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7?  3? 


BOSTON 
PUBLIC 
LIBRARY 


,//A33 


OFFICE  OF  NATIONAL  RECOVERY  ADMINISTRATION 
DIVISION  OF  REVIEW 


PRICE  FILING  UNDER  NRA  CODES 

By 
Enid  Baird 


WORK  MATERIALS  NO.  76 
VOLUME  II 


TRADE  PRACTICE  STUDIES  SECTION 
MARCH  .d36 


OFFICE  OF  NATIONAL  RECOVERY  ADMINISTRATION 
DIVISION  OF  REVIEW 


PRI  CE  FI  LIN£  UNDER  NRA  CODES 
By 
Enid  Baird 


TRADE  PRACTICE  STUDIES   SECTION 
MARCH,    1936 


—  415  w 


3.  The  Scope  of  the  Code. 

The  approval  of  F':A  had  to  be  secured  for  many  actions 
of  the  Code  Authority  for  the  asbestos  industry.   One  of  those 
■that  caused  considerable  debate  and  discussion  between  the  UFA 
and  the  code  authority  was  the  definition  of  the  term  "Affiliates". 
"Affiliates"  of  members  of  the  industry,  according  to  the  code,  were 
to  be  subject  to  the  code,  the  definition  of  the  term,  therefore, 
was  of  importance  in  determining  who  'should  wile  prices.   -In' 
F *ptember,  1334,  the  sub-code  authority  for  the  brake  lining  in- 
dustry proposed  that  certain  largo  private  brand  buyers  be  regarded 
as  affiliates.   The  1TBA  took  exception  to  this  and  the  proposal  was 
rejected;  after  further  attempts  to  secure  a  definition  satisfactory 
to  the  Administration  the  matter  was  dropped. (*) 

4.  Standard  Price  Filing  Forms 

On  January  11,  1935,  the  Code  Authority  for  the  valve  and 
fittings  industry  wrote  t'o"  the  deputy  in  charge  of  the  code  submitting 
a  standai-d  price  filing  form,  "....which  we  are  endeavoring  to  b  ring 
into  general  use  in  our  industry  for  the  purpose  of  price  filing...." 
The  deputy  submitted  the  form  to  the  advisory  boards  and  divisions. 
The  Legal  Division  and  Research  and  Planning  Division  objected  to 
its  use  being  made  mandatory,  and  the  Consumers'  Foard  felt  it  was 
unwise  to  approve  it  even  as  a  suggested  form.   The  price  filing- 
form  was  withdrawn  for  further  industry  consideration,  without  for- 
mal action.   One  aspect  of  the  form  to  which  all  parties  in  the  NBA 
took  exception  was'  a  clause  which  provided  for  the  filing  of  minimum, 
rather  than  actual  selling  prices.   On  January  21,  1935,  the  deputy 
in  a  letter  to  the  code  authority  objected  to  this  aspect  of  the 
form.   The  letter  read  in  part  as  follows: 

"....In  the  first  place  the  Valve  and  Fittings  Code 
Authority  is  not  empowered  to  issue  such  an  interpre- 
tation.  The  NBA  is  the  sol"'  authority  in  this  res- 
pect.  Moreover,  the  word  'other'  cannot  be  inter- 
preted in  any  way  but  its  true  meaning;  namely,  that 
there  shall  bo  no  deviation  in  prices  filed  by  them 
either  up  or  down.   In  this  respect,  therefore,  the 
Code  Authority  lias  exceeded  its  power  in  interpreting 
'other  than'  to  mean  'lower  than',  which  has  an  en- 
tirely different  meaning. ..." (**) 


(*)    See";<hnufacturers'  Control  of  Distribution;  a  Study  of  Trade 
Practice  Provisions  in  Selected  1TBA  Codes",  Trade  Practice 
Studies  Section,  Division  of  Beview,  March,  1936,  Part  II, 
Chapter  IV. 

(**)   Documents  referred  to  above  are  in  UFA  files,  valve  and 
fittings  industry  code  authority  folders. 

9826 


-  416  - 


In  the  shovel  dragline  and  crane  industry,  the  code  authority 
also  desired  to  secure  a  standard  form  for  price  filing.   In  connec- 
tion with  this",  the  deputy  administrator  in  charge  of  the  code  on 
September  19,  1934,  wrote  the  administration  member  of  the  code 
authority  as  follows: 

"....  I  have  wired  Mr.  Lutkin  that  no  attempt  should 
be  made  to  force  the  standard  price  list  form  upon 
members  of  the  industry  without  first  having  the 
approval  of  the  form  by  the  Administrator.   It 
would  seem  better  to  report  this  form  to  the  in- 
dustry, stating  that  the  accompanying  form  or  its 
equivalent  should  be  used  that  the  Code  Authority 
mav  have  uniform  filing  of  prices.    It  is  under- 
stood that  the  Code  Authority  will  not  attempt  to 
make  the  use,  of  this  form  mandatory...." 

Later,  the  form  was  submitted .for  official  approval  in  order 
that  it  might  be  made  mandatory.   The  Research  and  Planning  Di- 
vision and  the  Consumers'  Advisory  Board  both  strongly  objected  to 
it.   The  former,  in  a  report  quoted  in  a  letter  from  the  deputy 
to  the  code  authority  dated  December  18,  1934,  contended  that 
such  a  form  was  both  contrary  to  policy  and  contrary  to  the  pro- 
visions of  the  code  for  the  industry,  which  provided  that  each 
member  should  "individually  publish  his  price  list".(*) 

3.  Supervision  Subsequent  to  Action  (Corrective) 

1.  Price  Fixing  Activities 

In  a  number  of  instances  the  Administration  found  it 
necessary  to  reprimand  code  authorities  for  activities  connected 
with  price  filing  which  were  tending,  or  might  tend,  toward  price 
fixing.   One  of  these,  which  merits  consideration  in  some  detail, 
concerned  the  mayonnaise  industry. 

In  the  summer  of  1934,  a  price  reduction  on  mayonnaise  and 
salad  dressing  was  announced  by  one  of  the  largest  producers  in  the 
industry.   The  code  authority  met,  declared  that  an  emergency  existed 
and  asked  that  the  Administration  approve  their  findings.   Prior  to 
the  hearing  on  the  matter,  the  largo  producers  in  the  industry,  in 
conference  with  a  representative  of  uho  Administration,  agreed  "upon 
an  upward  revision  of  prices;  thereafter  the  code  authority  requested 
that  the  hearing  on  the  emergency  be  postponed.   In  making  this  re- 
quest, Mr.  W.  P.  L.  Cuttle,  Managing  Agent  of  the  Code  Authority,  in 


(*)  Letters  quoted  are  in  1TEA  files,  shovel,  dragline  and  crane  indus- 
try. 


9826 


-  417  - 

a  letter  to  Deputy  Administrator  Walter  White,  dated  July  7,  1934, 
said: 

"....  If  the  conditions  which  caused  the  emergency 
continue,  I  will  immediately  request  the  Administra- 
tor that  he  promptly  fix  a  date  for  a  public  hear- 
ing. May  I  report  to  you  those  conditions,  which, 
if  continued,  will  result  in  a  continuance  of  the 
emergency. ..." 

Then  he  proceeded  to  list  a  series  of  prices  for  the  various 
sizes  of  "both  mayonnaise  and  salad  dressing,  with  differentials 
between  advertised  and  unadvertised  brands,  and  stated  that  the 
emergency  would  exist  if  prices  fell  belov.  those  he  has  specified. 
In  reply,  Mr.  White  stated,  in  a  letter  dated  July  11,  1934: 

" ....The  conditions  which  you  report  with  respect 
to  price  may  be  true  in  a  general  way,  but  I  very 
strongly  advise  against  any  inclusion  of  these 
statements  in  bulletin  form,  as  such  a  procedure 
could  only  be  interpreted  as  a  deliberate  price 
fixing  activity.   It  seems  to  me  that  the  principal 
factors  in  this  business  can  establish  their  price 
schedules  and  then  they  must  disregard  a  certain 
amount  of  nonconformance  "by  the  smaller  factors. 
If  any  small  factor  threatens  to  increase  his  volume 
to  a  point  where  disruption  of  the  market  is  threaten- 
ed, then  that  man  should  be  dealt  with  individually  by 
the  code  authority  or  their  representative.  I  trust 
that  your  industry  may  continue  to  stabilize  its  own 
affairs  without  the  necessity  of  government  inter- 
vention. ♦.."(*) 

Mr.  White's  warning  appears,  however,  to  have  largely 
gone  unheeded  for  the  code  authority  shortly  thereafter 
virtually  ordered  the  filing  of  higher  prices.  A  code  authority 
bulletin  dated  July  23,  1934,  reads: 

"....  The  Code  Authority  in  view  of  the  recent 
suostantial  increase  in  oil,  lias  voted  by  telegram 
to  amend  the 'Lowest  Reasonable  Cost'  figures  pre- 
viously adopted  by  it  and  submitted  to  the  Adminis- 
trator for  industrial  recovery  following  its  declara- 
tion that  an  emergency  existed  in  this  Industry..... 
It  was  thought  necessary  by  the  Code  Authority  to 
adjust  only  the  unadvertised  brands  of  salad  dress- 
ing as  the  item  that  was  sold  at  an  improper  level 


(*)  Letters  quoted  above  arc  in  UFA  files  Mayonnaise  Industry. 


9826 


-  418-419- 


and  in  vital  need  of  adjustment  in  view  of  ris;ing 
ingredient  costs....11 

(then  follows  a  list  of  prices  on  three  sises  of  salad  dress- 
ing). 

"Sales  below  these  figures,  in  the  opinion  of  the 
Coda  Authority  as  expressed  by  its  action,  would 
constitute  destructive  price  cutting.  The  Code 
Authority  reaffirms  its  purpose  of  eliminating 
destructive  price  cutting  in  this  industry  and 
hopes  that  this  will  be  accomplished- by  the 
voluntary  individual  action  of  manufacturers  in 
their  efforts  to  rehabilitate  this  Industry  and 
their  own  businesses.   However,  if  it  cannot  be 
accomplished  in  such  manner,  then  the  full  powers 
of  the  Code  and  of  the  National  Industrial  Recovery  Act, 
together  with  its  penalties,  will  be  fully  util- 
ized.. .."  (*) 

In  connection  with  the  code  authority  bulletin  just  quoted, 
mention  maybe  made  of  a  letter  dated  July  34,  1934,  sent  by  Mr. 
Otto  Seidner,  a  member  of  the  mayonnaise  code  authority,  to  Mr. 
Lester  S.  Dame,  assistant  deput3r  administrator.  Mr.  Seidner, 
objecting  to  some  of  the  actions  of  Mr.  Tuttle,  referred  to 
the  bulletin  quoted  above,  which  he  stated  he  had  just  receiv- 
ed.  He  also  enclosed  a  copy  of  a  letter  sent  to  him  by  a 
fellow  member  of  the  code  authority.    Speaking  of  the  latter 
he  said: 

"....It  would  seem  from  this  letter  than  I  am 
not  the  only  one  who  is  convinced  that  the 
Mayonnaise  Industry  is  being  run  by  Mr. 
Tuttle,  who  is  evidently  taking  dictation 
from  someone  else." 

Then,  referring  to  the  code  authority  bulletin  he  continued: 

"I  also  received  a  circular  letter  from  Mr.  Tuttle  this 
morning,  in  which  was  stated  that  the  Code  Authority 
had  Agreed  to  this  and  voted  this  and  voted  that.... 
But  I  have  not  had  an  opportunity  to  say  whether  or 
not  I  agreed  to  vote  on  any  question.   This  is  not 
the  first  time  the  members  of  the  Code  Authority 
have  been  notified  that  they  have  agreed  to  do  things 
of  which  they  knew  nothing...." 


(*)   Bulletin  in  NBA  files,  mayonnaise  industry. 


9826 


-  420  - 


In  reply  Mr.  Dame  wrote  to  Mr.  Seidner  of  July  26,  1934: 

"....While  I  have  teen  a  little  doubtful  of 
some  of  the  actions  taken  by  Mr.  Tuttle  I  have 
felt  that  up  to  the  present  time  they  were  in  the 
test  interests  of  the  Industry  and  of  all  concern- 
ed. However,  I  must  agree  with  you  that  he  has 
possibly  overstepped  his  bounds  in  connection 
with  some  of  his  latest  bulletins,  where  he 
states  that  the  Code  Authority  has  made  such 
determinations....!  believe  it  is  up  to  you  and 
the  other  members  of  the  Code  Authority  to  in- 
vestigate to  your  own  satisfaction  whether  or 
not  Mr.  Tut  tic  is  acting  in  the  interest  of  the 
Industry  and  the  Code  Authority  and  in  accordance 
with  the  desires  of  the  Cede  Authority....  It  is 
not  an  action  that  should  come  from  the  Adminis- 
tration unless  the  Code  Authority  fails  to 
act." 

Later,  Mr.  Dame,  in  a  letter  to  Mr,  Tuttle,  dated  October  4,  1934, 
also  warned  him  of  price  filing  activities.   He  said; 

"....  It  is  apparent  from  many  letters  and  con- 
versations that  I  have  received  and  had  with 
members  of  the  Mayonnaise  Industry  that  they  are 
of  the  opinion  that  the  Code  of  Fair  Competition 
for  the  Mayonnaise  Industry  was  primarily  intended 
to  fix  prices  and  guarantee  a  profit....  The 
question  of  price  manipulation  is  one  that  you 
and  the  Code  Authority  should  stay  away  from  as 
much  as  possible.   I  know  that  it  is  difficult 
to  do  so,  but  that  is  the  situation,  and  you 
must  face  it  sooner  or  later  or  you  will  find 
yourself  in  a  hale  which  it  will  be  difficult  to 
get  out  of...."  (*) 

The  administration  members  of  the  code  authorities  were  util- 
ized in  some  instances  in  an  effort  to  supervise  and  correct  alleged 
price  fixing  activities  carried  on  in  conjunction  with  price  fil- 
ing plans.   Thus  on  July  3,  1034,  Mr.  J.  F.  Lynch,  Assistant  Dep- 
uty wrote  to  Mr.  Shepard  Be.rncs,  Administration  Member  of  the 
Floor  and  Wall  Clay  Tile  Code  Authority,  saying  that  the  Research 
and  Planning  Division, 

"••••entertains  some  fears  that  the  price  of 
tile  is  being  raised,  under  the  open  price  filing 


(*)  Correspondence  referred  to  in  preceding  paragraphs  contained  in 
iTRA  files,  mayonnaise  industry. 


-  421  - 


system,  to  a  print  which  will  prevent. . ..increase 
in  volume  of  sales." 

He  stated  that  it  had  been  suggested  that  certain  changes  "be 
made  in  the  Code  in  order  to  prevent  too  fast  an  increase  in 
prices.  Among  these  was  the  changing  of  the  open  price  plan  to 
conform  with  the  provisions  of  Office  Kemorandiim  No.  328,   He 
asked  the  administration  member  to  sound  out  the  code  authority 
on  the  matter  and  also  to  submit  his  own  opinions  on  the  question. 
The  record  does  not  show  any  subsequent  action  on  the  case.(*) 

Mr.  E.  W,  Morrell,  Administration  Member  of  the  Code  Authority 
for  the  Scientific  Apparatus  Industry',  on  February  19,  1935,  wrote 
to  Mr.  Alfred  Hand,  Assistant  Deputy  Administrator  of  the  code 
concerning  another  instance  of  alleged  attempted  price  fixing  which 
he  had  sought  to,  discourage.   Mr.  Morrell  stated  that  shortly  b efo re 
he  wrote,  a  meeting  of  the  industry  was  held.   Describing  this  meet- 
ing, his  letter  reads  in  part: 

"....There  was  a  long  discussion  on  a  proposed  agree- 
ment not  to  file  prices  below  a  fixed  schedule.   I 
had  to  advise  them  that  IT?A  policy  is  opposed  to  price 
fixing  and  that  NHA  could  not  sanction  or  recognize 
any  fixing  of  prices  by  their  Institute,  so  far  as 
Code  provisions  might  be  concerned.  Also  that  formal 
action  by  their  Institute  of  this  nature  might  be  illegal. 
However,  the  general  sentiment  was  in  favor  of  an  infor- 
mal agreement  along  these  lines,  as  their  only  salva- 
tion in  eliminating  the  price-cutting  which  seems  to 
have  disorganized  this  Section,  and  they  did  not  con- 
sider that  svtch  action  would  involve  any  violation  of 
the  Code.   It  appeared  to  me  that  any  such  action 
that  they  might  take  in  their  Institute  would  not 
amount  to  anything  as  it  would  not  be  adhered  to, 
and  that  the  situation  would  work  itself  out,  per- 
haps by  a  request  for  declaration  of  emergency,  if 
conditions  warrant  it,  and  perhaps  accompanied  by  the 
establishment  of  cost  accounting  system  if  policy 
permits.... "(**) 

A  number  of  other;  instances  of  supervisory  action  by  1TRA  to 
offset  price  fixing  activities  should  also  be  noted.   In  the  crushed 
itcae  industry,  the  Horthwest  Construction  Co.  lost  a  bid  because 


(*)   Letter  in  NBA  files,  w?.ll  clay  tile  industry. 

(**)  Letter  in  KEA' files,  scientific  apparatus  industry. 


9826 


-  423  - 


they  wore  informed  "by  the  district  committee  that  they  must  figure 
the  cost  of  materials  at  the  lowest  price  which  was  $1.50  per  yd. 
Another  contractor,  who  had  bid  at  .''1,00  per  yd.,  received  the 
award.   The  Northwest  Construction  Co.'s  original  "bid  had  "been 
at  90^?  a  yard.   As  a  result  they  wished  the  contract  readvertised. 
The  Legal  Division  ruled  the  district  committee  out  of  order  in 
advising  the  Northwest  Construction  Co.  of  the  requirement  that  they 
"bid  at  $1.50  a  yd.,  and  that  the  company  who  received  the  hid  could 
not  be  cited  for  violation. (*) 

A  memorandum  from  the  Leg?!  Division  to  the  deputy  in  charge 
of  the  canvas  goods  code,  dated  December  24,  1934,  stated  reasons 
for  staying  the  price  filing  and  certain  other  provisions  in  the 
code.   One  of  the  reasons  ?as'  that' a  public  hearing  had  developed 
substantial  evidence  that  price  fixing  had  taken  place  under  the 
guise  of  price  filing.  (**) 

Subsequently  the  price  filing  provisions  of  this  code  were 
stayed,  in  accordance  with  this  recommendation. 

Investigation  of  the  alleged  efforts  of  the  Regional  Code 
Authority  of  the  Wholesale  Confectioners  Trade  to  arrive  at  a  price- 
fixing  agreement  caused  NRA  to  conduct  an  investigation  of  these 
activities.  Price  filing  had  played  an  important  role  in  this 
effort  to  fix  prices.   The  entire  matter  was  summarized  in  a 
lengthy  memorandum  to  the  national  Industrial  Recovery  Doard  from 
Mr.  Ddward  K.  '.'.'arren,  Regional  NRA  Director  in  New  York  City,  dated 
May  14,  1935,  concerning  charges  against  the  Treasurer  of  the 
wholesale  Confectioners'  Cor'e  Authority.   This  memorandum  reads 
in  part: 

" in  or  about  Juno,  July  and  August,  1934, 

respondent  accepted  blank  forms  of  price  lists 
which  had  not  been  filled  in  with  prices  but 
which  had  been  signed  by  members  of  the  Industry, 
and  also  accepted  authorization  from  such  members 
of  the  Industry  to  insert  prices  in  such  price  form, 
such  prices  to  be  those  which  he  thought  should  be 
inserted  therein  in  order  that  the  filed  prices 
of  all  members  of  the  Industry  in  the  New  York 
trading  area  would  be  identical  or  essentially 
the  same « ...respondent  neglected  to  file  or 

treat  as  filed,  twenty  price  lists  deposited 

with  him  pursuant  to  the  provisions  of  the  code.... 
respondent  told  members  of  the  industry  what  prices 
and  discounts  would  be  acceptable  to  the  Code  Autho- 


(*)   Letter  in  NRA  files,  crushed  stone  industry, 
(**)   Letter  in  NRA  files,  canvas  goods  industry. 


9826 


-  423  - 


rity....  urged  members  of  the  Industry  to  file 
■uniform  prices  and  discounts  which  result  in  prices 
approximately  BO,;  above  cost  of  the  products  and 
considerably  above  the  total  cost  of  doing  busi- 
ness.  The  respondent  indicated  that  the  Code 
Authority  would  not  accept  filing  of  lower 
prices. " 

LIr.  Warren's  memorandum  continues  by  stating  that  Mr.  7/eber 
refused  to 

"treat  as  filed  one  or  more  price  lists  tendered  to 
him,  basing  his  refusal  on  the  ground  that  price 
lists  could  not  be  filed  and  made  effective  which 
contained  prices  below  the  standard  prices  sponsor- 
ed by  the  respondent,  which  prices  were  considerably 
above  cost. . . . " (*)  • 

The  Hew  York  regional  office  recommended  the  ousting  of  the 
head  of  the  regional  code  authority  but  the  Supreme  Court  decision 
on  May  27,  1935,  -prevented  the  carrying  out  of  this  action. 


(*)  Memorandum  in  1IEA  files,  wholesale  confectionery  industry. 


9826 


-  424  - 

The  secretary  of  the  Code  Authority  for  the  Macaroni  Industry  was 
warned  by  the  deputy  administrator  against  too  extensive  rec6mmendations 
for  price  increases  and  the  maintenance  of  filed  prices  at  a  profitable 
level.   These  .-warnings  resulted  in  no  special  corrective  measures,  al- 
though the  industry  was  subjected  to  some  brief  investigations  by  the 
Department  of  Justice  because  of  complaints  of  price  fixing  activities.  (*) 

The  activities  of  the  Code  Authority  for  the  fire  extinguishing  App- 
liance Industry  in  issuing  bulletins  containing  regulations  not  in  accord 
with  the  code  provisions  and  in  attempting  to  fix  prices  were  criticized 
by  the  ERA.  and  were  subjected  to  investigation  by  the  Federal  Trade 
Commission.   The  review  of  the  code  authority  bulletins  and  the  actions 
concerning  them  are  given  in  detail  in  another  section  of  this  report.  (**) 
The  establishment  of  trade  factors  and  mandatory  price  differentials  to 
be  used  in  connection  with  them,  and  the  establishment  of  lowest  reasonable 
costs  by  means  of  a  cost  accounting  sj^stem  not  approved  by  the  ERA  were 
among  the  activities  to  which  objection  was  raised.   Most  of  these  matters 
hadbeen  informally  approved  l>y   the  deputy  adminstrator  who  had  been  in 
charge  of  the  code  when  it  was  first  approved.-  'The  Federal  Trade  Commission 
investigation  of  this  industry  resulted  in  a  cease  and  desist  order  being 
accepted  by  the  industry  in  November,  1935. 

An  ERA  investigation  of  alleged  price-fixing-  in  the  candy  manufacturing 
industry  was  conducted  in  the  -spring  of  1935.   The  charges  centered  around 
the  activities  of  the  chairman  of  the  code  authority,  and  others  connected 
with  the  national  confectioners'  association,  in  attempting  to  restore  the 
waiting  period  which  had  been  staj-ed  by  ERA  action  at  the  time  the  code  was 
approved.   The  methods  employed  in  certain  areas  in  which  these  activities 
occurred  were  the  holding  of  meetings  of  industry  members  at  which  a 
price  level  was  agreed  upon,  with  members  obligated  to  file  such  prices  with 
the  regional  officers  of  the  code  authority  before  they  were  forwarded  to 
Dun  and  Sradstreet,  which  was  serving  as  a  confidential  agent  for  the  code 
authority.   These  activities  were  alleged  to  have  occurred  during  December, 
1934,  and  necessary  action  to  remove  the  chairman  from  his  official  capacity 
was  taken  early  in  1935.  (***) 

The  chairman  of  the  Code  Authority  of  the  Builders'  Supply  Trade  was 
charged  with  issuing  bulletins  to  the  industry  without  approval  of  the  ERA' 
with  publishing  suggested  price  lists  in  metropolitan  New  York  trading  area 
and  with  issuing  a  cost  schedule  without  ERA  approval.   Members  of  the  trade 

(*)     See  letter  from  Mr.  Walter  7/hite  to  Mr.  G.  G.  Ho  skins,  April  17, 
1934,  in  ERA  files,  macaroni  industry. 

(**)   Pages  251  &  292-294,  above. 

(***)   See  Transcript  of  the  Hearing  on  the  Code  for  the  ■candy 

Manufacturing  Industry,  January  19,  1935,  in  ERA  files;  also 
memorandum  from  C.  7.  Dunning,  Deputy  Administrator  to  D.  M. 
Nelson,  Code  Administration  Director,  dated  January  28,  1935, 
in  ERA.  files,  candy  manufacturing  industry;  also  minutes  of  the 
meeting  of  the  Code  Authority  for  this  industry,  held  February 
22-24,  1S35,  in  ERA  files,  Candy  Manufacturing  Industry. 


9826 


-  425  - 

complained  that  he  completely  dominated  the  Industry.  A  memorandum  from 
the  assistant  deimty  administrator,  dated  March  11,  1935,  summarizes  the 
charges  and  describes  the  investigation  of  his  activities,  but  does  not 
include  the  outcome. (*) 

2.    Suspension  of  Price  Piling  Plan. 

The  Legal  Division  of  the  I'BA  objected  to  the  powers  assumed  by  the 
code  authorities  for  various  divisions  of  the  paper  and  pulp  industry  in 
suspending  price  filing  provisions  without  special  authorization.   These 
suspensions  of  price  filing  for  particular  areas  and  products  for  varying 
periods  of  time,  had  been  made  during  downward  spirals  of  prices  in  an 
effort  to  deter  price  cuts  and  stabilise  prices.  These  actions  by  the 
Legal  Division  amounted  to  condemnation  of  the  entire  price  filing  plans 
of  some  of  these  industries  as  being  illegal  because  of  the  assumption  of 
quasi-legislative  and  quai-judicial  powers  not  within  the  scope  of  the  code. 
One  opinion  by  Mr.  Jack  Scott  of  the  Legal  Division  held  that  no  open 
price  plan  of  any  kind  could  be  put  into  effect  without  approval  of  the  NBA, 
despite  the  enabling  language  in  the  code. 

This  opinion  was  transmitted  to  the  deputy  in  charge  of  a  Paper 
Division,  Mr.  W.  J.  Brown,  in  connection  with  the  plan  of  the  folding 
paper  box  industry  and  was  severely  criticized  by  Mr.  Brown  in  a  memo- 
randum to  Division  Administrator  Battley  on  January  4,  1935.  (**) 

This  and  other  legal  criticisms  of  the  price  filing  plans  in  the 
paper  codes  effectively  prevented  IffiA  enforcement  activities  in  connection 
with  these  plans,  but  did  not  prevent  voluntary  compliance  on  the  part  of 
members. 

The  disapproval  of  the  mandatory  customer  classification  set  up  by 
the  envelope  manufacturing  industry  and  the  revoking  of  that  bulletin  led 
to  the  voluntary  suspension  of  price  filing  in  that  Industry  in  April,  1935. 

An  illustration  of  unauthorized  suspension  of  the  price  filing  plan, 
as  it  applied  to  one  industry  product  is  contained  in  a  letter  dated  January 
9,  1935,  from  Deputy  Administrator  Janssen  to  the  Code  Authority  for  the 
Crushed  Stone  Industry.   The  letter  (****)  stated  that  the  action  of  a  dis- 
trict committee  in  exempting  railroad  ballast  from  the  price  filing  require- 
ments was  not  justified;  the  letter  stated  that,  once  a  district  committee 

(*)      Memorandum  to  P.  A.  Hecht,  Deputy  Administrator,  from  A.  C.  Cook, 
Assistant  Deputy  Administrator,  March  11,  1935.   In  KRA  files, 
builders  suppler  trade. 

(**)     In  1IEA  files,  paper  and  pulp  industry. 

(***)    Seo  above- pages  248-249. 

(****)   Quoted  in  "The  Administration  of  the  Code  for  the  Crushed  Stone, 
Sand,  Gravel  and  Slag  Industry, "  by  the  Code  Administration  Study 
Section  of  the  Research  and  Planning  Division,  in  173A   files. 


9826 


-  426  - 

had  elected  to  make  price  filing  effective,  only  code  amendment  could  re- 
verse this  process. 

3.  Irragular  Allegations  of  Violation  , 

On  December  21,  1934,  the  Code  Authority  for  the  Scientific  Apparatus 
Industry  filed  a  complaint  against  the  Abernathy  Furniture  Company  and  the 
Swenson  Construction  Company.   The  charge  was  failure  to  file  prices  .and 
bidding  below  the  lowest  filed  price  on  a  P.U.A.  contract  by  the  former 
company,  to  which  the  latter  concern  had  sublet  a  contract  for  laboratory 
furniture.   It  was  commented  on  this  case  by  the  assistant  deputy  that  no 
violation  had  occurred  since  no  notice  to  file  prices  had  been  sent  by  the 
manager  of  the  code  authority  to  the  respondent  prior  to  the  filing  of  bids. 
(*) 

4.  Supervision  of  Application  of  Executive  Order  No.  6767,  and 
Administrative  Order  X-48. 

-  Considerable  correction  and  guidance  was  given  to  code  authorities  in 
connection  with  Executive  Order  ho.  6767  and  Administrative  Order  X-48.  (**) 
Only  one  example  of  this  will  be  given  here. 

On  July  1,  1934,.  the  code  authority  of  the  plumbing  fixtures  industry 
filed  a  notice  to  members,  stating  that  Executive  Order  X-48,  requiring  that 
the  Government  be  granted  as  favorable  terms  for  like  quantities  as  any  other 
purchaser,  did  not  apply  to  that  industry,  since  the  code  prohibited  selling 
direct  to  consumers.   The  Legal  Division  of  the-FRA  ruled  that  X-48  and  6767 
did  apply  and  the  code  authority  in  October,  1934,  rescinded  its  original 
order.  (***) 

5.  Supervision  Connected  with  Cost  Formulae 

The  pricing  formula  designated  by  the  code  authority  of  the  Marking 
Devices  Industry  was  ordered  withdrawn  by  the  FRA.  since  there  was  no  sanc- 
tion in  the  code  for  such  a  formula.  A  request  for  withdrawal  of  the  uni- 
form price  lists  filed  pursuant  to  the  formula  was  made  in  May,  1934.  (****) 

6.  Availability  of  Pilings  to  Members 

The  secretary  of  the  Code  Authority  for  the  Cast  Iron  Soil  Pipe  Industry 
was  rebuked  on  a  number  of  occasions  by  the  deputy  for  issuing  bulletins  and 
other  instructions  to  the  industry  contrary  to  the  provisions  of  the  code.  In 
one  instance  he  was  ordered  to  retract  a  letter  stating  that  price  lists  filed 
with  him  were  available  only  to  members  of  the  cast  iron  soil  pipe  association, 
and  to  disseminate  such  prices  to  all  members  of  the  industry.  (*****) 


(*)      Letter  in  NEA  files,  scientific  apparatus  industry. 

(**)     Por  a  more  complete  consideration  of  these  two  Orders,  see  below, 
pp.  477-483. 

(***)    FRA  files,  plumbing  fixtures  industry. 

(****)    URA  files,  marking  devices  industry. 

(*****)   0n  this  see  Mackenzie,  J.  TT. ,  "Preliminary  Renort  on  the  Administra- 
tion of  Trade  Practices  by' Codo  Authoritier.;1,  Code  Administration 
Studies  Section,  December,  1935,  pages  3C-33,  KRA.  files. 

9826 


-  427  - 

7.  Classification  of  Customers. 

The  practice  of  the  Asphalt  Shi]     .."  Roofing  Code  Authority  of 
holding  meetings  to  consider  the  classifications  of  customers  used  in 
filing  prices,  was  objected  to  by  the  Administration.   The  code  authority 
was  ordered  to  abolish  this  practice  of  "mi s-classif i cation  meetings",  as 
they  were  called.  (*) 

8.  Rejection  of  Pilings. 

The  activities  of  the  Code  Authority  for  the  Gas  Apoliances  Industry 
were  subjected  to  HRA  investigation  late  in  1934,  and  a  report  on  these 
activities  was  prepared  by  the  Deputy  for  the  consideration  of  the  national 
Industrial  Recovery  Board.   These  alleged  activities  included  efforts  to  fi; 
prices,  to  reject  filed  prices' where  not  acceptable  to  the  code  authorit3>-, 
and  to  coerce  non-members  (of  the  industry)  to  conform  to  regulations  not 
included  in  the  code.  (**) 


The  Code  Authority  of  the  Vitrified  Clcy  Sewer  Pipe  Industry  informed 
its  members  that  they  would  be  in  violation  of  t  :e  price  filing  provisions 
of  the  code  if  they  gave  prior  information  of  price  changes  to  their  cus- 
tomers.  The  1T3A   objected  to  this  interpretation  and  asked  that  it  be  with- 
drawn. (***) 

In  a  bulletin  issued  on  October  18,  1934  the  Code  Authorit3'-  for  the 
Crushed  Stone  Industry  set  forth  a  number  of  resolutions  in  the  nature  of 
explanations  or  interpretations. 

These  stated,  among  other  things,  that  the  code  was  to  be  interpreted 
to  meaji  that  it  was  unlawful  to  make  a.   sale  at  less  than  prime  plant  cost 
plus  10  per  cent,  that  the  code  provision  permitting  filing  of  prices  less 
than  prime  cost  plus  10  per  cent  to  meet  competition  meant  to  meet  a  com- 
petition for  which  a  price  was  filed;  that  in  the  absence  of  definite  rulings 
on  the  matter  \ij   the  district  committees,  certain  rules  concerning  delivery 
terms  were  to  be  observed;  and  that  "any  producer  not  having  filed  prices  at 
least  five  dajrs  prior  to  the  timo  of  any  letting  thereto,  cannot  subsequently 
file  prices  to  meet  the  filed  prices  of  any  other  producer  which  were  not 
properly  applicable  to  that  letting".  (****) 

(*)      See  Appendix  A  for  further  details. 

(**)     See  "Price  Piling  in  the  Gas  Appliances  Industry"  Appendi:;  "C"  of  "A 
Limited  Survey   of  Price  Filing  in  I~RA  Codas",  Preliminary  Report  of 
the  Price  Piling  Unit  of  the  Division  of  Review  of  the  rRA,  Novem- 
ber, 1935.  KRA  files 

(***)    HRA  files,  vitrified  cloy  sewer  pipe  industry. 

(****)   KI&  files,  ensiled  stone  i'.dastry. 


r\  r\  O/* 


-  428  - 

John  E.  Skilling,  Lega.l  Advisor,  in  a  memorandum  to  Assistant  Deputy 
Administrator  Dickerman,  dated  November  24,  1934,  stated  that  the  effect  of 
each  of  the  resolutions  was  to  amend  the  code.  Deputy  Administrator  Janssen, 
on  December  5,  1934,  wrote  to  the  code  authority  and  submitted  the  legal 
adviser's  criticisms,  hut  stated  that  in  hi  s  opinion  the  first  two  resolutions 
did  not  exceed  the  power  ^iven  to  tne  cede  authority.   The  code  authority  re- 
plied by  stating  that  the  third  resolution  had  been  amended  and  the  fourth  one  | 
rescindec1.   Speaking  of  this  the  writer  of  the:  Pesea.rch  and  Planning  Code 
Administration  Study  said: 

"With  further  reference  to  the  letter  of  the  Deputy  Administrator, 
in  which  he  concurred  in  the  Code  Authority's  resolution  No.l  and 
No.  2,  the  investigator  finds  no  record  of  approval  of  these  resolutions 
b-r  the  various  NRA  divi  sions:  and  Advisory  Boards,  nor  of  any  official 
action  thereon.   It  is  evident,  however,  from  the  reoly  of  the  Code 
Authority  that  it  considered  its  resolutions  No.  1  and  2  had  been  con- 
curred it,  since  it  expressed  satisfaction  at  this  result.   It  should 
be  noted  here  that  Resolution  No.  1  presumed  that  the  Codal  restriction 
against  sales  below  prime  plant  cost  plus  10  per  cent  is  in  effect, 
whereas  as  a  matter  of  fact,  the  standard  uniform  accounting  and  costing 
system,  on  the  basis  of  which  that  allowable  cost  is  to  be  computed 
(Article  VII,  Section  2  d)  had  not  been  approved  by  the  NRA  as  required 
under  Article  II,  Section  2,  and  still  remains  unapproved "  (*) 

Administrative  Order  No.  109-46,  dated  October  15,  1934  exercised 
further  supervision  over  this  industry.   It  read: 

"Whereas,  on  September  25,  1934,  the  District  Committee  of  North 
Carolina  for  the  Crushed  Stone,  Sand  and  Gravel  and  Slag  Industries, 
adopted  the  following  resolution:   ' 3e  it  resolved,  where  quotations 
are  filed  by  a  plant  that  is  not  set  up,  the  producer  must  designate 
the  exact  location  of  the  olant  and  the  property  on  which  it  is  to  be 
located  and  the  number  of  miles  said  plant  is  located  from  some  specific 
part  of  the  project  for  which'  prices. are  filed.1 

"And  whereas  the  Deputy  Administrator  has  reported  and  it  appears  to 
the  satisf action  of  the  National  Industrial  Recovery  Board,  that  the 
said  resolution?  will. result  in  hardships. to  such  members  of  the 
Industries,  and  that  justice  requires  that  it  be  disapproved: 

"Nov;,  therefore,  -pursuant  to  the  authority  vested  in  the  National 
Industrial  Recovery  Board,  i-t  it  hereby  ,c-£&es§.d  that , the  ,  said  resolu- 
tions be  and  they  are  hereby  disapproved." 

In  suhnary,  the  foregoing  instances  of  cases  involving  NRA  supervision 
may  be  analyzed  as  follows: 

Among  the  items  involved  in  the  various  cases  were:  the  use  of  a 
standard  price  filing  form,  price  fixing  activities  associated  with  price 
filing,  the  use  of  cost  formulae,  customer  classification,  the  rejection  of 
certain  price  filings,  the  scope  of  membership  subject  to  the  code,  the  avail- 

(*)   Quoted  in  "The  Administration  of  the  code  for  the  Crushed  Stone,  Sand, 

Gravel,  and  Slag  Industry",  by  Sterling  March,  Code  Administration  Study- 
Section  of  the  Research  and  Planning  Division,  page  99. 

9826 


-  429  - 

ability  of  price  filings  to  all  members  of  industry,  failure  of  certain 
members  to  file  prices,  failure  to   adhere  to  filed  prices,  failure  to 
file  prices  on  certain  products,  establishment  of  uniform  credit  terms, 
the  application  of  Executive  Order  No.  5767  permitting  sales  to  governmental 
agencies  at  less  than  filed  prices,  and  substitution  of  filing  of  elements 
of  cost  for  the  filing  of  prices. 

The  problems  involving  the  above  matters  reached  the  attention  of  the 
Administration  through  a  number  of  channels.  Among  these  were  (l)  submission 
of  question  to  the  MA  by  the  code  authority,  (either  by  virtue  of  a  code 
requirement  or  because  the  code  authority  wished  to  avoid  unauthorized 
action;  (2)  through  raising  of  the  issue  as  a  result  of  a  ruling  or  inter- 
pretation of  the  code  authority,  as  evidenced  by  code  authority  minutes  or 
bulletins  (sometimes  the  matter  was  brought  up  when  the  deputy  saw  such  a 
bulletin;  sometimes  a  member  of  on3  of  the  advisory  boards  or  divisions 
raised  the  issue);  (3)  a  complaint  alleging  violation  of  a  code  requirement 
or  a  code  authority  ruling  might  have  been  filed  with  an  MA  compliance 
agency  by  the  code  authority;  (4)  a  customer  or  member  of  the  industry  might 
have  compained  against  some  action  or  ruling  of  the  code  authority;  or  (5) 
the  administration  member  of  the  code  authority  might  have  brought  to  the 
attention  of  the  Administration  some  questionable  action  by  the  code  authority. 

As  the  foregoing  indicates,  sometimes  Administrative  supervision  took_ 
place  before  a  cor.tenplated  action  or  reulinp  did  not  cone  to  light  until  it  h& 

effect.   Sometimes  the  action  or  ruling  did  not  come  to  light  until  it  had 
been  put  into  force  and  some  objection  to  it  was  voiced.   It  is  impossible 
to  determine  what  proportion  of  the  cases  involved  action  beforehand,  and 
what  proportion  involved  action  after  the  fact. 

As  to  methods  of  handling,  many  cases  were  handled  by  correspondence 
between  the  Administration  and  the  code  authority,  or  between  the  Adminis- 
tration and  the  member  of  the  industry  or  customer  of  the  industry  affected. 
In  some  instances,  special  investigators  or  the  administration  member  were 
asked  to  look  into  the  matter.  Public  hearings  resultod  from  the  efforts  to 
adjust  some  of  the  problems  requiring  supervision.   Conferences  were  held 
with  members  of  the  advisory  boards  and  divisions  to  ascertain  appropriate 
action  in  other  cases. 

Because  of  the  incompleteness  of  the  records  it  is  most  difficult  to 
state  very  much  of  a  definite  nature  concerning  the  efficacy  of  Administra- 
tive supervisory  activities.   It  is  clear  that  in  some  instances  warnings 
against  more  or  less  outright  price  fixing  activities,.ialmost  completely 
disregarded.   In  other  cases,  advice  to  code  authorities  that  certain 
activities  were  outside  cf  their  proper  field  of  a.ction  appears  to  have  been 
effective.   Again  any  quantitative  measure  is  virtually  impossible. 

Supplementing  the  aspects  of  administrative  supervision  presented 
in  the  foregoing  section,  the  section  following  will  deal  with  the  work 
to  the  Administration  and  the  code  authorities  in  effecting  compliance  with 
the  open  price  provisions. 


-  430  - 

.  SECTION- B  -  COMPLIANCE  AND  LITIGATION  ACTIVITIES 

I.   COMPLIANCE  ACTIVITIES  BY  CODE  AUTHORITIES  A"":  THE  IT.K.A. 

Introduction 

In  securing  compliance  with  the   rice  Tiling  "rovisions  of   codes, 
as  with  other  trade  practic  provisions,  much  of  the  responsibility  and 
authority  was  delegated  "by  the  Administration  to  the  code  authorities, 
their  trade  practice  complaints  committees  and  other  representatives. 
However,  the  Administration  had  its  own  Compliance  Division,  with 
Washington  and  field  headquarters;  and  the  Government  Contracts  Branch 
also  worked  to  "bring  ah out  conformity  with  trade  practice  provisions  of 
codes.   The  work  of  these  compliance  agencies  will  he  considered  in  this 
section. 

,  A.   Code  Authority  Compliance  Activities 

"The  Manual  for  the  Adjustment  of  Complaints  by  State  Directors 
and  Code  Authorities"  laid  down  the  following  proportion  as  a  basic 
guide  for  the  division  between  code  authorities  and  the  Administration 
of  responsibility  for  obtaining  compliance: 

"....The  responsibility  for  insuring  that  codes  are 
administered  and  that  the  public  is  protected  lies 
with  the  Administrator;  but  the  aim  of  H.R.A.  is  to 
give  t  :>  Industry,  through  its  code  authorities,  the 
widest  possible  range  of  self-government,  subject  to 
the  ultimate  responsibility  of  the  Administrator ..." (*) 

In  order  to  become  officially  authorised  to  handle  trade  practice 
complaints,  code  authorities  were  required  to  submit  for  the  approval 
of  the  Administration  their  plans  for  procedure  in  such  cases,  modeled 
upon  the  outlines  of  methods  for  handling  complaint's  contained  in  the 
Bulletin  #7  previously  referred  to. 

