cturin '" Association opposed "oublicity of 
prices to buyers at all ti les p:ad. its representatives asserted that 
price filing v'a,s mt crried on for the benefit of buyers. The same 
attitude existed in the Parm 'Equipment Industry rhere even jobbers 
vrere refused, informa.tion reg"rdina- jobbers' ;orices filed and in the 
gas ap-oliancer*. industry vhere it ras resoj.ved tha.t jobbers and other 
distributors be d.enied inforiiia-tion. The other four industries in rhich 
there ^."as no dissenin^tion of prices to buyers a.nd no codal injimc- 
ion UTJon aem.bers to puV;"! ish orices -"ere: can'"'c,s goor's, ladder, steel 
ca.stin'i:s and. under" ea.r. 

In six ind'astriec rhere. no ;orovision 'as m-d^e for dLissemin-^'tion 
to buyers in the code, evid.ence is lac"" ng as to v.-hetiier or not the 
central agency r;ent bo"^ond the raininun requirements a,nd actually re- 
leasee" data, to bxiyers. The a.bsence of "oor-.itive evid.ence that '"lis- 
semina.tion occurred ta^:en in conjunction ■'.•ith the absence of a code 
provision for d.isse:iination c:.'ea,tes a. 'orcsunotion that inforr.ation 
actua.ll- r-s not released,. The si:;: ind.ustries ':'ere: cast iron soil 
pipe, fire extin..,-u.i3hing a.iToliance, lime, .nottinghan le.ce curtain, 
rubber manufacturing and vitrified clay se'.er pipe. 

finally, in three industries, marble cuarrj'-ir-g a,nd finishing, 
medium a.nd. 10^" priced, jerelr"'', aiid ■'.-ooo cased, lead loencil, ;oractically 
no filing r-as made ''oy members, so that dissenination to buyers ^r'as of 
course non-existent. 

There is ta,bulated oelo"' the resai'ts of a. questionnaire sent to 
former code authority officials for industries ^'ith price filiu'r 
Sj.'stems vnich rere not included, in the cod.e samnle. The replies are in 



answer to the question of the e.-ztent to r.'hich customers availed themselves 
of the opportunity to insipect or reauest that prices be sen:; 


Air filter 

Concrete mixer 

Household ice refrigerator 

Metal tank :• 

Motor fire 

Pulp & paper mill wire cloth 

Sheet metal distrihtitors 

Talc and soa^ostone 

Transparent materials converting 

Water meter manufacturing 

Card clothing 
'"Industrj'- C 
*Industr3'- A 
*Industry D 

Cutlerj', manicure implement, etc. 

Cutting die 

Perfume and cosmetics 

Road machinery 


Yev}/- infrequent 

Ver^i' little 

Ver;'.?- fev/ asked for them 

Fo reuuests 

To requests 

Practically none 



Ver^T- little desire 


Fo requests 

Six Requests 

One request 

Vei^.'- srriall extent 

Fo requests 


Fot more than 100 requests 

Practically none 

It is aToparent from all of the evidence above that not a great deal 
of price publicity to buyers was achieved as a result of price filing 
in the industries studied. In an important share of the industries, pub- 
licity was deliberately denied to buyers, v,'hile in most of the remainder 
of the indu.stries it v/as either limited as to scove or obstacles '.^ere 
placed in the v/ay of obtaining adequate information. However, there is 
the fact that bu3''ers frequentl'- did not full;,'- avail themselves of exist- 
ing opportunities for obtaining information; tlii.s seems to be confirmed 
by the replies to the qixe s t i onnai re as tabulated above. To some extent 
this seeming lack of interest v/ar the result of difficulties in obtaining 
information - the need of going to the agoncy office in a distant citj'', 
the ex^oense involved or other factors; but on the other ha,nd it is ex- 
rslainable on the basis tha.t necessar^/- information \.'as readily and 
customarily obtained through other channels. 

It should be pointed ovLt in conclusion in order to avoid any mis- 
apprehension upon the matter, that prior to the ¥IU\, publicity to buyers 
had never been a feature of organized price publicity. Even Edd5'-' s plan 
never included distribution to customers — partly because some incentive 
'jas needed to get members to file and exclusive use of the data repre- 
sented such an incentive. I'Rli, it may be said, did contribute and em- 
phasize this idea. 

(*) Requested to be kept confidential. 


A. Rihlicitr to lienbers 

Price filing, r-s it operated in the Selected sample of fifty- 
seven indust: ies, by no means afforcud complete publicity of pricing 
policies. The substantial deficiencies of the assembled information 
were accentuated by the fact thit much of it never reached the hands 
of conrpeting raemoers. In a fe'v cases, competitors \7ere able, through 
price filing, to obtain sub-tantia2, complete loiowledge of sellers' 
pricin£: -oolicies. These v/ere the exceptions. The average results fell 
far short of that mark. 

There is pre'sented below a recapitulation of the knO',7n factors in 
the industries studied vrhich o-oerated to detract from full price public- 
ity to members. The information has been compiled from code require- 
ments and from available records of c-ctual performance, but in the ab- 
sence of a systematic survey by questionnaire to check the extent of 
adherence to code requirem.ents, the trbulation is subject to omission 
and other possible errors. 

AgricvLltural Ins.ecticide ^.^mi^ici^de^ (lOO members) 

Pilin'K on non-"tpnc are -oroducts incomiolete 
Only a fe^ terms of rale filed 
Minimum rnd not £,ctual prices ^-ere filed 

i;embers received filings only UTjon request but rrere notified 
by letter of nen schedules filed. 

Asbestos (50 members) 

Some non-; adherence to filed prices 

Most competing distributors did not file prices 

Prices to automobile Lianufacturr-rs not disseminated regalarl^'' 

Asphalt Shingle & Roofing (^5 members) 

Some non-adhurence to filed prices 

Balcin^ (25,000 members) 

Very fe'7 retailers filed tnd 60 percent of wholesalers did 

not file 
At lea?it half of tho?;e filing did not adhere 

Lac!:ed hecesr:ary inrTedient standards to make filings comparable 
Only inspection of files permitted and this confined to persons 

having "legitimate interest" 
Only a few requests for inspection 

Suilders' Supplies (40,000 members) 

Very fe'j filings after first month o,f operation (because of 
code authority ruling that price filing not mandatory 
after Executive Order 6767) 

Some non-adherence to those prices filed. 


Members received filings oily upon request and at 10 cents 
per; in requesting required to designate filings 
or specific raenber 

Eu-siness Furniture (150 meiabers) 

Small minority never filed and many eventually stopped filing 

(because of refuse.l of IHA to aoprove mandatory resale 

price maintenance) 
Adherence gradually broke do^'n until adherence requirement 

finally was ste.yed (bre.'_I:doi"ni caused by necessity of 

meeting distributors' j^rices) 
Custom-built products excluded 
Complaints from some members that prices ?/ere not sent to them 

Cand^ Manufacturing (lOOO members) 

Tno-fifths of membership never filed 

Members received filings only u-oon request and payment of 

costs; required to designate filings of specific member; 

could get filings only for trade classes to v'hich they 

Only 162 requests in first three months eoid for prices of 

only 13 firms 

Canvas Goods (15 vfholesalers; 3,000 retailers) 

'..'holesalers never filed and very fev? retailers did 
Very poor adherence on the part of those filing 
Lacked workable product classification 
Dissemination confined to inspection 

Carbon Dio"-ide_ (40 menoers) 

Twenty parcent of members never filed (due ipajrtially to dis- 
like of filing 'vith trade association ''oy no'i-members) 

Competing distributors did not participate in latter part of 
price filing period 

Sales in small containers to mecical """ield o~.'ludsd from 
filing by code authority 

Hissemination only to competitors in same region 

C_axp e t and Rug (50 rab e r s ) 

Seme non-adlaerence to -filed prices 

Prices filed \7ere minimum and not a,ctual ■ 

C_ast^ Jron_ Soil Pipe^ (35 members) 

Considerable ;-!0,i-adiierence to prices filed 

Some products designated by code excluded from filing require- 
ment by co(-e authority (lack of standardization or be- 
cause multiple-line producers r/ere using them as free 



Dis semi nation to non-nemDers of tr J.s association often de- 
layed and at first refused entirely 

Cenent (100 neraberr) 

lis Geminated only to competi c-or;.; in srr'e region 

Coffee (1,200 inemoers) 

Only the lari^er memoers filed p,t rj.l :'e£ularly 

At least 75 psr cent not ad.herinf in Irter period (coae author- 
ity explains by failure of '.'?A to prosecute early 
.^ds semination only on reqne.-:t 'ji'. fc-; requests made 

Copper :: 3rs.qs Hill Products (50 h-o;-...'C1's) 

Conpetinp; distributors did act filr though many '/ere "boimd 

to adhere oy contra.ct'3 -.'it'i. ■ -:"if,",cturers 
Dissemination only upon requ'^Fj.t or ".y inspection 

Corda:::e ajid Tvine (25 i'::eia'bers) 

Adherence ^ood for a time hut ;;r,- dv.r.ll:" 'broke down until 

filin" provisions deleted .t; r;-.c:.ih-ent 
CoiToeting- prisons .-^nd Phillipi:^o p:.'o:""".cers didn't participa.te 

r/hich let to ore,al-cdo./n 
Products used for nanufrcture of c-.:'p-5ts, ru-.'^-s, and furniture 

excluded from filin,'? hy co ■,; ,?rLthority 

Crurhed Stone, Sand. Gravel and Sir/: ('!-,5''^0 members) 

Soiie non-'^dlierence 

A fev; products excluded from filiiv; h" code authority 

Dissemination only to coraprtitorr: ir. ' r;ie re.-^ion 

31 e c t r i.c al Hanuf a.c tur i ng (l.UOO ne ::rs) 

Piling established oriy for p:-rt of i;i ustrv products 

Only three or four terms of s.-le in',.j.r.ded 

Divrsity of products aad lach of Gtr:i""ardization impaired 

comparability of filin::s 
Prices filed -'ere minimum and not acturJ. 
disseminated only to producers of £i;:ilr.r products and not all 

filind's sent out 

Z]n"elo2:3e (175 memoers) 

Iduiy adopted schedules of others 

Poor rdiierence to filed prices 

Only lo'jest filed price and raoct fr.vorable terms disseminated 

Pr'ices filed were minimum and not cctv.-^l 

U.-mes of mevfoers adopting Icost filed price not disseminated 


-166 to 176- 

Farm Equipment (200 members) 

Some non-fdherence 

Hot all of competing distributors pprticiiDated 

Lumber manufacturers producing industjy -oroducts dia not 

Prices filed were ninimum paid not pctual 

Inspection of filed data at Institute Office the only dis- 
semination, though weekly bulletin listed members 
reTiort'ihg changes and -oroducts involved 

Fertilizer (800 members) 

Some non-adherence 

Filings on special formulp.e caused difficulties of compar- 
ison with standard Dre-oarations 
Prices to wholesale cooperatives not filed 

Fire Extinguishing Annlipnce (SO members) 

Some non-adherence 

Curaneting distributors didn't r)p.,rticipate 

Prices filed were ninimum and not r.ctuB.1 

I2:°2I^^:y^._jn3J- P lay Tile (50 members) ' 

Sens evasicj through selling first grade products as "seconds" 
Com;'-)8':ing distributors didn't TDarticipate 
■Pro'd\u''.er3 . ci similar lorodacts in Structural Clay Products sjid 

^i;xrs. Cotta industries didn't iDarticipate 
Prices fllod were rainimtun axnd not actual 
Files 0,'ta onon to inspection only 

Folding P a per Box (300 members) 

Hymb3i. of members didn't file 

Cun = i r.3vable non-adherence 

Very lirtl;.-. filing on ncn-Gb;rpo tit ive' products; only o'x those 

for which some memher chose to register 
Little similarity of xiroducts since most of industry Y^r^ducts 

made- to-order 
Prices filed were minimum and not actual 
Sent only to Droducers of similar oroducli who were "iogfetr.T<j^" 

for such products or for iiij<^-Gific (.pi stonier c: 

Funeral Supply (10,000 nrmbcre) 

Number of members did not file 

Some non-- dherence 

Prices filed were minimum and not actual 

Sent out only x>rices on stn.ple and highly competitive Items: 

rest on reouest and tiayment of cost 
Sent only to producers of same region and of similar products 



flas Appliances (l,3C0 members) 

Half of members did not file 

Much evasion of filed -oricer. through indirect concessions 
such as free deliverier, , crating and carton allow- 
Many terms onitted in filinji des-oite instructions of code 

Prices filed were ninimuin and not actual 
Dissemination on most products only on request 

Industrial Alcohol (15 members) 

Meaninglessly low mininum orices filed by some 
Number of srar-ller producers did not file 

Macaroni (550 members) 

Some members did not file 

Considerable non-adherence to filed nrices 

Widespread evasion thrca<?;h -■giving of valuable premiums , open- 
end contracts and diversion of brokerage to trade buyers 

Members notified of changes but could get details only on 

request and were required to specify individual filer, 
product, and grade when requesting data. 

number of requests received overtaxes agency's facilities 

Machine Tool & Forging (225 merr.bers) 

Non-standard uroducts not included and definition of stand- 
ard products ambigtaous 
Sent only to "oroducers of similar products 

Marble Quarrying and Finishing (200 members) 

No filings made 

Marking Devices (1,100 members) 

One-third of members did not file 

Very little adherence to filed -orices 

Non-standard products excluded 

No terras of sale filed 

No dissemination of information in any way 

Mayonnaise (375 members) 

Widespread non-adherence to filed "orices 

Com-oeting distributors did not -oarticipate 

Fe-^ terms of sale filed des-oite instructions 

Details not disseminated, only siiramarizing letter; local 
■orice changes only available for inspection at re- 
gional offices 


Medi um and Low Priced Jewelr y (650 raenlj e r s ) 

Ko filings were 'nade 
Metal Vindow (25 raemliers) 

Producers of similar iDroducts in All Metal Insect Screen 
Industry did not participate 
Non-ferrous windows excluded from filing 
Prices filed were minimuifl and not actual 
ITo revisions filed to .nieet first revision of discounts 
■rere disseminatod 

Paper and ?ulp (4?5 memlDers) 

Lack of product standardizR.tion impaired coraparatilitv of 

filin^js in some product divisions 
Dissemination chiefly on reauest and fer; reauests made 
Prices filed were minimum and not actual 

Paper Distributing (1700 memoers) 

Many members did not file 

Many p.dopted schedules of others 

Widespread non-adherence to filed prices 

Competing wholesale ;^rocers did not Participate 

Absence of product classification impaired comparability 
of filings 

Prices filed were minimun and not actual 

Only lowest filed price and "representative medium" price 

llanes of members adopting lowest filed price not dissem- 

Plumbing Pixture s (250 members) 

■Kon--adherence was widespread (due to competition of whole- 
s.alers and provision permitting sales below filed 
price to meet com'ootition; most common in Bi&.ss Pjioni-;,' 
eventually broke down completely) 

Competing distri'outors did not participate 

Members refused to file prices to mail ordor houses 

Special discounts not disseminated 

Ready Mixed Concrete (350 members) 

Filings made only in several metropolitan areas 

Retail Mon-oment (SlOO members) 

Forty percent of the members never filed 
Adherence by those who filed poor 

Diversity of products retarded filing and impaired value 
of filings, made 



ixmy filin;;^s ouitted ternG of s?,le ( sranll Demterr, hadn't 

formed consistent policy '•itii res^oect to r.iany terras) 
Prices filed v/ere miniLiiiin s,nd not a,ctiial 

!To disseninrtion imless requested a,nd cost of copying paid 
Low prices v,.ot alv/ays disserainpted 
Dissemination '.nly to members of saiue region 

Hetail RuoTjer Tire fc Battery (140,000 memters) 

I'ilings largely confined to metropolitan areas 
AdJierence to filed prices v:as poor 
ilo evidence cf dissemination 

aa"b"ber i'anxifact-gr i ng-Auto Fa'brics division (50 merfDers) 

Competing distributors did not pr,rticipa,te 

Rubber i;a;-iufac t"ax'i ng-?QOtv/ear division (l". members) 

K ubber i"anuft.icturing-rleel & Sole divis ion (50 members) 

Small me:aber3 refLised to file (asserted they vrould lose 
differential to better ]aioi7n brands and be vfiped out) 
ITon-standard products excluded 
Lacked qualit;^ standards 
A'j-herence vras poor 

Salt Producin g (50 nembors) 

ITo dissemination of filed date except for a fev: special 

Scientific A'j;' ' 'aro.t'Lis (450 members) 

Some non-adlT.ere:nce 

Producers of similar and sv./bstitute products in other in- 
dustries did not participate 

Lack of product classification and diversity of products 
impaired comjiaxability of filings made 

Ilo dissemination except upon request auid paj^ment of five cents 
-oer page; in mal:ing requests members required to designate 
specific man^xTrcturer and specific product 

Set XJ-Q Paper Box (1000 mo^nbers) 

Very few members filed (due to f,-.ilure of ITEA to approve 

mandator;'' cost accounting manual) 
llo dissemination except upon reauest 

Shovel, Dragline and Crane (35 members) 

Alm^ost one-third of members did not file 
Some non-adherence by those iTho filed 
Some members failed to file on non-standa,rc', products 
Largest products excluded by code authority 
Filing liampered bjr lack of \:orkable product classification; 
ggog some mem.bers refused to cooperate in classification 


Sorae of filings omitted, all terras of sale 
Prices filed weie lainiraum a:id not actual 

Dissenination ^rithlield fro'ti those not using uniform form, 
\Thich \7as not sanctioned 'o:/ code 

Steel Casting's (200 meinDers) 

Sone non-adherence 

S Clay Products (400 neiabers) 

Large mamber of menbers did not file 

Adherence ooor on riart of those filing 

Producers of similar -oroducts in floor d wall cl?y tile 
and terra cotta industries did not participate 

Lacked workable -Droduct classification 

Lack of delivered basis and zoning nlan imnaired comparabil- 
ity of filings (due to high shipping costs vev unit 
and im-oracticability of filing Torices for hundreds of 

Dissemination confined to inspection 

Tag Manuf a c tur ing (50 members) 

Many adopted schedules of others 

Only "s^rice elements 'vere filed 

Only lowest filed price disseminated and only to nroducers 

of similp.r products 
Prices filed were niniraujn aiid not actual 
Ifames of members viho ado"oted lowest filed "orice not 


UnderTrear and Al lie d Pr o ducts (400 members) 

Circular ICnitters did not file (oossibly because of dis- 
like of filing r/ith association) 

1^0 disse3ninp„tion exceiot upon renuest pzil where adequate 

reason vras given; no specific Tjrices ever given out, 
but only the information as to whether a filed "orice 
■7as above or below the -orice suggested by the inauirer. 

Valve and Fittings (T'SO raenbers) 

One-half of raembershir) did not file 

Some non-adiierence and evasion through indirect concessions 
Coiarieting distributors did not participate 
Products of special design excluded from filing 
Conditional or cualified filings prevalent 
Prices filed were iiinimii a'ld not actual 

Ho dissemination of details but only a bulletin notifying 
members of changes 

Vi trified Clav Sewer P ine (lOO members) 

Competing distributors did not iDarticipate 



Sentic tenl.s ercliided from fi"'-inj_'; "by code authoritv, and 
filin,'^s on culls Here refusod 

Many filin,:;s omitted terms of sale or were quite incomTolete 

ITo details disseiinated, out only condensed analysis ore- 
pared ty code autliorit?/- 

Dissemination confined to raemoers of sa.rae re -'ion 

W liolesale Confectionary (12,000 menters) 

About one-fourth of strai^Tiit-line -wholesalers did not file 
Aljout one-half of allied-line vrholesalers did not file 
Non-adherence was rridesriread 

Ho disserainrtion exceut u"oon request and ■'-•a^'nent of 10 cents 
per oage; bulletin from code authority notified 
changps as made 
Wood cased Lead Pencil (15 menters) 

Pi'B.ctically no filings received ("because of failure of IffiA to 
appi'ove su-o;olementsry control provisions and refusal 
of merntcrs to file special discounts to preferential 

It may bo soen from the above sumaary thet in more 
than haUT of the industries studior, the price filing system 
failed to mal:e available to the members of the industry any 
appreciable laiov/ledge of comrTotitors ' prices. In rt least six 
industries tliero was nc publicity at all and in -)erhaps ten 
more the publicity achieved was qxxito insignificant. In not 
more than a dozen of the industries coulo. price publicity be de- 
scribed a,s svJbstantially complete. It ap^^ears then that in these fifty 
seven industries the publicity function of price filing was com- 
paraiiivoly unsuccessful. 

The above summarj.^ indicates some of the many factors 
which in combination accouiited for the ineffectiveness cf price 
filing in achieving publicity of prices. The chief of these 
may be s"ijii.-;:arizcd as follows: 

One general factor was the failure of a number of 
the members of vax^ious indiistries to file any information at 
all. A niunocr of reasons may account for this. It was found 
that in industries with a relatively large number of units, 
many of which wero small in size, the filing of information was 
particularly incowpleto. The lack of success in the baking, 
builders supplies, canvas goods, narking devices, paper distri- 
buting, retail mon-nment, retail mbber tire and battery, and 
vriiolesale confectionary industries illustrates this point. It 
was often foiond difficult to induce proprietors of very small 
businesses to participate, even in industries with a smaller 
membership. Their markets v/ere chiefly local, their pricing 
policies often not always sufficiently ex^jlicit to report them 
indetail or to xnidcrtakc to adhere to them. 

The poor response to the requirement to file was 

. -182- 

frequently attributed ty industry raembors' to iiRA.'s failure 
effectively to prosecute the few early violators. This encour- 
aged others, some of Vifhom were tempted by the advantages of 
secret price cutting; whereas others were confronted with the 
necessity of meeting the con~,:)etition of earlier violators. In 
other instances apprehension about the use that was made by the 
central filing: agency of the filed informa.tion explained refusals 
to file. In some cases members found the expense and effort involved 
in preparing information for filing too burdensome. M?.ny members 
refuse to participate in any of the cooperative programs because 
they disa-Qproved, for reasons not alv;ays exj^Dressod, either of the 
principle of ilRA. or of price filing. The aggressiveness of the 
code authorities in urging members to file influenced greatly the 
degree of compliance obtained. ?ailure of the code authority to 
induce members to file may have been due either to the code author- 
ity's inefficiency or its lack of interest, insufficient fimds to 
enforco the filing requirement, or the failure of the KRA Adminis- 
trator to support its compliance activities. The code authorities 
and industry members lost their enthusiasm and interest for price 
filing in certain industries v/hen NIA. refused to approve various 
supplementary control provisions; this is exemplified by the vrood 
cased lead pencil and set up paper box industries. 

Failure of members to adhere to their filed prices •'iia.s 
a second general' factor which frequently detracted from the pub- 
licity achieved. To a considerable extent the factors presented 
above as explaining the failure to file "orices explain also the 
failure to adhere to iiriccs once filed. In addition it may bo 
stated that members viho had filed prices were in some instances 
impelled to abandon adherence in order to moot the conroetition 
of enterprises not coming v;ithin the jurisdiction of the code. 
This v.'as most often the situa.tion in industries where some mem- 
bers distributing their own products directly to the consumer 
faced the competition of intermediate distributors employed by 
other members. 

The third general factor defeating publicity v.'as the 
failure of centi-al agencies to provide full dissemination of 
the information received. It was not possible in most cases to 
ascertain the reasons for non-performance by the agencies; on the 
basis of available evidence, however, these exrolanations are 
stiggested: The clerical cumborsomeness duo, in some industries, 
to the large number of members filing prices, and in others to 
the volume of filings received from, each member, interfered with 
the complete dissemination of the price information received. In 
some cases, the exoonsc involved in full dissemination wovild have 
far exceeded the funds at the disposal of the agency. Finally, 
some code authorities simply were not interested in price pub- 
licity and accordingly made no real effort for adequate dissem- 

Part of the poor record of publicity is directly at- 


tributablo to the failure of raembers to seek tho information. 
This asp-jliod. ia industries v.'hosG codes provided for the in- 
spection of price lists at centrs.l points and those which 
lorovided tiiat the infoiTnation y/ould he sent only when request- 
ed oy memhers. Failux-e to take advantage of the information 
was in some cases duo to the ejnonse involved in either x)ayin5 
for sheets to he mailed '^r sending someone to ohtain the in- 
forica.tion. In some instances it appears that the lack of in- 
terest was exj3lained by the fact tip.t members either had al- 
ready obtained the information through other clTr-.nnels or could 
do so more easily than tlirough the price filing device. 

In addition to the above, there V7crc several 
reasons why in certain of the industries effective publicity 
was not obtained. The filing of terms of sale, which fre- 
quently constituted significant variables in real prices, 
was in sone cases e::cluded by code authorities; in "other cases 
efforts to include all of tho significant terms of sale met 
■-/ith failure, ' In a nimber of industries minim-uin rather than 
actual prices were filed. It was usml to exclude from the scope 
of price filing some products — particularly non-standardized 
made-to-crder ones. V/here non-standard products were listed 
the lack of comparability often made existing filings without 
value. Prices to certain t:,'pos of buyers wore occasionally 
omitted and the classes of customers were frequently not well 
defined. The geographical scope of the plan often was limit- 
ed. ^7hen freight was an imioortant item of cost, comparability 
of prices was impaired when filings were on an f. o, b. basis. 

S. Pii ^licityto Iiwers 

'Hao publicity afforded to buyers by price filing in 
the industries studied was even less tiian tiis.t realized by in- 
dustry members. The deficiencies of the information assembled 
has been suonmarized in the preceding section. The smaller amount 
of publicity realized by buyers was the result of the more limit- 
ed dissemination of information to them. To some extent 
this was duo to the fact tliat the codes nade no provision for 
publicity to customers. In other cases the industry agoncies 
made^no effort to perform in accordance with their responsibility 
to distribute inform.ation to customers. Finally, it was often 
tne caso th3.t although provision vas made tc customers by the 
industry agency for obtaining information through sTDOcific re- 
quest or by inspection tho customers cither lacked interest or 
found it inconvenient or too costly to avail themselves of these 

Tailing into account the limited amount of data col- 
lected and the limited degree of dissemination, the evidence in- 
dicates that in fully half of the industries studied little or 
no price publicity rms afforded by the -^rice filing plans to buy- 
ers; and m no more than ten of the ronraininghalf of the industries 
was the publicity afforded of any substantial utility. 



PEIJE j'ILIK& AS A C0]^|-T:^-.0L DS^JICI] 


All price filing is for the purpose of 'coatrol' - if control is 
defined as influence over prices and pricing practices, and/or corapatitive 
relations. Price publicitv in itself operates as a corrective or control 
measure by alt-ring the {.traos-ohere of business or>erations, i.e., bv remov- 
ing doubt and uncertainty, secrecy -:id ignorance in business dealings. 
Such a means of regulation is directedpres\xmablY toward "fair" coniDetition 
for all, with no ulterior industrv .Duroose to regulate the making of -orices ff 
the freedom of individual oroducers to alter their -orices at will. 



Kr. Edo.y offered orice filing to Dusiness men as a legal method of 
attaining control - a method that defended u^on the natural proohylactic 
effects of publicity, ratner than on the artificial price-fixing agreements 
which were both illegal pnd ineffective. In advocating the open lorice 
policy, he devotea some large pmount of time find soace to its ethical values, 
"the nei competition ir-hich is to eliminate 'vicious' oidding, secret re- 
bates, concessions and graft, to end fraud and misrepresentations and the 
lyin.g buyer who claims to have a lower bid when he has not, and 'to make 
business life a little better worth living'." 

There is no reason to doubt the sincerity of this economic philosophy 
as propounded oy i.r. Eday; but neither is there any reason to minimize the 
practical considerations that acccmDanied his advice. The existence of the 
anti-trust laws was in a larg-'; part responsible for the guiding nrinciples 
set up by Mr. Eadv in recommending this t7/pe of cooperative activity as a 
remedy for disturbing price comioetition. His r.dmonitions were to avoid 
mandatory actions, to avoid collusive agreements, and even the appearance 
of evil, bv disseminating -orice lists widelv, with no suggestions as to 
their raeaniag or as to their desirable or undesiraole characteristics. In 
other words, raemoers of industry were to be led into coo-oerative exchange 
of price lists and were to be led only as far as the light on the legal 
horizon g-uided the way. In his own words: 


"The theoretical prc-oosition at the basis of the open price 
policy is tha.t knowledge regarding bids and orices made is all that 
is necessary to keep -orices at relrtivplv stable and normal levels. 
No p^greements to maintain orices are necessary; they are not onlv 
\innecessary but detriaentpl. " (*) 

Publicity was advocated by Eddy as a cardimil orinci-ole - as a measure 
of protection from the anti-trust laws as v;ell as a means of building co- 
ODeration and confidence of oartici^ants in the plan. It was to demonstrate 
to a suspicious jublic that lorice filing ""'as not akin to urice fixing and 
utilized no controls other than that of o-ablicitv itself. 

(*) Federal Trade Commission Heoort, Open Price Trade Associations , cage 6, 
paragraph • 2 . 




"All that is done must be done openly. In order to avoid misunder- 
standings b-^' members, by castoners, by the oublic, it is necessary 
that the constitution and O'^-laws be caref-ill"'' drawn so as to e-coress 
in full the ourposes cf the association and every agreement underlying 
its organiTation. This is advisable everyArhere. It is doubly advisable 
in this country where the law regarding restraint of trade is so strict 
and the public so susrjicious. Both the safety and strength of the 
association lie in oublicitv. This me^ns that, once organized, the 
records of all neetings, all transactions, must be so Icent that they 
set forth accurately every act of the association that has any bearing 
upon orices, conditions of trade r-nd the objects of the organization — • 
Hold meetings with o^oen doors - literall'^'', not figuratively; invite 
competitors to attend es visitors whether they wish to join or not; 
and ^urge any curious or doubting customer to come pnd observe what is 
done. Do nothing vqu are afraid to record^ record everything you do, 
and 'ceex) your records wncre any oublic official in the oerformance of ' 
his duties mav have easy access to them. In short, preserve so carefully 
all evidence regarding intentions, ac^^s -nd results that there will be 
no roo;a for inference or arf^-i-ment th-'t anything else was intended, 
done, or achieved." (* 

The possibilities of ooen orice filing for controlling orices, or at 
least for encouraging more uniform • na profitable price levels, smd for use 
in securing compliance vdtii ^rice control measures such aa allocation of 
TDroduction, basing ooints, etc., had ap-neared in some detril in the Supreme 
Court Cases, but the use of price filing to these ends was limited by the 
■oervading restrictions estaolished agi^inst coooerative measures in restraint 
of trade, and the inabilit-"^ to ccnoel all merabers to participate in price 
filing or any ether -orograra of control. The fact that !TI"RA -orovided for 
some relaxation of the cinti-trust laws made it less necessary to proceed 
with the caution advocated by Mr. Ea-.. y, and less necessnry to depend upon 
voluntary cooperation. 

The IJSA codes offerea the ooport'unit^'- to ma':e iDarticipation in price 
filing and adherence to published oricjr- Liandatorv, through the legal pen- 
alties of code violation, "^en so, code proioonents were obviously reluct- 
ant to lenend ur.on oublicity alone to sti.iulate the initiative and judgment of 
se-oarate producers in the direction of more stable and more profitable prices. 
It was recog-nized that publicity was not a sure remedy against the disrup- 
tive practices of ignorant or recalcitrant members, nor was it a protection 
against such indepenaent members s.s might find their individual interest 
net in accord with the general group program of stabilization. For these 
reasons, price filing was bolstered with other prohibitory code provisions; - 
prohibition against selling below cost, various restrictions on terras and 
conditions of sale, res'-'le price maintenance, and other forms of distributor 
controls were common. In other words, because members might not automatically 
be enlightened to act in their ovm (or tho groups'! best interest by the 
fuller knowledge given through publicity, certadn barriers to their freedom 
of action were incorporated ^i'th the publicity reouirement. 

As it became incre-'singlv hard to secure administrative approval for 
formal code controls, more and more reliance was placed on the price filing 

{*) I bid , page 8, paragraph 4. 


device to achieve the same or similar results. In addition to serving as 
a check of compliance with accessory code controls, it became a ground for 
various limitations on merchandising and price practices. (*') 

These reouirements ordina-rily i ivol-^^ed restraints on the individual 
member in the determine tion of vhat Dnces and terms he could or must 
publish in the first place, his freedom to deoart from or change those 
prices or terms once thev had been filed, and his right to aooly them to 
such customers or localities as he chose. 

PerhaiDS the best reoson for erploring the control aspects of price 
filing in relation to other code provisions is that "going" open price 
plans offered the most obvious opportunities for extending other measures 
of control. If these v,ere sanctio.ied by the code, this extension was 
essentially legal even if no sufficient account had been taken of the 
cumulative economic effects of such measures in the industry concerned. 
If these other controls were not grrnted in the code, they could in nany 
instances be introduced extra-legally in the form of rules and regulations ^ 
(governing the manner of quotations, the essential elements of acceptable H 
filings, etc.) or b" concerted action to follovr certain group practices. 
Price filing obviated one of the wea.kest factOx-s of such concerted action 
as vol;int'ry agreement for price control. Once agreement had been reached, 
price filing puolicized the first c>.eviations therefrom and, because of 
the requirement to adiiere to prices on file, afforded leg-;'l recourse against 
any member that was inclined to weaken or to make an exception' in the case 
of a oarticularly desirable order. Hence only open departures from such 
agreements, properly filed, v/ers iiimune froa legal penalties. 

The rules and regulations pursuant to price filing requirements 
often had the trappings of authority if not the official seal. This was 
a significant element in price control d',ixing early months of code operations 
although of decreasing im:portance as a deterrent in later months. Vague 
or geaeral cowers to acaoinister the Px'ice fili.ig plans, or the assumption 
of such powers in aooarent good faith, offered a real protection to those 
code authorities that wanted to regu-late prices or pricing methods. So ^ 
long as the rules were pseudo-administrative in character, those issuing * 
them entailed no real risk oeyond official disapproval and possible rebuke 
from NRA officials supervising the operation of the plans. Even this risk 
was minimized by the absence of coutinous supervision and the existence 
in other codes of provisions sanctioning the same type of control activity. 

(*) See above for a discussion of the two control f^onctions of price 
filing: That of oolicing other code restrictions or regulations 
of price; and of serving as a means for ir.ioosing various price con- 
trols - either through their incorporation in the, original code 
provision or by the industry agency administering the plan. As 
pointed out there, this distinction, while necessary from an analytical 
standpoint to distinguish clearly the co-itrol from the publicity 
function of price filing, has not been formally used in the organ- 
ization of the evidence presented inthis ch-.pter. 



T!lie very real difficulties encouMtered in the operation of price 
fili»i^ plans uithin the code limitations could often "be cited to demon- 
str.-ato the need for additional legal controls to ens-ore the beneficial 
P'^blicity values of price filing. Industries mic-^ht thereby gain a 
Cympathetic hearing and sanction iron IHA for additional porrers to 
that end. The significance here is that neasures facilitating the 
publicity function of price filing, i .e ., classification of products 
customer classification, price filing hy distrihutors, uniform terms 
and methods of quotation, are commonly tne same neasures tKat facilitate 
the control function of price filinf:, or overt price fixing hy collu- 
sion. In an administrative regime hi-jhly dependent on hlanliet policy 
rulings, "ith only intermittent supervisory contacts, the matter of 
intent and conseqiient effects coiild not "be determined uith any high 
degree of certainty or promptness. If the industry or code authority'' ■ 
was reasonahly discreet in "behavior, cooperative action in price con- 
trol was relatively easy to conceal under tke guise of price filing. 

It is part of the function of this chr.pter to explore the activities 
that were initiated and carried out in the na:e of price filing, not for 
the purpose of allotting responsitilit",' for the developments, hut to 
present some perspective of the ra'nif ications of the device as a : ' 
regulatory measure ajid, if possihle, to indicate also, vdiich of the 
developments are non-essential to the puhlicity device and hence avoid- 
ahle under a hetter aininistrative regime, and which are more "basically 
related to the pu'blicity device and must he allowed for and anticipated 
in the use of price filing as a coo^ierative device. 


.The forms of control in '■•hic':\ -orice filin^-^ plans pla^'^ed important 
roles; appear in at least five major groups: ... 

(1) Control over the price level 

(2) Control over price changes ■ . - 

(3) Control over the price stmcture 

(4) Control over channels of trade an.d, distrihutors 

(5) Control over division of the husiness 

Only the more salient aspects, of tl^ese. inter-relations can he 
dealt with here. Other S'tudies in the trade practice field will 
develop in more detail the functional aspects of various measures other 
than price filing in promoting these ends. It is the intention here 
only to descrihe the nature of the use to which price filing, as sne 
of- the .several neasures, was ptit in "bringing ahotit an a,ttaininent of 
these o"bjectives. 

A. Control Over the Price Le vel - ?elation of Price ?iling 
To Cost Provisions 

1. Introduction 

The general expectation tlia.t price publicity would serve as a 



deterrent to destructive price cut-.ting was noted in Chapter III. But / 
few industries were content to rely on this more indirect and uncertain 
means to a mere favorable Tsrice level. There was a demand for the im- \^ 
mediate elimination of sales below cost — a:..demand which had been anti- ""v 
cipated and tacitly aoiiroved in the Congressional debates x)receding the 
enactment of the National Industrial Recovery Act. (*) 

In the absence of out-and-out price fixing by the eetR-hliGhaont -Of ^ 
minimum orices, the most obvious nro^ for the price level was some kind ■ 
of cost floor below which members were not allowed to quote. The exist- 
ence in a code of such a cost floor, and its observance by members, 
would introduce some deterrent to price cutting and some control of the 
price level whether ouen price filing was Tjresent or not. Hence, if 
there is to be obtained any realistic appraisal of the role of price 
filing in the control of the price level, the prevalence in open price 
codes of various types of no-selling-below-cost and other minimum price 
provisions cannot be ignored. The following discussion will be confined 
in most part to the relation of price filing to selling-below-cost pro- 
visions, since these latter provisions represented the principal type of 
regulation designed to exercise a direct control over the price level. 

The close relationship between cost comparison work and price fil-. 
ing had been noted by the Federal Trode Commission in its report of 1929. 
(** j The general observation was mii-de that the two were similar in nature 
in that both had for their objectives un improvement in general market 
information whicii would lead to more intelligent pricing prac ices. 
"Educational cost work had been frequently utilized by open price associ- 
ations; but the essential duplication of effort and etqaease involved in 
organized cost comparison and price reporting led the Federal Trad« Com- 
mission examiners to the conclusion that these two activities were apt 
to be alternative rather than joint methods of cooperation, with cost 
comparisons more commonly used in industries whose products were not 
sufficiently standardized ^r comparable to make price comparison easy. (**•** 
The fact that com-olete cost figures (based on unifcrm cost formulas in- 
cluding all indirect as well as direct costs') might serve as suggested 
prices and be used for concerted price control auite as easily as might 
price reporting was recognized by the commission's report, but the elimin- 
ation of ignorance concerning costs was generally considered a sufficient 
motive and justification for such activities. 

The cost provisions in NBA Codes, however, were not designed sole- 
ly for use in the elimination of ignorance. Like the price filing pro- 

(*) Congressional Record . 73rd Congress, First Session, 5373. Cf. page 32 
ff. Nelson, Saul, Minimum Price Regalations Under Codec of Fair 
Competition (February, 1936'^ 

(**) Qs,, city .. Chapter IV, page 161 ff, 

(*♦*) Separate cost elements rather than price, were filed under a 

number of RRA. price filing plt'-^s. These ordinarily were indus- 
tries having non-standarized or made-to-order oroducts, or were 
competitive bidding, based on cost estimates, was the usual method 
of price quotation. 


visions they conte'rolated a nandptor'"' restraint on members not ready to 
act in accordance "ith the 'mo^Tled.^e of their o'rn or others' costs. There 
is no indication thpt cost methods aio. orice reportinej were regarded as 
substitute provisions in the drafting; of codes of fair comioetition. There 
was never any apijarent inclination to discoura^ie their simultaneous use 
in codes. A"no selling bclo^^ cost" "orovision, together with authorization 
for -uniform accounting methods to be devejloped and aijoroved by the Adminis- 
tration, was a most frequent accompaniment of a price filing lorovision. 
Minimum price and cost provisions apoepr more frequently in early price 
filing codes than in cede? without price filing provisions. As is illus- 
trated by the following statements, the combin--tion of "no selling below 
cost" and price filing provisions was regarded genera,lly as the ordinary 
and basic element of code control rgainst "destructive" price cutting and 
price instabilitv. 

In a report submitted to the Code Authority for the Retail iionument 
Industry by Mr. Donald Blake, on i.Iarch 26, 1935, when he submitted his 
resignation as chairman and as a member of that code authority, he stated: 

"....when we af'smpted to ' repriiaand' some of our members for 

selling below cost we were "uvised thr t 'cost' was such 

an indeter-ninate and vague term the provision could not and 
would not be enforced unless and iintil a 'yardstick' of costs 
or a cost finding system had been adopted and approved by the 
Administration. Uonths of effort aiid hundreds of dollars have 
been exoended in a futile effort to sec\ 'the bureaus' approval 
bf a 'yardstick' or cost system - although the provisions of our 
original code definitely stat?d thyt it was one of the 'duties' of ■ - 
the Code Authority to prepare and odoot such a svstem. The failure 
of the 'selling 'eelow cos t' provision and the refus?^l of the ^'^RA to 
approve a cost svst?:;i ha^^e vitiated and voided the purpose and effect 
of the price filing system . Tnus, todav, so far as price stabiliza.tion 
is concerned, we find ourselves in 'precisely the same deplorable 
position we were in prior to the Code."(*^ 

The Administration member of the code authority for the marking de- 
vice industry, Mr. ?. D Hansen, in s letter to J/ir. J. R. Swift, the chair- 
man of the code authority for thrt industry, on September 7, 1934, dis- 
cussed the question of the price level in the industry and the relation 
of the cost formula and price filing to changes in that price level. After 
reminding Mr, Swift that administrative approval w^^s necessary for the cost 
formula, Mr. Hansen, referring to a letter he had previously received from 
Mr. Swift said: 

"....The filing of prices. con, of conjrse, be called for by 

the Code Authority at any time, out lontil the cost finding system 
is established, aoparently this will not help matters, and I quite 
agr^-e with you in this opinion " (**) 

Clearly both kir. Hansen and lAr. Swift regarded price filing as an adjunct 

of cost finding systems, designed for and useful for enforcing cost formulae. 

(*) Report in FRA Files, . on^uaent Code. (Underlining supplied) 

(**) Letter in ITRA Files, marking devices industry. 



At the liearine; on the code for the paper and piolp industry a state- 
ment made "by one of the chief prorjcnents of the code similarly stressed 
the importance of the price control -Thich the industry expected to achieve 
"by virtue of the combination of price filing ajid "no selling "belorr cost" 
provisions. Kr. S. L. Willson, President of the American Paper pud Pulp 
Association stated at this hearing: 

" To facilitate the rehahilito,tion of the Industry to a 

point vmere it may pay its proper dividends to the 
thousands dependent upon such incomes for livelihood and 
to protect the level of vfages herein provided, the Code 0011" 
tains provisions for open price records and restraining 
provisions against selling "below cost. It provides for the 
necessary protection of its competition from the relative 
few who, with or without reason, in the pa,st initiated 
ujafair price cutting...." (*) 

The structural clay products industry attempted to link price filing, 

and rainim^am price fixing. At t:-.e '.'.saving i this code held on A'ugust 23, 

1933, it vras proposed oy the code con littee that the proposed code he re- 
vised ti include the following; ' ' 

" The Regional Recovery Conmittee shall have power on its 

own initiative or on the complaint of any raanufa.cturer ti^ in- 
vestig3,te axiy price for any product shown in any list filed hy 
any raa,nuf acturer . . . . If the .. .Committee after such investiga- 
tion sliall determine that such price is rji unfair price... the 
Committee may require the said manuf actiirer . . . to file a new 
list showing a fair price... If such manufacturer shall 'heye not, 
within ten days after notice ... .filed a new list showing such 
fair price... the sa,id Coiomittee shall have power to fix a fair 
price for such product, which fair price, however, shall not he 
more than the price of any other manufacturer at that time 
effective for s\ich product .. .The deplorable condition of this 
Industry requires this revision and it is included with the 
understanding that it is subject to review by the Administrator 
after a nine months period...." (**) 

The code authority for the macaroni industry even attempted to use 
price filing to make certain r.ctions of industry members code violations 
rotroactively. • The code for this industry contained a rather ambiguous 
provision which permitted members of industry to sell below individual 
cost to meet "...the price of a co:.Tpetitor which is not in violation of 
this code." (***) The code authority, amplifying this provision ad- 
vised members of the industry as follows: 

(*) Transcript of the public Hearing on the code for the pr-oer and pulp 
industry, September 14, 1933, page 25-26. (in ISA files, Paper & 
Pulp Code.) * , " 


(**) Transcript of tl:e Public Hearing on the Code for the Structural 

clay products industr--, August 23, 1933, pages 249-251. (in MRA 

(***) See Article Vll . Section 5 of the code for Ilacaroni Industry, 

Codes of Fair Competition, as approved. Government Printing Office, 
Vol-ume V, page 534. 



"Pending inv.^.stigetion cf orice lists vhich ai:cf:r belcv cost, 
we vail hold that.... any -.ifmber v;'ao ineets a price which is under 
investigation will .^•.Iso be 'out •md'^r investigation. If the price 
being invef.ti gated, later troves to be ii voilation of the Code, 
the member meeting such a price v;ill also be alleged to be in 
violation of the Code. This is a drastic ru3ing, but is abso- 
lutely necessary to clean up the chfiotic condition nov existing. 
.7e hope you will sse the necessity for this " (*) 

The original code Drovision riade it virtue.. lly iraoossible fox" a lem- 
ber safely to meet a lower ':jrice since it would be imoossible to ascertain 
definitely if thnt price were in violation of the code. The code author- 
ity r-'i.lius^- woula either hpve forced higher urices or made a large n-omber 
cf incustr^r members liable for coae violation retroactively. (**) 

The importance of the ccmbinftion of cost ana irice filing pro- 
■■■isions can not be me^surea solely by the frequency with which it occurs, 
but involves also the function , 1 relrticnship es established by the 
various codes. 

2. Prevalenc e of Cost ana ^Iini:ju;a Price Frovisions in Codes in 
the Study Sanrjle 

The most common form of cost limitations were those prohibiting 
sales below cost. Such provisions aixoeL-ired in 47 of the 57 codas in 
the samole. ITith the exception of the Frrra Eouioraent Code, all of the 
forty-seven codes r-rohibiting sellin.?; below cost provided also for the 
establisnrnent of uniform cost accounting systems as a basis for deter- 
ming cost. Only eleven of these cost methods received NBA approval; 
in five instc.nces the aourovrl was conditional. (***") 

{*) Bulletin :to. 27, jlagast 2'), 1934, issued cv liacarcni Industry Code 
vuthority, In URA Piles, mac-'Troni inclustry. 

(**) Other evidence of the use of orice filing to effect "orice control 

arc given below in Chapter vi, '.Thile these instances do not always 
indicate an explicitlv stated desire to use iDrice filing systems 
for price control objectiveB, the3'' do indicate the actual use of 
such systems in thrt manner and are, therefore, perhaps of even 
more significance than mere statement of intent. 

(****) Ko. of ilame of Code Date ar.- Administrative 

Code oroved Order No . 

67 Pertilizer Industry 2/24/34 67-4 

234 liacaroni 3/31/34 234-4 

265 Coffee 3/31/34 265-4 

128 Cement 5/12/34 128-9 

333 Canvas Goods 5/ 5/34 353-5 

134 Gas Aopliance &. App. 6/ 7/34 134-9 

98 Fire Extinguishing Aopliance 7/2'V34 98-5 

176 Prper Distributing Trade 9-19-34 176-21 

156 Rubber i.anuf acturing 9/25/34 156-37 

204 Plurabing pixtures 9/14/34 2')4-14 

37 Builder's ^apuly Trade 12/3/34 37-23 



Thus the St;^ndard principles of Accounting for Deterraination of Costs 
for the Gas Appliances pnc. .Appiratiis Industry ^ere sanctioned, with the 
proviso that if v^'ithin a period of f ou.r hionths it v/as determined that 
ineauities were createo, 07 the use of such princitjles, the ap-or.oval would 
be rescinded. The pluribing fixtures industry received apx>rGval for their 
cost accountm.g systera on condition th^-t the code authority endeavor to 
improve the system and re'.jort to thf= ;-.&Ministrator within six months. 
The administrator's oraer of ai^provrl of the Elements of Cost for the 
Macaroni Industry limited the effective- periodtc 9*^ days. The terms of 
the order ar)proving the Uniforra Accoanting Manual for the "lubber I:anu- 

..facturing Industry s-oecifiea txipt the divisional code provisions- pro- 
hibiting sales oelow representative costs were to be deleted, that the 

'method of calculating the cost of certain items be revised, and that the 
code aiAthority report the rssults of the use of such manual to the divi- 
sion administrator vifithin 9"' days. The anoroval of the Uniform Account- 
ing Items for -the Builders' Supralies Trade indicated that each member cf 
the trrde should utilize such .lethods "to the e" ter.t found practicable." 

Prohibitions of destructive orice cutting, either general in form 
or in accordance with Office iiemorandiim 228, which rsermits complaint 
and final NBA determination as to the destructive nature of the orices, 
aoT3eared in nine of the fifty-seven codes. (*') 

Provisions permitting the declaration of an emergency, and the 
determination of miniTnua prices to aoply during such eraergencr-r, were 
contained in eleven of the fifty-seven codes. The Copoer Code, Canvas 
Goods Code, the Mayonnaise Code, Baking Code, Cmdy Hcinufacturing Code, 
-..liolesale Confectionerv Code and the Agricultural Insecticide Code, 
contained provisions similar to that set forth in the Office Memorandum 
of Februar}'' 3, 1934, which 'xs^ted to the code authority the right to 
determine the existence of an emergency and, subject to NHA ap^ro^-al, 
to establish oinijaiun trices based on lowest re'.sonable cost. The Lime 
Industry Code, Cast Iron Soil l^ixie CoQ.e, Builders' Supplies Trade Code, 
and Retail Tire and Battery T'rade Codr^, contadneo -orovisions similar 
to that set forth in Office 'I'emorana-dra No. 228. In these nrovisions 
the KRA reserved to itself the power to declarR an emergency and to es- 
tablish the rainiriura price, price emergencies declared on the basis of 
these -orovisions resulted in the estahlishment of minimum prices in 
three of the above codes for the oeriods iidicated: 

period Admin. Order 50. 
Agricultural insecticide £; fungicide ll/ll/34 to 2/9735 275 A-11 
Cast iron soil pipe 7/16/34 to 10/13/34 18-8 

Retail tire and battery 5/14/34 to 10/l/34 410-3 & 


The cnndy manufacturing industry asked for an emergency declfiration on 
certain products on two different occasions, but the KRA denied the 
aDplication. The mayoniiaise industry code a-athority also requested an 
emergency price declaration, but just previous to the date set by the 

(*) Sne copner, coffee, builders' supolies, cast iron soil pipe, mayon- 
naise industry, canyis goods, industrial .'ilcohol, lime, carbon 
dioxide and retail tire & battery codes. 


NBA for a herring on this reouest the coce r.uthority withdrew its appli- 
cation, stating thr.t the situation complained of had been a,djusted. The 
hearing was pccordingly postponed indef initel:/-. 

Most of the codes exemplified by thrt of the metal window industry;-, 
simpl:/ provided thft "no m^uiber of the industry shall S'-:"ll any industry 
product at a price belo.? his ovm individual cost", with an equally gen- 
eral provision that the code authority should provide for the formu- 
lation of a uniform cost accounting system to be used, after N3A approval, 
as a .guide for determining such individua,l cost. Members were forbidden 
to sell below such costs and, of course, to file prices lower than such 
costs. Trequently, this limitation, wa.s modified to the extent that 
members were 'oermitted to file below cost to meet a competitor's re- 
vised price that was not in violation of the cost provisions of the code. 

Other cost iDrcvisions stipulated the factors that must be included 
in the cost calculations or cost formula to determine the individual 
minimum costs which must be covered by filed prices. 


Thus the Asphalt Shingle and ^.oofing Code provided in Article XII 

"It shall constitute a violation of this code for any member 
of the industry to sell any oroduct aba net urice which shall 
be below the said aer/.ber's 'direct cost'. Such 'direct cost' 
shall include the s\im of the following itens chargeable to the 
orieration of such member' s business in conformity v/ith so-'und 
accounting practice, during the -oreceding calendar month. 

(A^'i Direct rav/ material cost (inclurive of transportation 
and'* , plus 

(b) Direct labor cost, ulus 

(C") I.'anufactarin j Dui-oen (inclusive of power and steam, 

factory ov:Thead, mai.itona,nce expense, technical con- 
trol, factory warchous , rnd factory shipping charges'), 

(d) Fifteen (15^) percent of the 'Total Hanufactured Cost'; 
(i.e., the sim of the items 'A' plus 'B' plus 'D'^ 
pro^^id-' a that depreciation tax3S, insurance, ureserves 
of any character, interest on investment, selling and 
administrative exiD^nses, r>nd. crior operating losses, 
li^Cijwise interest charges on funded or other debt shall 
not be included in 'Manufacturing Burden' ; and provided, 
further, thot any member of the Industry may sell below his 
ov;n 'direct cost' midor the following circuinstajices: 

"(a) to meet competition on prices established on 
products of co"ap':^ting grada and cuality filed by another 
m.:-mO:;r of th-_- Industry pursuant to Article VII hereof, 
and not directly or indirectly investigated by the party 
desiring to mi_-.::t such competition, or 

"(b) to me it competition in violation of this rule 
concerning which he has made comiplaint to the Code 



Authority, or any a . iithcri'zad a-qancv thereof, but only -oending 
action thereon ." (Underlining supclii-d^ 

Lowest reuresentative costs as a basis for duterrning the minimum 
price was nrovided for in th^; Codo for the 'S'-ivo ""ilxtinguishin^ AoDliance 
Manufacturing Industry (Code- No. 98). This rn-thod is described under (e) 
of Article VI: 

"The Code Authority shall procc ja to establish a uniform 
system of cost accounting in conformity with accepted standards, 
for use by the members of the Indistry. fipon a.T)uroval by the 
Administrator, such system of cost accounting shall be used 
by each member of tho.. Industry in determining his costs. Each 
member of the Indies try shall re'o o rt his individual costs, com- 

puted in accc: 





tem, to a disinter 



inDartial s.gency desi^^nat 

ed b\ 

' tm 

e Code Authoritj^. 


Agency \ 

shsll deterni 

uc the 


of t 


re"Drcsentative ui-i] 

iiiber of the 

Industry wncs 

e costs ar , 



S'lch representative costs shall 

be oublit.hed 

to the 




memb n" of the Ind 

us try 


sell pre ducts 

of th.; 

; I nun 



;■)'.; such rfpresenta 

tive costs. 


Such representative costs shall be revised from time to time at 
reasonable intervals. The term 'represi:;ntativc member of the 
Industry' is defined as being one ^^ho mcinufactures within his 
ovYn plant a representative line of the products of the Industry, 
who maintains research and development departments for improve- 
ment in the art of fire extinguishm*jnt, and who through educat- 
ional publicity and sales promotion broadens the market and de- 
velops business for all members of the industry." (Underling 
supplied) (*) 

The Structuml Clav Products Industry Code (iSS'i provided for the 
development of a uniform cost accounting system VYithin 120 days aft:T the 
effective date of the code, to be used in determining the individual cost 
of each member of the industry. In the interim, an ."a verage cost" system 
was established in the following manner: 


"After a survey of the estimated cost, both direct and indirect, 
of the reasonably efficient pl-nts then in operation within that 
region ijinder the terms of this code, -the regional committee may 
recoamond to the Code Authority for its approvel, sub.ject to 
review by the AdjQinistrator, an allovrable cost, provided th-at 
such rllowable cost, sn."ll not i iclude any r3serves for purposes 
oth^r thrn depreciation, or any ; llowances for interest on in- 
vested capital or for devolopuentrl e>:ponses, and provided further, 
that the distribution of indirect expenses per unit of product, 
shall b . on the estimated basis of an average rats of utilization 
of plant facilities by such r ^asonably ..fficient plants during 
the period 1927-3D. ITpon approval by the Code Authority of any 
such allov/able cost, no mer.:ber of the Industry shall sell, or 
publish a price for any such product belo-.r its allowable cost 
so arrived a t . except to ab sorb tr,ansportation charges to meet 
the published price of an?;- other member of th.^ industry for such 

(*) Th.j applic£ ticn of this orovision by the Code Authority beyond code 
powers is described in a subsequent section. 

-product . " (*) 

Tho P-oor and FuIt) Industry Code- tdso -Di-ovided for TDreliminarv cost 
rules to b. set up by the- coda authority pending submission nnd at)proval 
of a uniform cost syst.m. Thes.; oroliminary rules reauired no IIPA ax)proval 
and v.-er., in offoctiv use oui'ing most of code Doriod. The most important 
it.-m in these rules required that raw materials be included in cost at 
current market price, whether purchased or -oroduced. This effectively • 
eaualizcd the cost floor for integrated and non-integrated mills and acted 
as a bar to any drop in urices blov/ the cost of the non-intugrated mill. 

3 - Code Provisions Conveying: Fowcr to Challenge and Void Prices 

Examples of code nrovisicns fo]mally conveying to code authorities 
the right to apply tests of cost, and to void prices on the basis of find- 
ings, without the necessity of forrial charges of code viol-ation, 'Jill 
illuatrat.: th^j functioial rel.'^ tionship of such oowers to price filing, and 
their potential infliience over the level of prices as filed. It should be 
observed that in many instances the burden of proof ' was placed on the mem- 
ber vhose price was challenged to show thcit his or ice was above cost, rather 
than i.n the code authority to erove that the price in question wa^s below 
cost aiid in violation of the code. 

Ins.smuch as these leovrers were particularly restrictive of individual 
freedom ii filing prices, additional e-:airoles have be n cited from some 
codes outside the stud-"" saiople. 

Th^ Iron and Steel Code, as approved e'a Au-gust 19, 1933, contained 
in Schedule 1], Section 5, th.. riglit of th board of directors on its own 
initiative, or on complaint, to investigate any base price on file rnd to 
require the member to furnisn cost data. If the base price was judged 
unfair for such product at such basing point and liablt^ to result in unfair 
competition, the board of directors could require the member to withdraw it 
and file a new f^ir Dase price to become effective immediately. If . suph nqw . 
price was not filed within ten days, thij board of directors could set a 
price, not more than zjiy other acceptable price en file for such a product 
at such a basing point, ilotice of all decisions, together with the reasons 
ther-:for, were to be filed vfith the President. This provision was annulled 
in the amondinent approv>_d on i.;ay 30, 1934. 

The Canvas Goods Code permitted a.n extension of the waiting period 
for an additional ten drys to investigate a filed price. The 'Oil Burner 
Code provided further that if a price were found to be below cost, the list 
was to be withdravm and a revised list submitted. 

The Gas Cock Industry Code provided that where the Governing Committee 
found that any price v;ould cause instability of the ma.rket, it might re- 
quire a member to show that such price did not involve: a net return less 
than cost, or it might require him to file a„ revised price. 

(*) Article ?I, Section (e), Co'ie for Structural Clay Products Industry. 
Undcrlinin-;,- supplied") Codes of 'air Competition, as aporoved, 
Gov_;rnment Frintin; Office, ^'oluine Page 


Such an alternative su^^eet?; the possi"bility tliat choice ni^:ht -ell 
have "been influenced Ly the de^Tee of difficult;- encountered or antici- 
pated in convincin.'T the code axithority thr.t a price ''as not belor cost, 
or ty the adeouacy of a vievfoer's cost records to satisfy such an inves- 
tigation. In this case the provision did contain the safeguard that 
the price -jas to re;".ia,in in effect until sUo'jn to Tse oelo'v cost. The 
Gasoline Punp Code contained a si:iila,r provision. 

Three sinilar codes for the couprossod air, hea.t exchange a.nd 
pui'TO mfg, industries, -rhich operated under the sane supervisory agency, this agency the right to investiga.te v:n.y filed price, require cost 
da-ta, and if the price '7as unfair, having regard to cost, to require 
the filing of a nev; price. If the nev price '7as not filed in ten da.ys, 
the agency could fix a fair price, "but not no re than any other "anchal- 
lenged price then on file. 

In the Ceuent Industry Coc'e, a~pproved l-Ioveiyoer 27, 1553, Article 
IX, Section 5i provided that if the code authorit;'' ha.d rea^sonahle 
cause to helieve that a.ny price -"iled at its office '"'as in violation of 
any provision of the code it light extend the effective date of svich 
price for a period of not lore than ten (lO) days in order to investi- 
gate the nenher's costs. 

The Precious Je^relry Prodv.cing Code, Schedule A, 5, provided that 
any filed price "belo'7 the nen"ber's cost, as sho'vn hy his certified cost 
sheets, (availa.hle to .code au.thority upon request), should he held in 
aheyance "by the code authority pending suhnission of a revised price 
hased upon the cost of each a.rticle. 

The SahDer Poot'-ear Division of the I^xliher manufacturing Code 
introduced a nore positive dependence 3et':'ee-i filed prices and costs '^oir^ 
a provision "hich United revisions of prices to neet those of a conpe- 
titor, to a period of thirty- days a.fter the filing of ne'j annual prices. 
"Thereafter any changes in Schedules must he supported h;'' cost date to 
'7arrant such changes, SLihrnitted to the Divisional Aiithority, " 

The Paper and Pulp Code added to a very ela.horate price filing 
provision the poi7er for the paper industry authority to investiga.te 
any filed price, require cost data and upon stated cause nake void such 
price. Po:'.'er to svispend the/price pending such investigation vras lod- 
ged nith the adninistrator, hut there -Tas no specific provision for his 
revierr of the decision arrived at by the Code Authority. (*) 

The envelope; 'lanufacturinr', folc'ing paper ho::, ta-g industry and 
sone thirteen other paper codes i:acorporated the reciiirement that 
filed prices "aust he justified either h" individual costs or hy the 
schedule of p. conpetitor iTho ':;r.s not selli:ag helo'"' cost. The provisions 
all read suhsta,ntia.lly as follows: 

(*) There 'vas, o:'" course, else'/here in the Code, the usual clause 
giving the aciiinistrator right to revieT code authority actions. 


I'All schecu-les to "be /.ustifiec. as (a) not oelo'? 
O'-'n cost, or ("b)' riot "belo-^ lonqst cor.ipetiti've ' 
■ filec'. price; if latter, t.he co:'ipe'titive sciied-o.le 
to be ic.entifiec., , , .; enliers 'la;' -^ile to neet 
revisions, effective date, Schedule justified 
"by another schodu.le as in (Id) above, to "becone 
void upon revision upiTard or cr.ncella.tion of 
justifying schedule, ,,, Code authority nay in- 
vesti:^e.te any filed -rice, rer-uire cost data, 
and if violation is found notify .nenher and 
price thereupon "becones void, "(*) 

One ohvious ao-vantage to such an interlochin:'- requirenent is the 
isolation of the Ion cost filer. 3y linl:inG all the lov prices to his 
schedule there 'Tould he an automatic cancellation of the loner prices 
of all nenhers vho had used his schedule to justify their onn, at any 
tine he chose, or '-as persuaded, to raise his price to a higher one. 

The paper distrihuting trade included sinilar recuirenents of cost 
justification, with the provision that after 25'^ of the nenhers in 
nunher and dollar volume had filed, all other neihers -'ere sutonatically 
hound by the lowest price on file unless individual filings (justified 
"by costs) nere filed. The presence in the Paper Distributing Code of a 
stop-loss provision, based on replacenent costs plus a nininu!-.i labor nark 
up, gave innediate noaning to this cost detcrnination, particularly in 
the case of sales by wholesale grocers a.nd others ^-^ho nere prone to cut 
prices belo\7 the accepted levels. 

In anticipation of o.n approvec. standard accounting ■systen, the 
Foundry Supply Code provided that each iienber shoiild thereafter file 
nith price lists a statement of whether the price 'jas justified upon 
his o'.-n cost or on a previously filed coir.petitive price. No price 
jvistified by the latter nas to be less than the Icest justified price 
of the product previously filed and still in effect. 

The llachine linife and Allied Steel products Code gave the code 
authority the ooner to require any nenber to sho'.' that a price \7as not 


belo-7 cost, if they founc'. that it ^rould cause instability in the narket. 

Under the Upholstery Spring and Accessories Code, the code autho- 
rity night require any nenber to submit data on cost of production of 
any product for nhich prices had been filed and night, to prove" the 
accuracy thereof, examine so -racli of the :iember's books and records as 
necessary; notification nas' to b6 given all members if such data 'jere 
required. If the code authority :^ound that the filed price violated 
the code, such price nas to become non-effective, and after notification 
from the code authority, the nenber v/as to file a ne'-r price list 
com-olying nith the code. All decisions of the code authority, _ 
together 'jith reasons; therefor^ -'ere to be filed \7ith the adninistrator, 
subject to suspension and cancellation. 

(*) "Cost provisions of ap--.roved Codes," Heport IJo, 38 '"07 Post Code 
Research and Planning Division (in IIRA files) 



4. Code Authority Application of Coat Previsions . 

The functional relationship of coat provisions to filed prices 
was in many cases not set forth In dotsil in the code. Presumably, 
however, the delegation to code authorities of the right to administer 
and to secure compliance with the codes would include the implied right 
to prevent and check violations of the cost' litaitations as revealed by 
prices filed with theta or other agency under the pricp filing provisions. 
Specific administrative powers to a.-oply these cost restrictions by in- 
vestigating books and by suspending or voiding filed prices were granted 
in relatively few codes, but experience would indicated that the presence 
or absence of these powers in the cede was no measiire of the actual 
powers exercised by code authorities in challenging, investigating, de- 
laying and rejecting filed prices which were believed to be below cost 
or at least be'low the level, the Code Authority had decided was accept- 
able. ' • 

The fact that such loowers were approved by the Administration in 
a number of instances may have seemed sufficient precedent to permit 
similar powers in other industries, inasmuch as the date of code appro- 
val or other chance circumstance led to the inclusion of such powers 
in some codes and their omission in others. Some indus'tries that did 
not ask such powers when the open price provision wf?s written assumed 
them either as necessary adjuncts to code enforcement or as a convenient 
means for keeping prices in line with some predetermined level. Thus 
in the coffee industry the approved cost formula forbidding sales be- 
low the replacement cos.t of green coffee, to be published bi-weekly by 
the code authority, was' extended to an arbitrary cost floor which was 
used in checking filed prices. In an endeavor to fix minimum prices to 
an extent beyond that allowed by the formula, the bi-weekly bulletins 
announcing the repla"cement prices of green coffee included also minimum 
mark-ups for roasting set by the code authority. Sales at lovsr prices 
than those suggested wer'e to be considered prima ficie evidence of vio- 
lation and any prices filed below the established figure were to be 
challenged as below cost. Revisions of filed prices to recognize in- 
creases in the published replacement costs could also be checked by this 

Actually, the code authority did not attempt to secure general 
compliance with the nrice filing requirement but focussed attention only 
on the more significant competitive units (large national distributors, 
im-ocrtsnt local distributors, and those .units reported to b'e cutting 
prices). In this manner price filing served as a check on compliance 
with an arbitrary cost floor set by the code authority. The knowledge 
that prices below the established flo'or would result in a complaint and 
cost investigation was in most case.s sufficient to deter the filing of 
prices lower than the allowable costs set by the code authcritj''. (*). 

(*) Memorandum, dated 9/25/36 from M. D. Kossoris Chief of Minim-um 

Price Unit, on "Interview with Secretary of Coffee Trade Association, 
Monday, September 23, 1935" (In HRA files Coffee Code). 



The gas pppliances and spoaratus industry provided for a test of 
costs in Rule S - Approval of Prices, issued to the industry on Decem'ber 
9, 1935, Bulletin 5: 

"All prices as filed shall "be subject to the ap-nroval of 
of the Gas Appliances Comuittee and the Committee shall he 
.authorized to investigate the prices to determine if they 
will result in the customer -oaying for the goods received 
less than the cost to the seller. 

"Each emnloyer in the industry shall f-^xmish the Committee a 
certificate certifying that the "orices as filed are not con- 
trary to tne provisions of Art. VIII cf the Code and that they 
will noA result in the customer paying for the goods received 
less than the cost to the seller. This certificate will 
he accepted hy the Committee as the ha sis for its initial 
and temporary approval of the prices." 

This ruling was ordered withdrawn by tlie l\r.P..A. at a meeting on 
January 8, 1935. (*). 

The ultimate refusal of the Administration to approve mandatory cost 
accoimting systems find cost formulas prepared in accordance with enabling 
code provisions tended to make cost limitations legally inoperative 
in the majority of open price codes, but did not entirely nullify their 
effects. Particularly during the early days cf the codes, thy were in 
common use as propaganda for higher prices and not infrequently as coercive 
devices to prevent the filing of low prices, even under codes that did 
not convey to the code authority specific controls over costs. 

The Code Authority of the Mayonnaise Industry issued repeated bul- 
letins to members warning them that increasing costs should result in 
the filing cf new and higher prices to avoid "engaging in destructive 
price cutting or selling below your full cost." 

Release No. 27, dated November 19, 1Q34, was a specific "reminder", 
and in addition disseminated information on pending price changes. The 
release advised that Kraft and Best Foods Companies were increasing their 
prices effective ITovember 20, ma3'onnaise prices on a dozen 8-ounce jars 
to $1.55 and on salad dressing to $1.35. It continued as follows: 

"To avoid selling below erst and engaging in destructive price 
cutting such firms as Kolsum, Blue Seal, Standard Brands, and 
others, have filed new prices on private labelled, unadvertised 
brands of salad dressing as follows: 

8-OTmce $1.25 

IS-o-unce 2.07 

32-oance " 3.50 

All of which is subject tv a discount of 2- per cent...." (**). - 

(*) See below page 345 for code provision. 
(**) The waiting period in the Code was stayed in the Order of Approval. 


A later release, No. 37, cites three cases in which prices which 
the code authority regarded as too low were associated with sub- standard 
salad dressing and mayonnaise. Since the standard requirements of the 
code are mandatory, this communication might also be deemed a warning 
that too low prices might lead to investigation and changes of code 
violation (*). 

The following extracts from the Minutes of the Meeting of a Re- 
girnal Committee of the Code Authority for the Retail Monument Industry 
further illustrates this ;ooint; 

"The most iratiortant thing for the dealers around New York City 

is to know whether the prices of montur.ental work can be stabilized 

at B minimum figure below which no ^ne can sell? 

"The Memorial Associates, Inc., with a membership of sixty in good 
standing - after months rf v^fork on the part of certain members - 
agreed upon and adopted a price cost schedule, which each member 
was to file as an individual or firm. 

"Many did just what they agreed to do. Some did and s\ibsequently 
withdraw their prices and filed lower schediiles. Others merely 
did not keep their word- just went ahead and filed lowei- schedules. 

"Before adopting these orices it wns agreed thj)t it was absolutely 
essential to stabilize the price level, so that all work sold 
should at least bring in the overhead cost. About fourteen men 
got together, so-called leaders, and after much discussion, final- 
ly agreed upon what the average overhead is. The idea was not"' to 
exploit the public at all but to establish that minimum below 
which it would not be possible to get even an overhead cost. Mem- 
bers could sell at that or above as the situation called for. They 
all agreed that with this minimum it would be possible to get a 
fair orice for a monument, so that the man quoting a fair price 
would net be made to look like a robber by some one cutting in a 
ridiculously low price in competition. 

"This has not worked out. Thrse who filed lower iDrices are con- 
sistently taking a'-ray business from those who kept their word. It 
is not T)ossible to meet lower prices when one does not know when 
the low filer is quoting. Therefore, the chiseler has had all the 
advantage because he has been able to keep his voluiae and add to 
it, while the honest nan's market is being taken array from him 
by these seekers after volume." (**). 

Mr. Althauff went on to suggest that the quickest solution to the 

(*) The further use of suggested price floors in the Mayonnaise In- 
dustry is discussed on pages 385-287 b^ilow. 

(**) Minutes , December 10, p. 4 (In l-QA files) These remr.:rs were 
made by a Mr. Althauff who is not identified in the Minutes. 



above sit-ustion would te foi- all dealers to withdraw their filed prices 
and file new ones to meet the lowest competition. He admitted that 
this would be ruinous to many members, but that it would teach the low 
filers a well needed lesson and that once their volume had fallen off 
they would be ready to listen to o reasonable ^olan for the stabilization 
of the industry. Ee indicated further thct if the organization in 
New York did not take some such action he VTOuld do it on his own account, 
since he cou2d no longer tolerate the conditions described or as he 
put it: 

"In the meantime we cannot be Dut in the pcsitioh of losing the 
business, and getting the name that we are high priced people 
and have these people seeking business on the ground that I am 
a. member of the Code Committee and can't cut ray price down to 
meet theirs." (*). 

In Region l\"o. 39 the Retail Monument Code Authority for Region 
No. 3, voted an extention of 10 days' time after May 3th, 1934, during 
which members could comply with the price filing requirement. The chair- 
man suggested that assistance should be offered the dealers by enclosing 
in the letter a copy of the cost price figures adopted by the Memorial 
Associates, Inc. The supervisor of Memorial Associates, Inc. was asked 
to explain the figures of his organization and to serve on a committee 
to prepare the statement suggested above. 

On- April 10 1935, a letter was sent to the regional field offices 
instructing them not to attempt' to enforce cost limitations not based 
on approved cost accounting plans, but priort to that time charges of 
selling below cost were occasionally filed and adjusted by the Com- 
pliance Division on the basis of arbitrary assumption of cnst control 
on the part of the code authority. (**). These complaints were, in 
some instances, filed by the code authority with the Government Con- 
tracts Division. Since certification of compliance was necessary 
before aviards were made, prompt decision were necessary to ascertain 
the legitimacy of the bid, and were occasionally rendered without due 
regard for approved standards for cost determinations. 

5, The Filing of Costs and Use of Price Filing in Connection With 
Costs Lists and Cost Manuals . 

In many instances even more intimate relationshiDS between lorice 
filing and cos-ts were developed by. the methods prescribed for operation 
of the open price plan. These plans u-s-ually involved the filing of 
cost elements or cost factors to be used in estimating prices on made- 
to-order goods. In other instances the filing of prices was linked to 
some gross cost list or uniform cost manual from which members could 
file discounts or deviations to indicate their individual selling pri- 

These plans were variously conceived and introduced to industry 
practice, and'were not always contemplated by the code itself. Three 
examples v/ill illustrate. 

(*) Ibid, p. 4. 

(**) e. g. Set-Up Paper Box Industry. 


a. The Malleable Iron Industr-'^. 

The Codp for the Malleable Iron Industry makes no provision for a 
price filing plan. It does provide that the code authority, in accord- 
ance with an approved cost accounting system could determine periodi- 
colly a schedule of fair and reasonahle costs in the industry and that 
it should be a violation of the code for any member to sell products of 
the industry at orices below the aforesaid schedule. 

Ifter a long process of negotiation cost schedules were submitted, 
and were to be mixltiplied by a figure 2-^- times the fair average costs, 
to constitute list costs from which a discotmt would be figured to 
arrive at the fair and reasonable cost. The purpose of this weighted 
schedi^Le was stated to bo to remove the circulated cost figures suf- 
ficiently far from the actual cost level tn deter the tendency to re- 
gard then as suggested prices at which products were to be sold. The 
initial discoijnts broadcast to the industry by the coda authority were 
to be those which would result in costs based on the fair and reason- 
able cost determination and might be expected to be used as a minimum 
price level. 

To mitigate the price fixing element of this process a procedure 
was approved by whicn members could sell below these costs by filing 
all quotations made below these figures with full identification of 
the transaction including the name of the customer. The individual 
member was obliged, whenever question was raised, to establish the fact 
that his quotation was above his individual cost. By this process a 
virtual price filing system v/as set up, under which members abided by 
the fixed price level (not cost). A member could sell below such sche- 
dule only by filing with the code authority the customer's name and 
pattern number with respect to such sale, and being prepared to prove 
that it was above his own cost. 

With various modifications and details, this method was in use 
from April, 1934, to the termination of the Act. The deputy administra- 
tor and others criticized the plan on a n-umber of occasions because it 
required identification of the customer for all quotations below the 
fixed level. A memorandum from J. R. L. Santos, Assistant Deputy, on 
November 12, 1934, stated further that "the trouble involved in suti- 
mating and filing has tended to make the majority of orders in the 
industry based not on the individual member's cost, but on the schedule 
of Fair and Reasonable Costs formulated by the Code Authority." Ne- 
vertheless, this same memorandum recommended extension of the procedure 
for another period of 60 days beyond November 12, 1934. 

This cost filing procedure copied the ordinary price filing provi- 
sion further by establishing, through code authority ruling, the obser- 
vance of a five day waiting period before filed quotations could become 
effective. (*). 

b. Marking Devices Industrj'-. 

The Marking Devices Industry Code contained a price filing provi- 
sion in Article VII requiring the filing cf price lists and of costing 
and pricing formulae for prndn cts not usually sold from -DriG* lists. — 
(*) Bulletin 3, malleable iron industry. In NRA. files. 



It provided also f^r a cost-finding system to "be approv'Bd by the Admi- 
nistrator. A Bulletin issued by the cede authority on December 23, 
1933, (*) carried the information to members thf^t; 

"....a neW and very comprehensive plan was adopted for our National 
Costing and Pricing ^ruides. The Plan is outlined in the attached 
memorandum and has received tentative api^roval by the Administra- 
tor It is a natiu-al development of the open price plan. The 

necessities of our Industry, incl\\ding the circumstances imder 
which our raade-to-order products are sold and manufactiored, require 
special interpretations of the usual operations of the Open Price 

"National Costing and Pricing G-uides 

"national Costing and Pricing Guides shall constitute the standard 
estimating a.nd pricing guides for all of the Marking Devices In- 
dustry throughout the United States. A map of the United States 
has been laid off in certain areas and Adjustment Factors have 
been allotted to each of these. These factors will compensate for 
inequalities in the inherent total business volume available in 
each given area. Also there have been .et aside certain metropo- 
litan areas ¥i/here the total volume is of such' significant charac- 
ter with respect to the balance of the area that it needs separate 

"The theory behind the use of these factors is that so far National 
Schedules liave not given consideration to the important effect of 
territorial volume uoon costs; and if planning did include this 
consideration, a single National Schedule would have to be issued 
on many different standards. Also, it is felt that territorial 
volume is a definable measurable influence upon costs, particular- 
ly in o-ur Industry, that a large metropolitan area offers to the 
members of our Industry supporting volume on which to set up faci- 
lities, skills, volume purchasing, field organizations, cataloging, 
and the like, which would not be warranted in smaller volume areas; 
that because we have previously failed to ta!ce heed of the heed of 
the influence of inherent volume upon our costing, our National 
Schedules have failed to meet the needs of the country, and there- 
fore have not had general acceptance and use. 

"Therefore, hereafter our National Schedule (which will be called 
National Costing and Pricing Guides), will be standardized, sim- 
plified, and comprehensive guides from which Local Schedules and 
individual price lists and catalogs can be made. All customary 
products and services will be described and priced either through 
list orices and discounts or through formulas for estimating prices. 
They will show the unadjusted standard prices at which goods can 
be sold across the United States without selling below cost on a 
containing basis, by the average viell managed member of this In- 
dustry; and when treated by the territorial factors these National 
Schedijle Prices will be adapted to the conditions of the given 
areas, which can and will be supported by the buying customs and 
standards of that area. 

(*) In NBA files, marking devices industry. 


"Products and services will not "be permitted to be sold in any 
designated area at prices lower than those reached ty the National 
Costing and Pricing Guides vrhen adjusted to that area "by the ma- 
ximum factor permitted in that area and ty such quantity factors 
and/or conditions of sale factors or discount Plans as are autho- 
rized "by the Guides rnoproved by the Code Authority, 

"There is no objection to the issuance of Local nnd/or the filing 
of individual Price Lists and Catalogs at price levels reasonably 
above the National Schedules as adjusted in the above manner, but 
any Local Schedules and any individual Price Lists and Catalogs, 
not in-eviously approved by the levels tlian those set up by. ,tlie 
National Schedules, so adjusted, will be iraraediately looked upon 
with suspicion and investigation will be made to ascertain; 

" First ; — whether such schedules could result in sales below 
cost with respect to individual transactions or individual items; 


" Second : — whether selling at the levels indicated will be 
harmful to the average member cf the Industry; and 

" Third : — whether discrimination is indicated between pur- 
chasers of the sane class or ajaality. 

"If any filing offends in any of these three particulars, the Code 
Authority will issue a cease and desist order, and a refusal to file 
a corrected schedule T;ill result in a request for prosecution by 
the Administrator." 

The threat of immediate investigation in the event T)ric3s were filed 
below the national schedules should be noted, as well as the three 
tests to be applied to such prices. The determination in ever;/ instance 
that the challenged prices would be "harmful to the average member" 
might be anticiapted, since the National Guides were sup-oosedly fair to 
the "average member. ... 

Among the five things listed as being of primary importance to the 
industry by W. S, Lord, Secretary of the Code Authority in a letter to 
Walter Mang-um, Assistant Deputy, May 8, 1934, (*) were; 

1. The right to establish and enforce minimum prices for the 
customary products, and 

2. The right to compel the proprietorial type of firm to charge 
into its costs the time cf the o\'mer at a fair rate. 

(None of the other three listed had any reference to cost or -nrice). 

It should be noted that the bul.letin quoted above stated that the 
plan had received "tentative" approval by the administrator. Later, 
objections v/ere raised b:/ the ITBA which sought to forbid the use of 
these manuals. The industrj'' resisted all efforts to eliminate the 

(*) In }niA. files, marking devices industry. 


scheme, on the grounds that the pricing manuals were necessary, had heen 
in use in the industry in some form for 25 years, and were really only 
suggestions for costing and accounting. Such iiu'Dortance was atta-ched 
to the list that one letter from J. 2.. Swift, Chairman of the Code Au- 
thority to A. D. Ferguson, Pehriiary 28, 1935, contained an indirect 
gesture to sacrifice the price filing provisions if necessary to secure 
the approval for the guides. The refusal of the industry to ahandon 
the manuals led to a stay of the price filing provisions of the Marking 
Devices Code in March 1935. The records availahle do not indicate 
whether the price schedules continued to "be used. 

C. The Folding Paper Box Industry . 

The open price plan of the folding pa-ner hex industry is of loarti- 
cular interest "because of the ingenuity of the plan itself in applying 
a hy'brid cost-price filing system to an industry having hoth standard 
and non-standard items, and, second, hecause of the graphic illustration 
of inconclusive and conflicting administrative action in relation to 
its adoption and use "by the industry. The plan, itself, as it was put 
in operation ty the code authoritj?- agents, Stevenson, Jordan, and Har- 
rison, is included as Exhi"bit IV, Appendix C, hecause of its intrinsic 
interest as a. complex variation of the ordinai-y open price pla.n and as 
a point of reference for the brief chronological references and descrip- 
tion given here. 

The enabling provisions of the open price article in the Folding 
paper Box Code were almost identical with those for the other paper 
codes, in that it was permissive with the code authority tj establish it, 
to desi^ate products on which prices were to be filed, to determine the 
form of filing, and to investigate prices alledgedly below cost. 

An early account of the proposed plan was found in a memorandum 
from the -Research and Planning representative (l.:. D. Kossoris) who had 
been asked to submit his recommendations. The memorandum was dated 
July 1, 1934, and was addressed to 'J. W. Pickard, Deputy Administrator 
of the Paper Division. (*). 

The proposal of the folding paper box industry was summarized as 

"No member is to go on the open price basis as long as he estimates 
his prices'' by using- the standard conversion rates formulated by the 
Code Authority as well as the current market price cf raw materials . 
The standard conversion rates are basod on the operation of a s?,ni - 
thetic and efficient mill . But when any member wants to disregard 
these rates and use lo^er rates which he can actually justify by 
his costs, and when he wants to use either because he can buy them 
chearier or because he manufactures them himself - he must go on the 
open price basis. On tliat basis he may sell down to actual cost, 

(*) NEA files, folding paper box industry. 

toth as to conversion and riw materials. When quoting on the open 
price basis he must file the price he is offering and eirpose him- 
self to the price comvetition of all ccmoetitors interested in the 
particular type of "business. " (Underlining supplied) 

The purpose of the proposal w?s descrihed as two-?old: 

"(l) To permit the ccrahined mills i.e. the mills which hcth malre 
their own paperhoard and convert it into folding hoxes - to sell 
all the way down to cost so as to he nble to service large customers 
at prices satisfactory to them (cr they will set up their own plants) 
a.nd (2) to permit some degree of imif ormity of estimating with the 
door wide open to fall below the standard figures whenever actual 
cost permitted, Wlien using the standard factors, everyone would 
know the basis on which everyone else estimated his prices, without 
hsvirg to analyze hundreds of conversion factors filed by the othe^r ^„ 
industry members. When on the o-nen price basis, everyone who in- 
terested himself in the particular kind of business would know the 
exact price his competitors offered." (*) 

The recommendation of the Hesearch and Planning adviser contained 
no basic objection to the combination of cost and price factors in this 
plan, but objected only to the waiting period. 

"The objection to this proposed combination of standard cost factors 
and open price limited by cost lies in the waiting period which 
must be observed ?/hen filing ? price. According to Article VI of 
the approved Code, five days must elapse before a quoted price 
becomes effective. This period, in effect, carries i.Tith it a pu- 
nitive result in view of the particular nature of the industrj?-. 

^'As already indicated, all production is according to customer spe- 
cification. Identification of the specific product for which an 
open price is filed is impossible without naming the customer. In 
quoting a, price, a producer .would be compelled to say 'I am bidding 
X dollars per thousand for 100, Q&O of Arraour's 2 lb. sausage cartons." 
In effect this will mean 'Boys, this is ray price to Armour. Come 
on in and see if you can do better. 

"The result may be heavy price competition with combined mills or 
. even pure converting mills joining. The latter, in order to get 
into the business, will in turn exert pressure on the paperboard 
mills to lower prices - and the result may well be that it will be 
the paperboard mills which may carry the brunt of this type of 

"Much of this can be obviated if the waiting period is eliminated. 
Then a member will be able to file his price and have it effective 
at once. If he can sell to the customer at that price, well and 
good. If the customer wants to shop for other bids, he may do so, 

(*) Q£. cit , above 



■but if the price is satisfactory to' toth customer and bidder, the 
latter ought not to "be exposed to the sharpshootin,^ of his com- 

Other memoranda from Research and Planning supplemented this pre- 
liminary report, hut did not aoprove the plan. Nevertheless, the plan, 
somewhat revised, wfs launched "by the code authority during August, 1934. 
A letter sent out by the code authority to memhers on August 7, 1934 
announced the postponed effective date of August 27, 1234; 


"In order that merahers of the industry ■ma3'- have further opportunity 
to register their customer and -oroducts in accordance with the pro- 
cedure established and to allow time to complete arrangements for 
the operating organization, the effective date for the Open Price 
Plan as declared in FBA Order Wo. 12, is postponed from August 10, , 
to August 27, 1934. 

"As quickly as possible after forms are received, members should 
begin registration of customers and products with the Ag'ent of the 
Folding Box Authority." 

On Septem-ber 4, 1934, a memorandum from Blac^cwell Smith, Legal Di- 
vision, to the cede assistant of Division III, indicated disapproval 
of the plan as constituting a code araendinent: 

"I concur in the statement of the Review Officer that this plan 
should not be approved. Approval of the Plan would amoimt to amend- 
ment of "the Code and it would be in no sense an Open Price Plan 
procedure under Article VI of the Code, 

"This comment is made witho^it in any- vray discussing the objections 
which might be made to the Plan', even if offered in the form of an 

There were two further memoranda of the same date, September 7, . 
1934. One was from G, K. Kamill, Research and Planning Adviser, to 
LI. D. Kossoris, then Assistant Deputy Administrator, Paper Division. 

"This is in reference to the Rules for Defining Cost Plan of Pro- - 
cedure adopted by the Folding Paper -Box Cede Authority as received 
from E, R. Boylan, Administrative Member, under date of July 28, 
1934. • 

"There is no authority in the Code fi'r establishing methods for 
arriving at prices or rules governing the operations of members 
under their own costs. Conseqiiently, this Division regards the 
matter covered by the 'Plan of Procedure' as ones which properly 
should be handled as modifications of or amendments to the Code. 
The 'Plan of Procedure' is therefore disapproved as not falling 
within the scope of an open price plan of selling as provided for 
in Article VI, Section 2, of the Industry's Code." 



On the same date, September 7, 1934, Mr. Kossoris addressed a 
memorandum to Rotert J. Keetler, Legal Division, confirming an opinion 
as to the power of the code authority to establish the plan under the 
code grant of authority, without further action of approval; (*) 

"On this hasis of these facts ycu advised me that this type of 
open price provision as proposed hy the Industry was within the 
power given in the approved Code to the Code Authority to declare 
an open price method of selling and that no approval on the part 
of the Administration was required." 

The plan was in effect for several months prior to January 1, 1955, 
when the Code Authority for the Folding Paioer Box Industry presented 
a "brief at the Public Hearing on Policy relating to Price Provi- 
sions in Codes of Pair Competition. This included some description 
of the plan, and expressed full satisfaction with its operation 
as follows: 

"3. That there has been developed and put into operation an open 
price plan suited to the conditions of this industry, and particular- 
ly adopted to the made-to-order characteristics of those products 
which are produced and marketed to fit the particular nseds of 
each customer. 

"4. That the application of the open price plan now in operation 
fits the needs of industry, has reduced vindicative and destruc- 
tive price cutting, has stabilized labor conditions, and has 
brought into being conditions of known market values where no 
such knowledge had previously existed, and that without such know- 
ledge neither stability nor fair competition may be enjoyed, 

.Dated just six days before the presentation of the above brief, 
January 4, 1935, a memorandum from TJ. J. Brown, Deputy Administrator, 
to Captain J. P. Battley, Acting Division Administrator, protested a 
proncuncement by members of the Legal Division that the open price plan 
as set up was illegal and unenforceable. (**). Excerpts from that me- 
morandum are self-explanatory: 

"The plan briefly, is this; 

"1. On products for which no cne has filed an open "orice, no cora- 
. petitor needs to file any price. But as soon as any Industry mem- 
ber files a price for the particular product, everyone else selling 
that product cannot sell at a lower Tirice without so 'filing. 

"2. Products on an open price basis may be treated in several 
different ways; (a) A member may choose to indicate his price 
level by using the current market price of raw material with con- 
version factors based on the costs of a theoretically efficient 
plant. The combination of the two woiild permit anyone to compute, 

(*) In 1\TEA files, folding paper box industry. 
(**) In IffiA files folding paper box industry. 

-• uy- 

■within p. fairly/ nr,i-:.'QT7 range, the price oT o. cor.petitor using 
this systen. (a) A '"nemDer may simply inc'.icp-te the product, 
■ identifyin'y it by cxistomqrs, since each of ther-e has his own 
specifications. iLiy raemher selling to this ciiotovier or having 
an inquiry fronhi ■'. is at once notified of the prices on file. 

"In connection -.-ith the presently operative open price method 
of sellinj^ in use in the Folding Box Industry, several questions 
hsve heen raiseo. oecause of the Industry'"' s effort to obtain com- 
pliance, The issue resolves itself into vhether or not the 
Legal Division can run counter to the e:r3resr. language in the 

(There follo:;s a recital of the code provisions empoA'^ering 
the code authority to p\it an open price plan into effect, 
and notes i'...c.t the Industry had proposed a plan hut that 
it had ":et ■.ith objection froia several of the Advisers). 

"The Industry then f.eveloped another plan rhich net with the 
tentative approvr.1 of the Division of Research and Planning which 
recommended approval for a trial perioa of six iionths, frankly 
recognizing the crroerimental nature of the plan. (*) The pro- 
posal WPS disci^ssed v.'ith H. J. Keebler, Coviisel on Policy, who 
advised that the proposal needed no official approval as the 
language of the Code adequately covered it. A r.eno confirming 
this discussion ''as sent to Ilr. Keebler on Septei.iber f, 193'+> 
and a receipted copy left in our files." 

"Recentlv the Code Authority souf'^'t to obtain co':pliance against 
a member who refused to file any prices at all. The regional 
counsel, hr, Geor:;e Lronz, refused to proceed on the grounds that 
in his opinion the language of the Code was not siif ficiently 
broad to'ena.ble the Code Authority to prescribe the open price 
plan in question. In doing so, of course, hr. Dronz puts his 
own interpretation on the mechanism of an open price plan." 

"Mr. Bronz was reruested to submit his objections for instructions 
from the Legal ^'ivision. In considering it, l.Ir. Scott, Managing 
Counsel of the Division, ruled that no Industry had the right to 
put into effect any hind of open price plaji without specific KEIA 
approval, in spite of enabling language of the Code, 

"In view of the past developments in connection vrith the open 
price plans, and the specific v;ording in the Code, the attitude 
of both hr, Dronz and Ilr. Scott appear to be uncalled for. I 
reqaest that this '..latter be taken up with the hational Industrial 
Recovery Board to determine whether or not the legal advisers can 
impose their ov/n views upon an industry in spite of any express 
la,nguage in the ap; roved Code." 

(*) The memorand^ir.1 referred to was not located in the file, 


The records availaole now do not show the results of this memoran- 
diim, nor the effects upon the folding paper box industry and the operar. 
tion of the price filing plan. Comments in the Code History would 
suggest that voluntary cor:pliance permitted its continasjace, "bit wfforte 
at enf*srcement were a'owidoned by the industry, (*) 

(*) Further explorr,tion of many of the points '.-ould be desirable, as 
well as further infoi'uation on the perforr.iance of the unique plan. 




The most immediate effect of the mandatory price filing requirements 
in l^TPiA codes vas to limit the freedom of an individual seller to alter his 
ovm prices or terms at \7ill. The traditional prerogative r^f "prices suh- 
ject to change r/ithout notice, " no loxiger existed under price filing plans 
v.'hich stipulCoted that all sales must be in accordance with filed prices, 
and that all changes in prices must he fiisd, i-ith a central agency hefore 
they could become effective to the trade. ( *) This limitation existed 
whether or not there was a v/aiting period; its importance was, of course, 
magnified by the presence of ?, waiting period. 

Tlie waiting period was the most obvious feature for control over 
price change in IJRA price filing plans; and, for this raason, the most con- 
troversial element involved. In the following discussion attempt is made to 
determine the significance of the vralting period in the light of its role in 
price filing activities. The waiting period may be defined as that period 
between the filing of prices and price terms with the code authority or 
other agenci'- and their effective date. The term applies to the period 
bet'..'een the original filing of prices and their effective date as well as 
to the period that must elapse before price revisions can become effective. 

1. TJaiting Period Requirements in Codes 

Requirements in codes varied from the simple prior notice to the 
code authority or other confidential and di stinterested agency to v/aiting 
periods of from 1 to 20 daj'-s before the filed price could become effective. 

Of the total 444 open price codes, 136 made no -orovision for a waiting 
period. The preponderance of this number, 103, provided that prices were 
effective immediately upon receipt by the agency, 6 required acloiowledgement 
of the filing by the agency before becoming effective, and 27 permitted 
prices to be effective even before receipt by the agency. One hundred and 
forty codes provided for a v;aiting period before any revision of prices; 
113 of these were stayed in the Order of Approval. One hundred and thirty- 
two codes required waiting periods before downward revisions only, of which 
provisions 70 were stayed. In 23 codes not specifying a waiting period, 
provision :.'as made for the establishment of a waiting period at the dis- 
cretion of the code authority. Administrative approval for this action 
was required in most instances. 

Of the 272 codes which required waiting periods either before any re- 
vision or before downward revisions, 212 allowed for a shortening of the 
period for prices filed to meet competition. One hiandred and tventy two 
permitted prices to become effective on the same date as a revised compe- 
titive -orice, if such prices were not lower than the prices being met; 
77 codes permitted revised prices to become effective on the same date 
as a previously filed change without specifying that it must not be below 
such competitive "orice; 13 required that prices revised to meet competition 

(*) See the Table in Ajrpendix C, Exhibit II, for a list of the few 
industries permitting change vjithout notice. 



"be filed 'before a certain ijart (1 or more days) of the waiting period 
required of the first fileS revision had elapsed. Thirty codes authorized 
the code authority to lengthen the waiting period with administrative 
approval generally required in most instances. (*) 

A majority of waiting periods incorporated in codes, it may he seen 
from the ahove, were stayed h;/ the Administration. After the passage of 
Office Memorandum No. 228 in June, 1934, few open price provisions were 
approved which contained waiting periods. Tlie Administration except during 
the first six months was on policy grounds consistently oppo.sed to their .. 
inclusion in codes. (**) 

Industry attitudes, on the other hand, were preponderantly favorahle 
towards waiting period provisions at all times. The arguments for waiting 
periods remained constant from the pre-code period until the last of code 
days. Proponents of the waiting period maintained that their original 
contentions were home out hy operating experience - that the economic 
effects of operating under waiting period provisions justified their origi- 
nal attitudes. The force iiTith which waiting periods were urged by industry 
memhers is illustrated hy the following statements: 

In the hrief filed hy the Code Authority of the Diesel Engine Manu- 
facturing Subdivision of the Machinery and Allied Products Industry, it was 
stated, "We feel also that a waiting period is a most essential part of an 
open price list exchange for best results. ii(***) iftich stronger was the 
expression in the brief filed jointly by the supervisory agencies of the 
compressed air, heat exchange, pump manufacturing and laundry and dry clean- 
ing machinery industries: "In so far as the waiting period is concerned 
the four industries in question state unqualifiedly that without the 
waiting period the filing and distribution of price lists would be a useless 
expense in so far as chiseling and destructive price cutting is concerned." 

Condemnation vias directed at the Administration for denying or staying 
waiting period provisions by several industries: 

"By denying us a waiting period of at least 10 days, the NBA has made 
possible the bulk of our chiseling to date." (*****) 

("') Division of Research and Planning, HEA, Analysis of Trade Practices, 
Provisions Relating to Open Price and Bid Filing Systems - Appendix 
C, Exhibit II. 

(**) Exceptions to Policy were made in a few instances, notably in the 
lime and cement industries. See page 476 below. 

(***) Transcript of public Hearing On Price Provisions in Codes of Fair 
Competition, Volume S-IX, page 2806, MA files. 

(****) Transcript of public Hearing On Price Provisions in Codes of Pair 
Competition, Volume S-VI, page 2060, NBA files. 

(*****) Statement of H. H. Harris, member of the alloy castings industry 
code authority transcript of public hearing on Price provisions 
in Codes of Fair Competition, VoliJme H-III, page 1363, NRA, 



"...if honest manufacturers are to have any protections from 'chiselers' 
it (open price provision) not onlj?" is vjorthless but has developed into 
a real menace 'because of the suspension of the T^aiting period;" 

"...Linless the suspension is lifted from the vaiting -oeriod, the filing 
of prices v/ill "become entirely valueless if not destructive and rrill 
have to he given up." ( *) 

"The one imfortuante part about the open price filing codes is the 
fact th3,t they took the waiting periods av/a;;,^ from lis. The e:qoerience 
that I have had in our industry definitely indicates the. need of a 
T/aiting period to prevent the mentally dishonest member of the industry 
from tailing advantage of the mentally honest ones." (**) 

Tlie certral issues around v/hich controvers;'" over the \7aiti:ig period de- 
veloped were tv/o: (l) its use as a period of pursuasion or coercion agadnst 
members reluctant to adhere to price standards or levels conceived to be 
proper by the agencj'' or by certain members or groups of members vithin-, the 
industrj?-; and (2) its use as o. period 'v.'ithin v/hich to publicize fully the 
price offers of competitors before permitting them to become effective. (***) 

Tlie material presented belov.' is largely of a qlJAlative character, re- 
presenting in considerable part a., statement of the arguments of both op- 
ponents and proponents of vaiting periods as derived from the testimony at 
the Price Hearings held hy the national Industrial P.ecover'/ Administration 
from January 9 through the 12th, 1935. At this time .both opponents and 
proponents could base their arguments on experience. ; The evidence is sup- 
plemented by correspondence and records of" the administrative agencies which 
indica^ted the use to v;hich the '"aiting period was put .and from complaints of 
industr;^.' members indicating the extent to which they had actually been in- 
fluenced in their price behavior by the existence of the waiting period - 
either through voluntary choice or because .of pursuasion or coercion from 
others. . 

( *) Statement of D. S. Hunter "representing 8 com^oarhtively small indus- 
trial groups v/hich have su-oT)lementa.ry codes under the Fabricated 
ivietal Products i.'ianuf rcturing Industry'-". Transcri-ot of Public Hearing 
on Price Provisions in Codes of Pcdr Com-0'5tition, Vol. S-V pages 
1544 and 1546, 'h^A files. 

(**) Statement of Franlc A. Bond for the Chain kan-ai"rctu.ring Industry Code. 
Authority. Transcript of Public Hearing on Price Provisions in Codes 
of Pair Competition, Vol-ume H-III, iDage 414, FRA: files. ' 

(***) The latter issue concerns more the' publicity than the control func- 
tion of price filing. Its discussi-on, however, has been confined 
to the present cuaptei- because the e::tended controversies that de- 
veloped make it desirable to bring together in one place all of the 
material bearing on the waiting period. 


. . -215- 

2. Use c.s r Device For Coercion 

The fact that coercion er.isted in connecti'-in ' ith sone open price 
plans vras rather clearly established in the repoi't on open price filing 
■.•aade 137 the Consiuiers ' Advisory lioard in Us", 1C34. This present study 
has not added any significant ar-iount of evidence on the prevalence or 
location of specific cases of siich coercion £.nd no attempt has "been made 
to stuinarii^e the material elsewhere available. (*) Such evidence ras 
obtained chiisflj from those i.iembers of open price industries \7ho ex- 
perienced such pressure. 

(*) See: Rrperience './ith the Open price Provisions of Ap^jroved Codes , 
Consuiiers' Advisors'- Board, Report, '.[ay 24, 1934, po^ges 4-10 Chapter 
II deals vrith The Prevalence of Coercion . A conplete record of 
. cases of pressure against low price enterprises r/hich were reported 
bjr inaustry laembers in response to a questionnaAre sent out by the 
CAB is attached to that Report as Appendix B. On 'pa^e 4 of the Re- 
port the following siijm.iarj'- of industries reporting siich cases is 

Code ho. ■ Industry ITo. of Cases 

4 *Electric 4 

.25 G-asoline puxip Lag. 1 

35 Compressed Air ' 1 ■ 

57 Puinp iuanufact'LLTing 2 

58 Cap and Closui'e • 1 

39 *[,Iarl:ing Devices ' 1 ■ 

62 Steel Tubular cn.d Pirebox Boiler ■ 1 

63 plumbago Crucible '1 
56 liotor Bus 1 
77 Crown Ilanufacturing ' 1 
81 *Copper and Brass hill Prod 1 ■ 
88 ^Business Piu-niture, Storage Eo^^uip. 3 
90 *Pnneral Supply 3 

98 *Pire Extinguishing Appliaiice l.ifg. 3 

99 ^Asphalt Shingle and. Roofing 1 

107 *Ladder lienufacturing 3 

108 "Ilotor Fire Apparatus Lifg. ' 2 

109 ^Crushed Stone, Sand, Gravel & Slag 1 
120 * Paper and Pulp (Cardboard Lifers, Div. ) 1 
123 ^Structural Clay Products 1 
136 *Vitrif ied Clay Sewer pipe i.ifg. 1 
157 Warn 'Air Furnace I'fg. 1 
149 IJachined TTaste Llfg. 2 
155 *Rubjer Llemufacturing 4 
175 *iiaper Distributing Trade " 1 • 

186 ]ind Grain Strip Wood Bloc!c ■ , .1 

187 Cotton Cloth Glove hfg. 1 
205 *I.Ietal Window 1 
236 Coo]ting and Heating Appliance lifg. 1 

* Industries included in Open Price Piling Study sainple of 57 codes. 


One specific illustration of pressure is included here because the 
incident itself revealed the luiusual incentive to coercive pressure arising 
from the knov/ledge that a proposedlou price t7oul.d be vridely publicized. (*) 
A large distributor v.'as anxious to contract v'ith a member of the industry 
for its complete supply of the product over a period of a year at a price 
which was belov/ the prevailing level of filed prices. The manufacturer con- 
sidered the price to be above his cost an6., therefore, filed this price with 
the code authority. 

The receipt of such a price caused the code authority secretary to 
make personal contact with the manufacturer. In the meeting which followed 
betv/een representatives of the manufacturer, the purcha.ser and the code 
authority secretary, the latter objected strongly to the filing of the new 
low price on the grounds that, if published, this price would be immediately 
met by all members of the industry. The fact that there was a ten-day 
waiting period served to intensify the probabilitj'- that competitors would 
meet the cut and there would be no limit to the price cutting which would 

One observation should be made in respect to the illustrative material 
included in the 1934 Report of the Consumers* Advisory Board, as well as 
other material examined and the case described above. The material suggests 
that general code authority rulings compelling adherence to arbitrary group 
standards of price or pricing methods were far more common sources of coercior 
than were all night sessions of persuasion or attempts to black-jack a lov; 
filer with threats of economic sanction. Such rulings e.voided the direct 
frontal attack on the lov; filer since the procedure becaine technically one 
of enforcement, although in reaJity it was illegal coercion to force compli- 
ance with unauthorized code regulations. Such rulings were associated with ti- 
the pseudo-administrative pov;er of the code authority or its agent, and hence 
did not depend for success or threats. Such regulations natui-ally hampered 
most the members who engaged in aggressive price competition, who \7ere less 
willing to abide by luiiform group rules and to forego any competitive adva.n- 
tages. In the words of many industry members, they v/ere the "chi sellers, " 
who might well have been subjected to crude coercive meas^ires if there had 
not been available the safer and more effective methods of compelling compli- 
ance with the desired standards. (**) 

The effectiveness of such extra-legal requirements as coercive devices 
was, of course, reduced as members became more familiar with their rights 
under the code and more readj'- to appeal to the Administration to assure them 

(*) A Resume of the Conversation between members of the companies and 

the code authority secretary v/as submitted to the Consumers Advisory 
Board, 12/28/53. with the request that the names be kept confidential. 