1.   Code  Authority  Methods  Eor  Handling  Complaints 

Little  information  is  available  concerning  the  details  of  the  pro- 
cedure  actually  followed  by  compliance  agencies  of  code  authorities  in 
the  handling  of  complaints.   However,  charges  were  made  that  some  code 
authorities  failed  to  follow  the  prescribed  methods  of  obtaining  com- 
pliance.  It  is  impossible  to  state  definitely  the  extent  to  which  such 
charges  were  justified,  and,  if  justified,  whether  such  instances  were 
typicc-1  or  exceptional.  One  case  of  alleged  mal— administration  will  be 
mentioned  to  illustrate  the  point.   It  concerns  the  activities  of  the 
Mayonnaise  Code  Authority.   On  September  S,  1934,  Mr.  Nathan  Raff, 
President  of  the  United  Food  Products  Company  3f  Brooklyn,  IT.  Y.,  ad- 
dressed a  letter  to  General  Hugh  S.  Johnson  stating: 

"....It  would  seem  to  us  that  after  the  filing  of  our 
advance  schedule  with  the  local  Code  Authority,  the  gentle- 
men who  are  administering  and  managing  the  business  of  this 
Authority  would  recognize  that  we  have  shown  a  spirit  of  co~ 

(*)  NRA  Bulletin  #7,  dated  January  22,  1954,  page  3,  NBA  files 


-431- 

operation  which  should  be  welcomed  and  appreciated,  but  since  Aug- 
ust 20,  (th«  effective  uate  of  the  schedule  filed  by  Mr.  Raff  con- 
taining the  increase  in  prices)  these  gentlemen,  especially  Mr.  Tut- 
tle,  the  managing  agent  of  the  Code  Authority,  gave  us  nothing  but 
continuous  annoyance.   They  called  us  a  number  of  times  telling  us 
that  we  must  again  raise  our  prices  in  order  to  conform  with  price 
schedules  filed  by  othc  r  manufacturers,   We  finally  arranged  for  a 
conference  with  Mr.  Tuttle  at  10;  .X  A.  M.  on  Fri'daj;  ,  August  31.   The 
writer  and  his  business  associate';  went  down  tj  see  Mr.  Tuttle  at  the 
appointed  hour.   Mr.  Tuttle  again  tola  us  that  we  must  raise  our 
prices  to  the  level  of  the  schedules  filed  by  other  manufacturers. 
All  of  our  arguments  that  it  wovld  be  sneer  folly  for  us  to  announce 
another  price  rise  now  whs  of  no  svail  to  Mr.  Tuttle,  or  fact3  and  . 
figures  that  oar  present  prices  are  not  below  cost  ant.  do  not,  there- 
fore, constitute  an  act  of  nfa.ir  competition  meant  nothing  to  him 

then  Mr.  Tuttle callec  in  two  men  from  the  adjoining  room, 

whose  name'-,  he  die  not  give  us  and  announced  that  this  was  a  meeting 
of  the  Complaints  Committee  of  the  local  Authority.   He  started  to 
reao  the  riot  act  to  us;  he  t'areateneo.  to  have  us  indicted  and  con- 
victed of  all  c-jorts  of  crimes After  Mr.  Tuttle  got  through  with 

all  of  his  cajjling,  intimidations  sno.  threats,  we  again  announced 
that  we  wouli  not  raise  our  prices  now  out  would  only  do  so  when 
conditions  would  so  warrant " 

On  Septemoer  10,  Mr.  Tuttle  wrote  to  Mr.  Lester  S.  Eame,  Assistant 
Deputy  Administrator  concerning  this  matter: 

" Our  Coue  contains  the  ..rovioion  prohibiting  destructive  price 

cutting  which  inclucea,  without  limitation,  sales  below  cost.   In 
view  of  the  lact  that  the  Cooe  Authority  had  determined  the  lowest 
reasonable  cost,  it  is  obvious  that  if  the  Coue  Authority  can  sus- 
tain its  figures,  any  sales  i_elow  these  costs  constitute  destructive 
price  cutting.   We  are  confident  that  expert  examination  would  sus- 
tain these  lowest  c  :sts. 

"The  Trade  Practice  Complaints  Committee  requested,  the  presence  of 
the  officials  of  the  Union  Food  Products  Co.,  as  outlined  in  the 
letter.   The  Trade  Practice  Complaints  Committee  said  nothing  about 
the  price  level  of  other  manufacturers,  but  stated  that  complaint 
has  been  made  to  the  effect  that  "Tni ^n  Food  Products  filed  prices 
representing  destructive  price  cutting  prohibited  by  the  Mayonnaise 
Code. 

"Neither  the  Managing  Agent  or  any  other  member  of  the  Trade  Practice 
Complaints  Committee  read  the  riot  act  to  the  officials  of  the  Union 
Food  Productf.  Co.,  and  the  only  reference  to  penalties  of  the  Act 
were  made  in  response  to  t>'e  suggestion  advanced  by  an  official  of 
the  T'nioR  Food  Products  to  the  effect  that  they  would  continue  to  do 
so  as  thy  pleased  end  that  the  NIRA  could  not  or  would  not  be  en- 
forced, ...  'I 

A   tendency  for  code  aut'  orities  to  attempt  to  anticipate  their 
official  authorization  to  act  ,"in  the  first  instance"  is  efidenced  in 
the  following  correspondence  from  Mr,  G,  G,  Iloskins,  Chairman  of  the 
Code  Authority  for  the  Macaroni  Industry,   It  also  indicates  the 
methods  used.  b„  one  code  ruthority  to  achieve  mobility  of  their  ad- 
justment agency; 


-  432  ~ 

nWe  have, a  letter  from  Division  Administrator' Riley 
stating'  that  our  inly  elected,  members  of  the  Code 
Authority  have,  he  en  recognized  as  such.  Can  we  as-t 
surne  that  the^r -recognition  as  the  highest  industrial 
adjustment  agency  as  per  NBA  Bulletin  #7  will  he  forth** 
coming  soon?  • 

"Proceeding  under  the  authority  given  me  .in  your 
recent  letter  -we  are  assuming  that  they  can  handle 
complaints  in  the  first  instance  hut  sooner  o.r  later 
we  are  going  to  cor.e  against  a  state  compliance  director 
who  does  not  recognize  us  as  being  the  highest  adjustment 
agency  in  otir  Industry,   Incidentally,  onr  by-laws  call 
for  three  members  of  the  Code  Authority  to  sit  as  such 
committee.   This  ;rovision  'was  made  so  that  by  traveling 
to  various  parts  of  the  country  I  could-  pull  in  two  other 
memhers  of  the  Code  Authority  without  requiring  a  meeting 
of  the  whole  Code  Authority, ,,." (*) 

Certain  Code  Authorities,  by. virtue. cf  -articular  code  provisions 
enabling  them  to  do  so,  enforced  compliance  by  means  of  so-called  "liqui- 
dated damage"  agreements.  While  there  wr.s  considerable  variation  between 
the__.  codes  as  to  the  exact  procedure ,  the-  ueneral  nature  of  these  plans 
was  the  same;  members  guilty  of  violation  of  trade  practice  -orovisions 
were  assessed  a  fine  hy  the  code  authority  or  one  qf  its  agents. 

Discussing  the  operation  of  liquidated  damage  provisions,  Mr. 
Walter  Mangum,  Acting  Deputy  Administrator,  in  a  memorandum  to  Acting- 
Division  Administrator  Prentiss  L,  Coonley,  November  27,  1934,  said; 

"....There  are  various  procedures  set  up  for  handling 
the  cases,  but  that  adopted  by  the  Reinforcing  Materials 
Fabricating  Industry  would  appear  to  he  extremely  fair 
and  impartial.  These  cases  are  presented  to  the  Code 
Authority  in  the  abstract  and  impersonally.  The  name 
is  not  divulged  even  to  the  members  of  the  Code  Author- 
ity.  If  a  member  of  the  Indu.stry  is  found  guilty,  damages 
are  then  fixed.  If  he  pays  willingly,  his  name  is  never 
disclosed,   Shoxild  he  desire  to  appeal,  a  public  hearing- 
is  then  ordered  and  all  the  facts,  including  names,  are  dis- 
closed. The  Reinforcing  Materials  Fabricating  Code  Authority 
has  handled  four  hundred  ninety-eight  (493)  cases  in  nine 
(9)  months.  While  some  of  them  have  been  rather  bitterly 
fought,  in  most  instances  the  offending  member  has  admitted 
guilt  and  paid  the  damages  assessed,   This  Code  Authority 
estimates  that  the  average  caso  is  completed  and  the  money 
paid  within  three  months  from  the  time  it  is  first  brought 
to  their  notice.  This  Industry  has  now  collected  as  damages 
a  sum  sufficient  to  support  its  Codo  Authority  operations  for 
, tne  next  six  months," (*») 

(*)  Letter  to  Mr.  Walter  White,  Deputy  Administrator,  HRA  files 
April  12,  1934 

(**)  Copy  of  memorandum  appended  to  "The  Use  of  Liquidated  Damage 
Provisions  in  Industry  Agreements",  1TRA,  Enforcement  Studies 
Section. 


-  433  - 

Concerning  the  effectiveness  i  f  this  type  of  provision  as  an  aid 
to  enforcement,  this   emor;  .■       tinues: 

"  . . .  .Generally  speaking  it  is  fount:  that  these  provisions 
are  most  a  plicab'le  to  th     ircement  if  trade  practice 

article,  and  are  not  usually  brought  to  "bear  in  cases  of 
labor  violations.  A  most  considerable  measure  of  success 
has  been  obtained  in  these  codes  where  the  procedure  has 
been  adopted  and  the  provisions  made  effective.   I  feel 
that  the  liquidated  damage  provisions  could  be  made  most 
effective  in  a  number  of  codes  in  the  (textile)  Division  .... 
The  provisions  are  working  better  in  industries  which  have 
strong  trade  associations  or  institutes,  rather  than  in 
those  which  are  not  closely  knitted  together ... .Every 
effort  should  be  made  to  have  industries  adopt  these  pro- 
visions.  Their  value  is  in  forcing  compliance  in  small 
cases  where  publicity  might  be  both  harmful  and  unfair, 
and  frequently  many  cases  conld  be  handled  in  this  way 
where  the  offense  is  not  such  that  the  conviction  could  be 
secured  in  court...." 

Some  further  indications  of  code  authority  compliance  procedure 
may  be  found  in  the  digest  of  109  price  filing  cases  (involving  the  57 
codes  treated  by  the  Price  Filing  Unit)  made  by  the  Compliance  Division 
and  sent  to  the  Trade  Practice  Studies  Section.   These  cases  were  those 
which  were  referred  to  the  National  Compliance  Council  and  (after  January, 
1935)  to  certain  of  the  regional  offices,  after  state  offices  and  code 
authorities  had  been  unsuccessful  in  bringing  about  conformity  with  code 
provisions.   Of  the  109  cases  digested,  75  were  handled  originally  by 
the  code  authorities,  23  by  the  state  offices  and  6  by  the  Government 
Contracts  Branch.  74  of  this  total  number  were  handled  by  correspondence, 
33  by  interview  with  the  respondents  and  3  by  interview  with  competitors. 
Although  this  breakdown  is  a  description  of  method  of  handling  by  the 
three  compliance  agencies,  since  the  preponderance  of  cases  were  handled 
by  code  authorities  in  the  first  instance  and  the  greatest  number  were 
handled  by  correspondence,  it  is  evident  that  the  majority  of  cases  handled 
by  code  authorities  must  have  been  handled  by  correspondence. 

It  is  interesting  and  perhapd  significant  to  note  that  89  of  the 
above  complaints  were  originally  brought  by  coco  authorities,  18  by 
competitors,  1  by  a  trade  association  and  1  by  an  employee. 

adequate  quantitative  data  are  available  as  to  the  extent  of 
'  the  handling  of  trade  practice  complaints  in  general  by  the  code  author- 
ities, or  the  proportion  which  price  filing  complaints  made  up  of  the 
total  number  of  complaints  dealt  with.  Figures  to  be  presented  below 
in  connection  with  "illA.  compliance  work  indicate  that  in  codes  with  price 
filing  provisions,  violations  of  these  provisions  often  made  up  a  con- 
siderable proportion  of  the  total  violations  which  were  referred  to 
NBA  for  action. 

2.  Code  Authority  Compliance  Difficulties 

Difficulties  in  securing  compliance  were  inherent  in  the  nature  of 
certain  open  price  plans,  such  as  those  containing  provisions  requiring 


-  434  -  •• 

price  filing  "by  a  great  number  of  small  units  of  the  industry  or  filing 
of  prices  on  a  great  number  of  non-standard  items. 

Of  the  difficulties  which  -'err  experienced  by  Code  Authorities  in 
their  compliance  activities,  three  major  problems  will  be  treated  here: 

(a)  Failure  of  NRi  to  actively,  persistently  and 
successfully  prosecute  violators; 

(b)  Inadequate  code  authority  financing  to  carry  on 
compliance  work;  and 

(c)  Reluctance  of  industry  members  to  report  violations. 

The  most  frequently  repeated  complaint  made  in  explanation  of  the 
failure  to  secure  compliance  with  price  filing  provisions  is  that  vio- 
lators of  open  price  provisions  v/ere  not  actively,  persistently  and 
successfully  prosocuted.   It  is  repeatedly  pointed  out  in  the  code 
histories  and  elsewhere  that  failure  to  secure  convictions  of  violators 
sooner  or  later  broke  down  compliance  with  price  filing  provisions.   The 
following  is  a  typical  expression  concerning  this  situation: 

"...There  was  ore  outstanding  case  of  violation  by  a  member 
who  defied  all  provisions  of  the  Code... This  case  had  a  very 
serious  effect  on  the  Industry  and  was  quite  a  problem  to  the 
Code  Authority  as  it  developed  early  ini  its  administration, 
and  al though  vigorously  pushed  for  settlement,  no  prosecution 
or  adjustment  was  made  during  the  life  of  the  code.   Failure 
to  enforce  compliance  in  this  one  outstanding  case  had  a  very 
discouraging  effect  on  the  Code  Authority  and  prompted  the 
question  as  to  whether  or  not  the  provisions  of  the  Code  could 
be  enforced. .." (*) 

In  certain  codes,  the  lack  of  adequate  code  authority  financing 
played  a  part  in  the  failure  to  secure  crnroliance.   Thus,  a  memorandum 
dated  December  24,1934,  signed  by  Frentiss  L.  Coonley,  Division  Adminis- 
trator, stated  that  one  of  the  reasons  for  the  staying  of  the  price  filing 
and  certain  ether  trade  practice  provisions  of  the  Code  for  the  Canvas 
Goods  Industry  was  the  realization  that  the  Industry  did  not  have  the 
funds  necessary  to  secure  compliance  with  highly  restrictive  trade  prac- 
tice provisions. (**) 

In  some  instances  the  hesitancy  of  members  if  the  industry  to  report 
code  violations  by  their  competitors  mode  the  securing  of  compliance 
difficult.  An  instance  of  this  type  of  difficulty  was  experienced  in 

(*)  ,  Code  History  for  the  Ladder  Manufacturing  Industry,  page  33-39, 

For  other  illustrations  of  this  point,  see  Code  Histories  for  the 
Retail  Monument  Industry,  page  9;  for  the  Plumbing  Fixtures  In- 
dustry, page  44;  for  th   ayonnaise  Industry,  page  .230;  for  the 
Macaroni  Industry,  pages  40-44  and  93;  for  the  Cement  Industry, 
page  52;  and  for  the  Folding'  F  per  Box  Industry,  page  81, 

(**)   Code  History  for  the  La. .dor  Manufacturing  Industry,  pages  38-9, 

9826 


-  435  - 

the  Candy  Industry.  The  writer  of  the  code  history  for  the  industry 
says: 

11 The  administ  atioj   f  t]   tr  de   ractice  provisions 

was  han  ier  a    by  •  r.tv  r    :t   co  m  the  part  of  members 

of  the  Ino  istr;  t   t'il   :     !..'.■    against  competitors  who 
violated  trade  practice  or  visions.   This  brought  about  a 
situation  wherein*  rrta:  ■•        ibi  rs  sat  tight  with  files  con- 
taining evidence  pf  violations  which  they  planned  to  re- 
lease only  in  self-defense  against  complaints  filed 
agains t  them ...."(*) 

As  has  "been  noted  above,  the  Administration  laid  iown  in  Eulletin 
No.  7,  and  its  subsequent  amendments,  rules  for  the  guidance  of  com- 
pliance agencies  of  code  authorities;  and  the  code  authorities  were  re- 
quired t:  submit  for  Administrative  approval  their  plans  for  handling 
trade  practice  complaints;  but  once  such  plans  were  approved,  NBA  super- 
vision over  the  power  delegated  to  code  authorities  to  bring  about  com- 
pliance' was  to  a  considerable  extent  haphazard,  indirect  and  incidental. 
A  limited  amount  of  direct  supervision  was  effected  through  the  work  of 
administration  members  of  code  authorities,  and  of  the  trade  practice 
compliance  officers  .and  adjusters  attached  to  State  NBA  offices.  Accord- 
ing to  a  statement  made  in  an  interview  by  Mr.  Howard  C.  Dunn,  formerly 
Trade  Practice  Compliance  Officer  for  the  State  of  Illinois,  state  NBA 
offices  did  considerable  work  educating  the  members  of  trade  practice 
complaints  committees  as  to  their  duties  and  responsibilities.   Such 
groups  often  did  not  know  how  to  proceed,  Mr.  Dunn. stated,  and  they  were 
guided,  checked  and  assisted  in  their  work  by  the  State  offices.   Some' 
check  was  made  through  checking  rules  and  pronouncements  in  code  author- 
ity bulletins,  but  such  checking  was  by  no  moans  unviersal.  .Complaints, 
such  as  the  one  cited  above  frcni'LIr.  Baff  if  the  Mayonnaise  Industry, (**) 
sometimes  led  to  limited  investigation  of  compliance  procedures*   Much 
of  the  NBA  supervision  over  code  authority  com  liance  .activity  was  brought 
about  by  such  indirect  means. 

The  nature  and  extent  of  ERA's  own  compliance  efforts  with  respect 
to  price  filing  will  be  outlined  in  the  section  following: 

B .   NBA'  Compliance  Activity . 

1.   Volume  and  Disposition  of  Cases  Handled  by  State  Offices. 

On  an  accompanying  page  is  shown  a  table  which  indicates  the  volume 
of  compliance  activity  of  the  NBA  State  compliance  offices  relative  to 
price  filing  provisions  in  the  codes,  and  the  proportion  which  this 
activity  represented  of  these  Offices'  total  compliance  work.   The  great 
majority  of  these  coses,  it  is  indicated,  v/ere  referred  to  the  NBA  agen- 
cies by  the  code  authorities  after  prior  attempts  to  adjust  the  cases 
had  foiled..   The  following  points  ore  offered  as  the  high  lights  of  the 
table : 


(*)  Code  History  for  the  Candy  Industry  page  48 

(**)  Snrora.,,F.  430. 

qqoo. 


-  436  - 

Of  6,115  individuals  and  firms  charged  with  violating  trade  -prac- 
tice provisions  in  the  57  codes  comprising  the  open  price  sample,  46 
per  cent  vrere  alleved  to  have  failed  to  file  prices.   Complaints  of 
failure  to  file  prices  outnumbered  complaints  of  failure  to  adhere  to 
prices  filed  in  these  codes  by  approximately  7  to  1. 

In  many  instances  s  case  against  a  single  individual  or  firm 
involved  several  types  of  violations.   The  data  for  the  57  codes  further 
show  that  the  6,115  cases 'noted  above  violations,  total  of  7,142  trade 
practice  violations.   Of  this  total  number  of  violations  charged,  3,264 
or  45  per  cent  involved  either  failure  to  file  or  failure  to  adhere  to 
filed  prices. 

Comparable  figures  for  the  entire  number  of  codes  for  which 
figures  were  compiled  (*)  show  that  alleged  price  filing  violations 
made  up  13  per  cent  of  all  cases,  .and  approximately  the  same  pro- 
portion of  all  the  violations  charged. 

It  is  thus  evident  that  from  a  compliance  standpoint  the  price 
filing  provisions  were  a  source  of  a  large  amount  of  difficulty.   The 
office  of  the  field  division  of  the  ;TRA  advises  that  a  survey  of  ITRA 
State  office  complaints  which  have  been  made  since  the  Schechter  de- 
cision, indicates  that  failuie  to  file  prices  accounted  for  more  of  the 
alleged"  violations  than  any  other  one  type  of  trade  practice  provision. 
Failure  to  file  statistics  accounted  for  the  next  largest  number. 

The  majority  of  cases  in  the  Open  Price  Sample  Codes  involved 
members  of  12  codes.   These  codes  are:   Baking,  Builders'  Supplies' 
Canvas  Goods,  Crushed  Stone,  Electrical  Manufacturing,  Macaroni,  Plumb- 
ing Fixtures,  Retail  Monument,  Retail  Rubber  Tire  and  Battery,  Set  Up 
Paper  Box,  Structural  Clay  Products,  Wholesale  Confectionery.   Those 
Industries  each  contain  a  large  number  of  units  (though  not  necessarily 
a  large  number  of  ewnloyees   or  large  dollar  sales  volume). 

These  12  codes  account  for  86$  of  the,  total  number  of  cases  in- 
volving the  57  codes  in  the  open  price  sample.  Likewise  the  12 
codes  listed  account  for  87^j  of  the  total  number  of  violations  of  trade 
practice  provisions  in  the  codes  in  the  sample.   To  look  at  it  in 
another  way,  these  12  codes  account  for  36$  of  all  complaints  alleging 
failure  to  file  prices  in  all,  (not  just  the  sample  of  57)  codes..  The 
12  account  for  56$  of  all  complaints  alleging  failure  to  adhere  to 
filed  prices  in  all  codes.   Since  over  440  codes  contained  open  price 
provisions,  and  since  12  of  these  accounted  for  over  one  third  of  all 
alleged  violations  of  open  price  provisions  investigated  by  NRA  State 
offices,  it  is  clear  that  compliance  cliff iciilties  with  price  filing  for 
which  NRA  aid  was  involved  tended  to  cluster  in  a  small  percentage  of 
the  total  number  of  open  price  codes. 

(*)   See  footnote  to  the  table  cited  above. 


9826 


-  437  - 
METHOD  07  DISPOSITION  07  CASES,    ALL   CODES (*) 


Method  of 
Disposition 


Total   Violations 


Alleged  failure  t< 
file  prices 


Alleged  failure  to 
adhere  to   filed  -prices 


Fumber  of     Percent?  ;;c:  Number  of     Percentage:  Number  of     Percentage 
Violations     of  total      :   Violations  of  total      :   Violations  of  total 


Adjusted  21,961  53.3$ 
•Kfo  Violation  9,205  22.3$ 
Dro-oioed  6,144  14. 8$ 
Pending  3,887 °.6< 


TOTAL 


41,197 


100.0$ 


4060 

1709 

863 

550 


7182 


56.5$ 
23.75o 

12.1$ 

7.7$ 


100.055 


392 

135 

101 

60 


688 


56.9$ 
19.6$ 

14.6$ 
8.9# 


100.0$ 


Prom  this   tabulation   it   will  he   seen  that   there  were  no    significant 
differences  in   the  proportion  of  the  price  filing  and  other  cases  disposed 
of  by  the  different  methods.      All   three  of   the   items  listed,    total  alleged 
violations,    alleged  violations   involving  failure  to   file  nrices   and  alleg- 
ations of  failure  to  adhere   to   filed  prices,    had  approximately  the   sane 
percentage  of   their  respective   totals  handled  in  each  of  the   four  methods. 
Over  half  of  the   alleged  violations   docketed  under   each  of  the  three 
categories  were  adjusted;    about   one  fifth  did  not   involve  actual  violation; 
about  one   seventh  of  the  cases     dropped;    and  somewhat   less  than  one 
tenth  were  ponding  when  the   Supreme   Coiirt   invalidated  the  NBA. 

To    summarize  briefly,    alleged  failure   to   file  prices  was   the  most 
frequent   of  all   trade  practice   complaints   investigated  by  the  NBA 
State  offices.      A  very  small   proportion  of   the  open  price   codes  account 
for  a  substantial  number  of  tho  alleged  violations.      Somewhat   over  half 
of   the   complaints  were  adjusted  and  about   one   fifth  of   the   complaints 
were  found  to   be   without   basis. 

2.     Difficulty  of  State  Offices  with  Code  Authority  procedures 
and  With  Changing  Code  Provisions. 

Apparently   considerable   difficulty  "as   experienced  by  tho  Compliance 
Division  because    some   code  authorities  habitually  filed   complaints  of 
violations  without  having  previously  investigated  to   determine  the   sound- 
ness  of  tho  accusations.      In   an  attempt   to    reduce   the  number  of  complaints 
not    substantiated,    the   Compliance  Division,    on  August    11,    1934,    issued 
Field  Letter  No.    148,    reading  as  follows: 


"4.      COUPLAHTS  PILED  BY  CODE  AUTHORITIES.      It   appears 
that    Code  Authorities  are   sending  lists  of  alleged  vio- 
lators  of  their   code   to   Field  Offices  -There   subsequent 
investigation  reveals  either  that   the  respondents  are 
no   longer  in  business,    or  are  not   properly  classified  under 
such   code.      In  the   future,    you  will  not   investigate  lists 

(*)    See  Attached  table  for  detailed  definitions  of  methods  of  disposition. 


-  438  - 

of  complaints  of  failure  to  file  statistics,  contracts, 
pric'os,  otc. ,  unless  a"  certificate}  is"  attached  to  such 

conplaint  that  the  respondent  w»s  in  business  as  of  some 
recent  date,  and  that  a  registered  letter  ^as  sent  to  him 
notifying  hin  of  his  code  violation." 

This  policy  was  modified  somewhat  by  Field  Letter  Ho.  173,  dated 
November  3,  1934.   This  stated: 

"Section  3.   Item  4  of  Field  Letter  7To.  148  instructs  you 
to  take  n'o  action  on  conplaint s  filed  by  Code  Authorities 
alleging  failure  to  file  price,  statistics,  et.c,  unless 
they  are  accompanied  by  a  certificate  that  the  respondent 
was  in.  business  as  of  some  recent  date  and  that  a  registered 
letter  was  sent  hin  notifying  hin  of  his  code  obligations. 

If  the  action  taken  by  your  office  will  consist 
merely  in  sending  the  respondent  a  letter  informing  him 
that  he  will  be  deemed  to  be  in  violation  unless  the 
necessary  information  is  filed  with  the  Code  Authority 
(particularly  --lien  a,  long  list  of  alleged  violators  is 
filed  by  you)  it  will  not  be  necessary  to  require  a 
previous  notice  by  registered  mail.   If,  however,  a  con- 
plaint  is  accepted  for  formal  action,  with  the  possibility 
that  it  nay  be  later  referred  to  Washington,  the  file  should 
include  a  return  receipt  for  ?  registered  letter." 

Difficulty  of  the  field  offices  in  keeping  up  mith  stays  of  code 
provisions  is  evidenced  in  the  following  excerpt  from  Field  Letter  ITo. 
198,  dated  February  9,  1£35: 

6.   Canvas  Goods  Industry.   The  Apparel  Section  informs 
us  that  offices  have  docketed  complaints  under  provisions 
of  the  Canvas  Goods  Code  which  have  been  stayed.   This  stay 
went  into  effect  on  January  14th  and  covers  the  following 
provisions  of  Article  VII,  B;  Section  1  (a);  Section  1  (b); 
Section  2;  Section  3  (a)  and  (b) ;  Section  4;  Section  5; 
Section  6;  Section  7;  Section  8;  Section  S;  and  Section  10. 

(Sections  4  and  5  provide  for  the  price  filing  plan  and  for 
adherence  to  filed  prices.) 

3,  National  and  Regional  NBA  Compliance  Procedure. 

When  a  conplaint  seemed  impossible  of  adjustment  by  the  code  authority 
enforcement  agency  aid  the  IT  HA  Stats  office,  it  was  generally  referred 
to  the  Compliance  Council  of  1THA,  of  after  January,  1935,  to  the  1TPA 
regional  office.   Information  concerning  Compliance  Division  policy  and 
procedure  with  rosnect  to  cases  of  alleged  violations  of  the  mrice  filing 
provision  was  obtained  in  an  interview  with  Mr.  J.J.  Rcinstoin,  formerly 
Acting  Chief  of  tiie  Co-ordinating  Branch  of  the  Compliance  Division.   The 
first  stem  was  to  notify  the  respondent  in  the  case  that  the  complaint 
had  been  referred  to  the  >THA  Compliance  Council  (or  regional  office) 
and  that  a  hearing  would  be  held  on  a  designated  date.   The  respondent 
was  entitled  to  appear  in  person  at  such  hearing  but  few  appeared,  gener- 
ally due  to  the  fact  that  they  were  so  far  removed  from  Washington  or 


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9826 


-  439  - 

other  hearing  headquarters.   In  lieu  of  such  personal  appearance,  the  re- 
spondent uas  entitled  to  transmit  evidence  denying  the  allegation  of 
violation.  Mr.  Reinstein  stated  that  t>rice  filing  cases1,  were  regarded 
as  "routine".   The  code  authority  would  make  a  showing  that  the  alleged 
violator  way  a  member  of  the  industry  and  that  he  had  not  filed  prices. 
Removal  of  the  respondent's  Blue  Eagle  frequently  followed.   In  most  cases, 
Mr.  Reinstein  stated,  no' 'further  action  was  taken,  since  the  Litigation 
Division  did  not  push  such  cases  in  court  action(*)lf  the  respondent 
filed  prices  at  a  later  date,  he  was  entitled  to  the  return  of  his 
Blue  Eagle. 

4.  The  Government  Contracts  Division. 

The  Government  Contracts  Division  of  the  1JRA  (earlier  the  Government 
Contracts  Branch  of  the  Compliance  Division)  also  was  an  aid  toward  the 
enforcement  of  the  tr^de  practice  provisions  in  certain  codes.   This  Div- 
ision, among  other  activities,  attempted  (1)  to  secure  the  cancellation 
of  contracts  between  government  agencies  and  code  violators  and  (2)  to 
bring  about  the  withholding  of  new  government  contracts  from  such  vio- 
lators. 

"....  The  case  of  Morrison  Brothers  is  typical  of  such 
instances.   They  were  the  low  bidders  and  were  awarded  a 
contract  to  remodel  school  buildings  at  Bethesda.,  Md. 
Before  the  job  was  started  they  were  found  to  be  in 
violation  of  the  Contractor's  Code,  and  the  right  to  use 
the  Blue  Eagle  was  terminated  ~by   the  Compliance  Division. 
The  Government  Contracts  Division,  after  investigation, 
recommended  cancellation  of  the  contract,  but  P.W.A. , 
for  reasons  that  seemed  good  and  sufficient  to  them 
declined  to  follow  the  recommendation  and  permitted  the 
performance  of  the  contract.   Without  meaning  to  criticize 
the  action  of  P.W.A. ,  or  to  question  the  soundness  of  the 
reasons  which  prompted  such  action,  it  is  submitted  that 
th  work  of  the  Government  Contracts  Division  was  seriously 
hampered  and  its  prestige  and  ef f ectivemess  considerably 
damaged  thereby. 

"Despite  its  lack  of  wower  of  cancellation  of  contracts  and 
the  lack  of  complete  coo-oera.tion  of  Government  Departments, 
there  can  be  little  doubt  as  to  the  v^lue  of  the  ^ork  of  the 
Division  in  securing  codo  compliance  in  man3r  industries. 
In  the  case  against  the  Baltimore  Lumber  Com.nany(L-1407),  it 
appealed  that  orders  for  government  work  constituted  70;j 
of  the  defendant's  business,  and  because  of  this  fact  the 
defendant  was  willing  to  consent  to  an  injunction  in  order 
to  retain  his  eligibility  status.   In  the  building  trades 
and  among  building  and  roads  contractors  conditions  in  Govern- 
ment contracts  were  very  valuable  in  securing  code  comoli— 
ance,  and  the  tremendous  purcha.se s,  under  such  contra.cts, 
of  steel,  cement,  lumber,  machine  shops,  products,  cotton 
garments  and  papar  undoubtedly  greatly  aided  enforcement  by 
other  means. "(  **) 


(*)   See  section  II,  Litigation  Activities,  below. 

(**)   "Extra  Judicial  Methods  of  Enforcement", Work  Materials  No.  27, Legal 
Enforcement  Studies  Section,  Division  of  Review,  NRA,Jan,  1936  pp.44. 


-  440  - 

Other  testimony  nay  also  be  cited  relating  to  the  effectiveness  of 
this  agency  of  compliance.   The  National  Fertilizer  Association  News, 
in  its  issue  of  April  18,1935,  stated  that  the  cancellation  of  certain 
government  contra.cts  had  acted  as  an  efficient  means  of  bringing  about 
conformity  with  code  provisions  in  that  industry.   The  History  of  the 
Code  for  the  Bailders  Supply  Trade  also  testifies  to  the  efficacy  of  the 
activities  of  the  Government  Contracts  Division. (*) 

The  uork  of  this  division  was  handicapped  in  some  enpes,  it  is  said, 
because  of  the  fact  that  the  Division  was  unable  to  secure  definite  and 
certain  information  concerning  whether  or  not  a  given  action  complained 
against  constituted  a  code  violation.   Its  position  was  thus  rendered 
difficult  when,  after  attenrpting  to  have  contra.cts  cancelled  because  a 
given  concern  had  violated  a  code  authority  interpretation  of  a  code 
provision,  this  interpretation  was  held  to  be  an  improper  action  on  the 
pa.rt  of  the  code  authority. 


(*)    See  page  19  of  the  code  history. 


9826 


-  441  - 
II.   LITIGATLX;  ACTIVITIES 

A.  Number  of  Cases  Handled. 

There  were,  durin  %   the  life  of  the  bRA,  2,064  cases  referred  to  the 
Litigation  Division  for  court  action.  (*)   Of  these  cases,  279  involved 
failure  to  file  prices.   (in  most,  if  not  all  cases,  other  violations 
were  associated  with  failure  to  file  Trices.)   The  number  of  cases  in- 
volving selling  below  filed  jrices  is  not  available,  since  such  cases, 
in  the  tabulation  made  by  the  Enforcement  Studies  Section,  -^ere  lumped 
with  a  number  of  other  tyoes  of  violations  under  the  heading  "Violations 
Involving  Minimum  Price." 

The  279  cases  were  distributed  among  the  codes  as  follows: 

Code  No.  of  Cases 

Involving 
Failure  to  File  Prices 

Lumber  and  Timber  Products 

Retail  Solid  Fuel 

Retail  Lumber 

Retail  Monument 

Wholesale  or  Distributing  Trade 

Builders1  Suo  uies 

Graphic  Arts 

Fabricated  Metal  Products 

Electircal  Manufacturing 

Business  Furniture 

Funeral  Supplies 

Cigar 

Wholesale .Confectionery 

Baking 

Ice 

Crushed  Stone,  utc. 

Rubb  e  r  Manuf ac  tur  ing 

Slate 

44  Others   (3   or  less   cases   each) 

Total 

B.  Attitude  of  the  Litigation  Division  Toward  Prosecution  of  Price 

Filing  Cases. 

Mr.  Robert  Denvir,  Chief  of  the  Enforcement  Studies  Section  of  the 
Division  of  Review,  in  response  to  questions  concerning  the  policy  of  the 
Litigation  Division  in  prosecuting  violations  of  the  price  filing  provisions, 
stated  that  there  was  no  general  policy  with  respect  to  the  type  of  cases 
which  the  division  would  -prosecute.   However,  he  continued,  few  if  any 
cases  involving  only  failure  to  filo  price  were  brought  up  for  court  action, 
since  it  was  necessary,  in  each  case  successfully  prosecuted,  to  show  that 
interstate  commerce  wa.s  affected  or  involved.   It  was  difficult  or  impossi- 
ble, he  stated,  to  demonstrate  that  the  failure  to  file  prices  had  adversely 
affected  interstate  commerce,  and  hence  cases  involving  failure  to  file 

(*)  Data  suyTiedby  the~office  oTlTr".- Robert  DehTirT_Enforcement  Studies 


78 

23 

21 

11 

9 

9 

3 

8 

6 

5 

5 

4 

4 

4 

4' 

4 

4 

4 

68 

-  442  - 

prices  or  failure  to  adhere  to  filed  prices  re  re  not  actively  pushed  "by 
the  Division  unless  the  transaction  involved  in  the  price  violation  was 
clearly  of  an  interstate  character.   In  general,  it  was  felt  that  a  ' 
violation  of  price  filing  provisions  could  not  be  successfully  orose— 
cuted  by  itself,  (*) 

SECTION  C  -  HRA  POLICY  r-ZLATIITG-  TO  0PE1I  PR  I  CIS-  FILIIIG 


.   SUI&IA3Y 

The  preceding  sections  of  this  chanter  have  presented  the  work  of 
the  NFA  in  supervising  code  authority  administration  of  the  price  filing 
■orovisions,  and  in  assisting  to  obtain  industry -compliance  with  their 
requirements, 

'  The  pro-sent  section  traces  the  development  of  the  policy  which 
guided  the  Administration  in  its  dealing  with  the  subject  of  open  price 
filing  as  a  whole," 

Two  major  trends  are  apparent  in  the  official  policy  statements  of 
the  IffiA  with  respect  to  price  filing,  and  in  the  views  set  forth  by 
the  various  advisory  divisions  and  boards.  The  first  of  these  is  an 
evolution  from  an  almost  wholly  uncoordinated  and  unoritical  acquies- 
cence in  open  price  programs  as  presented  by  the  sponsoring  industries, 
to  a  carefully  considered  and  definitely  announced  policy  dealing  with 
both  the  aims  and  the  techniques  of  the  price  filing  device. 

The  first  code  providing  for  price  filing  was  approved  on  August  4, 
1933.  As  late  as  March,  1934,  a  spokesman  of  the  Administration  stated 
that  no  official  price  filing  polios'-  had  as  yet  'oeen   formed.   At  that  ti 
more  than  300  Codes,  a  large  wro^ortion  of  them  containing  open  price 
provisions,  had  been  approved.   On  June  7,  1934,  with  the  issuance  of 
Office  Memorandum  ITo.  228,  the  first  official  pronouncement  of  price 
filing  policy  appeared.' 

The  second  principal  trend  accompanied  the  first.  The  provisions 
approved  during  this  early  period  were  diverse  in  form.   The  industries 
proposing  them  were  frankly  intent  \toon  price  stabilization,  which  in 
many  instances  was  taken  to  signify  price  control.   The  price  filing 
provisions  were  in  the  main  designed  to  effectuate  this.   Policy  development 
in  the  Administration,  however,  tended  definitely  away  from  this  aim  and 
toward  the  objective  of  price  publicity  divorced  from  orice  control. 


(*).  The  dubious  legality  of  many  of  the  open  price  plans  set  up  In  pur- 
suance of  code  provisions  was  also  a  factor,  if  we  can  judge  by  the 
memoranda  of  individual  legal  advisors'.  Ilote  particularly  the 
business  furniture,  macaroni,  folding  paper  box  cases  referred  to 
in  the  text  of  this  study.  Farther  study  of  the  subject  of  this 
section  would  be  desirable. 


9826 


me 


-  443  - 

To  achieve  this  aim  required  that  the  price  filing  provisions  he 
more  uniformly  drawn,  and  that  specific  .:■  fe  guards  and  limitations, 
based  upon  administra.tive  eroerience,  be  written  in.   Office  Memorandum 
No.  228  set  forth  the  first  model  -oricc  filing  clause.   The  following 
are  among  the  safeguards  which  w~re  >r  ;r  isively  sought  to  be  thrown 
around  the  price  filing  provisions  in  the  Movement  to  make  them  more 
nearly  mediums  of  price  publicity  and  less  mechanisms  for  the  main- 
tenance of  price: 

The  rule  was  laid  down  that  prices  must  be.  filed  with  confidential 
and  disinterested  a&ents  rather  than  with  the  code  authorities. 

The  waiting  period  prior  to  the  effective  date  of  price  reivisions 
was  declared  contrary  to  policy,  except  in  special  instances. 

It  was  held  that  price  filed  must  be  actual  selling  prices,  instead 
of  merely  minimum  prices. 

Mandatory  customer  classification,  which  had  frequently  been  incor- 
porated as  part  of  the  price  filing  provisions,  was  forbidden. 

Restrictions  upon  premiums,  "free  deals"  and  advertising  allowances, 
other  than  that  they  be  filed  along  with  prices  and  terms  of  sale,  were 
declared  to  be  contrary  to  policy. 


j 


In  order  that  there  might  be  supervision  of  price  filing  plans  and 
study  of  their  effects,  it  was  stated  in  newly  incorporated  provisions 
that  no  -price  filings  could  be  destroyed  without  the  written  consent  of  the 
Administrator. 

It  was  ruled  that  price  lists  should  be  disseminated  immediately 
upon  receipt  by  the  agency  receiving  them  (this  both  aided  in  price  pub- 
licity and  prevented  suspension  of  lor  prices  by  persons  interested  in 
maintaining  or  increasing  price  levels). 

It  was  required  that  all  -orice  information,  including  all  terms  and 
conditions  of  sale,  be  filed. 

It  was  provided  that  filed  prices  must  be  mo.de  available  to  all  inter- 
ested parties  (including  customers). 

There  was  by  no  means  entire  unanimity  within  the  Administration  it- 
self upon  these  points,  nor  acquiscence  in  them -by  industry;  neitjhter  was 
there  any  great  -progress   made  in  applying  this  policy  to  the  many,  and 
highly  important,  codes  whose  price  filing  provisions  had  been  approved 
prior  to  the  policy  formulation,   nevertheless,  the  above  represents  in 
general  the  prevailing  joint  of  view  concerning  price  filing  policy  at 
which  the  Administration  had  arrived  when  the  code  period  came  to  an  end. 

Iii  the  following  section  the  general  course  of  this  policy  develop- 
ment, and  the  principal  factors  affecting  it,  will  be  traced,  beginning 
with  the  deba.tes  in  Congress  preceding  passage  of  the  National  Industrial 
Recovery  Act  in  June,  1933,  and  carrying  through  to  the  invalidating  of 


QrtPfi 


-  444  - 

the  codes  by  reason  of  the  Schechtei- decision  in  May,  1935. 

I.   SENATE  DEBATES  Oil  PRICE"  PILING  PRICE  TO  PASSAGE  OF  THE  ITIRA. 

Among  the  earliest  intimations  linking  the  subject  of  open  price 
filing  with  the  proposed  National  Industrial  Recovery  Administration,  and 
indicating  the  objectives  sought  by  such'  a  policy,  may  be  found  in  refer- 
ences to  the  subject  made  in  the  Senate  while  the  Act  was  being  debated. 
This  has  already  been  referred  to  briefly  in  the  introductory  chapter  of 
the  report. 

At  that  tine,  Senator  Borah  wanted  the  anti-monopoly  clause  of  the 
Act  sup-olemented  "oy   an  anti-price-f ixing  clause  and  an  anti-restraint-of- 
trade  clause.   Senator  Wagner,  one  of  the  chief  proponents  of  the  Act, 
objected  to  these  proposals,  holding  that  -  "*  *  *  a  prohibition  of  'res- 
traint of  trade  and  price  fixing-'  as  these,  -ohrp.se s  have  been  interpreted 
by  'the  courts  would  stand  in  the  way.  of  the  most  salutary  effects  which 
the  bill  is  designed  to  accomplish." 

He  continued: 

"For  instance,  exchange  of  information,  which  serves 
to  make  competition  rational   instead  of  blind  and 
destructive  and  which  thus  expands  trade  and  commerce, 
would  be  prohibited.   It  was  declared  an  illegal  re- 
straint of  trade  in  U.S.  vs.  American  Linseed  Oil.  (*) 

'Price  stability  as  distinguished  from  monopolistic 
price  fixing,  is  a.  universally  recognized  necessity  in 
order  to  achieve  economic  welfare,  and  yet  it  would 
be  made  practically  impossible  by  the  Borah  amendment. 
This  amendment  would  prevent  even  the  publication  by 
business  of  their  own  price  schedules  and  their  ad- 
herence to  these  schedules  even  for  short  periods  of  time. 
Such  a.  practice  was  declared  an  illegal  restraint  of 
trade  in  the  Linseed  Case.   Yet  such  practices  might 
be  necessary  to  prevent  unfair  price  cutting  and  other 
destructive  price  manipulations."  (**) 

Speaking  of  this  debate  and  of  its  legal  implications,  Mr.  George  J. 
Peldman,  Assistant  Counsel  of  the  Litigation  Division  of  the  URA,  in  an 
undated  "Memorandum  of  Law  Considering  the  Legality  of  Code  Provisions 
Requiring  the  Piling  of  Prices"  wrote: 

"One' 'of  the  Supreme  Court's  favorite  methods  of  determining 
what  changes  were  contemplated  by  a.  new  statute  is  a  resort 
to  the  intention  of  Congress,  which  may  be  in  part  adduced 
from  the  Congressional  hearings  and  debates.   That  price  fil- 
ing was  definitely  contemplated  is  obvious  from  the  debates. 