( **) Cf. Illustrative material in sections on customer classification, 
cost floors, distributor controls, product classification in this 



those rights, ^'evertheless it is fair to asstuie that ^any menbers subject- 
ed to such ar'bitrarj'- requirements vera not clear as to the scope of code 
authority porers conveyed in the code, and that otliers were intimidated 
by potential economic pressure from e::ercising their privilege to loner 
prices belon the group stajida.rd. ' , 

The for.i of coercive activitj-' discussed above has no necessary or 
direct relationship either to the v'aitinf^ period or to the identification 
of sellers in disseminating price information, .although both of these el- 
ements may facilitate the process. The re:nedy v/ould seem to lie in a care- 
ful drafting of price filing provisions to delimit code authority porers 
strictly in terms of procedural detail and Content and to maintain continu- 
ouse public supervision of price filing operations. 

Attempts v/ere made at the January, 19-35, Price Hearings by indxistr;'- 
representatives to refute the cliarge that vraiting periods A7ere used to pro- 
vide a period during which competitors may coerce or pers\aade a member of 
an industrjr into withdravring a ne'Tly filedlotrer price before it becomes ef- 
fective. The brief filed by the Cement Code Authority maintained tha.t this 
contention vras never demonstrated in practice, continuing that "On the con- 
trary, it nould seem that anjr fear of retaliation ^hich influences a mem- 
ber of industry in determining the price of his goods exists '-ithout refer- 
ence to any waiting pe:-iod or even to any open price plan." (*) 

Herman H. Lind, Executive Officer of the liaohine Tool and Forging 
Industry said that "a careful analysis of price cna^nges filed in our office 
indicates only a single iiistance of a price once changed being withdrawn 
either during the waiting period or for a short time thereafter, -nd the 
single change nas the result of an err^or. " Honevsr, he suggested that "If 
there are indications that the waiting period ha,s been used to bring pres- 
sure to bear by competitors on sellers ^ho liave reduced their prices to 
have them change them that abuse could be avoided by a, provision that price 
changes once amended cannot be vithdrawn before the e;cpiration of the 
waiting period except where obvious errors have been made.".(**) 

The code authority secretarj^ of the bral^e-lining division of the 
asbestos industry made the follo'^'ing comments on the use of the waiting 
period as a. deterrent to price change. (***) 

(*) Transcript of public Hearing on price Provisions in Codes of Fair 
Competition, Volume X-III, page 850, IIPA. files 

(**) Transcript of Public Hearing on Price Provisions in Codes of 
Fair Competition, Volmie H-I, pages 36 and- 67, I'HA files 

(***) Hiiutes of Division ieeting, Jnjiua.rj'- 9, 1935, 131A. files 



"The olDJection raised ty i^tlri. theorists is that if 
anyone files a loiter price, sone one else cones along, 
threatens hi " and forces him to revise his price hefore 
the five days are up. I don't "believe such threats Trill 
ever he effective in this industry. As it stands nor 
anyone can go in and arrange, verhally the details of an 
order, then file the price and no one has "been, given an 
opportunity to meet the price. Ever;/one I have consult- 
ed feels that one of the things to he done was to maize 
everyone realize that if anj^one should cut the price, he 
would proraptlj'- be net and he would not get the order." 

The manager of the lahoratorj?- supplies section of the scientific ap- 
paratus industrj'' also stated that in his experience there has "been no pres- 
sure "brought to hear during the waiting period to coerce any mem'ber to re- 
vise prices upward or downward, hut the procedure did ten? to prevent vio- 
lent and unjustified daily fluctuation to secure a particular order, (*) 

The executive chairman of the Ice Code Authority denied thte contention 
of opponents of waiting periods that waiting periods prouote collusive price- 
fixing. He said: 

"This provision does not serve to promote collusive 
price-fixing in any degree. On the contrary, it very de- 
finitel:/ serves to prevent the develop-ient of those 'dem- 
oralizing and destructive market conditions which tend to 
force competitors into collusive agreements in order to 
save their economic lives. Because of the standard nature 
of the oroducts and other characteristics of the industry 
which we liave alrcadj- discussed ice prices must necessarily 
be uniform in anj?- market wi^ere a c'estructive "orice "ar is 
not in effect — the lo^-est "orice-minded member of the indus- 
try in a market, therefore, establishes the wrice for the 
entire market, ,, "(**) 

The vice chairman of the Retail Lumber and Building Material Code 
Authority made a statement waich suggested, that the waiting period might 
be used to fix minimum prices '"hen he said, "^e favor the fixing of minimum 
prices, but if such a method of cost protection is not feasible or is deem- 
ed contrary to the public interest, then we favor and strongl;- recommend 
open price filing with a reasonable waiting ioe::iod, " Later ho stated that 
the only reasons for asking for a waiting period were to allo^' time neces- 
sarj'' to notify- and so that price "will becone effective, and in an enforce- 
able way, and without expense." (***) 

(*) Transcript of Public Hearing on Price Provisions in Codes of 7air 
Competition, Volume S-VI, -oage 2058, i'l^ files, 

(**) Transcript of Public Hearing on Price Provisions in Codes of ITair 
Competition, Volume H-III, page 1132, i^A files. 

(***) Transcript of Public. Hearing on Price Provisions in Codes of ?air 
Copipetition, Volume H-IV, pages 1769 and 1772, iIRA files 



Because of tlie comprehensive and constructive nature of the state- 
ment of the President of the Machinery and Allied Products Institute, 
Mr. O'Leary, that portion of his statement dealing '"ith the waiting period 
is quoted rather fully as follov,'s: 

"TTe Icnow of no abuses that have occurred in our industry 
(in connection with open price filing), and we believe' that 
we should follow and definitely carry out open price filing 
in every one of the industries that desire it, with waiting 

"The waiting period provisions have heen stayed in the 
great majority of the codes applica.hle to subdivisions of 
this Institute. Accordingly, ^e have had little opportunity 
to observe the effect of such waiting periods in practice. 

"As illustrative of a broad principle of code administra- 
tion, however, the variety of need of open -oricing with wait- 
ing periods among the 58 subdivisions^ of our Institute is 
worthy of attention. Some of these subdivisions feel strongly 
that their products are so far from standa.rdization, so special 
in their adaptation to the needs of particular installations 
that neither o-oen price filing nor waiting periods can be heln- 
ful in their pricing problems. Other subdivisions hope that 
as tine goes on they may be able to develop sufficient standard- 
ization and classification of products that such provisions will 
prove beneficial. Others again feel that both iTrovisions are 
absolutely imperative if their in6.ustries are to be saved from 
an endless struggle that not only eats up the slender working 
capital that remains to them after these years of adversity, 
but stifles new design and all other ijrogress in the develop- 
ment of their products and their market, 

"This variety of experience, within the confines of a 
single and reasonably well coordinated group of industries, 
demonstrates the value, perhaps even the necessity, of giving 
careful consideration to the particular situation and needs of 
e_ach narrow tjrpe of industrj?" in seeking suitable regulations 
of its pricing policies, 

"The Administration has shown its scepticism as to the 
effect of waiting period provisions by originally staying 
their operation as to all codes adopted subsequent to the date 
of the stay, and by keeping that stay alive to the present time, 

"TJe do not wholly share the doubts of the Administration as 
to the advisability of these provisions, out submit that this 
again is a matter requiring treatment in view of the varying 
circumstances of the industries. It is clear that if it should 
be made the rule in any industry that the manufacturer cannot 
change a filed price until after his new price has been filed 
for some specified niomber of days, that waiting period does 
offer an opportunity for his competitors to present arguments 
to him as to the fairness and. propriety of his new price-. 



Such provisions maj?- also "be open to other so-called atuses 
of which we are not avrare, nevertheless, such a waiting 
period has very distinct advanta,;ies and it is our feeling 
that such provisions should he given a "broader trial, eli- 
minating any a'buses vdiich may develop, rrhile still conserv- 
ing their advantages. 

"V/e wish to suggest the following considerations in 
favor of further and "broader tests of the waiting period 

"(a) A mere requirement for the open filing of prices 
without a waiting period leaves open the possi'bility that 
any manufacturer may make a special price to one consumer 
merely "by filing that price for a "brief period and promptly 
withdrawing it, A waiting period does have the advantage 
of eliminating that possi"bility. Prices must "be effective 
for some definite period of tirae, at least sufficiently 
long to permit other com:oetitors to come in on as favora"ble 
a basis as every other. 

"("b) iiost of the manufacturers in our su"bdivisions 
distri"bute their produ.cts over wide a,reas and nan;'' of then 
have' national distri"bution. In order that comioetitors a^ 
well as consumers may be advised of filed prices, it is 
necessary that information as to such prices shall be dis- 
tributed by the Code Authority over large areas. It is not 
practicable to advise all parties by telegraph or telephone 
of constant changes in price. The waiting period. does of- 
fer an opportunity for distribution of this information so 
that eraplo3''ers and consumers on the TJest Coast will be ad- 
vised of the new prices equally as advantageously as em- 
ployers and consumers on the East Coast or in the riddle 

"(c) A waiting period does tend to equalize the op- 
portunities for both larger and smaller employers. Busi- 
ness is always in flu;c; changes are constant in lorices of 
materials and in methods of manufacturing and distribution. 
The small enterprise is often at a serious disadvantage in 
reflecting these changes in the "orice of its i^roduct. The 
larger enterprise usually has a correspondingly larger staff 
of estimators and is often more alert to raal:e its prices fit 
the current conditions. The waiting period does give the 
smaller manufacturer an opportunity to notice price chan/^'es 
by its larger competitors and ? corresponding opportunity 
to change its own prices to meet the new nrices filed by its 

"(d) From the standpoint of consumers there is an ad- 
ditional n,dvantage in the waiting period. Prices may go . 
up as '-'ell as down. The na.chinery bii^^er requires time fir 
the study of competitive design of products,, relative effi- 
ciency and price. The fact that i:irices cannot be changed 



for a United Period should o;oerate to give the "buyer 
an opportunity to compare the relative merits of pro- 
ducts that are offered to him rdth the assurance that 
there rrill be no acTverse change in price during the 
period in irhich he is engaged in such studies." (*) 

After the completion of his statevient, Ilr, O'Learj'' was Questioned "by 
Mr. Smith and i;r. Henderson on the sulDject of his attitude toward the wait- 
ing period provision. His attitude during this questioning is stunnarized 
in his statevaent, "Open Price policy, definitely, is not of great value to 
many industries without a waiting period and of no value to our industry," 

The a"bove denials of the use of waiting periods as rseriods of coercion 
or persua.sion serve to show the emphasis which prononenets placed upon an- 
other function of the waiting period, viz., to provide sufficient time to 
publicize fully the price offers of competitors "before they become effec- 
tive. Evidence bearing on the significance and uses of the waiting period 
in this coiinection is presented in the following section. 

3. Use As A Period To Publicize Pully The Price Offers 
Of Competitors. 

a. To Afford Ample Time For Dissemination. 

The number and geographical distribution of industry,'' members, in anjr 
other tlia.n a small, highly localized industr;;^, it was claimed, makes a 
waiting period imperative in order that all members may have an equal op- 
portunity to become acqiiainted with the competitive facts as ^^ell as, that 
all customers and other interested -oprties may have an equal oprjortunity 
to be made aware of price changes. The number and geographical distribu- 
tion of industry members should be largely, the determining factor ^fith re- 
gard to the length of the waiting period, "If the open price plan itself 
is economically sound, all interested -oarties must have as equal an op- 
portunity as ■Dossible to avail themselves of the current conditions of 
competition. The more this is assured, the more competition there ^'ill be, 
for competitors cannot compete, if they, do not know. when, where, how or with 
what to compete." (***) 

The candy manufacturing industry is an exa.mple of on industry/ which, 
it was asserted, would liav.e benefited from a waiting period "because of its 
geographical structure. The Code History discusses the problem as follows: 

(*) Transcript of Public Hearing on Price Provisions in Codes of Fair 
Competition, "Vorome H-I, pages 103-07, MA files. 

(**) Ibid, oage 119. 

(***) Brief submitted b;'- the Code Authority of the Cement Industr;'- 

Transcript of Public Hearing on Price Provisions in Codes of Fair 
Competition, "'/olume S-III, page 831, IJTA files. 

(****) pp. 78-80 Hote: '^'aiting period stayed in the Order of Approval, 



"In an industry of this size scattered as it is over 
almost all of tlae 48 states nith. son.e memViers distri- 
buting through the country and others only in their 
o:^in locality, an open price plant idthout a waiting 
period merely puts a preraiiLm upon the last in turn 
. to meet the precise terms of the filing of a change 
in iDrice at a later tine ""'hen the competitors learn 
■ . of the change in price. During this period the 
memher is in a position to "clean up" "because of 
his lower price which other nemhers of the ind.ustry 
might readily have met had. they imovm of the change 
prior to the effective term of such change. Hence 
in this ind.ustry the absence of a waiting period has 
served to keep the price structure "cJhurning" rather 
than to sta.hilize it. Had the Cod.e continued, it is 
li]:ely that an application for the stay or the elimi- 
nation of the open ^orice plan v/ould have been raad.e by 
the Code Authority." 

IT, Sims i'cG-rath, attorney, representing the Asbestos pjid Asphalt and 
Shingle Eoofing Industries Covle Authorities, defended the waiting loeriod 
in his reply to i r. Thorp's o'aertiorx as to how in;-)ortant he felt that 5 
da;'' waiting period is to the functioning of the o'oen ijrice system. He 

"TTell, the members of tl^e industry feel the t it is 
important, but I do not feel that it is as important 
as in some industries. Nevertheless, take the Asphalt 
and. Shingle Hoofing Industry. The manufacturers who 
compete with each other are scattered all over the 
country. It does take a few- days. It need' not be 
5 days — perhaps 3 days would accomplish it; but in all 
of them it talces some period of time to notify them, 
so that they can lower their price to meet the lowered 
price of the competitor and Drevent a raid, llo" that 
is what I suppose all business men like to lorevent — , 
the jackal practice of somebody \?ho jumps in and gets 
some business at a low price from a competitor and 
immediate!;'- puts his price up again. They don't like 
that, and it seems to me that also lead.s to discrimi- 
nation," (*) 

The above statements illustrate the need felt in some ind.ustries 
for a period to disseminate price lists before their effective date. The 
alternative suggested, and. indeed provided i^j Office I.iemorandum No. 228, 
that price lists be v/ired or telephoned imraediatel;'' upon receipt b;'' the 

(*) Traaiscript of Public Hearing on Price Provisions in Codes of Fair 
Competition, Volume H-III, pages 1449-50, ITU. files. 



price filing agency, T7as said to be impractica'ble and costly, particularly 
Tvhere there \7ere a large nuiiiter of members scattered ridely throughout the 
country and where price charges occurred T7itii great frequency. 

b. To Afford Opportujiity to Meet Price Charges 
Instituted by Competitors and Thus to Promote 
Stability in Prices. 

Several statements of industi^.^ members quoted above, (*) in rrhich it 
was denied that T7aiting periods were used as period of coercion, throw 
light on ^hat is probably the more significant function of this aspect of 
price filing plans. One aspect was stated clearly by the Code Authority 
secretary of the Brake Lining Division of the Asbestos Industry when he 
said that: 

"As it stands now anyone can go in and arrange, verbally, 
the details of an order, than file the price and no one 
has been given am opportunity to meet the price. Every- 
one I have consulted feels that one of the things to be 
done was to make everyone realize that if anyone should 
cut the price, he would promptly be met and he would not 
get the Order " (**) 

To be distinguished is the follov/ing statement of Ilr. O'Leary, Pre- 
sident of the Machinery and Allied Products Institute, in that it does 
not say definitely that the waiting period will result in price mainten- 
ance but emphasizes rather its fimction to give competitors an equal op- 
portunity for securing particular orders: 

"A mere requirement for the open filing of prices without 
a waiting period leaves open the possibility that any manu- 
facturer may make a special price to one consumer merely by 
filing that price for a brief period and promptly withdraw- 
ing it. A waiting period does the advantage of eli- 
minating that possibility. Prices must be effective for 
some definite period of time, at least sufficiently long 
to permit other competitors to come in on as favorable a 
basis as others". (***) 

These two statements have the one thing in common that they look to 
the waiting period as a device to promote stability in prices , one by 
eliminating the incentive for price reductions, the other 'by reducing the 
incentive for special lorice concessions to secure particular orders fol- 
lowed by prompt withdrawing of the price. That waiting periods would 
promote price stability was franlcly and frequently urged by industry mem- 
bers. The exact manner in which this wou].d occur was less often made 

(*) See pp., 217-221 above. 

(**) Above. 

(***) Above, 



explicit. The follo\7ing quotations are typical. 

Mr, Bladr/in, Executive Officer of the Code Authority for the Radio 
Broadcasting Industry, in reply to questioning "by lir. Smith as to the re- 
lative importance of the v/aiting period and the simple announcement of 
current offerings of price, said, 

"Well, I thinl:, Hr, Smith, generally the waiting period 
tends to suhstitute prevention for cure. And I arii speak- 
ing now of our o\7n industry. If a radio broadcasting 
station, under this code, is going to "be permitted to 
change its rates at will without filing over a 15 day per- 
iod, then there can "be no sta"bility in rates whatever, be- 
cause with that, the seller-by that I mean the salesman 
who is v,'orl:ing for the Commission or for the station — 
every time that he meets vdth a tough customer, he knows 
that under the code he is pemitted to establish a new 
rate. He can file it today or he can file it tomorrow, 
Nov/, then that happens, every broadcasting station in that 
trade area must do exactl;'' the self-sane thing, and we 
might go back to the days when one salesman will be fol- 
lowing the other all over town, trying to find out just 
exactly what price ho is selling at." (*) 

The Code Authority for the Lime Industry maintained that since chisel- 
ing was effectively eliminated through these provisions, "reasonable price 
levels, therefore, are maintained, and price wars, both offensive and de- 
fensive, no longer prevail. The effectiveness of these open price pro- 
visions lies in the waiting period, Were that to be eliminated, the open 
price policy would become worthless overnight," (**) 

Although not making it entirely clear why the waiting period is es- 
sential to the fiilfillment of the obligation of natural resources indus- 
tries, the Lime Industry Code Authority further claimed, 

"There is a deep moral obligation upon all natural resource 
industries to maJce available as raw 'materials, the natural 
products which are our heritage, and to furnish these pro- 
ducts as efficiently, as economically, from the standpoint 
of conservation of natural resource, and at as low a cost 
as possible and to produce as high grade products as human 
ingenuity can devise, furthermore, such raw materials should 
be distributed to consuming industries under conditions where- 
in a degree of stability will be imparted to such consiuning 
industries. To ensure the fulfillment of this obligation, 

(*) Transcript of Public Hearing on Price Provisions in Codes of 
Fair Competition, Volume H-IV, pages 1552-53, NEA files. 

(**) Brief, Transcript of Public Hearing on Price Provisions in 
Codes of Fair Competition, Volume S-VIII, "oages 2443-45 
imk files. 


and to bring about a permanent degree of stablization, 
the open price provisions of the code, together viith. a 
suitable waiting period and the basing point provisions 
are necessar^r ..■......."(*) 

In certain service industries, when the service offered is an in- 
tegral part of the cost of the customer's product, it was argued that 
it is necessary for the ctistomer to know the amo^unt of this expense item 
in order to compute costs intelligently and set prices accordingly. 
Thus, instead of a gradual downward adjustment in prices that may be set 
in motion 'by the occasional granting of more favorable transactions here 
and there, there is a greatly enhanced value put on the first transaction 
that is legally completed at a lower price, and correspondingly great in- 
centive to everjr individual in the group to refrain from that first "bar- 
gain" regardless of whether or not there is a waiting period. This the 
customer cannot do if prices fluctuate from day to day. The merchandise 
warehousing trade offers an example of this type of industry. The secre- 
tary of the code authority said, 

"It is economically unsound for rates and charges in public 
warehouses to fluctuate from day to day. It is necessary for 
manufacturers, importers and other warehouse-users to know 
in adva.nce of their sales what the cost of deliverj,'' is to be. 
There is need for them to know what the warehousing factor is 
in their distribution expense, just as they Icnow what the rail- 
road rates are for the transportation of their products. They 
want to know also that their competitors are paying no less than 
they are for public warehousing service in their various competi- 
tive markets. It is, therefore, in the interest of the public 
served that the rating procedure in the I^erchandise Warehousing 
Trade have stability, and that changes in rates and charges be 
made by orderly process, just as with other agencies utilized 
in the movement of goods from factory to consumer. We know 
of no other way by which this stabilization may be maintained 
except through the publication and filing of tariffs; and a 
30 day waiting period, usual vith other agencies in distribution 
would be more efficacious than a 10 day period that the trade's 
code now provides for." (**) 

The Code Authority for the Corrugated Pipe Industry was more specific 
about its experiences since the stay of its waiting period: 

"The experience of this Code Authority during the past six 
months, attempting to operate \inder an open price policy 
without a waiting period, has created tv/o significant de- 
velop-'nents: First - a general lowering of^ prices all along 
the line until products are now being sold at a level below 

(*) Brief, Transcript of Public Hearing on Price Provisions in Codes 
of Fair Competition, Volurae S-VIII, page 2453, KRA files. 

(**) Transcript of Public Hearing on Price Provisions in Codes of Fair 
Competition, Volume H-III, pages 1424-25, IffiA files 



the cost of doing btisiness, this, in spite of the fact 
that demand and volume have shovm an increase; Second - 
the trend, of "business is niovinjg toward the larger manu- 
facturers and being lost hy the smaller companies. Al- 
though the first chisler is usually the small prod.acer, 
he creates a situation wherein the larger companies must 
continually louer their price level in order to compete. 
Since a large company can exist longer and more success- 
fully under a price T7ar, the small producers are grad- 
ually-forced out of "business. This latter trend is also 
definite, arid the smaller manufacturers in the industry, 
have indicated in no uncertain terms the need for a ^vait- 
ing period under the open orice policy." (*) . - . 

The Code Authoritjr for the Scientific Apparatus Industry claimed, 

"Our records sho^7, that such price changes, as have been re- 
gistered T/ith the filing agency are not upward, "but dovjn- 
ward revision. I'any of our products are sold exclusively 
to Governmental Purchasing Agencies, where the lowect price 
is the deter?nining fo.ctor in the award. If downward price 
revisions were to "become instantly effective — without a 
waiting period— -it v/ould simply constitute an inducement 
for mem"b'ers "bidding on Governiaental contra.cts or 
to inraediatelj" file and "bid "belov/ the: lowest prices on file, 
for the purpose of securing a -ooirticular a-ard, .aad at once 
refiling increased prices for us-e in the general market. 
Our industry has alreadj' sujffered raiich from this kind of 
practice on the part of those not previously known as 
members of the industry. The result, in most co,ses, has 
been to tal'-e work aviay from those in o\ir- industry who are 
being paid skilled workers wages and give i t to those put- 
side the industry \7here a much lower wage scale is in . 
effect...." (*■*) 

It VB.S claimed also that members may be prevented from making a 
rash change on any sudden impulse of anger or suspicion by the presence 
of a waiting period. It wa,G stated that in an industry such as the ice 
industry, where the basic elements of cost vary little, there i s no 
economic justification for any rapid fluctuation in price, (***) 

(*) Brief, Transcript of Public Hearings on Price Provisions in 
Codes of Fair Competition, Volume S-II, page 692, I^^^A. files. 

(**) Brief, Tronscriipt of Public Hc^-rings on Price Provisions in Codes 
of Pair Competition, Volume R-VI , page 1751, IH'iA files 

(***) Statemeiit of ; ount Taylor, Lxecutive Chairman, Ice Code Authority 
Transcript of Public Hearing on Price Provisions in Codes of '^rir 
Competition, Volume Ii-III, page llol 



In other cases, especially where the product was complex and required 
much engineering, it was contented that the waiting "oeriod was essential 
to prevent "blind and haphazard meeting of prices. The situatidn of the 
diesel engine industry is a case at point: 

"¥e have stressed in the foregoing the complexity of our 
situation and have mentioned the thousands of parts in- 
volved in a large diesel engine. Whether these are tought ,. 
or manufactured, the lahor of estimating the cost of an 
engine is great. Some time should "be allowed for^ this 
after knowledge of a competitive price change, in order that 
each manufacturer can appraise his situa,tion in the light of 
facts rather than follow competitive prices up or down in 
"blind fashion." (*) 

The machine tool and forging industry is another which said that a 
vast amount of engineering, which is a matter of cooperation "between the 
technical staffs of the "buyer and the seller for the purpose of deter- 
mining proper tooling and arrangement, necessitates tliat time "be allowed i. 
for adjustment of prices to costs. 

It should not "be concluded from the statements presented a"bove that 
price filing with a waiting period will always work towards a greater 
sta'bility of prices. It has "been seen that theoretically the effect of the 
waiting period in reducing the initiative for price change depends upon 
the rapidity with which sellers receive notice and adjust to price changes 
as compared, on the other hand, with the rapidity with which "buyers re- 
ceive notice and o"bjcct to price changes, (**) The practical importance 
of this consideration, however, is diminished "by the fact that evidence 
indicates that few "buyers under codes received price information. (***) 
Two other factors are pertinent in consideration of the function of the 
waiting period in promoting price sta"bility. One is the extent to which 
a competitor may have the fairsightedness to know that price reductions, 
for example, may "be met "by com-oetitors and tliat the consequence of such 
meeting of prices may be unprof ita"ble to him. (****) The other is the 
extent of the information which he r-^ceives a"bout the pricing policies of 
his competitors. O'bviously if he is suspicious that his competitors are 
not adhering to their filed prices and terms or are granting secret prices 
which are not in anj?- manner filed he too will resort to secret pricing, ■ 

(*) Brief su'bmitted ly the diesel engine industry 

Transcript of Pu'blic Hearing on Price Divisions in Codes of Fair 
Competition, Volume S-IX, page 2806, IfflA files.- 

(**) Ahove, pp. 60-83. 

(***) Above, pp. 158-162." 

(****) See above, pp. 50-52. 



There is evidence to indicate that secret pricing vas "orevelent under 
certain NRA price filing plans, (*) In such a situation the laiting period 
can have little if any significance as a deterrent to -orice changes. 

On the other hand, it should not he concluded that rrithout a -waiting 
period ririce filing can have little or no deterring effect uiDon iDrice 
charges. Consideration of the possihle influence of a requirement for 
prior notice of change in deterring individual price changes has, under 
the IIRA, "been confined largely to the effect of a "\/aiting period". It 
was the latter device that was most commonly recognized as the "control" 
element in price filing. The announcement of policy against the waiting 
period r'hich accompanied Office Memorandum 228 was considered hy many to 
constitute a definite retreat from the control to the simple puhlicity 
function of price filing, and a restoration of the Eddy plan of Drice 
filing for infonnation only, 

Actua-lly the retreat was far less significant than that, even as a 
policy decision. (**) The elimination of the waiting "oeriod did not re- 
sult in a change from the reporting of future prices to the reporting of 
past -iorices. It did not, strictly speaking, result even in a change from 
future to current prices, "because menhers were, according to the model 
provision, ohligated to adiiere to their filed prices until notice of an 
impending change had actually reached the administrative agency or code 
authority. In some instances, it was required that the memher must await 
notice of receipt of the changed orice "before -outting' it into effect. 

This filed price indicated .not only the current price at the time of 
filing, hut the price until further notice. The v/aiting period was ex- 
tremely 'foreshortened "by the new policy "biit its influence war not entirely 
eliminated, if we consider its lorimary function to act as a deterrent to 
price changes and not as a period of coercion or -oersuasion. 

The requirement in the Sugar Institute plan, that price changes "be 
posted not later than 3 t'.l'L, preceding their effective date was, in effect, 
little more than a requirement of nrior notice such as was provided for 
in Office Memorandum 228. But the decree handed down "by the lower court 
in the Sugar Institute case would ap;oear to deny. the right of concerted 
action "by an industry to file either current or future prices. The con- 
trolling feature, according to one writer, was the agreement to adhere to 
the posted price pending notification of . The decree expressly ex>- 
cepted onljr 13a st or closed tranactions. (****) 

(*) See a"bove, pp. 147-15'"^. 

(**) The practical significance of the decision on -existing price 

filing plans was, of course, minimized "by the limited application 
of the new nolicy, Sec. pp. 465-477 "below. 

(***) This might perhaps be implied hy the requirem.ent in Office Memoran- 
dum 228 that the administrative agency must notify the members by 
telegram or equally prompt means of the time if arrival. 

(****) Of. Handler, op. cit., v. 11 and the discussion of the Stigar In- 
stitute case, pp. 32-23 above. 


The later statement of policy, in the statement of the National 
Industrial Recovery Board, April 23, 1935, decried the use of a rraiting 
period because it was "likely to freeze a competitive process which should 
"be kept active." It stated further that: 

"In an open price market there is no co'unter- 
part of such a devide. While prices are ris- 
ing a flood of orders during a waiting period 
may unsettle a future market, Mien prices 
are too high the incentive to reduce them in 
order to get more volume of sales may he 
lessened by the knowledge that price reductions 
will not become effective until competitors, 
by similar reduction, have destroyed most of 
the sales advantage." 

The same remarks are, to a lesser degree, applicable to a.nj price 
filing plo.n that req.uires prior notice of change. The communication 
facilities of telegraph and telephone can reduce any period of s&,les 
advantage after prices reach a central agency to a negligible period. 
If. sellers are widely. , scattered, filing on a regional basis can be es- 
tablished. The publicity given to any lower price assures that it may 
become generally known and .that repercussions in the way of general re- 
ductions of prices or retaliatory price cutting are' more immediately 



C . Price Filing; and Control over Ce rt ain Elements of the Price 
Structure . 

1. Introduction. 

As contrasted with efforts to control price levels, which have "been 
generally regarded as price fixing, industries have, in the past, been 
allowed some degree of freedom in efforts to regularize their price 
structure through standardization of products, cost formulas, trade 
differentials, contract forms, and methods of price quotation. As vol- 
untary activities of trade associations such effort had been encouraged 
in some instances through trade practice conferences conducted by the 
Federal Trade Commission. 

It is not necessary to explore here the incentives, the origin, or 
effects of such voluntary activities except as they affect or are modi- 
fied by price filing. Some indication of the relationship of cost form- 
ulas and gross cost lists to price filing has been given in a previous 
section. Tt is apparent that plans such as those described in the 
malleable iron industry and the marking devices industry (* ) introduce 
a control over the total structure or pattern of price relationships 
within the industries far beyond that of a simple no-selling-below-cost 
provision. It is proposed in this section to explore means of regular- 
izing certain specific elements of the price structure, as they are re- 
lated to price filing, including (1) product classifications, (2) customer 
classifications, (3) geographic pricing devices, and (4) discounts and 
similar terms and conditions of sale. 

The advantages of regularization of the price structure in con- 
nection with the mechanical operation of and effective publicity under 
an open price plan have been recognized by previous commentaries on open 
price filing and have been touched on in Chapter III (**). Comparability 
of prices and price terms is extremely difficult unless some standard- 
ization of products, price elements and methods of quotation exists. 
The publicity associated with the price filing procedure cannot be at- 
tained without some common understanding of product, grades, quality 
and other specifications, and the mechanics of filing and disseminating 
prices are much simpler when the variations in pricing practices are few 
and publicity can be limited to changes in one or a few elements of price 
rather than variations in a multitude of price elements unrelated by any 
fixed pattern. 

Such standardization eliminates many of the causes for incomplete 
filings and limits the possibility of evasion or secret price-cutting 
through substituting a product of higher grade or quality for one of a 
lower grade, by applying a wholesale discount to a retail order, etc. 
On the other hand, such a regularization may involve a control or limit- 
ation of the individual's pricing policy in a manner which confines 
competitive pricing within very narrow limits or prevents it entirely. 

(*) Above, pp. 201-211. 
(**) Above pp. 118-119. 


Many of the gross price lists, product classifications, and trade prac- 
tices made mandators under codes were elaoorations or continuations of 
methods that had been worked out some time previous to the NRA. Ihe 
effect of the price filing plan in these industries was to make mandatory 
the use of such pricing practices by the entire industry rather than by 
that portion of it that had voluntarily adhered. With price competition 
confined to. a relatively few elements, complete uniformity was much more 
readily attained, both in those instances in which it arose from the 
voluntary re-filing to meet the prices of competitors, and in those in 
which it was deliberately sought by agreement. When there are multiple 
elements of price, many intermediate steps of uniformity are involved in 
the creation of a uniform net price between competitors and many more 
price elements are available for juggling by competitors seeking a more 
advantageous combination of terms, discounts, differentials or allowances. 

There is some reason to believe that industries with very simple 
price structures or those whose price stractures had been foimalized by 
means of gross price lists, cost manuals, or well established product 
classifications and trade practices, faced fewer problems in the opera- 
tion of their price filing plans "under the codes than did industries with- 
out such simplified or formalized price structures. Tnis conclusion ex- 
tends not only to the mechanical operation of the plans, but also to the 
publicity achieved. 

The effectiveness of standardized price structures in facilitating 
control over the price structure of individual members of the industry 
depended, too, in large part upon the extent to which those structures 
represented a codification of customary methods of pricing as opposed to 
new methods not well assimilated in industry practice generally. A 
mandatory code requirement that prices be fixed differentials or extras 
be applied to a filed base price ;af forded an excellent frame work for 
controlling the structure of price lists and the relationship of the 
several component prices making up the price lists of individual filers. 
In many instances, however, the very circumstances involved in efforts 
to achieve standardization - e.g., excessive product differentiations, 
complex marketing structures - are circumstances unfavorable to success- 
ful price filing operations. Hence the failure of elaborate product 
classifications, custcjuGr classifications, etc., to achieve a high degree 
of control over the price structure in such industries is not surprising. 
Such failures indicate the greater difficulties of price control in such 
industries, difficulties which would appear even under mandatory price 
fixing regulations. In other industries in our sample, efforts at con- 
trol of the price structure by means of such standardization of products, 
customer classes, terms and conditions of sale have been highly success- 

2. Product Classifications. 

Industries which had already developed formal product classifications 
were successful in many instances in introducing the requirement that 
filed prices be expressed in terms of discounts from gross list prices. 
In other industries, price filing was a direct impetus to product class- 
ification. This did not necessarily or usually focus on quality stand- 
ards, but rather on the classifying of products into identifiable groups 



suitable to express price or cost differentials. The requirement (either 
by code or code authority) that such differentials "be made uniform and 
mandatory was not unusual. (*) 

Approximately one-third of the 57 industries included in the price 
filing st.miple attempted or accomplished some control over the price 
structure through the establishment of product classifications. 

The form of control varied from s, general classification or defin- 
ition of the products of an industry to a complicated and comprehensive 
classification with the establishment of uniform extras and deductions 
to be applied to base prices. As an assisting device for price control, 
product classification was especially significant in the metal window 
industry, the steel castings manufacturing industry, the business fur- 
niture manufacturing industry, and the gas appliances and apparatus 

a, I^'etal Window Industry. 
The gross price list adopted by the Metal Window Institute under 
trade practice conference procedure of the Federal Trade Commission in 
1929 and revised on later occasions was incorporated by reference in 
the code for the metal window industry, to be followed uniformly by all 
members of the industry'. (**) The price filing plan required only the 
filing of quantity and installation discoiuits from this gross price 
list. The gross price list included standard specifications for in- 
dustry products and fixed differentials for classes of trade, special 
finishes, special non- standard! zed products and other terms and conditions 
of sale. 

The ^'Gross List Prices" represented an extensive compilation of 
the base list prices for the "Standard" and "Special" products of the 
industry, with the inclusion of "Standard List Extras" and "Special 
List Extras" to permit the determination of a list price for any re- 
quired product. (***) 

In the furtherance of its control over the price structure through 
a system of product classification, the code authority adopted a reso- 
lution requiring an industry member to seicure the permission of the 

(* ) E.g., business furniture, Paper and Pulp Manufacturing Code, en- 
velope industry, tag manufactaring, metal window, steel castings. 
(**) Section 1, Article VIII, Code of Fair Competition for the Metal 

Window Industry. 
(***) Gross List Prices, dated August 1, 1933, issued by Metal Window 
Institute, p. 100, (in NRA Files, Metal Window Industry Code) ■ 



commissioner of the code authority in order to depart from the "Gross 
Price Lists" in quoting prices on a project involving the use of industry 
products in excess of "limiting sizes". The conmissioner in such cases 
was to furnish the industry memter with the basis for estimating the 
list prices for the special requirements in question. (*) 

The individual raemter was not privileged to establish his product 
classifications under the Metal Window Industry Code, nor was he priv- 
ileged to vary the price relations betvyeen products. His discretion in 
filing was limited to the filing of discouiits. 

The importance attached to such product standardization is indicat- 
ed by the desire of the code authority to stay price filing on a group 
of products not covered by the gross price lists. Standardization had 
not been accomplished for non-ferrous window products prior to the Code. 
The difficulties of price filing in this Division led to a resolution 
by the code authority on January 23, 1934, requesting that members be 
relieved from filing prices on these products, until such time as the 
coordination committee could study the non-ferrous products, and through 
cooperation with all producing manufacturers establish a practicable, 
general standardization of such products on a basis similar to that then 
in effect for all steel products. This was sought in order that there 
might be "some basis upon which discounts to the trade may be intelligent- 
ly . established". (.**) 

b. Steel Castings Industry. 

The steel castings industry is an excellent example of an industry 
that established such a formalized product classification just prior 
to the code and utilized it in connection with the price filing plan. (*** ) 
The pri'ce filing provision of this code was permissive, with the agency 
of the sub-division or product classification empowered to establish 
price filing. It stated only that after it had been determined to es- 
tablish price filing each member manufacturing products within such sub- 
division or product classification "...shall within ten days after notice.. 
...file with the agency a price list. .. showing its current prices, and 
the agenc2/ shall immediately send copies thereof to all members of the 
industry engaged in the manufacture of such specified product. " A ten 
day waiting period was provided for revision. Adherence to these price 
lists was also a matter for decision of the agency of the sub-division 
or product classification concerned. The code provided that if the 
agency so desired "no member of the industry within such sub-division 

(* ) See Rule Book, supra, p. 22. 

(**) "Metal Window Industry Rule Book", p. 1. In NRA ' flids,' metal 

window industry. 
(***) See Appendix B. 



or product classification shall sell directly or indirectly by any means 
whatsoever, any product of the industry included within a sub-division 
or product classification ... at a price less than the price shown for 
such product in the list filed by such member." 

There is no mention in this price filing article of any industry 
price list or other limita.tion on the freedom of individuals to quote 
their prices according to any method they chose. The Steel Castings 
Industry Code designated the board of directors of the Steel founders' 
Society as the general agency for the administration of the code and 
empowered the board to "make such rules and regulations subject t>o the 
approval of the Administration as may be neoessary for the Administration 
and enforcement of this Code." (•*) 

On February 13, 1934, the Code authority adopted Commercial Reso- 
lution No. 16, Which made it mandatory for members to file prices on 
the basis of schedule letters representing a comprehensive system of 
product classification. The developi.ient of these schedules as a measure 
for regularizing the price stnicture in the industry had followed a 
series of experiments with price filing and cost work. (**) 

The Steel Founders.l Society had engaged in price filing activities 
under an old Eddy Associ;\tion some twenty years before, in which in- 
dividual reports were collected and circulat'ed back to m.embers. This 
plan w..,'^ abandoned after the decision in the Hardwood Distillation and 
Linseea C,\'', cases. It was followed Ij'tter by a plan for exchange of data 
on past t.?:. rsactions. These "closed busincs.s reports" were likewise dis- 
continued j.:i 1534. Other intermittent efforts at exchange of price's took 
place at one (.ime or another but were abandoned because the mcribers were 
not sufficiently interested to participate. The efforts of the Society 
were apparently turned toward cost studies and exchange of cost inforraar- 
tion. In h'.ci.'ch 192? a book of "notification blanks" based on the last 
published pr'-ccs of the Anericfui Steel Founders wore circulated 1»o menv- 
bers of tbr; -'..e?! Founders' Society. Manbers were later asked to report 
on the pii~ '"c-;''"io'as and orders for the apparent purpose of showing deviar- 
tions fro"-' r]'o notification levels that had been sent out. The price 
level notiii.-.ation- was abandoned in April, 1924, because it was not very 
generally uaed by members. '2).is background of early experience of price 
filing and cost studies (***) ej^ilains in -part the methods used by the 
Steel Founders' Society in setting up the price filing methods in the 
industry after the code was approved. On the basis of cost determination 
schedules, made up in 1926, the institute set up an elaborate classifi- 
cation of products according to their industrial use and devised a master 

(*) Section 1, Article V, Code of Fair Competition for the Steel Cast- 
ings Indiistry. 
(**) See Appendix B, p.. 53.9ff. 

(***) Information tai--en from the Federal Trade Commission's report 
"Open Price Trade Associations", page 337. The association at 
that time consisted of only 49 members, constituting about 22^ 
of the concerns in the manufacture of steel castings. 



schedule for gross price lists on the basis of these classifications. 
Some eighteen price schedules were designed to furnish means for a ready 
calculation of the list price on a weight and number of pieces basis, 
and, as an initial suggestion, the known 600 classifications of products 
were assigned to the various schedules on a basis of their relative costs. 
These schedules were identified by letters ("A", "B", "C" etc.) and 
individual founders were urged to file the desired schedule merely by 
indicating the pertinent letter. Later, by means of commercial resolu- 
tions, the code authority for the industry made it mandatory to file on 
the basis of these established schedules, although members were still 
free to indicate the particular schedule to be applied. Tliis mandatory 
requirement was disapproved by some of the advisory boards, but no ao* 
tion was talcen by IIEA to forbid the ruling. 

While standardizing the products and the extras for weight and 
number of pieces, the code authority also found it necessary to set up 
a classification committee to review the new classifications submitted 
by members. On May 7, 1934, the code authority adopted Resolution ITo. 
22 which provided for a committee on definitions and classifications to 
serve and to meet at least once each quarter for the purpose of review- 
ing, all steel castings classifications filed by members of the industry. (*) 
This committee had power to disallow such classifications as in the 
Judgment of the committee, after due consideration of all facts present- 
ed by the member of the industry filing such prices, were either dup- 
lications of pro-existing approved classifications or not properly 

It was further resolved that such committee might require members 
of the industry to define new classifications and might formulate def- 
initions to apply to any classification filed, such definition to be 
controlling in case of disputes regarding improper classification of 
castings for pricing purposes. It was also resolved that no now class- 
ifications should be accepted, published, or used as the basis for making' 
quotations until they had been approved by the committee on definitions 
and classifications. (**) 

c. Business Furniture Industry 

The code committees of the steel shelving and other divisions of 
the business furniture industry were granted the power under the code 
to establish the minimum additions to and the maximum deductions from 
the base prices of the various lines of the industry product. (***) 
On May 11, 1934, the code committee approved a list, recommended by the 
industry's planning &. classification board, of uniform extras and deduc- 
tions, comprising 38 pages, to be added to or deducted from the base 
prices of fourteen standard products. 

The legality of the exercise of this power by the code committee 
was questionable in that the uniform extras and differentials were to 

(*) See Appendix B, pp. 583-607. 

(**) Ibid., 

(***) Article VIII, of Exibit C, Divisional Supplemental Code for Steel 
Shelving Industry, Code Fair Competition for the Business Furni- 
ture, Storage Equipment and Filing Supply Industry Code. 


te based on the direct cost thereof and no cost accounting system had 
'been approved. 

d. Gas j^pliances and Apparatus Industry 

Ihe Gar,- Range Institute nem'bers, who operated under the Gas Appli- 
ances and A pparatus Industry Code, on Novemher 19 and 20, 19.'^4, at a 
meeting attended hy representatives of over 9Qfo of the gas range pro- 
duction agreed to a product classification and to a minimum pi-ice plan 
which was designed to afford a complete price control. The following 
excerpts from the minutes of the meeting present a detailed picture of 
the nature of this agreement. (*) 

" Three Levels of Base Costs 

There was a unanimous agreement reached that the confidential agency 
should use three cost levels, which are as follows: 

1. Exclusive metropolitan New York and Philadelphia low market 
"base for the apartment house trade. 

2. The Cleveland base for the average quality range. 

3. The Detroit base for standard quality ranges. 

" Metro :--. J it a n Low Market Base Cost . 

It Tft*3,s agreed that a total manufacturing and selling <?ost of not 
less than $,37.50 be applied to both the tonsole range and 'the table top 
range manufactured exclusively for the metropolitan apartment house trade 
in New York and Philadelphia territory. This is subject to either (1) 
a deduction of $1.00 for manufacturers selling direct who are not nation- 
al advertiserD, or (2) a discount of not more than 20^- to jobbers and 
public utilities. This means that under no circumstances will the costs 
of the manu:^ac;^urer to the apartment house or building trade with respec't 
to direci; soles be less than $27.50, with the exception of t^o $1.00 
differc-nt '.cl above specified. It was agreed that the minimum base cost 
in any ca-.i'i would not be less than $32o00. 

"The following specifications apply to both the console and table 
top range; 

1. 36" in length (end shelf and heat regulator not included 
in measurement). 

2. Oven size: 16" wide. 

3. Full porcelain outertrim with japan cast frames when used 
in constructions. 

(*) Bulletin, dated November 23, 1934, issued by the Gas i^ppliances 

Institute (In NRA files, Gas Appliance and Apparatus Code, Volume 
A, part 2) 



4. Stipple or mottle enameled oven and broiler linings. 

5. Japan grates and Burners. 

6. Enamel burner box linings or bowls. 

7. Semi-insulation — Oven top and two front doors of oven 
and broiler. 

8. Any kind top burner lighter. 

9. Storage drawer type. 

10. Drop door conventional broiler (not pull-out). 

"Any additions to or deductions from the above specifications should 
be figured in accordance with the Cleveland base. 

" It was further agreed tha t ad vancing co sts would necessitate a 
5% increase over this base before or by December 15th. 1934. 

"This establishes a minimum cost of $28.88, after December 15th, 
1934, subject to either (1) a deduction of $1.00 for manufacturers 
selling direct ?;ho are not national advertisers, or (2) a discount 
of not more than 20^ to jobbers and public utilities. This means that 
under no circumstances will the costs of the manufacturer to the apart- 
ment house or building trade with respect to direct sales be less than 
$28.88, \7ith the exception! of the $1.'^0 differential above specified. 
Thus, the minimum Dase cost in any case after December 15th will be not 
less than $23.10, 

"A permanent committee was appointed for the purpose of holding 
semi-monthly meetings with reference to this metropolitan New York and 
Philadelphia Low Market Base. 

"Tlie Cleveland Base 

"The Cleveland base is for a full enamel range and represents the 
costs of employers who manufacture for average markets. It does not 
include the manufacturers under the Detroit base. The base cost was 
agreed to be $22.00 for a console and $23.25 for a table top. The 
specifications for both the console and table top stripped ranges are 
identical to those above illustrated for the Metropolitan New York and 
Philadelphia Low Market Base, with the following additions and deduc- 

1. Add 50^ per inch-body measurement - over 36", 

2. Add 50(J per set for enamel grates. 

3. Add 50^ per set for enamel or alloy burners. 

4. Add 75((f for loose enamel lift cover. 

5. Add- $1.35 for lift hinged cover or attached. 


6-. Add 75(^ for pull-out "broiler, 

7. Add 75(z^ for raise or lowering "broiler. 

8. Add 37-|-(# each for Duplex or Harper "burners. 

9. Add $4,00 for any type oven heat control. 

10. Add 25^ per side and "back for insulation. 

11. Deduct 25j^ each for one piece swing storage compartment 
of oven and "broiler com"bined door. 

IS. Electric lights including "brackets and cord — clocks — condi- 
• ments, etc., shall be added at cost plus 20%. 

"Tnese costs are the extreme low and can apply only to goods of 
second quality. Costs must "be graduated upv/ard in accordance with the 
quality of the merchandise. The standard quality manufacturers su"bject 
to the Detroit "base agree that their costs are at least 12|-/S over these 
Cleveland base costs. 

"I t was further a.g:reed that adv^xncins co sts v.-ould necessitate a 
bfo incr ea se over this base before or by December 15th. 1934. Thus, the 
Clevela nrl "base, effective not later than Decemce'r 15th, 1934. will be 
the followin g; , . 

Average quality full enamel console $23.10 

Full enamel average table top range -24.41 

AH costs F.O.B. factory." 

"The Detroit Ease . 

"The Detroit base was reaffirmed by the manufacturers of standard 
quality ranges. Thus, the base costs were agreed to be $39.00 for a 
console range and $43.50 for a table top range, with the following specifio- 


Detroit Base Co'isolo Hange Snocif icr.tions . 

1. 40" in length (end s .elf and neat re^ailator not includec', 

in "i-easurement ) . ■ 

2. Oven size: 16" vjid.e Ity 14" hi:5h. 

3. Jrpanned grates and japanned burners, 

4. Drop door (conventional) broiler. 

5. Any I'lind of top burner lighter. 
6. ■ Oven heat regulator 

■ 7. ■ Full oven insulation 

Detroit Base Console Rar.?e AdcHtions snd Deductions 
li Add or deduct ?*^1.00 vev inch over or under 40" in length. 

2. Deduct 25^ -oer inch for oven height \mder standard 14" height. 

3. Add 50'(p for enameled grates. 

4. Add 50;^ for enameled burners. 

5. Add 75(^ for loose enameled cover over cooking toi^ burner's. 

6. Add '^1.50 for hinged or attached ena^Teled cover over cooking 
top burners. 

7. Add 50^ for p'oll-out broiler. 

8. Add *;i.00 for raising and lovrering raechanism in broiler. 

9. Add 37x75^ each for duplex (ha,rper tjroe) b\irner. 

10. Deduct not more than S8.C0 for heat control. 

11. Deduct 63-l/3if for less insulation in each body side. 

12. Deduct 63-1/3;^ for less insulation in bods'- back, 

13. Deduct 30(p for less insulation in oven top. 

14. Add "^2.50 for electric light (including bracket and cord) 

15. Add 20^ loer piece .for condiment set. 

Detroit Base Table Tor) Ran^'e Sioecif ications 

"The specifications of the standard table top range are identical to 
the standard console ran-^e as stated above 'Ith the following exceptions: 


-240- ■ 

1. An7 kind of cover top over cooking top "burners, and 

2. Tvjo service drar/ers or eq^uivalent service comiDartnent . 

Detroit Base Talple Top Ilsnige Ac^ditions and Deductions. 

"Saiiie ap. for console range except no extras need to Ise added for en- 
ameled cover over coolting top burners, the cover top "being regular eOj^ui-o- 
ment on ta'ble top ranges. The 30^ deduction for less insulation in oven 
top on console ranges does not apply to ta"ble top ranges, 

"The a"bove additions and deductions applv only to the qualities of the 
Detroit hase, and are not to "be used in ccrouting the Cleveland. l)ase vrhich 
applies only to ranges of qu-^.lity. Any manufacturer claiming the 
'average' quclity differential of 13-"'fj should use the Cleveland "base. 

"The costs for "both console and ta'ble top ranges are computed ?.0.B. 

"Fo. additions or deductions specified in the Cleveland "base can be 
applied to ran?:os under the Detroit "base or to the ;oronotional num'ber, 

"It is further agreed that advancing: costs T^ould necessitate a S^o in- 
crease over this "base hefore or "by Decen'oer 15th. 1924. Thus, the Detroit 
"base, effective not later than December l'!^th. 1934^ v;ill he the following! 

Standard quality console ra?iges !t;40.95 

Standard quality table top range 45.68 

" Filed Prices 

"The Gas Appliances and Apparatus Industry Code requirer all 
sel' prices to be filed 'uth a certificELte that they are all 
above costs. Your immediate attention is directed to the necess- 
ty of filing nen prices in line vith the costs '"hich have been 
illustra.ted above." 

In summarj'' it may be said that in the netal '^indow industry iproduct 
classification served to make possible the establish-ient of a gross orice 
list setting forth list -orices to be follovfed "oy all members of the industry 
in filing. Price freedom was limited in the ^ain to changing of quantity 
discoimts. In the steel castings indii.strjr, price filing on ,. cora^Dlexity 
of products T'as facilitated by an initial classification of products by the 
industry agency and by a close control over the nanner in r/hich members 
classified nerr products. This scheme of classification was supnlenented by 
various schedules of net price differentials for quantity. (nuiber and weight) 
nurchases v-hich tthe agency applied to the various isroduct classifications. 
These net price schedules for the various product classifications in turn 
were suggested for adoption by industry members. The business furniture 
agency controlled price filing on a variety of products by establishing uni- 
form extras and deductions from base -orices on standard -oroducts, to be used 



in determining the prices of unstp.ndardized products, which were, in turn, 
listed and defined by it. The Gas Range Institute, in the administration 
of the price filing plan, atterapted to fix prices for "base products i^'hich 
it defined and in addition to apply additions and deductions for products 
which varied in some particular from these "basic ones. 

In each of the above cases product classification was established 
a.s a -oart of the price filing plan and was used as a basis for determining 
for, or sug.'^esting to, the industry "lember prices to be filed on the var- 
ious products which he made. 


3 " CiistoLTjr Classificatio n 

• a. Introiluction 

Sorac- kind of classification of c-ustonjrs is implicit in an.T price 
filin,^- plan if it is assumed that publicity is not expected to destroy 
the prevailing pr^ctic^i of selling products at varying prices according 
to the quantity pui^chased, the geographic location, or the trade status 
of customers. The groupin,,: of custoiners is primarily for the purpose 
of setting up price differentials, which are r ;flect-;d in filed prices. 
Theor.;tically these price differentials are based. on the relative cost 
of serving the different classes or on the relative advantage to the 
seller of disposing of his products to a particular class - an advantage 
usually arising because of services that may be rijndered in the distri- 
bution of thf; goods to the ultimate (*) . 

The term "custOTiir classification" has ordinarily bc^en reserved, 
in NRA discussions and elsevher.. , for the groupin ; of customers 
according to trade status, rather than according to size of purchase 
or of location, and for a formal, organized classification ratner than 
the independent flexible groupings adopted by individual sellers. 
Custoraer classification may consist in the listing of those classes of 
customers to Vi-hich members may sell, .ith^r v»l ih or v/ithout tht; de- 
finition of these classes; or it may extend to the placing of indi- 
vidual bu^J-ers into the classification established. II. R. A. policy, 
as expressed in Office Memorandum ^67, issued July 20, 1934, de- 
clared against provisions in cod(-s establishing or permitting the 
establisliment of mandatory customer classifications. Suggested 
classifica;:ions could be prepared, and approved by KRA, but there was 
to be reserved to each m-^iiaber the right at all times to classify his 
own customers in accorr.ance with his own judt^jnent. CoLircion or in- 
fluence to limit this freedom or to bring about uniform or stipulated 
prices, discounts or differentials, was prohibited, as were suggested 
classifications leading to resale price; maintenance or discrimination 
ngainst any customer or class of customers. (**) 

It was in part because the pr-.ivalence of uneconomic discrimination 
was recognized that Office Lernorandurn llo . 267, which permitted su^rgestive 
customer classifications, was promulgated. On the other hand, the 
extreme difficulties of determining and measuring the cost of serving 
various classes of customers or the value of the services rendered by 
these groups on the one side, and rigidifying the distribution structure 
and of discriminating against certain individual concerns and classes 
of cvistomers on the other, led the Administration to avoid the responsi- 
bility of approving binding classifications, under any circumstances. (***) 
The policy statement represented an admission tnat price publicity in 
itself \fould not in many instances endunoconomic discrimination (****) 

(*) Quantity diff rentinls may b3 used instead of functional 

trad- discounts, or be calculated roughly to recognize differ- 
ences in service, or they may exist concurrently with thera. 

(**) See Appendix C, Exhibit Y, for Office lemorandura 267. 

(***) Interview with C. A* Pearco, -.'ho participated in the dis- 
cussion preceding the formulation of this policy statement. 

(****) Q^,, Chapter II, above, pages 64-66. 



and that such put.licity rair^'ht "bi helpfully supplemented by positive 
controls, if it wer^ possible to formulate them with necessary safe- 
guards. The device of suc;;gestive or ec'ucntional classification which 
was approved represented a compromise "betv'een acceptance of the urgent 
need for positive controls over discrimination and conviction that it 
was impossihle for an agency. such as the KHA to measure this discrimina- 
tion precisely enough to justify the mandatory control of one of the 
most significant elements of comjiieti tors' pricing policies. (*) 

This policy announcement, however, caused numerous protests which 
served to focus attention on another intimr?te relationship between 
price filing and custoiner classification as mutually dependent measures 
for promoting price publicity, viz., 

That the requirement that members adhere strictly to prices 
as filed is difficult of enforcement vifithout some accepted 
uniform definition of customer classes, since sellers can 
violate the requirement by giving a favored buyer an indi- 
rect price concession at any time simply through shifting 
him into a customer class for vrhich he did not normally 
qualify, or by creating a new customer class and filing 
whatever price he wished to apply to it. (**) 

It is this point which raises the issue pointed out in other connec- 
tions and illustrated further below and whicn was prevalent in connection 
with most price filing plans under Mik coHes, namely, that price .publi- 
city may depend for its effectiveness precisely upon the establishing 
of controls over, or the regularizati on of, those elements of pricing 
policies which are subject to manipulation to avoid or evade the require- 
ment established; but restrictions of any of the elements of pricing 
policies may represent to that extent restriction of competitive pricing 
and, moreover, may represent that one element of stabilization that is 
necessary to perfect a complete pattern of control over price competi- 
tion. It was this objective rather than full and effective price publi- 
city in which codified industries were often interested. Attempts, for 
example, to stabilize the price structure by minimum prices, uniform 
trade discounts and other terms and conditions of sale, either by code 
provisions or extra-legally, called obviously for customer classification 
to prevent evasion. In other cases, customer classifications were 
more directly the tool of certain groups within an industry to preserve 
or otherwise make more secure their ovm methods of distribution or 

(*) Even so it may be noted, by accepting the responsibility of 

approving non-mandatory classifications the Administration pre- 
sumably did not avoid the difficulties of determining classifi- 
cation of customers along lines of cost serving or functions 
performed. The fact that Office Memorandum Wo. 267 was em- 
braceci in only a few instances by industry perhaps prevented 
this issue from coming to the foreground. 

(**) See in this connection Chapter III, page 132 iff. 



Fnatever the inmediatt: or ultimate objectives of the industry in 
establishin,^-: partial or complete customer classifications or devices 
with similar effects, price filin,; plans servdc' as a lo^.-ical and ready- 
means for estatjlishing these controls — in some cases /by their incor- 
poration in thu plan itself and in others hy rulings made informally 
pursuant to the administration of the plans. In "both cases, price 
filiUf'; had, of course, the supplementary function of checking the 
compliance of members with the classifications established. In other 
instances, price filing served primarily in a policing function, i.e., 
by checking the conform.anc3 of members in adhering to classification 
standards established by othsx' code provisions or b^'' dominant members 
of the group. As an aid to tiie policing function of price filing, it 
was frequently provided that members file the definitions of cu3tomer 
classes used or the names of specific buyers classed under the general 
groupings established. Many illustrations are avnilable of the use 
of price filing under NRA. codes in connection vith customer classifi- 
cation or sim.ilar devices. No attempt is mads in presenting the cases 
which follov/ to classify them according to the objectives v/nich their 
proponents may have had in .aind — whether primarily to promote more 
effective publicity through eliminating a.venues:0f evasion or to 
promote a scheme of more effective price control or stabilization or 
to protect or otherwise make more secure certain methods of distri- 
bution. In many inst-^nces it is not possible to state the objectives; 
in other instances they may be clear. 

b. Illustrations of the Use of Price Filing Plans 
in Connection with Ciistomjr Classifications 

The Lime Code provided that no builders' supply dealer or agri- 
cultural dealer should be classified as an agent for agricultural, 
industrial or chemical lime, or as a jobber for building lime in the 
trading area in which he operates as a retail dealer, unless approved 
by the district control comnittoe involved . This requirement was meant 
not only to prevent evasion of the price filing requirements by mis- 
classification but also as part of a program of control over resale 
prices. The issuance of Office Memorandum No. 267 resulted in a sta^r 
of this provision pending further consideration of policy. The Code 
History, however, reports that customer classification was discussed at 
almost every meeting of. the code authority and that vague, indefinite 
and improper classifications were common and interfered greatly with the 
workings of the open price policy. (*) 

The farm equipment indu'stry required eacli manufacturer to submit 
a list of jobbers with whom he did business in order that "an accurate 
list of jobbers" could be obtained. These jobbers were then required 
(by the code) to file prices to dealers. Any manufacturer selling to 
other persons at jobber discounts would be violating the code. 

The proposed r^^vised code for the pa;oer and pulp industry, presented 
at Public Hearing, June 29, 1934, would have included extensive controls 
over distributors, including the filing of the names and status of all 
persons gr nted distributors' discounts and allov^ances. (**) 
__ _______ 

(**) Transcript of Hearing, IIRA files 


The asbestos industry required the filing of all accounts, except 
dealers, to he kept confidential in case of dispute or upon request of 
a memher as to the classification of a particular huyer hy another 
memher. It was also proposed to compile a list of jobbers to be re- 
cognized by the members but it was feared that non-members of the asso- 
ciation, including affiliates, vould not observe the list. 

The G-as Appliance and Ai)paratus Industry Code, Article IX, 
suggested that sales prices find terms "may provide reasonable differen- 
ces as to (a) export sales, (b) sales to large purchasers, (c) sales to 
wholesalers, jobbers and brokers, (d) sales to retailers, and (e) 
direct sales to consumers." (*) It provided further that "published 
sales prices and terms of any employers applicable to one class are 
not applicable to any other class, and if so used shall be a violation 
of that code." 

This cooe provision was amplified by coc'e authority action in 
Rule 7, established December 4, 1933, proviHing that sales prices and 
terms for gas water heaters should be classified as: 

(a) Export sales 

(b) Sales to utilities 
Sales to jobbers 

Sales to mail order houses 
Direct to you sales 

(c) Sales to pl-umbers 

(d) Sales to consumers. 

Later extra-legal attempts v/ere made to impose fixed discounts 
on different classes of trade. (**) 

Article X, Section 2 of the Mayonnaise Code, provides, specifically 
that "every member of the Industry must classify buyers Upon a reasona- 
ble basis- — -but all discounts shall be uniform to all trade buyers of 
the same class for products of the same grade and quality and must be 

Apparently the code authority felt that this provision was outweighed 
by Article X, Sec. 6, which provided that no members of the industry 
should offer or make a distribution service price unless it was a ge- 
nuine distribution service price; and defined such a genuine price to 
mean a price differential which was based upon and reasonably measured 
by a substantial difference in the distribution service rendered. 

Whatever the supposed authority for the action, the code authority 
evidently did establish a classification to be followed, for on May 23, 
1934, (the code was approved on March 21, 1934) official bulletin No. 3 
indicated their ruling concerning the proper classification of syndicate 

(*) Codes of Fair Competition, as approved. Government Printing 

Office, Vol. Ill, Page 429. 
(**) The account of that action is contained in "Price Filing in 

Gas Appliances Industry", S. McKittrick; (in 1-tBA files). 



stores. (*) This read in part: 

"There has been referred to the Code Aiitnorit^"" the 
matter of classification of syndicate stores to "be 
follov.'ed "by mem'bers of the Industry in filinj their 
schedules of prices and ri:j counts and in inakin;.^ their 
sales to such stores. Such syndicate stores include 
such companies as F. W. Woolvjort'h and Company, McCrory, 
Kresge, etc., and other esta'blisnraents of similar 
nature, vrho do not operate their own wholesale v/are- 
house "but which "buy direct from manufacturers for 
direct shipment "by the manufacturer to the indivi-* 
dual stores. It is the official opinion of the 
code authority that sucn companies must he classi- 
fied as retailers and. that they may not "be classi- 
fied as wholesalers. Therefore, in selling to 
such stores, your sales must be at retail prices..." 

Difficulties were experienced in enfo-cing such trade clnssific 
tions in this industry and various attempts were made by the code 
authority to urge manxifacturers to take action to reduce discounts 
that mi^ht r-:sult in price cuttin.";; in t"ne secondary market. 

In code authority release Ko . 1-i, drteo Au-./ast 23, 1934, V.r . 
W. P. L. Tuttle, the code authority secretary, wrote to the members of 
the industry: 


11 4 f 
... 11 

a vdiolosal 

e distr 

ibutor con sis 



awav to 

the retail 

ers a 1 


■nor t ion 

of its 


but ion s 

lervics dis 



is "orina 



that the 

1 discount 




er by 

the m;mu- 


■ is excess 

ive and 





in such 

cases, the 


ctiirer wo\ild 

be and 



to reduce 

the dis 

count allowed 

to such whole- 

sale buyers. " 

(Underlining by Tuttle) 

"In order that the meaning of this bulletin shall be 
very clear, let us emphasize that a cash and carr^"" 
wholesaler is not entitled to the same distribution 
service discount that a service wholesaler receives..." 

"Another apparent violation of this code would be 
v/here a chain store purchases quarts Salad Dressing 
at $2.90, less 15/J, and sells to the consumer at this 
figure or less. In such an instance, the chain store 
would be giving away all of its distribution service 
d-iscount because it would have added no mark-up to 
cover its retail costs. Therefore, the d^istribution 
service discoxuit vrould be an excessive one." 

To In in-Ul files 



Mr. Tuttle goes on to say that ■until this code provision (and 
apparently, the rules he had clustered around it) was complied with, 

"...there can lie lictle stability in this industry 
and manufacturers of private label and branded 
merchandise would not be able to protect their own 
full-service wholesalers against the price cutting 
methods of other non-service wholesale buyers..." 

On Jr.nuary 24, and again on March 22, 1935, Mr. Tuttle wrote 
to manufacturers on this subject, referring particularly to chain 
stores, large independent retailers and cut-price v/holesalers as those 
improperly receiving and utilizing excessive distribution service 
disco"ants or prices. (*) 

The asphalt shingle and roofing industry provided for the 
filing with the code authority of the qualifications set by individual 
members for determining the prices, terms, and conditions of sale made 
applicable by them to the different classes of trade. The names and 
locations of their customers were likewise to be filed, grouped accord- 
ing to their stated qualifications. These names, with their ratings, 
were to be made available to the trade and to industry members v;ithout 
disclosing, the name of the manufacturer submitting them (except to the 
extent necessary to prevent violations) . This provision effectively 
disclosed and prevented any evasion of filen prices by secret shifts of 
classification, while ostensibly preserving the freedom of individual 
manufacturers to classify .their customers as they wished and to change 
their trade qualifications at any time. Actually the provision led to 
close regulation and a uniform customer classification enforced by super- 
vision through "Mis-Classification" meetings held at periodic intervals 
under the auspices of the coc e authority. These meetings were unautho- 
rized by the code and their discontinuance was ordered by the KRA at 
one time (**) 

The valve and fittings industry code contained definitions both 
OS markets and of classes of trade factors, and provided in Article IV, 
Section 1, on "Published Price Policy", that: 

"members should file theii' prices to each of the trade 
factors defined in Article II, provided that the lowest 
prices that m.ay be filed shall be the prices at which he 
shall sell his products to his distributors." 

The primary market was defined as that in which a distributor pur- 
chases from a member of the industry, a secondary mai-]:et as one which 
may be served by a distributor. 

The code, as first proposed, contained a provision permitting the 
code authority to establish differentials in price between various 
types of buyers. This was not approved, but a provision was submitted 

(*) See pp. for later proposal to amend code to bind 
distributors to resale price maintenance contracts. 

(**) For details, see Heport of asphalt shingle and roofing 
industry. Appendix A, pp. 544-546. 



authorizing a market sudy to determine the hasis for fixed differentials. 
No recoramendations vrare ever made. .The short-line producers in the 
industry opposed fixed differentials on the ground that they would pro- 
vide price uniformity, detrimental to the opponents "because johhers 
preferred to obtain a full line from one producer if prices \rere equal. 

Without approval of mandatory differentials, the industry' attempted 
to encourage the existing follow-the-leader tendency to utilize the 
Crane Company list vdth appropriate discounts to the various trade 
factors, A projDOsed mandatory price filing form, including; a further 
hreakdovm of customer classes than was provided in the code, with rij:id 
definitions of these classes, and a specific reference to the Crane 
Company list, was disapproved hy the IJHA. The attempt to estaolish 
fixed differentials aiid control over the sales in the secondary (distri- 
hutor) market had been accompanied in the early code proposals by a de- 
finite resale price maintenance policy. This v;as like^dse opposed by 
short-line raaiiufacturers because it did not limit direct sellers (usually 
the full-line raanuf accurers) from lor/erin-;; prices to the consumers, and 
was omitted from the cede as apy amoved. Later, movem-nts vere made to 
develop a plan for resale price maintenance contracts to bind distri- 
butors to filed prices, but this plan vas not submitted for approval 
before the end of code operations. (*) 

The envelope industry illustrrtes clearl^r the informal activities 
of code authorities in settint?; up customer classifications in connection 
with the ac'jninistration of the price filing plan. The lack of definite- 
ness of one provision in this code opened the door for this activity. 
Article VII, Paragraph 4 of the code reads: 

"...All such schedules- (filed) shall be in such 
form as the code authority shall prescribe...." 

Tlie code authority apparently took this as .a basis for issuing 
mandatory customer classifications. Such classifications were the source 
of considerable complaint from customers; but the office of the 
assistant deputy administrator was inclined not to take action' con- 
cerning these complaints (**) although the Le-^^al Division, the Research 
and Planning Division and the Consumers' Advisory Board expressed dis- 
satisf'ction viilh the manner in ^vhich the price filing plan was operating 
and in particular vith the action of the code authority in imposing 
customer classifications through price filing forms. (***) 

As a result of the issuance of Office I'lemorandum llo. 267, the 
industry found that it had less compliance vntla the classifications 
established by the code au,thority; and partly because of this failure, 
on April ,25, 1935, the code authority voted to siispend the open price 
plan. Because of the iuTmincnce of new legislation at that time, the 

(*) See page 297 ♦ Por reference bo this section see Report on 
Valve and Fittings Industry, prepared by Marvin L. Shirley, 
Di;;tribution Relations Unit. .. 

(**) See memorandum from Asst. Deputy Admin. &. K. Hamill, to W. J. 
BroTOi, Deputy Administrator, April 15, 1935, in lOA files 
envelope industry. 

(***) See menoranda to Asst .Deput;- Hamill from the Legal Division April 
16,1935; from Rese-irch and Planriing Division, i'arch 28,1935, and 
gg|;ig from Consumei's Advisory Board, Apr. 23, 1935, In NRA files, en- 
voi or),= industrv. 


office of the daput;- nrlrninistrator tool: no action on this decision "by 
the code authority. (*) 

The Wood Cased Lead Pencil Code as proposed provided in detail for 
terms and discounts to ap;ply to tj/-pes of customers,' including dealers and 
consumers. (**) These were suspended in the Order of Ai^proval, with 
the exception of cash disco-unts and credit terms. (***) The provisions 
were meant to st'-.hilizG prices h.y standardising quantity and trade dis- 
counts, so that the "rilative" prices to customers would be maintained 
even thougn the list prices to v;hich they wer applied mi>_:ht be altered 
by the individual raanufact"uj:er under the price filing provision. The 
list price v/as defined as the price at imicn the manufacturer •'770uld sell 
one gross to the consumer. Quantity discounts were provided for direct 
sales to consumers, graduating upvrards to a maximum of 33-l/3^. Minimum 
price schedules were also approved ori,5;inally in the code but were sus- 
pended. Price filin~ was apparently intended in this code to serve as 
a purely checkinc^; device for adherence to established controls, for the 
failui^e of the IIHA to allow these provisions to operrte led the code 
authority to reo^uest the suspension of th'j price filin,^ provisions. (****) 

The Candy Mpnufactiu-in^;; Code did not provid'c specific customer 
classifications but Section 1 of tne open price article stipulated that 
all filed price lists should include all discounts and allowances, — 
whicji should be uniform for all buyers of the saJ'fie class londer like 
terms and conditions in the same m.arhetin..^ area. 

In order to effectuate this provision the core authority listed 
and described by functions the classes of buyers reco-^nized in the 
industry, including '..-holesaler , vragon- jobber , independent retailer, 
chain store, syndicate store, concessionnaire, and vending machine 
operator. These classifications were released in Code -administration 
bulletin No. 1, entitled the Open Price Flan. Bulletin No. 2 further 
classified buyers as sm^ill cn.-dn store, medium chain store, large 
chain store, cooperative buyer, concessionnaire, and vending machine 
operator, v/ith definitions. The iniependent retailer class was expanded 
to include the "variety store" and "the depa.rtraent store". 

Difficulties with these classifications were constant. The code 
authority rejected a proposal to incorporate the provisions of Office 
Memorandum No. 267, on the grounds that it appeared not only to permit 
but to encourage discrimination in the price at which new merchandise 
is offered to the several classes of buyers. It Vifas argued that the 
opportunity to quote an ind.ependent retailer as a large chain store, 
or to quote him the svjae price or prices, actually fostered discri- 

(*) Co- e History for the Envelope Industry, page 9 - 10 

(**) Co/.."? of Frir Conpetition, as approved.. Government Printing 

OfJice, Vol. VII, F. 109 
(***) Ibid. 
(****) Sum. nary of Report -on Wood Cased Lead Pencil, prepared by 

Distribution Relations Unit, Division of Review. 



A few rnemliers of th-j induj^tr^ insisted on filing; prices to an 
ndditional class of buyei-s t^iovm as "supply jobbers", to whom they 
quoted a 25 per cent discount as compareri vrith tlie "service jobber" 
quoted tlie usual <30 per cent discovrnt. The code authority sou,vht ^ 
to obt-'in n interpret;. tion of Art. VII, Sec. 1, quoted above, ''hich 
would have conpelled nanufncturers to "justify" their classification. 
The Coc'j -listroy r=,ports tnat this interpretation cotild not be handed 
dovm becnuse of policy limitations, but contained the fui'ther observa- 
tion that: "It must be rfcCo^;nized that 'Oie co.'e provision is inpossible 
of enforcement if members are left free to set up ri'tificial classi-- 
fications of customers and to clasoify customers artificially." 

code authority action to handle the situation was rr.ported in the 
minutes of the rnoetint.; of Sepcember 30, 1S34. (*) A telet^ram was read 
fro;n one of the field pen of tne coc e authority stp.tin-.? that a manu- 
facturer had filed prices with Dun & Bradstreet, Inc., a].lowing 
an extra five pel cent trade diocount to ''supply jobbers' sometimes 
called ' surpply houses' aiid in -.ome territories laio\-n as ' sub- jobbers' . 
It \i'as stated that,rs of tnis iarustry were permitted to classify 
buyers pccordin ■ to tn ar ovn jud-^nent, but that if any classification 
wais adopted other than taose defined by the co'i'e authority, the manu- 
facturer (menber of th- indu.try) ;;ii vht justif; the classification by 
definin.;' it specifically ?/hen filing; his price list. If the definition 
submitted did not definitely create a different cl-ss of bu;-ers than 
those defined by co^e authority, the manufacturer filin< such prices 
had viola^ted the code in that his prices were not 'unifoi-m for all 
buyers of the same class unrher like terms and con^litions in the sam.e 
marketin,.--; area^. ' The iiinutes then st,;ke: 

"In the opinion of the cone autnority the so- 
called supply jobbers ( supijly houses or sub- 
jobbers) in fact do not perform functions other 
than those applied to jobbers as defined by the 
Code Authority. Motion by Kr. Vonuiff secon'''ed 
by Mr. L3unte that tha code' autho2^ity instract the 
Mnnaf^in-:,- Director to notify members of the industry 
or at his discretion to instruct Dun & Bradstreet 
to notify members of the industry that in all such 
cases tjiey must be jovernuf* by the fact stated 
above. Motion carried." (**) 

This. action was tantjimount to enforcing a mandatory customary classi- 
fication, in that the Code authority was raadi the sole judge of a proper 

One instance v/ill suffice to sho\; the infliience of pi'ovisions 
designed to prevent discrimination in leadin: to control ov3r customer 
classes and the pricus filed to the several classes. 

(*) Code History, C.-ndy i.ianuf acturin^; Industry, op. cit . 
(**) Minutes of the meeting,' of the coi-'e authority for the Candy 
Maimfacturin-j Industry, September 30, 1934, in ilHA files. 



Article VII, Section 9 of the pire Extingxiishing Api'^liance Code for- 
Tsade "Biscrinination in prices or terms of srle 'between piirchasers of 
the sane class.j whether "by raisclassif ication or otherwise.!' These trade 
classes were. to be defined "by the code authority with standard different- 
ials to oe fi::ed by that bod;;-, subject to approval of the administrator. 
Such approval was never given, but the code authority on its own re- 
sponsibilit:/ classed ::ianufacturers as in grade A or 3 according to the 
size of the sales organisation and the extent to which they supplemented 
their line with products from other manufacturers, and defined distri- 
butors, jobbers, very Large users, dealers, general consumers, and govern- 
ment agencies i These definitions v.'ere natixrally arbitrary in character. 
For example, "ver^' large users" were not defined by o^uantit^^ but as 
specific t^r-pes of purchasers, municipalities of 250,000, utilities, trans- 
portation agencies, chains, etc. uail order houses were included under 
the jobber classification. Distributors v;ere to act as nanufe.cturers' 
branch houses under contract and v;ere (b;- code eoithority rtiling) to be 
limited to 85 per nanuf actui-er , nor more t.ian 5 in any one state. (*') 

A hearing to consider these rulings was held on April 30, 1934, and 
was followed by MSA disapproval of the classifications on June 7, 1S34. 
Nevertheless, they were adhered to in large part by association members. 
Evidence indicates that the code authority attempted throughout to en- 
force its classification and differentials. The alleged basis for such 
attempts was lAtind in the anti-discrimination clause cited above. Bul- 
letin, ITo. 7, erltitled Discrimination between Piu-chasers, stated "It is 
clearly the intent of the Code of Fair Competition of the F. S.A.I. the.t 
all members of the industry sha,ll operate on a uniform basis v;ith respect 
to classification of customers end this conform v'ith Section 9, Article 
VI I of the dode. i' 

The Research and planning code adxiinistration study of the rubber 
manufacturing industry contains a detailed account of customer classifica^ 
tion and its relation to price filing in that industry. This statement of 
the experience in that industry merits quoting in detail: 

"....Foiu- of the nine Divisional Codes (in the Rubber Manu- 
facturing Industry) namel;', the Flooring, the Rubber Footwear, 
the Heel and Sole, and the I.Iechanical Rubber G-oods Divisions, 
provide for mandatory customer classification, but are effect- 
ive in only two Division, viz.. Flooring and I.Iechanical Rub- 
ber G-oods. 

"For the Flooring Division, definitions of classes of customers 
are set forth in the Code bn.t for the other Divisions, the Code 
Authorities are authorized to submit to the Administration re- 
omraended definitions of customer classifications. The Code Au- 
thority of the Footwear Division ha.s never submitted for Admin- 
istrative approval group customer clacsif ications. This con- 
dition was bro'iight about by the fact that .the price filing 

.(*) For references see B-olletins 11 and 25, Fire Extinguishing Ap- 
pliance Code Authority, IIRA files. 



provisionc are not in effect. Customer clascifications for 
the Heel and Sole Division v;ere approved "by Administrative 
Order ITo. 156-43, iTovember 2, 1934, But, inasmuch as the 
open price filing provisions in this Division v;ere stayed on 
February 1, 1935, the customer classifications ino;oerative, 

"Customer classifications for the 1 le cal Huther Goods 
Division ¥rere approved "by Administrative Order ITo. 156-36, 
October 2, 1934. 

"The customer classification definitions, as recommended b;-' 
the Code Authority were contrary to policy and, to overcome 
the objections of the Legal and Research Divisions, the 
following paragraph v/a.s inserted in the ce-f initions. 

"'nothing in these dcTinitions i'^ to be construed as 
prohioiting the officie.l filin/j of different prices for 
customers in -".ny class and of different -vrices as oetv/een 
classes of trade uased on differences in cost and on services 
rendered or on qi^antitius ptrrcnased.' 

"Soon after Office nemorincua iTo, 267 vras issu.ed, stating 
tliat it was against the oolicj'' of the Administration to ap- 
prove codes with mandatory classifications, a member of the 
liechanical Division v/rote directly to President Roosevelt 
protesting against this policy of eliminating price fixing. 
This letter stated tiiat the various embers after much effort 
and ex;oensc liad established the rubber industry on a profit- 
a.ble basis and ?/erc just reaching the point v/here most com- 
panies were beginning to shov/ a "'refit, and that the new 
policy of the Administration threw tho price situation wide 
open and ?/ould naturally reflect on labor costs. The members 
could not understand, the letter continued, v;hy more consider- 
ation was not given the ma.tter before adopting the climinatiDT» 
of price fixing. The letter to the President was ansvrored 
June 19, 1934, stating that the new policy ap^-licd only t^ 
Codes not yet approved. 

"The Legal Division of the NRA had fouiid it necessary to call 
the attention of the Deputy to sections of C :)de Authorities in 
relation to custorier classifications whicji were illegal. On 
December 13, 1934, the Legal Division stated tkit practice 
of the Code Authoritj? of the reclianicnl Division as indicated 
by their circular letter 'To. iviD 1436, by definitely fixing 
the classification of a named account was illegal because it 
prevented the flexibility upon which the Acaninistration ap- 
proved the classifications 

"In conclusion, the evidence indicated that c\isto er classifi- 
cations arc desired by Industryonly when there is an effective 
open price filing system, and, as soon a,s open price filing- 
becomes inoperative, customer classifici\tions are ineffective. 
This v/as illustrated by the Footivear Divisions v/hich declined 
to submit to the Administration rccommonded classifications 
after their open price filing systems bccjimc inoperative. 



Lilcewise, in the Heel and Sole Division, after the suspension 
of open price filing;;, customer classifications "became meaning- 
less." (*) 

The minutes of the meeting: of the Divisional Code Authority for 
the Mechanical Hubter Goods Industry, held on March 30, 1934, amplify 
one of the points mentioned in the Research and Pla,nning Division 
report. At tliis meeting the divisional code authority y/as informed 
that the flat helt group, molded hose crouo, and the miscellaneous 
hose group, mem.bers of the /lechanical ruhher goods suh-division, liad 
passed a resolution to the effect that memhers of these groups v'ould 
refrain frnm quoting "distrihutors" on a "distrihutors" price "oasis 
witnout having first secured the divisional code authority's arp-^oval ■ 
of the classification of the .-Iven accowit. as a '"distr.."biator" « , The 
divisi-^nal code authority, "by formal motion duly adopted, a"o"Troved such 
a "oroccdure. (**) Clearly in this instance permissive customer classi- 
fications were so utilized as to be made manda.tory. 

Another instance of arbitrary action against a certain type of 
customers is evidenced in the case of the Code for the Business 
Purnitijire Industry, 

T'ne customer classification in this code was mandatory. Recom- 
mendations on problems concerning tlie classification of s^^ecific 
customers were made by a. "Planning and Classification Toard." Various 
interpretations v?ere made "by this board. Concerning fnese interpre- 
tations, the pLesearch and Planning Code Administration Study for tliis 
industry says: "...persons not regularly engaged in the resale of in- 
dustry products , including architects, equipment engineers, and con- 
tractors are (classified as) consigners and not brokers or dealers and 
must be sold on a one-ordcT-one-delivery basis; ... .any purcliasirg agency 
that is organized "oy cons'jjp.ers to buy at less tlian retail prices shall 
be regarded as .a conswiier, Claanges in customer classification and dis- 
counts granted thereby (relate to) institutions of learning, college 
book stores, and various state ■'^urcto.sing departments. There is little 
doubt that it lias caused a reclassification of laany buyers as contrasted 
with their pre-code classifica,tion. One exampile is tliat of very large 
consumer buyers, not for resale, w"ho are luirped together vnth all other 
consumers. Several protests from Io,r|S-e educational institutions and 
many states bear evidence to this fact. Another t^/pe of protest is 
that from equipment engineers who formerly sold some products but now 
are included as a consumer only, one ' such concern claiming that they 
had been -out out of business because of tnc discount "basis adonted. . ." (***) 

(*) "T"he Administration of the Code for the Ri^bber Manufacturing 
Industry", ITPJl Zesca^rch and Planning Division Code Administra- 
tion Stuc'y, prepared by T/. H. Cross, Narch 1935. Page 50-52, 
(This stiidy in NEA files rubber manufacturing industry.) 

(**) Minutes of Meeting of Divisional Code Authority, IffiA files. 

(***) "The Administration of the Code for the Business Purnitxire In- 
dustry", Research and Planning iCode Administration Study Sec- 
tion, in KEIA Research and Planning Library, pages 67-68. 



Pinally an example- of the use of price filing; plans or police 
conformance to standards established "by dominant mcmters may "bo given. 
In the ca,r"bon dioxide industry, there v/crc numerous complaints that 
discriminatory prices for solid c3.r"bon dioxide (dry ice) were "'Dcing 
filed and char^,cd to purscijasors owning 'converters' for reducing dry 
ice for use in co.r'b onated "bcvcraf,cs, etc. The prices charged to this 
class of customers were maintained at a level much higher the.n those 
for the product to pu^rch^-scrs using dry ice for packing ice cream a.nd 
similar uses. The differential, which was substantial , v/as evidently 
maintained "by means of the Sv-^parate customer classifications and by 
economic pressure from dominant producers interested in 'orcscrving the 
market for liquid car"bon dioxide and protecting the heavy investment 
in containers, which vifas threatened "by any general increase in the use 
of dry ice in converters. Th' ericc filing mcclTanism was, of course, 
only a device in this control prtgram. The code did n^'t sanction 
mandatory customer classification, although the price filing forms 
issued "by the cocc auth'jrity cont.aincd a suggested classification. 
But with dominant industry members intent on preserving the differ- 
ential, the nrice filing system 'ffered a convenient m.cans for checl:- 
ing the behavior of those members of the industry or distri'butors ir— 
clincd to reduce the differential and to sell solid carbon dioxide to 
converters on terms similar to those accorded otner purchasers. (*) 

(*) For complete account of attempted control in this situation hy 

dominant producers, see Research and Planning Report, Price Filing 
and Customer Classificati'^-n in the Carbon Dioxide Industry, Refer- 
ring. to this study,, v/hich wa,s conducted by A.F. O'Donnell, of the 

■ ■ Chemical Unit of -the Code Administration's ccfion of the" Rcacarch 
and Planning Division, T. R, Snyder, Assistant Chief of the Code 
Administration Section said in a Memorandum dated May 29, 1935, 
"Due to the customer classifications practiced by this Industry, 
particula,rly discriminatory, with reference to the use of dry ice 
in liquefiers or converters, relocated allegations of monopoly liad 
been made. This survey by Mr, O'Donnell included a field study 

. '' . , in iTcw York City for price filing and general information, to- 
gether with an examination of the file in the Federal Trade Com- 
mission, the Departm.cnt of Justice and the Securities and Exchange 
Commission on this subject.,.." 



4. Geo^ra-^hic i'rice Ar-angem.rnts. 

In discussing the interrelationships "bet-veen price filing and geo- 
graphic pricing practices, it seems desira^olc to accept the general group- 
ing devised in the report on "Control of Geographic Price Relations 
Under Codes of Fair Competition." (*) In this report these practices 
are classified as (l) those regulating the amount and incidence of trans- 
portation cha.rges and (2) those which define the geographical areas in 
v/hich certain piiasos of the ;-)rice ms.king process are regaxlated. 

Within the first group fg.ll those provisions requiring either 
f.o.h. or some form of delivered pricin^ and those regulating the nature 
and extent of freight allovances. "Methods of delivered pricing include 

(a) Prices varying in direct proportion \7ith actur^.l 

transportation charges 
(h) Prices 'oniform for zones or for the vhole country 

(c) Prices i.vith freight cnua.lization permitted, usually 

with the most favorahly located com-->etitor 

(d) Ba.sing -^oint d.clivered pricing 

Practices reg-iilating the ■:)rice-m9lcing process within cortriin areas 
include (l) price filing zones (with certain limitations) and (2) anti- 
dumping zones, natural marketing areas, etc. These arrangements are 
usually accomoanied hy regulations reg? transportation a,llov;ances» (**) 

A further distinction is ma.d.e bet'; een 'oracticcs i-,'hich tend to sha.rpcn 
Torice competition ?nd thus to force price levels down, and those which 
tend to curb price com^Totition and to facilitate price leadership and 
agreements as to price-fixing, production conti-ol and ether controls. 
In the former grouo are "olaced freight allov/ances (coupled with either 
f.o.h. or delivered pricing), among them the frequently used practice 
of equalizing freight with mors favorably loC3.ted competitors. To the 
extent that freight allowances are regulated or systematized they acquire 
certain control characteristics. Anti-duinping zones and (tentatively) 
price filing zones are placed in the second category, as arc all limitations 
on freight absorption, inflexible and controlled basing point systems, and 
uniform delivered prices for the \7lx>le cotmtry or for certain geographic 
zones. (***) 

(*) Division of Heviei;, IIEA. 

(**) See Preliminary Heport, or), cit., pages 3-4 for descriptions of 
these ty-ies and the basis for the classification. 

(***) F.o.b, mill pricin^, flexible basing point systems and other forms 
of delivered pricing are given an intermediate ajid- indeterm.inate 
position, dependent upon the circumstances of their application 
in particular instances. The basis for these classifications is 
fully set forth in the Preliminary Report, op cit., pages 3-12 



Since this section is concerned with the control as-oects of Drice- 
filing in relation to these geograxihic pricing devices, attention '"ill 
te focussed on the extent to which price filing facilitates the OT)er- 
ation of those nractices which tend to restrict cora-oetition, and the 
extent to which t)rice filing reauireuents have been "used to secure the 
adorition of such -oractices in industries, in "diich they were n'»t form- 
erly Torevalent, or whose codes did not sanction them. One impact of 
control, which may operate with respect to any of the ■oractices listed 
above is the tendency of price filing (and of rules pnd regulations 
gove-^ning Thrice filing) to encourpge uniformity of -orice, anrl of the 
component elements of price. Such uniformity (if maintained by Tsrice 
filing, \7aiting rjeriod, no selling below cost, etc.) has been found 
useful as a means of temnering t)rice com-oetition, an' of encouraging 
stability of -orices at a -orofitable level. Hence uniformity in the 
amount of transiDortation charges as Rn element in -orice (as by sys- 
tematic freight enualization) , or uniformity in the practice of freight 
allow'-^nces, may contribute to a general program of -nrice control and 
"prioe uniformity, even if the narticular geogra-ohic practice carried on in 
an iinregulated manner would belong to the cate.gory of "oractices tending 
to further comtjetition Any mandatory regulation of transportation 
terms in connection with "Drice filing has, of course, the effect of add- 
ing one fxirther element of inflexibility to the ""^rice structure. (*) 

a. The filing of Prices on a Delivered Basis 

The intent to ea"aalize iDrice com"Detition by requiring uniform 
terms and conditions of sale is very a"D"Darent in "orice filing regulat- 
ions. In the realm of trans-oortation costs such eauality can not be 
attained without some arrangement for the leveling out of differences 
in price arising from the locations of the different sellers with -es- 
pect to the potential "ourchaser. Since the essential "ooint of cora"o- 
etition is at the point of delivery, these arrangements have led visu- 
ally to delivered price systems or ('•'hat is the economic equivalent), 
to f.o.b. pricing, all freiriht allowed. 

It has freouently been -argued in connection '"ith -orice filing, 
that the use of delive red -orices sim-olified the filing "orocedure, and 
made -orices more intelligible for customers who wished to cora-oare with 
prices quoted by several companies, and were interested not in f.o.b. 
prices but in what the -oroduct cost on their o'^n -oremises. Delivered 
pricing was further regarded as a useful means of "oreventing secret 
allow.- nee s in the form of trans-nortation or freight, and hence the 
evasion of filed -orices. (**) 

It is a,-o-Darent that d'-livered -orices cio simr)lify the price struct- 
ure and thus contribute to ease of filing, and dissemination of filed 
nrices. Tho argument tli^.t thg,' .facilitate com^a-ison by a customer of the 

(*) Cf. with section bo low, "Terms an;l Conditions of Sale" pn. 269-27^, 
(**) See in this connection Chapter 111, above, r)age 138. 


fileri nrices of several mpnufacturers is likewise true, in that they 
obviate ti^.e necessity of calculation and com-Da--ison of transportation 
terms. But if such terms can be clearly and comt)letely filed the added 
convenience of delivered filing is hardly sufficient to outweigh other 
factors of consumer consideration. Delivered r)rices do not in many inst- 
ances reveal the constituent elements of transportation and mill price 
and hence do not convey complete market information, particularly as to prices 
paid i for the s'lrae nroduct by othe-'- customers of the same class, loc- 
ated in different areas. Price discrimination between sales regions 
may easily exist under such pricing practices, and cannot be disclosed 
under many types of delivered price quotations. Even when the discri- 
mination is apparent (as in uniform size differentials) it is perpet- 
uated by tile geograrihic pricing practice to which members adhere, and 
may destroy natural advantages of location that would exist for certain areas 
under different pricing. practices. This "meeting of price competition" 
at the Tjoint of delivery is the main incentive to freight equalization 
and delivered prices. To the extent that the -oractices are systematic- 
ally followed, they lead directly to uniformity of sellers' price quo- 
tations at any specific point. Publicity and the existence of a writing 
period, of course, contribute to this end. Hence the filing of deliv- 
ered prices (other tnan those based on actual transportation costs) is 
a, disti>nc;f; aid to complete uniformity of price quotations by sellers. 
While this, uniformity is not of itself evidence of -orice control, if 
such price* ■ are flexible to changes in cost, market conditions, etc., 
neither is the fact that delivered prices (e.g. basing point prices 
or ■anifortn- zone, prices) are immediately met when filed under an open 
price plah, evidence of competition. As the report of the Geographic 
Price Structure Unit indicates: 

" The question as to whether the formation of prices is 

competitive or controlled, rel-'tes exclusively to a stage 

of tne nrocess which precedes any filing or publishing of 

" It is true that t/ie existence of basing points facilit- 
ates price leadership, if such exists, but nothing 

suggests t'nat the institution of basing points alone can 
bring about price leadership or any other form of price 
control. There is a functional inter-relationship between 
basing points and measures trnding to maintain high and 
stable prices, but no necessary sequence running from basing 
points as a caiuse, to nrice control as effect." 

"The essential and significant competition occurs in the 
formation of the price and in its responsiveness to changes 
in market and cost conditions, and has nothing to do with 
the fact that all producers must meet it, once it is set".(*) 

(*) Preliminary Report, op. Cit. , pp. 22-23, p. 65. 


b. Price Filing and Bfsing Point Prices 

Price filing was used in each of the four industries that had sT)ec- 
ific basing -ooint provisions. It served to -nerfect the structure of nrice 
uniformity and to eaualize competition at the t)oint of delivery. By nro- 
viding for publication of basins noint nrices it effectively prohibited 
rebating to local customers and other ■Dractices that -hfid tended in pre- 
cede days to break -down the formal -orice strucfcure contemr)lated by 
these systems. 

The actual method of .price filing usdd by basing point' industries 
varied considerably. Thus the. Irori and Steel Code ' reouired the filing 
of Drices F.O.B. the base Doi'nt ne^'rest to a member's •plant. All rail 
freight, extras, deductions, etc., were eptablished by the code and 
authorized code authority rulings.^ s'-o that price competitions was con- 
fined to the filing of base p:- ices.; with prompt uniformity appearing 
through a process of price leadership and the, meeting oif filed prices. 
A ten-day waiting pe-^iod facilitated' this arrival at uniformity before 
prices became effective. (*) ■..., ' . , ' , 

The code as written provided t:iat if a producer , did not' fiH^,ijpon 
a basing point in the area in which he- was'., selling', 'he .should •■e'ell.- at a 
price in that area not lower than the lowest filed -pf ice '.- iiheVcode' 
authority interpreted this to mean that producers ' filing 6li_ba'gihg\.points 
other than their own must file at a price not' less ' than -the "IvDyje'st .-price 
filed .by members subject to that base point. .''By this" laeans, any' reduct- 
ion of base prices had to be initiated by producers- ''situated inotKe immed- 
iate price area for any basing point. The number-, of '■ producers particip- 
ating in the price-making process at the.t basing 'ppi'tit wag thus, ef f ictive- 
ly limited. Such a limit.':'>,tion was not i"'arranted Isy the code; it/was dir- 
ectly instrumented by the price filing .provision. . , '' 

In the iron and steel industry, price filing served as an automatic 
impersonal mechanism to record and to perfect the process of price lead- 
ership, already dominant in t'ae iron and steel industry. It contributed 
to the efficiency and smooth operation of the basing point c.ontrol by pre- 
venting 'secret price cutting and local rebates, which had been in part ■ 
induced by the basing point practice which tends to discriminate against ■■. 
purchasers located near a non-basing-point mill. By recuiring adherence 
to base price s, the price filing provisions prevented open as. well, as 
secret departures from the basing point structure.- Producers were, less 
willing to cut a base price, which meant a cut to all consumers within 
the area, than they were to absorb freight in individwd instances. 

The practice of published prices had been general in the industry 
since the era of the Gary Din:iers, so that price filing served largely 
as a mechanism for facilitating orderly changes in uniform prices, al. - 
ready well established by price lemle^ship and by the basing point 
structure. The maintenance of thc^ic filed prices by distributors fur- 
ther preserved the pattrrn, and periodic re- filings paved the way for 
simultaneous changes. * -. 

(*) This waiting period was later deleted. 


The Cement Inc'-u«tr.y Code omitted mention of any "basing T)oint sys- 
tem. The code did r»rovide in Article X, 3, 4, d. that .it was an Unfair 
Practice: ■ ■ 

" To divert or -nermit nurchasers or users of cement to divert 
shipments of cement from one destination to another destination, 
the result of which will enable the purchasers or user to secure 
cement at less than the memlDer of the industry's published market 
TJrice at the point of final destination." 

In this industry, the burden of maintaining the basing point prac- 
tice was assumed, so far as the code was concerned, by the -price filing 
arrangement. Prices filed were destination "orices in every instance. 
The "meeting" of filed nrices at the -Doint of destination led to eoual- 
izecl prices for all TDroducers, althout'rh, the net returns to producers 
differed according to transportation costs to the destination. Basing 
points were multiple (approximately fifty). Base prices were not filed 
but could be e' sily ascertained by non-basing point mills, (about sevent;\[; 
in number), by a process of calculation from the destination prices and 

the official freight book compiled and disseminated by the Cement Inst 

itute. " 

The process wps essentially similar to that followed prior to the 
code, although the medium was somewhat changed. An intricate system of 
salesmen's reports had been used prior to the introduction of K.'R.A. 
price filing to keep producers .("oarticularly non-basing point mills) 
informed of changes in base prices. (*) This was done by means of iramr- 
ediate reports from any salesmen confronted by bids at any destination 
point which were different than that arrived at by the previous base 
price plus applicable freight. An i,'nmediate check with salesmen in 
other localities would reveal oV-^c^ changes in destination quotations, 
and permit a. simple m8,thematical calculation of the new base price. 

The filing of destination prices under the code obviated the need 
for the continuous watchfulness of salesmen and ins-iared a systematic 
record of all Quotations. A change in a basing point price could be 
calculated instantly anr" the opportunity to meet destination. prices in 
every instance was. assured. 

The increased convenience of this system to producers and its 
improved facilities for checking compliance with the basing point form- 
ula are obvious. The failure to file base prices and changes therein 
was unimportant to them, but it made the increase in publicity negli- 
gible so far as consumers were concerned. Destination prices on file 
were not all changed simultaneously with a change in the governing base 
price, but only as quotations were made for a new business at the loc- 
ation. Hence the consumer was still dependent upon salesmen's quotations-. — — 
for* information. This probably was of minor importance, because of the 
general spread of such knowledge by salesmen, but it does emphasize the 
subordination of the general publicity function of the. price filing 
plan to the checking function for the. benefit of sellers. 

(*) See p. 18 Chapter 1, for account of earlier experience with price 
reporting in the Cement Industry. 



Destination -orices were filed londer the code for some 100,000 
different destinations, by those -nroducers interested in selling at 
•DarticTilar t)pints. The waiting -oeriod permitted "refilings to meet 
any destination price, so that these were characteristically uniform, 
calculated at tliat basing noint nrice -oius freight which would result 
in the lowest destination -orice, all basing TDoints considered. 

The insistence that filed -orices be delivered destination -ori- 
ces was explained by the code authority chairman, in a. letter to the 
deputy administrator, on January 24, 1935, on the grounds that other 
forms of price quotation would defeat the premise that every market 
should be an open market, and that regardless of freight advantage 
or disadvantage a man-ufacturer should be free to compete wherever he 
desired. ■ r- 

Such arguments are essentially those voiced in favor of any 
basing point system. To the extent that the basing points in the 
cement industry were fixed .and controlled by dominant industry lead- 
ership without the code, the filing of destination prices according 
to the basing point formula served the same ends of discipline as 
were achieved by the combined basing point and price filing provis- 
ions of the Iron and Steel Code. A potential flexibility in the num- 
ber and location of basing point mills would tend to reduce the cont- 
rol element, but it is difficult to determine the actual extent of 
flexibility existent in the industry. 

Participation in the price-making process.- for any destination 
was not limited in the cpment industry either by the code or by price 
filing regulations. Actually, price leadership operated to a high 
degree in the initiation of prices. The number of mills following 
such leadership at a given destination point depended on those willing 
to serve the market (or to quote on a particular, bid) , and to meet the 
filed price by accepting a lower mill net for the shipment. 

Destination orices were necessarily uniform. The intention of 
the industry to keep all elements of competition uniform is evidenced 
by other code provisions covering terras and conditions of sale, dealer 
relationships, etc. It is further indicated by the efforts to require 
the filing of destination costs to the Ignited States gover-nment, and 
thus to prevent dif f e->-ences in bids that might arise through the ap- 
plication of land grant or other special freight rates. The practice 
permitted members to submit bids to the G-overnment, based on a price 
F.O.B. shippers' mill, that would result in the ultimate destination 
cost quoted in the oid, when the freight rate was applied to the F.O.B. 
mill price. This practice was specifically authorized by the code as 
revised on May 11, 1935, biit the provision was stayed in the Order of 
Approval for further study of its possible effects. 

The cast iron soil pipe industry and the copper industry both per- 
petuated previous basing point systems by means of the price filing reo- 
uireraent in the code. In the former indistry, a single producing center, 
Birmingh'-m, Alabama, was used as the base point, with an ass-umed base 
price of f'^lOO. (*) 

(*) Frenuent violations and evasions of filed prices were charged but 
the discounts on file were identical in most instances. 



Trrde discounts w^re deducted from tlds "base, anu freight from 
Birmingham to destination was adoed for the delivered nrice. If the 
shipment was made from a point other tiian Birmingham, the actual freight 
was absorbed by the shin-oer. The result was uniform delivered rjrices by- 
all -oroducers at any point in t.iC United States. Members of the indus- 
try who objected to the oractice claimed that although the use of the 
Birmingham base was not orovided for in the code, they were warned 
that economic pressure in the way of destructive -orice cutting would be 
used against any member who dl.d not conform to this -orpctice. (*) 

A basing -ooint system was established in the coDner industry by 
means of Regulation No. 3, f iling of Prices , which required that: 

"Prices filed shall be for electrolytic co-o-oer on the basis 
of Connecticut Valley delivery and shall include differentials 
for all other grades, shp-oes and -ooints of delivery. The Sales 
'Clearing Agency shall -nromiDtly advise all members of all such 
filed -orices and differentials and by whom filed." 

c. Uniform Delivered Price Zones . 

This narticular form of delive^-ed pricing contemrDlates eoua.l- 
ization of frei.':ht costs by ef ch -nroducer, so that all consumers located 
anywhere within a defined zone will be ouoted the same delivered, -orice 
regardless of actual freight costs. Presumably, the freight element is 
arrived at by some method of averaging freight cost unon all shipments 
to those located within the territory. 

Essential administrative difficulties in enforcing such a method 
of freight equalization are obviously lessened ''ay the use of price fil- 
ing, with delivered -orices filed a-oplicable to the defined area (whether) 
filed regionally or centr:~lly). Meeting of comnetition at the point of ■[ 
destination becomes -oossible by the meeting of one de livered price a-op- 
licable to an entire zone. Price -uniformity among -oroducers is then 
easily maintained. (**) Any natur"! geogra.-phic advantages so far as 
freight costs are concerned are nullified, and the -nrice structure is 
at the same time simplified for pur-ooses of filing and dissemination 
of price information. 

In addition to the advantages offorded by price filing to approved 
systems of -uniform delivered zone prices, there are instances under IffiA 
codes in which price filing reouirenents were utilized to set up such a 
zone system without code sanction. 

(*) Letter to deputy from administrative member. May 2, 1935 (in 
IT5A files). Letter from TTalker Machinery and Foundry Co., 
Roanoke, Va . to deputy. May 19, 1934, ITRA files. 

(**) The term "uniform delivered rone price" in itself refers to uni- 
form prices quoted by one producer to all customers in a zone. 
Uniformity among producers -for standard products is a natural 
and expected result of such a process of freight equalization. 
It is facilitated and perfected by price filing. 



The iDusiness furnitiore industry included in certain divisions of 
its nroTDOsed code (including steel office furniture, shelving *ind vis- 
ible filing eouinraent) , a lorovision that a zoning system he incorT)orat- 
ed in connection with-nrice filing, inasmuch as 

"Differences in frei^rht rates pn^'i costs of transnortation necess- 
arily resiilt in discrimination as hetween -ourchasers in cUfferent 
localities. In order to minimize such discrimination each raemher 
sh8.11 -Duhlish a iDrice list for e-'Ch of the follo'ving zones ...." 

The system was to include uniform mandatory freight differentials 
to be ar'ded to the oase larices, \vhich ?/ere to a-n-nly to the Eastern Zone. 