(*)   U.S.  vs.  American  Linseed  Oil.  2G2  U.S.  371-1923. 
(**)   Congressional  Record,  June  13,  1933,  page  5840. 
9326 


-  445  - 

V 

Indeed,  a  close  re-  din ■;;  makes  it  apoear  that,  , in.  the,  -proper 
c i r cutis tance s .  it  is  alnost  the  duty  of  the  Recover" r  Admin- 
istration to  include  -hen  in  the  interest  of  a  stable  marke+_, 

" It  is  significant  in  this  respect  that  an  amend- 
ment to  the  original  Bee  v  r   Sill  was  offered  in  the  Senate, 
which  sought  to  forbid  combinations  i  n  'restraint  of  trade 
and  price  fixing'.  The  fact  th-  t  bhese  provisions  did  not 
find  their  way  into  law  as  finally  enacted  is  of  the  utmost 
importance.  As  was  stated  "by  fir.  Justice  Cardozo  ...  (in 
another  ca.se),  the  omission  may  have  been  unwise,  but  it  cer- 
tainly was  not  inadvertant It  is  of  special  signi- 
ficance that  Senator  Borah  made  several  unsuccessful  attempts 
to  have  his  amendment  reinstated  a.fter  the  conference  report 
had  been  submitted  and  before  the  final  vote  was  taken.   In 
fact,  this  issue  was  the  highlight  of  the  Congressional  de- 
ba.tes. 

"In  view  of  the  established  intent  of  Congress,  which  not  only 
permitted  but  encouraged  price  filing  when  necessary,  the  Re- 
covery Administration  has  no  alternative.   The  intent  of  Con- 
T  >ss  governs." (*) 

Two  points  of  particular  importance  appear  from  the  foregoing:  first, 
that  "price  stability  as  distinguished  from  monopolistic  price  fixing" 
was  one  of  the  primary  aims  of  the  Act,  and  second,  that  it  was  the  appar- 
ent intent  of  Congress  that  price  filing  under  the  I1RA  should  be  "not  only 
permitted  but  encouraged  *  *  *  *  when  necessary". 

The  working  out  in  terns  of  administrative  auction  of  what  .thus  seems 
to  have  been  the  basic  legislative  policy  with  respect  to  the  filing  of 
prices  will  be  seen  in  the  Sections  following. 

II.   PIRST  11RA  PRICE  FILING  PERIOD  -  JUlffi  15,  1933  THROUGH  JUHE  6,  1934- 
EXPERIiEITTATI'H  AID  SEARCH  FOR  A  POLICY. 

Almost  precisely  a  year  elapsed  from  the  date  of  the  passage  of  the 
HIRA  to  the  time  when  a  definite  and  relatively  complete  policy  with  re- 
spect to  o-oen  price  plans  was  formally  enunciated  by  1IRA.   This  period 
was  characterized  by  the  adoption  of  a  large  number  of  codes  containing 
price  filing  provisions  differing  widely  in  various  details,  and,  especially 
during  its  later  months,  by  r,n   increasing  tendency  toward  critical  examination 
of  the  effects  of  these  diverse  experiments  and  search  for  some  basic 
policy  with  respect  to  then. 

A.   Six  Months  of  Price  PiUnr  Experimentation. 

The  fourth  Code  to  be  approved  under  the  liRA  contained  a  detailed  and 
comprehensive  price  filing  plan.   This  -as  the  Code  for  the  Electrical 
Manufacturing  Industry  approved  August  4,  1933.  numerous  others  quickly 
followed.   During  this  period  of  intensive  code- making  man:r  codes,  includ- 

(*)   Legal  Division  ISA  files,  "Price  Piling,  Ho.  413". 
9826 


-  446  - 

ing  those  for  major  industries,  were  approved  with  urice  filing  plans 
to  which  virtually  no  consideration  had  been  givenlin  the  -oublic  hear- 
ings. During  this  period,  in  fact  (with  certain  exceptions  to  be 
noted  later)  little  serious  consideration  of  any  kind  ^as  given  either 
to  the  nature  or  the  possible  economic  effects  of  the  price  filing 
provisions  as  provisions  as  proposed  or  approved. 

1.  Reasons  for  Administrative  Attitude. 

One  reason  advanced  for  this  early  attitude  of  relative  inattention 
to  the  price  filing  plans  on  the  part  of  HRA  is  the  primary  Toreoccupar- 
tion  of  the  Administration  during  this  period  with  the  task  of  obtain- 
ing satisfactory  wage  and  hour  provisions  in  the  codes  for  the  purpose 
of  relieving  the  unemployment  emergency  and  bolstering  purchasing  power. 
Again1,'  the  aim  of  price  stabilization  -  already  noted  in  the  Senate  de- 
bates -  was  almost  universally  sought  by  the  industries  proposing  codes, 
and  was  to  a  considerable  degree  acquiesced  in  by  the  Administration, 
especially  when  claimed  as  an  effect  to  the  increased  labor  costs  as- 
sumed.  The  policy  of  the  Administration  therefore,  insofar  as  it  may  be 
called  a  policy, .appears  to  have  been  to  aporove  what  the  industries 
asked  for  with  respect  to  price  filing  provisions,  without  serious  ques- 
tioning.  It  was,  in  fact,  a  period  of  broad  experimentation  with  price 
controls  of  various  kinds,  and  with  price  filing  methods  in  particular* 

As  an  illustration  both  of  the  general  nature  of  the  irice  filing 
plans  approved  during  this  period,  and  the  scant  attention  given  them  in 
the  process,  an  account  of  ore  of  the  typical  early  -provisions  may  be 
given. 

2,  The  Price  Filing  Plan  in  the  Electircal  Manufacturing  Code. 

This  Code,  as  remarked  above,  was  the  fourth  to  be  approved  under 
LIRA  and  the  first  to  contain  a  ;orice  filing  plan*   Only  one  reference  of 
any  significance  concerning  filing  appears  in  the  transcript  public  hear- 
ings on  this  code.   Deputy  Commissioner  Allen,  who  conducted  the  hearing, 
in  speaking  of  the  plan,  said: 

"...  the  intent  is  that  a.  manufacturer  may  at  any  time 
elect  what  he  wants  to  sell  his  goods  for;  if  he  does,  he 
reports  it  to  the  supervisory  agent,  showing  his  list   and 
discount,  placing  upon  him  the  obligation  to  publish  that 
to  all  competitors  and  interested  parties,  and  it  provides 
the  opportunity  for  any  manufacturer  to  change  his  list  and 
discount  at  any  time  he  wants  providing  he  will  not  sell 
below  his  -nub li shed  discount  price,  so  Ion"  as  the  period 
of  that  list  and  discount  is  effective."  (*) 


(*)   Transcript  of  Hearing  on  the  Code  for  the  Electrical  Manufacturing 
Industry,  July'  19-21,  1933,  Vol.  I,  page  224. 


9826 


-  447  - 

llothing  else  of  importance  concerning  price  filing  appears  in  the 
transcript  of  the  hearing,   llonu  of  the  reoorts  on  the  final  draft  of  the 
code  submitted  "by  the  boards  and  divisions  of  the  Administration  to  the 
deputy  administrator  prior  to -approval  contains  any  reference  whatever  to 
the  price  filing  provisions*   Similarly,  in  the 'historical  sunmary  of 
the  main  points  discussed  in  the  development  of  the  code,  which  Deputy 
Administrator  Allen  submitted  to  the  Administrator  ^hen   the  code  went 
up  for  approval,  there  is  no  mention  of  the  open  price  plan.  (*) 

The  essential  ->oints  concerning  price  filing,  contained  in  Article 
X  (f*)  of  the  Electrical  Manufacturing  Code,  were: 

1.  If  the  code  authority  determined  that  it  was  customery  in  the 
industry  to  sell  products  on  the  basis  of  printed  price  lists,  it  could 
require  the  filing  of  such  lists, 

2.  If  the  code  authority  determined  that  conditions  in  a  subdivision 
whiph  had  not  previously  sold  on  the  oasis  of  price  lists  were  similar  to 
thpse  in  a  subdivision  which  had,  it  could  require  that  the  former  sub- 
division also  file  jrices.' 

i ' 

3.  A  ten  day  waiting  -oeriod  was  provided  for  revisions  of  price 
lists. 

4.  Competitors  could  file  revised  lists  to  become  effective  on 
the  same  date  as  a  revision  about  which  they  had  been  notified. 

5.  All  known  manufacturers  in  the  Industry  were  to  receive  the 
original  and  revised  price  1 ists. 

,  5.   Members  of  the  industry  were  forbidden  to  sell  below  filed 
prices.  There  was  no  reauirement  that  they  sell  at  filed  prices. 

It  will  thus  be  seen  that,  what  later  "as  to  become  one  of  the 
principal  points  of  contention  with  respect  to  general  1JRA  policy  con- 
cerning price  filing  -  the  waiting  neriod  before  revised  prices  could 
become  effective  -  was  written  into  the  code  and  acquired  something  of 
the  force  of  a  precedent  in  the  very  first  price  filing  plan  approved. 


3.  Early  Dissent  With  Respect  to  Price  Filing  Provisions. 

TThile  That  has  ^oeen  previously  said  as  to  the  degree  of  attention 
paid  to  the  price  filing  plans  in  process  of  approval  reflects  the  general 
situation  at  this  time,  certain  groups  and  individuals  within  the  Adminis- 
tration, and  closely  connected  with  the  code-making  process,  soon  began  to 
object  to,  or  at  least  to  question  tentatively  the  wisdom  of,  the  types  of 
open  nrice  provisions  which  -^ere  being  written  into  the  codes. 


(*)   Mr.  Sterling  McKittrick,  who  was  an  assistant  deputy  engaged  in  the 
administration  of  this  code,,  stated  that  he  is  of  the  opinion  that 
minor  comments  on  its  price  filing  provisions  were  made  by  some  of 
the  high  •.Administration  officials  in  memoranda  prior  to  the  approval 
of  the  code.   These  have  not  "oeen   located  by  the  Price  Piling  Unit. 

(**)  Codes  of  Pair  Competition,  as  Approved,  Government  Printing  Office  Vol. 
I,  P.  49. 


-  448  - 

Although  the  objections  of  these  individuals  paid  groups  did  not 
serve  immediately  to  alter  the  nature  of  the  plans  which  were  being  ap- 
proved, the  type  of  policy  eventually  adopted  b  '  IiRA  was,  as  will  be 
seen  in  a  later  section,  mat jriallv  effected  b;r  the  dissenting  opinions 
expressed  in  the;:e  earl:;  months  of  code  f ornula.tion* 

Several  instances  of  these  dissident  attitudes  follow: 

(a)   The  Code  Analysis  Division. 

During  the  latter  part  of  Jul",  arid  during  August  and  September  of 
1S33,  the  Code  Analysis  Division  headed  by  Mr.  Stephen  De.Bruhl,  served 
in,  a  sense  as  a  policy  advising  group  for  the  Administration*  According 
to  information  secured  from  Mr.  TJ.  IT.  Bardsley  and  Mr.  Pat  Taft,'  both 
of  whom  were  members  of  the  division,  .the  function  of  the  group  was  to 
take  the  codes  shortly  af ter  they  "tri  originally  submitted  by  the  indus- 
tries and  comment  on  the  provisions  for  the- benefit  of  the  deputies  in 
charge  of  code  negoitations.   Their  policy  advising  activities  -'-ere  of 
a  rather  negative  char;  cter,  according  to  Mr.  Bardsley,  who  character- 
ized the  work  of  the  group  as  that  of  attaching  "red  flags"  to  call,  to 
the  attention  of  the  deputies  >rovisions  of  doubtful  desirabilit}--*   In 
general,  Mr.  Taft  reported,  this  group  looked  pith  disfavor  on  price 
filing  provisions  and  urged  their  elimination.   The  members  of  the  divi- 
sion had  no  very  clear  cut  reason  for  this,  Mr.  Taft  stated,  but  ^ere 
vaguely  afraid  that  o?en  nrice  systems  might  be  used  in  price  fixing 
activities. 

The  following  illustrates  the  position  of  the  Division  on  open  prices: 

"This  article  (in  the  -iro-iosed  Code  for  the  Machine  Tool  and 
Forging  Machinery  Industry)  sets  \\r>   an  onen  price  association* 
Uhile  the  association  as  defined  is  not  of  en   extreme  type,  the 
difference  between  an  open  price  association  and  a  fixed  brice 
plan  is  apt  to  be.  a.  narrow  one."  (*) 

(b)   The  Division  of  Fiesearch  and  Planning 

This  agency,  established  to  advise  the  Deputy  Administrators  and  the 
Administration  generally  concernin  ;  the  -:>robable  economic  effects  of  code 
operation,  and  to  study  those  effects,  issued  no  formal  statement  of  polic 
for  the  guidance  of  its  code  advisers.  Mr.  James  Hughes,  former  chief  of 
Code  Administration  Section  of  the  Division,  stated  (*)  that  prior  to  the 
issuance  of  Official  Memornadum  Ho.  228  (arice  filing  policy)  on  June  7, 
1934,  the  division  had  no  established  oolicy  on  the  subject. 

Mr.  Victor  von  Szeliaki,  who  preceded  Mr.  Hughes  in  the  administra- 
tive work  of  the  division  made  the  same  statement  but  added  that,  neverthelesl 
certain  of  the  division's  economic  advisers  locked  with  disfavor  on  waiting, 
periods,  and  in  general  on  the  re  .orting  of  jrices  other  than  for  closed 
transactions. 


(*)  Reoort  submitted  by  Code  Analysis  Division  to  the  Control  division 
on  September  6,  1933,  prior  to  the  publj.cj  hearing  on  the  Code. 

(**)  In  conversation  with  representative  of  Price  Piling  Unit. 
98PR 


-  449  - 
(C)   The  Consumers1  Ac  ris  ry  Board 

Reports  of  the  cc         s  of  the  "■■/■  it;  i  rs'  Advisory 
Board  also,  during  the  jeriod  vn  to  t  n  of  Dffice  '  "eino- 

randura  ho.  230,  f re nuentl"  in  i      t  -  t  the  attitude  of  that 
board  was,  in  general,  on   '    to  ::  .  "  '  ;    of  ■  ay  other  than 
past  trices.  As  for  enannle,  is  ;  e  lorr&'s  report  rrith  re- 
spect to  the  Cement  Code,  cl-ted  Serbe  nber  15,  1933.   In  other 
cases  no  objection  vte-.s   raised  to  the  'iling  of  current  prices, 
but  only  to  certain  tyoes  of  current  renorting.   Opposition  rrns 
also  expressed  to  waiting  periods  in  ooen  irice  provisions,  rs  in 
the  reoort  on  the  Li::e  Industry  Code,  Sentember  16,  1933. 

In  r   statement  prepared  as  a  7ui.de  to  its  Consumer  Advisors, 
the  Consumers '  Advisor/  "Soard  stated  in  a  raenorandun  dated  September 
23,  1933, 

"....Under  the  uise  of  collecting  information,  the  open 
mrice  schedules  mronosed  in  some  codes  lay  the  foundation 
of  monopolistic  control  of  )rices.  Periodic  collection  of 
aver?  e  prices  or  of  the  range  of  nrice  quotations  is  de- 
sire.ble.  Detailed  reports  of  trices,  qualities,  name 
buyers,  etc.,  i::  particular  transactions  ma-  be  made  the 
ba.sis  for  strong  pressure  to  live  uo  to  tacit  monopolistic 
understandings,  and  should  he  examined  closely  from  that 
point  of  vie-;. 

"Publicities  of  scheduled  future  prices  should  be  omposed 
as  a.  device  to  facilitate  rrice  fixing  a  ;ree  -ents.   In  cases 
where  such  reporting  systems  cannot  be  ejected  from  the 
codes,  they  should  e  surro  .  ed  '->-r  four  safeguards: 

1.  The  time  interval  bet-  een  the  f ilin  ;  of  a  irice  schedule 
and  tiie  date  it  jecoin   effective  should  be  reduced  to 

a  minimum  in  order  to  shorten  the  >eriou  of  nersusion. 
A  five  day  interval,  although  too  Ion:,  should  be  taken 
as  the  outside  limit. 

2.  Schedules  properly  filed  should  become  effective  auto- 
aatically  without  veto  by  u:y  trrde  associ  tion,  code 
authority,  or  producer. 

3.  It  should  bo  mandator;''  that  at  the  same  time  and  in  the 
same  manner  as  reports  are  "'he  to  other  producers,  the 
same  remorts  should  be  nr.de  to  buyers  of  the  mroduct. 
The  only  limitations  upon  this  requirement  should  be 
that  ---here  the  renorts  are  -de  >y  nail,  very  small 
buyers,  -ho  have  not  re  que  .it  eh  sucl"  re  jorts,  nay  be 
omitted,  and  that  there  the  reports  rre   made  to  m 
association,:  "buyers"  -:rh 0   are  not  renr<  sented  by  an 
equivalent  association  should  be  notified  in  such 
other  ways  as  -ill  ;ive  the   equal  access  to  the 

i  iform.r  ti  n. 

9326 


-  450  - 

4.  "To  tine  lip.it  shoi  ribed  "or  the  duration  of 

a  price  schedule,   Such  Units  often  see]:  to  eliminate 
long  tern  cc  lti  cts  ."or  future   i]  Lver,  particularly  in 
in  cases  where  the  contract:    e  -t  low  prices  in  order 
to  keep  plants  running  durin  ;  r-n  of  '  season.   The  con- 
sumer's interest  lies  in  encouraging  the  stability  of 
production  by  such  contracts.'1* 

4.  The  Beginnings  of  Official  liBA  Price  Piling  Policy. 

IThile  for  the  npst  jart  IJHA  irice  filing  policy  during  this  period 
was,  as  hrs  ieei  indie?  ted,  nerd;-  that  which  was  implicit  in  the  ap- 
pro,ed  open  price  plans,  with  some  critical  opposition  iron  3-rticulrr 
grouos,  there  were  a  few  preliminary  statements  foreshadowing  definite 
formulation  of  policy  by  the  Adninistration. 

'  The  earliest  model  code,  dated  October  25,  1933,  contained  no 
preference  to  price  filing;  but  a  confidential  policy  memorandum  carry- 
ing  the  same  ante  "did.   This  memorandum  appears  to  have, been  t he  earli- 
est authoritative  statement  of  general  principles  as  to  open  price  sys- 
tems under  the  ITRA.   It  re?   in  part  as  follows: 

"Open  Price  Syste  is  should  be  ur  ;ed,  prpviding  that  prices — 

(a)  shall  be  effective  within  not  more  than  ten  lays  in 
complex  industries  or  five  days  in  simple. 

(b)  shall  be  capable  of  withdrawal  at  the  pleasure 
of  the  seller. 

(c)  are  not  subject  to  veto  or  modification  by  any 
agency. 

(d)  are  to  he  generally  ptijlishecL  for  the  ienefit  of 
buyers  as  --ell  as  sellers." 

This  iienorandun,  signed  by  Alvin  Brown,  -ts  r    statement  of  the  con- 
clusions reached  at  a  meeting,  held  on  October  25,  1053,  of  the  Policy 
Board  appointed  at  the  direction  of  the  AC   dnistrator  in  Office  Order 
ho.   35,  issued  September  IS,  IS 33. 

This  hoard  was  made  up  of  the  following:   17.  L.  Allen,  Alvin  rown, 
Thomas  S.  Hammond,  P.obert  T.  Lea,  Edward  P.  "Ico-rady,  Charles  hichelson, 
Ilalcolm  huir,  Donald  h.  Pichberg,  hrs.  C.  C.  tuusey,  Alexander  Sachs, 
K.   .  Simpson,  h'elson  Slater,  Robert  II.  atraus,  ''  Iter  C.  lee  le,  --...  D. 
JThiteside,  C.  C.  Uilliams,  and  Leo  "olman. 


(*)  Confidential  •  ienorrndun  from  the  Consumers '  Advisor;'  Board  to  Coae 
Advisors,  Dated  5  .  )te  1  er  23,  1S33..  In  ITRA  files. 


9825 


-  451  - 

It  shoul   )e  lote  .  t'vt,  -ith  the  exception  of  the  approval  given 
to  tie  waiting  jeriod,  the  irinciples  set  forth  in  this  errliest  official 
expression  of  price  filing  >olicy  -  li?:e  ::ost  of  the  critical  opinion 
recorder,  in  the  section  rjrecedin  :  -  tended  to  e-plv  sir,;e  the  proper 
function  of  the  orice  filing  pirn  as  p,  le&ixm  of  price  publicity,  as 
distinguished  fron  r    lecaanis;-  for  >rice  control*   This  fundamental 
divergence  fron  '-.'hat  v  ;:.:  rail'/  seen  as  the  industry  attitude  to- 

V7ard  the  orice  filing  -olnns  will  bo  found  to  characterize  XL.  policy 
on  the  subject  nore  cum  nore  p.s  that  policy  develops. 

It  should  also  he  noted,  however,  that  in  the  case  of  a  nuriber  of 
codes  approve c  after  the  issuance  of  this  nenorandura',  the  policies  ex- 
oressed  in  it  were  not  followed.   The  analysis  of  open  price  provisions 
prepared  by  the  Research  and  Planning  Division  indicates  that  three 
codes  mid  one  supolenent  were  approved  after  October  25,  1935,  in  which 
there  was  a  waiting  period  in  excess  of  lri  d;  _"s.   Of  these,  only  one 
actually  nent  into  effect,  the  other  three  having  had  the  waiting 
period  stayed.* 

Of  perhaps  even  pore  ir.roortr;ice  is  the  fact  that,  according  to 
this  spj.ie  reserrch  pnd  planning  analysis,  there  '-■ere,  after  October 
25,  1933,  when  the  policy  peporandun  urs  issued  providing  for  avail- 
ability of  filings  to  custoners,  137  codes  approved  which  made  no 
provision  for  buvers  to  receive  filings. 


(*)   ".Analysis  of  Tr.-de  Practices,  Provisions  P.elatin  ;  to  Open  Price 
pnd  73 i c"_  Pilin  ;  Systems",  preprred  hv  the  Division  of  P.  e  search 
rnd  Planning,  1I3A,  revised  n  -  sorrected  through  '"ay  27,  1955, 
lurlA  files. 


-  45?  ~ 

B .   Six  Montns  of  Study  and  Search  for  Policy . 

In  the  first  half  of  this  section  there  have  been  pointed 
out  the  rapid  and  largely  unconsidered  ado  "tic n  of  open  price  provisions 
in  tie  cedes,  the  outcropping  of  critical  protest  against  the  types  of 
provisions  adopted,  and  the  "beginnings  of  an  official  V.RA   policy  with 
respect  to  open  price  systems,  all  of  which  characterized  the  first  six 
months  of  the  code  period. 

During  the  second  six  months  of  the  'ISk,    various  efforts 
were  made  to  find  out  the  actual  effects  of  the  several  types  of  price 
filing  plans  that  had  been  approved,  and  to  take  certain  preliminary 
steps  to  safeguard  open  price  systems  in  general  against  abuse.   It  hed 
become  increasingly  apparent  that  certain  aspects  of  price  filing  plans 
approved  in  the  early  codes  were  leading  to  undesirable  results. 

The  Administration  was  still  without  explicit  and  authori- 
tative price  filing  policy,  although  during  this  period  various  movements 
were  set  en  foot  which  eventually  culminated  in  broad,  definite  state- 
ments of  principles.   In  addition,  the  Review  Division  did  certain  work 
in  codifying  expressions  of  policy  on  matters  of  detail. 

The  most  drastic  action  so  far  taken  in  connection  with  a 
■policy  consideration  affecting  price  filing  was  effected  toward  the 
end  of  this  period  by  an  official  order  staying  all  waiting  period  pro- 
visions not  yet  approved,  pendin&  the  outcome  of  a  general  study  of  open 
price  plans. 

The  details  of  tnese  various  developments  are  presented  in 
the  sections  following. 

1.   Efforts  to  Ascertain  the  Results  of  Approved  Price 
Plans. 

In  January,  1934,  a  public  hearing  was  held  by  the 
NRA  on  "Price  Changes".   This  action  was  taken  especially  for  the  purpose 
of  giving  an  opportunity  for  expressions  of  opinion  as  to  the  actual 
operation  of  the  price  provisions.  At  that  hearing  considerable  testimony 
was  given  to  the  effect  that  prices  generally,  and  especially  bids  on 
government  purchases,  had  increased  and  had  become  much  more  uniform  since 
codes  were  put  into  operation.   It  was  maintained  by  many  that  the  open 
price  provisions,  and  more  specifically  the  waiting  period  in  the  "orice 
filing  systems,  were  in  large  part  responsible  for  this.  (*) 


(*)   For  testimony  concerning  identical  bids,  see  statement  of 

LIr.  J.  \7.  Nicholson,  Purchasing  Agent  for  the  City  of  Milwaukee, 
Wisconsin,  at  the  hearing  on  "Price  Changes" ,  January  9,  1934, 
pages  533-580.   See  also  appendix  "A"  of  the  memorandum  submitted 
to  General  Johnson  on  February  19,  1934,  by  the  Consumers' 
Advisory  Board. 


9826 


-  453  - 

T..:.is  ..earing  was  the  first  major  move  to  ascertain  the  effect  of 
the  trade  practice  provisions  of  codes.   Other  similar  efforts  followed. 

Largely  as  a  result  of  the  evidence  produced  at  this  meeting, 
three  official  NBA  orders  affecting  open  price  provisions  were  issued 
successively.   They  were  Office  Orders  63,  63-A,  and  63-B,  the  text  of 
which  follow: 


OFFICE  ORDER  NO. 63 

January  25,  1934 

Provisions  for  Open  Price  Associations 

Pending  completion  of  a  study  now  being  made  as  a 
result  of  the  price  change  hearing,  no  farther 
provisions  for  open  price  associations  (including 
price  registration)  are  to  become  effective  in 
codes.   Therefore,  where  such  provisions  are  in- 
cluded in  proposed  codes  not  yet  approved,  they 
shall  be  stayed  in  the  Executive  or  Administra- 
tor' s  order  of  approval  for  60  days  pending  com- 
pletion of  the  aforesaid  study. 

By  direction  of  the  Administrator. 

Alvin  Brown 

OFFICE  ORDER  NO.  63-A 

January  27,  1934 

i  .GDI  FI  CAT  I  ON  OF  OFFICE  ORDER  63  ON  PROVISIONS  FOB 
OPEN  PRICE  ASSOCIATIONS 

Office  Order  No.  63  is  modified  to  read  as  follows: 

"Pending  completion  of  a  study  of  open  price  associa- 
tions now  being  made  as  a  result  of  the.  price  change 
hearing  no  further  provisions  which  prescribe  a 
waiting  period  before  tiie  prices  filed  become  effec- 
tive will  be  approved  in  codes.   Therefore,  where 
such  provisions  are  included  in  proposed  codes  not 
yet  approved,  they  shall  be  stayed  in  t..e  Executive 
or  Administrator's  order  of  approval  for  sixty  days 
or  pending  completion  of  the  aforesaid  study. 


-  454  - 

"This  Order  is  not  intended  to  prohibit  or  stay  provi- 
sions for  open  price  associations  which  provide  that 
revision  prices  shall  "become  effective  immediately 
upon  filing." 

By  direction  of  the  Administrator: 


Alvin  Brown 


OFFICE  ORDER  NO.  63  -  B 
January  27,  1934 


UODIFICATI'N  0?  OFFICE  ORDER  NO.  63  -  A  OH 
FHOYI  SIGNS  FOR  OPEN  PRICE  A3?OCIATi:iT5 

Office  Order  No.  63  -  A  is  modified  to  reed  as  follows: 

"As  a  result  of  the  price  change  hearing  a  study  is 
"being  made  of  open  price  associations.   This  study 
particularly  involves  the  waiting  period  "before 
filed  prices  become  effective.   Therefore,  any  pro- 
vision for  a  waiting  period  in  codes  not  yet 
approved  will  be  stayed  in  the  Executive  or  Admin- 
istrator' s  Order  of  Approval  for  sixty  days,  or 
pending  completion  of  the  study." 

By  direction  of  the  Administrator. 


Alvin  Brown 

An  extensive  but  unsuccessful  search  was  made  by  the  writer  to 
locate  in  the  NRA  files  the  originals  of  these  orders,  to  which,  it 
is  assumed,  would  be  attached  recommendations  concerning  the  orders 
by  the  officials  concerned.   None  of  the  various  sections  of  the 
organization  in  which  the  original  orders  might  logically  be  filed 
was  able  to  locate  the  documents.   Therefore,  it  is  not  possible  to 
indicate  just  why,  two  days  after  an  order  was  issued  staying  all 
open  price  provisions,  the  stay  was  modified  to  apply  only  to  those 
with  waiting  periods;  and  why  on  the  day  the  second  order  was  issued, 


9826 


-  455  - 


a  third  v;as  promulgated  which  stayed  only  waiting  "periods.  (*) 

Whatever  the  precise  reasons  for  t.ie  modifications,  it  seems 
certain  that  there  was  strong  industry  px'otest  at  this  drastic  move  to 
curtail  the  right  to  a  type  of  provision  already  possessed  by  large 
numbers  of  codified  industries. 

Moreover,  in  five  codes,  including  supplements,  the  policy  ex- 
pressed in  Office  Order  No.  63-B  was  not  followed.   The  codes,  approved 
after  January  27,  1935,  in  which  there  were  waiting  periods  which  were 
not  stayed,  were: 

252   Merchandise  Warehousing 

(Approved  January  27,  1934) 

237   Graphic  Arts  (All  Divisions  and  31  Appendices) 
(Approved  February  17,  1934) 

401   Copper 

(Approved  April  21,  1934) 

4-1   Befrigerator  Manufacturing  (Supp.  to  Electrical  Mfg.) 
(Approved  June  9,  1954) 

4—2   Portable  Electrical  Lamp  and  Shade  (Supp.  to  Elec.  Mfg.) 
(Approved  June  27,  1934) 

According  to  a  responsible  administrative  official,  the  action  as 
t3  tie  codes  listed  above,  with  the  exception  of  the  Copper  Code,  was 
due  to  "pri^r  commitments" ,  which  it  was  felt  could  not  be  disregarded. 
The  Copper  Code  provision  was  of  a  special  type. 

Except  for  these  cases,  however,  Office  Order  No.  63-B  marked  the 
definite  adoption  of  a  policy  disapproving  tie  further  acceptance,  at 
least  without  stay,  of  mandatory  waiting  periods  in  connection  with 

■  t 


(*)   In  this  connection  it  may  be  noted  tnat  Mr.  Irving  S.  Paul,  head 
of  the  code  authorities  of  three  of  the  subdivisions  of  the  fabri- 
cated metal  products  industry,  stated  in  personal  conversation  with 
the  v/riter  that  the  three  codes  with  which  he  was  concerned  were 
up  for  approval  just  at  the  time  Office  Order  No.  63  was  issued. 
Mr.  Paul  reported  that  when  he  was  advised  that  by  virtue  of  this 
order  the  price  filing  provisions  in  his  three  codes  were  to  be 
stayed,  he  protested  vigorously  to  the  Administration.   He  based 
this  protest,  he  said,  on  the  contention  that  the  industries  would 
have  no  price  protection  at  all,  and  get  nothing  from  the  codes  to 
compensate  them  for  the  increased  cost  burden  the  codes  would  bring. 
He  felt  that  his  protest,  and  his  proposal  to  withdraw  the  appli- 
cation for  the  codes,  were  influential  in  bringing  about  the  modi- 
fications contained  in  Office  Orders  63-A  and  63-B. 


9826 


-  456  -  ■  - 

open  price  plans.  (*)   The  stays  imposed  by  that  Order  were  never  re- 
mo  v  eel. 

2.   Special  Studies  Undertaken  With  an  3ye  to  Policy. 

As  a  further  outgrowth  of  the  hearing  on  price 
changes,  and  as  a  result  of  the  increasingly  felt  neel  to  finl  out 
what  was  resulting  under  the  price  filing  provisions  if  a  definite 
policy  was  to  be  formulated,  both  the  "Research  and  Planning  Division 
and  the  Consumers'  Advisory  Beard  made  special  studies  and  reports 
during  this  period  on  the  operation  of  the  open  price  plans.   Each  of 
these  reports  included  a  number  of  policy  recommendations,  the  princi- 
pal points  of  which  are  summarized  below. 

(a)   Research  and  Planning  Division  Report, 

The  first  of  these  studies,  dated  April  3,  1934, 
was  prepared  by  Mr.*  Simon  Whitney  for  the  Division  of  Research  and 
Planning. 

After  surveying  the  operation  of  open  price 
provisions  in  the  codes  approved  up  to  that  time,  Mr.  Whitney  advised 
against  complete  elimination  of  open  price  provisions.   "Te  said  that 
such  a  procedure  would  be  "taking  away  a  useful  but  dangerous  tool  in- 
stead of  teaching  its  use." 

Mr.  Whitney's  definite  recommendations  were: 

"1.   The  reporting  of  prices  on  past  transactions 
is  already  legal  and  should  be  permitted  but  the 
buyer  should  not  be  identified  and  even  the 
seller' s  name  should  probably  not  be  reported  to 
his  competitors,  unless  the  industry  can  show  a 
real  necessity  for  identification. 

"2.   The  exchange  of  current  price  lists  should 
be  permitted. 

"3.   Tne  mandatory  waiting  period  should  be  elimi- 
nated from  codes  unless  a  given  industry  can 
prove  its  necessitv  to  prevent  grave  abuses,  or 
unless  the  customers  want  it  too. 

"4.   Price  reporting  should  not  be  taken  over  by 
the  government  but  the  NRA  should  reserve  the 
right  to  require  copies  of  all  price  data  to  be 
filed  with  it. 


(*)   Hie  later  amendments,  however,  affecting  the  Lime  and  Cement  Codes, 
continued  approvals  of  waiting  periods  which  had  been  included 
in  the  original  provisions. 


9826 


-  457  - 

":".   Price  reports  should  be  male  available  to  buyers 
as  well  as  sellers,  under  reasonable  conditions. 

"6.   Sealed  bids  should  not  be  exchanged  until  after 
t.  e  award . 

"7.   Price  fixing  should  be  stopped  by  taking  all 
price  fixing  provisions  (of  whica  price  reporting 
is  net  one)  out  of  co.es,  and  by  issuing  a  warning 
to  industry  followed  by  prosecution  in  case  of 
continued  price  fixing. "(*) 

(b)   Consumers'  Advisory  Board  Report.     [ 

The  second  of  these  studies,  undertaken  pursuant  to 
an  order  issued  directly  by  General  Johnson,  was  conducted  by  the  Con- 
sumers' Advisory  Board.  This  board  had,  almost  from  the  first,  as  the 
preceding  subsection  has  shown,  been  opposed  to  much  in  the  open  price 
plan's  which  were  being  approved  by  the  Administration.  Typical  of  the 
attitude  of  this  Board  is  the  following  extract  from  a  letter  to  General 
Johnson  dated  February  19,  1934: 

"The  recent  hearing  on  price  changes  produced  a 
considerable  volume  of  evidence  that  open  price 
systems  are  facilitating  uniform  price  fixing 
....the  information  at  hand  indicates  that  the 
difficulty  cannot  be  dealt  with  merely  by  elimi- 
nation of  tne  waiting  period.   The  basic  diffi- 
culty as  we  see  it  is  that  open  price  systems, 
with  or  without  waiting  periods,  identify  the 
person  or  firm  quoting  the  low  price  and  thus 
facilitate  the  use  of  pressure  to  force  his 
price  up  to  the  level  generally  lesired  in  the 
industry. .. .Tail e  we  do  not  believe  it  desir- 
able to  eliminate  tie  reporting  of  prices  and 
price  transactions  completely,  we  feel  that  it 
would  be  possible  to  throw  safeguards  around  the 
reporting  in  such  a  manner  as  to  make  more  diffi- 
cult the  harassing  of  those  who  would  keep  prices 
down.   To  this  end  we  suggest  as  worthy  bf  your 
consideration,  that  actual  prices  charged  in  sales 
already  made  be  reported  to  NBA  agency  pledged  to 
keep  the  detailed  reports  confidential  and  to 
supply  to  members  of  the  industry  only  statements 
of  the  range  of  prices  at  a  given  date.   If  the 
reported  prices  indicate  that  existence  of  Ques- 
tionable conditions,  we  believe  that  remedies 
can  best  be  applied  by  such  an  agency  rather 


(*)   "Open  Prices"  by  Simon  Whitney,  Research  and  Planning  Division, 
i-TRA,  April  3,  1934,  page  40. 


9826 


-  458  - 

than  by  those  who  have  private  interests  at  stake." 

On  Llay  4,  1934,  after  a  study  of  the  operation  of  price  filing  pro- 
visions, the  Board  issued  a  report.   Its  recommendations  concerning 
policy  wore: 

1.  Important  revisions  are  needed  in  nearly  all  open  price  pro- 
visions in  cedes. 

2.  Open  price  provisions  should  not  be  abolished  until  attempts 
have  been  made  to  remedy  abuses. 

3.  In  revising  open  price  provisions,  a  model  clause  is  not 
enough;  varying  conditions  in  the  different  industries  should  be  taken 
into  consideration. 

4.  The  result  of  open  price  provisions  should  be  true  publicity. 
Therefore,  code  authorities  should  immediately  upon  receipt  make  all  : 
price  information  available  to  all  members  of  the  industry,  to  the  govern- 
ment and  to  the  public, 

5.  Code  authorities  should  be  prohibited  from  promulgating  regula- 
tions concerning  customer  classification,  grading,  discounts,  etc.  under 
the  guise  of  price  filing  forms. 

6.  There  should  be  no  revelation  of  identity  of  the  filers;   only 
the  range  of  prices  should  be  distributed.   Therefore,  a  confidential 
agent  should  be  the  recipient  of  the  filing. 

7.  Y/aiting  period  should  be  retained  only  if  the  above  safeguards 
are  made. 

8.  Detailed  check  on  the  operation  of  the  provision  should  be 
made. 

9.  There  should  be  prompt  investigation  of  alleged  abuses  of  price 
filing  systems;  if  there  was  abuse  proven,  the  system  should  be  suspend- 
ed automatically  pending  a  hearing  concerning  revision  of  the  plan. (*) 

It  will  be  noted  that  the  recommendations  contained  in  these  reports 
of  the  two  advisory  divisions  were  in  substantial  agreement  upon  the 
following  general  points:  (1)  that  open  price  filinr  systems  should  not 
be  done  away  with  until  efforts  had  been  made  to  remedy  the  abuses  con- 
nected with  them;  (2)  0°y  implication)  that  features  related  to  price 
publicity  should  be  encourage!  and  those  tending  to  price  control  should 
be  weakened;  (3)  specifically,  that  the  waiting  period  should  be  abolish- 
ed except  where  positive  need  for  it  could  be  shown;  and  (4)  recommended 
changes  should  apply  to  codes  already  approved,  as  well  as  to  future 
approval s . 


(*)   "Experience  with  Open  Price  Provisions  of  Approved  Codes",  Con- 
sumers' Advisory  Board,  N3A,  winy  4,  1934,  pages  39-42,  NRA  files. 


9826 


-  459  - 
3.   Further  Search  For  a  Basic  Policy. 

A  further  effort  to  ascertain  the  results  of  the  price 
provisions  in  the  NBA  codes,  and  to  help  in  the  formulation  of  a 
basic  price  filing  policy,  took  the  form  of  a  series  of  conferences 
with  code  authorities  held  in  March, ,1934. 

That  even  at  that  late  date  no  definite  policy  had  been 
adopted  ir-  evidenced  ^y   the  following  statement  made  by  Mr.  A.D. 
Whiteside  in  his  introductory  remarks  as  chairman  of  one  of  the  group 
converence  en  "Prices",  held  as  part  of  these  general  code  authority 
conferences: 

"***I  must  reiterate,  in  closing,  and  say  to 
you  that  irrespective  of  rumors  to  the  con- 
trary, tie  National  Recovery  Administration 
has  formulated  no  conclusion  for  a  definite 
opinion  regarding  open  price  provision s*****"(*) 

Still  another  evidence  of  the  absence  of  definite  policy, 
even  at  a  date  when  most  of  the  major  codes  had  been  approved,  is  seen 
in  the  fact  that  although  the  "Suggested  Outline  for  Use  in  Code  Draft- 
ing", dated  April  3,  1954,  notes  as  a  possible  Pule  11  of  Trade  Practice 
Rules,  an  open  price  provision,  no  model  is  suggested.   The  outline 
states  tat  a  suggested  form  of  open  price  provision  would  be  "separately 
circulated".   As  far  as  can  be  discovered,  however,  no  such  model  pro- 
vision was  distributed. 

To  these  scattered  and  largely  uncoordinated  attempts  on 
the  part  of  tie  Administration  to  reach  a  Lefinite  position  on  open 
price  systems,  as  set  forth  in  the  preceding  pages,  there  was  aided,  on 
April  9,  1934,  a  somewhat  more  systematic  effort  resulting  from  the 
issuance  cf  Policy  Order  No.  83  which  created  the  office  of  Assistant 
Administrator  for  Policy. 

Subsequent  to  this  a  Policy  Group  of  four  was  appointed 
consisting  of  i.ir.  BLckwell  Smith,  Mr.  Leverett  S.  Lyon,  Mr.  William  W. 
Bardsley,  and  Mr.  L.  C.  Marshall.  This  group  advised  different  admin- 
istrative officers  in  the  UFA  on  policy  matters,  some'of  which  related 
to  price  filing.  An  undated  document  has  been  prepared  concerning  the 
work  of  this  group;  it  is  entitled:  "Compendium  of  Abstracts  of  Policy 
and  Other  Statements  issued  by  the  Policy  Group.  ••(**) 


(*)   Conference  of  Code  Authorities  and  Trade  Association  Code  Committee 
Conference  Group  No.  II  "Trade  Practices  -  Prices",  March  5,  1934, 
page  o . 

(**)  Available  in  the  office  of  the  Legal  Service  Section, 
ITRA  files. 


9836 


. -  460  - 

The  following  opinions  on  policies  concerning  price  filing  were 
expressed  by  this  group  prior  to  the  issuance  of  Office  Memorandum 
No.  233: 

(1)  Prices  filed  should  be  those  at  which  the  member  sells,  not 
his  minimum  price. 

(2)  A  member  of  an  industry  should  not  be  required  by  the  Code 
to  file  ".elivered  prices.   The  filing  of  delivered  prices  should  not, 
however,  be  forbidden. 

(5)   In  the  case  of  an  interpretation  of  a  code  provision,  the 
group  reccmmen&ed  that  ".****  the  date  of  filing  of  prices,  terms,  or 
conditions  of  sale  shall  be  deemed  to  mean  the  date  of  receipt  of 
notice  by  the  cole  authority,  with  instructions  to.  the  code  authority 
that  it  adopt  regulations  that  such  filing  must  be  by  registered  mail 
with  return  receipt  requested. " 

Finally,  it  should  be  noted  that  policy  statements  touching  at 
times  upon  price  filing  matters,  were  made  during  this  period  by  the 
Review  Division.   This  division,  designated  to  advise  the  Administrator 
concerning  conformity  of  proposed  code  provisions  and  rulings  with  LIRA 
Policy,  was  one  of  the  first  agencies  to,  begin  compilation  of  state- 
ments of  principles.  Unlike  the  advisory  groups  who  represented  parti- 
cular interests  (industry,  labor  and  consumers)  the  Review  Division  did 
not  attenpt  to  influence  the  formulation  of  Administration  policy. 
Rather,  its  function  was  to  comity  policy  and  precedents,  as  indicated 
by  previous  administrative  action,  and  to  check  new  rulings  and  code 
provisions  r.gainst  suca  a  compilation*   To  some  extent,  therefore,  ac- 
tion -^receded  ratier  than  followed  x>licy  during  a  great  portion  of  the 
code—making  period. 

An  undated  summary'  of  policy  prepared  for  the  guidance  of  the 
members  of  tie  Review  Division  and  based  upon  precedents,  by  Mr.  Alvin 
Brown,  contains  a  digest  of  matters  of  policy  with  respect  to  price 
filing  as  follows: 

A  mandatory  list  of  extras  embodied  in  a  code  was  looked  upon  with 
disfavor;  it  was  urged  that  in  place  of  this  the  members  of  the  indus- 
try in  question  be  required  to  file  tlieir  extras  the  same  as  any  other 
price.  (May  1,  1924) 

A  provision  for  filing  prices  by  basing  points  was  "believed  valid" 
since  each  member  was  free  w.ien  filing  to  define  his  own  delivery  bases. 
(May  1,  1934) 

The  policy  of  permitting  the  code  authority  to  prescribe  the  price 
filing  form  was  approved.  (May  1,  1934) 

The  objection  of  a  Consumers'  Advisor  to  a  provision  that  producers 
must  include  marble  at  filed  prices  in  estimating  on  finished  jobs  was 
not  sustained.   It  was  contended  that  this  was  objectionable  since  the 


nno/' 


-  461  - 
producer  could,  file  whatever  srice  he  chose.   (February  5,  1934) 

These  statements,  it  will  ije  seen,  leal  with  particular  details 
related  chiefly  to  the  operation  of  price  filing  plans  i:i  specified 
circumstances,  rather  than  with  broadly  considered  matters  of  policy 
affecting  the  general  question  :.'  open  price  filing. 