ITone of these zone plans was a-n-oroved 'by W^A but they were T>ut into 
use under the nrice filing nlan hy code rulings and recommendations 
drawn up hy the -planning a.nd classification hoards, on the assum-ption 
that a.uthority was conveyed in the following T5rovision in Schedule A: 

"The price and/or selling of any item of industry tr^oducts 
helow member's cost to the ultira;ite consumer as determined 
by the cost accounting methods set uri by the Code Committee 
and subject to a-o^roval by the Administration, in the quantities 
and under the conditions and at the -ooints of delivery involved 
is an unfair method of comt)etition. "' 

The code authority ruled that no member of the industry could file 
■orices on other than a delivered basis, and reinstated the zones and 
zoning differentials pronosed before. An opinion given by the legal 
advisor on the code indicated that this ruling could not be su-onorted 
and that members were entitled to quote either on a delivery or F.O.B. 
basis. The cost accounting methods had never received NHA a^nroval, so 
that justification for the mandatory recommenda,tion did not arise from 
the above provision. (*) 

The Paper and Pulp Code as amoroved, rtrovided for the calcula- 
tion of -prices on a delivered basis, with cost of distribution to be 
included as a -oart of cost. It did not specif ically reauire the filing 
of delivered prices, but gave to the code authority the right to pre- 
scribe the " form" in which prices should be filed. The fair trade 
practice provisions presented by the sub-cede authorities for various 
product divisions in January, 1034, proposed for several divisions a 
complete zoning system, with all quotations to be F.0.3. mill, carload 
rate of freight allowed. Four zones - Eastern, Central, Mountain and 
pacific - were established, with the requirement that the price base 
for all m embers was for' delivery Vin Iho-^Eantern zone, with specific 
zone differentials to be added for other zones. Such a system of uni- 
form delivered zone filing was maintained by code authority rulings 
and industry practice despite the fact that' the trade, practice provis- 
ions were disapproved by the Administration. The power granted under 

(*) Memorandum from Julian Johnson, Legal Advisor to Deputy Adminis- 
trator, September 13, 1934, NPA Files. 



the code for the code authority to prescribe the forms of filing may well 
have been deemed sufficient sanction for prescrioing delivered price 
filing, by zones, but it did not in any detcree sanction the require- 
ment that uniform zone differentials, be added to the price for the base 
zone. Such an end could have Deen achie\ed onlv tnroufi:h ^roup acceptance 
of the trade practice provisions, under code authority direction, or by 
tacit process of follow- the-leader. 

A similar restoration of price filing by zones v'as accomiDlished 
in the envelo-oe industry after NiiA sanction of a proi:osed zoning 
system wps vdthheld and it was deleted from the code. (*) 

( d ) Other Fo r ms of Delivered Pricing . 

The use of delivered prices and i"rei«'ht ecualization i^as not limited 
to those codes providing specifically for oas-ing points or uniioriii 
delivered -price zones. The fertilizer industry provided for the division 
of the industry into marketing areas for pvirTDOses oi ac;;iinistration. 
These areas ^'^ere ordinarily based on tyce of crop and soil, and differ- 
ences in freight cTiarges. Tney were not set up in connection with any 
specific device to govern geographic price relations, although it "as 
provided in the code thf^t regional committees might adopt unifor'i rules 
governing transportation which would be binding upon raenbers after thev 
had been approved by the FnA. Such rules were never submitted for NRA 
approval, although the practice of filing prices on a uniform delivered- 
to-the-farin base within zones was developed by a process of concerted 
action and price leadership under the price filing plan. (**) Hembers 
could file prices atiplicaole to any zone or to any sub-division ^^ithin 
a zone, but could not sell in any are? witnout filing-. Transportation 
charges ™ere uniform in almost every area, with provisions for allo^'ances 
for truck transportation and other transportation services rendered 
oy the consumer. tny manufacturer could equalize freight charges to 
meet the lo'-er price of a competitor more iavorajly located, by absorbing 
the freight charge and filing the lower price set ,by his competitor. 
The adoption of the delivered-to-the-faria basis of pricing was ostensibly 
for the purpose oi' simplifying the price structure and facilitating 
the comparison of filed prices. The practice probably contributed to 
this effect, although the ability to eliminate the distributor as an 
uncontrolled element in price competition wps prooably a more compelling 

(*) See below p, 321- ' The cork industry also proposed a zone delivered 
price system on the grounds tnat it vras an existing practice in the 
industry. The provision V7as not approved by KhA. 

(**) The resolution passed at the one administrative committee meeting 
is recorded in the minutes of Julv 11,, 1934, calling for delivered 
to tae farm basis' of Quotation, the schedule to show allo'-ance for 
delivery from railroad- or bo^^t landing to farm. Decision as to the 
time of for'^arding notice of action to the NHA was left to the 
executive director. 



The Steel Castings Code Authority likevise required Dy regulation 
th?t prices filed by ? member snoulc be uniiorm dtliverec -pricfcE (with r» 
freight included) to pll custo.uers. This was Dart of thegenerpl 
lorraplized price structure set up by the incustiy for Drice schedules. (*) 

The 3ode Authority oi" the CopiDer and rass ;.dll Prooucts Industry 
issued a Dalletin of _.ules pnd ne^ulatibnn on Nover.iber 7, l&^-4, incl-j.ding 
I eqj.irements for delivered prices on all chirjinents of 100 lbs. or over, 
witn prepayment of freight, -"s follov^s: 

"hule No. 9. ireight Allowances. oi sale shall 
include prepayment of freight to any destination m the 
United States on shipments oi 100 i?oands net or more with 
the unc erstanding that the shipper reserves the ri;:nt to - 
control the routing. i<,;aotations shrill providi^': 'The 
prices quoted are f.o.o. (insert destinatior) . ' "here 
other then shipper's regular .nethod of shipraen" is used 
. terms shall be f.o.b, mill '-ith actual freignt allo'-'ed 
but at not more tnan the lo'-est publishec rate, uuotations 
for each shipment shall provide: "The prices 
ouoted art. f.o.b. mill, freight allo"-ed". 

"Manufacturers shall not make anv allo'^ance to a customer 
who provides his oi-'n carriage oi a saipment from the Mill 
or any intermediate point, 

"All shipments under 100 pounds siiall be f.o.b. mill, but 
if delivery of such cnipments ic aade by seller a mini iium 
charge 01 $1 shall be lade, except that in the case of 
parcel post and express shipments the actual cost of 
delivery inust be charged; provided, ho'-tver, that such 
rainiimim charge shall be applicable c^ly to shipments 
.from the mill. . 

"L^cess transportation charges assessed by railroad or 
steamship coinpanies covering shipments recuiring special 
equipment in handling or transporting shall be charged 
to customers." 

The code for this incustry, in Article IV, contains autnorization 
for this action, since it reouires manufacturers to adopt and maintain 
equitable uniforin contract terns and conditions to De establistied by 
the executive coiijnittee and since it states that it is the "policy of 
this code" to bring about uniformity in regard to consignments, freight 
allowppces anc otner sales practices. Specific WrJ approval oi the terms 
adopted was not reouired, alttiough they could, under the provisions of 
Article XV, have been disap'?roved. No evidence appears that tlie freight 
regulations were ever for'i^lly reviewed. 

The Asphalt Shingle and r.ooiing Code contains no reference to 

(*) See report, Appendix 3, F. 705, 


transportation provisions other than a provision in the price fili'^g 
article requiring distribution to epch claec- oi trace of the prices, 
terms and conditions of sale, aiiecting ^ach such class oi trade "in the 
territory to vhich such pricer, terms and conditions of sale apply". 
This provision was apparently in recognition to the prevailing industry 
practice of freijfj-ht equalization, "'hereby prices were ouoted f.o.b, 
factory plus a delivery charge based on rates that would apply if the ■ 
customers bought frjm the factory nearest to him. A zoning plan proposed 
by the industry in its raei chandising plan (submitted in ^Jarch, 1934, but 
never accorded NnA approval), '"ould have sini'-ilif led and. systematized 
tnis practice by setting up a zoning plan. Under this plan each plant 
or group of plants in close proximity v/as made the center of a zone 
having an average carload freight of 10(# per hundred veight. Shipment 
to zones located at greater distance from the plant or group oi plants 
required successive freight differentials of 5i^ per hundred weight 
to be added t^ the delivery charge. In filing delivery teras prices 
could thus have been eouallzed in brackets of 5^ per hundred weight 
rather than by the nearest amount of actual freight rate. The essential 
features of this plan were in force through the individual tilings of 
industry members. lurther detailed regulation of freight alloi^ances 
according to customer classif icar ions was also proi:osed in the merchandis- 
ing plans. (*) 

The vitrified clay sewer pipe industry, attempted varied mandators 
regulations of transportation terms by code authority action. Thus on 
December 1?, 1932, the eastern regional code authority voted certain 
regulations to oe in effect for a trial period of 30 days including the 
reouirement that (with minor ej^ceptions, noted) raanuiacturers must quote 
and sell pipe on the basis of F.O.B* errs nearest rai'^road station or 
spur, and that, for purchasers comin=.-: to the plant with a truck, under 
no circumstances was the price to be lowejr than "Schedule #1, no freight 
allowed". At the same meeting it was lesolved that the secretary should 
require all firis to file in writing by December 14, 1933, schedules of 
prices of pipe delivered on the job. 

Later, on June 27, 1934, ..lanui f cturers "rere informed by letter 
of Resolution No. 65, that the regi.onal com'aittee could establish 
delivery terms in the various trade areas which should 'be uinima man- 
datory I or manufacturers ^'rho quote delivered prices beyond the rail 
point nearest to the customer - i.e., f.o.u. job site dealers' yard, 
etc. Resolution No. 67, established such ipinima at 2 points of the 
list i2-/o) . This was to apply to some thirteen eastern states. Later, 
4 points of the list was established as a similar minimum charge 
applicable to Ohio. Eacn manufacturer was required to add these charges 
to his individually filed f.o.o. car prices. 

'These regulations '-'.ere adopted pursuant "to 'Article XI, section 1, 
which authorized the regional committee to establish" "standard terms 
of sale" subject to review by the Administrator, but were issued to the 

< *^' See Appendix A for detailed account of the operation of these 
practices. • ' 



industry ^"ithout -prior review. (*) ' . . 

The account of these and other activities of this industry in 
seeking to establish control over prices indicates the value of delivered 
pricing and the importance of mandatory regulation of transportation 
charges, as a means to preserving uniformity of filed prices and 
competitive terms. (**) 

(e) Price i'lling Zones and Anti-Dumring Zones 

A number of FtA cooes provide that prices shall oe filed according 
to established zones or areas instead of with a central national agency, 
or that prices shall be filed to apply to separate areas, even though 
recorded •'^ith one national office. Such price filin-- zones do not irat)ly, 
of necessity, any process of freight eaualization or other regulation 
of transportation allo'-'ances (such as vias descrioed in the svstem of 
uniform delivered price zones) althouf:n sone systematic regulation may 
ue undertaken in connection '"itn them^ 

The reasons for such divisional orfi:anization are ordinarily given 
as the necessity for sim-olifying the procedures of filing and disseminat- 
ing -orices. The T3ractic»l consinerations ai'e oovious when there are many 
producers and many product classii icrtions. If competition is more or 
less localized or if the points of supply are well scattered over the 
country, competition may be naturally limited to those producers in a common 
market area. Under such circumetarces it is neither necessary nor useful 
to disseminate prices that are applicable in iar distant regions. (***) 

There is a further positive advantage so .far as the industry is 
concerned resulting from the more friendly cooperative relations that 
can be built up Tvithin a smaller grouiD, This elei.ient vras highly e n- 
phasized by Mr. Eddy and the early advocates of price filing and has a 
distinct significance in forvaiding the success ot the mecnanism as a 
stabilization measure, in that it emphasizes the interdependence between 
competitors and the values of cooperation. The opportunities for ef- 
fective education and propaganda are much better, in small units, rith 
the further advantage, recognized in several codes, of adjusting particular 
market regulations and/or prices to local competitive circumstances. 
So long as such price filing areas are purely aCitiinistrative in character, 
tht advantages of smoother operation and less complicated mechanism for 
filing and disseminating vdll warrant their use. If price liling is 
intended primarily to serve as a stabilization device, such regional 
areas may further the desired voluntary restraint in price cutting better 
than would a system of national filing. 

(*) See letter from J. T» Lyncn, Assistant Deputy to D. M, Strickland 
Manager of the Eastern Regional Comi.iittee, 7-21-34, NKA filed. 

(**) See pp, 300-312. • ■ ' 

(***) See Chapter III above p. 98. 



In two other respects price filin,^ zones may involve dei'inite 
control of competitive -oricinB;, In many instances price filing zones 
are iised similarly to anti-dumping zones to limit the riarticipation '-'f 
outsiders in the formation of the nricc- level. This is accomr)lished 
either by the simple device of forbidding producers to file prices 
in zones in rhich they are not located, or bv reruiring them to 
file prices no lower, than the lowest price filed by a producer located 
in that area. (*) 

The anti-dumping and price filing zones in the salt industry were 
synonymous in geographic area, with the code providing that a producer 
outside of a geographic area coald not t-:±ve a more favorable price to 
a purchaser in a given area than that purchaser could get in the area 
in which he was located. The restrictive effects of this segregation 
of price-making into areas were felt in particular instances in the dis- 
continuance of coLlmissions that had formerly been granted by outside 
producers to particular customers, including farm cooperatives. (**) 

In one inrtance complaint Ti-as m,'de to NHA that Trices on one 
product in a particular area '-ere controlled exclusively by a single 
producer, v^ho had increased prices unduly and was able under the terms 
of the code to inaintain them at that level because no Outside company 
could file or sell in the area belov the price established bv this 
local producer. (***) 

The prevailing practice of the industry for vears prior to NRA. 
had been to. issue published price lists for the marketing areas in.vhich 
a member desired to sell and to compile state freight rate books for 
use in '■■rriving at deliverer orices at any pomt within such market area. 
Freight rates '^ere calculated per 100 pounds from the nearest producing 
fields. Tlie result of these practices nas uniformity of prices for all 
producers to customers loC'-^ted at each point of deliverv, but no uniformity 
between prices charged to customers located at different points of 
delivery. The extent to vvhichcompanies would absoru freight was a 
matter oi individual company policy in extending the sales area by 
meeting competition at the point of delivery. Prior to appi oval of the 
KRA code and price filing plan the restriction on undercutting .prices in 
other areas ' as wc.iifciined on a voluntary basis. Under the code this 

(*) E. C-. , Lime Industry Code, as revised, paper distributing and salt 

(**) E. g. , Correspondence between Farmers i;;ievator Service Co., the 
code authority, the deputy administrator, and the Jefferson 
Island Salt Company. For details, s(.e Summary Report of .■Dist;Fibu- 
tion r.elrtions in the Salt Producing Industry, Preliminary Report, 
Distribution i-.elations Unit, Trade Practice Studies Section^, 
Division of Revie"', p, 1?. 

(***) Complaint presented at Price Hearing, January 9, 1934, - NRA: files, 


practice vas set forth and reaffirmed with the stipulation in Article 
IV concerning published prices thr-.t "The mininam prices published in any- 
marketing field by any producer in that field shall De the lowest prices 
at which any producer mpy sell in that field." 

Other price filing requirements allow members to file in zones 
other than their oi-'n, but require the adoition of transportation 
charges to the price filed in the home area. Any of these th^-ee -oro- 
visions effectively limits the ability of a procucer to extent his 
price-making influence be^'■ond his immediate area, even though it does 
not ali-'ays shut him out from the market. (*) 

The mayonnaise industry sought to limit freight absorption by 
a provision forbiccing manufacturers to sell beloi" their 0"'n cost 
(which imist include the cost of transporation to destination) except 
to meet the "legal" price oi another manufacturer* '.hile this restriction 
Fas not accoMpanied by the setting up of anti-curaping zones, it ^as used 
for essentially the same purpose - to prevent distant competitors from 
undersellin ■ local competitors, by forcing them either to add full 
transportation costs, or else to accept the filed price of local 
manufacturers. In other vords, delivered i-rices might be eour-lized, 
but freight absorption could not extend to the point of lo"'ering the 
going price list of local manufacturers. arnings of prosecution for 
code violation ^-'ere issued by the Code Authority on several occasions, 
including Code Authoritv Release No. 3, dated IApv ?i^, ly34, wnich 
state that: 

"....It is very important that manufacturers si ould. 
note that auotations or sales made lor shipment at 
a distance from the manufacturers plant can only be 
made "legally" at a price sufficient to cover tne 
full cost of freight to the city in i^hich the trade 
is located. 

"Some manufacturers who are selling at a very low 
price (approximately cost) in their own home market, 
are selling at distant points, where freight costs are 
considerably higher at the same price and are under- 
selling local competitors. Such sales are mace in 
violation of this Code since they art; at prices below 

"The Code Authority cannot accept for itself the 
responsibility of vprning each manufacturer in such 
instances. It is the duty ot each manuiacturer to 
I . und'jrstand the code and, .to operate :in accordance with 
the Code provisions and, therefore, it is suggested 
that each manufacturer view his 0"'n transaction in 

(*) Compare the results with those sot forth in the Freliminarv heport 
of the Geographic Price Unit, op cit. pp. 10-1?. 



terms of this e:x-olenation. If any trgnssction is mnde 
in violation of this explanation, the Code Authority, 
in prosecuting; violations of the Code, i='ill deeifi that 
this bulletin ipives full -.earning and such notice and 
ex-planation as reouired. 

"No manufacturer npy sell below his ovn cost (I'hich 
must include the cost oi transportation to destination) 
exceiDt to meet the "legal" price of another manufacturer 

It is observed above that the filing; of prices applicable 
to zones or limited marketed areas permitted and encouraged the 
preservation of regional differentials in price. This ^-^as in part 
due to the limitations on outside competition in the "price-;,iaking process, 
regional price filing is also conducive to the protection of a local 
competitive situation - either of -orice cutting or of a high degree 
of price control - preventin;'; the general spread oi a T'eaker price 
situation throughout a wide area. Or the entrance of outside competition 
that might tend to bring a lowering oi prices vithin an area. 

This result has been apparent in a few industries which altered 
their price filing renuirement by code authoiity action to permit 
isolation, or special tre?>tment of trouolesome price areas. Thus, 
the Eastern regional committee of the vitrified clay sewer pipe industry, 
when faced with a severe price cutting situation in metropolitan New 
York, considered the advisability of abandoning price filing in that 
area in oi-der to preserve the price sturcture outside Nev York, or 
of filing separate prices for the are^ which '-'ould not apply to the 
rest of the region. 

In several instances price filing areas were made to coincide 
with previous trade association groupings; this facilitated compliance 
and cooperative action in observance of group marketing prices, regional 
price leadership, or other forms of control. This was particularly true 
of the Pacific Coast area. 

5. Terms and Conditions of Sale 

Regulation of the terms and conditions of sale afforded the 
various industries a signiiicrnt form oi control over the price structure. 
Price filing plans in some instances were useful as a means for checking 
conformance with such controls and in other instances as a means for 
the establishment of such regulations. In most cases, hov^ever, it 
is difficult if not impossible to distinguish between these restric- 
tions which i"ere established entirely apart from the price filing plan, 
in which case price 'filing served only in a policing capacity, and those 
which were estaolished or intended as an integral part of the plan. 

(*) In VRA Files, mayorriaise industry. 


In any ca'se-, standardization of the terms and conditions of sale 
has teen encouraged and defended "by the industries as necessary in 
order to eliminate the evasion of filed prices through secret and 
indirect concessions. (*) The usual objection to the establishment of 
such uniforra or maximum terms of sale, on the other hand, was that it 
constitutes one element of price fixing and to that extent serves to 
rigidify the -orice structure. 

A review of the code provisions and of the available authorized 
and unauthorized reei^alations and rules promulgated Dy the code authorities 
indicates that all of the 57 industries selected for special stuay en- 
gp£;ed in some form of regulation over terms and conditions of sale. Usually 
this was accomplished by a provision in the code, although tho more de- 
tailed type of regulation t<'£s «ffected by the code authority rules and 
regulations, which cf ten represe'^ted deviations irom the powers granted 
by the code. In some instances the code and the code autnority combined 
to prescribe limitations on price terms. 

An indication of the degree of control exercised over the price 
structure through the method of standrrdization is presented in the 
following chart, '"hich notes for tne 57 industries the cases in which 
the code or code authority imposed some kind of restriction upon the 
use of eleven types of terms and conditions which have been chosen for 
illustrative purposes. Irumerous exa:nples oi the restrictions adopted 
by individual code authorities in connection with the price filing 
plans are available, but are not included here. lany of them appear 
elsewhere in the report. Examination of the case histories of price 
filing in the steel casting and aspnalt shingle and roofing industries (**) 
will indicate the manner in i^hi ch such ret^alations may be used to discipline 
pnd to secure uniiorraity in the terms and conditions oi sale filed by 
industry members. 

Other illustrations given would servo merely to imxltiply the inst.f-n'^.es 
of such regulation. 

(*) See Chapter III, above ppges 118-120. 

(**) See Appendices A and B. 



Instancee of Control over Price Struct-ure by Regulation 
of Specified Teras «md Conditions of Sale. 









X ; 


Agricultural Insecticide 




Asphalt Shingle & Hoofing 




Builders' Sv^nlies 


Business Furniture 

X : 


Candy ! 

X : 


Canvas Goods 


Carbon Dioxide \ 


Carpet & Rugs \ 

X : 


Cast Iron Soil Pipe \ 

X : 


Cement ; 

X : 

' 5266 

Coffee ; 

X : 

, X Jl 101 

Copper ! 

y : 


Copper & Brass Mill Products; 

y : 


Cordage & Twine 

X : 


Crushed Stone, Sand &Gravel 

y : 


Electrical Manufacturing 



X : 


Farm Equipment ; 

X : 


Fertilizer ; 


Fire Extinguisher 

z ; 


Floor & Wall Clay Tile 


Folding Paper Box 

X : 


Funeral Supply 

X : 


C5as Appliances ! 

y : 


Industrial Alcohol ! 



Ladder ! 

y : 

-■ 31 


y : 

4 234 



Mrciiine Jool & Forging 

y : 


Marble Quarrying&Finishing 


tiarlcing Devices ; 

z ; 


".'ayonnaise ; 


Iledium * Low Priced Jewelry ! 

z ; 


Metal Lath 


Metal Window 


Nottingham Lace Curtain 

X : 


Paper Distributing . 

y : 


Paper & Pulp 

y : 


Plvuabing Fixtures ! 

z : 


Ready Mixed Concrete ; 

y : 


Retail Monument 


Retail Rubber Tire<S:Battery 

X : 


Rubuer Mfg. 

; z • 


Srdt Producir^ 

: ! 


Scientific Apparatus 

! y ; 


Set Up Paper Box 

! y : 


Shovel, Dragline & Crane 

: X : 


Steel Castings 

z : 


Structural Clay Products 


Tag Manufacturing 

: y : 


Underwear &. Allied Prouucts 

: X , 


Valve Fittings 

! X ; 


Vitrified Clay Sewer Pipe 

: z : 


irnolesale Confectionery 

• X : 


Wood Cased Lead Pencil 

: X : 


39 : 

Key to Symbols: 

a e *> 
o • o 

O B O 
fl « <M 

& *a o 

o o 


a o t< 

o .H o 

*» O. e 

u a 

« *> 'H 

W ■ rH 





26 :25 





'-' » 
u o 

^ CO 

U ft 
IS) o 

>. •-' 





X J 





y: y 

X : 

y I 
■ : 

X : t 

I : X 

t : 

X : X : 

X : X 




y : 


X : 


! X 

J X 




^ - Regulated ^y '-^^ code provision 
y _ II « II code authority 

z « " II II Code pj;d code authority 

22 :21 ; 20 : 14 : 13 :11: 




The relation of the price filing requirements of nannf acturinj^ codes 
to the resellers of products presented constsait difficulty in the opera- 
tion of price provisions and in IIEA administration of open price plp,ns. 

These difficulties can he grouped roughly in tr.'o classes, although 
the]'- varied somev/hat from code to code. They involved: 

(1) The possihle use of distrihutors, either 

controlled or independent, as a means 
of evasion or suhterfuge to avoid ad- 
herence to filed prices, and 

(2) Competitive disadvantages that might arise 

hecause some sales at a given distribu- 
tion level were made in accordance \?ith 
filed and open prices, while others were 
unrestricted either hy puhlicitj'' or the 
necessity of adiierence to published prices. 

The second type of problem ■".•as still unresolved, so far as official 
WRA. policj" was concerned, at the close of code operations, althoiigh cumu- 
lative p.dministrative and economic difficulties had arisen to indicate 
the need for some guiding principle to follow in code revisions. (*) 

Accoiijits of pre-lQA open price plans throw little light on the prob- 
lems of distributor participation in p^'ice filing plcns set up by manu- 
facturers. This nay be explained by the circumstances (a) that voluntrj'2r 
open price systems were usuplly composed of sellers with common interests 
and methods of operation, (b) that they did not bind their members to 
current or future prices, and hence left thera free at any moment to meet 
the prices quoted oj those not pnxticipating in price filing, and (c) 
that since pre-KEA price filing plans rarely included all the manufactur- 
ers of a product, the non-participation of distributors was of relatively 
less importance. 

The tv:o problems outlined above presented distinct issues of public 
regulation, and hence will be discussed separately, even though the perti- 
nent code provisions did not always differentiate clearly between the two 
purposes of preventing subterfuge end of eoualizing competitive adVcin- 
tages, and the activities of code authorities pursuant to such provisions 
were even less separable. 

(*) A committee, -under cnairnanship of Millard Thorp wa-S appointed 
under Office i,ie;norandum 333, February 1, 1935, to study and to 
condr.ct heerings on distribution differentials in codes. This 
committee included uneo^ual price filing requirements among the 
topics for study and report, but no formal recom;aendations were 
ever released as a result of their investigations. The extent 
to v.Viich complete publicity v/as deterred by exem-ption of dis- 
tributors from price filing requirements is treated on pages 
1*^4 and 110 of the previous chapter. 



1 . P rohi'bition of SubterfUjf^e or Svasioa of Price Piling ; 
liequirement Tjy Keia"bers thro-'j^h Use of Distribut ors. 

The first problem - tne.t of preventing evasion of price filing Vf 
members - v/as primarily one of compliance e-Jid enforcement of price filing 
rec[uirenents approved by IGA and made mandatory upon code members. De- 
liberate evasion of the requirement of publicity through e. controlled 
source of distribution, or through collusion rrith an independent distrib- 
utor, v.'as a patent code violation. Eence, the explicit proscription 
against such an evasion or subterfuge, T;hen needed, vas entirely in keep- 
ing with the intent of the price filing requirements of a code, ^nd did 
not entail e::tension of those requirements to groups that had not pcrtic- 
ipa,ted in code drafting and ^ere not subject to the provisions. 

But even though the principle involved was clear, the compliance 
problem of determining just when a distributor was controlled, or v/hen 
there we,s actually collusion to defeat the purpose of the price filing, 
raised frequent difficulties. In other instances, the prohibition against 

subterf\ig-e served to emphasize unequal competitive relations betv/een 
meraber-moJixif actixrers, which led to a demand for controls to bind inde- 
pendent distributors, or to delimit the conditions under which member- 
raanufactiiTers might deal with such distributors. (* ) 

Code provisions forbidding members to utilize distributor channels 
as a means of evasion of the price filing requirements were limited in 
some cases to sales through wholly-owned or controlled sales affiliates, 
or through controlled brokers, agents, or comiuission salesmen. In other 
instances, they v;ere more general, forbidding members to diverge from 
filed prices "either directly or indirectly through distributors, or 
otherwise", provisions of the, former type were upheld by IdA, and oc- 
casionoi interpretations ascribed such obligation to controlled outlets 
even when the code did not specifically bind them to observe the prices 
filed Vj the parent company. The principal-agent relationship v/a,s con- 
sidered the governing factor in such cases, with the member company re- 
sponsible for the prices of distributors and brokers, v/hen they were 
truly, acting in the capacity of an agent and did not take title to the 
goods. Despite this general attitude, the iSA did not impose the re- 
quirement with any consistency. (** ) 

lypicel code provisions governing controlled OLitlets were those 
contained in the valve and fittings, the metal v/indow, the readj^-mizced 
concrete, the asphalt shingle and roofing, asbestos, and crushed stone, 
sand end. gravel codes. 

The Valve and Pittings Code (53) Article IV, Sec. 13, provided that 

(*) See next section, pages 276 FP 

(**) E.g., Ruling and interpretations in the Caat Iron Soil Pipe Indus- 
try. See also Item 1126, "Controlled Enterprises", page 13, "ork 
Llaterials Ho. 20, by Alvin Brov/n, Division of Review, "Policy ' 
Statements Concerning Code Provisions and related Subjects." 



"A sale nade by any nem"ber of the industr;;,'' through, an affiliated produc- 
ing conrocny of such member shall "be deemed a sale made by such member." 
Despite this code provision governing; affiliates, the problem of other 
kinds of controlled outlets caused great difficulty in the valve and' 
fittings industry. Some of the larger companies, including the Crane 
Company, distributed largely through v/arehouse and branch outlets. The 
industry apparently could not agree on an interpretation of trieir status, 
and the deputy administrator did not issue one on his ov/n res lonsibility. 
One resolution of the code ?:athority undertook to deal with t.'.e problem 
by requiring members to separate the operations of branch houises and con- 
trolled v.'c-xehouseG from those of thf= parent company and to rea^uire that 
they invoice goods to such controlled outlets at regular filed distribu- 
tor prices as a completed sale rather than a bookkeeping transaction. 
The ruling further attempted to require the controlled brancn or ware- 
house to maintain the manufacturer's prices in resale. The deputy ob- 
jected to this attempt to treat such outlets in a dual caxoacity — > as 
independents in buying and controlled in selling — but apparently accept- 
ed- the first requirement that they be treated as independent warehouses 
or distributors. Such a partial ruling of course, did not resolve the 
basic issu.e of control of resale prices by distributors, although if en- 
forced it might have put direct sellers (vfith controlled outlets) and 
those selling through independent distributors and p/arehouses on an eqiial 
plr,ne of freedom to depart from filed prices in the secondary market. 
But the possibilities of using controlled outlets as a subterfuge to di- 
verge from filed prices were too great for this to serve as an entirely 
satisfactory solution of the problem. 

The plumbing fixtures industry utilized a somewhat similar approach, 
requiring manufacturers to segregate their wholesale business and to in- 
voice to such departments at prices similar to those filed for indepen- 
dents. 'Pais was to have been accompanied 'by a mandatory differential 
bet^.'een i/holesale and retail sales, so that the products of all maniifac- 
turer's prices to wholesaler plus differential. The fact that this dif- 
ferential WG,s not established, and that price-filing in the TTliolescie 
Plumbing Code (which required maintenance of manufacturer's prices) v'as 
not put into effective operation contributed to the price filing diffi.. 
culties in the plumbing manafacturing industry, and. the failure of the 
device 3S a stabilizing measure. 

The Lletal Window Code (205) Article XV defined affiliates and pcrent 
corporations, and stated that, "Any such parent corporations shall be 
responsible for the observance by .-ny affiliated corporation of all app).ro- 
pria^te provisions of this code."(*) 

The provisions in the asphalt shingle and roofing and the asbestos 
codes were very similar. 

The Read5'--i.iixed Concrete Code (311) Article VII, Section 2, required 
that, "llo member of the industry shall directly violate this code hy dis- 
posing of his industry products through a middleman whom he controls by 
steals ownership, or any other form of ownership, aoid who does not .a^dliere 

(*) Codes of Pair Competition, As Approved Government Printing Office, V, page 150. 


to the standards of fair competition established "by the code." 

The Crushed Stone, Sand and Gravel Code (109) Article VII, ii,- stat- 
ed that "since the 2re,:t voluue of industry products is sold by prodiicers 
direct to consumers no producer indirectly shall violate this code by 
disposing of his products through a raiddleirian v/hom he controls by stock 
ownership or other-jise and who does not adhere to the standards of fair 
competition established in this code. " 

Code provisions that included other than controlled affiliates in 
forbidding evasion may be exemplified by those in the Vitrified Clay 
Sewer pipe (136) and the Shovel, Dragline and Crane (102) codes. 

Article XIII, Sec. 3, of the former code defined an affiliated com" 
pany, and stated that, "Ho member of the industry shall sell, directly 
or indirectly, through an affiliate company or otherwise by any meejis 
whatsoever , any of the products of the industry at a price lower, or at 
discounts greater or on more favorable terms of payment than those pro- 
vided in his current net price and/or price lists and discount sheets, 
so filed with the Committee as aforesaid." (Underlining Supplied) 

Article VII, Sec. 2 of the Shovel, Dragline and Crane Code included 
the requirement that, "Any deviation from tne standards set forth in 
this Article VII, or any amendments thereto, by any member of the indus- 
try, either directly or indirectly throu;^j. a distributor , shall be con- 
sidered CXI unfair method of competition and a violation of this code by 
such member." (Underlining Supplied) 

Such phrases as "otherwise by cny means whatsoever" and "indirectly 
through a distributor", failed to mJce clear the extent to which members 
were obligated for the behavior of- independent middlemen and the means 
which they were to employ in discharging their obligation. Ostensibly, 
the provisions applied only to deliberate subterfuge, but they were not 
always so interpreted by the industries concerned. Thus, the Business 
Furniture Code (88) included in four of its supplementary codes the 
following ambiguous provision: 

"Ho member shall sell any industry product contrary to 
his published prices, discounts, or terns of sale; and since 
a substantial- majority of the industry's products are sold 
direct by the manufacturer to the consuiner, and since the 
purpose and effect of this article would be otherwise defeat- 
ed, it shall be an unfair method of competition for any mem- 
ber to distribute to the user industry products indirectly 
through an agent, dealer, broker, or otherwise, contrary to 
his published prices, discounts, or terms of sale," 

There is apparent in such a provision the mingled intent to prevent 
subterfuge and also to equalize competitive relations at the consuiner 
level, by maJcing members of the industry responsible for the behavior of 
middlemen in preserving their published prices and terras of sale. This 
provision was interpreted by the code authority to constitute a resale 
price maintenance requirement, and caused prolonged controversy between 
the Administration and the industry. The problem of equalizing competitive 


positions iinder the price filing provision was cleL'Tly more dist'ur'bing 
to this gx'oup than the protlen' of preventin'j suhterfuges or evasions of 
the price filing reo^uireraent. Before relating the experience with this 
provision, it is desirable to ezcaaine hriefly the natiore of the prohleia 
of co:npetitive disadvantages prising \7hen distributors are exempt froiu 
price filing requirements of manufacturers' codes. 

2. Slinination of Competitive Disadvantage Arising Wh en 

Distributors are Exempt from tlae Price giling Requirement . 

The desire to malce distributors subject to price filing requirements 
arose most frequently in industries in vmich direct selling existed side- 
by-side nith distribution through middlemen. In such industries, manu- 
facturers filed prices applicable to ultimate consumers as well as prices 
applicable to jobbers and other distributors \7ho bought the products for 
resale. So long as the latter were not subject in some v/ay to price pub- 
licity, cuid to restrictions of tiie price filing plan, they competed in 
consumer sales on their o\in terms, and were able to cut under consuiiier 
prices filed by manufacturers \vithout disclosing their ovra prices or -oric- 
ing prsLctices. 

A similar situation existed vfhen manuf;.,cturers filed prices both to 
retailers and to wholesalers vmile tJiose wholesalers were free to sell to 
retailers at any price they chose v;ithout prior announcement of publicity. 
The complica.tions were perhaps greatest when (as in the business furni- 
ture industry) groups of manufacturers used distinct channels of distri- 
bution, one group selling direct to the consumer through wholly-owned 
subsidiaries or outlets, or through agents, brokers or commission 
salesmen, while others sold through independent '/holesalers and/or re- 
tailers. The first group would file consu;.ier prices with discounts, end 
was forced to adhere to these prices in all sales; the latter group night 
file prices in the same manner or might file only to primary distributors. 
In either case, if they were not held responsible for the prices of the 
inde-^endent dealers through whom they marketed their products, the -pro- 
ducts of the tviro manufacturers would meet in the consuier market, v/ith 
the direct seller faced v/ith secret competition from his competitor's 
products v/hen they were resold. 

The business furnit-uxe industry may have anticipated just such a 
situa.tion in drafting the provision quoted in the previous section. It 
had initially a.sked for an ercolicit resale price maintenance clause, 
which was denied by the Administration. The modified provision, li:il:ed 
to the price filing requirement, was substituted. (*) The result was, ; .s 
indic£i.ted, conflicting interpretation of the code. The industry v/as suc- 
cessful for a period in requiring adlierence by dealers to the published 
list prices of raanujfacturers, but was faced v/ith increasing non-coupli- 
ance from such dealers after the KHjl New Yorl: Regional Office refused to 
interpret the code to mean that members were responsible for maintenaiice 
of published orices through independent resale channels. 

(*) The fact that the original proposals of the industry included resa.le " 
price maintenemce, raandctory discoxmts and price differentials as 
v;ell as price filing suggests that price control was the primar;'- ob- 
jective of the ind\istry. 



The code authority then sought, on plea of -an emergency, to incorpor- 
ate a provision in the code reo^uiring members to secure resale price 
maintenance contracts with dealers, v/ith liquidated damages to "be paid "by 
dealers not conforming to such contracts. The Administration refused to 
give its assent to such a proposal, despite the insistence of the code 
authority that the only alternative v/as comulete brealcdown of the price 
filing plan because of the inevitable violations by direct sellers, who 
would be forced to meet dealer competition at- the consumer level. (*) 

a. Policy Consid-eration Involved . 

The t3roe of distributor problem presented to 'AAA in this instajice 
involved a somewhat different adrainistra.tive problem than that of pre- 
venting violations of the price filing pla:i through subterfuge. To in- 
sist that price filing requirements be imposed upon groups not otherwise 
subject to a code, simply to preserve or to bolster the price regulation 
desired by the original code sponsors, ajid to protect them from competi- 
tion from others not subject to the regulation, was not in accord v/ith 
NilA's usual policy of allowing an industry to propose its own forms of 
regula.tion and of limiting the jurisdiction of a code to the industry-' s 
own members. 

The price filing provisions in ISA codes were ordinarily sought by 
industries themselves and were not imposed by the Administration, gince 
the IIRA he,d not chosen to impose price filing on the manufacturer group, 
it could not w;.th consistency impose it on a separate distributor group 
unwilling to accept it.(**) 

(*) j?or reference to above, see Research and Planning Report, Code 

Adiiinistration Study of the Business Furniture Industry, Library, 
Division of Review; "The qualified resale price maintenance 
clause was included to place direct selling manufacturers and 
these who sold through dealers on an equal basis ,"... "adherence 
by dealers to the published list prices of manufacturers has 
beeu usual. A small minority in the industry, however by con- 
sistent non— corapliaxLce with Code Authority rules have nearly 
caused a' brealcdown of the entire elaborate control system v.'hich 
has been set up. " 

(**) Cf. the statement made by Corwin D. Edwards, at the Hearing on 

Distribution Differentials, March 14, 1935, Dr. Edwards was ashed 
by Dr. TJillard Thorp, Chairman, whether he believed that an effort 
ougiit to be made to treat the two groups (jobbers and manxifactur- 
ers) c.s far as they do the same thing, in the same way. Dr. 
Edwa^rds indicated general agreement with this point of view, but 
made the further point "that the group which has been tied by code 
provisions in most cases (since the codes have been written at the 
initiative of industry) has chosen to tie itself, and that the 
argLKient for tying aja additional group in the name of fairness is 
only strong if there is very strong public reason why tying is de- 
sirable. The argument for untying the group which is at a competi- 
tive disadvantage ought to be the prevailing one in all cases in 

which the regulation itself is not Clearly a public one; in other 
words, in cases in which you would not consider imposing the regu- 
lation upon the industries if they did not want it." llimeographed 
report. "Discussion from Record of Hearing on Distribution Differ- 
entials, "-following statement of Consumers' Advisory Board by 

nevertheless, the 'NBA had sho'/n itself rep.dy, in most cases, to en- 
coura^ge ;price filing provisions -DJicler proper restrictions, and to cd-.iit 
to codes such ct-ccessor;-- provisions as seemed necessarj'- to eff ectiiate 
then, so long as these did not r.ctually contravene declared policy or 
constitute price fining. This attitude r.iay exple,in in part the various 
compromises and inconsistencies in the treatment of the distrilDutor price 
filing problem revealed "both hv code -provisions and "by the adninistr^-.tion 
revieu of code authority nalings, and other extra^legal attempts to govHLTi 
distributor jrice filing relE,tions. The frequent inequities resulting 
from the e::emption of distributors from price filing \7ere recognised, 
but it v/as also recognized tha,t unless distributors './ere actually mad.e 
parties to a vertical code, the effort to bind them to observance of filal 
prices led in many cases to resale price maintenance contracts, and/or to 
secondcJ'3r bo;'cotts of distributors not 'Tilling to sign such contracts or 
to comply v.'ith manufacturers' filed prices. 

The'^e intended results v/ere apparent in approved code provisions for 
a number of industries. In other industries they beca:ne apparent only 
through subsequent rules and regulations of the code authoritj'^, man,-/ 
of vuiich w-ere nithout any sanction from the Administration. Still other 
industries, faced with complications arising from secret competition "o-j 
distributors, sought to extend some control over their price quotations 
by code ar.iendments or formal interpreto,tions from the iEA. 

b. Code provisions I]::tending Price Tiling Requirements 
to Dist ributors. 

In addition to codes including distributors as members of the indus- 
try, t,nd hence subject to price filing, code provisions meaait to extend 
the price filing requirei.ients to the distributor group fall into three 
general ca.tegories: 

1. Provisions making it mandatory for members to secure 

contracts from distributors, binding them to abide 
by the applicable -orovisions of the code or by the 
msjiufacturers ' ov/n filed prices; 

2. provisions permitting members to require such contracts. 

■"■"S. provisions forbidding members to sell to distributors 
not conforming to the practice provisions or 
otherwise non-cooperative. 

In practical operation, provisions of the t' o latter tjnes v;ere apt 
to lead to mandatory code authority .rulings similaa- in intent and in re- 
sults to the mandatory code provisions, unless dea,lers v/ere read;>^ to co- 
operate voluntarily in maintaining open prices, either by filing or by 
adhering to the prices filed by their suppliers. 

1 . Distrib utors Included ar. i.iembers of the Industry 

Difficulties in compliance \/ere not infrequent even v;hen jobbers 
were, by definition, subject to the code and its price filing provisions. 
If distributors were numerous and .not. well organized or if they were 



dealing in UEiny related lines of product, they '.vere little inclined to 
conform to detailed price filing requirements. (* ) 

Thus the Fcirra Equipment Code (20) defines the industry as inclxiding 
those engaged in the "manufacture and/or assembly and/or sale other than 
retail," of farm equipment, yet the code authority experienced difficulty 
from the very outset in securing price filings from the independent 
wholesalers, v/ho claimed tha.t they had had no voice in the code and were 
not subject to it. Some account of these difficulties is given in the 
Code Ad-uinistration Study of the Parm Eq^uipment Industry; 

jobbers, particularly hardware jobbers, maintained that 

they were not subject to the Farm Equipment Code because they 

were operating under the General "Wholesale Code The files 

of the Administration disclose that there was a great deal of 
correspondence and discussion relative to the disinclination 
of a certain class of jobbers to comply with the price filing 
requiren.ents. (=*=*) 

"On April 21, 1S34, the Secretary of the Coordinating agency 
telegra"ohed the Assistant Deputy Administrator requesting a 
statement of the position of the Administration regarding job- 
bers under the Parm Equipment Code. The telegram particularly 
aslied for an opinion regarding the desirability of obtaining 
jobbers' assent to the code by req^xiring as a condition prece- 
dent to the granting of jobbers' discounts that jobbers first 
assent to the code. The Assistant Deputy Administrator's re- 
ply of April 22, 1934, recommended raalcing jobbers discounts 
dependent upon assent to the code if they were not othenvise 
disposed to compl;/. (*** ) , . 

Appcjrently the advice of the assistant deputy administrator rvas fol- 
lowed by the coordinating agency. Jarm equipment manufacturers were s.slc— 
ed to file lists of their jobbers, and the latter were then asked to give 
assent to the code and its fair trade practice provisions, with the under- 
standing that they v/ould be refused the jobbers' discounts if they did 
not give such assent. 

But the controversy did not end with this. There was an exchange of 
letters in September, 1934, between the secretary of the Wholesale Ilard- 
vifare Trade Association and the assistant deputy e.dministrator, in which 
the former pointed out that it was out of the question to require hardware 
v/holesalers to file prices on some 700 small or large items of fai'm equip- 
ment, and stated: 

that all his conts.cts with the Administration had impressed 

(*) E.g. Scientific apparatus, farm equipment, carbon dioxide, vitri- 
fied clay sewer pipe. 

(**) Research and Planning, Code Administration Study, The Farm Equip- 
ment Industry, Division of Review. 

(*=^*) Op. cit. pp. 38 ff 


u-'oon liira that the Atiininistration nould not coijjitenance any con- 
dition '.vherety manufacturer g rnifht e::ercise any control over the 
selling prices of independent '.rholesalers. 

The assistant deputy adjiinistrator v;rote "bac'-c assuring hira that "be- 
yond any douht such wholesalers v.-ere subject to the I'ejrm. Equipment Code 
V7hen se; farm equipment. Still a later letter from the Administra- 
tion llenher of the coordinating agency (the code authority), dated Febru- 
ary 16, 1935, indico-ted that members of the Hardware Association had not 
yet been \i"illing to file prices. (*) 

The a.ction taken by the industry in denying jobbers discoimts xras 
tantamount to a boycott of all distributors refusing to comply, and op- 
pears a cfLiestionable method of securing compliance with the price filing- 
provision despite the fact that jobbers were, according to definition, 
included uiider the code and night have been subject to prosecution for 
violation of its provisions. 

The funeral supply industry included jobbers as members of the indus- 
try, but instead of asking them to file prices, the code made it an lui- 
fair practice to "extend to rny customer, either retail or jobber dis- 
coiuits and terms differing in any vajr from the manufacturers' published 
discounts and terms." This provision was defended by the Code Authority 
Secretary, John Byrne as follows; 

It is manifest that manufacturers cannot maintain 

volume and quantity discounts if they cannot bind their 
jobbers to maintain the same volurae and quantity discounts. 
There is no reo.son v;hy jobbers should be permitted latitude 
\7hich is denied to manufacturers, particularly in an in- 
dustry where manufact^iring and jobbing f'OJictions are prac- 
tically indistinguishable. (**) 

The price filing provision of the code refers only to "members" a^id 
does not specifically exempt jobbers from filing prices. This may 
be accounted for by the fact tlic't jobbers v-ere really manufacturing dis- 
tributcyjTs who filed prices on the product they manuf actijred and were e::- 
pected unde:i« the above provision to maintain their suppliers' filed 
prices on the products they bought to supplement their own line. 

2. I.Iandatory Contr rc tc \;ith J:istributors 

The Iron and Steel Code, Schedule E, Section 4, approved August 19, 
1933, contains a provision ersentially similar to the amendment proposed 
by the Business Furnitiore Code(=f**) and denied by the Administration in 
February 1935. It reads as follows: 

(*) Op. cit. opge 44. 

(**) See Transcript of Public Hearing on proposed code, September 19, 
1933, page 85, WRA files. 

(***) See page 276 above. 


Before any mem'ber of the code shall allon any such 
deduction to any jotlDer or sell for resale to any 
purchaser uho shall not be a jobber. .. such member 
shall secure from such jobber or such other purchaser 
an agreement substantially in a form theretofore approved 
by the Board of Directors. . .\7hereby such jobber or other 
jpurchascr shall agree vrith such nember (a) that such 
jobber or other purchaser vdll not, without the approval 
of the Board of Directors, sell such product to sxiy 
third party, and (b) that, if such jobber or such 
other purchaser shall violate any such agreement, he 
shall pay to the Treasurer of the Institute, in trust 
as and for liquidated jdanages the stun of $10. per ton 
of any product sold by such jobber. . . 

The price "at which such member might at tha,t time sell such pro- 
duct" referred, of course, to the prices filed under the open price 
system of the Iron and Steel Code. This was generally recognized as a 
bona fide resale price maintenance clause, and was condemned by the 
Federal Trade Commission in its two reports on the basing-point system 
in the iron and steel industry. (*) 

The Lime Code (31) as first approved, contained in Article IV, 
Section 1, the following provision: 

Unfair Llethods of Competition - Transactions with Jobbers , 
Distributors or Brokers . - It shall be an luifair method of 
competition for any manufacturer to create or enter into 
relations with any jobber distributor or broker except sub- 
ject to the condition that such jobber, distributor, or 
broker shall agree to be bound by all the applicable provisions 
of the code relating to the sale of the various tjqies of line. 

The Code History reports that "Oiider this provision the manufac- 
turer was responsible for sales by his brokers and jobbers and was 
required to see that they complied with the applicable provisions of 
the code, thereby eliminating one form of "chiseling" by distributors. 
The emended Line Code omitted this particular provision, but contained 
in Article IX, Sections 14 and 15, a classification of jobbers and re- 
quirements concerning their treatment imder the code. These sections 
were stayed in the Order of Approval, a stay regarded oj the author of 
the Code History as a great mistalce in that it permitted "brealcdown 
of fair competition through the distributor channels," and "jeopardized 
the working of the open price policy," by tending to set up "what were 

(*) Practices of the Steel Industry under the Code, Senate Document 
ITo. 159, Section 14, 15, pp. 35, 38, and Report of the Federal 
Trade Commission to the Senate with respect to the Basing Point 
System in the Iron and Steel Industry, November 1934, page 10. 



in effect secret prices instead of oioen prices." (*) 

The Cordage and Trrine Code, Schedule "A", Cordage and Wrap'oin^ 
Tvrine, Section 3, provided that the code a-athority, v.'ith the approval 
of the administrator coxild arrange conferences r.'ith all classes* of 
secondary sellers to establish cor^nissions, trade discounts or allow- 
ances based on nature and extent of distributing services and functions. 
Subsequent sections provided for mandator;- adherence to such schedules 
after apriroval, except that nicnbers uould be required to decrease the 
allowance to any secondary seller rho alloved an excess allo-rance to a 
customer. The decrease r/as to "equal and not exceed" the decrease given 
by the secondary- seller. The code also provides for the appointment of 
mill agents and distributors under specified conditions, including an 
agreement either to abide by code provisions, or to act in the capacity 
of exclusive agent. Names of all mill agents and distributors vrere to" 
be filed and made knoim. 

The Agricultural Insecticide and Fungicide Industry Code (Supple- 
ment 1 of Code 275) provided in Article V, Section 2 that: 

Ever;- member of the industry shall enter into a 
written agreement rrith his jobbers whereby all such 
jobbers agree to file price schedules in accordance 
with Article VI of this code and a,bide by the follow- 
ing provisions of this Article V, Section 

An excerpt from the transcript of the Public Hearing on 
Pebruarir 7, 1934, indicates clearly that the p^orpose behind this require- 
ment was to maintain manufacturers' prices. The draft of the code under 
consideration at that hearing stipulated that jobbers agree to abide 
'oy Trade Practice provisions. i.;r. Oeorge Haddock, representative of the 
Consumers' Advisory Board, in discussing the industry/ proposal, remarked 
as follows: 

The intent of your industry' here, it appears to me, 
is to compel the jobbers not only to maintain your 
fair trade practice provisions, but also to main- 
tain your prices to dealers. 

Iir. Hitchner, representia- the code sponsors, answered: 
"That is correct." (**) 

( ) Division of Review, Leon H. Harkey, History of the Line Industry 

Code, page 109. The amended code evidently relied on the customer 
classification for control of jobbers rather than the direct agree- 
raents previously required. It is not entirely clear whether under 
the original code jobbers were required to file their o\7n prices 
or to adiiere to manufacturers' filed prices. 

(**) Transcript of Public Hearing on proposed code for agricultural 
insecticide and fungicide industry, p. 140-142 (in ITHA files.) 



At a later hearing the deputy administrator in charge of the code, 
(Battley) indicated that he v;as goin;; to ask the industiy to revise 
the v^ording of the proposed provision: 

It appears that you are trying to estatlish or may estab- 
lish a "boycott and while ne do not allov; one group to 
urite a larr covering a group not represented here, I think 
you can rewrite it so that it Trill in effect carr;?- out 
your intent, without stating definitely that you would 
"boycott any dealer 

The provision, worded as quoted a"bove, was approved on Llay 1, 1934 
for a period of six nonths. Sven in this revised form it did not re- 
move the possi"bility of "boycott through withholding the jo"b"bers' dis- 
co'onts from those jo"b'bers who filed prices not accepta"ble to supplying 
manufacturers. Hence, the requirement that"b"bers file their own 
prices was at "best a compromise, possi"bly accepted in this instance "be- 
cause of the conditions which led later to emergency price control. (*) 

The Cork Industry Code, Article "VIII, Section 6, descri"bed the 
diverse distri"bution menthods followediinLihat industry, and required 
dealer contracts, as follows: 

iiany mem"bers of the industry sell their products 
through agents, distri"butors, jo'b"oers, wholesalers, 
and/or contractors, while others sell their pro- 
ducts directly to the ultimate user. In order to 
prevent indirect evasion of this Article "VIII "by 
those mem"bers selling through agents, distri"butors. . 
it is here"by provided that the Executive Committee.. 
su"bject to approval of the Code Authority and the 
Administrator shall prescri"be app'ropriate forms of 
contracts to be entered into between members of the 
industry and agents, jobbers. .. (except retailers) 
for the distribution of the products of this indus- 
try ajid the observance of such prices and terms as 
those currently filed with the code authority at 
which the manufacturer sells such products. 