4,   Summary  of  the  First  Price  piling  Feriod. 

To  summarize  what  has  been  presented  above  as  to  policy 
with  respect  to  price  filing  in  the  first  period  considered  —  from 
adoption  of  the  Act  on  June  16,  1233,  through  June  6,  1934:  —  price  fil- 
ing provisions  were  incorporated  during  this  period  in  a  large  number 
of  codes;  these  provisions  were  diverse  in  form,  reflected  in  the  main 
no  uniform  or  considered  policy  on  the  part  of  the  Administration,  and 
were  adopted  largely  as  desired  by  the  industries,  whose  interest  was 
frankly  in  mechanisms  for  price  stabilzation.   Growth  of  criticism  of 
this  situation  within  the  NBA  itself,  added  to  efforts  to  determine  the 
actual  effects  of  the  price  filing  provisions  (stimulated  to  some  extent 
by  outside  dissatisfaction),  resulted  in  various  tentative  efforts 
directed  toward  the  formulation  of  a  general  policy.   With  the  exception 
of  the  stay  upon'  waiting  periods  embodied  in  Office  Order  63-B,  how- 
ever, it  may  be  said  that  there  was  no  general  declaration  of  price 
filing  policy  prior  to  the  appearance  of  Office  Memorandum  No.  228 
which  opened  the  second  NBA  price  filing  period  and  which  is  the  sub- 
ject of  t  e  following"  section: 


-  462  - 


III.    SECOND  NBA  FRICE  EILING  FE  IOD  -  JUNE  7,  1S34  to  MAY  29,  1935  - 
DECLARATION,  CLARIFICATION  AND  APPLICATION  Ov  FOLICY. 

A.   Office  Memorandum  No.  228. 

This  period  was  inaugurated  by  the  appearance  of  Office  ■  'emorandum 
No.  228,  the  most  important  statement  of  NRA  policy  concerning  price  filing 
ever  issued,  and  one  of  the  most  important  of  all  NRA  policy  statements. 
The  memorandum  dealt  with  the  Question  of  price  provisions  in  general,  but 
its  Exhibit  A  contained  a  very  detailed  and  comprehensive  setting  forth 
of  what  were  henceforth  to  be  considered  permissible  price  filing  re- 
quirements, in  which  was  disclosed  a  marked  alteration  of  previous 
attitude  in  several  respects. 

1.   Background  of  the  lemorancum. 

The  origin  of  this  policy  statement  is  probably  to  be  found  in  the 
hearing  on  price  changes  held  in  January,  1934,  and  noted  under  Section 
II,  B,  above.   Aouses  of  open  price  systems  uncovered  at  that  hearing 
had  led  to  various  inquiries  into  tne  operation  of  the  provisions,  and  the  ■ 
unfortunate  corsecuences  of  lack  of  a  uniform  Administration  policy  as 
to  prices  in  general  had  become  increasingly  apparent,  resulting  in  the 
organization  of  a  policy  formulating  group. 

The  immediate  background  of  the  memorandum  vas  a  group  of  policy 
recommendations  submitted  to  ;ir.  Blackball  Snitn,  the  Assistant  Admini- 
strator ior  Policy,  ny  r.  Leveret  S.  Lyon,  Deputy  Administrator  for 
Trade  Fractice  Folic",  in  the  latter  part  of  lay,  1934.   The  memorandum 
was  also  signed  by  the  .'.embers  of  a  policy  committee  working  with  ir.  Lyon. 
The  members  of  that  committee  were:   Mr.  ..lilton  Katz  of  the  Legal  Division, 
Mr.  James  E.  Hughes  of  the  I-.esearch  and  Planning  Division,  Mr.  vV.H.S. 
Stevens  of  the  Consumers'  Advisory  Board,  Mr. Edwin   .  George  of  the 
Industrial  Advisory  Board  and  Mr.  Paul  Kutchings  of  the  Labor  Advisory 
Board. 

This  memorandum  contained,  with  only  slight  differences,  what  later 
became  Exhibit  "A"  of  Oifice  emorandum  #228.  Ir.  presenting  this  draft, 
Mr.  Lyon  explained  that  he  had  proceedec  on  three  assumptions: 

"(1)   That  price  policies  of  the  National  recovery  Administration 

are  to  be  designed  in  terms  of  a  continuation  of  a  capitalis- 
tic economic  order; 

"(2)   that  fair  competition  is  desirable  and 

"(3)   that  fair  competition  require'  knowledge  oi  competitive 
i actors  to  the  fullest  extent  possible  without  unduly 
curtailing  private  initiative  or  giving  rise  to  collusion 
and  price  fixing. " 

Mr.  Lyon  further  stated: 

"On  the  basis  oi  these  assumptions,  I  have  concluded  that  open 


463  - 


price  provisions  properl^  crr-'-r,  may  be  made  a  desirable  part 
of  p   code  of  fair  competition  as  a  device  to  secure  genuinely 
intelligent  and  iree  competition." 

He  further  said  that  he  believed  that  the  model  provision  which 

was  later  designated  Exhibit  "A"  oi  Gil  ice  Jeaorandum  #Sr£fa,  provided 

industry  "with  what  is  reallv  necessary  in  th<.  attainment  of  an  open 
market." 

4 

Elaborating  on  the  reasons  for  the  various  portions  of  the  recom- 
mended provision,  Mr,  Lyon  stated  that  waiting  periods  hatfe  been  excluded 
^ecause  it  '-as  regarded  as  important  "to  retain  the  possibility  of  gain 
through  the  quick  realization  o:  market  trends  and  prompt  action.   If 
business  men  are  not  permitted  the  possibility  of  realizing  such  gains, 
the  incentive  to  alertness  and  the  inducement  to  wholesome  price  read- 
justments is  largely  nulliiied."   he  stated  that  ■  nile  there  were  some 
evidence  and  considerable  feeling  that  waiting  periods  aided  collusion, 
this  was  not  the  principal  reason  lor  omitting  provision  for  waiting 
periods. 

He  stated  that  he  believed  that  the  facts  that  all  prices  had 
to  oe  received  by  the  confidential  agent  beiore.  they  became  effective, 
that  they  were  to  be  immediately  pnd   simultaneously  distributed  to  all 
ouyers  and  sellers,  and  that  they  could  not  be  increased  for  48  hours  were 
sufficient  guarantees  against  abuses  in  the  nature  oi  "price  raids." 

There  '-as  some  though  apparently  not  a  great  difference  in  "opinion 
in  the  committee  concerninr  identii icatior  of  sellers.   In  his  memorandum, 
Mr.  Lyon  stated  that  he  believed  much  ,7'as  to  be  said  for  non-identification 
but  that  he  felt  that  in  vie'  of  the  lack  ox  standardization  in  so  many 
lines,  non-identification  w=s  impractical.   -e  urged,  however,  that 
divisional  and  deputy  administrators  "be  asked  to  attempt  to  work  out  such 
provisions  for  unidentifiable  publication  in  every  possible  case,  espec- 
ially in  dealing  with  industries  '"hose  products  are  well  standardized." 
On  the  other  hand,  Mr.  r".  H.  S.  Stevens,  oi  the  Consumers'  Advisory 
Board,  expressing  a  minority  opinion,  urged  that  "the  confidential  agent 
should  be  directed  to  issue  prices  in  unidentifiable  form  wherever  prac- 
ticable.  The  deputy  administrators. might  then  be  instructed  that  they  were 
to  modify  this  rule  only  when  it  was  clearly  impracticable  to  release  the 
price  in  unidentifiable  form."   This  appears  to  be  primarily  a  difference 
in  emphasis;  in  one  case  the  standard  was  to  contain  identification  but 
deputies  ""ere  to  depart  from  the  standard  in  this  respect  wherever  possible. 
In  the  other  case,  the  standard  was  to  be  non-identif ication  and  departures 
from  it  were  to  be  made  onlv  where  absolutely  essential. 

Mr.  Lyon  stated  that  reouests  from  industries  for  waiting  periods 
should  be  considered  on  the  merits  as  "proposed  departure  irom  announced 
policy."   A  craft  article  providing  for  a  waiting  period  of  three  days 
was  submitted  as  a  model  for  those  cases  in  which  the  need  for  a  waiting 
"eriod  was  established  by  an  industrv, 

9b26 


-  464  - 

He  stressei  the  importance  of  the  provision  for  filing  with  a  con- 
fidential agent;  this  "rs  an  item  of  paramount  importance,  he  maintained. 
This  provision  ,-rould  have  the  following  advantages,  among  others:  (l) 
it  wculd  eliminate  favoritism  among  members  of  the  industry;  (2)  it  ™ou.ld 
prevent  the  plan  from  being  used  to  the  detriment  01  customers  and  the 
public  and  (3)  it  <^ould  help  to  Secure  compliance  with  price  filing  pro- 
visions since  filing  would  not  be  made  with  a  group,  such  as  a  code  author- 
ity, made  up  of  competitors. 

2.  Principal  Points  as  to  Price  filing  in 
Office  Memorandum  No.  £26 

The  chief  points  in  Exhibit  "A"  oi  Office  Memorandum  No.  228  as 
issued  were :  •    • 

(1)  Filings  were  to  be  made  with  a.  confidential  agent  of  tne 
code  authority,  or f    if  there  was  none,  with  an  agent  designated  by  the 
administrator, 

(2)  Price  lists  were  to  be  filed  for  all  standard  items  and 
such  non-standard  items  as  the  code  authority  should  designate. 

(3)  Prices  and  revised  prices  were  to  be  effective  immediately 
upon  receipt  by  such  agent. 

(4)  Price  lists  were  to  be  distributed  at  once  to  all  members 

of  the  industry  and  to  those  customers  who  paid  the  cost  of  distribution. 
They  were  also  to  be  available  at  the  office  o„  the  a,r,ent  for  inspection 
by  any  cugto.ier. 

(5)  The  code  authority  was  to  keep  a  permanent  list  of  -11  prices 
filed. 

(6)  revisions  upward  could  not  be  made  until  filed  prices  were 
in  effect  at  least  46  hours. 

(7)  All  sales  were  to  be  made  at  prices  listed,  no  higher,  no 
lower. 

(B)   There  should  be  no  agreement,  conspiracy,  etc.  concerning 
prices;  a  free  and  open  market  was  to  be  maintained.  (*) 

3.  Differences  Between  Subiitted  and  Announced  Draft. 

The  proposed  price  filing  provision  presented  to  Mr.  Smith  bv 

(*)   As  was  noted  aoove  concerning  Oiiice  Greer  No.  63,  it  was  likewise 
not  possible  to  locate  the  documents  (other  than  the  memorandum  to 
Mr.  Smith  irom  Mr.  'yon  quoted)  which  "'ere  exchanged  with  the  Ad- 
ministration prior  to  the  issuance  oi  this  order,   por  the  full 
text  of  Exhibit  "A"  of  Office  Memorandum  No.  22b  see  Exnibit  V  of 
Appendix  A. 

^826 


-  465  - 


Mr.    Lyon  differed  only  slightly  irom  the  model  provision  ps  finally 
incorporated,  in  Office  ..iemoraridum  No.  2?:6.   The  changes  which  are  of 
signii  icarce  pre: 

The  provision  as  it  r-as  finally  approved  provided  that  -prices  should 
be  filed  with  "a  confidential  and  disinterested  agent  of  the  Code  Authority, 

or  ii  none, then  with  such  en  ?  i  nt  designated  ov   the  Ad  mini st rat or. "   The 

portion  of  the  sentence  underlined,  was  not  included  in  the  draft  prepared 
by  the  committee. 

The  final  draft  added  to  the  pro-posed  draft  the  section  providing  that 
all  prices,  in  addition  to  being  distributed,  should  "be  available  for  in- 
spection ov  any  of  -their  customers  at  the  office  of  such  agent." 

The  draft  proposed  bv  Mr.    Lyon's  committee  provided  that  after  a  re- 
vision of  prices,  prices  and  terms  should  remain  unchanged  for  not  less 
than  46  hours.   The  final  craft  provided  that  a  hi  :ner   price  should  not 
be  filed  for  4&  hours. 

The  following  cppeareo  in  the  original  draft  as  a  -paragraph  to  precede 
all  the  sections  incorporated  in  the  final  draft: 

"In  order  to  -prevent  unfair  competitive  practices  contrary  to  the 
policv  of  the  Act  bv  making  generally  available  full  information 
concerning  prices  and  pricing  practices,  but  not  thereby  to  permit 
monopolies  or  monopolistic  practices,  this  article  provides  for 
the  open  filing  of  -prices  and  terras  o:  members  of  the  trade  and/or 
industry. " 

Just  as  the  foregoing  paragraph,  ,?,hich  "as  an  introductory  paragraph 
in  the  Lyon  dralt,  ,:,ps  omittec.  ir  the  iina.1  form,  so  the  final  form  also 
omitted  tne  following,  which  in  the  Lyon  draft  was  the  concluding  paragraph. 

"If  the  Administrator  on  complaint  filed,  or  on  his  on  initiative, 
after  due  investigation  and  on  opportunity  to  the  Code  Autnoritv 
and  other  interested  persons  to  oe  ue&rd,    shall  find  that  this  article 
has  permitted  or  is  permitting  action  contrary  to  the  provisions  of 
tne  National  Industrial  .  ecovery  Act  or  otner-'ise  against  the  -public 
interest,  he  may  stay,  modiiy  or  c?ncel  this  article  or  any  part  or 
application  thereof,  in  accordance  with  such  findings." 

Otner  changes  were  in  phraseology,  and  did  not  affect  the  sense  of 
the  text. 

..hat  was  of  particular  significance  a  out  Memorandum  No.  £28,  beyond 
the  fact  oi  a.  definite  -^rice  filing  policy  Deing  announced,  was  its 
assertion  that  a  "free  and  open  market"  was  proposed  to  be  maintained,  and 
its  banning  of  waiting  periods  and  other  control  features  in  favor  of  re- 
quirements aimed  '-holly  at  effectuating  price  publicity.   It  is  obvious 
that  such  a  change  of  attitude  would  meet  with  a  certain  amount  of  resis- 
tance and  difficulty  in  application,  especially  insofai  as  such  application 
might  be  attempted  to  oe  extended  to  codes  already  approved. 

9826 


-  466  - 


4.   Policy  Connected  ith  Application  of  the  Policy. 

Because  the  major  codes  had  been  approved  before  the  issuance  of 
Office  memorandum  No.  228,  the  effectiveness  of  this  policy  statement  de- 
pended largely  upon  the  attitude  taken  by  the  Administration  with  re  <ard 
to  amending  cooes  to  conform  to  the  new  policy. 

Page  1  of  this  Memorandum  contained  an  important  statement  con- 
cerning the  application  of  the  policy  it  set  forth.   It  stated: 

"(4)   Adjustment  of  Codes:   Pending  codes  and  codes  hereafter  sub- 
mitted shall  be  adjusted  to  these  policies.   Divisional  Ad- 
ministrators shall  seek  through  agreements  with  Code  Authorities 
of  approved  Codes  to  a  lend  .them  to  conform  with  these  policies 
pnc,    '-herever  resistance  is  encountered,  the  suoject  shall  be 
taken  up "with  the  Administrator." 

This  statement,  however,  was  considerably  qualified 'by  Office  Memoran- 
dum No.  ?o0  issued  July  16,  1934,  which  stated  in  part: 

"....This  (the  fact  that  attempts  '"ere  being  made  to  formulate  policy 
does  not  mean  that  every  code  in  process  and  not  approved  at  the  time 
of  announcement  of  3  general  policy  must  conform  in  the  sense  of  in- 
cluding the  type  of  provision  favored  by  policy.   Under  Certain  cir- 
cumstance's it  might  be  manifestly  uniair  to  recuire  substitution  of 
a  ne1"  clause  after  lengthy  negotiations  have  finally  resulted  in 
assent  bv  the  industry  to  a  supposed  final  form  of  the  code. 

"Change  in  codes  designed  to  bring  them  into  conformity  with  policv 
will  be  recuired  only  to  tne  following  extent: 

"k«hen  in  final  form  and  assented  to  by  tne  Industry,  before  the  date 
of  announcement  of  a  general  policy,  the  code,  if  otherwise  acceptable, 
'ill  be  approved.   lowever,  provisions  flatly  inconsistent  with  the 
essentials  of  such  policy  will  be  stayed,  to  the  extent  of  such  in- 
consistency, until  the  Industry  sho^s  wny  such  portions  should  not 
be  permanently  stayed,  or  made  to  comorm  in  substance  to  such  policy." 

As  to  approved  codes,  Memorandum  No.  £60  said  that  nothing  would  be 
done  if  the  provisions  contrary  to  policy  was  causing  no  'difficulty,  but  in 
such  cases  the  Research  and  Planning  Division  would  check  the  operation 
of  the  provision  -  "Whenever  desired  by  the  Industry,  or  whenever  the 
occasion  is  appropriate,  changes  will  be  effected."   whenever  a  provision 
out  of  line  with  policy  was  found  to  be  causing  difficulty,  after  consul- 
tation with  the  industry  it  should  be  stayed  unless  the  difficulty  "'ere 
remedied.  (*) 


(*)   ror  the  full  text  of  Office  memorandum  #260  see  Exhibit  V  of 
Appendix  "C". 

9826 


~  467- 


5.   Reactions  to  the  New  policy. 

This  modification  of  the  Administration's  position  concerning  appli- 
cation oi  the  new  policy  cant  -s  a  result  oi  the  opposition  of  members  of 
industry  and  of  certain  individuals  Fine  -;i  oups  within  the  Administration 
to  the  type  of  crice  provisions  set  forth  in  Office  he  lorandum  No.  228. 

Summarizing  both  the  reasons  for  the  change  in  Administration  policy 
which  culminated  in  this  Memorandum  and  also  industry  reactions,  ir.  Leon 
Fenderson,  Director  of  the  Division  of  Economic  Research  and  Planning  at 
the  hearing  or.  Price  Folicy  held  by  the  Administration  in  January  1935, 
said : 

"...As  to  the  open  price  feature.   The  open  price  provisions  in  the 
early  codes  departed  from  the  best  thought  as  to  ideals  of  open 
prices.   The.. .best  ideals  of  open  prices  ''ere  those  which  were  e  n- 
ohasized.  ...  by  Eddy,  the  precursor  of  the  plan,  which  were  to  provide 
publicity  to  competitors,  to  the  public,  to  the  Government,  and  the 
buyers,  so  that  everyone  might  have  notice  as  to  what  prices  were 
oeing  emoted  and  it  was  thought  that  secret  rebates  and  the  destruc- 
tive influence  of  private  prices  and  concessions  would  be  largely 
dissipated  if  a  strong  open  price  policy  pere  mainted. 

"The  present  policy,  as  enunciated  in  Office  Me  lorandum  No.  226, 
which  is  at  everyone's  disposal,  is  to  get  back  to  these  ideals. 
Our  files  indicate,  most  naturally,  that  many  members  of  industry 
regard  price  publicity  in  tho3e  ide='1  istic  forms  as  not  of  high 
value,  and  regard  it  as  a  means  of  preventing  price  cutting  and 
as  an  agency  bv  which  coercion,  mild  and  otherwise,  as  our  files 
show,  and  our  open  price  studies  show,  may  be  applied  to  competitors, 
who  were  getting  cat  oi  li'e,  and  mav  De  given  notice  as  to  what 
the  industry  thinks  of  then. . . " (*) 

During  the  ensuing  period  there  was  fie<uent  conflict  between  those 
groups  within  the  NRA  which  favored  the  principles  o:  Office  memorandum 
No.  22e  and  those  within  NRA  and  in  industry  who  opposed  it.   Industry 
was  particularly  inclined  to  avoid  any  reopening  of  a  o  "roved  codes,  since 
groups  such  as  the  Consumers'  Advisory  Board,  which  favored  in  most  res- 
pects the  policy  of  memorandum  No.  2<b,  sought,  whenever  a  code  was  up 
i  or  any  consideration,  to  have  it  amended  to  comorm  fully  to  policy. 

The  fact  that  under  the  terms  of  Office  Memorandum  No.  22B,  price 
changes  were  to  become  effective  immediately  was  one  reason  i or  tne  dis- 
approval oi  it  b?  members  of  industry.  Thus  the  Code  History  for  the- 
landy   Industry  savs:  "The  Code  Authority  rejected  suggestions  that  the 
provisions  of  Art.  VII  of  the  open  price  plan  be  a  leaded  in  conformity 
with  Office  memorandum  No.  2c6,  the  members  explaining  individually  that 
even  though  the  waiting  perioe  was  stayed  by  the  Executive  Order  they 

(*)   See  Transcript  oi  Hearing  on  "Frice  Folicy",  Jan.  y,  1935,  pages  32-4. 
NRA  files. 

9826 


-  -is  a  ~ 

still  entertained  hope  that  this  stay  might  be  lifted. ."  (*) 

Tne  Code  History  for  the  Scientific  Apparatus  Industry  also  deals 
with  tne  reluctance  01  industry  to  change  codes .   It  states: 

"A  reluctance  to  propose  amendments  or  to  re-write  tne  code  was 
always  evident.   In  the  matter  of  price:  filing  provisions,  the  presence 
of  a  waiting  period  oi  not  to  exceed,  f  if  teen  d  ays  bet  ore  revised  prices 
become  effective  is  sufficient  reason  for  unwillingness  to  jeopardize 
the  provisions  de< med  essential  oy  proposing  any  amendments  thereof."  (**) 

When  a  public  hearing  was  held  on  September  2b,  1934,  to  consider  an 
amendment  to  the  Macaroni  Code  which  would  provide  that  future  contracts  be 
limited  to  filed  prices,  all  reierences  to  jiled  prices  and  emergencies 
'"ere  deleted  from  tne  amendment  at  the  request  of  the  code  authoritv.   This 
was  done  because  the  code  authoritv  was  very  anxious  to  keep  the 'pro- 
visions prohibiting  sales  belo1"  cost  in  the  code.  They  feared  that  if 
this  section  of  the  code  i-'ere  opened  uo  for  amendment  they  might  be  required 
to  accept  the  wording  "of  office  me norancum  22S.  (***) 

The  situation  relating  to  amending  codes  to  include  Office  .:emorandum 
No.  228  has  been  conciselv  stated  by  tne  writer  of  the  Code  "-mstorv  for  the 
jTire  Extinguishing  Appliance  Itfg.  Ind.  as  follows   "...It  was  early  evident  ' 
that  an  industry  to  which  had  been  granted  a  waiting  period  applicable  to 
price  filing,  a  mandatory  cost  accounting  system,  and  'lowest  representative 
cost,'  would  not  willingly  lorego'such  apparent ' advantages  in  favor  of  the 
newer  KRA  oolicv  pronouncements....1^****) 

In  short,  members  of  industries  with  codes  providing  I'or  a  type  of 
price  filing  suitable  to  effect  price  control  as  well  as  price  publicity, 
were  as  might  oe  'expected ,  extremely 'loath  to  adopt  a  type  of  price  filing 
"'hicn  lent  itself  much  less  readily  to  effecting  such  control. 

As  a  result  of  this  clas.sover  the 'desirability  ox  tne  new  policy  pro- 
nouncement, there  was  constant  conflict  between  these  groups  within  the 
NBA  which  favored,  the  principles  of  Office   emorancum  ^22  S  and  those  within 
NBA  and  in  industrial  groups  which  opposed  it.  Those  groups  such  as  the 
Consumer's  Advisory  Board  which  favored  in  most  respects  the  new  price  pro- 
visions endeavored  to  have  the  codes  amended  to  conform  to  policy  whenever 
any  code  was  up  for  consideration,  or  whenever  anything  related  to  codes 
was  to  be  aooroved.   As  r 'result  there',,ras  a  general  indisposition  to 
open  up  codes  for  amendment. 


(*)  Code  History  for  the  Candy  fg.  Inc.  F.  81 

(**)  Code  History  for  the  Scientific  Apparatus  Industry,  p,  12. 

(***)  See  Code  I istory,  page  &7  ff. 

(****)  See  Core  History,  page  47. 

962  6 


-  469  - 


The  reluctance  01  industries  to  surrender  their  >aaeYious  price 
control  provisions:  in  favor  of  the  milder  provisions  recommended  in 
Office  :it  Morpndum  lr-b   ^as,  in  numerous  instances,  acco  ippnied  by  a 
feeling  of  resentment  that  a13prov.pl  "ras  denied  to  regulations  that 
would  effectuate  existing  code  provisions,  regardless  of  the  fact  that 
such  provisions  were  contrary  to  the  revised  policy.  There  is  some 
evidence  that  these  attitudes  '-ere  not  limited  to  industry  members  but 
were  shared  by  certain  deputies  who  administered  the  codes,  and  bv 
others  who  were  advising  on  code  ,'iocii  ications.   It  is  obvious  from 
communications  addressed  to  Division  Administrators  end   others 
that  the  principles  of  Office  '  emorandum  22b  "rere  never  thoroughly 
accepted  by  some  of  those  charged  with  the  direct  administration  of 
codes,  and  in  the  best  position  to  experience  the  resistance  from 
industrv  engendered  by  the  policy. 

As  one  instance  of  this,  as  late  as  January  2C-,  1935  (six  months 
alter  the  declaration  of  the  oolicy  of  June  7,  1954),  a  memorandum  was 
addressed  to  '7. A.  Farriman,  then  Administrative  Officer,  from  the 
Deputy  in  charge  of  the  business  Furniture  Code,  recommending  approval 
of  certain  regulations  for  the  maintenance  of  resale  prices,  and  a 
liquidated  damage  agreement  to  enforce  them.   In  su omit ting  these 
regulations  for  the  approval  of  the  administrative  officer,  the  deputy 
voiced  the  following  opinion  concerning  the  position  taken  by  the  economic 
advisor,  <io  stated  that  the  regulations  rere  contrary  to  NBA  policy  as 
expressed  in  Office  [emorandum  228  and  should  be  disapproved: 

"I  do  not  concur  in  this  opinion.   Office  memorandum- 
228  provid.es  that  the  principles  expressed  therein 
shall  be  incorporated  in  all  codes  approved  after  its 
issuance,  and  "'here  agreement  can  be  secured,  in 
all  codes  previously  approved,  out  it  does  not 
forbid  approval  of  regulations  designed  to  effec- 
tuate code  provisions  contrary  to  these  principles 
in  codes  previously  approved. 

"It  is  my  belief  that  so  ion,-;  as  tne  industry  con- 
tinued to  desire,  and  refuses  to  agree  to  deletion 
or  amendment  of  a  code  provision  not  in  accord  with 
policy,  and  the  NBA  does  not  stay  such  provision, 
NBA  should  not  reiuse  to  permit  action  effectuating 
it,  merely  because  the  code  provision  is  contrary 
to  policv.   To  refuse  approval  for  this  reason  is 
to  137  mind,  coercive  and  unfair  to  the  incustry." 

The  National  Recovery  Board  did  not  concur  with  the  recommendation 
of  the  deputy  in  this  case  and  the  resale  price  maintenance  regulations 
were  not  approved,  although  there  was  no  immediate  move  to  stay  the  ex- 
tensive price  control  provisions  in  the  code  or  to  modify  the  code  in 

accord  with  policy  declarations.  ( *) 

(*)   The  industry  later  asked  voluntary  stays  of  clauses  requiring  adherence 
to  filed  prices  in  two  supplements  of  this  code,  but  not  to  the  supple- 
ment that  had  been  interpreted  by  industry  as  containing  resale  price 
maintenance.   A  study  01  the  code  was  ordered  for  possible  revision 
after  June  16,  1935. 


-  470  » 

Ulicn  coder,,  in  spite  of  industry  opposition,  were  rmended  to 
provide  for  price  filing  of  the  'type  provided  for  in  Office  Memorandum 
No.  223,  efforts  were  made  in  some  instances  to  secv.re  the  control 
features  of  old  style  prices  filing  plans  even  under  the  new  type  of 
provision. 

The  reaction  of  the  builders'  supplies  industry  took  the 
form  of  opposition  to  the' literal  application  of  Office  Memorandum 
228,  which  had  "been  inserted  in  their  code  "by  amendment.   The  adminis- 
tration member  of  the  code  authority  for  thin  industry  in  a  letter  to 
the  deputy  dated  December  10,  1934,  stated  that  at  a  code  authority 
meeting  the  secretary  of  the  code,  authority  had  urged  agencies  "under 
the  terms  of  the  ne1'/  (228)  price  filing  provision  to  'take  all  the 
time  necessary'  in  checking  the  filings  and  receipting  therefor  and 
urged  that  receipting  be  delayed  £ t  least  for  48  hours. "  The  letter 
from  the  Administration  member  continued: 

"His  (the  Secretary  of  the  Code  Authority's)  attention 
was  invited  „to  the  Code  prevision  which  prescribed  that 
the  prices  filed  by  a  member  of  the  industry  become  ef- 
fective-immediately end  that  accordingly  no  member  of  the 
trade  could  technic;  lly  be  termed  in  violation  of  the  code 
in  quoting  prices  after  he  had  knowledge  through  registered 
return  receipt  that  his  filings  had  been  received.   The 
Secretory  argued  this  point  bitterly  and  no  eloubt  an 
appeal  will  be  mr.de  to  Washington,  as  it  seems  he  hrs 
been  advised  that  filed  prices  do  not  become  effective  un- 
til the  Secretary  has  filed  them  in  his  own  good  time  and 
has  advised  the  members  of  the  industry  of  sv.cn.   filing.  " 

The  difference  of  opinion  over  the  application  of  the  provi- 
sions of  Office  Memorandum  #228  to  the  Code  for  the  iParm  Equipment 
Industry  presents  an  interesting  cse,  which  is  '  or thy  of  mention  at 
this  point.   The  producers  of  track  type  tractors  in  this  industry 
were  sharply  divided  over  the  desirability  of  incorporating  the 
price  filing  provisions  of  office  Llemorandum  #228  in  their  Code.   One 
group,  headed  oy   the  International  Harvester  Companj ,  opposed  price 
filing  unless  there  were  included  a  provision  which  exempted  from 
prices  to  be  filed  the  prices  quoted  on  government  bids  for  track: 
type  contractors.   The  opposing  group,  headed  by  the  Caterpillar 
Tractor  Company,  wished  prices  to  be  filed  on  all  types  of  sales,  in- 
cluding those  to  the  government.   In  a  memorandum  dated  July  16,  1934, 
to  Mr.  George  McHultyof  the  Legal  Division,  Mr.  W.L.  Schurz,  Assistant 
Deputy,  summed  up  the  controversy  as  follows: 

"The  entire  controversy  cm  be  reduced  to  this  single  ir;sue. .. 
The  background  of  the  disagreement  between  the  two  groups  is 
probably  the  intense  rivalry  between  the  International  Har- 
vester Company  and  the  Caterpillar  Tractor  Company  for  the 
large  government  business  in  track-type  tractors  bought  for  road 
building  and  for  other  public  work  projects.   At,  present, 
the  Caterpillar  Company  has  the  great  bulk  of  this  business 
and  fears  that  without  price  filing  a  price  war  would  re- 
sult, with  the  International  Harvester  Company  taking  the 

9826 


-  471  - 

Ltiative.   On  K     '  ,r  si    the  ;]    ■.   '■ 
Com  any  has  repeatedly  Represented  that  price  filing  on 
^•ov  rnment  business  inevitably  results  in  identical  bids  and  so 
defer t   the  purpose  of  such  bid  \       designed  to  prevent 
collusion  and  price  fixin  ;.  " 

The  cost  of  retaining  a  confidential  agent,  and  a  desire  that 
filed  price  information  should  not  be  available-  to  customers,  "/ere 
other  reasons  advanced  by  the  industries  for  opposition  to 
Office  Llemorrndum  ITo.  223.   The  Coae  Authority  for  the  Ladder 
M  nuf  cturing  Industry,  at  a  hearing  on  amendraexts  held  en   Sep- 
t  racer  18,  1534,  objected  to  filing  prices  with  a  confidential 
agent  because  of  the  additional  expense  involved,  and  also  ob- 
jected to  dissemination  of  filed  jrices  to  customers  on  the 
ground  that  it  was  "none  of  oar  distributors'  business  v;hat  price 
they  were  quoting  mother  distributor."  (*) 

Since  this  question  of  the  employment  of  a.  confidential  agent 
for  price  filing  purposes  was  one  of  the  significant  ner'  re- 
quirements embodied  in  hemorandum  228,  seme  discussion  of  the  point, 
and  of  problems  which  arose  in  connections  with  appl.icn.tion  of  the 
provision  may  be  included  here. 

6.   The  Confidential  Agent. 

The  Qualifications  for  a  "confidential  agent "- under  the  terms 
of  the  model  open  price  provision  given  in  Office  memorandum  228 
were  never  set  forth  in  any  formal  order  and,  as  a  consecuence, 
there  was  no  established  method  for  d© terming  the  eligibility  of 
those  selected  by  code  authorities  to  perform  such  functions. 

The  code  nuthroity  for  the  Carbon  Dioxide  Industry,  which 
was  the  first  code  to  be.' amended  in  accordance  withitha  rr-.» 
policy,  appointed  the  chairman  of  the  code  authority,  who  was  like- 
wise president  of  the  Carbon  Dioxide  Institute,  as  the  confidential 
agent  for  receiving  filed  prices.   The  institute  had  acted  as  the 
agency  with  which  prices  -ere  filed  before  the  amendment  to  in- 
corporated Office  memorandum  228.   During  this  time  there  had  been 
repeated  complaints  of  monopoly  and  dominance  of  small 
by  the  institute  members.   In  at  le  ',st  one  ca.se  turned  over  for 
compliance  action,  resulting  in  the  recommendation  that  the  Blue 
Eagle  be  removed,  the  member  'and.   admitted  his  refusal  to  file  prices 
and  stated  that  he  would  be  entirely  willing  to  file  them  in  Wash- 
ington, but  not  with  the  code  authority  made  up  of  the  executive 
members  of  the  Carbon  Dioxide  Institute.   These  same  charges  had 
been  made  at  the  original  hearing  of  the  code. 

Subsequently,  the  iI.h.A.  required  that  copies  of  all  price 
filings  be  forwarded  to  Washington,  and  at  the  recuest  of  the 
deputy  an  investigation  was  launched  into  the  operation  of  the 
Code  Authority  as  to  the  arice  filing  and  other  provisions. (**) 

(*)   Page  63  -  67  of  transcript  of  hearing,  September  18,  1934, 
iIRA  files 

(See  other  footnote  on  next  page,) 
9826 


-  472  - 

Despite  all  this,  there  was  apparently  no  ERA  objection 
voiced  to  the  appointment  of  the  president  of  the  institute  as  con- 
fidential agent  when  the  model  price  filing  provision  was  written 
in  the  code.   An  objection  was  made  by  the  non-association  member  of 
the  code  authority,  who  was  told  that  the  form  of  the  proposed  code 
provision  (with  the  exception  of  the  naming  of  the  chairman  as  con- 
fidential agent)  was  stipulatec  by  the  ERA  and  did  not  originate  -1th 
the  industry,  end  that,  in  the  opinion  of  the  code  authority,  the 
plan  r"ould  operate  better  and  at  less  expense  with  the  chairman  as 
the  confidential  agent. 

The  available  records  indicated  that  the  Chairman,  Mr.  Pettee, 
was  vice-president  of  the  largest  carbon  dioxide  company  prior  to 
his  resignation  to  become  president  of  the  Carbon  Dioxide  Institute 
when  it  was  organised  just  before  the  submission  of  the  code.   Other 
reports,  not  fully  substantiated,  stated  that  he  held  the  controll- 
ing interest  of  a  company  given  an  exlusive  distributor  contract 
with  this  same  large  member.  (*) 

In  still  another  case,  the  Builders'  Supply  Code,  in  which 
the  price  filing  plan,  git  forth  in  Office  Memorandum  228  was  intro- 
duced by  amendment,  it  was  desired  to  name  the  chairman  and  the 
Secretary  of  the  code  authority  as  the  agents  for  the  receipt  of 
filed  prices,  on  the  grounds  that  they  were  not  members  or  connect- 
ed rath  the  trade.   The  administration  member,  in  a  report  to  the 
denuty,  raised  the  Question  if  they  could  rightfully  be  considered 
members  of  the  code  authority  if  they  '"ere  not  trade  members,  as  re- 
quired in  Article  VI,  Section  1,  of  the  code.   Present  records  do 
not  show  the  answer  given  to  this  question. 

In  at  least  one  instance,  the  Administration  heard  an  ob- 
jection to  the  qualifications  of  Stevenson,  Jordan  and  Harrison  as 
confidential  agents.   This  organization,  as  agent  for  the  Code 
Authority  of  the  Corrugated  and  Solid  Fibre  Shipping  Container  Code, 
was  designated  as  the  impartial  agent  for  receiving  statistical  in- 
formation.  One  company  refused  to  submit  statistics  because  of 
the  activities  of  Stevenson,  Jordan  and  Harrison  in  operating  the 
voluntas  plan  for  sharing  business  which  was  participated  in  by  a 
majority,  but  not  all,  of  the  members  of  the  corrugated  and  solid 
fibre  shipping  container  industry.   The  legal  propriety  of  the  two- 
fold agency  relationship  was  questioned  by  the  Agar  Corporation,  on 
the  grounds  that  it  introduced  too  great  a  strain  on  the  agent  to 
maintain  a  disinterested,  impartial  view.   Unfortunately,  for  the 
purpose  of  ascertaining  ERA  policy  on  the  necessary  attributes  of 
confidential  agents,  this  particular  issue  was  settled  by  compromise. 

(*)    Confidential  Report  on  Carbon  Dioxide  Industry,  op.  cit. 

(**)    Confidential  Report  on  Price  Filing  and  Customer  Classification 
in  the  Carbon  Dioxide  Industry,  A.  F.  O'Donnell,  I 'ay,  1935, 
ERA  files 


\ 

9826 


-  473  - 

The  •   •  rling  corporation  was  not  ready  to  charge  that  the  Stevenson, 
Jordan  and  Harrison  group  had  actually  violated  the  confidential 
character  of  information,  and  the  general  question  of  propriety  of 
the  dual  relationship  was  ignored  so  far  as  any  formal  action  on  the 
part  of  the  MPA  was  concerned. 

Inasmuch  as  the  corrugated  and  solid  fibre  Shipping  Container 
Co;  e  Authority  had  never  attempted  to  implement  the  price  filing 
provision  contained  in  that  code,  the  question  of  filed  prices  was 
not  involved  in  this  particular  hearing,  although  the  market  informa- 
tion service  carried  on  by  the  agency,  in  connection  with  the  volun- 
tary sharing  of  business,  '-as  far  more  complete  than  that  of  the  or- 
dinary price  filing  plan-,  and  to  that  extent  rras  more  comparable  to 
the  market  information  type  of  open  price  plan  described  in  the  Fed- 
eral Trade  Commission  report.  This  came  agency  did  conduct  the 
price  filing  activities  of  other  open  price  codes,  however,  using 
similar  statistical  reporting  methods.  (*) 

It  is  fairly  obvious,  from  comments  by  critics  of  open  price 
plans,  that  the  potential  evils  designed  to  be  clone  away  with  by 
requiring  prices  to  be  filed  with  an  impartial  agent  were  of  at 
least  tvo  distinct  types:   (1)  the  danger  of  favoritism  in  dissem- 
inating information  or  in  disclosing  confidential  data  to  a  com- 
petitor; and  (2)  the  use  of  the  price  filing  plan  for  coercion  or  for 
propaganda  toward  price  control.   The  solution  arrived  at  unr;er 
Office  Memorandum  228  was  pertinent  chiefly  to  the  first  end. 
This  conception  of  impartial  and  disinterested,  as  applied  to  mem- 
bers of  the  industry,  without  specific  regard  to  the  interest  of 
customers  and  the  public,  is  not  unlike  the  conception  of  unfair 
competition  as  applied  literally  to  harmful  effects  upon  competitors. 
Within  the  bounds  of  this  interpretation,  however,  were  failures  to 
guard  against  cases  such  as  in  the  Carbon  Dioxide  Code,  in  which 
non— members  of  the  Association  anticipated  discrimination  and  were 
reluctant  to  submit  prices  and  other  statistical  data  to  a  trade 
association  official.   The  possibility  of  group  bias  as  well  as  in- 
dividual bias  was  sometimes  not  considered  in  the  appointment  of 
such  confidential  agents. 

7.  Extent  to  Which  Hew  Policy  Was  Incorporated  in  N.R.  A.  Codes. 

The  principles  of  Office  Memorandum  #228  were  quite  generally 
applied  to  the  pricn  filing  provisions  of  new  codes  in  the  Inst  half 
of  1934  and  the  first  half  of  1935.   However,  because  of  the  opposition 
of  industry  to  the  type  of  price  filing  in  this  memorandum  as  set 
forth  above,  and  its  unwillingness  to  open  codes  for  amendment,  and 
because  of  the  vacillating  policy  of  the  Administration  concerning 


(*)   The  Folding  Paper  Box,  the  Kraft  Paper  and  Sulphate  Board  divisions 
of  the  Paper  and  Pulp  Code  and  the  Envelope  Industries  are  cases 
in  point. 


:826 


~  474  - 

the  amendment  of  codes  to  conform  to  new  policy,  in  only  a  few  in- 
stances were  codes  amended  to  include  the  new  type  of  open  price 
system.  (*)   Ther=fore  the  new  policy,  while  not  completely  nullified, 
was  rendered  much  less  effective  than  it  otherwise  might  have  been. 

According  to  Research  and  Planning  study  and  other  sources,  76 
codes  and  supplements  had  open  price  provisions  conforming  to  the 
policy  and  exhibit  set  forth  in  Office  Memorandum  No.  228  when  code 
operation  came  to  en.   end.   Of  these,  58  were  approved  after  the 
memorandum  was  issued;  the  remaining  18  had  "been  approved  "before  the 
date  of  the  Memorandum  and  had  price  filing  "^provisions  incorporated 
by  amendment. 

A  break  down  of  this  information  may  of "interest: 


(*)   Omfpr ,  at  -  pm  cm  tjcs  soctopn  os  based  i-gpia  "Analysis  of  Trade 
Practice  Prcvi-sions  Relating  to  Open  Price  and  Bid  Filing 
Systems"  prepared  bythe  Division  of  Research  and  Planning  of 
ERA.  revised  and  corrected  up  through  May  27,  1935,  and  on  other 
records. 


S826 


-  475  - 

codes  with  opeit  price  provisions  conforming  to 
office  memorandum  number  228. 


iame  and  number  or  Division 

I.  Food  Division 

II  .  Textile  Division 

III.  .  Basic  Materials  Division 

IV.  Chemical  Division 

V.  Equipment  Division 

VI.  Manufacturing  Division 

VII.  Construction  Division 

VIII.  Public  Utilities  Division 

IX.   Finance,  Graphic  Arts  and 
Anuseraents  Division 

X.   Professional  Division 

XI.   Wholesale  and  Retail  Division 

TOTAL 


NO.    CONFORMING 

APPROVED  AFTER 

THRU  AliENDMEITT 

O.M.    228   ISSUED 

2 

3 

4 

6 

<t) 

2 

2 

13 

5 

13 

0 

0 

0 

1 

0 

3 

1 

0 

1 

4 

18 


58 


The  codes  in  which  the  price  filing  provisions  of  Office 
ilenorandun  No.  228  were  included  by  arnenci.ient  were  therefore  relatively 
feu,  and  nost  of  then  were  for  snail  industries.   They  include. 

TEXTILE  DIVISION 

No.  3S6  1411:  Filtering  Materials  and  Dairy  Products  Cotton  Wrappings 

No.  312.  Narrow  Fabrics. 

BASIC  MATERIALS  DIVISION 

No.  115  Wood  Plug 

No.  389  Clay  and  Shale  Roofing  Tile  (Pacific  Coast  Division) 

No.  31  Line  (but  see  paragraph  following) 

No.  128  Cenent  (but  see  paragraph  following) 

CHEMICAL  DIVISION 

No.  275-2  Carbon  Dioxide 

No.  110  Hardwood  Distillation 

No.  33-A  Soap  and  Glycerine  (Pacific  Coast  Section) 


S826 


-  476  - 

EQlIIPuZHT  DIVISION 

No.    274     Saw  and  Steel  Products  Manufacturing 
Ho.    315     Industrial  Safety  Equipment 

ILAITUFACTUPJHG  DIVISION 


Ho.    58     Cap  &  Closure 

Ho. 277     Gray  Iron  Foundry 

ITo.259     Porcelain  Breakfast  Furniture 

Ho. 286     Beauty  and  Barber  Shop  Machanical  Equipment  Manufacturing. 

Ho.    84.6      Shoe   Shank 

WHOLESALE  ALTS  RETAIL  DIVISION 
Ho.    57     B  uilders'    Supplies 
PROFE  S  S I  OilAL  D I VI S I  OH 

■ — i .  . 

Ho.  352  Photographic  and  Photo  Finishing 


It  should  he  noted  that  two  of      "owe   codes  which  are  listed 
as  conforming  to  the  price  filing  provision  a  of  Office  Memorandun 
Ho.  223  "by  amendment,  deviated  from  this  model  open  price  system  in  one 
important  particular.   These  were  the  codes  for  the  line  and  cement 
industries.  Amendment  Ho.  2  of  the  Lime  Code,  approved  April  1,  1935, 
and  A-iendment  Ho.  1  of  the  Cement  Code,  approved  on   May  11,  1935,  h  oth 
included  mandatory  waiting  of  five  days  in  price  filing  plans  which 
otherwise  conformed  to  Office  Memorandum  Ho.  228.   Such  waiting  periods 
had,  in  "both  cases,  been   part  of  the  provisions  originally  approved 
with  the  codes. 

A  further  analysis  of  the  material  collected  and  tabulated  by 
Research  and  Planning  indicates  that  the  first  code  (*)  in  which  the 
price  filing  provisions  of  Office  Memorandum  Ho.  223  were  incorporated 
was  No.  473,  Toven  Wood  Fabric  Shade,  which  was  approved  on  June  28,1934. 
After  June  7,  1934  there  were  at  least  11  codes  approved  (again  not  con- 
sidering supplements)  which  contained  price  filing  provisions  varying  in 
some  respect  from  the  standard  set  forth  in  Ho.  228.   The  last  of  these 
11  codes  was  Ho.  492,  Stereotype  Dry  Mat,  which  was  approved  on 
July  27,  1934.  (**) 

(*)   Information  about  supplements  to  codes  is  not  readily  available. 

(**)  Among  the  important  differences  between  the  open  price  plan 

provided  for  in  this  code  and  Exhibit  "A"  of  Office  Memorandum 
'  Ho.  228  are  the  following: 

1.  Prices  were  to  be  filed  with  the  code  authority,  not  a  con- 
fidential agent. 

2.  The  code  provided  that  if  a  member  did  not  file,  he  should  be 
deemed  to  have  filed  prices  equal  to  the  lowest  filed  and 
terms  equal  to  the  most  favorable  filed. 

9826 


-  477  - 

3 .   Executi ve  Order  #G767  -  A  Concession  to  Government 
Purchasing  Agent s . 

As  the  promulgation  of  Office  Memorandum  Ho.  228  may  be 
re  arded  as  a  response  to  demands  from  both  within  and  without  ITHA  that 
price  provisions  m  general  bo  safeguarded  against  use  to  effect  too 
rigid  controls,  so  Executive  Order  Ho.  6757  was  issued  in  response  to 
complaints  of  excessive  price  uniformity  in  bids  on  public  purchasing, 
brought  by  various  government  purchasing  agents  -  Federal,  state  and 
municipal.  Also,  as  with  Ho.  223,  some  compromise  with  opponents  of  the 
o  ■  r  is  found  in  the  process  of  its  application,  the  percentage  of 
"government  tolerance"  being  in  some  instances  reduced  from  15  tc  5. 

1.   Essential  Points  Involved  in  Executive  Order  6767. 
The  essential  points  in  this  order  issued  June  23,  1934,  were: 

a.  A  person  subject  to  a  code  calling  for  price  filing  night, 
without  violating  the  code,  bid  to  a  governmental  body  at  a  price  less 
than  his  filed  price  by  as  much  as  15;  j. 

b  .  He  must  file  with  the  code  authority  a  copy  of  his  bid 
after  bids  were  opened,  if  he  bid  below  his  filed  price. 

c.  The  Administrator  could  reduce  this  15,j  tolerance  to  as 
little  as  5}   if  he  found  the  15fo  was  resulting  in  destructive  price 
cutting. 

d.  The  Administrator  was  to  report  to  the  President  on 

the  effect  of  the  order  within  6  months  after  the  date  of  the  order. (*) 


Cont'd. 

3.  According  to  the  code  provisions,  if  a  member  withdrew  a 
price  schedule  raid  did  not  substitute  a  new  one,  he  was 
deemed  to  have  filed  equal  to  the  most  favorable  ones  on 
file. 

4.  There  was  in  the  code  a  ten  day  waiting  period  on  down- 
ward price  revisions.  (This  was  stayed  in  the  order  of 
approval. ) 

5.  It  was  provided  in  the  code  that  a  member  selling  below  cost 
to  meet  competition  might  adopt  as  his  filed  price  the  price 
of  the  member  whose  competition  he  was  meeting.   It  further 
provided  that  "such  adoption  shall  become  automatically  void 
upon  the  withdrawal  or  revision  upward  of  the  price  adopted." 

6.  Piled  prices  were  to  be  aminimum,  not  necessarily  actual 
selling  prices. 

7.  There  was  no  requirement  that  filings  be  preserved  or  be 
made  available  to  the  Administrator. 

8.  The  code  did  not  contain  the  ant i- conspiracy  clause  vrtiich 
formed  the  final  paragraph  of  Office  Memorandum  No.  228. 

(*)   Por  full  text  of  Executive  Order  Ho.  6767  see  Exhibit  V  of 
Atmendix  "C"  . 


9826 


-  478  - 


This. order  supplemented  an  earlier  ITBA  Administrative  Order  dealing 
with  governmental  purchases,  Order  X-48,  issued  on  June  12,  1935.   The 
salient  ""eatures  of  this  Order  were: 

In  sraite  of  an^  code  -orchibitions  there  might  be  to  the  contrarv, 
members  of  industry  biding  on  government  contracts  were,  by  authority  of 
the  order,  en titled  to: 

a.  Quote  -orices  to  government  agencies  as  favorable  as  those  per- 
mitted to  an-?  commercial  buyer  of  the  same  cmantity. 

b.  Make  with  government  agencies  a  definite  contract  for  future  de- 
livery of  a  definite  amount  within  three  months  from  the  date  of  the  con- 
tract at  a  fixed  price. 

c.  Make  such  contract  with  a  government  agency  for  an  indefinite 
amount  for  up  to  6  months. 

d.  Quote  to  such  agencies  prices  and  terms  to  aoply  on  contracts  to 
become  effective  not  more  than  sixty  days  from  the  date  of  the  opening  of 
bids. 

e.  Quote  such  agencies  prices  f.o.b.  point  of  origin  and/or  f.o.b. 
destination. 

"Provided,  however,  .....that  nothing  in  this  order  contained  shall 
operate  to  oermit  devis.tion  from  or  abandonment  of  open  price  and  cost 
protection  provisions  now  or  hereafter  contained  in  any  such  code." (*) 

2.   Relation  of  Order  No.  6767  to  Frice  Filing  Policy. 

Ti/hile  the  immediate  effect  of  Executive  Order  6767  was  to  permit 
sales  in  one  very  important  purchasing  field  at  prices  considerably  below 
those  filed,  and  thus  in  a  degree  to  nullify  the  filing  provisions,  the 
Order  was  nevertheless  in  the  direct  line  of  price-filing  policv  of  the 
time  in  that,  like  Memorandum  228,  it  sought  to  eliminate  undesirable 
consequences  wiiich  had  developed  in  practice,  without  abolishing  -orice  fil- 
fng  altogether. 

The  purchasing  agents  who  testified  at  the  nrice  change  hearings  pre- 
sented a  large  and  convincing  mass  of  evidence  of  the  current  tendency  to 
price  uniformity  in  government  bidding.  This  was  objected  to,  not  only  as 
indicating  the  existence  of  T)rice  control  and  the  nrobability  of  arti- 
ficial^/- hic:h  orices  for  public  purchasing,  out  also  because  it  was  seen  as 
striking  at  a  public  -oolicy  of  long  a.nd  rather  slow  growth,  namely,  the 
awarding  of  contracts  for  government  supplies  on  the  basis  of  the  lowest 
bid  price. 

What  was  desired  was  a  means  to  maintain  some  measure  of  price  flaxi- 
bility  in  bidding  on  government  reauirements.   Whereas  Memorandum  228  sought 


(*'   For  text  of  .administrative  Order  X-36  see  Exhibit  V  of  Arroendix  "  C" . 


9826 


-  479  - 

to  achieve  a  similar  general  end  by  modifying  the-  technique  of  price  fil- 
ing itself,  Order  6767,  employed  the  method  of  relaxing  arrolication  of  the 
open  price  requirement  in  the  particular  circumstance. 

It  was  not,  in  fact,  expected  that  actual  quotations  would  drop  the 
full  15$  permitted,  but  rather  that  the  competitive  uncertainty  as  to  just 
how  far  tney  would  drop  would  tend  to  restore  the  "free"  if  not  entirely 
the  "open"  market  called  for  my  I  emo  228.   For  cases  where  prices  showed 
a  tendency  to  drop  to  a  destructive  degree,  the  modification  from  15*&  to 
5*o   was  provided. 

Nevertheless,  the  policy  prescribed  by  Order  6767  met  with  strong 
reactions  from  many  of  the  industries  principally  affected,  as  the  follow- 
ing section  will  show. 

3.   Reactions  to  Order  Mo.  6767. 

As  would  be  expected,  the  general  attitude  of  industry  members  toward 
this  Executive  Order  was  not  favorable. 

a.   Expressions  of  Industry  Opinion. 

Complaints  against  the  policy  embodied  in  the  order  were  registered 
b,r  a  large  number  of  the  industries  whose  business  was,  in  a  significant 
degree,  connected  with  governmental  agencies.   Five  types  of  objections, 
not  altogether  mutually  exclusive,  may  be  noted.   Many  more  illustrations 
of  these  types  than  are  given,  are  at  hand. 

It  was  first  contended,  almost  universalljr,  that  "destructive  price 
cutting"  and  "price  chaos"  would  result  from  operation  of  the  Order.   At 
a  meeting  of  the  governing  committee  of  the  water  works  Valve  and  hydrant 
producers  sub-division  of  the  valve  and  fittings  industry,  on  July  6,  1934, 
a  resolution  was  passed  stating  that  the  committee  considered  that  the 
enforcement  of  Executive  Order  6?67  "would  result  in  ruinous  competition 
among  the  manufacturers  of  this  industry."   They  further  stated  that  "... 
unless  exempted  from  this  order  we  cannot  guarantee  to  maintain  or  he  able 
to  afford  the  cost  of  the  labor  provisions  of  our  code. ..."(* ) 

The  second  allegation  made  in  connection  with  the  Order  was  that  it 
involved  unfair  discrimination.   Thus,  Lr.  A.  L.  Boniface,  Secretary  of 
the  Code  Authority  for  the  Eire  Extinguishing  Aopliances  Industry,  in  a 
letter  to  the  ITEA  dated  July  3,  1934  stated:   " . ...We  would  also  call 
attention  to  the  unfairness  of  selling  one  unit  of  our  product  to  a  Federal, 
State  or  municipal  or  other  public  authority,  at  the  same  price  at  which 
we  would  sell  a  hundred  such  units.   We  would  also  point  out  the  unfairness 
of  putting  the  smallest  village  in  the  same  class  with  the  Federal  Govern- 
ment as  a  buyer  of  products  of  this  industry". 

In  the  third  place,  it  was  contended  that  this  order  brought  about 
secrecy  and  uncertainty  as  to  probable  prices  to  be  ouoted  in  bids.   On 


("O   Ecsolution  contained  in  a  letter  from  the  Code  Authority  for  the  Valve 
and  Fitting  Industry  to  General  Johnson,  July  11,  1934. 


-  480  - 

this  point  the  chairman  of  the  code  authority  for  the  portland  cement  in- 
dustry on  July  10,  1934,  wrote  to  the  Administration:   "....Our  second 
objection  is  that  the  Executive  Order  practically  eliminates  the  open  price 
plan.   The  essence  of  the  open  price  plan  is  to  make  competition  fair  and 
fully  effective  by  putting  all  competitors  on  notice  of  the  ..ertinent  facts 
of  the  competition  which  faces  them.   This  purpose  is  not  effected  if 
notice  of  the  facts  is  given  after  the  bidding  is  over.   The  'Executive 
Order,  therefore,  effectively  brings  open  dealing  to  an  end  and  thrusts 
bidders  once  more  into  darkness  with  its  attendant  suspicions  and  lack  of 
competitive  facts " 

The  order  was  also  opposed  on  the  ground  that  it  would  break  down 
the  established  channels  of  distribution.   The  Code  History  for  the  Plumb- 
ing Fixtures  Industry,  commenting  on  this  aspect,  says:   "The  Industry 
strenously  objected  to  Executive  Order  ilo.  5767  and  Administrative  Order 
X-48  permitting  Industry  members  to  ouote  the  government  as  low  as  15$ 
below  the  lowest  filed  prices  (prices  to  distributors^.   The  Industry  always 
regarded  the  government  as  a  consumer.   Most  governmental  sales  were  made 
through  wholesaler^  or  contractors.  Hence  many  of  the  objections  had  their 
genesis  at  those  sources.  .  .  .  "(*) 

Finally,  it  was  contended  that  the  Order  made  compliance  with  the 
price  filing  provisions  more  difficult  to  obtain.   On  this  point,  the  Code 
Authority  of  the  Valve  and  Fitting  Industry,  in  a  letter  to  Mr.  A.  C.  Cook 
of  the  itfRA,  said,  on  July  31,  1954:  ".  .  .  our  code  authority  has  not 
secured  complete  compliance  by  all  members  of  the  industry  with  the  re- 
quirement that  they  should  file  their  -orices.   Our  efforts  to  secure  this 
compliance  has  been  defeated  by  the  Executive  Order  itself  which  leads 
these  non-coo-oerative  members  to  assume  that  the  administration  does  not 
deem  it  is  good  policy  to  file  arices  and  abide  by  them  in  accordance  with 
code  provisions." 

b.   Attempts  to  Circumvent  the  Operation  of  the  Order. 

Various  devices  were  employed,  more  or  less  legally,  to  defeat  the 
purpose  of  the  Executive  Order. 

Statements  were  issued  attempting  to  dissuade  members  of  industry 
from  auoting  prices  to  governmental  agencies  below  those  they  had  filed. 
Code  Authority  Bulletin  No.  23  of  the  Gas  Appliance  Industry,  dated 
July  11,  1934,  and  sent  to  members  of  the  Industry,  stated  the  provisions 
of  the  Order  and  concluded  with  the  following  paragraph: 

"Prices  to  Governmental  Agencies  should  be  fair  and  reasonable 
prices.   The  member  of  the  Industry  is  not  warranted  in  selling 
products  of  his  manufacture  to  Governmental  Agencies  at  less  than 
cost.   It  is  our  hope  that  each  member  of  the  Industry  will  comply 
with  al""  provisions  of  our  Code  and  the  Orders  of  the  Administration. 
The  Industry  as  a  whole  and  each  member  of  the  Industry  will  be  damaged 
greatly  and  if  the  members  of  the  Industry  use  it  the  exception  per- 
mitted under  President  Roosevelt's  Executive  Order  will  result  in 


(*">   Code  History,  plumbing  Fixtures  Industry  pp.  60-61 
9826 


-  481  - 

destructive  price  competition. " 

Similarly,  a  code  authority  bulletin  dated  July  3,  1934,  sent  to  the 
members  of  the  suppliers,  furniture  and  optical  sections  of  the  scientific 
aoparatus  industry,  stated: 

"Our  members  before  availing  themselves  of  this  privilege  (to  bid 
as  much  as  15$  less  under  Executive  Order  #6767")  should  carefully 
weigh  its  advantages  or  disadvantages  on  the  following  points: 

"(a'1   This  order  is  in  the  form  of  a  privilege;  you  are  not  com- 
pelled to  take  advantage  of  it  as  it  is  purely  optional.   As  your 
discounted  prices  would  immediately,  upon  filing  the  same  at  this 
office  become  available  to  all  customers,  the  result  would  be  that  by 
giving  the  public  buyer  a  discount,  you  have  automatically  lowered 
to  all  customers  the  level  of  your  orices  in  all  brackets  to  the 
amount  of  your  discount.  (*) 

"(b)  Your  competitor  is  privileged  to  file  a  complaint  with  your 
manager  that  you  are  engaged  in  destructive  price  cutting. 

"(c)  Accourding  to  Article  II,  Section  1,  Schedule  C,  all  consumers 
must  be  given  the  same  prices.   Therefore,  your  filed  quotation  be- 
comes your  filed  price  effective  at  once  and  cannot  be  changed  for 
10  days.  (**) 

"(d)   This  of  course,  will  not  apply  to  franchise  items  whose  terms 
of  sale  are  determined  by   the  manufacturer  of  the  same. 

"(e)  All  members  arc  requested  to  report  any  violations  of  the  above 
at  the  earliest  possible  moment  which  will  be  investigated  at  once  by 
your  manager. 

"(f)  You  realize,  of  co-arse,  that  your  competitor  by  revising  and 
filing  his  -orices  to  you.  lower  level  can  then  reduce  the  same  by 
15$  and,  of  course,  the  next  competitor  can  also." 

On  Hay  5,  1934,  the  UIRA  stayed  the  privisions  relating  the  -orice 
filing,  customer  classification,  and  uniform  sales  terns  of  the  Code  for 
the  Rubber  Manufacturing  Industy,  in  so  far  as  they  applied  to  the  Mechanical 
Rubber  CrOods  Division.   This  action,  in  large  part,  grew  out  of  code  author- 
ity connected  with  Executive  Order  =£6767. 

Discussing  this  a.ction  of  the  board,  "RA  Press  Release  #11170,  dated 
May  3,  1935,  stated: 

nAt  the  hearing  held  Aoril  16  to  18,  testimony  adduced  clearly  showed 
abuse  of  authority.  .  .  The  hearings  relative  to  the  charges  were  con- 


(*0   This  is  a  misunderstanding  on  the  oart  of  the  code  authority  .  The 
order  did  not  have  the  meaning  here  given  to  it. 

(**)   Idem. 

9826 


-  482  - 

ducted  by  D.  V.    Nelson,  former  Assistant  tc  the  Chairman  of  the  N.I.R.B. 
His  findings,  reported  to  the  Beard,  were  as  follows: 

'"That  the  evidence  discloses:   a  participation  by  respondents,  both 
as  en  individual  code  authority  and  in  conjunction  with  the  Rubber 
Manufacturers'  Association  and  the  Code  Authority  for  the  Hubber  Manu- 
facturing Industry,  in  an  active  and,  for  a  time,  a  successful  attenrot 
to  obtain  concerted  action  among  members  of  the  Division,  particularly 
those  manufacturing  fire  hose,  to  disregard  the  -provisions  of  Execu- 
tive Order  6767 " 

On  January  23,  1935,  the  mechanical  rubber  goods  divisional  code  auth- 
ority sent  a  circular  letter  to  all  members  of  the  division  stating  that 
the  authority  had  taken  exception  to  Executive  Order  #6767,  which  permitted 
members  of  al^  codes  to  quote  prices  on  Government  bids  15fo   below  filed 
prices,  that  the  code  authority  had  requested  an  exemption,  and  that  pend- 
ing, such  action,  members  were  to  disregard  the  Executive  Order.  (*) 

On  February  5?  1935,  in  a  memorandum  to  the  dupty  in  charge  of  the 
code,  the  Code  Legal  Advisor,  commenting  on  this  release,  said: 

"The  Code  Authority  is  required  to  effectuate  the  policies  of  the 
Act  and  assist  in  the  administration  of  the  Code.   It  is  a  heinous 
disregard  of  their  functions  to  issue  such  a  statement  as  'pending 
such  ret  ion,  they  have  deemed  it  advisable  to  disregard  this  order' . 
This  is  an  illegal  and  unwarranted  act  asking  Industry  members  to 
uphold  prices  on  governmental  order  . . " 

This  action  of  the  code  authority  resulted,  before  the  provisions  of 
the  code  were  suspended,  in  a  boycott  of  a  jobbing  firm  which  attempted  to 
sell  to  the  City  of  Milwaukee  fire  hose  at  less  than  the  uniform  filed 
nrice.   This  firm  bid  about  Bfo   below  its  filed  price,  pursuant  to  Executive 
Order  $6767.   It  was  unable  to  fill  this  order  because  no  manufacturer 
would  sell  it  the  hose. 

Attempts  so  to  interpret  the  order  as  to  affect  its  operation  were 
made  by  certain  code  authorities.   Thus,  in  a  Bulletin  dated  July  16,  1934, 
discussing  the  Executive  Order,  the  code  authority  for  the  Macaroni  In- 
dustry stated:   nTHIS  DOES  NOT  PERMIT  YOU  TO  SELL  BELOW  COST  IN  VIOLATION 
OF  ARTICLE  VII  SECTION  5  OF  THE  MACARONI  CODE."   (The  caps  are  their)  This 
interpretation  was  issued  without  any  official  sanction.   When  the  issue 
fas  raised  (by^ahotherrcodeuauthofriiby),  the--HRA  Legal  (Division  ruled  that 
the  order  too::  -precedence  over  code  provisions  concerning  selling  below 
cost.  (**) 


(*)      Research  and  Planning  Code  Administration  Study  of  the  Rubber  Industry, 
page  42-3,  NRA  files. 

(**)   See  letter  to  A.  M.  Davis,  Counsel  for  the  Code  Authority  for  the 
Mayonnaise  Industry,  dated  July  23,  1934,  by  Lester  S.  Dame,  Asst. 
Deputy  Administrator.   This  letter  states:   "After  checking  with  the 
Legal  Division,  I  wish  to  advise  that  even  though  the  15fo   reduction 
of  said  price,  as  is  permitted  to  a  government  agency  under  Executive 
Order  6767,  represents  a  price  below  cost,  a  manufacturer  may  quote 

9825   such  a  price  "  N.  R.  A.  files 


w 


■'-  483  - 

More  might  be  quoted  to  the  same  general  effect.   In  addition  to 
this  industry  opposition,  there  was  considerable  divergence  of  opinion 
within  the  Administration  itself  as  to  the  policy  expressed  in  Order  6767, 
Nevertheless,  the  order  remained  in  force  throughout  the  remainder  of  the 
life  l.  the  cedes. 

C.   Other  Orders  Affecting  Price  Filing  Policy. 

Issuance  of  Office  Memorandum  228  had,  as  previously  shown,  definitely 
aligned  Administration  policy  with  the  proposition  that  the  proper  function 
of  price  filing  was  to  effectuate  price  publicity,  rather  than  price  con- 
trol.  A  series  of  other  policy  statements  followed  which,  while  primarily 
concerned  with  setting  limits  to  the  use  of  specific  control  devices  as 
such,  also  had  a  bearing  upon  price  filing  as  a  publicity  medium. 

1.   Customer  CI  ssification. 

The  first  of  these  policy  statements,  contained  in  Office  Memorandum 
No.  257  dated  July  20,  1934,  related  to  customer  classification.   The  gen- 
eral relation  of  this  subject  to  price  filing  already  has  been  indicated 
in  Chapters  Three  and  Four  above.   In  various  of  the  earlier  cedes,  provisions 
had  been  included  empowering  code  authorities  to  set  up  such  classifications, 
which  members  were  required  to  follow  in  reporting  their  prices.   In  pract- 
ice, such  mandator]/  classification  had  been  found  in  some  cases  to  work 
hardships  en  certain  classes  of  customers.   In  other,  the  traditional 
business  methods  of  individual  members  had  been  disrupted.   More  broadly, 
the  making  rigid  of  one  element  in  the  price  structure  was  seen  as  possibly 
facilitating  the  effectuating  of  general  price-fixing  agreements. 

Office  Memorandum  267  was  the  Administration's  answer  to  this  problem. 
Its  essential  features  were  as  follows: 

1.  The  code  authority  was  to  formulate  and  keep  current  a  suggested 
classification  of  types  of  customers. 

2.  The  classification  was  to  be  subject  to  the  disapproval  of  the 

administrator. 

j 

3.  ilo  members  were  to  be  required  or  coerced  into  putting  anv  custo- 
mer in  any  ^articular  class,  nor  w,^s  any  discount  for  any  class  to  be  re- 
quired of  any  member. 

4.  Each  memoer  was  to  be  free  at  all  times  to  classify  his  own 
customers  as  he  sam  fit. 

By  thus  making'  uossible  a  suggested,  but  net  mandatorv,  system  of  cust- 
omer classification,  the  Adminis tration  proposed  to  minimize  the  use  of  such 
classification  as  a  control  device;  but  to  the  extent  thrt  it  should  be  used 
by  members  in  reporting  their  prices,  the  effectiveness  of  price  filing  as 
a  medium  of  price  publicity  would  be  enhanced. 

2.   "Free  Deals"  or  Premiums. 

Another  problem  concerning  which  the  Administration  had  to  make  policy 

9826 


-  -  4:84  - 

determination  related  to  "free  deals"  or  premiums.   Kany  of  the  earlier 
codes,  in  the  days  when  price  control  provisions  were  more  readily  grant- 
ed, had.  prohibited  the  use  of  premiums.   If  control  of  -price  was  to  be 
the  objective,  obviously  such  patent  subterfuges  as  the  giving  of  free, 
items  or  premiums  of  significant  value  in  connection  with  the  sale  of 
articles  had  to  be  orhibited.   But  if  the  objective  was   simply  to  make 
all  dealings  known  and  above  board,  with  freedom  to  the  individual  to 
price  and  sell  his  goods  as  he  saw  fit,  a  complet  "ly  different  approach 
was  necessary. 

Office  memorandum  Ho.  316,  issued  December  6,  1934,  and  dealing 
with  this  matter,  stated  that 

"'.  .  .  the  uroper  way  to  prevent,  ..  .  evasion  of  any  trade  practice 
provision  (where  such  attempted  evasion  is  connected  with  premiums 
or  'free  deals'")  is  careful  drafting  cf  the  provision  in  question. 
For  example,  in  an  open  price  provision,  it  should  be  required  that 
all  terms  and  conditions  of  sale,  including  premiums  or  'free  deals' 
and  conditions  relating  thereto,  must  be  filed." 

Here  again  is  seen  &   suggestion  that  publicity  of  prices  be  employed 
as  one  means  of  abating  a  questionable  trade  practice,  rather  than  more 
rigid  methods  tending  to  price  control. 

3.  Advertising  Allowances 

Similar  to  the  situation  relating  to  premiums  is  the  question  of 
advertising  allowances;   Again  the  position  of  the  Administration,  as 
expressed  in  official  policy  statements,  was  that  there  should  be  free- 
dom to  act,  but  that  there  should  be  publicity  for  the  type  of  action  a 
member  of  an  industry  chose  to : take.   Office  i  emorandura  No.  326,  issued 
on  January  5,  1935,  said  that  the  remedy  for  evils  connected  with  the 
practice  (use  of  advertising  allowances  as  price  concessions'),  la3r  in 
part  in  "causing  that  Part  of  the  advertising  allowance  which  is  actually 
a  price  reduction  to  appear  in  prices  -  reported  prices,  if  the  industry 
or  trade  has  an  open  price  plan."   It  also  stated  that  the  part  of  the 
allowance  which  was  actuallv  a  payment  for  advertising  or  promotional 
service  should  apoear  as  such,  with  a  definite  description  of  the  service 
for  which  it  was  given. 

4.  Forward  Contracts 

The  problem  of   limitation  of   the  duration  of  forward  contracts  to 
sell  had  been  presented  to   the   Administration   on  a  number  of   occasions. 
Definite  policy  on   this  matter  was   announced  in  Office  Memorandum  Kb.    327, 
dated  January  10,    1935.      The   question   involved  may  be   summed  up  as  follows: 

Any  price  control  efforts  on  the  part  of  industry  groups  could  be 
effectively  hampered  if  members  could  make  long-term  contracts  to 
sell  at  a  fixed  price,  regardless  cf  later  market  changes.  There 
were,  therefore,  efforts  made,  particularly  because  of  the  rising 
market  which  in  many  industries  accompanied  the  life  of  the  KRA,  to 
have  code  provisions  established  a  limit  to  the  length  of  these  con- 
tracts.     Again,    in  the  policy  ueterraination  as    to   the  matter,    there 


-  485  - 


can  bo  seen  the  effort  on  the  Dart  of  the  Administration  to  apply  the 
principles  of  mibli city  without  control.   The  order  stated: 

"1.  NHA  policy  generally  aoes  not  favor  code  provisions  which 
would  limit  the  permissible  period  of  forward  contracts  to  sell. 

"2.   Policy  favors  provisions,  having  the  purpose  of  improving 
competitive  conditions,  which  require  the  filing  by  each  member  of 
an  industry  in  accordance  with  open  price  provisions  of  Office 
Ilemorandum  l\To.  228,  of  his  practices  as  to  forward  contracts  to  sell. 

"3.   In  cases  in  which  it  is  reasonably  clear  that  the  reouire- 
ment  for  filing  would  be  ineffectual,  provisions  which  would  limit 
the  duration  of  fcrvard  contracts  to  sell  may  be  approved  if  the 
following  conditions  are  met: " 

Then  arc  listed  six  conditions  which  required  that  the  maximum  contract 
period  (l)  be  "reasonable",  (2)  be  in  line  with  past  practice  in  the  in- 
dustry, (5)  take  into  account  special  cases  and  problems,  (4*)  be  not  of  a 
nature  as  to  create  compliance  problems,  (5^  be  not  of  such  a  nature  as  to 
render  employment  and  production  less  stable,  and  (6)  give  adequate  con- 
sideration to  the  effect  of  the  provision  upon  purchasers.  (*^ 

D.   Interpretations  and  Advisory  Opinions 

In  addition  to  the  official  orders  enunciating  policy,  various  inter- 
pretations and  opinions  expressed  by  the  Advisory  Council  (**^  touched  upon 
-price  filing  questions. 

The  Administration  position  that  publicity,  not  control,  w?s  the  aim 
of  -price  filing  was  reflected  in  -advisory  Council  o-oinions  concerning  the 
type  of  -products  on   which  -prices  should  be  filed.   If  control  of  prices 
is  the  objective,  -presumably  any  una  all  prices  should  be  filed;  if,  how- 
ever, the  air:-  is  merely  to  approximate  an  organized  marked  similar  to  the 
commodity  and  securities  exchanges,  certain  products  clearly  do  not  lend 
themselves  to  price  filing.   Among  the  latter  are  products  made  to  special 
specifications,  and  perishable  commodities  on  which  the  price  varies  con- 
siderably from  day  to  day  depending  upon  the  \xo  ily  which  must  be  disposed 
of.   The  first  type  of  product  is  dealt  with  in  a  decision  of  the  Council 
which  was  given  in  response  to   the  following  question  from  a  Deputy  Ad- 
ministrator in  charge  of  the  Hon-iietallic  Products  Section:   "Where  codes 
provide  for  open  price  filing,  is  it  a  requirement  that  members,  of  industry 
file  -prices  quoted  on  orders  placed  with  definite  specifications  given?" 

The  reply  by  the  Council  was: 

"It  is  the  sense  of  the  Council  that  the  Code  Authority  should 
not  require  the  filing  of  -prices  on  products  which  are  manu- 
factured on  unique  specifications  until  such  time  as  there  are 

(*)      Por  the  full  text  of  Office  uemoranda  ::os.  316,  326  and  327  see 
Exhibit  V  of  Appendix  "E" 

(**)      Set  up  to  advise  the  /Tational  Industrial  levocery  Board  on  policy  matter. 

9826 


-  -x6S  - 

recurring  salesof  such  products  -  in  ether  words,  an  onen  urice 
filing  provision  may  be  applied  logically  only  tc  such  products 
as  enter  regularly  into  channels  of  trade.   '.There  there  are  no 
persisting  and  recognized  specifications,  there  appears  to  be  little 
value  in  price  filing."  (*) 

A  case  in  which  the  advisory  council  expressed  its  doubts  as  to  the 
applicability  of  Drice  filing  to  perishable  products,  other  than  nerhaps 
the  reporting  of  past  "orices,  concerned  the  cede  for  the  southeast  fish 
and  shellfish  oreparing  and  wholesaling  industry. 

Price  filing  orovisions  were  "revised  to  restrict  the  obligation  of 
the  trucker  (as  opposed  to  the  established  wholesaler;  there  was,  appar- 
ently, such  dispute  and  friction  between  these  two  groups)  to  one  of 
regularly  reporting  at  the  close  of  each  day,  to  the  appropriate  agent, 
the  ouantity  of  each  community  sold,  at  each  price  term,  ra.ther  than  to 
comoel  him  to  file  prices  in  advance  of  sales  and  to  adhere  to  filed 
prices; " 

Said  the  Council?  " the  change  from  advance  price  filing  by         I 

truckers  to  :>rice  reporting  upon  conclusion  of  sales  is  an  improvement, 
even  though  the  whole  effort  in  such  an  industry  is  still  regarded  as  high- 
ly doubtful "(**•) 

As  has  been  noted  above,  one  of  the  cardinal  -ooints  of  Office  Memo- 
randum No.  228  was  that  the  price  filed  should  be  made  available  to  pro- 
spective purchasers,  as  well  as  to  industry  members.   The  t>roposed  code 
for  the  clock  manufacturing  industry  followed  Office  Memorandum  Ilo.  228 
for  the  most  part,  but  did  not  orovice  for  giving  price  data  to  consumers, 
and  in  one  pi-  ce,  provided  that  price  must  not  be  lower  than  (instead  of 
other  than^  those  filed.   Because  of  these  deviations  from  announced  policy, 
the  matter  was  brought  to  the  attention  of  the  advisory  council.   The  de- 
cision of  the  council  concerned  ifself  for  the  most  part  with  the  desire 
of  the  Industry  to  withheld  prices  from  buyers. 

The  industry  contended  the  t  large  buyers  would  -oress  to  the  utmost 
for  price  reductions  and  stated  specifically  that  if  all  their  price  lists    ' 
to  jobbers  and  chain  stores  were  ooen  to  chain  stores,  the  latter  would 
insist  not  only  on  as  low  a  price  as  anv  joboer  wf.s  sold  but  on  a  lower 
price  because  of  quantity  pruchases. 

The  decision  of  the  council  reads  in  part  as  follows: 

" The  possibility  that  an  entirely  open  price  would  not  work  to 

the  Industry  advantage  is  no  warrant  for  oermitting  the  Industry  to 
pick  and  choose  parts  of  oolicy  that  taken  alone  would  give  it  in 
turn  an  unfair  advantage.   The  obligation  of  distributing  trices  to 
customers  is  the  responsibility  that  goes  with  the  privilege  of  a 
free  exchange  of  prices  among  sellers.   To  take  one  without  the  other 
was  never  contemplated  by  police  and  would  in  fact  amount  to  the 
declaration  of  a  new  policy.   All  other  industries  would  be  entitled 
to  claim  it  as  a  precedent  and  thereby  nrovide  themselves  with  a 

perfect  sta~e  setting  for  price  collusion."  (***) 

(*)      I  bid,  raage  87,  Decision  No.  92,  November  9,  1934. 

(**)      I  bid,  Page  318,  Decision  No.  196,  March  18,  1935. 

(***)   "Decisions  of  the  Advisory  Council",  page  235.   Office  of  L.  C.  Karhsal 
Head  of  Division  of  Review,  N3A,  and  formerly  Executive  Secretary  of 


-  487  - 

Accordingly,  the  council  recommended  refusal  cf  the  orot>osed  plan  on 
the  basis  of  its  bei  ig  contrary  to  policy. 

Similarly,  if  as  Office  .cranium  No.  228  stated,  a  free  and  onen 
market  was  the  aim  cf  price  filing,  the  code  authority  could  net  be  em- 
'0C"rQred  to  suspend  urice  filing;  such  a  procedure  was  too  susceptible  to 

I    s  involving  price  control.   Therefore  the  council  recommended  dis- 
approval r'hen  the  spinning  industry-  sought  an  amendment  which  followed  the 
Office  ivieinoranduia  in  most  particulars  but  which  provided  that  the  code 
authority  could  susp.end  any  price  it  found  to  be  willfully  destructive. 
The  suL-oe.i^ion  was  to  be  for  8  aa-s,  and  could  be  extended  by  the  Adminis- 
trator.  The  council  said  this  out  too  much  cower  in  the  hands  of  the  code 
authority.   It  also  said,  hovever,  that  the  request  evidenced  a  uerhaps 
justifieu  need  for  some  sound  method  of  dealing  quickly  with  genuinely 
destructive  "orice  cutting.  ("0 

Office  Memorandum  228  provided  that  price  changes  were  to  become 
effective  immediately  uoon  filing.   2e  sons  for  elimination  of  the  wait- 
ing period  given  b~r  Mr.  Leveret  Lyon  in  the  memorandum  accompanying  the 
proposed  draft  of  Ho.  228  have  been  noted  above.  (**)      The  attitude  of  the 
advisory  council  on  this  joint  is  illustrated  from  the  following  with  re- 
spect to  a  uroioosed  amendment,  in  which  the  lime  industry  accented  Office 
Memorandum  No.  228' s  price  filing  provisions,  except  that  it  insisted  on 
a  waiting  ->?eriod.   It  advanced  the  usual  argument  that  it  would  prevent 
"nrice  forays, ■"   The  council  said  that  it  had  "considerable  resnect"  for 
"the  oft  cited  argument  that,  sines  the  usual  incentive  to  reduce  prices 
is  the  chance  to  get  more  business,  the  effect  of  the  waiting  neriod  in 
warning  each  member  of  the  industry  that  any  orice  reductions  are  likely 
to  be  met  and  therefore  to  be  without  advantage,  will  merely  be  to  main- 
tain urices.   That  is  not  a  function  of  open  price  systems  as  the  Adminis- 
tration conceives  them.   The  council  doe;  not  oresume  to  offer  this  single 
point  as  closing  the  cases  for  waiting  periods,  but  does  stand  on  the 
ground  that  the  point  is  a  strong  one   and  that  r>olicy  is  still  against 
them.   The  council  recommends  that  the  waiting  period  be  deleted  from  the 
ODen  price  provisions."  (industrial  Advisory  Board  dissented  as  to  both 
premises  and  conclusions.') 

The  National  Industrial  Recovery  Board,  however,  subseauently 
approved  the  waiting  period  in  this  code,  the  recommendation  of  the 
advisory  council  to  the  contrary  notwithstanding.   An  extensive  search 
has  been  made  in  the  files  to  ascertain  the  reason  for  the  reversal  of 
the  council's  recommendations,  but  no  information  on  the  matter  has  been 
secured. 


(■O   I  bid,  Page  186,  Decision  No.  146, January  9,  1935. 

(**)      See  Section  LLL,  a,  1,  of  this  Chapter. 

(***)      I  bid,  Fage  322,  Decision  So.  198,  ,  arch  2' \  1935. 

9826 


-  488<  - 

IV.   VIEWS  ON  PRICE  FILING  ^CLICY  IF  THE  FINAL  DAYS  OF  NRA. 

The  preceding  pages  have  outlined  the  trend  of  development  of  a  def- 
inite -oo  1  icy  on  the  part  of  the  Administration  as  a  whol°  with  respect  to 
price  filing,  this  policy  bping  concerned  chiefly  with  throwing  various 
safeguards  around  the  open  price  provisions  approved,  in  order  to  prevent 
tneir  undue  use  as  devices  for  price  control.  That,  despite  this  develop- 
ment, there  still  remained  varying  attitudes  upon  the  question  among  dif- 
ferent elements  within  the  Administration  itself,  tc  the  very  end  of  its 
existence,  is  evidenced  by  significant  expressions  of  opinion  noted  below. 

A .   Open  Price  Policy  as  Discussed  at  the  Senate  Finance  Committee 

Hearing  on  th^  NRA,  L'nrch  1935 . 

At  the  hearings  held  before  ta^  Senate  Finance  Committee  during 
March,  1935,  with  respect  to  various  aspects  of  NRA,  questions  concerning 
the  price  filing  provisions  were  raised  by  certain  senators. 

Replying  to  queries  of  Senators  Couzens  and  King.  Mr.  S.  Clay  Williams, 
then  Chairman  of  the  National  Industrial  Recovery  Board,  said: 

"...  there  is  not  anything  in  an  open  price 

provision  in  a  cod"  that  fixes  prices 

There  is  an  argument  that  it  is  desirable  that 
the  purchasers  of  any  commodity  in  this  country 
should  know  what  (price)  that  commodity  is 
moving  t?  others  at .  .  .  ."(*) 

Mr.  Williams  continued: 

" .  .  .If  an  industry  comes  forward  and  says  that 
a  majority  of  the  industry  is  in  favor  of  open 
price  publication  or  an  oien  price  clause,  I 
have  been  willing  to  say,  'well,  all  right  with 
me  if  you  want  it.'"(**) 

He  continued  by  saying  that  one  argument  advanced  for  open  prices 
is  that  they  tend  to  prevent  one  producer  from  gobbling  up  the  market  at 
a  secret  low  price.   This,  he  said,  was  held  by  some  to  be  undesirable 
since  it  would  mean  concentration  of  business  and  dislocation  of  business 
in  plants  not  getting  the  orders.   He  said  he  f=lt  this  argument  was  im- 
portant enough  to  outweigh  the  possible  coercion  of  persons  filing  low 
prices,  as  contended  by  opponents  of  open  prices. 

The  questioning  continued: 

Senator  Cousens:  "Is  he  (a  member  of  an  industry  which  has  to  post 
prices)  not  fearful  of  doing  it  (posting  a  lover  price)  because  he  would 
drag  the  others  down  and  not  get  the  business  anyhow?" 

Mr.  Williams:   "I  believe  he  is." 
(*)" Investigation  of  the  National  Recovery  Administration",  Hearing  Before 
the  Finance  Committee  of  the  U.  S.  Senate,  March,  1935,  page  246. 
(**)   Ibid. ,  page  247. 


-  489  - 
....Senator  George:   The,  -price  posting  has  been  done  at  least 

with  the  hope  of  keeping  the  price  "up. 

....-  Mr.  Williams:   "I  assume  that  a  great  many  peoole  who  were 
favorable  to  price  posting  were  of  the  opinion  that  it  would  not  be  hurt- 
ful to  -prices  ...  ."  (*) 

Mr.  Williams  was  asked  concerning  the  identical  bids  which  Government 
agencies  had  received,  and  if  this  did  not  indicate  that  competition  had 
b-en  eliminated.   He  reolied  that  he  thought  not;  that  the  identical  bids 
came  from  the  fact  that  all  oid  the!  lowest  -price  on  file;  he  contended 
that  had  there  not  b^en  price  filing,  bids  would  have  been  higher;  he 
said  that  "The  posting  of  trices  t»nds  to  bring  your  bids  down." (**) 

The  question  was  raised  by  Senator  Slack  whether  permission  to  have 
a  price  filing  system  should  b°  granted  by  an  administrative  organiza- 
.  tion  like  the  KRA  or  by  Congress.   Mr.  Williams'  answer  was  that  he  thought 
it  was  administratively  impossible  for  Congress  to  do  it;  that  only  a 
body  like  th<=  MA  cculd  investigate  the  particular  situation  in  an  in- 
dustry and  find  out.(***) 

The  general  view  of  -price  filing  her--  expressed  differs  little  from 
that  held  by  proponents  of  o^en  price  systems  in  the  first  days  of  the 

KRA. 

B .   Policy  Views  of  Various  Groups  Within  th-  Admi nls tration . 

\ 
Other  coints  of  view  expressed  in  th-  oeriod  immediately  preceding 
th*-  Schechter  decision,  and  illustrating  both  divergences  and  agreements 
of  opinion  as  to  different  aspects  of  price  filing  policy,  are  outlined 
in  the  suosections  below.   Qertain  of  these  expressions  were  the  result 
of  direct  requests  by  the  Administration  for  oolicy  recommendations. 

In  April  1935,  the  Code  Planning  Committee  was  appointed  to  consider 
the  oolicy  to  b^  followed  in  the  revisions  of  codes  which  it  was  ex- 
pected would  oe  mad-  after  the  anticipated  renewal  of  th-  NIRA  by  Congress. 
Colonel  Salter  Mangurn,  Chairman  nf  this  Committee,  requested  suggestions 
from  the  Advisory  Boards  and  Divisions  concerning  oolicy. 

1.   Consumers'  Advisory  Board  Recommendatinns 

On  May  8,  Mr.  Corvin  D.  Edwards,  Technical  "ir-ctor  of  the  Consumers' 
Advisory  Board,  in  a  memorandum  to  Mr.  H.  Ferris  White,  Chairman  of  the 
Administration  Subcommittee  of  the  Code  Planning  Committee ,  said: 

"...  the  Consumers'  Advisory  Board  believes  that  an 
open  price  system  which  includes  publicity  for  the 
pric-s  of  individual  concerns  is  so  capable  of  abuse 
that  the  -presumption  is  against  it." 