(*) The requirement that members adhere to filed prices was 
stayed on July 30, 1934 for a period of 60 days. Cf. 
Administrative Order 275-A-5. Later, on November 22, 1934, 
the price filing requirement in Article "VI (a) was stayed 
for 60 daj''s. This was subsequent to an emergency declara- 
tion and the determination of lov/cst reasonable costs for 
■ lead arsenate and calcium arsenate on November 9, 1934, 
USA yiles 



Eecause of the anxietj' of the cor!: r.iejiufacturers to 'bria'; importers 
under the jurisdiction of the cor:; code, the definition of the industry" 
had oriijinall^ been dra-Tm to include prinar;?- resellers of the product. 
Distributors thus made subject to the code objected that the;;' had no 
voice in its drafting and rerc not '--illing to be bound, b;'- its provisions, 
including the requirement that they sign contracts to maintain manufac- 
turers' filed prices. Their protests r.-ere ujiheld ''oy the legal adviser 
on the code and an omendjient to the code definition \7as approved in 
September, 1934, excluding distribxitors fron code membership. 

But the industry'' uas still intent on reo^uiring individual manufac- 
turers to bind their distributors by contracts. The cori: insulation 
division dreu up a prescribed form for such contracts to be utilized bjr 
its members, and submitted it for ITEA approval. The contracts vere op- 
posed by certain advisers to the Deputy ajid the matter rras referred to 
the advi&oiy coimcil for consideration and recomxiendation to the Ilsition- 
al Industrial Eecovery '.Board. The council recomi.iended against approval 
of the suggested contract form, v.-hich followed the existing code provi- 
sion in providing that distribvitors should maintain the prices currently'' 
filed by their suppliers, but proposed a substitute compromise plan by 
TThich distributors vrould be as^:ed to sign contracts obligating them to 
file their 0"n prices and to adliere to them. This recommendation tjb.s 
accepted by the Hational Industrial Recovery Board and led to the 
amendjient of the code in Janur.r^r, 1S35, and the substitution of a ne-j 
provision governing contract relationships ^dth distributors. This 
provision T?as limited to SO o^ays unless 75,3 of distributors representing.' 
85;'^ by volume indicated their ^ullin.gness to accept such contracts. 
The co6.e authority enlisted the votes of 127 largel5'- exclusive agencies, 
in support of the plan. Only one opposing vote 'jas recorded, a result 
not surprising, inasmuch as their eligibility to vote (as distributors) 
XI3.S determined by the Code Authority itself. After the provision nas 
a^pproved other distributors could either sign the agreement or be re- 
fused distributor discounts. 

The intent of this provision v.'as exactly the sa:ie as that of the 
one originally in the code, altho'iigh the means trere modified. The 
ostensible freedom of distributors to file their oun prices uas limited. 
by the possibility of boycott, or the denial of the distributor dis- 
counts to any distributor prestuning to file prices lov.'er thtui those of 
his supiolier. The compromise recommended by the council was reminiscent 
of the attitude of the deputy administrator v/ho sought to renord a 
similar requirement in the AgricultureJ Insecticide Industry Code so 
that it T70uld not actually state that members \;ould boycott non-coope-r- 
ative distributors but nould effectively li;:it price competition from 
that source. 

The period during nhich this provision nas effective rras too short 
to suppl;;' evidences as to whether there would have been need to disci- 
pline distributors by such means or vrhether the existence of potential 
economic pressure v'ould have been adequate to secure continued coo-oera- 

tion. (*) 

(*) For references for above, see "I'anufacturers' Control of Distri- 
bution: A Study of Trade Pi-actice Provisions in Selected 1I2A. 
Codes," Division of Heview, liarch 1, 1936, Part II, Ch. II. 



The Code for the Carbon Dioxide Industry, as approved on 
May 4, 1934, contained in Article IV, Section 4, Contractual Relation- 
ship "ith Jobbers and/or Distributors, the requirement that every 
member of the industry enter into a written ag6enent irith his jobbers 
and/or distributors ^Tithin the metropolitan areas of plcjit and/or uare- 
house cities, yhereby the latter would agree to file price schedules 
and to abide by certain other fair trade practice provisions. It also 
req.uired that members of the industry' file a copy of each agreement 
nith the code authority. This provision vas to remain in effect for 
only six months vmless extended by the adr.iinistrator. (*) 

It nas extended by two Adrainistrative Orders, (275-B-lS, 
December S, 1954 and 275-B-19, January 2, 1935) until Januarjr 30, 1935, 
when it w^s allowed to lapse after a hearing on December 20, 1934, be- 
cause of continued opposition from small manufacturers and independent 

The provision was urged by the code sponsors, the Carbon Dioxide 
Institute, on the ground that members of the industry often sold to 
retailers, and that secret price cutting would persist, if the resale 
prices of the jobbers were unlmoiTn. The Research ajid Planning Division 
was willing to approve the j^rovision onlj'- for a limited trial period, 
stating its reason for opposing it as follows: 

This division is opposed in principle to any attempt 
to bind jobbers or other distributors to comply with 
terns of manufacturers' codes. We believe that such . 
action, in connection v^ith operation of an. open price 
system, might result in regale price maintenance, re- 
straint of trade among distributors and consequent 
exploitation of consumers. (**) 

Ilej)eated charges of monopoly in this industry, alleged misuse of 
the price filing provision to effect customer classification, and con- 
plaints that dominant manufacturers xrere using controlled distributors 
to foment price wars and drive indej)endent distributors out of business, 
led finally to amendment of the Carbon Dioxide Code to substitute the 
provisions of Office Ilemorandum 228, and to the investigation of the 
price filing operations mentioned in an earlier section of the study. 

(*) See Order of Approval, and Report to the President in Approved 
Code llo. 275 - Supplement llo. 2 

(**) Carbon Dioxide Industrj^, Volume A and B, Report of the 
Research and Planning Division, April 11, 1934 
(In Code Record Files) 



The report of the investi.'Tiator su'bstantiR.tcd in large measure the 
charges of attenpted price control throu^^h the neans indicated. (*) 

The oi-der approving the Code for the 'Jood Cased Lead Pencil Lianu- 
facturing Indxistrj'' staged nany of the provisions governing pricing 
practices, disco-unts, Cifrerentlpls, etc., including one meant to hind 
dealers to observe resale prices filed "by man-ofa-cturers. Article X, 
Section 1.'., ordered members to abstain from giving discounts of more 
than 2a pjr cent off list on pencilr retailing at five cents or less, 
until the/ obtained iTritten agreements from dealers stating that thej"- 
\70uld not, r.'ithout the consent of the code authority, sell to the con- 
suj:ier at less than the member's filed list price. These agreements 
Tjere to stipulate further that the dealer v:ould in turn require a like 
agreement from cjiy dealer to \7hom he resold the merchfjidise. The ;oen- 
alty for non-observance of such agreements by the dealer uas to reduce 
the E;oplicable discouiit rpte to 25 per cent off list. Dealers that 
executed, delivered and complied nith the agreen.ents vrere to receive a, 
disco-Jut of 40 per cent off list. Manufacturers v/ould, of course, have 
been in violation of the code if they had not required such agreements. 

The essential boycott eleiaent in this arrpngeiiient through the use 
of an unfavorable trade discount is more apparent uhen it is noted that 
the code made no functiona,l distinction bet!:cen irholesalers £Uid retail- 
ers, but designated both types of o'atlets as "dealers", and put all 
price differentialr on a, voiumo basis. The code sponsors insisted that 
it ras not practical in that industry to disting'j.ish betveen \7h0lesalers 
and retailers. 

Oppositi3rL:to the control provision of tha-cgde binding dealers to 
manufacturers' list prices was registered ^vj the liational Retail Dr^,'- 
Goods Association, mail order houses, and chain stores which insisted 
that it constituted resale price maintenance. (**) 

(*) Research and Planning investigation of price Filing and Customer 
Classification in the Carbon Dioxide Industry, Uay 29, 1935, by 
Al P. O'Donnell, Division of Revie'.;. Ihc report 'jas completed 
only at the time of the Schecter Decision and hence there v-as no 
administrative action based upon its findings. 

(**) See sunraarj'- of report on "Distribution Problems in the I7ood Cased 
Lead Pencil Industiy, prepared by hr. A. A. Kimball, Distribution 
Relations Unit, p. 26, WRA files. 

"Another set of provisions, nhich provided for resale 
price maintenance provided a boycott upon der?2ers 
T/ho failed to contract to maintain such resale prices 
and to sell only to such other c'ealers as ::iade similar 
agree'ments through tlie use of an unfavorable': trade 

discoimt They rrere severely criticized by certain 

dea].er organizations as an invasion of tlie rights of 
non-members of the industry " 



Although the open price filing provision of this code \7as not 
araong those stayed rriien the code rras approved, the code authority made 
no attempt to put price filing into effect after it vras imahle to get 
the minimum price sbhedule ap;oroved and the suspended marketing rules 
reinstated. Presumahly the industry program for price control was made 
ineffective by their suspension. Wine months later the r)rice filing 
provision and a provision harring the price discrimination 'bettreen cus- 
tomers of the same class rrere staj^ed at the request of the code author- 
ity. It is not possible to say Just vrhich provisions nere deemed essen- 
tial to the effective operation of price filing, but the inabilits^ to 
require dealers to maintain the filed list prices xras obviously one 
factor leading to the decision to abandon price publicity. 

The Asbestos Code, Article VII, Section 5, provided that each Sub- 
Division could thro'ogh its sub-code authority set a date after nhich no 
member of the division could 

sell to any buyer for resale more than one small intro- 
ductory order unless the buyer has agreed in writing 
■ (l) to mal:e no improper use of the members' merchandis- 
in g plans, prices, terms and/or conditions of sale or 
otherTTise misrepresent the policies or products of the 
member; (2) to sell from a list no higher than that from 
Y/hich the products rrere purchased (3) to observe all of 
the provisions of this code insofar as they are ai^plica- 

"To make improper use of" a member's prices or merchandising plan 
was interpreted to mean selling at a lower price or on more favorable 
terms. The whole provision contemplated control over consumer prices 
and distributor margins in connection with mandatory discount schedules. 

The braise lining division tried at various times throughout the 
code period to establish control over distributors, affiliates and job- 
bers "by meajLs of such written agreements, but was never completely 
successful. (*) The first classification for national and territorial 
distributors adopted in November 1953 pirohibited sales to them until 

(*) Subsidiaries or affiliates of the manufacturer were included 

■onder Asbestos Code by the definition of industry in Article II, 
Section 5. Kot all of the affiliates were owned or controlled 
by the manufacturer, but were rather private brand buyers, and 
regional distributors. Prolonged discussion between WBA and 
the code authority about the proper definition of subsidiaries 
and affiliates made their status as regards the code require- 
ment somewhat uncertain and resulted in numerous shifts in 
treatment of them, as noted below 



thej'- subscribed in vritinj to the code and nerchandising plan. (*) 

On several occasions, and as late as J-uaie 1934, effective dates 
for buyers' agreements rrere set "but vere \'ithdraT7n in each case because 
of the impossibility of scciiring ap'oroval of the plan and the simulta- 
neous a^mlication of the requirement to all resellers, under arrange- 
ments Tj'that TTOuld be mutually satisfactory^ to members using different 
channels of distribution. 

About a month after the requirement vas first put in operation, 
one lai-ge national distributor, national automotive parts and acces- 
sories, refused to accept the discount provided by the merchandising 
plan and succeeded in having the rrhole arrangement considered in a 
Public Hearing held by ITEii, Jan-aa.ry 18, 1934. Inasmuch as IJSA uo-old 
not approve the discount requirement, the industry also abandoned for 
the time the attempt to enforce the contracts required by the merchan- 
dising plan. Liembers selling to jobbers vrere reluctant to bind themselves 
to "required resale price maintenance agreements, so long as sales affili- 
ates, regional distributors, equipment manufacturers and other vere not 
also forbidden to sell to jobbers without contracts to maintain filed 

Throughout the code period members \7ere particularly concerned 
trith the possibility that the affiliates v.-ould get out of hand, and 
disregard the marketing practices and prevailing prices of the members 
of the industry, or v/ould be used ''oy some of the members to evade the 
price provisions of the merchandising plan. In several instances these 
sales affiliates marheted the entire production of several members and 
thus operated in a capacity sinilar to an oirned sales organization. 
In general, it appears that the fears of tne industry vrcre unfounded 
and that except for lov-priced popular product s, r.'hich passed through 
several intermediate distribution steps, the list prices and discounts 
filed by the members of the industry v.'ere observed by the various 
classes of trade. During the early part of the code, before any dis- 
pute as to the definition of affiliates, they uere considered members 
of the industry aiad filed their o^Tn prices and discounts to the various 
classes of trade. Later they vrere regarded as preferred customers and 
bound by agreements to observe the schedules filed by their suppliers. (** ) 

(*) The latter was not officially ap^'roved by 1I2A until August 8,1954, 
but excent for the discour.t schedule v/as in effect from llovemoer, 

(**) Divices Affecting Distributive Ptelations in the Bralce Lining 

ajid .Related Friction Products Division of the- Asbestos Industry--, 
a study by Clayton Geliman, Trade Prtictice Studies, 
Division of Ilevicn. 



3. Provisions Perraittin.-^ ilemtiers to Require Contracts 
from Distributors 

Permissive price maintenance contracts rere provided for by the 
Copper and Brass i.all Products Code as a means for preventing the breal: 
down of the open price structure. The provision reads in part as 

Whereas, the great preponderance of sales by manufacturers 
in this industry'' is made without the intervention of dis- 
tributors and the sale by distributors where such services 
are used, at a price less than the manufacturer's published 
price schedules would unfairly break dorm the open price 
structure provided for in Article V hereof, any manufac- 
turer may enter into an agreement with a distributor by 
which such distributor may a^ree that he will sell the 
prod.ucts purchased from such manufacturer at not less 
than the prices contained in the publislied price schedules 
of such manufacturer in effect at the time of any such 
sale. (*) 

(*) Code for the Copper and Brass I.iill Products Industry, Article VI . , 
Codes of Fair Com'rietition . As Approved, Government Printing 
Office, Vol. II, p. 295. (Underlining supplied) 


The importance of this provision to the industry and its function 
as a corollary to the open price provision was set forth in detail in 
a statement of the code authority presented at the Hearing on Distribu- 
tion Differentials, January 9, 1935. Declaring that the intent of the 
provision was identical with that of the price filing requirement - the 
prevention of discrimination among customers - the statement urged 
that such agreements were necessary to prevent distributors and their 
customers from obtaining an unfair advantage over the manufacturer and 
his customers. 

It is apparent that this provision is, in 
this industry, a necessary corollary of the 
open price provision of the code. The 
granting of secret discriminatory prices by 
distributors is just as objectionable as the 
granting of discriminatory prices by manu- 
facturers, and it is just as productive of 

evil results in the industry The effect 

is the same whoever does it - the re-estab- 
lishment of unusual treatment, and the re- 
sulting pressure for special favor from all 

If a distributor were permitted to give 
discriminatory prices to certain favored 
customers or to lower prices to all custo- 
mers below the prices charged by his supply- 
manufacturers, the probably result would 
be either a greatly increased production of 
sales through distributors, or the abandon- 
ment by the ma,nufacturers of the open price 
provisions of their code and the return to 
the discriminatory practices which have here- 
tofore been prevelant in the industry, (*) 

A series of code authority resolutions pursuant to the dis- 
tributor provision in this code were passed at the code authority 
meeting on January 34, 1934, after the first filing of prices on 
December 11, 1933. The most significant of these resolutions 
tended to make mandatory ''oy boycott the permissive action autho- 
rized by the code: 

Resolved that manufacturers after March 1 
shall not sell to distributors who have 
not signed the Distributors' Agreement. (**) 

(*) Transcript of Hearing on Distribution Differentials, March 14, 1935, 
NRA. files. Although emphasis is placed here on discriminatory prices, 
it should be noted that lo'-er prices by c'istritutors were generally 

(**) This resolution and other date included in this section are drawn 
from Minutes of the Executive committee for the copper and brass mill 
products industry, for the dates indicated. These minutes are on file 
in the NRA files. 


At this same meeting the coimsel for the industry su,^5;ested the 
desirability of -Triting to the Southern Hardware Distributors Association 
suggesting that they obtain a modification of the decree previously 
imposed by the Department of Justice so that its member might be enabled 
to sign the distributors' agreements. 

Some delay was encountered in putting the agreements into effect in 
the industry but action to that end was quite genei-al and quite effective,- 
It was reported at the meeting on March 30, 1934, (three and one-half 
months after the first date of filing) that only seven of the 34 manu- 
facturers having distributors had followed the requirement of the 
executive committee in including on their price schedule a statement of 
policy concerning resale contracts. But even than a total of 3,375 dis- 
tributor agreements (including ^sny. duplications) -'ere reported as 
signed, with 541 cases in which agreements had not been signed. It was 
voted at that meeting that the secretary should ask rneiribers to submit a 
list of ali distributors, and a further meeting to consider the distri- 
butor situation was called for April 12, 1934. At this -ri'^eting the 
executive committee was directed to coapile records of the distrioutors 
to determine '"hether each one "^as carr:'/ing out his agreement. The 
committee confirmed this action at the m.eeting on April 27, 1934. (*) 

On September 11, 1934, a new form of distributor agreement was 
recommended by the ' sub-committee on trade practices, which stipulated, 
inbrief, that in consideration of receiving his trade discount, the 
distributor would undertake (1) not to consume the goods for his own 
or his affiliates .use and (2) not to. resell the. goods at less than the 
schedules prices of the manufacturer filed with the Executive Committee. 

At this same meeting a report was made on the status of the .filing 
of lists of sales agents and distributors with the executive committee. 
This may throw some light on the extent tD which manufacturers were 
cooperating in the effort to control distributor prices: 

Sales Agents Distributors 
Request for lists 52 51 

Lists filed 33 . 25 

Manufacturers having none 16 14 

Manufacturers not yet filing 

or reporting 3 12 

Total ^ 52 ' 51 . .. 

On November 7, 1934,, only three companies were rep:irted as failing 
to file lists of sales agents in accordance with the executive committee 

No later figures on the number or proportion of distributors signing 
agreements ■■^ere found, but the report of the code authority at the 
hearing on distribution differentials, (**) would indicate a relatively 
successful experience in that respect. 

(*) The minutes of the May meeting were not located in the files, so 

that the results of this compilation arc not available. 

(**) See page 290 a bove. 



Some accoimt of difficulties encountered in securing compliance 
with the acjreeraents, and mention of a Federal Tra,de Co'-'imission inquiry- 
concerning the price maintenance agreements, are contained in the Code 
History for the Copper and Brass Mill Products Industry/, (*) 

. Violations- of the agreement were appar'ently most flagrant in the 
metropolitan area of New York and occurred in the sale of brass pipe. 
Shortly before the termination of code activities, members of the 
industry cancelled their agreements in that area for the sale of such 

Thefact that distributors were really not subject to the jurisdic- 
tion of the Code Authority of the Copper and Brass Mill Products Industry 
but were members of the code for the copper. Brass and Related Alloys 
Trade, made it necessary to rely on the manufacturer for enforcement of 
his own agreements. HJpon the presentation of evidence of the failure of 
a distributor to maintain the prices of any manufacturer with whom he 
had an .agreement , the code authority "TOuld attempt to find the member 
guilty of violation of Article IV, Section 2 of the Code, which required 
all manufacturers to "adopt and maintain fair and equitable uniform 
contract terms and conditions to be established by the executive 
committee" or, else to interpret his neglect to enforce his contracts as 
evidence of an intent to evade price schedules hy subterfuge. 

It would appear that the joint action of members of, the indust-ry ' 
in seeking to enforce contracts binding distributors to maintain manu- 
facturers' prices was in all probability "restraint of trade" within 
the meaning of the Jiederal Trade Commission Act, since the code pro- 
vision as approved was permissive to individuals and w,as not mandatory. 
Certainly the resolution to boycott non-signers went beyond the authority 
graAted in the code. The Code History reports that a,n examiner for the 
Federal Trade Commission called upon the deputy administrator in charge 
of the code for information relative to the contract agreements, because 
^ a complaint alleging resale price maintenance without code authorization 
■'had been filed with the commission. ".To report of the Commission's find- 
ings was made to the Deputy prior to the termination of the code,(**) 

In this connection, as with enforcement of compliance ,jases cited 
to the MA compliance division, the permissive character of the authori- 
zing provision might have had significant import, but as a matter of 
practical operation within the industry it was little different from the 
mandatory r equirements cited in the previous section, and was apparently 
even more successful.C*) ' ■ 

(*) Page 141 . 

(**) Code History, p. 141 , 

(***^ iphe Gasoline pump Industrv Code, Amendment 1, also provided for 
permissive contr3,cts. 



4. Provisions Forbidding; ^^eTnljer s to Sell to Distributors 
Hot^ to Tr a de P ractice provisions, or T\Ton- 
Cooperative . ■ ' 

The increasing rel-act'^nce of l^IRA to adTiit resale price maintenance 
clauses into codes may account for a number of vajjae code provisions 
designed to accomplish "oy indirect means the control of distributors' 
price G_uotations in accordance with manufacturers' filed prices. The 
business furniture industry was one case in point. The fire extinguish- 
ing appliance industry and the carpet and rug industry code provisions 
likewise imposed. obligations on manmacturers, without affording any 
clear basis for enforcing that obligation. 

The Fire Extinguishing Appliance Code (No. 98) Article VII, 
Section 11, page 7, entitled Destructive Marketing, prohibited as an 
unfair method of competition 

Continuing to supply any trade f^.ctor vrhose 
practices are duly proved to be destructive 
of the market at prices which enable him to 
continue destructive marketing. 

The code elsewhere provided for the establishment, subject to 
N-RA approval, of definitions of trade factors and appropriate differen- 
tials for the declared purpose of preserving "stability in the primary 
and secondary markets." It may be assumed that this was also the intent 
of the section quoted above. (*) 

"Destructive marketing" to distributors was interpreted by the 
code authority to mean deviation from the list prices filed by manu- 
fact^orers. Bulletin announcements required, among other things, the 
use of uniform resale contracts and the filing of distributor agreements 
with an impartial agency. It was voted on March 10, 1934, to limit dis- 
tributors per manufacturer per state to six, with a total of 85 jobbers 
or distributors for any one manufacturer. The requirement that destruc- 
tive marketing be^duly proved" was evidently not interpreted by the 
Code Authority to require submission of proof to the IJRk, for there is 
no record of any case being considered, although threats of prosecution 
for code violation were reported to have been used to secure compliance. 

The assistant deputy, under date of May 9, 1935, alluded in a letter 
to the code authority to the efforts of the industry to control the 
selling activities of distributors through r equirements that manufactures' 
filed prices be maintained. On May 13, 1934, the General Fire Truck 
Corporation wrote to the assistant deputy administrator of the code 
asking whether manufacturers had the right under the Fire Extinguisher 
Appliance Code to insist upon a jobber or dealer maintaining the retail 
prices which had been established by filing with the code authority. 
The deputy replied on May 17, 1934 with the statement that resale price 
maintenance was not sanctioned bv any provision of the Code. He indica- 
ted that Article VII, Sec. 11 (quoted above) forbade a manixfacturer to 

(*) See p. 251 above for further account. 


continiie to supply a joboer or denier Those practl'ce '^as destructive at 
prices permitting destructive practices "only upon the official finding 
by K.R.A. that factual evidence revealed the actual existence of such a 
condition. "(*) 

A complaint filed with the Federal CoT,!nission on April 4, 1935, 
charged collusive price fixing, and alleged that raetibers of the industry 
'^ere refusing to sell to jobbers ^ho ivould not agree to maintain resale 
prices. The Code FTistory for the Fire Extinguisher Industry indicates 
that this boycotting of recalcitrant distributors was not uncommon, and 
that if effectively ended their activity in cutting prices, (**) 

Article VII, Section 1 of the Code for the Carpet and Rug Industry 
stated that: 

Inasmuch as the merubers of the Industry 
control a preponderant snare of the dis- 
tribution of carpets a.nd rugs to retailers 
and consumers, '^hich distribution is to be 
governed by the following trade practices, 
it shall be an ■'onfair trade pra,ctice for 
any member of the industry to distribute 
through intermediate channels in such a. 
manner as shall create unfair competition 
as defined in Articles VII, VIII, and IX 
with members of the Industry distributing 
direct to the retailers "^nd consuaier. 

The price filing requirement is included in the above prohibition 
in Article VII. This provision \7as interpreted by the Code authority 
to require resale price maintenance by 'wholesalers, thereby preventing 
them from giving more fa.vorable prices to retailers than were allowed 
by manufacturers selling direct. This interpretation was enforced by 
the practice of nllO'-'ing to approved wholesalers a functional discount 
from the base price quoted to, while limiting the latter to 
the general discounts based on volume allowances to both '^wholesalers 
and retailers which were, according to the Code, to be filed at the 
beginning of the season, with the agent of the code authority. Des- 
pite the efforts of manufacturers to eliminate price competition from 
wholesalers and at the same time to protect their differential, occasion- 
al complaints indicated that cert-^in wholesalers continued to grant more 
favorable discounts to retailers than were granted by direct sellers. 
But .the plan was successful enough to cause charges of price-fixing and 
of the maintenance of uniform list prices and discounts to be made by ■ 
the National Retail Dry Goods Association. These charges were later 
docketed with the Federal Trade Commission for investigation. Such 
price control as was maintained obviously depended to a large extent on 

(*) Letters, of dates indicated, berween Assistant Depaty Administrator 
Hand and General Fire Truck Corporation, IIRA files. • 

(**) Pp. 54, 65. 


the combination of open filed prices (plus a seven day waiting period) and 
the resale price vnaintena^ce reqairenent rerid into Article VII, Section 
1, quoted above. (*) 

5, Requests f o r Co d e Amend'aeTts or other Sanctions 
to Biid Distributors to Filed Prices 

Sevenl industries, faced "/ith the problen of secret co~ipetition 
from distributors, brouf5ht compl-^ints to the ".llA or asked remedial 
action in the form of interpretations or amendments. The ::ecords do 
not always indicate to ■"hat extent these industries had tried to help 
themselves before appealin;; to the Administntion. Many ot these appeals 
came durin.? the later months of MA and resulted in no definitive action 
pending decisions on contemplated code revisions after June 16, 1935. 

The Code Authority for the Mayonnaise Industry proposed early in 
1935 an amendment to Article X of their code, which would require 
manufacturers to secure, contracts from dealers, alternatively binding 
them to file prices or to observe their suppliers' prices. The provi- 
sion, which was considered at a Pullic Hearing on Api'il 12, 1935, read 
in part as follows: 

(a) Inasmuch as 69fo of the products of the Industry 
is sold by :iember3. . .direct to retailers, and the 
remainder is sold to- non-members for the purpose of 
resale to retailers, therefore, in order to further 
carry out and saf equard the principles of open price 
competition, any sale of the products of the industry 
t6 a trade buyer other than = retailer shall 

be raa^e by the member under a contract whereon 
■such trade buyer shall agree either to resell 
such products in strict accordance' with the 
current price list filed with the Code Authority 
Dy the member selling s\ich trade buyer or to 
resell in strict accordanct; with his own price 
list which shall have been filed with the Code 
Authority by such trade buyer in accord'nnce 
with and following the procedure provided for 
members, of the Industry in Section 1 and 2 of 
Article X. 

(b) Sach contract shall further provide fhat 
said trade buyer shall not make or permit to b e 
made (underlining oupplied) any direct or 
indirect price concession to retailers. Said 
term 'direct or indirect price' means variation 
from the current price list governing the sales 
of such trade buyer and then on file with the 
Code Authority whether by means of a rebate, 
brokerage refund, credit concession, allowance, 
payment, special service free deal, gift or any 
other means whatsoever 

(*) The records examined do not indicate that this provis:on was ever 
officially interpreted by IIRA. 


The amendTient 'TOald have provided further that all industry 
mernhers r.ust complete the pl'^cinf;; under contract of tr^de "buyers 'lithin 
thirty/ d'^vs after the effective d-^te of the amendment. 

The controversies over this proposed amendment "^ere bitter and it 
vas never -i.cted upon b^ the IRA. The code authority, in Release 'Wo. 
47, issued in f'arch, 1935, defended it on the r^rounds th^t it ""^ould 
prevent destructive price cutting; by a fe-' distributors, "a condition 
"^fhich has lon-:^ retarded this industry from securing the full benefit 
of cost recovery " 

When questioned at the Public Hearing as to the intent and possible 
effects of the amendment, f'r, W. F. Tuttle, Chairman of the Code 
Authority, denied that there ^"^ould be resale orice maintenance or price- 
fixing so long as distributors viere free to file their o-7n prices, and 
said that the proposal '."/as designed onlv to carry the open yrice system 
to its logical conclusion. An ' essentially similar provisicn in the 
pasteurized and processed cheese industry, v/hich had been approved by 
the NIRB after consideration ny the Advisory Council, i^'as cited as a 
precedent for the provision by the Advisory Council, "xas cited as a pre- 
cedent for the provision. 

The U. S. Tnolesale Grocers Associp.tion filed a brief opposing 
the amendment, cla.iming th?.t it provided, in effect, for resale price 
maintenance. The National Food and Grocery Distributors also objected, 
stating they could not see the reasons "for requirinf^ 'ynolesale grocers 
to file their resale prices linder the Mayonnaise Code as '"holesalers 
(if this alternative be chosen) unless the purpose is to boycott such 
wholesalers as do not sell at prices dictated by the manufacturers. "(*) 

Other opponents of the amendment, including }'. E, Pearsall of the 
B. F. pearsall Butter Co., Elgin, 111,, protested that the amendment v/ould 
work to the detriment of the small men by eliminating entirel:/ the 
possibility of the small manufact\irer selling ne'r jobbers or 'Wholesalers 
after the latter had been contr-icted by manufacturers of nationally- 
lcnO'.7n brands. 

The larff? manufacturers have representatives in all 
sections of the country. Thsy are better able to 
contact and to contract their distributors and 
can do it more quicklv thun the rest of us — They 
('vholesalers) are not willing to contract them- 
selves so they or 'i?e 'Till be fined if there is 
any deviation for any purpose. (**) 

In general, it appeared that the ma.nuf -^cturers aiid distributors 
of leading brands were in favor of the amendment "'hile others were not. 

(*) Transcriot of Public Ifearinj on Propo'sed Amendment to Mayonnaise 
Code, April 12, 1935, pp. 94 ff, imA. files 

(**) Ibid. 



Althoueh the amendment ^as still pending Rt the time of the Supreme 
Court decision, it Tzas apparent that the deputy administrator in charge 
of the code wa.s not in sympathy i^ith the proposal. In one memorandum, 
dated April 15, 1935, he referred to the amendment as an attempt on the 
part of the manufacturers to legislate for distrihutors, T?hich he did 
not believe could he legally done, and as a type of provision Trhich 
would centralize po'^er into the hands of the manufacturer in such a 
way as to permit monopolistic practices, if such Trere desired, (*) 

Evidently the proposal to extend control over distributors by 
means of this amendment "^as resorted to by the mayonnaise industry only 
after the failure of former efforts to control through the customer': 
classification provisions of the code.(**) 

The valve and fittings industry has, in its early code proposals, 
submitted a provision setting forth a resale ptice maintenance policy 
as an accocipaniment to defined customer classes and fixed ■tjrade dif- 
ferentials. Neither the resale price maintenance nor the fixed dif- 
ferentials '?ere permitted in the approved code. 

After more than a year of code operation, with various attempts 
to stabilize the price structure in the prime.ry and secondary 
of the industry through price filing' -i.nd customer classification, the 
code authority on January 31, 1935, authorized the chairma.n to a.ppoint 
a committee to develop a contract plan with distributors. This com- 
mittee, called the Producer-Distributor 3.elationships Com'iittee, was 
appointed on February 7, 1935, for the purpose of establishing rules 
and Tegulat ions for the sale of products of the industry in the secondary 
market. The committee worked in cooperation with a group of distribu- 
tors(***)EJid worked out a. plan !'"hich -'ould have provided for a contract- 
ual relationship between producer and distributor, with a price schedule 
attached to indicate the producer's direct selling price for these pro- 
ducts to those in the secondary market. Distributors were under the pro- 
posed plan to require similar contracts from those resellers to whom they 
sold.. A report of this committee was ^scheduled for presentation at the 
meeting of the code authority on May 23, 1935, but the plan was never 
forwarded to the Administration. (****) 

(*) Memorandum from Deputy Administrator Irvin h'oise to Assistant 
Deputy L. S.Dame. 

(**) See pp. 245-247 above for details of these efforts. 

(***) The group is not clearly identified but was presumably the 7avle 
and Fittings Committe of the Central Supply Association, '^'hich had pre- 
viously complained of 'the discounts given them by manufacturers, and 
that distributors were not accord.ed prices more favorable than those 
to government agencies. Meetings were held on March 16, 19, and 29, 

(****)Code History of the Valve and Fittings Industry, Di^vision of 
Review, p. 39. 

9826 ' ' 

3. Sxtra-Le|;al Attempts To 3ind Distribution to Filed Price 

Ma,av of the efforts at distributor control cited in preceding 
sections have exceeded the gr^.nt of po^7er contained in the code, hut they 
have all derived in some degree flora interpretations of code provisions. 
In the absence of official KElA deterrnination in particular instances, it 
is not possible to ixidicate '"ith any degree of finalty just which 
activities were illegal extensions of code powers. For that reason, the 
examples were grouped in accordance vjith the ostensible enabling provi- 
sions of the code, even though supplementary code authority activities 
would not be justified by them. 

. There remains a further group of examples of attempted distributor 
control that do not fit any of the above categories, and depe id very 
slightly, or not at all on explicit code sanctions. In some instances 
they nrere patently extra-legal. In other instances, they iverj achieved 
by cooperative tactics in connection '"ith price filing, but not clearly 
contrary to the code. 

Thus, the fertiliser industry succeeded "by voluntary action" on 
the paat of producers in connection X7ith their filed price schedules in 
substituting in each sales territory except one the commission agency 
system for the independent dealer system. Ey this means, manufacturers 
were able to control their resale prices, and effectively to eliminate 
price co'ipetition from their dealers. This change was accomplished 
largely by vote of regional com.raittees (authorized in the code to re- 
comm.end to the code authority uniform marketing practices for submission 
to the 1'IRA) and wa,s then put into effect by a series of revisions of 
price schedules, following a process akin to price leadership. Approval 
of these recomiendations by HUA was not asked, nor did it appear necessary 
to effectuate the action agreed upon through industry vote. The secretary 
of the code authority attributed the change largely to the example of one 
dominant prodacer v/ho quoted prices delivered-to-the farm, and to the 
desire of manufacturers to eliminate the alleged practice among distri- 
butors of playing one manufacturer against another for better discounts, 
without passing on the resulting saving to the ultimate consumer. 

The explanation of the process of change is plausible enough 
and in keeping with the observed price revisions. But the obvious pur- 
pose of the change, and its necessary result, was to establish complete 
control over dealers' prices and to maintain the price schedules filed 
by producers. This change admittedly facilitated the administration of 
the price filing plan and contributed to the desired price stabilization 
for the industry. (*) 

The gas appliance industry attempted in various ways to .extend 
price filing control over jobbers and distributors first by declaring them 
subject to the code and its price filing requirements, and then by . 
industry boycott of distributors not willing to p.bide by manufacturers', 
filed prices. 

(*) For reference see Division of Review., Preliminary Report on the 
Fertilizer Industry by A. F. O'Donnell, Summary p. xix and The Study 
of Price Filing in the Fertilizer Industry, by Simon Whitney. 



The code s.s approved on lloveraber 27, 1933, defined the industry 
to include manufacturing, assembling ^.nd "Sellini; of .. .appliances to re- 
tailers, 'wholesalers and consumers, but not includin;; selling at retail." 
Original instructions for price filin.-; were, issued in rules established 
at the meetine; of the code authority on Decenber 4, 1933. These were 
bulletined to the industry on December 8, 1923, Thev made no mention of 
filing by distributors, or jobbers but referred generally to employers 
engaged in the "manufacture and sale" of specified products. Bulletin 
No» 13, entitled Distributors and Jobbers, was issued March 2, 1934. It 
declared that distributors and jobbers were specifically included as 
part of the code and were "required to file prices" and otherwise to 
comply with all its provisions. 

The bulletin continued further by asking each manufacturer to 
furnish the code authority immediately with the names of all wholesalers, 
distributors and jobbers through whom he distributed, and asked jobbers 
"to cooperate with the committee as their code authority. " Those who 
questioned the propriety of the request were invited to consult WA 
officials, specifically the chief of the Classifications Section. (*) 

This bulletin was, according to the code Administration Study 
of the Gas Appliances Industry, based on an unwarranted interpretation 
of the industry definition, (**) This opinion was shared by the author 
of the Code History, who stated that distributors and jobbers of gas 
appliances did not participate in the formulation of the code,, and that 
the Gas Appliance Institute, which presented tlie code was 4;ruly represen- 
tative only of manufacturers. (***) 

The Metal Window Industry Code, as approved on January 13, 1934 
defined only one class of resellers under the terra "dealer. " At the 
January 23, 1934, meeting of the code authority, definitions of tsro 
classes of "distributors" were approved by the code authority and a 
ruling was passed requiring manufacturers to file lists of such 
distributors, together with affidavits from each sales outlet so classi- 
fied, such affidavits to include: 

(*) Prior to this, the committee had passed a resolution on February 
14, 1934, that prices filed by manufacturers of gas water heaters 
should be distributed to manufacturers only and that prices filed by 
jobbers and distributors should be distributed to jobbers and distribu- 
tors only. Apparently some jobbers and distributors had already filed 
and the bulletin was meant to improve compliance. No record of a 
ruling by the Classification Division was noted. 

(**) Code Administration '-Study of the Gas Appliance Industry, by A. B. 
Fridinger, Research and Planning. 

(***) Code History, page 151 of first draft, incomplete on February 
1, 1936, See page 245 above, for description of attempted control of 
distributors' behavior through customer classification provisions. 



" a;'^ree:ients to irlntrin ^.11 provisions of the 

industry code so far v.s concerns the o'bservance of 
puolislied scheduler ipsued 07 his principo.1. These 
affidavits shall he rene-'ed at the end of each 
calendar ;:-'ear. " 

In a later rulin;j, issued in the code authority hulletin of harch 
^t 193.^1 i't '■•'£^•3 declared that "dealer-agents" too!: the saiie status 
as direct e':plo7ees, and i.Tust at'here to the trade practice provisions 
of the code -.'hich fororde the sale of industry products on tervis :ore 
favorahle to the "buyer than the published discounts of the ::anAfact'arer, 
This ru.ling -Tas reiterated in a later hulletin, dated April 15, ly])h. 
Inasnuch as this ru-linf; on the statirs of der^lers erxecded the "revisions 
of the definition, it -tp.s rep^adiated "by the Assistant Deputy Adninistrator 
in charge of the Code in a letter to the code authority on July IS, 1S3^« 
This letter stated. 

"It VBS the Linani'iour, opinion of the arvisers that the 
ruling^,. .. is incorrect r.nd should "be rithdra-jn. The 
advisers "'oelieve tna.t "hen a dealer purchases ".anvLfactured 
procucts, t£)J:es title to thcii, and assixnes credit risks 
in connection '^ith resale, all control of the products 
passes Gilt of the hands of the manufacturer, and that 
the manufacturer tlaerefore, so far e-s the code is con- 
cerned, cannot control resale orice-. Under the a"bove 
conditions, the so-called Dealer-Agent is not a pien'ber 
of the ".ietal "Jindo'"' Industry a.nd is therefore not su"b- 
ject to the provisions of tlie ^ietal 7indo~' Code,"(*) 

The Vitrified Clay oe'-'er Pipe Code contclns no resale price 
?aaintenance clause. (**) Yet appro;:ina,tely three ";eeks after the code 'vas 
approved, D. h. Strickland, ka,na';:er of the Vitrified Cla;- Products In- 
stitute, a^'dressed s. letter to jo"b'^oer5 ano. --holesalers,,' in pa.rt 
as follo'Ts: 

"Gentle;.:sn: On Dec. G I sent you a cop^' of the Code 
of Fair Con.petition for the Vitrified Clay Proe kanai- 
facturing Industry. 

"Today I a.i sending " ou provisions -Thich govern the 
resale of this Indu.stry' s : lerchandise. Though Man- 
datory, the ".provisions are cb:":on sense, a,nd a:.'? 

(*) Letter fron 2. li. Searle, Assistant Depp.ty to 3. K, Sartor, Secre- 
tary Code' Authority, 7/I8/3U tlPA files. 

(**) In Article VII, sec. I5, the po-7er is given to regional comittees, 
su"b,ject to review a.nd •lodificF.tion or disapprova.l thereof Tsy the At-iinis- 
tratio.n, '•'here"b5'' contractors', dealers' or 'johi^ers' discounts ^:.'iQ.l not "be 
e::tendec to those '".'ho do not perforn the "functions of contractors, dealers 
or joVoers — as nell as a- provision in Article XIII, Sec. 3» that ■ien"bers, 
shall "not "sell t'.irectl;'-, through affiliated conpa.n;;'- or other'Tise de- 
viate fro'i filed -prices, 


divided to insure clean, hee.lthy nr-rLetinfj in 
the Hastern rie£;ion of the se'jer pipe :ir.nufr.c- 
tiiring industry. 

"Sead these provisions carefully. Your cooper- 
ation is expected. Note especially: 

1. JobTsers ca.nnot sell 'belo'T their suppliers' 
piihlished price. This pu.lilished price is on 
file in this office. However, yo\i are errpected 
to p:et "our instracti o ns fro:::! your nanufacturcrs 
(underlininjT in oric;inal.) 

"2. Ter:ns of coiipenso.tion are ]:andatory. (See 
Article XI of Code) (This article provides that 
terras are subject to KHA reviep.) Do not p-sk 
your manufacturer to change the terns. He can- 
not uithout code violation. 

"3. Steps are to he taken on the estahlishmont 
of an official johhers' list. 

"U, Ilisconduct on the part of johhers is in- 
advised and carried penalties '7hich the nanu- 
fa-cturer \7ill respect, otherwise he violating 
the code. 

"A 'Torfl. from j'ou indicating cooperation 'vith 
the Manufacturers under the provisions and re- 
' galations of their code v/ould he timely and ivise. 

"This office \70uld he glad to revien any confi- 
dential information you care to send concerning 
your sales force, volume, market or territory. 
It is not mandatory that you. do this, hut it 
\70iild he helpful and furnish this office v.'ith 
first-hand information concerning the sa,les 
capacity of various firms representing this in- 
dustry, 3y confidential , I mean -rhatever you 
write \7ill he held inviolate in this office and 
in no instance mentioned to any other johher, 
to any manufacturer, or memher qf the ilcgionR.1 
Committee or Code Authority...." 

Action to hoycott dealers not coopera,ting vi^Ti manufacturers nas 
talcen at the meeting of the eastern regional code authority on January 
17, 135^. 

The minv.tes contain the folloi7in.'" resolu.tion ITo, 39" "Resolved 
that no manufacturer shall quote or sell, continue to cuote or sell, 
or commence to quote or sell, any dealer r/ho has heen listed as non- 
cooperative, any johher r7ho has hesn removed from the preferred list 
hecause of misconduct convincing to the [Regional Committee or its 
agents. Among other acts of r-isconcTuct are: 


-302- •■ 

a, Selling; at Tsettsr terns than 30 days to ccnsxiner, 

"b. Selling at pricen less thrn the manufacturer's 
posted price, 

c. Diversion of an;'' ca.r oi' other suhversive practice 
in an effort to.plf-ce cars in the dealers' yards or else- 
where at less than published prices or at "better than 
published terms," 

Resolution l-Io. ^7 ^^^ passed on I'.arch 21, 133^'''» a-nd reads as 
f ollo'.7s : 


"Hesolved that the follo'.'in'j he accepted as lefinition of .a 

'"dealers in this Industry are firns, persons, or cor- 
porations '.'Iio adequately ■'^tock and definitely promote 
and sell vitrified cls.y sener pipe and hindred pro- 
ducts to contractors and consunerr. genera-ll;'. Legiti- 
mate cealers s^iould he financially responsihle s.nd 
rea.sona'oly ahle to ciscount their hills. The policy 
and course of the dealers in pro;.ioting vitrified 
clay sewer pipe ag.- inst coupetitive ns.tcrials i.iust 
he constructive and cooperative r/ith sou.rces of 
suppl7/. Dealers perfoiTn the tine and place function 
in this IndxistryJ" (*) 

At the neeting of the eastern regional code authority on 
April U, 1S3^» the notion vfas lade and unanimously carried to require 
pledges of coopera.tion fron all recognized joohers: 

"Hesolved, thet the secretary and the nanager he in- 
structed to nail the follo'Ting plec'^e of cooperation 
to all johhers nov recognized in the Eastern He-rion 
of the Vitrified Cley Sewer Pipe llanufacturing In- 
dustry, The secretary 3,nd the manager are instructed 
to secure signatures to the pledge. If necessary, 
the sccrets.ry sjid the nanager -.Till asl: the sponsor 
of any individual johher to assist in explaining to 
his johhers the desirahility of conplying -;ith the 
industry's request. The secreta.ry and the nanager 
are instnicted to report to the regional connittee 
any firm, person or corporation wiiich neglects or 
refuses this evidence of cooperation." 

"To the Regional Connittee of the Vitrified Clay 
Se-?er Pipe Ilanufa.cturing Industry, Date 

(*) These t'-^o resolutions -.-ere rescinded tj; the eastern P.egi mal 
connittee at its meeting, June IS, 153'+. ^t the request of the 



Gentlenen; ?.ecoc-ii"ing that it is the opinion of naiui.frcti'.rers 
in the Eastern P.e,.'j;ion of the Vitrified Clay Se-,-er Pipe 
I'r.nufacturinr; Industr" to e::tenc". .ioVoer's conpensation to 
various firms, persons, c.nC. individuals 'rho perforn sales 
F^ervices and soles functions,: and 
Tiecognizinf:: that -'hen thn undersigned accepts the 
joliTDer's conpensa.tion it is -dt-h the understanding- 
it "ill be earned, and 

P.ecognizing that the sale of vitrified clay se-jer 
pipe and l:indred "oroducts is onlv possiole profitably 
Then there is close cooperation anc -lutue.l interest 
■betvreen jobbers and manufacturers; 

The Conpan'-, for the period. 

during -mich it is sold at jobber's terns pronises 
support to its sources of supply r.nd here-:uth, 
pledges the follo^ving: 

"A. To quote or sell at ^terns no :ore favorable 
than those established by the Eastern Regional 
Co^i:ittee and the nanufacturers of the Eastern 
Eegion of the Vitrified Clay Se':er Pipe iianufac- 
turinjg Inc'ustry, - such ter;.is, in reality being 
mandatory under the Sener Pipe Code, Art. XI, 

"B. To auote or sell at prices no less than those 
posted by the sources from -rhich the pipe 'jas 
brought, the undersigned reservin.^; the right to 
purchase from one or nore manufacturers and to 
change his sources from to tine as conditions 

"C. To neet the credit terns of the Industry. 

"D. TThen selling dealers, to be guided ^y the 
follo'ving definition anc. ^^nder no circunstances 
sell contractors or fly-by-night outfits 8.t dea.ler 

• 'Dealers in this indi\stry are fir'is, 
persons, or corooration "ho adequatel;'- 
stock and definitely promote and sell 
vitrified clay se^rer pipe and kindred 
■orodiacts to contractors and consumers 
generally. Legitimate dealers shoiild 
be fina.ncially responsible and reason- 
ably able to discount their bill::. The 
"oolicy a-nd course of the der.lers in 
■jronoting vitrified clay,se--er pipe 
against competitive materials : lust be 
constru-ctive and cooperative -ith sources 
of suoplj'. Der.lers perform the 'time and 
place' function in thjs industry.' 



"E. To pronote the interests of the Vitrifiec'. Cl?-3'' 
Sei/er Pipe Indu.strj'- and to help the Industry in p.ny 
lof^itiiir.te sales cajToaif;n. directec" toward conpeti- 
tive •oroducts other than vitrified clay. 


Although the Vitrified Clay Se-^'er ?ipe Code provided for ITi^ 
reviev'- of all rules and rer;ulations, there vras apparently no ^.ction 
taken to discourage these activities until conplaint -jas :iade "by the 
Dela-'arc Cl?,y Conpany of Fittshurch, Pa., that it had heen suspended 
from the johhers' list, and that rianufacturers had heen forhidden, on 
pain of coc.e violrtion, fron ncceptin^^ orders or nal:in.;: shipi.ients to the 
concern on johhers' terns. 

A '-'ire -'as sent fron J, P. Lynch, Assistant Dero.ty Administrator to 
J. 1,1. 3ryne, Secretary of the Eastern Ilerional Co:vrittee, dated liay 23, 


This attitude on the part of the Aojninistration led. to hitt'er pro- 
test fron the industry o-nd an indication that rrithput such reciuirenents 
it -rould "be necessary to elininate the jofoers or to forfiet the advan- 
ta'-es of price filing and other re^Tulatory devices. 

The follo-'iA:: are e::cerpts fror.i a letter of "i.'ay 2Uth, 153U fron 
J. il. Bja-ne to J, T. Lynch, in reply to the aoove ni.-lit letter: 

"Your ni^-ht letter of Hay ?.J), 133^. received here 
today 'brin.'^s to a head the noct inportant issue 
of the Eastern Ret:;ion of the Vit:;ified Clay Sener 
Industry. It is so vital, that if ve do. not have 
the support of the HSA for e, position that is 
evidently sound and reasonaljle, 've shall have to 
•.nclze drastic changes elininating the so-called 
jobber in his present form. 

"We cannot help feeling that only one side of the 
auestion -.'as presented to the Legal Division. 
Uhen the other siie is offered, and the Legal 



Division iinc.erstrnc.s the ii-responsibility of 
the jobber in this Industr7, it "vill also per- 
ceive that to conply 'Tith the request containec. 
in your -ire -touIo. be to destroy all of the con- 
structive acconplishraents in this Industry by 
IdA. and to nalie inevitable for it a relapse 
into denoralization and rain. 

The follo'^ing are excerpts from a letter of l.iay 25, 193'^» from 
J. T. Lyhch to J. 1.1, Byrne in repl;/' -to the above: 

"As the natter has been presented to us, the 
case is one involvin,._^ an effort on the part of 
the nanufacturcr to control resale price of 
their raaterial. There are tvo reasons -/hich 
made it necessary for ne to 'Tire j'ou as I 
did, -Thich reasons are as follo".'s: (l) there 
is a policy rulin^i; vhich is definitely against 
the control of resale price by nanufactu.rers; , 
(2) in the opinion of the Le^al Division, there 
is no authority in your code for such control. 

"The case -rhich particulf'.rly concerns me at 
the nonent in that of the Delav/are Clay conpa- 
ny, of Pittsburgh, Pa,, viho clained to have 
been eliminated fron the jobbers' list 
they inadvertently quoted a price 'Thich vras , 
only $2,00 belor; the i.ianu.facturers list price 
in ' an-'order anountin/i: to about i^^fOO, I have 
heard only one side, of this case and as^, of 
course, reserving judg/ient until the other 
side has been heard. " 

Subsequently, June IS, 133'-' > the resolutions 39 ^-^'^- ^^ "'ere at 
the insistence of i\TES>, -/ithdra-'n bj' the P.ef^ional Con.iittee. nevertheless , 
there is evidence that the a,tter.ipts at control '.7ere not abandoned. 

In repeated resolutions, attenpts -rere ladeto regulate delivery, the conduct of jobbers, uniform terns of sale, checkin;';; of in- 
voices, the rejection of inco :plete filings, etc, Ilany of these \7ere 
rescinded at one tine or another because of KRA. objections. Eventually, 
at a neeting of the eastern regional connittee on January 22, 1935» 
the follc-ring resolution va.?, unanimously adopted on roll call: 

"Pesolution No, 69, Pesolved, That, pxirsuant to Article 
VI, Paragraph 6(c) and pursuant to Article VIII of the 
Code of Competition for the Vitrified Clay Server 
Pipe I.Ianr.facturing Industry, it is recommended that all 
manufacturers independently file schedule Ko, 1 as the 
mininub factory yard price, regular terns to apply, vrith 
no freight allo'Tance of any kind to any class of buyer," 

All the events leading up to this action cannot be detailed chrono- 
logically, partly b ecause of lack of space, and partly becaxise the records 



from resolution Ho, 1 to rer5olution ]To, 69 not conplete. 3ia.t 
excerpts fron a Eun lary recount f;iven ""07 the nanar;:er of the regional 
code authority at a neetin;; on Hovemoer 2J, 153'+» 2.nd detailed in the 
minutes of that meeting', offer such a, graphic pattern of an attempt to 
apply controls to c istrihutors throwjh the ostensihle means of price 
filin:;, ths.t they are reproduced here -/ithout much attempt to explain or 
comn.ent on the actions alluded to "by the manager. 