(*)   Ibid.,  page  250.   . 
(**)   Ibid.,  pages  268-270. 
(***)   Ibid.,  pages  280-281. 


-  -4SD-. 

He  referred  in  this  connection  to  the  resolution  of  the  executive  com- 
mittee on  the  Consumers'  Advisory  ?card,  passed  en  Aoril  19,  1935. 

This  resolution  expressed  fundjjnental  opposition  to  the  open  orice 
policy  hitherto  employed  by  NRA,  evf'-n  as  modified  by  Office  Memorandum 
No.  228.   The  statement  contended  that  reporting  snould  be  limited  to 
past  transactions  and  that  the  information  circulated  to  participants 
in  the  reporting  system  snould  b°  i\i  the  form  of  summaries.   It  stated 
that  in  its  view  even  an  o'ien  pric°  system  so  limited  would  serve  no  de- 
siraole  public  nurpose  in  many  markiets  in  which  monopoly  exists. 

In  an  earlier  report,  d->t  =  d  >-'>ril  22,  1935,  to  Colonel  Mangum,  Mr. 
Edwards  had  stated  that  if  current  prices  were  to  be  reported  and  sellers 
were  to  be  identified,  the  provisions  of  Office  Memorandum  #228  were 
satisfactory.   In  this  memor"ndum  also,  however,  he  stressed  the  im- 
portance of  the  non-identifying,  summary -only ,  oast-transactiois  type 
of  r>ric°  reporting,  contending  tliat  this  type  was  capable  of  much  less 
abuse  than  the  kind,  provided  in  Office  Memorandum  #228. 

Thus  it  will  oe  se^n  that  chis  board,  which  ^rior  to  the  issuance 
of  Office  Memorandum  No.  228  hptd  argued  strongly  for  the  tyoe  of  orice 
filing  set  un  in  that  memo  rand' am ,  after  the  issuance  of  this  policy 
statement  moved  still  furtner  in  the  direction  of  safeguarding  the  device, 
to  the  noint  of  favoring  non-identif ication  cf  sellers. 

2.   Research  and  Plann.ing  Division's  Recommendations 

In  connection  with  Col.onel  Mangum 's  request  for  suggestions  from 
the  Research  ^nd  Planning  division,  a  memorandum  ireoared  by  C.  A.  Pearce 
and  transmitted  through  Mr-.  James  Hughes  conveyed  certain  suggestions 
concerning  the  general  pr  jblem  of  orice  filing. 

His  report  endorsed  the  price  filing  uolicy  set  forth  in  New  Series 
No.  1,  d"t»d  Aoril  23,  :.935,  (discussed  later  in  this  section),  and 
stressed  the  importance  of  certain  ooints  made  therein.   It  emohasized 
the  importance  of  the  filing  of  all  terms  and  conditions  of  sale  as  well 
as  the  filing  of  nomin.al  prices,  if  price  filing  was  to  be  employed  at 
all.   The  reoort  stressed  that  this  did  not  imply  that  price  terms  and 
conditions  should  be  made  uniform  by  code  restrictions;  on  the  contrary 
it  contended  that  it  was  of  importance  that  members  of  the  industry  have 
freedom  in  determinr jtion  of  terms  and  conditions.   Summarizing  this  po- 
sition, the  report  said: 

"I.t  is  felt  that  unless  it  is  demonstratively  prac- 
ticable to  file  all  th°  terms  and  conditions  of  s^le 
Cised  by  members  of  a  given  industry,  a  price-filing 
*6ystem  for  that  industry  is  not  acceotable.11 

If  the  aoove  conditions  were  met,  the  report  continued, 

"It  was  unobjectionable  to  pronibit  subterfuges  which 
would  make  it  possible  to  sell  at  less  than  filed  prices." 

Unless  ti'iere  mas  considerable  standardization  in  industry  products 
9826 


-  491  - 

it  would  be  impossible  to  compare  items  on  wnich  prices  were  filed,  it 

was  stated,  and  the  objective  of  DUJlicity  of  prices  would  not  be  achieved; 

therefore,  the  report  continued,  tnera  was  no  point  in  having  a  price 
filing  plan  in  such  an  industry. 

The  report  also  stated  that  nrice  filing  provisions  should  be  ap- 
proved in  cod-s  only  if  the  Administration  were  "satisfied  that  they 
(the  price  filing  provisions)  would  not  add  an  element  of  inflexibility 
to  tne  -nric^  structure  or  be  a  subject  of  abuse." 

In  thos=  industries  where  "dangers  of  abuse  or  of  unfortunate  ec- 
onomic consequences  may  be  anticipated,"  the  report  recommended  that  the 
extent  of  price  publicity  be  confined  to  the  reporting  of  past  trans- 
actions and  their  dissemination  in  such  =i  way  as  to  be  unidentifiable. 

The  importance  of  the  complete  impartiality  of  the  receiving  agent 
was  emphasized,  as  was  also  the  necessity  for  having  supervision  of  the 
operation  and  results  of  th»  plan  oy   the  Administration. 

3.   Oube.r  °clicy  Recommendations 

While,  as  has  been  previously  snown,  th-  waiting  period  was  regarded 
with  disfavor  by  the  Administration  generally  after  the  issuance  of 
Office  kemor-ndum  No.  228,  it  found  defenders  witnin  the  NRA  to  the  last. 
In  a  memorandum  dated  May  8,  1935,  Ovid  E.  Roberts,  Jr.,  Chairman  of  the 
Sub-committee  on  Trade  Practice  Provisions  wrot^  to  the  chairman  of  tne 
Code  Planing  Committee;  ",...  It  is  recognized  that  certain  industries 
nave  fairly  met  the  requirements  of  true  competition  where  as  much  as  a 
ten  d^y  waiting  period  has  oeen  provided.   Your  Committee  submits  that 
tiiere  are  certain  justifications  for  this  waiting  period  which  may  not 
be  lightly  egnored.   Essentially  this  is  true  in  tne  cas°  of  industries 
made  up  of  firms  which  do  a  nationwide  business." 

Tne  memorandum  went  on  to  state  that  it  should  not  be  th°  policy 
of  the  administration  to  encourage  the  use  of  waiting  periods,  but  that 
wher«  tney  were  justified,  they  should  be  safeguarded  by  a  provision 
making  it  an  unfair  trade  practice  to  ex°rt  any  influence  "inconsistent 
with  the  maintenance  of  a  free  and  open  market." 

C.  Pinal  Statement  of  NPA  Price  Filing  Policy. 

Wbat  may  be  taken  ^s  the  final  official  statement  of  the  Administra- 
tion as  to  the  ends  to  be  served  by  an  op^n  price  system,  its  essential 
characteristics  and  field  of  use,  appeared  barely  a  month  before  the 
Supreme  Court  decision  invalidating  the  Recovery  Act.  This  was  in  "Ad- 
ministrative Policy",  New  Series  TTo.l',  issued  by  the  National  Industrial 
Recovery  Board  on  April  23,  1935,  "to  expedite  administrative  procedure." 

The  portion  of  this  document  dealing  with  price  filing  was  summar- 
ized in  a  digest  of  NRA  policy  prepared  by  Mr.  Alvin  Brown  of  tne  Review 
Division  snort ly  after  the  decision. 

This  summary,  portions  of  which  are  quoted  below,  shows  increased 
clarity  both  with  respect  to  the  function  of  price  filing  and  with  respect 


9826 


-  49'3  - 

to  the  safeguards  npcDssqry.   The  summary  is  quoted  here  in  order  to  give 
a  conplete  view  of  the  position  .-\ hich  th«  NB.A  held  on  open  ->rice • systems 
at  the  end  of  two  years  of  exr,eriiT"=ntntion  with  them. 

"Open  -Price  Filing. 

0-nen  price  filing  is  a  mere  device.   Its  potentialities 
for  benefit  or  mischief  depend  upon  the  pumose  to  which 
it  is  put  and  the  methods  which  attend  its  use.   The  stand- 
ard oy   which  it  should  be  judged  is  price  making  similar 
to  that  afforded  by  an  own  and  competitive  market,  such 
as  an  organized  commodity  excnange. 

" Objectives  of  Price  Filing . 

•  The  ideal  of  an  open  and  competitive  market  .can  seldom 
be  fully  attained.   It  is  no^ed  to  approximate  its  object- 
ives by  open  price  filing  under  appropriate  circumstances. 
It  is  possible  for  the  or>en  file  to  allow  ouyers  and  sellers 

.  to  accomodate  their  activities  to  competitive  conditions, 
to  fix  limits  to  the  snread  of  quotations  at  any  given  time, 
and  to  tend  to  make  price  perform  its  industrial  function. 
Open  price  filing  snould,  so  far  as  possible,  be  made  to 
furnish  a  public  record  of  nrice  movements,  provide,  a  check 
on  discrimination  among  customers,  give  the  small  enter- 
priser information  about  the  activities  of  his  larger  com- 
petitors, reduce  the  amount  of  deception  among  buyers  and 
sellers,  give  the  parties  concerned  a  fuller  knowledge  of 
conditions  affecting  the  market,  and  promote  and  safeguard 
the  integrity  of  the  process  of  competitive  price  making. 

11  Essential  characteristics 

'The  following  are  the  essential  characteristics  of  an 
open  price  provision: 

"The  filing  agency 

An  impartial  and  confidential  body  should  be  the  ad- 
ministrative agency  in  order  that  price  lists  may  be  dis- 
tributed to  members  of  the  industry  and  to  their  customers 
without  partiality  and  without  efforts  to  influence  the 
quotations.   If  the  body  is  a  private  agency,  its  activities 
must  be  subject  to  the  immediate  oversight  of  the  Govern- 
ment . 

"Publicity 

The  prices  must  be  genuinely  nvailable  to  all  customers 
and  members  of  the  industry,  together  with  the  name  of  the 
seller  whenever  it  is  necessary  to  an  identification  of 
the.  quality  of  the  product. 


9926 


*.  493'- 

" Dpfinite  prices. 

The  filed  prices  must  be  tnose  at  which  sales  ire  ac- 
tually to  tnkel'ice,  rather  than  merely  minima  above 
which  members  of  an  industry  may  secretly  vary  their 
prices  as  they  choose,  or  maxima  from  which  discounts  are 
to  be  allowed. 

11  Identification  of  -product . 

The  various  qualities,  styles,  and  sizes  of  the  nro- 
duct  must  be  capable  of  identification. 

"Complete  filing. 

Since  --my  on-  of  -the  terms  of  sale  may  be  employed 
to  vary  the  actual  sales  price,  all  such  terms  -  quality, 
quantity,  style,  size,  discounts,  mint  of  shipment, 
classes  of  customers,  manner  of  Payment ,  and  so  forth  - 
must  be  fil-d  in  precise  and  definite  terms. 

"The  field  for  use  of  open  pricing. 

1 ' Unfavoraol e  f i_e  1  ds  . 

Open  "rice  systems  should  not  be  indiscriminately 
applied  to  the  entire  range  of  American  industry.   This 
device  may  require  much  effort  and  give  little  usable 
information  where  — 

(1)  Commodities  differ  so  widely  in  quality,  character, 
and  accompanying  s-rvices  that  prices  are  likely*  to  ■ 

.  vary. .with  each  sale. 

(2)  Where  the  number  of  concerns  and  products  is  very 
large . 

(3)  Where,  through  custom  or  convenience,  prices 
remain  stable  and  market  changes  lie  mostly  in  the 
character  of  the  goods  cold. 

(4)  Where  commodities  are  highly  perishable  and  their 
supply  fluctuates  rapidly. 

(b)  .here  the  natur-  of  the  product  makes  identifi- 
cation of  quality,  style,  or  size  difficult. 

" Favorable  Fields . 

On  the  other  nand,  the  feasibility  of  an  o^en  nrice 
system  increases  insofar  as  nrice  competition  is  active, 
the  products  of  th<=  industry  can  be  clearly  identified, 
and  price  cnanges  are  frequently  without  being  incessant. 


0826 


-  434  - 
"Factors  to  o»  Considered. 

Consideration  should  be  given  to  thp  following  factors: 
^l)  Frequency  ana  extent  of  price  change. 

(2)  Comolesity  of  terms  of  sale. 

(3)  Ease  of  identifying  the  product. 

(4)  Number  and  geograpnical  diffusion  of  members  of 
the  industry. 

(5)  Degree  of  price  competition. 

(6)  Economic  importance  of  the  oroduct . 

(7)  In  some  instances,  as  where  the  finished  product 
•  of  one  industry  is  the  raw  material  of  another,  the 

conditions  in  correlative  industries. 

'"Where  open  price  systems  snould  be  avoided. 

In  certain  industries,  open  pric  =  systems  involve  such 
probabilities  of  serious  abuse  that,  even  though  they 
are  feasible,  th°y  should  be  avoided.   These  are  in- 
dustries in  which  the  need  is  to  preserve  competition 
against  attack.   Such  is  an  industry  in  which  the  dom- 
inance of  an  enterprise  or  groun  is  intimidating  to 
smallei  independents,  or  one  in  which  the  chief  ob- 
stacle to  collusion  is  the  difficulty  of  devising  mach- 
inery for  price  understandings.   The  field  for  open 
pricing  is  that  in  which  competition  tends  to  be  ac- 
tive, but  ill-informed  and  chaotic;  not  that  in  which 
competition  tends  to  evolve  into  monopolistic  restraint. 

" Waiting  Period 

A  waiting  period  is  likely  to  freeze  a  competitive 
process  which  should  be  kept  active.   In  an  open  market 
there  is  no  counterpart  of  such  a  device.   When  prices 
are  rising,  a  flood  of  orders  during  a  waiting  period  may 
unsettle  a  future  market.   V/hen  prices  are  too  high,  the 
incentive  to  reduce  them  may  be  lessened  by  knowledge  that 
competitors  may  destroy  most  of  the  sales  advantage  before 
reductions  can  become  effective.,  Therefore,  the  general 
presumption  must  he  against  the  use  of  the  waiting  period, 
and  the  burden  of  proof  is  upon  the  industry  which  wisnes 
to  employ  it. 

"Br'St  case  for  waiting  period. 

Probably  the  best  case  for  a  waiting  period  can  be 
made  for  industries  in  which  sales  are  of  large  size  and 


9826 


-  495  - 

smf.ll  number,  members  are  many  and  widely  scattered,  and 
information  about  price's  cannot,  for  some  reason,  b^  quickly 
circulated. 

"Limit  on  frequency  of  mice  change. 

In  industries  where  trices  immediately  effective  are 
manipulated  for  the  purpose  of  allowing  large  discrimin- 
atory discounts  to  ">i  ivil^ged  customers,  it  may  be  neces- 
sary to  imoose  some  limit  uion  the  frequency  of  price 
change.   In  such  rare  cases  this  can  be  done  by  requiring 
that  a  price,  once  effective,  must  remain  so  for  some  re- 
asonable minimum  period." 

The  policy  statement  of  April  23,  1935,  also  considered  the  de- 
sirability of  the  compilation  of  unidentifying  summaries  of  prices 
based  u  -on  past  transactions  and  stated  that  this  method  of  price 
reporting  involved  neitner  the  technical  difficulties  nor  the  pos- 
sible abuses  that  might  arise  in  the  reporting  of  current  nrices. 
It  said:   "There  may  b<=  many  industries  in  which  the  -nds  of  public 
policy  will  be  adequately  served  ..."  by  these  price  summaries. 

The  board  concluded  by  stating  that  it  f<=lt  that  the  ^rice  filing 
d^vicp  should  be  perfected  .and  guarded  against  abuse. 

A  month  and  four  days  following  this  pronouncement  the  codes 
ceased  legally  to  exist. 


9826 


-  496  - 


APPENDICES 


9826 


-  497  - 
Appendix  -  A 

Price  Filing  in  the  Asphalt  and  Shingle  Roofing  Industry 

CHAPTER  I 

DE1EL0PLEIIT  OF  THE  MODERN  INDUSTRIAL 

AND 
REGULATORY  SETTING 

The  Asphalt  Shingle  and  Roofing  Industry  dates  hack  to  about  the 
middle  of  the  nineteenth  century,  but  development  was  slow  until  19no. 
Tn?  first,  trade  association  was  organized  in  1916  and  according  to  a 
statement  made  some  thirteen  years  later,  the  purposes  were  as  follows: 

"The  essential  purposes  of  the  association  were  stated 
by  the  secretary  to  be  the  general  development  of  the 
industry  and  to  increase  consumption  of  the  member's 
products;  simplification  and  standardization;  obtain- 
ing better  freight  rates;  the  development  of  statistics; 
industrial  research;  and  work  leading  up  to  a  national 
advertising  and  publicity  campaign."  (*) 

It  must  be  horn  in  mind  that  this  statement  followed  by  a  number  of 
years  the  establishment  of  the  association  and  the  probability  is  that  all 
of  these  activities  were  not  anticipated  at  the  outset.   By  1923  or  1924 
thirteen  members  reported  their  costs  to,  and  received  summarized  reports 
from,  the  association.  (**) 

I.   THE  ASPHALT  SHINGLE  AND  ROOFING  ASSOCIATION 

On  January  1,  1926,  the  Prepared  Roofing  Association  moved  its  head- 
quarters from.  Chicago  to  New  York  and  changed  its  title  to  the  Asphalt 
Shingle  and  Roofing  Association  because  "the  old  name  did  not  correctly 
describe  the  business  of  the  members."  (***)   These  changes  in  no  way  in- 
dicated the  death  of  the  old.  organization,  but  rather  a  strengthening  of 
the  lines  and  in  general  the  creation  of  a  more  closely  knit  unit.   It 
is  more  likely  that  the  aims  and  purposes  of  the  Association,  as  quoted 
dj   the  association  secretary*  are  descriptive  of  this  body  rather  than 
the  previous  one. 
(a)  Size 

The  membership  of  the  organization  is  reported  by  the  Federal  Trade 
Commission  in  its  report  of  1929  as  being  27,  which  number  represented 
about  75  per  cent,  "oj   number,  of  the  concerns  engaged  in'  this'  line  of 
business.   Applying  that  percentage,  there  were  at  that  time  about  36 
members  of  the  industry  and  all  but  nine  belonged  to  the  Association. 


(*)   Federal  Trade  Commission,  Open  Price  Trade  Associations,  1929, 
pp.  429-450. 

(**)   Ibid,  p. 429 
(***)  p. 429,  Ibid. 


9825 


-  493  - 

In  the  same  report  it  is  stated  that  the  membership  of  the  Associa- 
tion represented  "about  65  per  cent  of  the  volume  of  "business  as  measured 
by  sales."  This  figure  would  appear  to  he  conservative;  inasmuch  as  the 
Association  included  in  its  membership  five  of  the  six  larger  concerns 
and  the  largest  single  industry  member,  85  per  cent  of  the  production 
would  seem  to  be  a  more  accurate  estimate.  At  the  lower  figure  a  situa- 
tion would  exist  in  which  a  majority  of  the  larger  concerns  roughly  five- 
sixths,  and  a  majority  of  the  smaller  concerns,  roughly  three-f ourths, 
produced  less  on  an  average  than  the  minority  element. 

B,   Activities 

The  cost  reporting  and  the  dissemination  of  summarized  costs  under- 
taken by  the  Prepared  Roofing  Association  (*)  did  not  prove  to  be  a  worth 
while  venture,  and  before  the  association  reorganization,  the  activity 
had  been  discontinued  for  want  of  interest.   After  the  reorganization  had 
been*  completed,  activities  tending  to  keep  the  members  better  informed  as 
to  the  status  of  the  industry  and  their  particular  positions  within  the 
industry  were  begun.  Among  the  various  enterprises  were: 

"Statistics.  The  Association,  according  to  the 
character  of  the  returns  made  by  members,  dis- 
tributes each  month  reports  of  shipments,  in  four 
classes  and  a  total,  and  shows  the  distribution 
by  states.  With  the  summarized  reports,  the 
Association  returns  to  each  member  his  original 
report  to  the  Association.   The  Association  also 
issues  a  weekly  report  of  orders  for  the  four 
classes,  with  comparison  for  identical  concern 
with  the  previous  month  and  the  corresponding 
month  of  the  previous  year  collected  and  handled 
in  the  same  way  as  the  shipment  reports. 

The  Survey  of  Current  Business  publishes  monthly 
shipments  of  "prepared",  based  on  the  Association 
data  prorated  to  100  per  cent 

Prices.-  Whenever  a  member  issues  a  price  list  to 
the  trade  he  sends  80  copies  to  the  Association, 
which,  in  turn,  sends  a  copy  to  each  member.   If 
a  change  is  made  in  any  list,  the  manufacturer  notifies 
the  secretary,  who  in  turn  notifies  each  member. 


Others.-  The  Association  is  interested  in  simplifica- 
tion and  standardization,  and  has  a  research  associate 
at  the  Bureau  of  Standards.   A  revised  simplified  pra- 
ctice plan  was  put  into  effect  by  the  Association  late 
in  1927.   It  has  a  committee  to  cooperate  with  the 
Department  of  Commerce.   A  cooperative  advertising 
campaign  is  contemplated."  (**) 


(*)   Supra,  p.  A-l 
(**)   Federal  Trade  Commission,  Op.cit.,  pp. 4-29-430 
QRPfi 


-  493  - 

The  years  in  which  each  of  these  activities  "began  are  given  in  a 
letter  from  J.  S.  Bryant ,  former  Secretary  of  the  Code  Authority  and, 
since  1926,  Secretary  of  the  Trade  Association,  (*)  as  follows: 

Report  Year  started 

Weekly  Report  of  Orders  1926 

Monthly  Report  of  Shipments  1925 

Monthly  Report  of  Shipments  by  states  1925 

The  letter  further  states  that  these  reports  were  compiled  by  a 
Confidential  Agency,  West,  Flint  and  Company  from  information  submitted 
by  individual  concerns.   The  reports  in  the  form  of  summaries  were  mailed 
to  the  contributing  companies,  and  at  the  same  time  the  original  data 
submitted  oy   each  company  was  returned.   In  a  previous  letter  (**)  Mr, 
Bryant  informed  Mr.  Laws on  that  some  of  the  companies  did  not  make  their 
reports  directly  to  West,  Flint  and  Company  but  reported  to  the  Department 
of  Commerce.   These  data  were  added  by  the  Department  to  the  summaries  of 
the  Association  Agency  and  issued  as  a  monthly  report  by  the  Bureau  of 
the  Census. 

It  may  be  seen  from  the  above  outline  of  activities  undertaken  by  the 
reorganized  Association  that  the  members  of  the  industry  were  becoming 
converted  to  the  belief  that  a  fuller  understanding  of  the  condition  of 
the  industry  and  of  the  relative  standing  of  the  individual  members  within 
the  industry  was  more  desirable  than,  complete  secrecy  in  business. 

II.   DEVELOPMENTS  WITHIH  THE  INDUSTRY 

Concurrently  with  the  growing  enthusiasm  for  industry  organization 
other  factors  were  developing  which  were  to  have  a  lasting  effect  upon 
the  industry  and  industrial  development.   Two  of  these  were  and  are  of 
sufficient  importance  to  merit  attention.   The  discussion  of  these  will 
of  necessity  overlap  the  chronological  discussion  of  the  various  arbitra- 
rily selected  periods  of  this  treatment,  but  it  is  felt  that  present  con- 
sideration will  not  be  confusing. 

A.   Paten  Rights 

It  has  been  previously  intimated  that  early  in  the  history  of  the 
industry  the  guarding  of  innovations  in  products  became  customary,  and 
it  was  the  general  practice  to  procure  patents  to  protect  developments. 


(*)   Letter  from  J.  S.  Bryant,  Secretary  to  the  Code  Authority- for  the 
Asphalt  Shingle  and  Roofing  Industry  to  William  Lawson,  Assistant 
Deputy  Administrator,  July  9,  1934,   (In  NRA  consolidated  files, 
Asphalt  Shingle  and  Roofing  Industry,  folder:  "Statistics"). 

(**)   Letter  from  J.  S.  Bryant,  Secretary  to   the  Code  Authority  for 
the  Asphalt  Shingle  and  Roofing  Industry  to  William  Lawson, 
Assistant  Deputy  Administrator,  June  28,  1934.   (in  NRA  files, 
Asphalt  Shingle  and  Roofing  Code,  Statistics  Folder). 

9326 


~  SCO  - 

These  patents  covered  "both  the  finished  products  and  the  processes 
under  much  they  were  nade.   Literally  anything  pertaining  to  the  industry 
was  nade  the  subject  of  a  patent;  thus  it  is  that  today  we' find  patents 
covering  colors,  composition,  the  direction  in  which  the  figres  run,  the 
materials  used,  the  machinery  used  and  other  phases  and  steps  concerned 
with  the  finished  commodity.   The  fact  that  a  product  or  process  was  pat- 
ented did  not  mean  that  it  was  produced  exclusively  "by  any  one  member  of 
the  industry;  in  fact,  for  a  period  of  time  these  rights  did  not  .seem  to 
restrict  the  other  members  of  the  industry  at  all.   Later  it  was'. custom- 
ary for  the  one  who  ornied  the  patent  to  grant  a  license  to  others  to  pro- 
duce . the  product  or  to  use  the  process  so  protected.   This  plan,  it  appear- 
ed, served  two  purposes;  the  licensor  was  permitted  to  fix  the  minimum, 
price  at  which  such  commodities  could  he  offered  for  sale,  and  royalties 
might  he  collected  from  those  to  whom  the  license  was  granted. 

Originally  these  patents  were  rather  equally  distributed  amont  the 
respective  members  as  the  discoveries  were  made.   Any  lack  of  equal  bal- 
ance existing  generally  represented  the  variance  in  perspective  and 
assiduity  of  the  individual  representatives.  About  1920  the  Flintkote 
Company  undertook  to  get  control  of  the  patents  affecting  the  products  of 
the  industry  and  by  1929  had  acquired  about  lOOf),  which  represented  a 
considerable  proportion  of  the  total  and  far  more  than  were  held  by  any 
other  individual  manufacturer.  The  reason  for  this  policy  is  not  clear. 
However,  as  indicated  above  the  acquisition  offered  the  possibility  of 
increased  revenue  through  royalties  and  it  afforded  an  instrument  of 
price'  control  through  the  license  agreements,  under  which  the  licensor 
could  legitimately  fix  minimum  prices  at  which  the  controlled  products 
might  be  offered  for  sale. 

1.  Patent  and  Licensing  Corporation 

•  ■'  ■     '•■. 

By  1929  this  department  of  the  Flintkote  Company  had  reached' such 
proportions  that  the  Patent  and  Licensing  Corporation  was  set  up  to 
handle  all  patents  and  all  license  agreements  arising  from  them.   This 
Corporation  was  a  wholly  owned  subsidiary  of  the  Flintkote  Company,  capita- 
lized at  $1,0^0,  and  the  checks  to  cover  its  operations  were  issued  by 
the  patent  concern.   The  advent  of  this  company  marked  the  beginning  of  a 
rather  vigorous  licensing  policy,  and  all  concerns  were  urged  to  avail 
themselves  of  the  privileges  offered  by  such  agreements.   Frequently,  as 
a  means  of  inducement  to  the  prospective  licensees,  it  was  pointed  out 
..that  the  increased  earnings  would  more  than  offset  the  amount  paid  out  in 
royalties.   In  some  instances  the  Flintkote  Company  or  the  Patent  and 
Licensing  Corporation  were  unable  to  obtain  outright  ownership  of  the 
patents,  but  in  such  cases  they  were  able  to  gain  control  through  a  pool- 
ing arrangement  whereby  the  right  to  administer  was  turned  over  to  them 
and  the  royalties  were  divided  with  the  previous  owner.   Such  agreements 
were  entered  into  with  Certain-teed,  Bird  and  Sons,  Ott  and  F.  R.  Brydle.(*) 
Under  these  agreements  the  pro  rata  amount  to  the  respective  comoanies 
depended  primarily  on  the  individual  bargaining  ability  of  the  company  re 
preventatives.   In  one  agreement,  the  Hexogan,  Certain-teed  received  40 
per  cent  of  the  royalties;  and  in  another,  the  lulti-Color,  the  returns 


(*)  Patent  and  Licensing  Corporation  v.  Weaver-Wall,  D.C.  H.D.  Ohio, 
Testimony  of  Frank  Gilchrist  pp.  170  and  ff.  in  Transcript. 

982G 


-  501  ~ 

w?rp  divided  on  a  50-50- basis »  (*)   It  would  appear  from  these  ar- 
rangements that  sorn^  additional  advantages  w°re  expected  to  accrue 
from  the  fact  that  control  of  the  patents  was  centered  in  the  hands 
of  on'>  co  lira  any. 

B .   Combinations,"  Mergers  and  Absorptions 

The  other  mov-ment  which  materially  affected  the  picture  of  the 
Industry  was  that  reducing  the  number  of  members.   In  its  report  of 
Trie  Administration  Of  the  Code  Of  Fair  Competition  For  the  Asphalt 
Sningle  and  Roofing  Industry,  the  Code  Autnority  states  that: 

"In  the  ten  years  preceding  the  approval  of 
the  Code  eighteen'  (18)  companies  were 
merg°d  with  other  companies  in  the  industry, 
six  (6)  fell  into  receivership,  and  one  (l) 
burn°d  up."  (*) 

The  same  report  lists  the  following  mergers: 

1.  Storm-cite  Roofing  Corporation,  East  St.  Louis, 
111.,  merged  with  the  American  Asphalt  Roof 
Corporation,  1925. 

2.  Beaver  Products  Company  merged  with  Certain-teed 
Products  Corporation,  1928. 

3.  Lockport  Paper  Company  merged  with  Beckman-Dawson 
Roofing  Company. 

4.  Murphy-UcEwen  Company  merged  with  Beckman-Dawson 
Roofing  Company. 

5.  Beckman-Dawson  Roofing  Company  merged  with 
Flintkote  Company. 

5.   Chatfield  Manufacturing  Corporation  merged  with 
Flintkcte  Company. 

7.  Pioneer  Paper  Company  merged  with  Flintkote  Company 

8.  Richardson  Roofing  Company  merged  with 
Flintkote  Company. 

9.  Sail -fountain  Company,  Scranton,  Pa.,  merged 
with  Flintkote  Company,  1929. 


(**)  Report  of  the  Administration  of  the  Code  of  Fair  Competition 
fc-  Asphalt  Shingle  and  Roofing  Industry.  Letter  of  trans- 
mittal to  F.  J.  Patcnell,  Assistant  Deputy  Administrator  from 
Smith  Simpson,  Agent  for  the  Code  Autnority.  (in  NRA  Files, 
Code  Authority  Folder) 

9826 


-  502  - 

10.  Weaver-Henry  Corporation,  Los  Angeles, 
Calif.,  merged  with  Johns-Manville. 

11.  Amalgamated  Roofing  Company,  Chicago, 
merged  with  the  Logan-Long  Company. 

12.  McHenry-Millheuse  Manufacturing  Company 
of  New  York,  Inc.,  Fulton,  N.  Y., 
merged  with  the  Logan-Long  Company. 

13.  Continental  Roofing  Mills  merged  with  the 
Ruberoid  CoeiDany. 

14.  Safepack  Mills  merged  with  the  Ruberoid 
C  ompany . 

15.  H.  F.  V-ratson  Mills  merged  with  the 
Ruberoid  Company. 

+ 

15.   McHenry-Mlllhouse  Roofing  Corporation, 
of  Souta  Bend,  Ind.,  merged  with 
United  States  Gypsum  Company. 

17.  SiFo  Products  Company  merged  with  the 
United  States  Gypsum  Company. 

18.  Star  Roofing  Company  merged  with  the 
United  States  Gypsum  Company,  1934. 

It  is  possible  that  there  were  other  mergers  and  consolidations  during 
the  period  which  are  not  recorded.   In  1928  Flintkote  effected  a 
combination  with  Royal  Dutch  Shell  whereby  the  latter  company  acquired 
a  majority  of  the  voting  stock  of  the  former. 

From  the  above  it  will  be  seen  that  Flintkote,  aside  from  the 
combination  with  Royal  Dutch  Shell,  acquired  seven  (?)  companies; 
C°rtain-teed,  one  (l);  John-Manville ,  one  (l);  Logan-Long,  two  (2); 
Ruberoid,  three  (3);  United  States  Gypsum  Company,  three  (3);  and 
American  Asphalt  Roof  Corporation,  one  (l). 

Other  alignments  of  interest,  which  did  not  necessarily  take  place 
during  this  period,  are  Barrett  Company  with  Allied  Chemical;  The 
Texas  Company  (Texas  Oil  Company)  and  the  Barber  Asphalt  Company,  a 
subsidiary  of  the  General  Asphalt  Company. 

These  combinations  and  mergers  may  have  been  a  result  «f  the 
tendencies  toward  combinations  v/hich  were  apparent  late  in  the  19th 
and  early  in  the  20th  centuries  in  other  lines  of  industrial  endeavors 
and  may  have  been  stimulated  by  desire  tc  reap  the  benefits  of  the 
internal  and  external  economies  of  large  scale  production.   There  is 
no  doubt  that  tney  resulted  in'ooth  vertical  and  horizontal  inte- 
grations, an  example  of  the  former  type  oeing  the  Flintkote  Company 
which,  through  its  cl-jsely  held  affiliates,  carries  on  a  business 
varying  from  the  sale  of  raw  materials,  such  as  aspnalt  oil  (a  residue 
of  refined  petroleum),  to  the  finished  oroduct,  roofing  paper  and 

9836 


-  503  - 


shingles.   Certain-teed  furnishes  a  good  example  of  the  latter  type 
manufacturing  asphalt  sningles  and  roofing,  tarred  and  asphalt  felts, 
building  and'  insulating  papers,  newsprint  pap<=r  and  boxboard,  paints 
and  varnishes,  gypsum,  plasterboard  blocks  and  plaster  laths,  and 
Kalite  sound-absorbing  plaster. (*) 


(*)   "Asphalt  Shingle  and  Roofing  Industry:   A  Study  of  Some  Factors 
Bearing  upon  the  Industry,"  °am^s  E.  Gates,  Consumer's  Advisory 
Board,  p. 3. 

(in  NEA  Files,  Asphalt  Shingle  and  Roofing  Industry,  Folder, 
Legal  Code  Authority) 


9  £26 


-  504  - 
III.   THE  ASPHALT  SHIHGLE  A17B  R00FI1TC-  INSTITUTE,  1928 

Despite  the  nlan  of  enlightened  competition  under  which  the 
Association  had  been  operating,  at  least  since  1926,  the  Industry  was 
still  beset  by  the  vicissitudes  of  price  wars,  secret  rebates, 
fluctuating  discounts  and  the  like,  and  it  appeared  that  further 
steps  were  necessary  to  eliminate  these  evils.   The  filing  oi  prices 
and  the  dissemination  of  price  information  to  members  of  the  Industry 
had  not  proved  to  be  a  panacea. 

A  meeting  of  the  members  was  called  for  May  29,  1920.  at  the 
Commodore  Hotel.   The  exact  purpose  of  this  meeting  is  in  doubt.  One 
attendant  stated  under  oath  that  prices  were  discussed  and  that  a 
formula  was  advanced  for  determining  prices  on  non-patented  products 
based  on  the  minimum  prices  of  patented  products  as  fixed  by  Flintkotc.  (*) 
That  prices  and  pricing  practices  were  receiving  the  attention  of  the 
assembled  group  is  indicated  by  subsequent  events.   On  June  14,  1928, 
the  'Constitution  and  By-Lews  were  adopted  and  the  name  changed  to  the 
Asphalt  Shingle  and  Roofing  Institute. 

A.   Institute  Activities 

It  is  reasonably  certain  that  this  reorganization  heralded  a 
strengthening  of  the  bonds  of  industry  organization  and  the  further 
intensification  of  the  enlightenment  of  competition.   The  activities 
of  the  association  were  continued  and  the  scope  of  operation  broe.dencd. 

During  this  period  a  lierchandising  Plan  was  adopted  by  the  In- 
stitute which  established  a  complex  system  of  customer  classification, 
divided  the  country  into  shipping  zones  (determined  by  location  of 
factories,  warehouses,  etc.)  and  adopted  the  principle  of  freight 
equalization  as  a  br.sis  for  quoting  and  selling.   The  rules  thus 
adopted  by  the  Institute  were  to  govern  all  members  in  the  marketing 
of  their  products.   Either  because  of  fear  of  the  consoapiences,  con- 
scientous  objections  or  failure  of  the  plan  to  conform  to  their  es- 
tablished merchendi sing' policies,  some  of  the  former  Association 
members  refused  to  become  affiliated  with  the  new  organization. 

It  appears  to  be  advisable  before  going  deeper  into  the  new  order 
to  review  the  May  meeting.   The  pricing  formula  advanced  at  that  time 
was  proposed  by  Mr.  Bonney  of  the  Rubcroid  Company  and  established  a 
ratio  between  price  and  dimensions  of  shingles.  3y  applying  this 
ratio  to  the  units  of  area  of  non-patented  products  there  would  be 
derived  a  gross  price  which  would  vary  with  the  minimum  prices  quoted 
on  patented  products.   Under  this  scheme  control  of  the  prices  of  all 
industry  products  would  be  vested  in  the  owner  of  the  patent,  who  was 
alloiTed  by  virtue  of  patent  rights  to  determine  the  minimum  prices  at 
which  such  products  could  be  offered  for  sale.  (**) 

At  the  conclusion  of  this  meeting  it  was  agreed  that  this  method 
of  price  determination  should  be  adopted.  Mr.  Bryant,  Manager  of  the 
Institute,  then  cautioned  the  members  that  the  revised  nricc  list 


(*)   Patent  and  Licensing  Corporation  v.  Weaver-Wall ,  Testimony  of 

A.  L.  Wall.  Transcript  of  Hearing  pp.1120  end  ff. 
(**)  Patent  and  Licensin0  Corporation  v.  Weaver-Wall, pp. 1122  and  ff. 


9C26 


-  5C5  — 

should  be  stir e ad.  over  a  period  of  two  or  three  weeks  but  could  be  made 
retroactive  as  of  that  date-.  (*) 

The  new  organization  continued  the  plan  of  price  filing  which  had 
been  begun  by  its  nrede sessor  whereby  each  member  filed  80  copies  of 
his  or ice  lists  with  the  Institute,  which  in  turn  sent  a  copy  to  each 
member.   If  a  change  were  made  in  any  list,  the  manufacturer,  in 
addition  to  sending  the  required  number  of  copies,  notified  the  secre- 
tary, who  in  turn  notified  each  member  of  the  cange.   Thus  in  addition 
to  receiving  copies  of  their  competitors  price  lists,  members  had 
particular  notice  of  any  price  fluctuation. 

1.   Merchandising  Plan 

The  above  discribed  procedure  for  price  filing  did  not  introduce 
any  novel  plan  to  the  Industry  but,  with  tne  ado-otion  of  the  Merchandis- 
ing Plan,  tended  to  strengthen  as  well  as  broaden  the  scotie  covered  by 
price  filing.   The  specific  provisions  of  the  plan  will  be  discussed 
later  in  connection  with  the  Merchandising  Plan  of  1929(**).   The 
essential  difference  between  this  ^lan  and  that  of  1929  was  that  the 
latter  included  a  liquidated  damage  agreement  under  which  each  member 
of  the  Institute  posted  a  bond  in  the  amount  of  $100,000  to  grarantee 
performance.   The  new  plan  did  not  greatly  improve  conditions.   Though 
the  menoe:  s  did  file  their  srices  and  though  customers  were  classified 
and  terras  and  conditions  of  sale  were  set  forth,  there  was  no  provis- 
ion in  the  agreement  that  insured  observance  of  these  prices,  classes 
and  terms.   Price  wars,  either  secret  or  open,  continued,  throughout 
the  yepx   and  early  in  1929  some  of  the  members  of  the  Institute  began 
to  visualize  an  even  better  regulation. 

(a)  As  Amended  in  1929 

'  Had  the  plan  of  1928  been  observed  it  would  have  no  doubt  solved 
the  problems  of  the  Industry.  Price  determination  would  have  been 
vested  in  the  Patent  -and  Licensing  Corporation  which  could  be  depend- 
ed upon  to  care  for  the  interests  of  individual  members.   The  one 
weakness  of  the  program  arose  not  from  its  provisions  but  from  the  fact 
that  there  was  no  penalty  for  failure  to  observe  its  terms.   A  survey 
of  prices  (***)  will  show  that  immediately  following  the  May  meeting 
prices  jumped  roughly  11.5  -ner  cent  and  for  a  time  remained  both  uni- 
form and  Constant.   Eventually  some  member  of  the  Industry,  motivated., 
no  doube,  by  selfish  interests,  began  to  violate  the.- agreement  and  the 
Industry  was  again  thrown  into  a  price  was. 

That  it  rras  a  matter  which  demanded  the  attention  of  the 
'master  minds'  is  evidenced  "o/   the  numerous  meetings  which  were  held  in 
1929  to  remedy  the  situation.  (***»)  ___  •_  __ _  ___ __„_ 

(*)  IM£»  P-  1237 

(**)  Infra,  p.  506  &   ff. 

( *** )  Infra.  Table  3 ,  .p .  570  y 

(****)  patent  and  Licensing  Corporation  v.  Beaver-Vail,  p.  1112 

9825 


-  506  - 

The  guiding  influence  in  this  movement  is  unknown.  Among  those  named  as 
"officers  or  directors,  and  or  active  in  the  management  of  the  defendant 
Institute",  in  the  suit  filed  by  the  Government  were  executives  of  the 
larger  members  of  the  Industry.  According  to  the  records  seven  meetings 
of  the  executives  of  the  various  conroanies  -.'ere  held  in  the  fall  of  1929 
(*) 

The  plan  was  ap  roved  November  1,  1929,  and  was  to  become  effective 
January  1,  1930,  to  remain  in  effect  until  December  31,  1932.  (**)  At 
the  time  that  the  Merchandising  Plan  was  adopted,  the  members  of  the 
Institute  entered  into  an  agreement  that  provided:  that  each  member 
would  file  prices;  that  'Then  eny   change  of  any  price  to  any  one  or  more 
customers,  in  any  district,  was  mace,  the  member  making  the  change  should 
publich  a  printed  price  list  containing  such  change  to  all  the  trade 
concerned,  and  simultaneously  therewith  a  copy  should  be  sent  to  all 
signers  of  the  agreement  through  the  office  of  the  Institute;  that  each 
of  the  parties  agreed  to  observe  all  the  agreements,  covenants,  con- 
ditions and  stipulations  in  the  Merchandising  Plan  and  the  Code  of 
Ethics;  that  each  party  agreed  that  no  salesman,  district  manager,  sales 
manager  or  other  employee  had  a  right  ot  deviate  from  the  published 
prices;  that  cases  of  alleged  violation  would  be  submitted  to  an  arbit- 
rator, ,who  might  at  his  discretion  disregard  the  legal  rules  of  evidence; 
that  the  findings  of  the  arbitrator  should  be  binding;  and  that  each 
member  should  post  a  bond  of  $1^0,000  to  assure  adherence  to  the  plan. 

The  Tlan  itself  classified  the  customers  of  the  industry  in 
twelve  divisions,  namely;  Dealers,  Line  Y.  rd  or  Chain  Store  Concerns, 
Reserve  Supply  Companies,  Authorized  Distributors,  Jobbers,  Interstate 
Industrial  Consumers,  Intra-State  Industrial  Consumers,  General  Consum- 
ers, Railroads,  Railroad  Equipment  Companies,  Mail  Order  Houses  and 'City 
and  State  Government s.   Each  of  these  classes  was  defined  in  a  detailed 
manner.   At  least  two  classes  had  to  submit  data  on  sales  to  be  approv- 
ed by  Bradstreet  to  support  their  contention  for  such  classification, 
this  latter  rule  applying  to  the  Jobbers  and  Mail  Order  Houses.   It  was 
intended  tha,t  the  information  supplied  by  the  firms  desiring  to  be 
classified  as  Jobbers  and  Mail  Order  Houses  would  be  supplemented  by 
information  gathered  by  Bradstreet  through  their  regularly  employed 
field  force.   At  least  throe  of  the  other  classes  of  customers  had  to 
submit  a  data  sheef  attested  to  by  raenuers  of  the  firm  that  they  fell 
within  the  desired  classification.   The  determination  of  Bradstreet 
was  to  be  final,   it  was  their  duty  at  the  conclusion  of  the  investiga- 
tion to  notify  the  manufacturer  submitting  the  name  as  to  their  decision 
and  at  the  same  time  to  notify  the  Institute  of  the  dicision  made  and 
the  name  of  the  manufacturer  in  whos  behalf  the  investigation  had  been 
made.   The  names  of  the  accounts  approved  by  ^radstreet  were  compiled 
into  an  alphabetical  list  by  states  and  distributed  to  the  participating 
manufacturers,  not  indication  the  manufacturer  whose  application  re- 
sulted  in  the  approval.  ._ __ _ 

(*)   Ibed,  p.  1112 

(**)  Bill  in  Equity  Ho.  57-182,  U.S.  v.  Asphalt  Shingle  and 
Roofing  Institute,  Et .  Al . ,  Pane  18  and  63. 