Co::ients on the genera,l suhjcct of code complirnce -.'ere invited 
from lir. D. II. Strichla.nd, i;a,nager. He "began '^ith the assertion that 
fne aojiinistration of the code in that region had, "by comparison 'Tit'n 
other codes a.nd other industries, "been decidedly efficient, and attempted 
to prove it "by asi:in-'_; four ouestions. The first p'ertained to the complete 
ahsence of complaints regarding \7ag;e or hour violations, of vrhich t'nere 
■ere declared to "be "Hot one. Hot even the suspicion of one," 

The ner.t three questions perta.inef to compliance '.-rith open price 

"2, How mrny manufacturers refused to file prices pxirsuant 
to Article XIII? Hot one. And many and many a code is 
in the last stages of disintegrs,tion a.s far as price 
filing provisions a^re concerned Bi'.rply "because one or 
more pig-headed '.."mnority interests not conform 
to this important provision. 

"3. T7ith almost a.ll of our products "bought "by Govern::ient 
agencies, -That manufacturer has ever cut the price up 
to the optional I5 per cent aJlo'Ta.nceT Hot one. There 
is a silent definite testimony to the "ba.sic desire on 
your part to do sensi'Dle t"Liings. 

"U, Hov; ma^ny open and shut defiant violations have there 
L)een to Article XIII of the Code 'There a. ma.nufa.cturer 
refused to D3-y any attention to. his filer' price? 
Practically none. Ho manufacturer ha,s ever' said to 
■ me, 'Yes, I cut the price, ^-'hat are ^ou goir-g to do 
ahout it?' Only three or four complaints liave "been 
filed aga.inst manufacturers on this t;/pe of violation 
and in every case en effort has "been :-.ade "by the 
respondent to discuss this question on its inerits 
and not in a defiant ar"bitra,ry manner." 

Ilaintaining that the code ""'as a ""ell accepted article for agreement 
among manufacturers," Ilr. Stricl'land placed the entire "blajie for 
"trou"ble" on distrfoutors or "out in the market," after the goods "begin 
to move out of the manufacturers' control. 

"I7e TVi-n into most of our difficiilt;.'- '-'hen the goods star-' 
through the jo"b';)er, 'to the cea.ler and to the consumer, 

"First of a-ll the industry tried to control the jo'coer l)y 
mutual consent. This '-'orked "or a -fhile and then colla.p- 
sed •-'lien the ITHA i^aled a-gainst the efforts of your hired 



nen enrl yor.r Eastern SegioJ^^- Coniittee to control the 
jolioer "by the elimination of an-- joVoer in case of violation, 
-hen ^7e rashecl to T7ashin£^-ton anu took care of _oa.rt of this 
trouble "by Tinning sxceptance to resoliitions 'vhich declared 
direct shipnents throii^ih a joboer, hecause '7e do not ship in 
his nane, renain the manufacturer's property until they reach 
the dealer or consirier. Thus the jofoer cannot taice title 
and therefore if he cuts his price, it is a violation for 
the nanufacturers to ship the pipe, 

"Today, therefore, I -jill file and proseciltea complaint 
against any :.ianufacutrer 'vho ships through a johber ^7ho has 
cut the manufacturer is resale price or passed on part of his 
remuneration. And hereafter, without any intent to chal- 
lenge you, and 'Tith full realization that S5f^ support of 
the industry is al)solutely necessary, I nill continue to 
file and prosecute any effort of any manufacturer to ship 
through a jolDher, if the johlDer has cut the manufacturer's 

"Then the question of commission ss-lesmen popped into the 
picture. Some of these uere ohviously appointed for the 
sole purpose of circu-nventing healthy merchandising. Some 
of these 'vere, connected ^'ith dealers, :7ere '"busted' 
johljers, some ''ere purchasing agents, etc. At ls,st, 
Resolution No, 6S '7as passed to re.gulate such oTsvious 
foolishness. As a result a manufacturer '7ho illegally 
ships on an order from a commission sales::ia,n \7ill find me 
filing P. TTiolation and prosecuting it. 

"liore recently, the dealer situation has seriously jarred 

our marketing. Ho'7 can.'7e influence the dealer to do 

healthy things? Here '7e ruji into t"o or three different 
manufacturer's opinions, 

"1, If ','e ca-nnot get the dealer to cooperate 

'.'ith us, our case is hopeless and ve night 
as ijell go to demoralization at once, 

"2. The dealer should coopero,te, Taut in spite 

of i?,ny effort it seems like a problem '.'hich 
is unsolva'ole, 

"3, We should not trj^ to cooperate -'ith the 
dealer. Let him do as he pleases - to 
hell --.'ith him, 

"In spite of these various opinions, I stand right 'vhere I stood 
from the first, T7hich is, until this industry be common consent 
or by Code lav if procurable or b;- processes of education, can 
and does in a practical manner influence the resale of its 
products, it puts a prem.ium on chicanery, chiseling, dummy dealers 
and rebates, and you vrill always be at the mercy of lying, gos- 
siping, s-:all minded jobbers '7ho vrill drive you to sales demorar- 
lization over a,nd over a^-ain. 


"Little by little over the past iionths tliis ccMorr.lizinc; 
procesr, has ijeen c.evelopinc. Alnost all the piiil: slips 
'-'ere dealer quotations, folloued hy the aiding, and alietting 
of the uanvifacturer '.rho -.Tould ship on the technicality that 
he -.vas not in violation of the se-.'er pipe code, 

"At first "e relied on the corrion sense of the vianr.facturers' 
and the dealers' codes, IJoth have had enough loop-holes to 
'be inefficient. The dealer code finally had to "be re-jritten 
and one "by one the nanufacturers to protect their orn interest, 
elected to start shipping through to an unrestra.ined de' ler 
until toP-ay '7e are cJ.nost torn linh fron li:.-!!), as 'Witness 
the KB'-j York market. 

"Fre-'ious to the present derler code (under --hich nd"^ a-H 
dealers nw-.t i^ile a price.)" (*) 

"The Se'.'er Pipe kcn'afrcturers enceavored to cooperate 
constructively 'rith the dealer's viodal nark-up. RirsuE-nt 
to Article XI (the -icdal nark-u/^) the spread -fas increased 
fro:".i 5/^ of the net, inacciuch as this approached the 12-"- 
dealer nodal. Then to help solve the delivery proolen 
and avoio. the use o ■" such preposterous figxires as,0C0000001 
of a cent per foot, yoii adopted the resolution estahlishing 
2 pointer, of the list for L^elivery. 

"The joohers and cealers have decided this is too great 
an allo'''ance and are giving it a:j3.j in increasing Tolione, 
ivTeiT Yor?: dea.lers give lis the nost flc?.grant e::a:iple. 

"At first "blush the ans"7er seeris sLiple, just take anay 
the 2 points, etc, Ho'rever, this is only scro,tching the 
surface. The fundanentcl challenge is, can the industry 
inflxience its dealers to lieep the remuneration for then- 
selves - -rhether this is 2 jooints, 1 point 5,j or 'That, 
If not, the only V7o avenuer, open are: 

1. Elinina.te the dealers, or 

2. Content yoxxr'-elf to periodical demoralization 
fron concerns -'hich have no money invested in 
Jrour ousinesD, 

"?Lecent developments of the Ikiildcrs' Supply Industry 
Code ajid recent lulings of Legal Counsel in the JIM 
Compliance Board suggests positive steps 'vhich can 
"be. taken in our hehalf , " 

i.Ir, Stricl^land then proceeds to sho'7 ho'"' the open price plans of 
the t'7o codes could "be usee" to so lire the "oro'blem. 

(*) This is the Guilders' Sup'oly Trade Code '/hich was amended in 
October 2R, lS3'-l-i to i'- coiporate Office i;emora.ndiu,-i #22S, 


"Under the derlers' core all c.erlers :mst no-.- file, prices. 
Any '7ho bids v/itliov.t :"ilin";, violpten his o-m code. 
It '"'ill he the dutv of m.y office to protest any such vio- 
lations. For If a dealer has not filed he can- 
not furnish certificate 6§ cor.ipliance, I -'illr^iet a 
ralin^; fron Colonel ?.ose that the dealer is in violation 
then go after the 'Tashington and Sta,te officials to pre- 
vent auard and shipnent. 

"As an exDxrple, let lis use a nanwfacturers' filed delivered 
price to the cohsurier net of yl.225 per foot on 1S"3' double 
strength pipe in Sev Yorl: City, 

"1. If the lanufacturer' s hid is less than $1,22^ 
it is a violation of the se-7er pipe code, 

"2. If the :jian\"ifacturer's coin;:isr;ion salesman's 
"bid is less than $1,225 it is violation of 
the se"7er pipe code, 

"3« If the bid of a.n independent sales agent or 
jobber rho ships direct is less than $1,225 
it is a violation of the seiTer pipe code. 

"U, If the dealer is the bidder and has not 
filed a price, it is o. viols-tion of the 
Builders' Supply Industry Code, 

"I'To'"' suppose '70 have p. case T/iere a dealer has filed (underlining 
by author) and his filad -price is less than $1,225 "^er foot and 
he u::es this i';rice in his bid . There are t'7o co-c.rses of rction. 

"First, I '7ill protest i--nder the 3-ailder's Code, Article IX, 
Section 2, Pare.graph i, '•'here it reads as follo'7s: 

'TTilfully destru-ctive price c\itting is an unfair nethod 
of conpetition Piid is forbidden. A'ny -lenber of the 
Trad.e or of any other trade or i-ndr.stry or the cus- 
todiers of either ;iay at any time conplain to the 
Code Authority'- that any filed -price co-nstit\\tes -un- 
fair co-ipetition as destiTLctive price cutting ir'peril- 
ll'O^; s'.-iall entei-'prise or tendi-nr: to-'7ard nono'ooly or 
the inpa.irnent of code '70<ges and 7orl:ing conditions. ' 

"I-n orther nords, i'n addition to ■•orhin;; '/ith the Builders' 
Supply Indurtry Code, I 'fill also file, -pursuant to this 
Article XIII, Paragraph 3, " violation a.gainst any :ianu- 
facturer nho has pen-iitted his goods ajri affiliated 
co;'pa.ny or othcr^rise to reach the co-ns-o/ier at less than 
his :IET consumer posted -price, 

"Rer.ieuber, I use $1,225 as an e:c"iiple. It is the -present 
2 points to the cons-ojner, 2 points for tracking, and ^fo of 



of the ICET. If you reo.-ace tnis, the case is no I'.iffei-ent 
in ■;i-inciple. I p:.i not pereonally advocating: ;^1,225. The 
sprerx- is up to you, "but its 'laintenancc, vmatever it ir, 
i-? a code :mtter, 

"Also, as ti:ie goes on, -^e are learning hc' to proceed 
"ith conplaintn. There has "been confusion in connection 
v/ith conplaints and prooa-ljly always v.'ill oe cone confusion. 
However, there is a spiritec". desire on the part of the WRk 
to do soiethinf," positive about violations. This has he- 
come nore evident as tine has rone forvo-rded, 

"The steps usually trl:en in connection '-ith the filing 
of a co;iplaint are as follo'"^s: 

"1. On general conplaints, I ''ill notify all 
nanufacturers hy neans of the pinl: slips 
Te have heen ",'-: neretofore. Hereafter 
they ■'Jill he jv-st a:: definite as posnihl-e 
■7ith full insti^actions as to --hat not to 
. c:o.(*) 

"2, On specific conplcdnts, I ■■ill notify the 
respondent and per:"iit hin to vise ten days 
for return of his ans-^er unless the emer- 
gency of the situation seeis to indicate 
ten dr;;'s slicalf- not he r Honed, (Tor in- 
stance, suppose pipe is shipped just as 
rapidly as possible during this ten day 
period, etc.) 

"3» I- violr.tion has occurred, I -'ill file the 
facts in the natter to '.Tashington at once, 
seeking to precent anard of the pipe or 
cancellation of the contract. 

"I nill n'ite Colonr^l I.ose (**) statin; any fif, filed and 
used hy the dealer less tho.n 01.22'j; .jeopardizes the '-' and 
hour provisions of our Code am. no nanufacturer can hid direct 
and neet thir 'rithout fili^" do- -n and this endangers our '7a -es 
and hours, etc. 

"This nill result in either hrin;jing the dealer up to 
$1,225 " OJ-" establish a reasona.ble cost "'hich 'dll be 
the logical spread vre ccn adopt and fight for ii event 
we cannot sho\i cause that $1,225 is a nininura belon 
nhich it is idlfv-l price cutting. 

{'*) The ncrning of these ninl: clips cotild not be definitel;' cheched, 
The iviplicr'.ion is one of hoj'-pott, or sinilrr joints action. 

{*'■*) At t)uat tine Secretary of the r^iilders' Suppl]' Code Authority, 


"In addition to protoction under the Builders' Code a.nd 
pursuant to n,n interpreta.tion of our o".m code given ne 
last ne.-^k fron TJashin^-iton tlirou~:li the Compliance 3oa-rd 
of iToAT Yorl: State, I can file conplaint a-'^.T.inst any 
manufacturer -fho. elects to furnish (or permits his pipe' 
as alresidy Ijoufiht to lie furnished) p dealer v;ho had 
"bid less than $1,225 ~ ^^^ this is pursuant to Article 
XIII, Section 3 o^ our ovn code, a-s follovrs: 

'Mo member of the indxistry shall sell directly 
or indiroctlj?- throu^-h an affiliated con'oany or 
othen.7ise "by any leans ^rha-tsoever an3- of the 
products of the Industry at a price loner or at 
discounts greater, or on nore lavoraole terns of 
pa^T.ient than those provided in his current net 
price a.nd/or price lists and discoiint sheets, so 
filed uith the committee as aforesaid; provided, 
however, that at any time any memlaer of the In- 
dustry may meet the lanful price, meeting of a 
lo"er price must "be reported at once to the Com- 
mittee. An "affiliated " co ipany the :na.jority 
of '-'hose voting stoc'; is crned or controlled by 
a menDer of the Incustry. ' (*) 

"4. If it is a dealer complrint I •7ill hancle 
with Colonel .lose in just a.s efficient a 
manner as possible. 

"5» Copies of complaints nill go to the Code 

Secrcta.ry (Chica 'o offices) as a matter of 
form and Code la'", 

"S. During period of investigation every State 
purchasing Agent, Colonel P.ose, and other 
buyers irho may be interested, 'vill be in- 
formed that a ma.nufiictiirer is in alleged 
violation . The B'ailders' Supply Industr3' 
Secretary -'ill notify de.alers than an 
alledged violation is pending against the 
manufa.cturer is ou-estion. 

"7« If it is deteinined a violation has occurred, 
a,ll interested -''ill be notifieo. that the com- 
plainant cannot file a. certificate of com- 
plir-nce, Incidently the dealers' code nor.' 
sa,-''s : 

(*) The Interpretation of this section should be contrasted -.fith the 
one made under similr.r circuristances in the Business Furniture Code nhich 
set in notion the breelic^o'.Tn in resale price maintenance activities in that 
code, and the attempts to secure them by aj-.iendient. See p 276 . 



»Ko nen.'ber of the Trade shall handle any 
"builders' si.vr:.lies vrhich have either been 
namxfactured or sold "o'j a vendor vho c.oes _ 
not. represent that he is in full conpli-nce 
vfith the approvec' code of fair co;npetition, 
etc. ' 

"Let ne repeat: the action descrihecT at)oTe is not offered de- 
fiantlv. It' is not a chall ence 'askinc a manufacturer to resist 
connon sense. Ijat is a declaration that this office vfill 
devote just as auch tiiie as is necessary to the end that com- 
pliance a^jninistration v.'ill lie justly and impartially administered. " 

The neetinc of the eastern re^^ional code authority Pehruary 12, 1S35» 
uas largely devoted to the compliance problem in the Een York marketing 
area, -'here price cuttin;-,- "by dealers ras allegedly menacing the "economic 
opportunity of the industry." 

It '7as tentatively sug.-;ested that if rJi "open !.iarl:et" '.Tas 
desired, the only vray a.ction could legally tie taJten ander the code rroxild 
•be to estaolish the Wer/ York market area as a trading region and then 
■oass a resolution to the effect that prices for that particular region 
vere not to he filed in accordance rrith Article XIII. 3ut the minutes 
record that every member present pledged support to the provisions of 
the code as they applied to the Kerr York market anc offered assistance 
to correct the sub-standard practices. The later success of these 
measures is not indicated. 

The lliddle'-'cstern Regional co'r-ittee of the Vitrified Clay Serer 
Industry evidently faced something of the SMie problem and voted as 
late as Ilay I5, 1935, to ;:pke jobbers and independent sales ^..gents 
subject to" the code. This -ras forbidden b"/ the Aojninistration. (*) 

The problem of control oyer distributors' prices 'alao arose in 
connection -ith the ffice filing reaviirenents in severrl rdivisions of 
the Eabber Manufacturing Code, The Code Authority for the Automobile 
Fabrics, Proofing and Backing Division requested on Auj^ust 29, 153*;+. ^^^^-^ 
jobbers be forced to ac'liere to fair t practices, viz-., open price 
filing. The Division of Research and Planning objected and the request,^, 
vras held in abeyance of the Atministration. (**) 

The Code Authority o;"" the Babber Sundries Division asked at one time 
that the Acninistration e:rplain Article III, A, Section 1 of their code 
to include so-called "distributing manufactarers" in the price filing 
requirement, (■■"*,*) 

(*) 2ecolv.tion 06 of the middle -'estern regiono.l committee minutes, Hay 
15, 1933. and Letter from Deputy IT, A. Janssen to C-, 3. de Lenth, Hay 24, 
193^, imA files, 

(** Code Authority Minutes, 7-IO-3U, NM files, 

(***) See Memorandum to Deoutv in charge of rubber codes for Research 
c: Planning Division in NRA files 


A letter of iirotest av;5inst f i"!, in~ -jrices in the heel and 
sole division, cane fron one riieinoer vrhc stated th?^t 75 per cent 
of the voluiae of orodxict sole to repair shops '^ent through jot- 
hers, ^7hc -yere not required to fii.e -'prices. Ke st^^ted that it 
'73 3 r/ell kno'-'n th.-t such prices fluct'd/^tud continwily through- 
out the country ;?nd pre different in different parts of the 
country at the s?t e tine, and th^t in order to sta^;- in business 
he must reasonably bo in position to meet such competition. 

Members of the rubber hose division of this industry vere 
accused in complaint letters to the Administration of extra- 
code efforts to control distributors in accord riith. a price 
fising agreement of manirfaoturers. The Federal Trade Commission 
investigation of these activities disclosed at least one atterat 
at a secondary boycott of a distributor !7ho submitted a bid on 
rubber hose to the city of Mili^'aultee at less than the filed ^^rice 
of the concern which v^s to supply him. 

4. - Summary 

One may conclude from the i:)receding accoimts that the 
e:r.istence of independent distributors comiDeting i^ith manufacturers 
leads almost inevitably to the necessity, or at least the desire, to 
■■•^extend price filinj controls, usually throu^^h a policy of 
resale -"jrice maintenance.' The methods for carrying through such 
a policv, if net exolicit in code "oo-ers, are dii'^erse and tend 
to conceal the frequency of the difficulty and t he efforts to 
meet it. They include: (;j.) the prer;8ration of approved jobbers' 
or distributors' lists and the forbidding or voluiitary with- 
holding of jobbers' discounts to those nh^se behavior is not 
pleasing to the suprilier; (2) voluntary cooperation from dist- 
ributors to file and/or to maintain manufacturers' prices, and 
assistance from them in boycotting noncoooer'-^tive manufacturers and/ 
or distributors: (The Drice filing may, as in the case of paper 
difetributing, and the builders' supply tr^-'de, take place in a 
separate code ); (3) permissive or mandatory resale price 
contracts obligating distributors to file prices or to abide 
b^' prices filed by their su-opliers. 

The success of these attennts to extend controls to distrilv- 
utors is effected b;/ several factors. Tnile the willingness of 
distributors to be controlled, in return for protection of their 
margins, is of great practic^il assistance to the success of 
such a -Qclicy, (*) even more importance may be attached to una- 
nimity of interest in the manufacturing group and the absence 
of any major differences in reliance uion particular distrib- 
ution channels or in consumer acceptance of the products. "■' h 

(*) E.G. ,, paper distributing trade, supporting p^per and pulp, 
envelope manufacturing, etc. ; commercial stationers and office 
outfitting code suoi:)orting business furniture; the Builders' 
supply trade supporting vitrified clay sewer pipe and others; 
the copper, brass, Dronze and related alloys sup-oorting copper 
and brass mill products. Such sup^oort was less effective in the 
case of the wholesale plumbin,-; and plumbing industry codes. 


- ■ -314^ 

Such differences may arise in size ,' • ccra-nleticn of product-line, 
differences in "S^les r.ethods, in degree of intergration, etc. 

The large, full-line manufacturers, 'whose products have 
wide consumer accept^ncs, usually have a competitive advantage ^^hen 
prices are uniforia. If, as is -frGquently the case, such manu- 
facturers use their ov/n cutlets or branch houses, they are bound 
to observe their oun prices under the ordinary price filing plan 
and hence are anxious that independent distributors be likewise 
bound to observe resale prices of manufacturers, thereby making 
it possible to perpetuate uniformity in the secondary markets. 
Small or short-line maniifacturers , utilizing independent distri- 
butors, are prone to find such en arrangement onerous. (*) 

The arrangement may tend to eliminate an alleged customary 
price differential or "spot" for such raantifactursrs - as was 
complained in the esses of plumbing fixtures, valve and fittings, 
rubber heel and business furniture, or the res-^^le price main- 
tenance larovision may make it more difficult to attract dist- 
ributors for less well-I-aiO'Tn products, as alleged in the 
mayonnaise industry. 

In industries such as fertilizer and iron and steel, in 
which products are standardized, with no major divergencies 
in distribution channels effective control over distributors 
was possible, either by the code or by cooperative action. In 
other industries with a simple distributive system no problem 
of. distributor control arose. Thus in the machine, tool and 
forging industry products were differentiated, but sales were 
handled largely through exclusive salesmen or, agents. The steel 
castings industrj'- distributed largel-y to industrial users witl>- 
out the use of middlemen. 

(*) E.G-. mayonnaise, business furhitui-e valve and fittings 
industry, cork rafg. , funeral suijoly industry, wood cased lead 
pencil, asbestos. 


E . £.Q.n t._ro_l Over PiviKJor. of LXisineGE Thro ur.ii Sta.tisti cal 
?.c^oi;tin"; aiu "' Slin.rc-the-:3'aGinei:^,;- P lt'.ns . 

1. Introo-uction • ■ 

Perhaps tlie ;,iOGt si;?-nif leant attcrrots to extend price filing 
control \7ere those in '7hich price reportin,^ was used as part of a gen- 
eral statistical plan, in furthers.nce of sone formal or informal plan 
for sharing the iDUsinass. The use of quotas in connection '7ith price- 
fixing agreements is veil knov.'n. Apparently, the maintenance of uniform 
and stable prices under an open price plan leads to a similar necessity 
to estaolish some acceptahle means for distributing the availahle 'busi- 
ness, so that merahers v,'ill he content to kno'7 they are ,:receiving a 
share of the total volume and \7ill not attempt to increase that share hy 
price cutting and other merchandising tactics disturbing to the grou.p 
program. (*) 

In many respec":s these statistical reporting plans are identical 
with the market reporting type of open price association described hy 
the Federal Trade Commission in its 1S29 report. They resemhle, far 
more than most open price plans in itPA codes, the open-competition 
plans tha.t were used hy the American Hardwood Manufacturers' Association, 
the linseed oil inTastry and the maple flooring manufacturers, in that 
they require the ercchange of full market information, including stocks, 
shipments, capacity, and prod'acticn data as well as prices. 

The only ne."' feature of tE"e plan, if any, is the announced phil- 
osophy of sharing-the-husiness, and the systematic carrying out of that 
philosphy through the medium of the open price provisions approved in 
the codes. 

The filinf of ^Drices is not an .csaential part of the share- the- 
husiness plan , since q^^aotas are ordinarily expressed in volume and 
might he a.dlieroi to or enforced without reference to the exact prices 
received hy inflividual sellers, But since the "basic purpose of such 
plans is to en;;ourage the maintenance of a price level that will return 
a profit to iniustry raemhers, the filing of prices offers a useful 
check against the tendency of any memher of the industry to drop the 
price through concealed or special concessions and perhaps destroy the 
level for all. A tacit agreement to follow- the-leader or to ohserve 
a suggested-price floor might accomplish the same end hitt would he less 
easy to disc/.pline and of duhious legality. In this respect price fil- 
ing may offev a convenient support to the share- the-husiness program. 
Conversely, the estahlisliment of quotas on a percentage "basis has fre- 
quently '^iieon fo-ujid a useful support for a price filing program intended 
to result in uniform or stabilized prices. It is the latter development 
that appeaj.'s more common in-lOA experience. 

Mr. '7. J. Donald, Llanaging Director of the National Electrical 
Man ufactvrers Association, suggested something of this function of trade 

(*) In this connection see Chapter II, ahove, pp. 59-60. 

statistics in a report on planning in the Electrical Ilanufacturing In- 
dustry, issued on ]?e"bruarj7 k, 1935. ^.s follows: 

Essentially, trade statistics have the sajie hearing as 
uniforra costing activities on pricing policj'-, nanely, 
that they provide, additional data on the hasis of ijhich 
memhers of the industry nay do Dusiness more intelli- 
gently, especially in regard to pricing policies. 

I[no'7ledge that a conpany is or is not securing its 
accustoned percentage of the unit anc' o.ollar volume 
of sales of t he industry, in contrast nith .-^ossit) and 
'\7eather reports' "brought in "by salesnen regarding 
prices and terns of conpetitors renoves many of the 
charges and counter charges that voulC. othenTise e::ist . 
Data rerardinr inventory conditions also -provide 
in-Qortant ,7uidance to individual pricing policies . 

(Underlining supplied) 

So important is a sound statistical reporting system 
that some leaders of the industry have e::i)ressed the 
opinion that open price filing r/ithout corallary trade 
statistics soiietimes results in more chaotic conditions 
in the field of pricing than Movld. e:dst if no accurate 
hno'.7ledge regarding prices vere availa'Dle. 

• t Donald does not refer to a formal quota plan of shara-ngr^^he- 
"business "but his remarks indicate clearly the fuiiction of such a plan. 

2. Sliare the Business Plan In Corrugated Solid Ei"bre 
Shipping Container Inr'ustry. . . , ' 

ur. XI. XJ. PidTJard; fon.ier Deputy Ac'oinistrator in the ERA. and 
later Coordinator of the various "branches of , the paper industry, set 
forth the philosophy of voluntary sharing of "business and its relation- 
ship to open price filing in a speech hefore the ITational Container As- 
sociation' in Chicago, J\-uie 13, 1935.. His remarks are especially signifi- 
cant "because of his opportionity to o'bserve at close range the function- 
ing of price filing in the various paper industries and to appraise their 
results. These price filing provisions -rere complete in scope, 'Tith 
wide residual powers left to the code authority in each instance. In 
general, they functioned smoothly, -.Tith fe-r complaints of non-compliance. 
With one or t-vo e?:ceptions they r/ere conspicuously successful in main- 
taining prices at a uniform and profita"ble level. 3y the usual industry 
standards of performance they vere "successful"- open price plans. This 
should he ]:ept in mind in reading iir. Pichard's general opinion of the 
deficiencies of the open price mechanism as a measure for sta"bilization, 
and the values of a quota system. 

Defining the p\irpoSe of any sta.'bilization plan as "being to "it.ring 
a"bout an adjustment het^een productive cap? city and demand, at a point 
that -rould ^jleld the industry as a \7hole a fair profit, I.Ir. Pickard 
indicated that neither. .control of production or control of price could 




acconplish the purpose, tecF-use "both overloolred the fiinrlampntal f^-'T-t 
that production \7as alrer-d:: controlled and United 'by denand. (*) 

"The real pro"blera nas hov; to divide up such production 
a.s there was, Gnons'^' the individual "onits of the indus- 
try in such a 'vay as to cure the e:cisting conditions 
v;hich had already elininated profits, reduced ^7ages 
to a ninirnim and -lade huge inros-ds on capital in- 

"On the price approach to the prohlem the most con- 
nonly used mechanism rras the open price plan. 

"It vras soon found thr.t the mechanics of price filing 
were not nearly so simple as they looked at first. 
In order to jnalte filed prices intolligihle and 
comparahle, one with another, elahorate re;galations 
relating to grade, quality, quantity, freight allow- 
ances, discounts, p.;r-ents' commissions, jotliers, chain 
stores and a hundred other things were added to the 
plan. Further regulations were necessary to put cost 
determination on a uniforr.i "basis. The whole thing 
"became a lab^'rinth. This tended to produce violations 
and in fact it "became difficult to tell in ms,ny cases 
v/hsther a transaction did or did not violate the rriles. 

"Tha.t the open price plan would produce uniformity 
in price was recognized 'but the theor;'- wh,s that, 
at a uniform price, each mem"ber of the industry 
woulo. get his fair share of the toto.l "business. 
This t"heory faileri to take into p.ccount the fact 
that 3.t all times price variations are the rule 
and strict uniformity is a"bnormal. It was soon 
found that, at a uniform price, some individualr, were 
falling helow their usual voliJrie position in the 
industry. 'Before the code the Tisual remedy would "been a shrding of price iijitil the normal volume 
adjustment y;s,s restored, l)ut under the code this 
remedy v/as no longer availa"ble. A rorice could not 
lie: shaded without filing and pu'blication, rind -this 
resulted merely in reducing the whole price level 
and left the sufferer for volume worse off than 
"before,. No matter how la.r a"biding an individual 
may "be, when he reac'nes a point v/here it is a case 
of violating the la\7 or ^perishing, "ne \;ill choose 
violation. He begins to exit prices secretly and 
"by- su"bterfuge and as soon as such practices assume 
any consic'.era"ble proportions the open price plan is 

(*) This attitude, it may "be noted, docs not recognize that there 

might "bee a greater demand at a lower price, if there is marked 
els-sticity of demand. 



doomed. In one industry after another 'Thich cane 
under ray oTDservation, the open price plan gradually 
disintecrated and finally collapsed and r/as either 
officially abandoned or, ahat xras •7orse, "became a 
dead letter. Of cou-rse there nere real chiselers 
and, of course, the ITSA. vjac vealz and vacillating 
in its enforcenent progran, "but these only hastened 
an inevitahle result. 

" .i-'hat Tjas needed uas a plan uhich nould appor- 
tion such "business as ,there 'aag on a fa,ir basis, or, 
expressed in another '.7ay, as ^Tould apportion the 
burden of carrying equipment already made idle by 
lack of demand so that no one nould be crushed. Only 
one plan ^.vhich actually acconplished this and ^as 
proposed or put into effect. It vras the plan v/hich 
the container industry is using. Under this plan the 
normal position of each member of the industry, in 
terns of percentage of the total production, is 
determined and the members then voluntaril;^ linit their 
individtial production to that percentage of the total, 
whatever the total na^r be... 

"At this point let ne saj^ that I believe no'7 and 
believed then that as legislation the clause vrhich 
\7?.s included in your code had no value. Its value 
lay in the fact that by the approval of the code 
the principle of volujitary sharing of business 'jas 
recognized and given official expression. In n;r 
opinion the practice of 'sharing business is no:7 and 
alv/ays has been lego,l. 

"Please understand, hovrever, that this perfectly 
innocent tool nay be used in connection with some 
illegal act and might for that reason be condemned. ■ 
Production control by agreement is illegal and al- 
ways has been and the line bet^Jeen limiting production 
and dividing up such business as is available to the 
industry racist be kept sharp and distinct. 

* jj; ;(( * ^ * * •;< * * * * * "-i« * * 5^ =*= 

"Ily conclusion is that voluntary sharing of business 
has worlced. I\irthermore, it is the only one of all 
the plans submitted to the iC!lA. which has worked. Even 
in the few cases where the open price plan has been a 
success it has ibeen so only because it had tinder it 
an unannounced and perhaps hardly recognized adlierence 
to the principle of sharing "-business." 


-519- ■ 

Tlie sLi^G'estioii is inac'.e he:.'e t;iat tlie rrLiotn p'.an ^TO"all^ allon some 
leeway from the ri^-^id and artificial ixnifornity of prices unc'er an open 
price plan, and v/oulc" avoid the shiftinrj of volmae that such uniforraity 
ni^':^ht lie expected to produce, "hile still dcterrin^;^ the "cutting" of 
prices in an effort to attract non-existent volioias. 

This v-ould assx^iae a Gli.3:ht dispersion of prices around the pre- 
v.ailin/3 price, "but vould still necessitate .r^'roup cooperation to observe 
the profitable range of prices until it "occane generally advanta^'^eous 
to raise or lorrer the ran-^e-) because of increased or decreased denand., 
lo'jer or higher costs, etc.). The theory is essentially that of a 
m8,naged price. 

The success of these plans depends largely, on. the acceptance by 
all industry menbers of the sta^ttis qu o, so far as their volurae position 
in the inlustr;/ is concerned. It involves confidence that the existing 
nanaged price is the best price possible and that there is nothing to 
"be gained by lowering that price, either individually or for the in- 
dustry as a '.Thole. It involves also a general acceptance of the princi^ 
pie that excess capacity should or nxxst be supported v/ithout liquida- 
tion, that the burden of supporting it nust De shared by the industry 
as a whole (either through price cutting or throuf;;h cooperation,) and 
that the best way to share it and to survive is to refrain from lower- 
ing prices and thereby in.tensifying price conpetition. 

The economic irxclications of these assumptions need to be exam- 
ined fro:.i the point of viei' of the public welfare with far greater care 
than has been besto-jed upon thea in the past. To the extent that the 
existing proportionate distribution of volume amo-rug producers is not in 
accord with the relative efficienc:/ of those prodacers, it cannot be 
deemed entirely in the public interest to freeze that proportionate 
distribution 'b-j schemes either voluntary/ or bached by mandatory sanc- 
tions. And to the extent that "orice is managed so as to protect excess 
capacity and capital charges, it is not performing the function ordi- 
narily- ascribed to it. Finally, the demonstrated ability of a group 
to manage prices to such an end s'oggests immec! lately the need of some 
degree of pviblic observation to see that the e.bility is not misused — 
as Mr. Pickard indicates tha.t it could be used — to control production 
and to maintain prices at an unnecessaril;- high level. 

The corrugated and solid fibre shipping container industry had 
introduced into its code price filing provisions similar to those ap- 
pearing in other paper codes, but apparently ma,de no attempt to put 
them into effect. The provision was optional and might te put into 
effect "from time- to time" on specified products as determined by the 
Code Authority, with due notice to members 30 days prior to the date 
fi::ed. I.Iembers might file or abide by the lowest price and most favor- 
able terms filed by another. 

Evidently the provision -/a-s intended to be used only! if needed. 
Article Yl,. Section 12 to the code atithority, for the purpose 
of checking complia-nce with the cost provisions, the power to require 
members to submit to a designated a^'iency, v;ith respect to closed trans- 
actions only, coLTolete infoniation in regard to any quotation, order, 



contract, or sale of any product of the industry, including information 
as to specifications, quantities, price, conditions of storage, trans- 
portation or delivery, terns of l)illiilg, cash or trade discounts al- 
iened, and other pertinent facts relating to such quotation, contract 
or sale.The'iie reports, plus the statistics suTonitted and compiled for 
the industry in connection vith the vol-cuitary chare the 'business plan 
provided for in Article VII of the code, and approved "by the NM in 
133^, T7ere apparently all that nas necessary to estalilish the desired 
statilization in this industry. 

3. The Envelope Price Filing and Quota Plan 

The use of the statistical reporting and "quota" system in con- 
nection uith a going open price plan is "best illustrated li-y the envel- 
ope manufacturing industry, nhose code 'jas atoinistered "by the same 
industrial management group that acted for the corrugated and solid 
fil)re shipiDing container industry. (*) [Inasmuch as this group served 
as agent for a score or more of codes, many of r/hich contained open 
price plans, it is possible that an examination of the recor6.s of these 
industries uould shor? similar applications of the "biudget" reporting 

a. Organization of the Envelope Industry. 

Some fe'.T facts atout the organization of the envelope manufac- 
turing industry and the provisions of the open price plan are necessary 
for an t\nder standing of the "budget plan of operation. 

The envelope manufacturing ind'astry is made xcp of t-jo groups of 
manufacturers, one selling direct to industrial consumers and another ' 
selling chiefly through distributors. The Industry as a rrhole comprises 
approximately 175 nemhers. The United States Envelope Com.pany, the dom- 
inant company and achno-rlec^^ed price leader in the industry, distributes 
through branch compr,nics and jobhers. The ITestern Envelope Company of 
Kansas City, Ilisr-ouri, is the largest nan\ifacturer selling direct to 

The efforts of the industry at price stabilization centered 
around .the difference in the marlieting methods of the tv/o manufacturing 
groups, since any effective plan necessitated the cooperation of both. 
The past tendencies on the "orrt of consuj.ier manufacturers to reduce 
prices on direct sales had had a gro'iing tendency to ciit into the sales 
of johliers and to lo-rer prices at the consui.ier level. This circumstance, 
com"bined '-'ith great suipilus capacity, suggested the need for compromise, 
T,'hich -jas attempted under the code ty the establislxnent of standard 
trade differentials to the various classes of distributors and consumers. 

(*) Stevenson, Jordan and Harrison 



"b. The Price Filing;; Provision. 

The original o^Dcn price proposid in the Envelope Code provided for 
■the filing of prices to "each class of trade", with mandatory price dif- 
ferentials to he fixed, hnsed on differences in cost of distribution to 
various customer classes,' These differences ivcre to he ascertained hy 
mepns of a.n ao;'roved cost accOTontin.-;^' s^'-stem. This provision rras objected 
to by certain advisers, and T7a.s deleted from the price filing plan before 
aioproval, as was the proposal for a mandatory zoning; system. Both the 
rcguirenents for custoner classification f^nd the zoning were restored 
through the ru3.ings set up by the code authority for the operation of 
the "orice filing plan. 

Members of the industry \iere not required to file individual price 
lists', but could acceiot the schedule of another company as a minimum price 
list to be observed. This iilan resulted in lorice filing being limited al- 
most entirely to the United States Envelo;oe Company, representing the job- 
ber mills, and the 'iTestern Envelo-oe Corni^sny, the direct consumer mills. 
The -price lists of these t^-o coraiJanies becpme the Dra.ctical price lists 
for the entire industr;''. TTlien the open price, lolan was effective under 
the code, The United States Envelope Company filed very exhaustive price 
lists, covering pra.ctically all of the products of the industry, for 
of the various cla.sses of 

These -^rice lists ^jere filed \'' designa.ted zone areas extending from 
one to seven from the Eastern to the ITestern part of the United States. 
Price lists for Zone 7, the Pacii"ic Coast region, were characteristically 
higher than those for other zones. 

IIEIA, files contain records of only a.bout twenty-five (25) price filings 
from the entire indastr?/. Roughly half of these are by the United States 
Envelope Company, four or five are by the 17estern Envelope Company, with 
one or tvro scattering,- lists from other companies. (*) 

A more dotaiDed study of the set-up outlined above shows three possible 
groupings of industry interests under the open-jjrice plan — the consumer 
vs. jobber type of manufacturer; the large vs. the small members of the 
industry, and the regional interest. 

c. The B-adget Plan. 

The budget plan of o-ioeration v/as meant to preserve a balance for all 
of these conflicting interests and to prevent an;;'" shifting of volume which 
might be caused by price stabilization, and -woiild in t-urn destroy that 
stabilization if not recognized and adjusted. The basis of this plan was 
a series of voliime or -oroduction re-norts to be f-urnished by members of the 
industry for three years — 1931, 1932 and 1933. These rerjorts were com- 
piled and used to establish "normal" distribution of industrjr vol-ume, from 
which la,ter variations could ue measured. 

(*) Memorandiim to TT. J. Brown, Deouty Administrator from G, K. Hamill, 
Assistai-it De-outy Aiirdnistrator, on April 15, 1935, re Code Adminis- 
tration, Envelo^ie Industry Code, Q^en Price Plan, fflRA files. 


-323- .. ■ . . 

Bulletin Ho. 28 of the Envelooe Industr3'- Code AutViority, issued 
July IS, 1934, transmitted the forms to be used in compiling and suT>- 
raittiiof': these volume reports •-.'hich -,'ere to iaclude (l) the volume of 
envelooer; ship;Ded, (2) the volujne oroduced, and (o) the dollar value, 
of s'-les. The three anniial re-jorts '-'ere to be supi^leiaented by separate 
monthly reoorts beginning mth January 19o4« The purpose of these vol- 
ume statistics "as set forth in this some balletin s.s follows: , 

"Members ^.dll receive real benefit fro-i these statistics. 
The fii;^:ures submitted liy individual members -'ill be com- 
piled into opiDOsite totals for the whole industry,'-. Pie- 
loorts shoring these totals for the whole industry will be 
furnished to every .member of the industry. Each member 
will then before him a clear -oicture of the. state of 
the industr'", the general level of volume ;orevailing, for 
the month just ended aJid as compared with lorevious months 
and previous years. 

"The comi^osite reports which will be prepared for the in- 
formation of menbers vdll lorovide figures never before 
available from either GoveriLment or .irivate sources. 

"Each menber of the Envelope Industr^^ quite rightly feels 
tha.t he has a definite place in the Industry. Prom these 
statistics, as they will be traaismitted to all members, 
each individual maxiufacturer may determine what share of 
the total industry volume of business he ha,s Imd in the 
past, and "hat share he is currently getting. 

"ITo figures for aia3'' individ^ial conpa^y will ever be dis- 
closed in any form or in any manner to any other member 
of the Industry. As in the hrjadling of all other confi- 
dential data, extraordinary precaution will be taJ:en to 
assure that the rexjorts rendered by individual coiiipanies 
the records kept thereof and any outgoing re-^orts to menn 
bers showing individual figures, _r,re held strictly secret 
aaid confidential." 

Uo to this "'Oint the explanation of -our-oose has not differed from the 
general trade a.ssociation plan of industry statistics. It is onl"- by estab- 
lishin-; the srjecial relationship of such percentage figures to the open 
price plfrn, that there is revealed the further -our^ose that these volnme 
sta.tistics are meant to serve as a check, against the oossible economic 
effects of orice filing in bringing about shifts of volurae from one raajiu- 
facturer to ajiother. Bulletin #28 continues as follows: 

■"Your Code Authority has repeatedly endorsed the principle 
that the administration of the Code and of the O^en Price 
Plan of selling shall not be allowed to result in any major 
shift of volume from one section of the Indu:3_try to another, 
from one class of Dlants to another, or from one channel of 
trade to ajaother. The statistics called for on Porn E-11 
and Por E-12 are quite necessary to enable the Secretary to 
re-oort to the Code Authority whether at anj'^ time such a shift 
of voliime of business is occurring. The Secretary will also 



"be ena.l'led to ctaisiilt in confilenco vith individual members 
with res-oect to pny shift of the voliame from which 
they rasy he suffei-ing, 

"Without such statistics r.s these volume reports -Till pro- 
vide, aji individuol innnxof f.cturer CE,n never he sure whether 
A fr.llin/5 off in volune in his own business is merely due 
to a, general falliiag off of envelope business at large or 
whether it represents an actiisl slump in the relative vol- 
ume of business enjoyed 'oy his own conpany. 

"Tliese volume statistics ',111 contribute materially to the 
success of our O^^en Price Plan and to the general stability 
of the Industry. 'They are likely to become the most valu- 
able mechanism v/hich we will have for intelligent planning 
ajid intelligent management of the Industry along profitable 

An announcement concerning the t:ener-l comoosite rei^orts was made at 
the September 24, 1934, moating of the Envelope Code Authority, This first 
composite report v;as baoed on the volujne re-oorts received from 93 members 
of the industry, estim;,ted to represent SS^i-i to 90jb of the total volume of 
productiono Members present -ere furnished with individual copies of these 
composite reports which carried, for conparison, percentage figures for 
their indimdual companies. It was explained by the chairman that the 
average monthly total of production for the three year ■i)eriod, 1931, 1932 and 
1953, had been tentatively taken as normal and expressed as lOOfo, The volume 
for each of the first eight months of 1954 was exijressed as a percentage of 

"In the figures for the individual company, the monthly per- 
centages shov.r the company's current volume in percentage to 
the individual corapariies own normal or past average. Compari- 
son then of the individual company's ^percentages with the 
group or industry -oorcont' ,ge;3 shows whether the trend of the 
individual coi^pany's business has run parallel with the indus- 
try or whether it has run behind or ahead of the industry." 

Members of the code authority present at this meeting agreed mutually 
to disclose a.nd compare the percentage to normal for their individual com- 
panies for com-parison '-rith the industry total -oercentages. Additional com- 
posites ^'ore made available covering groups of members in various territories 
and groups representing various t.j/pes of business classified according to 
methods of marketing. 

It was fo-'ond fro-i these volurae reoorts that composite figures for a 
group of jobber t;lante showed a volume for the first 8 months of 1934 lower 
in relation to normal than the volume for the industiy at large, whereas 
various composites for consumer plants and local trade plants showed 1934 
volume to date higher in rela^tion to normal than the average for the in- 
dustry, (*) 

(*) llo da„ta are available tc indicate the extent of this change. 


Evidently some disturbance in the market in the Southeastern terri- 
tory of the United States -'as disclosed hy the reports. One laemher of 
the code authority esqtilained that the instnhility of prices had "been 
caused "by the action of a paper merchant in filing loner prices ai envelopes, 
under the "orice reporting plan of the Paper Distributing Trade. 

■Ihe minutes re-oorted that "after extended discussion of all the 
facts available in regard to the Southeastern market, end after review 
of sioecial composite volume, reports covering groups of members in that 
territoi^r, it Tras the consensus of opinion that no change in the "Open 
Price Flan" would be warranted at this time. (*) 

At this S8jne meeting of the code authority it n&s voted to prepare 
composite volume reports along severtd new groupings. Composites by- 
classification were to include five groups, defined as follows: 

1, Jobber plants — firms which sell chiefly to whole- 
sale merchants or wholesale envelope merchants; 

2, Paper merchants plants — paper merchants who own and 
operate envelope plants; 

3, Sta.tionery end tablet -^Irnts — •• firms which are members 
of the Paper Stationery and Tablet Manufacturing Indus- 

4, Trade plants- — firms which sell principally to distri- 
butors other than i,7holesale distributors and not e^iten- 
sively to consumers; and 

5, Consumer plants — firms which sell principally direct • 
to consumers* - 

Each member of the industry was definitely classified in one or 
another of these groupings in preparing composite voliine re'oorts for dis- 
tribution to menbers. Similarly, eight geographical reporting areas were 
established for vol-ume re;oorts, with their boundaries set forth. 

The available records are too fragmentary to trade the effects of the 
quota principle of maintaining the normal volume position of individual f 
industry members under the operation of the price filing plan, although 
references are frequent in the minutes to those percenta«~e reports and to ^ f 
revisions of the classes of trade ajid schedules which may have been necessi- 
tated by the resxats disclosed. Thus at the meeting of lloveraber 9th and 10th, 
1934, a new composite volume report was considered, in which members of the 
industry were divided into groups a.ccording to size; namely, large plants. 

(*) It should be pointed out in this connection that the Open Price PlaJi 
of selling as referred to here waiJ not the open price provision it- 
self but the elaborated plan set forth in Bulletin 14 of the Code 
Authority, --hich \7as made up of a complete set of specifications, 
standards, indexes of price schedules ajid differentials for the estab- 
lished classes of trade defined therein. 


;uediu.a sized plants aiac. small plo,:its. Accordiiv-;: to the report, the fig- 
ures indicated that since the effective date of the code, the snail and 
inediun sized plsaits had secured a larger proportion of the business 
c.vailahle than the^ had enjoyed during the oast three years, while the 
large plc:iits had suffered a corresponding decline in their share of the 
total iDusiness. 

d. Breakdown o"f the price Filing Plan. 

Even at this early date it was heconing apparent that rigid enforce- 
rent of tlie code along the lines prescrihed in the "Open Price plan'' was 
not possihle, and that violations were in hirny cases resulting in a loss 
of established Msinesc by those aenibers '.7ho complied v/ith the plan. 
Steps vers tahen at the IToveuber, 1S34, sesr.ion to relieve such rnembers 
fron the effects of these violations, by iieans of the following resolu- 
tion: (*) 

"TTHITJSAS it h£,s not ;.-et proved practical to prevent certain 
•• nanmacturers and distributors from selling belov; the filed 
prices provided for by the Open price provisions of the En- 
velope Code, rrid, '.FiIESHAS this practice works great injury 
to those ncjaufacturors and. distributors who adlaere to such 
filed "orices, the Code Authority, s^ibject to approval by a 
Lieeting of the Ir.dustrj", hereby rules that ae/abers of the 
Industry, in defense of bi^siness from their established 
custouers or fron established cu.sto::ers of their distributors, 
nay iieet bona fide known competitive prices, provided that a 
complete record of evevj such transp.ction shall be filed i7ith 
the Ad-iinistrative Agency immediately, a,nd further rules that 
it will acceTDt for filing, sdiedules of prices and terms of 
sale conta-ining the following reservations: 

"Tiie right is herebj'- reserved, in defense of business 
from our established customers or from established 
C'":somters of o\rr distributors, to meet bone, fide known 
competitive jrices. 

"Eor the purpose of this ruling an established cus- 
tomer shall be defined as one, a substantial portion 
of v.'hose business has been enjoyed by such member 
directly or through a distributor." 

The difficulties that appeared in the operation of the Open Price Plan 
follo\;ed in laxge part the issuaiice of Office Lemorandum 267, dated July 
30, 1934, forbidding the use of ^.landatory cr.stomer cla.ssifico.tion u:ider 
open price plans. -'The code authority classifications had been in effect 
x/ithout hllA sexLction until April lS3o, 'i/hen lir. G-. K. Hajnill, Assistaait 
Deputy of the Paper Division, submitted the:: for advisory opinion. Later 
he disaop;:)roved the Bulletin setting forth the defined classes of trcxl.e. 

(*) hinutes of .leeting, hovember 9, 1S34-, 13A files 



Alraost simultaneously with thas action, the code authority voted to stay 
the Open Price plen in the industry. This decision, coupled rrith the 
imminent termination of existing IIRA legislation and the expected re- 
vision of codes, led the deputy to refrain from any official order of 

The relatively short period of operation covered by industry re- 
ports "orevents any real analysis of the effects of the quota plan hut 
they do sioggest the possible uses to which such corollary statistics 
could he put. They raise the basic issue of the economic justif ica.tion 
for efforts to stabilize production on the basis of past volume of sales 
and existing excess capacity, 3Jid the further question as to whether the 
attempt to prevent shifts of business that might occur under open price 
filing would not defeat one of the astensible purposes of those plans 
in preventin, any wholesome adjustments that might take place with open 
prices anj improved competitive conditions that might arise through them. 

4, The Commodity Group Plan, for the Candy Manufacturing Industry. 

One further exoerience with a budget plan in connection with price 
filing is afforded by the candy manufacturing industry. The history of 
this plan, and the course of its operation, would indicate that it was 
first sponsored by Dun & Bradstreet, Inc., who had been appointed by the 
code authority at i'ts first meeting as the agency to handle price filing. 
The minutes of the code authority meeting on July 15, 1934, report tha.t 
Mr, H. B. Ludlura, representative of D\m & Bradstreet, Inc., (a former 
official in the IIEA who participated in the first Price Hearings, in 
January, 1954), reported at length on the exoerience of Dun & Bradstreet, 
Inc., in receiviiag and filing price lists, and made a number of suggestions 
and recommendations for the organization of the plan. Mr. Shannon, ICIA 
legal counsel, suggested that Dun & Bradstreet, Inc., be allowed to draw 
up the rules for the price filing plan. A committee to draw up classi- 
fications and products of the industr;/ anci to determine the separate 
classes of buyers to be recognized in the filing of prices was appointed 
to assist. These classifications included definitions of biiyers meant to 
conform closely with those in the TTnolesalo Confectioners';' Code, (*) 

The price filing plan as finally developed was called the Commodity 
Group Plsn. The code authority at various times utilized the services of 
Ernst and Ernst, cost accountants, Hxm & Bradstreet, Inc., as confidential 
agents of the code authority and later, Stevenson, Jordan pnd Harrison to 
Operate the Commodity Group Plan, so tha.t nothing short of an elabora,te 
case history ^ ould give a complete story of its development. The Commodity 
Plan was operated in conjunction with the detailed customer classification 
plan mentioned above, which wa.s not sanctioned by the IIRA, It was appar- 
ently developed in its final, form after informal attempts at price fixing ■ 
in the industry, (**) 

(*) The definitions were revised frequently in later meetings of the code 
authority and were used during' most of the period of code operation, 
although members were informed by the deputy administrator in Septem- 
ber, 1934, that such classification v/n.s not permitted under existing 
N.R.A, policy. 

(**) See p« 424 below. 