9826 


-507- 


In  addition  to  the  classification  of  cu.stor.iers,  the  Merchandising 
Flan  considered  Handling  of  Orders,  Quotations  For  Periods  Beyond  30  Days 
Terms  of  Payment,  Datings,  Back  Orders,  Allowances  Por  Fixtures,  Roll 
Roofing  of  Irregular  Pootage,  Shingle  Stock  in  Roll  Porn,  hill  Ends  and 
Seconds,  Definition  of  Types  of  Shipping  Points,  Definition  of  Classes 
of  Shipments,  Allowances  Por  Preight  Equalization,  Description  of  Pactory 
Zones,  P.O.B.  and  Preight  Equalization  Points,  Discounts  on  Purchases  and 
Qualifications  for  Discounts.   Since  space  does  not  permit  a  detailed 
discussion  of  these  various  provisions,  an  attempt  will  be  made  to  explain 
those  which  are  most  pertinent  to  the  pricing  structure  of  the  industry. 

Terms  of  sale  were  fixed  at  2fo   ten  days,  J>0   days  net;  or  sixty  day 
trade  acceptance  with  no  cash  discount;  or  2;1  10th  proximo,  net  30  days 
proximo.  Por  the  purpose, of  freight  equalization,  shipments  were  calssed 
according  to  amount,  source  of  origin  and  agency  of  transportation  and 
the  amount  of  freight  which  could  he  allowed  varied  with  each  class  or 
combination  of  classes.   Thus  it  may  be  that  delivery  would  be  made  free 
or  that  there  would  be  no  allowance  regardless  of  destination. 

Dith  the  thought  that  both  clarity  and  brevity  can  be  best  served, 
let  us  take  for  example  an  unknown  buyer  X,  requesting  quotations  from 
an  unknown  manufacturer  Y.  The  matter  of  discounts  and  amount  of  freight 
equalization  allowed  need  be  of  no  concern,  as  they  were  fixed  for  each 
of  the  classes.   It  would  first  be  necessary  to  determine  in  which  cf  the 
six  customer  classes  h  falls;  if  he  were  a  dealer  (Reserve  supply  or 
Line  Yard)  or  distributor  one  discount  would  apply;  a  Jobber,  another; 
a  Mail  Order  House,  still  another;  and  so  on  for  each  of  the  classes. 
After  the  classification  had  been  determined,  the  discount  applies  auto- 
matically.  It  should  x,'.:.en   be  ascertained  how  the  shipment  was  to  be 
made,  i.e.,  by  rail,  water,  track  or  a  combination  of  rail  and  water; 
and  finally  the  zone  in  -hich  the  customer  resided.  On  these  factors 
the  amount  of  freight  equalization  was  determined.   Truck  shipments  fell 
in  a  special  class  and  not  only  was  no  freight  allowed,  but  the  discount, 
for  some  unknown  reason,  was  reduced  2-ops.   As  in  the  ca.se  of  discounts, 
the  allowance  is  fixed  and  the  customer  falls  automatically  in  one  class 
or  the  other. 

The  Agreement  also  pledged  each  manufacturer  to  abide  by  and  observe 
the  twenty-six  provisions  of  the  Code  of  Pthics  which  in  turn  tended  to 
strengthen  the  merchandising  Plan.   The  Code  forbade  the  members  of  the 
Institute  to  evade  the  Plan  secretly  or  by  subterfuge.   That  is,  one 
could  not  evade  the  price  provisions  by  any  of  the  following  devious 
means:  overweight  merchandise;  consignments;  free  goods;  fictitious  in- 
voices; warehousing  for  customers;  etc.,  any  of  which  would  be  a  means 
of  increasing  the  discount  or  levering  the  list  price.   In  addition  the 
Code  stated  that  one  should  not  make  remarks  to  the  di sparageraent  of  a 
competitor,  entice  a  competitor' s  personnel,  etc. 

T7ith  the  approval  of  the  agreement  and  the  Code  of  Ethics,  its 
adoption  was  made  the  sole  basis  for  memoership  in  the  Institute.   By 
adoption  is  meant  the  signing  of  the  Agreement  end  the  Bond. 


9S26 


-  506  - 
2.  Relationship  of  Patent  and  Licensing  Corporation 

In  order  to  complete  the  picture,  it  is  necessary  to  again  turn 
our  attention  to  the  Patent  and  Licensing  Corporation.   It  had  been 
estimated  at  various  tines  that  from  60  to  75  per  cent  of  the  products, 
of  the  industry  were  patented.   Thus  the  control  of  patents,  especially  .. 
when  that  control  lis  vested  in  the  hands  of  the  largest  single  producer 
in  the  Industry,  might  be  a  very  important  matter. 

The  exact  degree  of  interrelationship  between  the  Institute  and 
the  present  corporation  is  difficult  of  determination.   Chester  E.  Rahr 
was  president  of  both  organizations  as  well  as  president  of  the  Flintkote 
Company.  That  the  Patent  and  Licensing  Corporation  was  of  the  opinion 
that  there  was.  a  common   interest  .is  less  uncertain.   Patent  control  was. 
sometimes  used"  as  a  whip  along  with  threats  of  T>rice  warn  to  coercs  members 
£pe  Industry,  to  accent,  the  Institute  Plan.  (*) 

Mo  agreement  was  necessary  to  put  the  Merchandising  Plan  into  effect 
with  regard,  to  paterited  products.   The  licensor,  oy   virtue  of  his  patents, 
could  and  did  determine  the  minimum  price  at  which  goods  could  be  sold, 
and  in  determining  that  price,  the  same  classification  of  customers, 
discounts  and  basis  for  freight  equalization,  as  used  by  the  Institute, 
were  employed. 

Thus  by  means  of  the  two  agencies,  the  Institute  and  the  Patent  and 
Licensing  Corporation,  there  was  a  double  control  of  the  members  of  the 
Industry. (**)   The  Institute,  through  the  bonds  made  in  its  favor,  might 
demand  a  penalty  up  to  $100,000  per  year  for  violations  of  the  Merchandis- 
ing Plan  and  the  Corporation  by  means  of  its  control  of  patents  might 
refuse  to  license  or  might   sue  for  damages  as  a  result  of  an  infringe- 
ment by  the  licensee.   It  would  seem  that  the  more  potent  of  these 
weapons  was  the  latter.   An  estimated  65  r>er  cent  of  the  volume  of  busi- 
ness of  the  Industry  was  in  patented  goods  and  prohibition  from  this 
field  would  vitally  affect  the  source  of  revenue  of  the  individual 
members . 

B .  Position  Under  the  Anti-Trust  Laws 

The  agreement  and  bond  went  into  effect  January  1,  1930  and  was 
revised  as  above  discribed  April  1,  1930,   The  revision  resulted  in  no 
material  changes,  therefore  it  is  felt  that  the  description  needs  no 
alteration  to  cover  the  period  from  January  to  April* 

Soon  after  its  adoption,  the  plan  was  called  to  the  attention  of 
the  Department  of  Justice  and  after  some  preliminary  investigation, 
proceedings  were  started  against  the  President  of  the  Institute,  twenty- 
three  member  concerns  and  against  eighteen  individuals  who  were  officers 
or  directors  and/or  active  in  the  management  of  the  Institute.  The 
Bill  in  Equity,  No.  57-163,  filed  in  the  District  Court  of  the  United 
States  for  the  Southern  District  of  New  York,  entitled  "  United  States 

(*)    Ibid,  p.  1077.1082,  and  1117, 

(**)   See  Chart,  p.  570. 


9826 


..-  509.- 

of  America,  petitioner,  v.  Asphalt  Shingle  and  Roofing  Institute,  et  al., 
defendants",  charged  that  the  defendants  since  January  1,  1926,  had  com- 
bined to  restrain  trade.   The  charge  reed  as  follows: 

"Defendants,  each  rail  knowing  all  the  natters 
herein  before  alleged,  unlawfully  have  engaged 
in  a  combination  jxd  conspiracy  to  restrain, 
and  pursuant  thereto  have  actually  restrained 
throughout  said  period,  and  are  now  restrain- 
ing said  interstate  trade  and  commerce  of 
defendant  manufacturers  and  their  customers 
by: various  means  raid  devices,  among  them 

"being  the  following: 

(a)  Defendants  ~av>ye   agreed  to  fix  raid 
have  concertedly'  fixed  and  maintained 
uniform  and  non-competitive  selling 
prices,  uniform  and  non-competitive 
discounts  for  the  various  classes  of 
trade;  and  types  of  purchases,  uniform, 
artificial  and  non-competitive  charges 

on  account  of  freight  rates  or  the  cot  of 
transporting  re  ardless  of  the  pouint  of 

the'  shipments /  and  uniform  -and  •non-compe-t-i—  • . 

tive  terms,  extra  charges  allowances, and 
conditions  of  sale,  etc.; 

(b)  Defendants  have  agreed  to  definitions 
for  and  have  concert edly  defined  the  various 
classes  of  purchasers  and  have  concertedly 
and  arbitrarily  chosen  the  names  of  the 
customers  which  may  be  recognised  by  defendant 
manufacturers  in  the  various  classes  and  which 
may  be  allowed  the  discount:',  and  terms  con- 
certedly fixed  for  the  prospective  customers 
who  had  previously  been  or  ordinarily  would  be 
treated  as  being  in  particular  classes  and  as 
entitled  to  prices  anc.  terms  accordingly, 
were  thus  unwillingly  placed  in  less  favorable 
clas-es  and  were  forced  to  purchase  said  products 
only  up->n  more  inerous  terms  and  at  discrimina- 
tory and  unfair  prices; 

(c)  Defendants  have  arbitrarily  agreed  upon 
and  concerted ly  fixed  the  credit  qualifications 
of  customers  necessary  to  permit  defendant 
manufacturers  to  deal  with  such  customers  as 
members  of  the  various  classes  of  trade,  and 
have  concertedly  and  arbitrarily  chosen  the 
persons  and  concerns  deemed  thus  qualified. 
Pursuant  to  such  plan  defendants  have  agreed 

to  refuse  and  have  refused  to  extend  to  many 
customers  credit  which  they  had  enjoyed  and 
would  ordinarily  enjoy  in  a  free  market; 


9826 


-  510  ~ 

(d)  Defendants,  through  the  Institute  have  con- 
certed].^ maintained  and  operated  a  system  for  the 
exchange  of  complete  schedules  of  all  prices,  terms 
and  discounts  proposed  to  "be  charged  by  each  defend- 
ant manufacturer;  as  a  p'art  of  said- system  they  have 
agreed  that  no  such  defendant  may  deviate  in  any 
instance  from  its  published  schedule  unless  it  shall 
forthwith  publish  to  the  trade  and  send  to  the  other 
defendants  a  printed  price  list  containing  such 
changed  prices; 

(e)  As  a  means  of  coercing  and  compelling  defendant 
manufacturers  to  perform  the  agreements  above  describ- 
ed, the  various  defendant  manufacturers  have  agreed 
that  an  arbitrator  shall  hear  and  determine  all  com- 
plaints for  the  breach  of  said  agreements  and  may 
make  any  award  therefor  up  to  $25,000  for  a  single 
breach.   Pursuant  to  agreement  defendant  manufacturers 
have  executed  and  filed  with  the  Institute  surety 
company  bonds  in  amounts  ranging  from-525,000  to 
$100,000  to  secure  the  -performance  of  said  agreements 
and  the  payment  of  said  awards; 


The  purpose  and  intent  of  defendants  in  entering  into 
and  performing  said  conspiracy  and  each  of  the  said 
acts  and  agreements,  and  the  actual  effect  of  each  of 
the  said  acts  and  agreements  have  been  unreasonably 
and  unlawfully  to  restrain  said  interstate  tra.de  and 
commerce,  to. stifle  and  eliminate  virtually  all  com- 
petition therein  and  arbitrarily  and  oppressively 
to  control  the  course  of  such  trade  and  commerce  and 
unlawfully  regulate  the  channels  of  distribution 
thereof" 


Since  the  above  litigation  we.s  never  prosecuted  to  a  conclusion,  it 
may  be  cited  only  as  evidence  of  the  alleged  activities,  rather  than 
proof.   The  case  was  carried  on  .the  docket  until  October,  1935,  at  which 
tine  it  was  removed  without  prejudice  to  the  cruse  of  the  Government. 
The  reason  for  the  discontinuance  may  be  partially  attributed  to  the 
NBA,  since  Price  Filing  Activities  were  made  legal  by  this  Act  and  the 
Department  of  Justice  felt  that  an  attempt  to  gain  a  conviction  would 
be  futile.   The  cessation  of  litigation  should  be  accepted  in  the  same 
light  that  it  was  granted;  it  did  not  indicate  a  weakness  in  the  Depart- 
ment of  Justice's  cause  of  action  nor  may  it  be  inferred  that  it  acted 
in. the  nature  of  an  absolution  of  the  alleged  conspirators. 

That  there  wa/  a  combination  in  the  Industry  is  indicated  by  the 
pooling  of  patents  and  turning  the  control  and  administration  of  rights 
arising  thereunder  over  to  Plintkote  or  the  Patent  and  Licensing 
Corporation.   Thus  patents,  wholly  or  partially  owned  by  Certainteed, 
Bird  &  Son,  F.B.  Brydle  and  one  Ott  were  placed  in  the  hands  of  the 
patent  corporation  to  be  administered  by  that  firm.   Whether  or  not 
this  combination  was  in  restraint  of  trade  could  only  be  determined  by 

9826 


511  - 


the  prosecution  to  a  conclusion  of  the  above  suit  or  one  of  a  similar 
nature. (*) 

C.  7a.lid.it"  of  Patents  Questioned 

1.   Patent  pnd  Licensing  Corporation  v.  "eaver-TTall 

Doubt  has  existed  for  sor.e  tine  as  to  the  legality  of  the  control 
arising  out  of  patents.   This  doubt  has  extended  to  both  the  right  to  so 
control  prices  and  the  validity  of  the  patents  under  which  this  control 
is  exercised.  Mr.  E.  C.  Hoffert,  for  tr/elve  ye;;rs  associated  with 
Certainteed  and  the  Lehon  Comt)any,  raises  the  Latter  question  his  article 
"IS  THE  PATENT  AND  LICSNSIi  G  CORPORATIl-N  A  PRICE  FIXING  AGREEMENT  FOR 
THE  POOPING  INDUSTRY?".  This  article  traces  the  history  of  the  patents  on 

"Overbury  Sauare-Butt  Strip  Shingles"  and  concludes  that  the  patent 
expired  in  1932.   Since  that  date  no  new  patent  has  been  taken  out  on 
this  product  but  the  Patent  and  Licensing  Corporation  continues  to 
control  its  minimum  price. (**) 

As  has  been  previously  intimated,  the  possibility  of  attacks  on  the 
validity  of  patents  ras  always  at  a  minimum.   The  licensee  may  not  ques- 
tion the  authority  of  the  document  from  which  he  derives  his  privileges 
and  the  individual,  not  directly  effected  by  such  rights,  seldom  is 
sufficiently  interested  to  r-.ise  such  a  puention.   Despite  these  irmrunit- 
ies,  the  irrefragaoility  of  the  -power  assumed  "oy   the  licensor  has  been 
questioned  at  times.  Unfortunately,  these  cases  infrequently  have  been 
prosecuted  to  a  conclusion  and  when  they  have  been,  the  decision  has 
in  most  instances  been  rendered  on  so".e  point  other  than  the  authenticity 
of  the  authouity  under  which  the  control  'as  being  exercised.   Since 
the  licensee  connot  raise  an  issue  on  a  oatent  under  which  he  is  operat- 
ing, these  actions  haire  generally  raised  the  point  of  infringement 
rather  than  the  seemingly  more  important  question. 

One  of  the  .ere  significant  of  the?e  suits,  primarily  from  the  point 
of  time  during  which  it  was  transpiring,  was  that  of  Patent  and  Licens- 
ing Cor-joration  v.  7eaver-Wall.  As  in  other  litigation,  the  issue  was 
reached  on  encroachment,  but  a  portion  of  the  testimony  had  to  do  with 
the  efficacy  of  the  right  under  which  the  plaintiff  was  claiming.   The 
point  of  att  ck  was  that  the  idea  was  not  new  in  the  Industry  at  the  time 
the  patent  was  granted,  and  that  prior  to  that  time  the  phenomenon 
protected  had  been  generally  used  throughout  the  Industry.  While  the 
decision  of  the  court  in  that  case,  as  to  the  immediate  question  of  valid- 
ity, is  not  available;  in  its  more  far  reaching  aspect,  that  of  the 
legality  of  the  Institute' s  activities,  the  decision  is  quite  definite. 
In  his  decision  the  Master  held  that  the  Institute  members  '-ere  guilty 
of  a  conspiracy  in  restraint  of  trade  and  had  violated  the  Sherman  Anti- 
Trust  Act,  the  Clayton  Act  and  the  Valentine  Act  of  0*.io. . 

(*)   Patent  and  Licensing  Corporation  v.  Leaver-Wall.   Testimony  of 
Prank  Gilcxirist.   Transcript, p.  170  and  ff. 

(**)   IS  THE  PATENT  .TIL  LICENSING  CORPORATION  A  PRICE  FIXING 
ARFANGEMENT  POP  THE  POPPING  Ii"DUSTRY?  H.  C. Hoffert. 
(  In  ERA  Piles,  Volume  B,  p.  56) 

9836 


-  .512  -  . 

CHAPTER  II 

THE  INDUSTRY  III  1933 

I.   SIZE  OP  THE  INDUSTRY 

The  Administrator,  in  his  letter  of  transmittal  to  the  President, 
November  1,  1953,  stated  that  the  report  of  the  Eesearch  end  Planning 
Division  showed  65  establishments  operating  to  a  greater  or  lesser  ex- 
tent and  that  the  capital  investment  of  this  industry  was  fifty-seven 
($57,000,000,00)  million  dollars,  (*)   Both  of  these  estimates  are  at 
variance  with  the  estimates  submitted  by  the  sponsors  of  the  Code. 

A.  number  of  Members. 

In  the  data  submitted  with  the  application  for  a  Code,  the  Asphalt 
Shingle  and  Roofing  Institute,  the  sponsoring  organization,  stated  that 
there  were  27  members  of  the  industry,  13  of  which  were  members  of  the 
organization.  (**)   It  is  felt  that  with  the  possible  exception  of  a  few 
companies  on  the  West  Coast,  which  operated  as  a  separate  body,  this  is 
a  reasonably  accurate  estimate.  It  may  be  reconciled  with  the  figures 
of  the  Research  and  Planning  when  it  is  noted  that  these  27  members 
operated  in  the  neighborhood  of  70  plants. 

B.  Relative  Size  of  Members 

The  size  of  these  27  members  of  the  Industry  ranged  over  a  consider- 
able expanse  from  the  point  of  view  of  capitalization,  from  a  high  of 
around  fifteen  ($15,000,000,00)  million  dollars  to  a  low  of  less  than 
twenty-five  ($25,000.00)  thousand  dollars.   Though  the  range  was  great, 
it  is  possible  to  arrange  them  in  three  groups  without  great  distortion 
of  the  picture.   Six  of  the  companies  fall  within  a  group  which  might  be 
classified  as  large,  ranging  in  capitalization  from  ten  ($10,000,000.00) 
million  dollars  upwards;  eleven  come  in  the  intermediate  or  medium  sized 
group  with  a  capitalization  of  between  one  ($1,000,000.00)  million  dollars 
and  ten  ($10,000,000.00)  million  dollars  with  the  point  of  concentration 
being  somewhere  around  a  middle  figure;  and  ten  companies  may  be  classified 
as  being  small,  having  a  capital  of  less  than  the  low  figure  of  the  inter- 
mediate group. 

Production  of  industry  products  does  not  always  follow  capital  in- 
vested.  This  is  due,  in  part,  to  the  fact  that  the  larger  companies  are 
generally  engaged  in  the  production  of  commodities  other  than  those  in- 
cluded in  the  Code  definition.   Regardless  of  this  dispersion  in  the  ratio 
between  capital  invested,  it  can  safely  be  said  that  roughly  50  per  cent 
of  the  total  sales  are  made  by  the  six  larger  members  of  the  Industry. 
It  had  been  estimated  that  one  member  produces  somewhere  between  17  and 
24  per  cent  of  the  total, that  same  member  controlling  through  patents 
about  65  par  cent  of  the  total  Industry  production.   Sales  in  most  in- 
stances, during  the  period  of  1926  to  1931,  approached  the  capital 

(*)   See  letter  of  transmittal  of  the  Code  for  the  Asphalt  Shingle  and 
Roofing  Industry,  Codes  of  Fair  Competition,  Volume  II,  page  525. 
(**)  Volume  A,  pages  4-7 -(in  Code  Record  Files) 


cmp.fi 


-  513  - 

invested,  indicating  that  the  Industry  could  operate  on  a  very  small 
profit  margin  and  at  the  same  time  show  a  fair  return  on  the  investment. 

II.  GEOGRAPHICAL  DISTRIBUTION 

Due  to  the  fact  that  freight  is  a  rather  important  item  in  the 
cost  to  the  consumer,  notwithstanding  the  freight  equalization  plan 
practiced  by  the  Industry,  the  factories  are  concentrated  in  sections 
of  dense  population.   Thus  from  a  total  of  76  establishments,  18  are 
located  in  Illinois,  9  in  New  Jersey,  6  in  Pennsylvania  and  4  in  New 
York,  the  remainder  being  distributed  among  19  states  primarily  in 
those  regions  which  show  a  high  ratio  in  population  per  square  mile. 
In  those  Instances  where  an  establishment  is  found  to  be  remotely 
located,  it  is  generally  true  that  it  is  a  small  individually  owned 
plant  which  operates  within  a  restricted  area. 

It  is  not  intended  to  indicate  that  sales  outlet  alone  determines 
.the  location  of  a  factory,  for  the  accessibility  of  raw  materials  is 
likewise  an  influential  factor.   The  principal  raw  materials  used  in 
the  making  of  asphalt  shingles  and  roofing  are  asphalt  oil  (a  residue 
of  refined  petroleum) ,  waste  felt  (rag  and  paper) ,  coal  and  mineral 
granules.  Peculiarly  enough,  many  of  these  necessary  materials  are 
available  in  a  proximity  of  the  principal  markets  for  the  finished 
products.   The  refineries  of  Pennsylvania,  Ohio  and  New  Jersey  would 
furnish  the  by-product  of  petroleum;  the  wastes  of  the  cities  would 
provide  the  necessary  ingredients  for  waste  felts  and  the, coal  regions 
of  Ohio  and  Pennsylvania  would  make  readily  accessible  the  element  of 
coal  tar.   Thus,  as  a  result  of  the  two  determining  factors,  we  find 
the  establishment  of  the  Industry  concentrated  in  rather  well  defined 
logical  regions.   It  is  probable  that  without  ihe  availability  of  the 
principal  raw  materials  there  would  be  no  great  change  in  plant  loca- 
tion as  the  finished  prodiict  is  more  bulky  and  consequently  more 
costly  to  ship  than  the  raw  products  used. 

III.  PRODUCTS  AND  PROCESSES. 

The  Industry  products  as  defined  by  the  Code  are  " felt-base 
(made  of  organic  or  inorganic  fibres)  asphalt  shingles,  sidings  and 
roofings,  roll  roofings  (including  cap  and  base  sheets  and  house 
sheathing),  starting  strips,  tarred  felt,  and  asphalt  felt."(*) 
In  the  Code  there  appears  a  comma  after  the  first  parenthesis  which 
was  put  in  by  error  and  was  never  considered  as  being  in  the  definition. 
The  commodities,  manufactured  by  members  of  the  Industry,  which  were 
not  included  in  the  Code  list  are  both  numerous  and  varied.   To  name 
all  such  items  would  be  a  laborious  task.   A  number  of  the  concerns 
produce  such  kindred  products  as  felts  of  one  kind  or  another  and  a 
few  of  them  furnish  a  sizeable  proportion  of  asbestos.   One  member  of 
the  Industry  operated  under  seventeen  Codes  and  produced  such  unrelated 
commodities  as  newsprint  and  paint.   In  most  instances,  however,  there 
is  a  closer  relationship  and  one  or  the  other  of  the  products  might 
logically  be  called  a  by-product  of  the  other. 

(*)   See  Article  II,  Section  6  of  the  Code  for  the  Asphalt  Shingle  and 
Roofing  Industry,  Codes  of  Fair  Competition,  Volume  II,  page  527. 

9826 


-  514  - 

It  is  necessary  to  concern  ourselves  only  with  the  processes 
involved  in  the  production  of  the  commodities  classified  as  Industry 
products,  i.e.,  asphalt  shingles  and  roofing.   The  base  material  ■ 
used  is  the  felt,  either  in  rolls  or  sheets.   This  material  is  first 
saturated  with  asphalt  oil  by  dipping  or  spraying  and  is  then  seated 
with  some  mineral  granule.   To  get  the  various  and  variegated  colors 
it  is  necessary  that  the  pigments  be  mixed  .with  the  saturating  or 
coating  materials  and  applied  before  or  with  the  -coating.   Both  the 
roll  roofing  and  the  asphalt  shingle  is  made  in  this  manner.   The 
shingle  is,  however,  carried  through  another  step  and  cut  either  in- 
dividually or  in  strips.   Though  to  the  layity  it  may  seen  to  be  a 
matter  of  relatively  little  importance,  the  direction  in  which  the 
fibre  runs  in  the  finished  shingle  is,  apparently,  of  some  signifi- 
cance, for  questions  of  patent  infringement  have  been  determined  on 
this  factor. 

The  necessary  processes  are  highly  mechanized,  and  the  number  of 
employees  has  a  very  loose  relation  to  the  total  value  of  the  products. 
In  1919  the  Industry  employed  8,671  wage  earners  while  producing  pro- 
ducts valued  at  $85,895,000,  while  in  1929  it  required  only  8,310  wage 
earners  to  produce  goods  valued  at  $123,000,000.   From  1919  to  1931 
the  percentage  of  the  total  costs  which  went  to  labor  decreased  in  a 
rather  constant  degree  from  12.1  to  9.0 

Perhaps  there  is  some  correlation  between  the  mechanization  in 
production  and  the  degree  of  standardization  in  Industry  products. 
Whether  the  relationship  is  one  of  fact  or  not,  there  is  a  very  high 
degree  of  uniformity  in  appearance  and  in  materials.   So  great  is 
this  standardization  that  frequently  you  will  find*. for  example,  a 
distributor  of  the  Mail  Order  group  buying  Private  label  goods  from 
two  or  more  producers  at  the  same  time  and  merchandising  them  as 
the  same  identical  product..  Or  perhaps  one  shipment  of  merchandise 
from  that  type  of  outlet  will  include  the  products  of  several  manufact- 
urers.  Another  factor  contributing  to  this  similarity  is  the  influ- 
ence of  the  Association  of  Fire  Underwriters  which  has  set .up  minimum 
standards  for  roofing  materials.   That  this  standardization  is  not 
entirely  a  matter  of  chance  or  a  development  thrust  upon  the  Industry 
is  attested  to  by  the  fact  that  the  Institute  has  for  some  time  main- 
tained a  chair  for  study  and  development  in  the  Bureau  of  Standards. 

IV  TYPES  OF  DISTRIBUTION 

As  was  pointed  out  in  the  discussion  of  the  Institute  Merchandising 
there  have  been  for  some  time,  within  the  Industry,  rather  well  defined 
channels  of  distribution  as  well  as  some  equally  well  defined  favored 
consumer  groups.   (*) 

It  was  likewise  pointed  out  at  one  time  these  channels  had  been 
specifically  defined  and  the  applicable  discount  to  each  group,  had  been 
fixed. 

(*)   Supra,  page  .506  and  FF 


9R?fi 


-  515  - 

Subsequently  the  definition  was  continued  but  observance  of  the  stated 
qualifications  was  no  longer  mandatory;  however,  it  was  necessary 
in  cases  of  non-obervance  to  give  full  publicity  to  the  deviations. 
There  are  no  indications  that  such  divergences  were  either  numerous 
or  "idely  publicized. 

For  the  purposes  of  discounts  the  customers  were  divided  into 
six  classes,  namely:   Dealers  (including  Reserve  Supply  Companies, 
Line  Yards  and  Authorised  Distributors),  Approval  Jobbers,  Mail 
Order  Houses,  Railroads  and  Railroad  Equipment  Companies,  Intrastate 
Industrial  Consumers  (also  City  and  State  Governments),  and  Inter- 
State-  Industrial  Consumers.  A  different  discount  was  granted  to 
each  of  these  groups  of  customers  and  within  the  group  a  Quantity 
discount  was  applicable.  Though  no  attempt  to  justify  these  class- 
ifications was  made  in  the  Merchandising  Plan,  it  is  logical  to  assume 
that  the  differentials  recognized  both  the  services  performed 
and  the  desirability  of  the  outlet, as  either  a  means  of  merchandising 
the  products  or  as  a  potential  market  for  the  products. 

To  qualify  as  a  Distributor,  it  must  be  shown  that  the  firm  or 
individual  has  purchased  during  the  past  year  a  specified  quantity 
of  merchandise  and  has  purchased  a  lesser  specified  quantity  from  one 
manufacturer.   The  preferential  discount  then  applied  to  anticipated 
total  purchases  and  was  not  directly  related  to  the  present  oder  ex- 
cept as  to  the  difference  between  C.L.  and  L.C.L.  prices. 

For  each  of  the  other  members  of  this  discount  group,  there  was 
rather  well  defined  requirements  relating  to  functions  or  types 
of  services  performed,  but  since  the  group  as  a  whole  occupied  the 
position  of  least  consideration  and  since,  supposedly,  any  purchaser 
purchasing  in  a  like  quantity  was  eligible  for  the  same  discount, 
they  hardly  merit  a  detailed  description. 

To  be  a  Jobber,  one  must  be  listed  in  some  registry  or  reco- 
gnized in  his  local  community  as  a  wholesaler,  must  maintain  at  least 
two  salesmen  who  are  engaged  primarily  in  soliciting  orders,  must 
have  a  credit  ratin?  sufficient  as  to  indica.te  financial  responsibi- 
lity, uustnaintaia  a^stock  of  not  less  than  40,000  pounds  of  asphalt 
roof  inf.'  products  and  must  sell  at  least  50  per  cent  of  his  entire 
turnover  to  retail  dealers.   In  lieu  of  the  two  salesmen,  the 
Jobber  must  sell  100  per  cent  of  his  entire  turnover  to  retail  deal- 
ers.  The  testimony  or  evidence  offered  by  the  prospective  Jobber 
was  of  little  value  in  the  final  determination  as  the  matter  was 
turned  over  to  Bradstreet  for  investigation  and  upon  the  findings 
of  this  company,  the  prospect  qualified  or  failed  to  qualify.  About 
1931,  these  functions  were  taken  over  by  the  Flintkote  Company  as  af- 
fecting patented  products  and  as  affecting  non-patented  products  when 
shipped  with  patented  ones. 

The  procedure  for  Mail  Order  House  was  much  the  sajne  as  that 
for  the  Jobber,  in  that  the  final  determination  was  vested  in  the 
hands  of  Bradstreet,  and  from  their  opinion  there  was  no  recourse 

or  appeal.   Peculiarly,  these  firms  fell  in  the  most  favored  group 
so  far  as  the  amount  of  discount  was  concerned,  in  spite  of  the  fact 
that  their  sales  amounted  to  only  5  to  6  per  cent  of  the  total  sales 

9826 


-  516  - 

of  the  Industry;  whereas  the  lumber  dealers  who  handled  roughly  70  per- 
cent of  the  total  industry  sales,  fell  in  the  least  favored  class. (*) 

The  other  classification  includes  large  potential  users  of  the 
Inudstry's  products  to  whom  are  extended  discrininatroy  discounts  for 
no  other  reason,  apparently,  than  that  they  do  offer  a  market  for 
large  quantities  of  the  commodities. 

v.  eatuke  of  the  markst 

The  Industry  is  entirely  dependent  upon  construction  as  a  market 
for  its  products,  and  more  particularly  it  is  dependent  upon  the  build- 
ing division  of  that  industry.   As  has  no  doubt  neen  assumed  from  the 
name,  the  primary  commodities  are  roofing  materials,  though  a  small 
part  of  the  products  are  used  for  building  'siding  and  for  water- 
proofing or  damp- proof ing  basements. 

A.  New  Building 

? — »* 

By  far  the  greater  part  of  these  materials  is  for  application 
of  new  structures,  and  the  consumption  of  the  individual  product  de- 
pends upon  the  type  of  the  structure,  i.e.,  residential,  commercial, 
industrial,  etc.  The  total  demand  for  the  products  of  the  Industry 
does  not  show  this  same  relation  to  types.   whether  shingles,  rolled 
roofing  or  tarred  felts  are-  used  is  based  principally  on  the  shape 
of  the,  roof  and  its  visibility,  In  residential  structures  the  :roof 
is  generally  visible,  unless  the  type  of  architecture  happens  to 
be  Spanish  or  of  some  other  style  which  calls  for  a  hidden  or  semi- 
hidden  roof.   In  the  latter  case,  the  selection  is  apt  to  be  of  the 
plainer  type  which  calls  for  either  rolled  roofing  or  built  up  roof- 
ing, whereas ■ in  the  more  visible  styles  are  more  frequently  used. 
Likewise  the  roofs  of  the  commercial  or  industrial  buildings  are  of 
the  flat  type,  in  which  cases   the  esthetic  makes  less  appeal  and 
practability  is  the  determining  factor.   Consequently,  the  demand  for 
t he . various  products  of  the  Industry  is  susceptible  to  fluctuations 
which  effect  the  demand  for  the  individual  product  as  well  as  to 
fluctuations  of  the  demand  for  the  total.  Due  to  this  degree  of  the 
dependency  upon  the  construction  field,  the  demand  for  the  products 
of  the  Industry  is  both  seasonable  and  cyclical. 

While  the  market  for  the  products  is  almost  entirely  determined  by 
the  construction  industry,  it  does  not  necessarily  follow  that  the 
demand  will  vary  directly  with  the  total  amount  of  new  building.  The 
life  of  the  average  asphalt  roof  depends  to  a  considerable  degree 
upon  the  per  unit  weight  of  the  roofing  used.   It  may  safely  be  said 
however,  th;  t  it  runs  from  seven  to  ten  years  (some  companies  offer 
a  guarantee  for  a  longer  period  of  time).   The  life  of  the  average 
house  being  the  excess  of  this  period,  it  is  obvious  that  each  struc- 
ture already  in  existence  affords  a  potential  market  for  such  roofing 
this  including  also  structures  which  were  originally  covered  with 
some  other  type  of  roofing. 

( *)   Transcript  of  Hearing,  page  137  Sept.  21,  1933 


9826 


-  517  - 


VI.  CCXiPETITIOIT 

In  marketing  their  products,  the  members  of  the  Industry  are  forced 
to  compete  with  at  least  four  well  established  industries.   In  no  in- 
stance .have  the  relative  merits  of  the  respective  products  been  deter- 
mined with  sufficient  defjiniteness  and  certainty  to  furnish  a  guide  for 
the  consumer.   That  one  form  or  type  of  roofing  is  more  durable  or  is 
more  resistive  to  fire  or  is  more  attractive  is  largely  a  matter  of 
personal  opinion  or  taste,  and  no  one  except  the  members  of  the  groups 
has  offered  a  conclusive  opinion  on  any  of  these  factors,  and  in  those 
instances  conflicting  opinions  are  numerous  as  their  advocates.   Since 
the  layity  has  no  guide  other  than  the  advice  of  interested  parties,  the 
market  limitations  are  determined  by  the  comparative  sales  abilities  and 
the  total  possible  demand,  both  of  which  are  uncertain. 

In-making  the  final  determination  bet-Teen  the  competing  materials, 
the  consumer  without  any  measure  must  roughly  estimate  the  respective 
virtues  and  discount  the  relative  deficiencies  and  then  make  a  guess  as 
to  which  would  be  preferable.  Under  such  conditions  it  is  possible,  from 
the  point  of  view  of  the  manufacturer,  that  an  industry  organization 
mi^rht  render  its  most  meritorious  service,  for  under  these  circumstances 
it  might  be  a.dvantagecrm',  to  combine  against  the  enemy  to  the  benefit  of 
the  industry  in  general. 

VII.  PRODUCTION,  COS'..'  AI.'D  PRICE  TREHDS 

Both  production  and  productive  capacity  from  the  beginning  of  the 
Industry  down  to  and  including  1929  showed  a  rather  constr-urt  increase. 
There  were  periods  during  this  time  when  there  were  temporary  decreases 
in  production,  but  even  these  moment ; try  retardations  rarely  reached  the 
productive  capacity  which  has  constantly  increased  to  the  present. 

Data  are  available  for  both  the  shipments  in  squares  per  year  as 
furnished  by  the  Industry  (*)  a.nd  the  value  of  prodacts  as  furnished  by 
the  Department  of  Commerce.  (**)   In  view  of  the  fact  that  the  latter 
figure  would  not  depict  the  changes  in  production  except  when  accompanied 
by  no  change  in  price,  the  shi  raent  data  a,re  thought  to  be  of  more  value 
at  the  present  instant. 


(*)   Uaterials  Searing  on  the  Asphalt  Shingle  and  Hoofing  Industry, 
prepared  by  the  he search  and  Planning  Division,  page  6.   (KRA 
files) 

(**)   Census  of  hanufac tares,  1929,  page  1349 . 
9826 


-  513  - 


Shipments  Per  cent 

(thousands  change  from 

Year                of  squares)  preceding  year 

1919  27,935  1.3 

1920  28,322  1.3 

1921  25,159  .  -7.6 

1922  30.U95  16.6 

1923  30,^99  0.0 
192U                                  32,571  6.8 

1925  33,730  3.6 

1926  36,303  7.6 

1927  37,975  U.6 

1928  3b,54o  -3.8 

1929  39,861  9.1 

1930  27.S7U  -30.1 

1931  22,565  19.0 

1932  .  23,023  2.0 

Shipments  inclf.de   smooth- roll  and  slate— roll  roofings  and  strip 
and  individual    shingles.    (*) 

It  will  "be  seen  fro;.:  these  figures  on  shipments  that  while  suscep- 
tible to  fluctuations  in  the  building  trade,  members  were  able  to  delay 
the  effects  and  recover  ::ore  rapidly  than  the  industry  from  which  their 
demand  came.  Data  on  building  permits  for  comparable  periods  show  a 
constant  decline  from  1326  through  1932  and  a  decrease  between  the  last 
two  years,    1931-1932,    of  65.7  per  cent.    (**) 

The  only  available  figures  on  the   cost   of  production  are  those  of 
the   Census  of  Manufactures  which  show  the  amount   for  wages  and  cost   of 
materials  (including  fuel  and  purchased  electrical  power) .     These   figur- 
es do  not  permit  a  determination  of  value   only  and  are   not  comparable   to 
the  above  data  on  shipments.      The  percentages   such  costs  were  of  the 
value,  of  products  are   shown  in  the  following  table:    (***) 


(*)        Materials  Bearing  on  the  Asphalt   Shingle   and  Roofing  Industry, 
prepared  "oy  the  Research  and  Planning  Division,   page  6,    (in  NRA 
files) 

(**)      Ibid. 

(***)  Based  on  Data  of  Census  of  Manufactures,  page  13^9» 


9S26 


-  '319  - 

Per  Cent  Labor  end  I.later- 
Year  ials  of  Value  of  Product 

IS 29  SS 

IS 27  63 

1325  66 

IS23  7S 

1921  70 

1919  73 

191U  72 

1909  71 

190U  70 

l&'SS  63 

The  above  date,  indicated  that,  compared  with  the  value  of  the  pro- 
ducts, costs  rope  fron  1S99  "to  1923  and  have  been  decreasing  since  that 
date. 

A.   Compared  T/ith  Competitive  Industries 

More  interesting,  from  the  point  of  view  of  this  study,  is  a  com- 
parison of  production  and  price  trends  with  similar  movements  of  the 
competing  industries.  Data  are  available  for  making  such  a  comparison 
with  wood  shingles,  slate  roofing  and  clay  tile  roofing.  These  figures 
reveal  the  fact  that  members  of  the  Industry  were  able  to  maintain  both 
price  and  production  more  advantageously  and  were  able  to  recoup  more 
rapidly  than  v-ere  the  competing  groups.  More  startling  is  the  ability 
to  maintain  and  even  increase  prices  during  a  period  of  falling  demand. 
Under  conditions  of  free  and  open  competition,  the  movement  would  be 
expected  to  be  in  the  opposite  direction,  for  in  an  attempt  to  increase 
demand  the  price  level  would  fall,  profits  being  maintained  or  the  amount 
of  losses  being  lessened  by  the  increased  volume.   It  will  be  seen  from 
the  chart  that  from  the  peak  production  of  1929^'to  the  minimum  production 
of  1933.  Asphalt  Shingles  showed  a  decline  of  only  53*2  per  cent  and 
Roll  Roofing  only  Hi.1-'  per  cent,  while  "Jood  Shingle  production  declined 
65.5  per  cent,  Slate  Roofing  70*3  Vev   cent,  and  Clay  Tile  72.1  per  cent. 
The  peak  and  minimum  years  did  not  always  coincide  but  all  took  place 
during  the  period  from  IS  &   to  1933*   During  the  same  period  the  price 
fluctuations,  as  measured  on  a  1929  base,  were  as  follows: 


9826 


i-  ■  r  Cent 
Decrease 

(Maximum)       Recovered  to 
Commodity         19-39  Base        1929Br.se 


Wood  Shingles  51.1  81.7 

Asphalt  Shingles  0.0  116.0 

Roll  Roofing  3.7  106.0 

Slate  Roofing  43.5  Hone  shown 

Tile  Roofing  33.5  ITone  shown 

It  should  he  mentioned  in  connection  with  this  analysis  that  only  in 
the  case  of  the  Wood  Shingle  was  the. 1929  price  high  price,  each  of 
the  oth  r  roofing  materials  showing  .  decrease  from  1923. 

Computations  from  the  figures  in  the  1329  Census  of  Manufactures 
develop  the  fact  that  in  that  year,  assuming  consumption  was  in  keeping 
with  production,  72. 6;*  of  every  dollar  spent  for  roofinj  was  spent  for 
products  of  the  Industry.   Th  nearest  competitor  was  the  wooden  shingle 
industry,  which  accounted  for  13. 9.;*  of  each  roofing  dollar.   Indications 
are  that  at  the  present  bine  there  would  he  an  even  greater  dispersion, 
the  ratio  of  wood  shingle  consumption  to  prepared  roofing  shipments, 
since  192,,  having  'been   as  follows:  (*) 

Ratio  of  wood  shingle 
consumption  to  prepared 
Year  roofing  shipments 


1922  42.7 

1923  41.2 
1934  36.1 
1925  37.5 
1925  33.0 

1927  30,5 

1928  25.9 

1929  24.1 

1930  23.1 

1931  20.3 

1932  18.2 

VIII.  EEEECT  OE  THE  DEPRESSION 

Building  as  measured  by  building  permits  reached  a  maximum  in  1925 
when  the  value  of  stich  permits  was  3,793,159,000  and  from  that  date 


(*)  Red  Ceo.ar  Shingles,  Report  if  th;  U.S.  Trriff  Commission  to  the 
President  of  the  United  States,  1934.  Tabic  16,  page  60. 


9826 


declined  steadily  to  a  level  of  $366,691,000  or  91.2  per  cent.  (*) 

It  is  quite  certain  that  .he  minimum  of  building  was  not  reached  until 

1933  although  figures  for  that  year  arc  not  available. 

With  the  unprecedented  decline  in  construction,  it  would  be  only 
logical  and  natural  that  the  demand  for  roofing  products  v/ould  show  a 
similar  movement.   There  was,  however,  considerable  variance  in  the  point 
of  time.  Shipments  of  prepared  roofing  reached  a  high  in  1929  of  39,861,000 
and  a  low  in  1931  of  22,565,000  for  a  total  decline  of  40.9  per  cent.   (**) 
As  has  been  previously  mentioned  a  portion  of  the  demand  for  these  pro- 
ducts arises  from  repairs  and  replacements  though  it  is  extremely  doubtful 
that  this  activity  could  account  for  all  the  difference.   It  appears  likely 
that  the  competing  industry  must  have  suffered  more  severely  and  that  the 
Asphalt  Shingle  and  Roofing  Industry  must  have  profited  at  their  expense. 