At e. hearin,t; held "by the IIBA on January 19, 1955, to investigate 
chprf;es of price fixing, the Chairman of the Code Authority, Mr, 
liTillij'inson, rolotod the nui:ierous efforts of the code authority to 
operp.te the price filing 'ircvisions of their code in a Tray as to 
"bring a'bout a profita"ble ;?nd sta"ble -orice level, and the final ado]>- 
tion of the Conimodit;'- Plan. The industry made an earl;'' atteraiDt to 
secure ap'iroval of a mendatory cost manual "based upon a survey con- 
ducted by Ernst pxid. Lrnst. It nas honed to use \.this manual as a 
"basis of TDrotection against sales "below cost. The cost manual 'vas 
never aroroved, although it \7as considered "by Mr. TiTillianson and others 
to "be a. necessary accomnaiiiment to the price filing provision. The 
stay of the -waiting period by the general Administrative Order of Janu- 
ary- 27, 1934, had "broiight further disorganization to the ^rice filing 

Refusals of the 113A to grrnt requests for eraergency declarations 
in the industry;'' further discouraged the industn^ and s-jggested the need 
for independent acti-^n to sto~) price cutting. The first request for an 
eraergency declaration I'a-s made early in Sevjtsm'ber, 1934; a second re- 
quest was made in January 1935. The pttempt a„t -irice fixing evidently 
"began during the period betr-een these tro dates, if we can accept the 
testimony of Ilr, Williauson ana others. 

Stevenson, Jordan and Harrison rjerc ret^.ined, after the investi- 
gation of the alleged orice-f ixing --^nd the change of "Ir. TJilliarason from 
his position as chrdrman of tlie code authority, to operrte the so-called 
Commodity G-roup Plc?n. 

The plan itself is descri"bed "by a former ;"art-tine administration 
Mera"ber, George A. Chniaan, in a raemor^:gdui transmitted to the IIHA. in 
July, 1955, Tjith the recommendation that it should "oe -jroposed as a voltin- 
tary agreement in the event of six'' extension of iiEA codes "by new legisla- 
tion. His report rlvanccs the sane need for the voluntary acceptance of 
normad percentage volujecthrt have oeen alread;^ noted. 

Briefly, the plrji involved dividing the industry into eight or more 
groups coiii^osed of rae:i"bers majiuf acturing identical or similar items: 

"These groups to hold frequent meetings in order that the 
per-onal elements and confidence in one another might "be 
e3ta."blished, the group menhers to furnish statistical in- 
formation to r confidential agency, such information to 
"be tabulated into some total aid the ma^nufacturers' rier- 
centage of the. total transmitted to the individual mem'ber. 
The C;rndy Industry more than an^i'thin-; also needs to Iznovr 
more about its industrj- through the volutie of the various 
kinds of candj'' marketed in the different a.reas and to note 
their o^ra percentages of the total "business. If a manufac- 
turer is receiving a, nor,.ia.l lercentage of business he is 
not a;pt to sell "below cost. In general, this industry has 
been operating as though there was an unlimited ajiount of 
business and that they could eventuallj'' bring their volume 
up to a "srofitable basis by selling below cost until that 
profita.ble volume is rea.ched. 



"The confidential agency able to distribute statistical 
information of this nature as ryell as cost information 
could trndoulDtedly have great influence in" stoppin:^ sales 
■beloTT cost." 

The Code History for the Candy Ilamifacturing Industry gives some 
further descri-otion of the plan, r.'hich provided for the reporting "by 
menbers, of stn.tistics pertainin;" to (l) poundage of shipments; (2) 
value of shipments; (s) price per pound; and (4) the trade channels in 
which the merchandise moved. 

"These figures were to he con'Diled, tabulated rnd partiallj'' 
analyzed in order that e.ach member repbrting those statis- 
tics might calculate the relation of his business in any 
grcvx) to the total business reported in that group and thus 
ascertain iihether he v/as holding his position or gaining 
or losing vrith reference to the group as a rrhole. It should 
be observed that these statistics ''?ere to be on -oast and 
closed transp,ctions and that all data submitted uere to be 
without the identity of the individual manufacturer in order 
that individual reports night not be disclosed in an identi- 
fiable form to any other member of the industry?-. 

"Through these devices the Code Atithority, acting on behalf 
pf the industry,- felt that many desirable data heretofore 
■ ■ undisclosed night be assembled pud through their intelligent 

interpretation by the recipients of such data the lorice struc- 
ture might be stabilized v/ithout being increased undiily. The 
pian was in effect for so short a time as not to v^arrant the 
drawing of conclusions as to its efficiency." (*) 

Excerpts from the minutes of the code authority meeting of May 10 
and 11, 1935, would indicp,,te that this Commodity Group Plan met with some 
considerable op Tosition fron members of the industry and from at least 
one member of the dode a.uthority. A progress reiort wps read at that 
meeting on the work of Stevenson, Jordaii ajid Harrison, r^hich showed 
"encouraging resijlts exceiot in Zone 7," The failure of the ^^le'-n in this 
zone '-as suggested as being due to the opposition of» Berger, Assis- 
tant Secretary'' of the ITational Confectioners' Association. Mr. Berger 
was reported as stating that "he was most antagonistic to the plan and 
that he was making .his objections l-niown to the industry in that area, and 
further, that he expected ultimately to see the whole set-up of this 
Commodity G-roup Plan declared illegal." ]?urther evidence was presented 
that Mr. 3erger had refused to furnish certain information requested by 
Stevenson-, Jordan and Harrison and had practically ordered a re^^resenta- 
tive to get out of his office r.nd not to bother him, but to let Stevenson, 
Jordfin and Harrison fi^jure it out for themselves. 

(*) Code Historv, -oages 4&-47. 



5. Prevalence of Budr":et Plans 

It is not "oossible to determine to what e::tent the budget or quota 
plans actually resulted in the freezing of existing volume distribution 
in those codes in uhich the:/ operr.ted, nor to estimate the prevalence of 
such 'ilans in connection with the HtH.A. price filing plaiis, (*) The 
proponents of this "orinciple of sharing- the-business appear chiefly ajnong 
the older established trade a.ssociations and include reijresentatives of 
st least one of the ler.ding organisations engaged in industrial man.'^rrre- 
nent. Such grou-os are tra.ditionally less inclined to resort to secret 
agreements or overt -^rice fixing efforts tiiat might subject them to action 
under the a"iti-trust la'7S, ajid have used alternative prdcedures for ac- 
complishing the desired stabilization of the industries they serve, A 
later study of open, price 'olans should e:colore these methods in an attempt 
to aporaise the economic or adrainistra.tive merits and demerits in more 
adequate fashion than nns been "oossible in this study. 

6. The Eddy PI a; is and the Bxid.Tet Systeri . 

Evidence of the relr.tionshio of the earl;;' Eddy Open price associations 
to the budget olans described in this section is furnished by a letter 
from a former a.ssocia.te of llr. Lddy, irho had served a.s a.ttorney for num- 
erous open price associations T7illiara j» Matthews of the Window Shade 
Institute, Hew York City, wpp. invited, in connection with the present 
study, to comment upon the theory of open irices set forth by Professor 
J. M. Clark in the statement entitled "An Interesting-^ Issue". ,(**) 

Mr, Matthews' letter in answer to this invitation refers at one 
point to Prof, '■ Clark's statement that under an Ooen irice plan members 
will be deterred from lowering the price since they will be una.ble to 
increase their total share of the business because of the rapidity with 
which the price cut will be net. Although' in general disagreement with 
Professor Clark's vie-'s, lit. Ha.tthews, a,greed that price cutting would 
be minimized by the working's of rn open price lolan bfecause it discloses 
the fallacy of such ta.ctics as a ueej:is to greater volvjae. He comments 
in part as follo\7s: 

^'Prices are set to get oil individual order, adquire a parti- 
cular customer, to maintain a certain volume so as to economi- 
cally oi^errte the ijlant, rnCi frequently to increr-se the volume 
and lower the imit 'oroduction cost. This last reason is thoroughly 
unsound fron the standpoint of the individual, especially in a 
subnormal market v:hen there is not enough busine'is for all, 'In 
order to a.rriye at the sa.rae net, if .one should cut the price 10% 
he would have to increase his volume 30^, In the a''osence of an 
expanding demand,, that ^excsss percentage of the industry business 
must necessarily come from other competitors who have the choice 
of staying out of the ma.rket or meeting the lowered price. The 
latter will ultimately hap :)fin, with the result, as production 

(*) The Paper a,nd PuIm Industry .iroposed to incorpor.ate a provision for a 
share- the-business plan in its revised code, submitted in Public, hear- 
ing, June 29, 1934, but there '-.-.s no indication of any intended connec- 
tion with the price filing plan, 

(**) See Chapter II, p, 62 above, 



figures invariably shor;, over a period competing sellers 
will acquire ap jroxiraately the sane -jercentage respectively 
of the industry's total business. The open price nlan needs 
to be suj jlenented xiith production figures so that each will 
loiow frw.i month to month his percentage of the industry/" 
total. If one's percentage slips substantially and he finds 
from the price reports thr t special concessions been 
made, he cm ' concl\ide that the reduction in his share of the 
industry business is offset by the increase of those who 
have been making the special prices. TTlien those facts are 
brought out, competition on price, as evidence through the 
reports, will automatically tend toward iioro stable prices 
•and greater consistency in the resijective, individual per- 
centages of the total industiy volume. Such is all educa- 
tional and market facts are the -orerequisite. In operation 
the r&jorting of prices does not resu].t in arbitrarily high 
or fixed prices at all, as many seem to think. The minute 
prices become arbitrarily high, someone will instantly see 
that he can operate at a profit on a lo'-^er level and will 
immediately do so. The operation of the open price plan 
proves exactly that and yet there is no agreement to name 
any fixed price, which should never be dictated by the govern- 
ment or industry, 

"Contrary to one statement made in this document (Prof. 
Clark's statement) the open price filing system does not 
tend at all in the direction of a monopolistic price, if 
it is meant by that, an arbitrarily high price. And, further- 
more, as already stated, the mere publication of the price 
operates .as a deterrent factor in preventing one from miking 
.prices which are too low. Iluch is said in this document about 
a price emitter increasing h^s volume and, as I read it, it is 
either assuv.ied, or conditionally assumed, that one, through 
the cut-price route, might consistently increase his rela- 
tive share- of the business. I believe X have sufficiently 
ex.ilained that phase and it can be stated positively that 
except in rare and peculia^r instances, such does not hapoen." 

"One point in the above calls for further comment. Mr. Matthews fails 
to indicate just why a member will lower his Thrice the instajit he sees that 
"he can operate at a profit on a lower level," If he can not, by that 
means, obtain a larger -oroportion of the total business, there is no ob- 
vious rea.son why he should choose to decrea,se his margin of profit on the 
existing volume. Mr, Matthews' earlier argument would appear to invalidate 
his conclusion, unless the demetnd for the iiroduct is elastic enough to total volume considerably with a cut in price. 

His general conclusion about open orice plans a striking resem- 
blance to the conclusions voiced by Mr. Pickard, and to the warnings of 
Mr. Eddy that price filing is o. long time cooperative means of stabiliza- 
tion, not a substitute for i^rice fixing by government or private intei^ 



• . . in nY judt^jment, the OTjen ;jrice system is the ansiier 
to pll questions which have ueen raised "bj the IIIHA. It 
does not serve the puncse, if such :3ur;)0se "be in con- 
teTnplation, of settin-; up an,y elaborate control in ITash- 
ington. On the contrary, even that system should "be put 
squarely up to industry to adoi^t it or not, as they see 
fit' and the more they try to get control, either on the 
part of industry or "by the g-overnment, the ^-reater T?ill 
"be the fiasco. These things cannot "be done "by law, and 
even as aoplied to the open "orice system there i/ill 
neYer "be a lav;, in iigr judgment, conpeling pll those 
■Darticipa.ting in a. particular market to file and pu"blish 
their prices, or to gdiiere to them rhen filed. Alreacly 
the open price system, is legalized and if Industry were 
told that it is in the interest of industry ;md the pu"blic 
to use the open -irice system — and that industry could 
not and should not look to the government for any other 
method, legal or otherv;ise, to enforce control over pro- 
duction or prices, "beca.use tlist cpjinot te done without 
the running jf industr;^ "by s, cent'ra.lized government — 
that would "be the sound method of aoproach." 



cha.?'Te:{ V 


In ChffTter II, it vras pointed out that a full account of (ieveloi>- 
menta under "orice filing --ould include evidence of the direction and 
e::tent of orice novenents, the frequency and rajige of price fluctuation, 
the relative trea.tment of different custoner classes, changes in the 
degree of cc.rolercitj'' of the price structure, ajid changes in the uniform- 
ity of customer classif ica.tions, list ;orices, terms of sale, and. net 
prices. As is indicated in that sta.tement, it is not possible to do 
more in this chapter than to set forth certain case studies "bearing u'p- 
on some of the ooints najned. Prom these case studies it "becoiaes clear 
that Dries filing as such was not accoLipanied "b - any one kind of varia- 
tion in prices, but there was great diversity in price movements from 
one industry to another. 

The cases -^resented below were selected a.s those in which the 
character of ^rice change during the -^rice filing period is most clearly 
indicated b"; the available evidence. 

A. The Level And General Direction Of Prices Under Price Filing 

1. The Concept and Problem of Price Levels 

It ha.s generally been assumed that "ooen" ^^rices tend to be 
higher than "secret" prices for a number of repsons, of which the 
following are most connonly cited: 

(a) Some of the -)rice reductiois which weald have been 
made because of ignorance of market conditions 
will not be nade "inder an ooen -nrice system. 

(b) Secret rebating will be -.lade lore difficult and the 
price wars which they so-ieti \es precioitrte will 
occur less frequently. 

(c) Price cuts which the seller otherwise would feel he 
should Make may not take ila.ce because of his 

fear of engendering the ill-will and ijossible 
retaliation of powerful co;-i letitors or the trade 

(d) Secret price a ;reements vfhich night break down by 
reason of secret concessions :ade b;''. certain com- 
petitors can be better raaintrined since the neces- 
sitj^ of filing trices '^ill either deter the price 
cutters from maJcing concessions or it will better 
enable the trade association or dominant compet- 
tors to identify and police infractions of the 

(e) La.';:ards in following the movements of price leaders 
may also be more ersily identified and broioght 

into line. 



Provious statisticr.l studies of the 'lovenent of r)rice levels under 
hpve b een rr-.ther inconclusive in their findings. (*) The lack of 
sifv'nif icant and araenaole '>rice data and the cov.rolication of the ^rohlem 
Dy n-'n^'' influences other th"n price filin^y have ""oeen the principal Unit- 
ing factors. (**) 

The saiae lacl; of a co-rplete historj'' of the chan;;^es in -orice struct- 
ures is a„lso a liraitin": factor in this study, especiall" insofajt as 
coni'3a.risons of pre-code and price levels or trends vrith those 
of the code "oeriod p,re desirn-hls. i.Iany of the industries vith o^en- 
■orice provisions in their 'i3A ^eodes 6-id not hr;ye price fi,lin^_'; either ."before 
or after the jeriod of 1I3A operation; "in those casfis:"";here ■orice'^rb-oorting 
plans r'ere in effect, the pre-code and "oost-code filin/'^'s and merchandis- 
ing plans have not been made availa^ole to the Price Piling Unit except 
^n one or t'70 instances. In so^ie cases it has "oeen proved impractica'ble 
to ca.lcula.te the 'prevallin;; ":irice levels for industries during 
the code period even with a co :plete collection of price filings and 
merchandisi:v;; "olans at hand due to the lach of suitable data shovring 
the volu'ie of sales ".^hich massed throurh the respective chrnnels of trade, 

The most jrofitablc :iethod -jould a--'0':'ear to he a. series of intensive 
case studies utilizin^;: a. sanole of cr^refully selected industries. The 
present study suggests such an a:o broach; honever, the liMitrtions on 
the selection of the sara^jle the -o'lirsuit of certaan a.s^^ects of the 
intensive analysis i.ia].;e it a very in.'erfect exajnple of rrhat might be done. 

In order to si'Tj"'"/' and facilitate the anal'sis, the industries used 
as illustrations of changes in 'irice levels -under open-i^rice codes have 
been divided into three groups — those sho-dng (a)higher, (b) conparative- 
ly stable, and (c) lo-er price levels. 

2« Zxaj:nles of Higher Price Levels 

a. Steel Ca^ 

In the steel castings industr;'-, the code authorit"/ suggested -^rice 
levels equal to 87 per cent of the levels prevailing for the saiie pro- 
ducts in 192S in its report to menoers on Decejiber 5, 1933. These 
levels, as a general r^ile, '7ere fairly '-'ell maintained nuch as origin- 
ally su--;ested, t'nrou :liout the code period. Parthernore. the evidence 

(*) Pedera,l Trade Conmission, Oien Price Trade Associations . 1929, p. 

102; Sir.ion Wiitne-?-, Ooen Prices . Reoort, Division of Hesearch and 
Planiing ITIlA.. A^ril 3, 1934, pp. 21-33; .ilelson, Hilton IT., 
Ooen Price Associaticns . yo, 177-100 Su)rr 

(**) Those studying the iroble": have-usurlly had to rely upon the price 
data co:.;piled b'' the !3ureau of La.oor Sta.tistics. Since some of 
these series rerresent list irice quotations rather than actual 
transactions, tlie orice :.aove.ients ta.hin;; "")lace through the addi- 
tion or elimination of discounts and other chrages in the price 
structure are not full'- tajien into account. 


- 334 - 

available seems to indicate tnat these orice levels were higher, es- 
pecially on the small castings, than those existing immediately orior 
to NRA and that the trend of prices turned downward follc^inc- its 
termination. (*) 

It is also interesting to note that this exTjerience under 
tne IJRA seem: to have paralleled, i'n ra3Xiy respects, the same indus- 
try's experience 'dth price reporting during the oeriod 1923 to 1926. 
Tne industrial engineers who examined and checked the pre-lTOA price 
research sponsored by the industry made the following statement: 

"During the examination of '1926 selling 
prices, the Engineers found that in many 
cases the schedules used in 1926 were 
the same as those in effect in 1925, 1924 
and in some instances even in 1923. Be- 
ginning in the latter part of 1925 

"(price reporting was discontinued in 

DeceraDer 1926)" the sellins 

prices generally scaled downward and in 
most cases 1927 and subsequent schedules 
were at lower selling prices than those 
of 1926." (**) 

In general, the prices of Steel Castings apparently increased 
almost twice as fast as costs under IvTRA. (See Tables II and III, 
Appendix 5, this study), increases being 18 per cent and about 9^ per 
cent, respectively. During the same oeriod prices of "producers 
goods for caoital equipment" advanced less than 4 per cent. (***) 

ifnile these price and cost coijparisons are sut)ject to the limita- 
tions usually imoosed by such general orice terms, they give the 
impression that Steel Casting prices increased more than the average for 
the same broad class of oroducts. 

(*) See Price Filing m the Steel Castings Industry , cIIRA Price 
Filing Studies, 1956, included in tais re-oort as Ap"Dendix B. 

(**) Ford, Bacon & Davis, Industrial Engineers, Nei? York, Report , 
Selling Price Schedules for "r iscellaneous Steel Castings , 
December 29, 1933, p. 14, MA files. 

(***) National 3-ureau of Economic Research, I,5onthly Letters. 


- 335 * 

Vvhen the original ana final schedules filed for 18 rcpresonta- 
tive stepl castings are conpared, it aopears tnat the trend was down- 
ward in aoout 22 oar cent of the cases, uoward in approximately 22 
per cent, and showed no change for the remaining 56 ner cent (see 
Table l). It must be remembered, however, taat m most instances the 
oriiT'inal filings represented substantial increases over pre-TTT'.A price 
levels and that generally the final scnedale filed, even where it was 
slightly below the original under NRA, conatitntcd ^n opnrociH.blc not 
gain over pre-FEA levels. 




Original and F.inal Price Schedules Prevailing for Eighteeen 
Repre$entative Steel Castings Under the H.R.A. Codes . 


Schedule 3/ 





Up Down 


1. Aeronaut ical-N.O. C.B.N. ' C 

2. Agricultural machinery F 

3. Automobile axle housings 

(tanjo type) C 

4. Automotive brake clutch 
pedal & similar levers 

5. Automobile brake drums 

6. Bread slicing machine 

7. Hydraulic cylinders 

8. Dredge ball & socket Joint 

9. Motor frames (box tinpe) 

10. Gears-cast tooth 

11. Heat treating furnace, etc.K-M-N 

12. Locomotive driving boxes 

13. Sectional u-bends 

14. Refractory & brickyards 

(roller tires) 

15. Roll-housings caps 

16. Power shovel & dragline bases 

17. Shoes & treads 

18. Valve bodies 


Q-R-A 1/ 



















P 2/ 





Q 2/ 

Q 2/ 

5 M-L 











Source: Compilation by Statistics Section, N3A from Daily Price Reports 
published by Steel ro\inders' Society of America. 

!_/ O.PJ'.R and S filed for various weight classifications, Division VI 

2/ These castings were affected by changes in the N.A.D. regulations there- 
by causing changes in the level of prices although the general letter 
shcedules remained the same. 

3/ See Appendix B for explanation of the process of filing letters to 
represent price shcedules. 



"b. fertilizer 

Mixed fertilizers superphosphate increr.sec". in price under MA 
(1933-1935) while i::portec. r^A? materials — nitrate of soda and kainit - 
declined. The net c.ii-:aQez conouted from "both the r^i'ice filings and the 
wholes-'^le price series co.r-.iled hy the Bureau of lahor Statistics are 
sho',7n in Taole II. 


Percent c-/:e Changes in Fertilizer Prices 

Grade of Fertilizer IIICSEaSES DUG H EASES 
or Ty^e of Ha'.7 Price filin/;-s, Bureau of Price Filings, Bureau of 
Material Zo:ie 5 Laoor Zone 5 Lahor 

• Statistics Statistics 

S-3~3, list 

8-3-3 ^st cash 

Z~4-k list 

S-3-3 tohacco 
grade list 

16 per cent superb- 
phosphate, list 

Nitrate of soda, 

20 per cent 
kainit, list 



13. s 


not ancludcd 
not included 

not included 

IS. 5 




SOUilCE: Adapted fro:; '..'hitney, Sirnoni Fertilizer Industry Price Study, 

Division of F.eviev;, IJRA, Preliminary He-oort, jeceraher I5, 1935. 
p. 2h, 

These changes in fertilizer prices may be co;,; r/ith increases 
of 12.2 per cent end 'y,G pier cent in the Bureau of Laaor Statistics 
indes of fSk '/rholesale prices and its index for finished products, re- 
spectively, from lloveriher, 1933 > *o May, 1935« 

It appears tho-t 3-3-3 is the most popular grade of fertilizer in 
Zone 5, that ahout S per cent of the 193^ sales of fertilizer were for, and that soiue oj per cent of the farmers in that zone ordinarily 



tuy in quantities too snr.ll to command a quantity discount, (*) Tatle 
III Column t'.iO, sho-zs t'lis r.iost t3''pical price r.s rell as the prices of 
two other mixed grades and for the three principal ra,v7 naterials. 

TjiiiLE III 
fertilizer Prices to Considers 

(joer__t on in Zone 5 fi/ ) . 

£-3-3 l6 per- 
Hate To'oacco cent Mtrate 20 percent 

Price g-3-3 S-U-U Grade Super-lios- .of. Kainit 

'Tas phate Soda 


(Nov. & Dec. 1S33 nixeg^and superphosphates (Loss than Carlots 
in carlots— later lists optional) in carlots with 

mixed ^oods) 

List Net Cash List List 
_ _ Prices Prices 

$27. U5 $26.54 $15. U6 $^3.32, $25.31 

29.35 22.75 20,55 U2.55 25.65 

28.1+5 2g.35 21.20 


27.50 27. U5 20.50 



29.30 29.20 22.15 39.65 23.05 


Source: Uhitnej'-, Sir.on, fertilizer Industry Price Study , NEA Preliminary 
Report, :^ece:'ber I5, 1935* P. 23. • . 

a/- Hoyster's (the price leader's) prices. 

Nov. 15* 

■ $2^.69 


Dec. 1* 




Feh. 1 

25. S5 


Peh. '5 

June 30 

July 26 



Aug.-- 2S 


Sept. 29 


Nov. 2 



Nov. 19 









(*) Bureau of .■v-a'icu.ltv.ral Economics, Division of A'i'ricvJtural Finance, 
Mimeographed report, November 193^; Nation:! Tertilizer Association, 
"American Fertilizer Practices, A Series of Reports Relating to the 
Use of Comnercir-l Plmt Food Presenting Infon.-iation Obtained by a 
Survey Among UG,000 farmers in 35 States". 1929, p. 6I. 



Stateraents made 'cj :;r. Brand, Secretary of the national fertilizer 
Association, are to the effect that although prices to farmers were in- 
creased only a"bout I5 "oer cent under the IdA code, the net price to fer- 
tiliser producers r.'~E increased about 3^1 per cent due to a reduction in 
the profit margin of distrihutors. (*) 

An a.nalysis of the price series of the Bureau of Later Statistics 
for Fertilizer durin/j the pre-code, code and post~code periods indicates 
t]^e following: 

(1) An upv.'ard trend in Fertilizer prices oe :an about two 
months before the effective date of the Code, "ove:i.ber 10, 1933. 

(2) This -L-.p-.;:-.rd trend continued under t'r.e Code until the cost 
formula was approved in l^ebruary, 193^5 thereafter..- prices remained quite 
stable until the tervination of 1\!EA. 

(3) The:;e v.'aG a post-code break in Tertilizer prices, begin- 
ning in June, 1935i ^^'^-<^'- cor.tinuing imtil prices soon reached about the 
same level as e::isted vhcn the code became effective, (**) 

The Fertiliser Industry Price Study gives the follov/ing account of 
the frequency of price, changes imder the codq: 



ShoTm by Price Shown by '£^areci\ of Labor Stat. 
Item Code io month average, 

_^^^^^ File s. Zone 5 Period Jan., 1926-June, 1933 

Grade S-3-3 fertiliser U I4 3 
G-rade S-U-U fertiliser 5 ^ot incliided not included 
Siiperphosphate 4 2 7 
Kitrate of Soda 7 2 12 
Kainit J U 2 

S6tirne: TJhitney, Si:-or., _''ertil izer Industry Price Stud:' , .December I5, 
1935. p. 25. 

Commenting on the table, Dr. Whitney observed: 

"There is no significant tendency observable under the Code, 
with the possiole e;:ception of the decrease in nu-uber of price 
changes on superphosphate. TJhile nitrate of soo^- prices also 

(*) i'lRA. Public Hearing on Prices, January 9, 1935> Trr:,iscript of Hear- 
ing, p. 13s, '~lk files. 

(**) These data not presented as conclusive e-,'idence of precise price 
movements but nerely as one indication of the general trend of 
Fertilizer prices. 



appear to have oeen sta.TDilized to some e::tent, this vrp.s for all 
practical purposes outside the sphere of inf3.uence of the Code," 

And continuing,-, on the size of price chp,nises: 

"In conparing the size of price changes under the Code with 
the average si::e of changes in previous years, the Bureau of Labor . 
Statistics series a^^s-in furnish .the only hasis of comparison. On 
grade 8-3~3» '^'-'^^ average size of the U chrji£;es occuring under the 
code was 79 cents a ton; while the lU chaji^es accuring from January, 
1926, through June, 1933 averaged $1.10 per ton. On superphosphate, 
the two changes under .the Code averaged 2^ cents a ton; the 3^ 
changes prior to the Code averaged 26 centr; a ton. No significant 
difference is apparent." (*) 

These comparisons '.vere made to .determine if there rrere differences 
in the behavior of fertilizer prices during the pre— code and code periods. 
The price series conpiled hy the Bureau of Labor Statistics were used for 
the pre-code years oecause there were no filed prices available for that 

The above conpa.risons, however, do not tell the whole storv for two 
reasons. (**) First, the price series of the Bureau of Labor Strtistics 
do not talce into corsideration fluctuations in some of the more inaccess- 
ible elements of the prices and therefore provide an irvperfect comparison 
with prices filed under the KHA code. Second, certain other changes 
(such as a change to a "delivered-to-the farm" basis, a change in treat- 
ment of dealers, and reduced trucking allowances) are not taken into con- 
sideration in the co'iparisons shown, although they meant very definite 
changes in prices to certain interested groups, inclu-ding consumers 
dealers, and prodiicers. 

(*) Whitney, Sinon, Pcrtilizer Industry Price Stud^'^ December I5, 1935i 
pp. 25-26. 

(**) Dr. r?hitney is, 01 course, aware of these li.iitr.tions. 


c. As-jih-'lt Sliin;:le r-.n<". Hoofinj-, 

V/nile a connleto collQCtion of -Drice filir.^s and merchandising plans 
are not av--.iiaole for the shin:,le ar.d rooiinj industry (for either 
the -ore-l:I!A code, or -oost-code ;:'eriods), the general trends indicated 
ty the partial collocticn of >ricc filinii^s and the Biircau of Lahor 
Statistics orice series ''ppcar to he sornewliat similar. (*) 

These data indicate that aophalt shin.^los v.'crc compar-^ tivcly hi^h- 
priced diurinji: 1925-193C', hut tliat the trend v.-as definitely dovmward. 
There was a decided break in prices late in 19;i;7 and early in 193S; a 
recovery in 1928 and a relatively hi^h. and. stahle plateau during 1931 
hut nev hrea'-s in 193:: and early in 1933. Slate-surfaced roofing and 
medi'um Drepared I'oofint; v/ere much lo-.ver in ;">rice than cither individual 
or strip shint^les, the former tyic of shin^'le usually hein^; the more 
costly. The slats-surfaced and prepared roofin,=:;s v/ere "Iso usually 
more stahle in price th±an the shingles. 

Durin,:- the period of operation under ITHA aspiialt shingles and 
roofings shov.'od the folloviii,". increases in price; 


Course of As'Vnalt Shingle and .'Roofin 

of Code Period 

yrom i.ia.rch 1933 to 


(Value "oer scuxare) 



liarch 1933 -. fey 1935 

Cha.nge during Period 
(Dollars) (Percent) 

Individual saingles 3.-19 
Strip Shin_,les 3.06 

Slate surfaced roofing 1.36 


/• 1.46 /■ 41.8 
/• 1.51 /■ 49.3 
f .41 /• 30.1 

/■ .11 

/• 3, ' 

Source: United States Bureau cf Laoor Statistics, Vfholesale .erices 

A price differential by ccrt'.in "troublesome" small enterprises v/as 
permitted hy the other mcmhers of the indoistry. In some cases this differ- 
ential amouiited to as much as 7i'/j. The theory "behind the differential vas 
that it is better to alloy; such small price cutters a stated differential 
vhich has been definitely a;_rcodi iwon, than to run the risk these small 
concerns cay "run wild"; since in the former case other producers "laiow 
aoout wnere they are." (**) 

(*) See Chart II Appendxx A, ( price Filing in the Shingle and 
Up o fin.- Industry .IISA Price Filin.. Study, 1936) 

(**) Intorvie',7 by ivir. Frandc Stocking of the Price Filing Unit with officials 
9826 of the Asphalt Shingle and Hoofing Institute, New York City, January 9, 
10. 1936. 


Follov/ini the termination of USA, there r-.piiears to have been a minor 
dip in the jrice curve for asplmlt shin^'les, which was soon followed "by a 
rather stron^ recover^-. D-orinti the l?.tter part of ilovemter and the month 
of December, "L93o, however, prices seem to liave receded quite sharply 
again. Slate surfaced and "ore-oared roofing orices seem to have taken about 
the s^me general course as those of shingles during the post-code period; 
however, the fluctu3.tions on these lower-priced products have not been so 
J) renounced. 

3. Other Industries for vfhich There is Some Evidence of 
' Upward Price Trends 

The price structure of the mn.gnet wire group of the electrical 
manufacturini;^ industry showed comparatively little change between the 
original and final filings. The -principal change seems to have been caused 
by t'-'o increases in the base price amoionting in all to 1^^ per pound. 

There were also increased in various extras ranging from 1 to 15 
percent. However, the general level of -orices was probably reduced during 
the code due to increased premiums given to quantity purchasers. 

A letter from the administration member to the deputy administrator 
for the carbon dioxide industrj'-, dated Hay 5, 1935, lias the following- 
answers to several questions apparently put 'hy the Deputy: 

Question 3: "Has price filing in the ind'astry a tendency to bring 
about a. uniformity of price or any tendency to raise 
or decrease the price?" 

Ansvjer: "To some extent. I might say that the effect of price 
filing has been to bring about the stabilization of 
prices and enable the sales manager of a company to 
discoiiiit iTis.ny of the reports of salesmen about price 
• cutting, due to their inability to get sufficient 
business. " 

Question 4: "What is the effect of -^i-ice filing on the small 
enteiprise? " • 

Answer: "The effect of price filin^^ on the small enterprise has 
been tliat it lias brought into a concrete form definite 
inforaiation about the competition of the large 
manufacturers rather than conjecture and namors and 
its success therefore lias been one of stabilization. 
The large manufacturers will not cut their prices for 
fear of criticism of being one of the ones v/ho initiated 
the doi;\mward spiral and the snB.ll manufacturers are safe 
in holding to their prices when they Imov/ that the large 
producers are not trying to cut under them," 

That situations '.vcre not alvvays so ideal as this is indicated by a 
later paragra-oh in the same statement which reads as follows; 

"I uiidcrstand tliat at the present time there is a complaint in the 

Los Angeles arer cy ?, small meraber of the industry tliat the lar^e 
proL.ucers, tiic liquid cai-oonic and nov,' ice corananics, are cutting 
prices to a destinictivo level. Irom the facts I liavc "boon able to 
obtain it is my understanding, tltat the coraplainailts only been 
in business since last Septeiiibor and in order to gain a foothold 
initiated prices bolo-; the existing market quotations. When the 
large -producers discovered these chiseling tactics they cut their 
-orices to meet the coiff'etition. The connlaint existing in Washington 
at this time by the small producer is the rostilt." 

There is some additional evidence, ira,;montary but suggestive, that 
the Los Angeles situa.tion v;as duplicated in certain other areas. (*) 

4. Sam-olos of Stable Price Levels. 

Some of the industries operating under o;oen-price provisions 
exhibited relatively stable price levels c>urin^' tlio period in ^-'hich the 
ITEA codes vore in effect. 

a. Laminated Phenolic Products. 

One of the indi^strial grou-s vhich exhibited a conparativcly stable 
price level Tuider ITEA was the Laminated phenolic pi-odxicts ^ro-an of the 
electricaJ .na.nufacturing industry. 

ThiLS grouo, which is composed of three typos of members /_(l) large 
electrical companies producing partly for their o-'/n use in further 
manufacture; (2) vulcanized fibre and phenolic fibre manufacturers; and 
(3) fabricators or agents of either of the first two subgroups_y had 
experienced some p'.^ice cutting prior to NBA. Since the group's products 
ere utilised chiefly as raw materials in the electrical and other manu- 
facturing industries, its majrket iia.d been- Imrd hit by the general 
inactivity of manufacturing during the depression. The keen competition 
resii.lting cr.used most members of the industry to seek and accept any 
business available, regardless of the size of the order. This, in turn, 
seems to bsive res^ilted in vpon the fabricator to cut prices 
still further in order to maintain his positio}^. (**) 

It is believed that the "orice call of the Laminated Phenolic Products 
Industry was primarily for the purpose o,f tryin^. to get the members of the 
groro to cooperate more closely and to stabilize prices. Another probable 
factor was the development of new markets (outside of the electrical 
industry); such a sit^^ption would a-r^ear to make it advisable for tho 
group to have additional information regarding products and the prices 
at which they were bcin__^ marketed by various members in these new fields. 

The advent and subsequent operation of price filing caused no vcvj 
material change in the •;)rice structure of the industry; however, it 
■orobably did exert a stcacyin,; influence inasmuch as the relatively minor 
price changes '"'hich did. occur took -^lace in a more orderly manner and any 
tendeiicics for the ~ricc level to sag" apooar to iipve been corrected. 

(*) See memorandum to the Administrator from liercer Johnston, Consumers 

Advisory Board, Au,_. 7, 19::4. W3A files. 
(**) See Caesar, Albert, L-'ininatod Phenolic Products , preliminary paper, 

l-SA Price Piling Studies of the Zlectrical i.ianufacturing Industry, 
9826 1935, pp. 1-6, IIPA files. 

List prices on wa&hers and otlicr faoric?ted products have remain 
tinchantjed for ma.ny years and are said to be identical with those which 
liavo oeen used for a long time in the Vulcanized Fibre Industry. There v/ere 
no chan^-es in the list prices of laminated phenolic products during the 
period of operation under HHA. 

Such price changes as occurred seem usually to taken place in 
discounts. A tj'pical change is described as follov;s: 

"One company ?rould change a discount; another conipany within a few 
days rai^-ht meet or even 'over-shoot' that price; others would file 
to meet one or the other, and eventually, after several revisions, 
the entire industry vrould end up on a common level only slightly 
different from the original. Changes in price or discounts were 
not extonsivc. In fact, in the case of the discount on v/ashers 
each coi.pany made as ma.ny as three or four fixings to effect 
a change of not more than 2 percent on large quantities." (*) 

The intermediate filings rranted larger discounts tlian the final 
filings. The former seem to have been the result of dabbling in special 
discounts to specific customers by scverel of the comp3.nies; this practice 
?«as finally checked by one of the larger companies which took a definite 
stand on the matter, defined the class of customers to whom the discount 
would apply and then quoted a standard discount to these customers. 
Most of the iniDortant producers follov/cd this leadership. 

One other development which aided in standardizing and stabilizing 
the price level of the industry was bringing the lone recalcitrant 
member into line with the rest of the i-;roup. Company number 25 was the 
only one of the 13 manufacturers of the primary product whose filings were 
out of line at the advent of open price activity. Two or three months 
after this, however, this company changed to the same price structure as 
the others B.nd continued so until termination of the code. 

The percentage of change in prices during the code period varied 
considerably with th ; t^ material. Using tubing as an example, 
the basic discounts ranged from 15 percent to as high as 60 percent 
depending on the grade of material. Thus, there was a greater production 
in -orice on the expensive grades and loss reduction (on the cheaper grades). 

The 'products of the different iianufacturers arc very similar in 
composition, physical properties and finish. This makes the relatively 
small number of minor cha.nges all the more remarkable since there seems 
to be a. ten..c-.-i?y (v;hich was rather marked prior to the code) for competi- 
tion to center on ":rice. 

b. Steel Castings . 

It ha.s been pointed out ;^^reviously (Table I) that while the ■:)ricG 
trends of certain steel castings wore v\-oward during the period under ilEA 
those of others were either stable or dovmward. Three castings which 
exhibited a relatively stable price level durin^ this -oeriod were "Aero- 
nautical Castingj lI.O.C.B.i:. , "Automobile Brake Drums- 1 to 100 pounds", 
and"Cylinders of the Hydraulic Accumulator Tyi^e". The following sections 
explain the price behavior of these relatively stable castings. 

T*) ibid ., p-). 7-8 

-34 G- 

(1) Aeronautical C-^stint^s, 'T.O.C .3.iT. : (*) ^hc first recorded filing 
on this classification was schodulc "C", v;liicli vras sent in by Foiindry j04 
on December 12, 1933, and constituted one of the lov/est schedules (highest 
-orices) filed for any classification under the code. This is martially 
accounted for by the fact that this class of casting: is usually very small 
and more exD.ensive to cast tlxan the lar^'cr ty^os. 

Tlie only -orice schedule filed on this rrodu-ct which deviated from the 
"C" level was a hi_,her one, "B", filed hy Foundry 303 on April 18, l'^34. 
Later, on July 4, 1934, this foundry returned to tlie level of "C". V/ith 
this one tera-iorary exception, the --^ricc level for this classification 
rzinained unchanged thrrughout the code oeriod. 

(2) Automohile ^r'^::o Din.i-ns - 1 to 100 Founds ; For this ;oroduct, 
schedule "I", orij^inali:,' filed "before the December 5th report on the price ' 
filing plan to industry members by the code authority, was the established 
level throu.^,hout the code period in all divisions. Four foundries in 
Division VIII, filed "I[", a lower level, on March 20, 1034, but in a few 
days most of them v/ere back up. to "I". Foundry 622 (usually the -orice leader) 
filed schedule "I" on Au:, 23, 1D34, ancl was follov.-cd by 23 foundries in 
division VI. This action definitely established the level of prices on 

most automobile castings. 

(3) Cylinders of the Hydraulic Accumu-lator T:/-oe ; The December 5th 
report of txio code authority listed the schedule for this casting as "G" 
and it remained at this level during the duration of ITHA.. There were 

48 "G" filings fjr this prod'oct, including the foundries in Division VIII, 
(California) which in this case did not file a schedule higher than tlia.t 
prsvailint; in other .ivisions. 

c. Ulectric Fans. 

Some idea of the different bekavior of the price levels for different 
types of electric fans is gi^'en in Tq.iDie VI. The main point is that whereas 
the prices of the npiality or higher priced fans wore well maintained during 
the code -^eriod those for the cheai^er 8-inch models showed a dovmv/ard trend. 
The medium triced 10-inch fans v?ere somev.'lia.t more stable than the S-inch 
bu.t less GO tlia.n the more contly oscillating models. 

Another point of interest is the shifting of the levels 01 the different 
competitors within the 8-lnch and 10-inch groups. 

While it appeared to bo difficult to maintain the level of $4.60 for 
8-inch fans , due no to the intense price cor.pctition from the same 
sized models of different nuality at $2.75, $1.75 and $1.50, the manufact- 
urers of the latter two fans apparently discovered that they had more of a 
price differential than they really needed and were able to increase their 
prices from $1.50 to $1.79 and.. from $1.7^ to $1.84, respectively, and still 
maintain a competitive advantage sufficient for thier i^uipioscs. At the 
same time, one of the competitors who forraei-ly sold at $4.60 sought a nev./ 
price niche for his'-x^oduct at $3.20. Four cf the eight who originally 
sold at $4,60 dropped to $3.95, The two who maintained the $4.60 price 
were the price leaders of the grouvi; one of these -probably added a sx^fficient 
nuinber of minor inrorovements to justify rctonticn of the $4.60 price; the 

(*) N.O.C.B.iJ. meant "not otJiorwise classified 'oy nai'ue." 

■ • • ■ ■ -546- 

other ap'ieared to more indifferent to the "Trice cormetition in this group 
and v>as ;:)ro"b?.'bly relying upon the prestige of firra name and general 
repv.tation to move the model at the ori£;inal price. The other two 
competitors '.i-o orit;inally filed a price of $4.60 discontinued malcin^;' B-inch 
fans. The fin-^.l resLilt \7?s ? more gradua.! grad-ation of price as -/ell 
as a- tendency for prices to gravitate tov^ard the center of the price 
range. In other words, each competitor seemed to he trying to establish 
some kind of an individufl -orice level or niche of his ov-n, apparently 
in an effort to aopeal to the trade interested in buying a relatively 
cheap fan at that particrdar ran^e. The only two companies maintaining 
the original price rvvere the outstanding lea.ders in the industry; these wore 
in a position to rely more on general prestige and apparently were not 
so sensitive to price competition, even in the low-priced models, althotigh 
even hero one of them was apparently offering a slightly inp roved model 
for the same money at the end of the code period. 

A somewhat similar tendency, although not so pronotmced, appeared 
in the case of 10-inch fai^s; here the two "non-standard" competitors who 
originally quoted $12.50 and 09.95, instead of the "standard" level of 
$12.95, dropped to new and lower levels of $10.00 and $7.75, respectively, 
apparently in an effort to appeal to o^iyers who might he interested in 
purcliasing a 10-inch fan at an intermediate level between the "standard" 
levels for 8-inch and 10-inch fans. 

Apparently no shifts v/ere made among the competitors so far sis their 
quotations on oscillating fans were concerned; all continued uniformlj'' 
to quote $22.50. 

Table VI contrasts the original and final price range, including 
8-inch and 10-inch fans.(*) 

It should be noted however, that although the ciia.nge in quantity 
discounts was .Identical for all groups, it may not liave affected them 
equally, particularly where the discoujit was based on tho value of 
the order. 


(*) While the comparisons are based on list -prices only in this case, 

these appear to tell the general story and between the three ty-pcs of 
fans inasmuch as the other price elements aprjear to have moved 
similarly to the list prices or in approxirae.tely the same v;ay for 
all three classes of fans. The list 'orice woT-dd not reflect the 
action of certain manufacturers who closed ou.t some models at , 

discounts as great as 55 .p.ercent; however, since most of tho "close- 
outs" appear to have affoctefd 8-inch fans, this merely emphasizes 
the situation as indicated in Table VI. 





(Lidt price.s for B-i'ich rnc. 10-inch f- ns) 

Tj-oe Ori-^inal Filing " FTnal Filing" 

of I'sn List Prices No. of Cos. List Prices No. of Cos 

10-inch $12.95 8 $12.95 



12. 5C 1 

(10.50 ■ lb/ 10.00 1 

(9.95) It/ 7.75 • 1 

8-inch 4.60 9-. -4.60 2c/ 

" (4.95) la/ ■ 3.95 4 

" • 3.20 1 

" 2.75 1 2.75 1 

" 1.84 1 

" 1.75 1 

" 1.79 1 

" 1*50 1 ■ 

All Ie,ns 

$7 . 8^. 




Ave re ^^e 
8-in. Fans 





10-inch fe- 






a/ For eifjht-inch fans one comppny oric:inall,y filed a price of $4.9- 
for the w'estern trade and $4.60 on the same item for the Eastern. 

b/ 0ri;:inc.ll:/, this company filed a price of $10.50 for the Vifestern 
trade and ,$9.95 for the satiie item in the East. 

c/ T".'0 companies discontinued racking eight-inch fans. 

Som-ce ; Compiled from the worksheets of the price Filing Study of the 
Electrical L'an-ofac taring Industry, NRA files. 


d. Food Service Equipment 

The price structure of this group V3,s relatively simple in 
character and underwent compBratively fev/ significant changes during 
the period of the code. Products of the group varied so widely in 
design sjid price that there was little comparability and no hasis for 
effective product standardization or classification. Furthermore, the 
group lacked cohesion hetween its rather large ntunher of comparatively 
small memhers, whose diversified interests tended to hreak the Industry 
up into several smaller competitive groups. Outside their own groups, 
raemhers appeared to pay slight attention to one another or to price fil- 
ing . 

'.r:OV the food service equipment group, as a whole, price fil- 
ing prooahly served as an educational device in one sense, inasmuch as 
it divu-lged, for the first time apparently, fairly complete information 
concerning the type of product which each meraher of the group manufac- 
t', and the marketing methods employed. 

As to prices, price filing apparently had very little influ- 
ence upon these. Terms of payment in the group seemed to have lacl:ed 
effective uniformity, inasmuch as many customers were in the hauit of 
availing themselve-s of the cash discount provided in the stated teiTJS 
of payi-ient, but often failed to meet their bills on the dates specified.. 
Such irregularities seemed to have been condoned Idj the manufact^jrers . 

e. Fuse Group, Electrical r'an^'jf act firing Indxistry 

Uhat has been said above, with respect to the apparent ef- 
fects of price filing in the food service equipment group applies a.lso, 
exce'ot perhaps as to cash discounts, to the Fuse Group of the .spme In- 

3. Industries in "hich the Price Lsvel Declined 

In a considerable number of industries ■'■■ith open-price codes 
price levels were lower at the termination of NEA than at the time of 
original filing. In some instances this fact may be somewhat mislead- 
ing due to anticipation of the influence of the codes before they '-ent 
into effect or the reporting of very high prices in the original fil- 
ings. It often ha,ppened that the market would not carry these high 
prices and -^he levels had to be reduced again. The resulting prices 
Tuay have be^n either higher or lov^er than those in effect prior to the 
anticipation of the codes or their adoption. 

a. Flexible Cord. 

' Host types of flexible cord exhibited a corTiward trend in 
price during the period of the price call although large increases -Tere 
made in list prices shortly after the price filing plan became operative, 


The iollo-'ing tables shoT list prices, high and loi-f discounts, and 
net "Jiices for a type of flexible cord ^-novn as "Type C F lumber 18 






Net Prices: 




Lo"/ : 







































Final net 

price Fas 25 per 



er than 



a/ The price call for the flexible cor6. division was cancelled prior 
to the Schechter Decision. 

Source ; YJorksheets for the Flexible Cord &roup, NBA Price Filing 
Studies of the Electrical Manufacturing Industry. 

















High: Low: 

Net Prices: 
High:' Lo\,' 

7/10/ 34 


7/.::3/34 a/ .85 
















J. 735 


List Price 

Plus 15fb 









0.808 to 



Quant ity:b/ 
List olus 




■ Jobbers, cha 


mail order houses. 

b't, any quantity 



Division was cancelled prior 

The price call for the Flexible Cor, 
to the Schechter decision. 

The greatest market for this type of cord is in radio manufacture 
ajid the quantity discounts shov'n on July 23, 1934, reflect the level 
of prices on this date fairly accurately. Most manufacturers also 
\)uy in large quantities and are able to take advantage of the lovrest 
price. Therefore, manufacturers buying large qua,ntities paid 9 per 
cent less at the close than at the beginning of price filing. 
Source: Worksheets for the Flexible Cord Division, NRA Price Filing 
3b25 Studies of the Electrical Manufacturing Industry. 


prices filed for another type of flexible cord varied as indicated 






mriiBER 18-1/64 RAYON 


■ Li2t 


Prices: (*) 

liost Favorable Discount :'. 

Net Price: 



10 per cent 

- $10.35 



65 per cent 




60 " " 




60 " " 




5 " 1' 




10 " " 




10 " '1 




15 " '1 


In this case, it will be noticed that large variations in the list 
prices v/ere accompanied by offsetting variations in discounts, so .that - 
the fluctuation in net prices was decidedly less than in list prices. 

It is probable that the declines in the prices of the four t;''pes 
of flexible cord were even greater than indicated by the prices filed 
since aenbers apparently did not adhere to these prices very well. 
Furthermore, compliance seems to h,~ve decreased as time passed. 

' The flexible cord group had no less than 39 cust;oraer classifications 
under the code. One example of differences in the movement of prices to 
different classes of purchasers under such a plan e^ppears in the table 
given belbv;. This table shows the vajriation between the -least and the 
most favorable treatment of customers by tne manufacturers of one type of 
flexible cord from early in September, 1933, through the -first part of 
1935. (**) 

(*) Note: All companies filed the same list price. The original file 

nder the Code became effective September 


•) Any conclusions wnich may be drawn from the price inforraa.tion 
filed by the Flexible Cord Group must necessarily be subject to 
the qualifications imposed by the fact that the members of this 
group did not adhere to the schedules filed in many 




Oj:' 0::E type O:.' jTEHilBLE COSD 

Tic.te List D iscount s 

piled: price: High Lov/ Net Price; 





To all, ^12.60 





High, $18.60 
Loi;, 10.85 
Spread 7.75 





To all, 312.40 





To all, 012.92 

6/21/34 13.60 10,0 Sfo High, $12.92 

Spre.-'.d, .68 

10/15/34 14.40 10,0 5,0 High, 513.68 

Lov/, 12.90 
Spread, .78 

2/IB/35 14.40 15,0 15,0 To all, 312.24 

Source: TTorJcsheets and Ciironological Histories for the Ele.xihle Cord 
G-roup. price IPiling Studies of the Electrical I.ianuf acturing 

Ch8j:'t I follo\7ing presents tnis dsi-ta in graphic form; the lo';: dis- 
counts onl" are alotted. 







A forraer ueLilier of tne trade rvssocia.tion of tiie electrical raaiimcc-- 
turi:ig industry has rel c ted iio\7 the creation of a. nev custoiiier nl^-ssif i- 
cation ".c.s in c;n i.ttcmot to stop indirect price cutting in the 
fler:il)le corl inuastr/ iruier the ILii code. Kis accQ-unt is as follo'.'s: 

'i,."itii the filing of September 22, 19o3, /tiie first filing un^Ler 
the code hr.d Deen u^de on September 7, 1933 for laost types of . 
flexible cord there tp oeared a nev; customer classification, 
!r.iov7n as '"Jirinr Device Llanafact or ers 'Tlio have a Listing \7ith 
Clc-sc A Chain Stores, and. '.Tuo Operate Under a Sales Agency Con- 

"This cla.ssif ication was made in an effort to correct a situa- 
tion, v/hich had e:;isted for a long time, -.Thereby a nanufacturer 
'vould designate toi (not a. legal 'agent') anci. a contract 
v,o-al:l be signed betv,-een theia. The agent uould obtain a 'list- 
ing' ".■■ith Gl'iss A chains which './ould give him a preferential 
position in the chains' purchases of mater irl. This arrange- 
ment, sll 'binder cover' mtide it possible for the manufactm'er 
to sell indirectly to the chains ^Tithout the orices being made 

"The effort on the part of the more responsible mtimaf acturers 
to bring all such agreements out into tne open failed, ho\7ever, 
rnd the classification 'r/as soon drop^i^d." 

An interesting illustration of leadership is seen in the price fil- 
ing history of this flexible cord group. The group is alleged to have 
had two ma,in leaders, one of \;hich (Company S) initiated most of the 
importajat changes in the direction of standardization rhile the other 
(Company 25) ".'as responsible for most of the initial shifts tovrard a 
lower price level. Chronologicp.1 records for nine of the most active 
and representative members (both large and small) of the flexible cord 
group show all of the price filings made 'oy these companies and a,lso 
whether they -./ere the first to file a given price or whether the;.- --ere 
follo'./ing the leadership of another members, and, if so, whom. The 
analysis of these filings mcy be sam;jarized as follows: 

(1) iiost of the filings v/hich initiated s- change in net prices or 
customer classifications were made uy one or the other of the two con- 
pa.nies mentioned above. (8 or 25). 

(2) SuCii changes were adopted by all other comp