This  observation  is  supported  by  price  movements  of  the  Industry 
during  the  depression,   Tal:en  alone  or  in  comparison  with  price  movements 
of  competing  materials,  prices  seemed  to  have  been  maintained  with  sur- 
prising success.  No  doubt  this  unusual  ability  may  be  explained,  in  part, 
by  activities  of  the  Institute. 

IX.   PRE-CODE  PROBLEMS 

Despite  the  maintenance  of  prices  and  the  seeming  harmony,  the  granting 
of  secret  discounts,  rebates  and  allowance?  caused  much  unrest  among  the 
members.   In  attempts  to  meet  such  special  grants  to  favored  customers  or 
groups  of  customers,  frequent  price  wars  were  precipitated  and  prices,  at 
least  temporarily,  went  skidding  downward.  The  problem  seemed  to  be  more 
the  possibility  of  these  wars  than  an  actuality,  but  without  some  method 
of  compelling  observance  of  filed  prices,  the  members  of  the  Industry  were 
always  conscious  of  the  danger. 

Another  practice  in  the  Industry,  and  which  the  members  felt  they  were 
helpless  to  combat,  was  that  of  extending  favorable  prices  to  mail  order 
houses.  Such  institutions  accounted  for  a  very  small  proportion  of  the 
total  sales  of  the  Industry,  yet  they  at  times  occupied  the  most  favored 
position  so  far  as  prices  were  concerned.  Recognizing  the  problem,  the 
members  did  not  feel  that  they  could  either  individually  or  collectively  . 
meet  the  issue  unless  there  was  some  method  of  compelling  adherence  to 
filed  prices. 


(*)  Material  Bearing  on  the  Asphalt  Shingle  and  Roofing  Industry, 

prepared  "b:  the  Division  of  Economic  Research  and  Planning,  page  6. 
(In  HRA  files) 

(**)  Supra,  page  518. 


9826 


-  522  - 

» 

CHAPTER  III 
INDUSTRY  PROGRAM  FOR  PRICE  FILING 


The  National  Industrial  Recovery  Act  became  law  on  June  16,  1933, 
and  industries  were  asked  to  submit  for  approval  plans  devised  to 
remedy  the  competitive  evils  of  each  particular  group,  at  the  same 
time  including  provisions  to  benefit  labor.   The  general  theory  was 
that  as  a  result  of  these  proposals,  not  only  would  industry  be  rehab- 
ilitated, but,  in  addition,  advantages  would  accure  to  the  wage  earner 
in  the  form  of  shortened  hours  and  increased  hourly  wage  rates. 

That  the  Asphalt  Shingle  and  Roofing  Industry  already  enter- 
tained definite  ideas  as  to  the  needs  of  their  business  is  evidenced 
by  the  fact  that  little  more  than  a  month  had  passed  before  they  had 
submitted  a  plan  to  the  Administrator.   For  the  purpose  of  negotiat- 
ing with  the  Administration,  a  Code  Committee  was  ao-oointed  by  the 
Institute,  consisting  of  the  following  individuals:   (*) 

Herbert  Abraham,  Ruberoid  Co.-,  Chairman 

L.  R.  Hoff,  Johns-Manville 

C.  W.  Bayliss,  Barber  Asifhalt  Co. 

It  is  probably  worth  noting  that  these  men  and  their  affiliates  were 
all  named  as  defendants  in  the  Bill  of  Eouity.   (**) 

It  should  have  been  a  foregone  conclusion  that  the  plan  submitted 
would  include  a  provision  for  the  filing  of  prices,  terras  and  condi- 
tions of  sale.   Yhe  industry  had  been  operating  under  such  a  plan  since 
1926  and  since  the  suit  of  1930  had  been  forced  to  operate  without 
any  measures  which  would  compel  observance  of  these  principles. 

I.   PROPOSALS 

The  original  proposal  submitted  on  July  27,  1933,  (***)  provided 
that  every  manufacturer  should  publish  (if  not  already  published)  his 


(*)     Resolution  signed  by  P.  C.  Rowe 
(in  KRA  files,  Volume  A,  p.  77) 

(**)    Supra,  p.   508. 

(***)   Proposed  Code  of  Fair  Competition  submitted  by  Asphalt  Shingle 
and  Roofing  Industry  dated  July  27,  1933,  and  letter  of  trans- 
mittal dated  August  7,  1933,  from  Herbert  Abrahams  to  Hugh  S. 
Johnson. 
(In  NRA  files,  Volume  A,  p.  7) 


9826 


■  _  523"  - 

prices, terras  and  conditions  of  sale  to  his  trade  concerned,  each  class 
of  trade  to  be  furnished  with  the  applicable  prices,  terms  and  con- 
ditions.  The  manufacturer  should  'QiaroTjpon  file  with  the  Institute 
for  immediate  distribution  to  the  me:  bei*s  of  the  Industry  a  complete 
schedule  of  all  prices,  terms  and  conditions  of  sale  then  in  effect. 
This  information  was  also  to  be  .kept  on  file  at  the  Institute  for  in- 
spection by  any  member  of  the  trade  or  any  manufacturer.   In  event 
any  change  was  made  in  the  price,  terras  or  conditions  of  sale  of  any 
manufacturer,  such  changes  were  to  be  published  within  43  hours  there- 
after and  the  member  making  the  change  was  to  file  all  such  changes  with 
the  Institute  co incidentally  with  the  publication.   (*) 

Paragraph  XXIV  of  that  proposal  noted  exceptions  to  the  require- 
mnets  for  filing  in  the  following  terms:   (**) 

"The  price  publicity  herein  described  shall 
apply  to  all  ;orices,  terns  and  conditions  of 
sales  of  all  asphalt  shingles,  asphalt  roof- 
ing and  allied  products,  except  at  terms,  con- 
ditions of  sale  and  other  provisions  contained 
in  industry  merchandising  plan  established  here- 
in under  need  not  be  published  by  the  manufac- 
turer, such  plan  being  public  document." 

In  regard  to  customer  classification  the  following  provision  was 
incorporated:  (*■■**) 

"The  names  of  all  customers  classified  by  manu- 
facturing tra.de  groups  eligible  to  receive  trade 
discounts  shall  be  filed  promptly  in  the  proper 
office  of  the  Institute  under  the  trade  class- 
ification designated  by  such  manufacturer,  and 
all  names  of  customers  so  filed  shall  be  com- 
piled in  the  classified  customers  list  and  shall 

.  be  open  for  inspection  to  the  manuf acturers  and 
to  the  trade  at  the  proper  office  of  the  Insti- 
tute, Conies  thereof,  for  the  appropriate  por- 
tions thereof,  shall  be  furnished  by  the  In- 
stitute upon  application  of  any  manufacturer  or 
member  of  the  trade  to  the  proper  office  of  the 
Institute  in  the  same  manner  as  provided  with 
respect  to  price  lists." 

It  is  not  indicated  in  this  provision  whether  or  not  a  manufacturer 
was  to  be  permitted  to  change  his  definition  of  classes  from  time  to 


(*)     It  should  be  noted  that  the  proposal  at  this  time  did  not  in- 
clude a  waiting  period. 

(**)    See  Proposed  Code,  Volume  A,  vv.    7-14. (in  KBA  files,  Volume  A) 

(***)    Ibid 

9826 


-  524  - 

time.   There  is  no  specific  permission  for  such  changes,  hut  at  the 
same  time  there  is  no  prohibition*  .••"■'  ■;.; 

In  addition  to  these  reflations  governing  price  -publicity  and 
customer  classification,  Title  5,  paragraph  23  empowered  the  Code 
Authority,  through  committees,  to  establish  a  Code  of  Ethics,  a  Code 
of  Simplification  and  Standardization  pf  Products  and  a  Merchandising 
Plan.   In  the  lignt  of  previous  and  subsequent  discussions,  it  seems 
imnortant  to  direct  attention  to  the  similarity  of  the  trade  "oractice 
provisions  of  the  original  prorto sal  and  the  nlan  to  which  the  Depart- 
ment of  Justice  objected.   Granting  that  the  merchandising  nlan  which 
would  have  been  adopted  by  the  Committee  would  have  been  likened  to 
that  under  which  the  Industry  had  nreviously  one-rated,  and  this  is  not 
an  unfair  assumption,  (*)  and  that  the  Code  of  Ethics  would  have  "shown 
the  same  relationship  to  the  previous  Code  of  Ethics,  the  Code  would 
have  reinstituted  the  plan  of  1930,  dispensing  with  the  services  of 
Bradstreet  and  the  imnartial  adjudicator. 

Just  what  transpired  between  the  original  nronosal  and  the  time 
of  the  public  hearing  is  not  a  matter  of  record,  but  it  is  apparent 
that  the  proposal  underwent  considerable  change.   A  five-day  waiting 
period  was  included;   (**)   nrovisions  were  made  for  changes  in  customer 
classifications;  and  the  empowerment  of  the  Code  Authority  to  estab- 
lish a  merchandising  nlan  was  delimited  to  nower  to  study  and  re- 
commend. 

The  Code  submitted  at  the  public  hearing  provided  for  publication 
of  prices,  terms  and  conditions  of  sale  of  all  products  to  the  trade 
concerned  and  the  coincident  filing  in  an  office  designated  by  the 
Code  Authority  for  immediate  distribution  to  the  members  of  the  In- 
dustry,  In  case  of  nrice  changes,  either  of  two  alternative  procedures 
might  be  followed  at  the  discretion  of  the  [0ode  Authority:   the  man- 
ufacturer making  the  change  might  be  required  immediately  to  publish 
to  the  trade  concerned  every  such  change  and  coincidentally  file  with 
the  Code  Authority  for  distribution;  or  he  might  be  required  to  file 
such  changes  with  ;the  Code  Authority  five  days  in  advance  of  the  ef- 
fective date  for  immediate  distribution  to  the  members  of  the  Industry 


(*)    See  Merchandising  Plan  submitted,  Infra,  p.   548. 

(**)   It  is  possible  that  some  of  the  changes  were  made  in  the 
light  of  the  results  of  similar  proposals  made  by  other 
industries.   In  an  interview  on  January  13,  1936,  J.S.Bryant, 
Secretary  of  the  Institute  and  former  Secretary  to  the  Code 
Authority,  stated  that  the  Industry  had  never  been  particular- 
ly enthusiastic  about  the  waiting  period  but  had  included  it 
in  their  demands  because  other  industries  had  been  granted 
such  a  nrovision. 


9826 


<*  525  h 

and" -publish  to  the  trade  concerned  on  the  effective  date.   The  terras  of 
the  provision  were  as  follows:   (*) 

"ARTICLE  X  -  PUBLICITY  OF  PHICES, 

TEEMS  AID  CCKDITI01TS  OF  SALE 

"Section  1.   Immediately  after  the  effective  date  of 
this  code,  every  mender  of  the  industry  shall  'Dullish 
his  prices,  terras,  and  conditions  of  sale  on  all  prod- 
ucts,  to  his  trade  concerned,  each  class  of  trade  being 
furnished  with  the  prices,  terms  and  conditions  of  sale 
directly  affecting  such  class.   The  trade  concerned  shall 
"be  all  the  trade  of  the  member  of  the  industry  directly 
affected  by  .such  prices,  terras  or  conditions  of  sale  in 
the  territory  to  which  the  same  apply.   Coincident  with 
such  publication,  every  member  of  the  industry  shall  file 
in  an  office  designated  by  the  Code  Authority  Committee, 
for  immediate  distribution  to  all  members  of  the  industry, 
a  complete  schedule  of  such  prices,  terms  and  conditions 
of  sale.   Prices,  terms  and  conditions  of  sale  in  effect 
in  the  Pacific  Coast  Section  shall  be  filed  in  a  Pacific 
Coast  Office  designated  by  the  Code  Authority  Committee. 

"Section  2.   In  the  event  of  any  change  being  made  by 
any  member  of  the  industry  in  any  price,  term,  or  condi- 
tion of  sale,  he  shall,  as  determined  by  the  Code  Author- 
ity Committee  either: 

"(a)  Immediately  publish  to  the  trade  concerned 
every  such  change  and  coincidentally  file  in  an 
office  designated  by  the  Code  Authority  Committee 
full  and  complete  copies  of  every  such  change  in 
prices,  terns  and  conditions  of  sale,  for  immediate 
distribution  to  the  memhors  of  the  industry. 

"(b)  File  full  aftd  complete  conies  of  every  con- 
templated change  in  prices,  terras,  and  condi- 
tion of  sale  in  an  office  designated  ~by   the  Code 
Authority  Committee  within  such  periods  as  may  be 
designated  by  the  Code  Authority  Committee  but 
not  exceeding  five  days  in  advance  of  the  effective 
date  of  any  such  change.   Copies  thereof  shall  be 
immediately  distributed  to  the  members  of  the  in- 
dustry.  On  the  effective  date  of  any  such  change' 
the  Industry  member  shall  publish  the  same  to  the 
trade  concerned  and  coincidentally  file  such  infor- 
mation in  the  office  designated  by  the  Code  Authority 
Committee  for  immediate  distribution  to  the  members 
of  the  Industry." 


(*)   Transcript  of  Public  Hearing,  p.  28. 
(In  ERA  Files) 


9826 


-  526  - 


The  problem  of  customer  classification  was  handled  in  almost 
the  same  language  as  in  the  proposal  of  July  ■  27th  (*),  with  no  change 
in  the  meaning. 

The  uniform  merchandising  plan  was  not  considered  a  matter  which 
might  be  of  interest  to  other  than  members  of  the  industry  and  it  was 
provided  that  the  Code  Authority  might  propose  a  Code  of  Ethics,  a 
Code  of  Simplification  and  Standardization  and  a  Merchandising  Plan, 
Before  being  sxibmitted  to  the  Administrator  for  approval  these  plans 
were  required  to  have  the  supoort  of  two-thirds  of  the  memoers  of  the 
Industry  located  east  of  the  Pacific  Coast  Section. 

II  PURPOSES  TO  3E  ACHIEVED 

In  discussing  the  purposes  to  be  achieved  ~oy   the  open  -orice  plan, 
it  i-s  probably  wise  to  speak  from  the  mouths  of  the  proponents.   In 
the  letter  of  transmittal  accompanying  the  original  proposal,  the 
Chairman  of  the  Cod's  Committee  wrote  as  follows:  (**") 

"In  the  year  1932  and  in  preceding  years,  many 
manufacturers  in  the  asphalt ,  shingle  and  roofing  In- 
dustry suffered  serious  losses.   In  order  to  enable  the 
manufacturers  in  this  Industry  to  make  even  a  little 
profit  and  to  carry  out  the  purposes  of  the  National 
Industrial  Recovery  Act  it  is  essential,  in  our  opinion, 
to  stamp  out  vicious  practices  which  have  existed  in 
the  Industry  causing  price  wars  and  cut-throat  compe- 
tition detrimental  to  the  workers  as  well  as  to  the 
manufacturers. 

We  have, therefore,  proposed  in  the  Code  an  open  price 
plan  which  expressly  permits  every  manufacturer  to  fix 
and  change  his  own  prices  at  will,  but  requires  him  to 
publish  to  his  trade  and  concern  all  prices  and  terms 
of  sales  effecting  such  trade,  and  after  first  publishing 
such  prices  and  terms  and  rates  then  to  file  them  in  the 
office  of  the  Asphalt  Shingle  and  Roofing  Institute, 
where  they  will  be  open  to.  inspection  by  all  members  of 
the  Trade  and  by  manufacturers.   Under  this  plan,  the 
manufacturer  may  change  his  prices  at  any  time  without 
prior  notice  to  anyone,  but  after  change  has  been  made 
he  must  publish  the  new  price  to  his  trade  and  file  it 
in  the  Institute  office.   We  earnestly  urge  the  importance 
of  an  early  approval  of  the  publicity  features  of  the  pro- 
posed Code. " 


(*)    Supra,  p.  523. 

(**)   Letter  dated  August  3,  1933,  from  Herbert  Abrahams  to  Hugh  S. 
Johnson. 
(In  1TRA  files,  Volume  A,  p.  7) 


9826 


-  527  t 

Further  reference  was  made  to  the  purposes  of  the  -orice  publicity 
features  in  both  the  first  and  second  drafts  of  the  Code,  where  it 
was  stated:   (*) 

The  purpose  of  the  publicity  requirement  of  this 
Code  is  to  insure  to  members  of  the  industry  to  the 
trade  concerned,  complete  publicity  of  all  prices, 
terms  and  conditions  of  sale  and  thus  promote  fair 
competition.   II o  member  of  the  industry  shall  sell, 
pay  rebate,  or  allow  a  deduction  at  any  time  to  any 
person  except  upon  prices,  terms,  and  conditions  of 
sale  then  in  effect  and  published  in  the  manner  re- 
auired  by  the  Code.   Each  member  of  the  industry 
shall  have  the  right  individually  to  publish  new 
prices,  terms,  and  conditions  of  sale,  from  time  to 
time,  not  inconsistent  with  the  provisions  of  the 
Code. 

More  specifically,  it  was  thought  that  publicity  would  place 
the  manufacturer  in  a  position  to  refute  the  alleged  prices  which  were 
quoted  prospective  customers  in  an  attempt  to  drive  a  better  bargain. 
Buyers, particularly  those  who  purchased  large  quantities,  in  an  at- 
tempt to  secure  a  price  advantage,  would  often  quote  a  ficititious 
price  alleged  to  have  been  offered  by  a  competit:  or.   When  this  price 
was  met  or  a  lower  price  quoted,  this  quotation  would  be  used  to 
drive  an  even  more  advantageous  bargain  with  still  another  competitor, 
and  so  through  a  vicious  cycle  the  price  would  be  driven  down.   Con- 
tinued over  a.  long  period  of  time  this  practice  was  apt  to  culminate 
in  a  general  price  war.   It  is  also  probable  that  publicity  of  prices, 
supported  by  governmental  compulsion  to  force  adherence,  offered  an 
opportunity  to  remove  the  mail  order  houses  from  their  position  of 
favored  buyers,  and  this  favoritism  shown  mail  order  houses  was  gen- 
erally opposed  by  the  members  of  the  industry  as  being  justified  by 
quantities  purchased. 

In  determining  the  real  reasons  why  the  Industry  supported  the 
measures  one  should  recall  the  expressed  purposes  and  reasons  of  the 
Institute  in  putting  a  similar  plan  in  operation  years  before.  (**) 


(*)    Transcript  of  the  Public  Hearing,  p.  30. 
(In  FRA  Files) 

(**)    Supra,  p.  504  &  ff . 


9826 


CHART  3R.. IV 
CONTROVERSIES  ARISING  DURING  CODS  MAKING  PERIOD 

I.  BETV7ESN  MEMBERS  OF  INDUSTRY 

In  making  their  proposals,  members  of  the  industry  seemed  to  "be  in 
almost  perfect  accord.   If  any  difficulty  was  experienced  in  determining 
just  what  would  best  solve  the  perplexities,  such  problems  were  ironed 
out  without  bringing  them  to  the  Administration.   It  seems  logical  to 
assume  that  there  were  no  serious  differences  and  that  the  members  of 
the  industry,  in  the  light  of  their  past  experience,  know  or  at  least 
had  very  definite  opinions  as  to  what  would  remedy  the  existing  evils 
in  their  competitive  system.  ** 

In  only  one  instance  is  there  recorded  a  lack  of  cfcplctc  harmony 
regarding  the  proposals  of  the  Institute.   On  September  13,  the  Western 
Elaterite  Roofing  Company  wired  the  Institute  that  all  references  to  a 
merchandising  Plan  should  be  eliminated  from  the  proposed, Code  on  the 
ground  that  they  had  not  been  worked" out  satisfactorily  and  that  they 
were  confusing.   Five  days  later  in  a  letter  to  the  Administration  the 
contents  of  the  telegram  was  quoted  and  the  suggestion  again  ma.de  that 
action  on  the  -plan  should  be  defer  cd  and  t  ho  problem  considered  in  a 
more  deliberate  manner  at  some  later  dato.(*) 

II.  MEMBERS  AND  CUSTOMER  GROUPS 

The  serenity  which  marked  the  consideration  of  the  members  of  the  - 
industry  was  not  so  apparent  when  the  Code  was  brought  to  the  attention 
of  the  customer  groups.   Cries  of  discrimination  and  price  fixing  were 
the'  immediate  reactions.  At  least  three  important,  customer  groups  pro- 
tested vigourously  the  provisions  relating  to  price  filing  and  customer 
classification,  each  contending,  for  one  reason  or  another,  that  if 
incorporated  in  the  Code  such  provisions  would  react  to  the  detriment  of 
the  particular  group  and  ultimately  to  the  consumer. 

A.  Lumber  Dealers 

The  opposition  of  the  Lumber  Dealers  was  not  crystallized  until 
March,  1934",  at  which  time  the  Merchandising  Plan  was  up  for  consideration. 
The  arguments  advocated  by  that  group  will  be  discussed  in  connection  with 
the  proposed  amendment.  (**)   It  should  be  noted  at  this  time,  however, 
that  in  anticipation  of  such  a  proposal,  the  group  protested  the  favorable 
prices  extended  to  the  mail  order  houses  on  the  grounds  that  they  were 
discriminatory  and  not  justified  on  the  basis  of  quantities. 

3.   The  Roofing  Contractors  Association 

The  objections  of  the  Roofinb  Contractors  Association  do  not  appear 
to  have  been  at  all  times  consistent  with  any  particular  economic  theory, 
being  primarily  leveled  at  those  provisions  of  the  proposed  Code  which 
dealt  with  the  filing  of  prices  and  trade  classifications.   In  regard  to 

T*)      Letter  dated  September  18,1933,  from  Edward  J.  Yetter  to  Assistant 

Deputy  Administrator  William  Lawson.   (in  NBA  files,  Asphalt  Shingle 
and  Roofing  Code,  Volume  A.) 

(**)   Infra,  p,  548. 

9826 


Article  VIII  (*)  (Trade  Qualifications)  the  criticism  war,  advanced  that 
the  various  classes  of  customers  should  he  designated  in  the  Code  and  that 
there  should  be  provided  some  means  enabling  those  who  were  assigned  to 
each  class  to  advance  to  more  advantageous  positions  (**).   The  then 
Article  X,  now  Article  VII  (.***)  was  attacked  on  the  grounds  that  the 
interchange  of  vices  among  members  was  tantamount  to  the  establishment 
of  price  fixing.   In  advancing  this  criticism  it  was  stated  that  (****): 

"Again,  we  are  forced  to  he  guided  ~oy   past  performances  in  attempt- 
ing to  determine  the  future  actions  of  the  industry.   We  have 
present  in  this  room  price  lists  issued  by  various  members  of 
this  industry  for  the  past  few  years.   By  a  strange  coincidence, 
although  these  price  lists  are  dated  usually  only  a  few  days 
apart,  they  invariably  mention  the  identically  same  net  price 
for  each  classification  of  material." 

In  general  it  was  felt  by  this  group  that,  since  they  were  vitally 
connected  with  the  industry,  they  should  be  consulted  in  the  drawing  up 
of  any  plan  of  fair  competition. 

C.   hail  Order  Houses 

The  hail  Order  Association  of  America  objected  to  the  proposals 
requiring  the,  filing  of  prices  and  customer  classification  on  the  theory 
that  such  information  was  confidential  between  the  manufacturer  and  the 
customer.   It  was  contended,  further,  that  the  requiring  of  data  relative 
to  sales  and  ;:rices  was  requiring  not  only  a  disclosure  of  the  manufac- 
turers business,  but  also  that  of  his  clients,  constituting  a  violation 
of  confidence. 

This  Association  expressed  the  belief  that  the  Code  Authority  would 
be  dominated  by  the  larger  firms,  who  were  opposed  to  the  mail  order  type 
of  distribution,  and  that  as  a  result  of  this  domination  the  Mail  Order 
group  would  be  discriminated  against  in  the  matter  of  discounts.   They 
further  alleged  that  the  larger  or  dominating  firms  would  avail  themselves 
of  the  information  filed  relative  to  the  mail  order  houses  in  order  to 
use  it  in  combatting  such  institutions. 

In  response  to  this  protest  the  Code  Committee  pointed  out  that  "in 
spite  of  the  fact  that  the  total  purchases  of  the  primary  mail  order  houses 
do  not  exceed  5'fo   of  our  Dutput,  they  have  been  able  for  many  years  to 
secure  prices  considerably  below  the  level  of  the  various  other  classes 
of  trade."  (*****)   it  was  advanced  by  the  Code  proponents  that  this 
situation  had  led  to  wide-spread  comolaints  from  the  other  classes  of 


(*)   Infra,  p.  543. 

(**)   Transcript  of  the  Hearing"  on  Code  of  Pair  Competition,  presented  by 
Asphalt  Shingle  and  Hoofing  Industry,  September  21,  1933,  p.  71-81. 
(***)   Infra,  p.  548. 
(****)   Transcript  of  the  Hearing  on  the  Code  of  Fair  Competition,  presented 

'oy   Asphalt  Shingle  and  Roofing  Industry,  September  21,1933,  p.  79. 
(*****)   Letter  dated  September  21,  1933,  from  the  Asphalt  Shingle  and 
Hoofing  Institute  to  HHA,   (in  IIHA  Files,  Volume  B,  p. 4) 

9826  . 


customers,  since  the  mail  order  firms,  as  a  resv.lt  of  this  advantageous 
■buying,  could  and  did  cut  prices  to  the  detrimea-t"  of  other  distributors 
of  the  industry's  products."  Relative  to  the  accusation  that  the  Code 
Authority  would  he  dominated' by  the  large  firms  and  as  a  result  of  that 
dominance  would  be  prejudiced  against  the  mail  order  houses,  it  was 
called  to  the  attention  of  the  Administration  that  each  member  would 
have  one  vote  regardless  of  size  and  that  there  would  be  two  represen- 
tatives of  the  Administration  on  the  body.   *-t  was  further  intimated 
that  such  an  accusation  was  an  affront  to  the  integrity  of  the  Code 
'Authority  and  the  Administration. 

III..  BETWEEN  INDUSTRY  AND  UFA 

Recorded  objections  of  the  Administration  to  the  proposals  of  the 
code  sponsors  were  not  numerous.  , Concessions  sought  were  no  greater  and 
no  broader  than  had  been  previously  granted  other  industries  and  definite 
policies  had.. not  yet  been  determined.   Each  proposal  was  supposed  to  stand 
on  its  own  merits  but  unconsciously  each  code  was  viewed  in  terms  of  those 
already  approved.   From  this  perspective  the  demands  of  the  proponents, 
while  possible  more  definite  than  some,  were  no  more  exacting. 

As  measured  by  the  changes  in  the  proposed  Code  from  the  time,  of 
its  first  appearance  (*)  to  the  time  of  the  public  hearing,  many  concessions 
were  made  and  many  disputes  settled.   These  alterations,  though  frequent, 
were  in  most  instances  directed  to  form  rather  than  to  content.  Many 
of  these  changes  were  effected  at  a  conference  on  August  31,  193",  with 
Chairman  Abraham  of  the  Code  Committee  and  Lanager  Bryant  of  the  Institute. 

Following  the  public  hearing  the  Consumer's  Advisory  Board  took  issue 
with  the  probisions  for  customer  classification,  waiting  period  and 
definition  of  costs.  (***)   This  Board  considered  it  undesirable  to 
require  the  listing  of  customers  according  to  classes,  contending  that 
this  practice  would  lend  itself  to  discrimination  and  even  to  "negative 
blacklisting".   It  maintained  that  the  other  two  provisions  would  raise- 
the  possibility  of  coercion  and  price  fixing. 

IV.   THE  EFFECT  OF  THESE  CONTROVERSIES 

The  outcome  of  the  various  controversies  can  be  most  readily  compre- 
hended from  a  discussion  of  the  pertinent  provisions  of  the  Code,  and  a 
comparison  with  the  similar  provisions  in  the  original  proposal. (****) 

The  provision  relating  to  publicity  of  prices,  terms  and  conditions 
of  sale  (Article  VII)  (*****)  f'  required  that  each  member,  within  ten  (10) 
days  after  the  effective  date  of  the  Code,  publish  his  prices,  terms  and 
conditions  of  sale  on  all  products  and  furnish  each  class  of  trade  with 
the  prices,  terms  and  conditions  of  sale  affecting  that  class.   Coincidentally 

J*)      Supra,    p.    50^.  :  .  .  .. 

(**)      Report   of  Assistant  Deputy  Lawson  dated  September  .5,   1933.      (in 
NBA  Files,    Volume  A.   p. 65) 

(***)      Licmora-n/yts;  dated  September  29,  .1933,    from  L.F.Boffey  of   the   Con- 
sumer's Advisory  Board  Zo  Malcolm  Muir,    Deputy  Administrator.    (I'n 
NBA  Files,    Volume  3,    p.    99) 

(****)      Supra,   p.    523. 

(*****)   See  Article  VII  of  the  Code  for  the  Asphalt  Shingle  and  Roofing 

9826     Industry,  Codes  of  Fair  Competition,  Volume  II,  p.  533. 


—  531  — 

with  such  publication  eo.cn  member  was  required  to  file  with  the  Cods 
Authority,  and  the  Code  Authority  was  required  to  irn.viediately  distribute 
to  all  members  of  the  Industry,  3  com-iletr.  schedule  of  such  : rices, 
terms  and  conditions  of  sale. 

Section  2  of  that  Article  provided  that  in  the  event  that  changes 
were  made  in  any  of  the  above  published  facts  the  member  so  changing 
should  file  with  the  Code  Authority  a  full  and  complete  copy  of  all  such 
changes,  within  periods  to  be  determined  by  the  Code  Authority,  but 
not  exceeding  five  (5)  days  in  advance  of  the  change.   The  agency  with 
which  this  information  was  filed  was  required  to  send  copies  of  such 
changes  to  all  the  members  of  the  industry  immediately,  and  on  the 
effective  date  to  publish  them  to  the  trade  concerned. 

It  was  further  provided  in  this  Article  that  no  member  should  sell, 
pay  a  rebate,  or  allow  a  deduction  except  in  conformance  with  prices 
■filed,  but  any  member  was  permitted  to  change  his  prices,  terms,  etc., 
individually  and  of  his  own  volition. 

Article  VIII  (*)  related  to  publicity  of  qualifications  of  the 
different  classes  of  customers,  as  established  by  the  individual  member, 
and  the  filing  of  the  names  of  all  the  customers  falling  in  each  class. 
These  qualifications  could  be  changed  ?s  the  will  of  the  member  dictated, 
but  all  changes  were  required  to  be  published  to  the  trade  and  filed 
with  the  Code  Authority.   The  nar.es  and  location  of  the  members  of  each 
class  were  to  be  open  to  inspection  ~oy   the  members  of  the  industry  and 
of  the  trade  but  the  name  of  the  manufacturers  submitting  such  names 
wore  not  to  be  disclosed  without  their  consent. 

Thus  members  of  the  industry  were  reouired  to  file  prices,  terms, 
conditions  of  sale,  definition  of  their  various  customer  classes  (if  any) 
and  the  names  and  location  of  all  customers  so  classified  with  the  Code 
Authority.  All  of  this  filed  data  was  subject  co  change  at  the  discretion 
of  the  manufacturer  filing,  but  when  prices,  terms  or  conditions  of 
sale  were  changed  other  members  of  the  industry  were  to  be  notified 
five  days  in  advance  of  the  effective  date  of  such  change. 


(*)  Ibid. 


9326 


-  532  - 

CHAPTER  V 

RELATION  0?  PRICE  FILING  TO  OTEZ: :  OGEE  PROVISIONS 

In  addition   to    the   requirements  for  filin;     >rices,    terras  and 
conditions  of   sale   and   trade    qualifications,    which  '/ere  all  an  essen- 
tial part  of   the  price   filing  plan*    there  '-ere  other   trade  practices 
which   tended  to    strengthen   the  prohibitions   set   out   in   those  provisions. 

In  d'rde.r  to  prevent  or  forestall    any  attempt   to  evade   the  pro- 
visions relating  to'  prices.    Article    IX,    Section  5,(*)   declared  the 
granting  cf  any  rebates     refunds,    commissions ,    credits,    or 
unearned  discounts,    in  the  form  of  money,    services  or  privileges,    to 
be   an  unfair   trade  practice   and   to    "be   in  violatior   of   the    Code.    Section 
6   cf   the    sane   Article    (**)   forbade    the   giving  of  prizes,    nremiums  or 
gifts   in  connection  with  the    sale   of  products  or  as  an  inducement 
thereto,    by  any  scheme   involving  lottery,    misrepresentation  or  fraud. 

Through':  these    two    sections  an  effort  was  made   to  prevent  evasions 
of   the  price  filing  plan  by  devious  methods,    which  might  not  of  them- 
selves constitute  violations.   Not  dnly  was  a  violation  of   the  filed 
prices  forbidden,    but  also   the  granting  of  an3r  gratuities  which  might 
have    the    same   resiilt,    as  a  deviation. 

The  other  Code  provisions  relating   to  prices  or  to  price  filing 
were   not   in  the  nature   of  additional   forces  compelling  adherence   to 
filed  prices,    but  were  provisions  having  a    tendency  to   limit   the 
freedom  which  might   be  exercised  in  determining  the  price   to   be  filed. 

I.   PROHIBITION  07   SALZS  3SLCW  COST 

The   original  proposals  from  the   industry  provided  that  no  mem- 
ber  shruld  sell   to   the   trade  any  product  at  a  net  price  which  was 
below  the   said  member's   total   cost   thereof.    Total  cost  was   defined  to 
include    "all   items  properly  chargeable  to    the   operation  of   such  mem- 
ber's business'^***)   and  included  such  items  as  the   cost  of  raw  mat- 
erials,   manufacturing,    selling  transportation,    depreciation  and 
interest,    all   items  of  overhead  expense   and   "all   other   items   in  con- 
formity with  sound  accounting  practices." 

(*)  See  Article  IX,  Section  5  of  the  Code  for  the  Asphalt  Shingle 
and  Roofing  Industry,  Codes  of  Pair  Competition,  Vol.  II,  p.  534. 
(**)      Ibid. 

(.***)    Transcript  of  Public  Hearing,    September  21,    1933,    p. 30, 
(    in  NBA  Piles. ) 


9326 


—  '  (J .  1 ._.     — 


Protests  were  registered  against   this  provision  by  the  Mail 
Order  Association  of  America   »nd  by  the   Consumers'   Advisory  Board. 
The  Association  contended  that   the   determination  of   "total   cost" 
was  extremely  difficult,    that  enforcement  would  be  a   oroblem  and 
that   the   real  purpose   of   the  provision  ras  to    fix  -orices.(*)    The 
Consumers'    Board  suggested  the    substitution  of  a  provision  establish- 
ing a   cost  accounting  system,    subject  to    the  approval  of   the  Ad- 
ministrator, -and  that   the   decisions  of  the   Code   Authority  on  points  of 
alleged  violations  be   subject   to   review  by  the    same  authority. (**) 

It  appears   that   something  in   the  nature   of   a   compromise   must 
have   been  effected  for  the   Code,    as  adopted,    contained  an  amended 
prevision  on  Selling  Below  Cost  and  further  provided  in  Article  VI 
Sectim  2  (e)    (***)    that   the   Code  Authority  should  make  a   study  and 
should  make   recommendations   based  on   that    study  with  regard  to   a 
\iniforra  cost  accounting  system.    The   Codegprbhibited.ihe   sale. df" any  _ 
products  by  members  of   the   industry  at  a   net  price  which  was  be- 
low the   said  members'    "direct  costs".    "Direct  Costs"  were   defined 
as   consisting  of  raw  material   costs   (inclusive   of  transportation 
and  shrinkage);    direct  labor  costs;    manufacturing     burden   (inclu- 
sive of  power  and  steam,    factory  overhead,   maintenance   expense, 
technical  control,    factory  warehouse,    and  factory  shipping  charges); 
plus  a  markup  of  15$  of   the    total  of  these   three  items.    It  was  pro- 
vided that   any  member  might   sell  below  his   own   "direct   costs"    to 
meet   competitive  prices  which  he   had  not   investigated  and  to  meet 
competition  in  violation  of  this  rule,   pending  action  theron. (****) 

II.   MISCELLANEOUS   SEMI-BELATED  PROVISIONS 

Though  not   directly  affecting  the  price   filing  provisions 
of   the    Code,    but   materially  affecting  the  pricing  practices   of   the 
industry,    Article  X,    Section  3  of    the   Code    stimulated  that  nothing 
contained  in   the    Code   should  be   construed  as  prohibiting  any 
member  of   the   industry  from  exercising  "all   its  and/or   their   existing 
lawful  patent  rights,    or  as   requiring  any  member  of   the    industry 
to    do   any  act    in  conflict  with  the    terms   of  any  existing  valid 
patent  licensing  agreement. (*****) 

(*)lbid,   p. 93. 

(**)   Uemoradum  dated  September   29,    1933  from  L.F.    Bcffey  of   the 

Consumers'    Advisory  Board  to  Peputy  Administrator  Malcolm  Muir, 

(in  NBA  Files,   Volume   3,   p.    99) 

(***)   See   Article   VI,    Section  8Ce)   of  the   Code   for   the    Asphalt 

Shingle  and  Roofing  Industry,    Codes  of  S'sir  Competition,    Vol.    II,    p. 532. 

(****)    i"bicL.    Article   XII,   p,    535-536 

(*****)      Itid]    Article   X,    Section  3,    p.    535 


9826 


-   534  - 


This   interpretation  permitted  the  Patent  arid;Licensin§  Corporation 
to   continue   to-,  set  :uo   customer  -definitions   and  to   fi:;  minimum 
prices  s&  related  %o  patented  products  and  33  related  to  non- 
patented  products  when:  shipped  such  pa  tented.products. 

The    Code  further  provided  that   the   Code  Authority  should  study, 
with  a  view  to  mating  recommendations  to    the  Administrator,    the 
problems  of  limitation  of  production,    limitation  of  ne"  equipment, 
industry  merchandising  plans  and  a    system  of  exchange  of   credit 
information.    The  -provisions   in  themselves  had  no   effect  on  prices 
or  price  filing   out   the  possible   results  might  have  had.    In  reality 
the   Code  Authority  reported  only  on  the   question  of  a  uniform  mer- 
chandising plan,    and  while   they  pushed  this  measure  with  considerable 
interest,    they  were  never  successful   in  obtaining  its  adoption. 


982G 


-  53o  - 

chapter  vi 
admiitistratio:>i  op  price  fili:tg  pla:t 
i.    the  administrative  ageitcy 


Originally  it  was  intended  that  the  Code  should  be  administered  by 
the  Institute,  but  by  the  time  of  the  public  hearing  the  proposal  had  been 
changed  to  virtually  the  form  in  which  it  v/as  approved.  As  finally  rati- 
fied, it  was  provided  that  the  Code  should  be  administered  by  a  Code  Au- 
thority consisting  of  five  (5)  individuals  elected  from  among  those  subject 
to  the  Codes  and  agreeing  to  comply  therewith  by  a  two-thirds  vote  of  all 
such  industry  members,  three  to  be  elected  from  the  membership  of  the 
Institute  .and  two  from  these  not  members  of  the  Institute  at  the  time  the 
Code  was  adopted.  , 

The  first  Code  Authority  was  elected  at  a  meeting  in  New  York  City, 
October  23,  1933,  (*)  but  at  the  requesc-of  Assistant  Deputy  Laws  on 
another  election  was  held.   The  request,  no  doifbt,  v/as  made  by  Mr.  Lawson 
in  view  of  chc  fact  that  this  selection  preceded  the  approval  of  the  Code 
by  fifteen  days  and  its  effective  date  by  twenty-nine  days.   The  Assistant 
Deputy  felt  that  to  be  properly  elected  under  the  Code,  the  election  should 
not  antedate  the-  effective  date  of  the  document  which  granted  the  power.  - 

A.   The  Co'"-0  Authority 

The  first  duly  elected  Code  Authority  consisted  of  the  following 
individuals  from  the  membership  of  the  Institute: . 

Mr.  Herbert  Abrahams,  Chairman, 

President,  Ihi^eroid  Company  for  over  twelve  years  and  connected  with  the 

company  in  various  capacities  for  over  thrity  years; 

Mr.   L.   E,   Eofi , 

Vice  President   of  Johns-Manville   Company  for  ten  years  and  connected  with 

the   company  for   over   thirty  years  J 

Mr.  C.  W.  Bayliss, 

Vic-  President  of  Barber  Asphalt  Company  for  over  twelve  years  and  con- 
nected with  the  company  for  over  twenty  years; 

and  the  folJ owing  from  the  non-members  of  the  Institute: 

Ralph  P.  Mullcr, 

Vice  president  of  Cooper,  Company  for  three  years  and  connected  in  various 
capacities  with  Euberoid  Company,  with  National  Asbestos  Manufacturing 
and  Cooper  Company  for  approximately  19  years; 


(*)   Code  History  of  the  Asphalt  Shingle  and  Roofing  Manufacturing  Indus- 
try, as  amended  August,  1935,  p.  14,  (in  HRA  files) 


9826 


...   _  536  - 

John  A.  Scharwath, 

President  of  National  Asbestos  Manufacturing  Company  for  approximately 

twenty  years  and  connected- with  the  Industry  for  over  40  years. 

It  may  he  said  that  the  latter  tv/o  nr  raters  of  the  Code  Authority,  in 
addition  to  representing  the  non-members  of  the  Institute,  also  represented 
the  smaller  members  of  the  industry.   The  Chairman  of  the  Code  Authority 
was  President  of  the  Institute  and  was  a  member  of  the  Executive  Committee 
as  were  the  other  Institute  representatives. 

To  assist  the  Code  Authority  in  carrying  out  its  duties,  Mr.  J.  S. 
Bryant,  who  had  been  connected  with  the  Institute  since  1926  in  the  capacity 
of  Manager,  was  appointed  Secretary;  and  Mr,  P  .  C.  Rowe,  an  affiliate  of 
the  Plintkote  Company,  Assistant  Secretary.  At  its  meeting  on  November  20, 
1953,  the  Code  Authority  appointed  Lewis  H.  Brown,  President  of  Johns- 
Manville  Company  as  Treasurer.  (*)  Mr.  Brown  at  that  time  occupied  a  like 
position  with  the  Institute. 

Other  industry -representatives  of  the  Code  Authority  were:  (**) 

Mr.  Smith  Simpson,  former  Aide  to  Assistant  Deputy  Administrator  Laws on, 
appointed  confidential  agent,  May  7,  1934; 

Mr.  0.  A.  Bigler,  Assistant  Secretary,  November  20,  1934,  with  Philips 
Carey  in  an  executive  capacity  for  many  years,  appointed  to  take  the  place 
of  P.  C.  Rowe,  resigned: 

Mr.  R.  T.  Kidde,  Agent  in  Charge  of  Chicago  Office,  December  3,  1934, 
appointed  to  replace  P.  C.  Rowe,  resigned: 

Mr.  I.  J.  Harvey,  Treasurer,  January  10,  1935,  President  of  the  Flintkote 
Company,  appointed  to  replace  Lewis  H.  Brov.ii,  resigned. 

B .   Powers  a.nd  Duties  of  the  Code  Authority 

The  Code  Authority,  by  the  instrument  croating  it,  was  empowered  to 
adopt  its  own  rules  of  procedure  and  to  delegate  its  authority,  or  parts 
thereof,  to  such  agencies  and  committees  as  it  might  select.   This  in  gen- 
eral gave  the  Code  Authority  the  right  to  avail  itself  of  the  of: ices  and 
services  of  the  Institute. 

Specifically,  subject  to  the  right  of  the  Administrator  to  modify 
or  disapprove,  the  powers  a.nd  duties  o4:'  the  Cod:-  Authority  were  as  follows: 

(a)  To  require  each  member  of  the  industry  to  file 
reports  with  respect  to  specified  matters  and  such  other 
matters  as  might  be  deemed  pertinent, 

(b)  To  permit  all  members  to  participate  in  and  share  the 
benefits  of  the  activities  of  the  Code  Authority. 


(*)   Ibid,  p.  17 

(**)   Ibid,  pp.  1SB-19 
9826 


-  537  - 

(c)  To  collect  all  confidential  information  through 
an  agency  which  should  keep  such  information  in  con- 
fidence except  when  required  'by  the  Code  Authority 
for  the  proper  administration  of  the  Code. 

(d)  To  designate  an  agent  or  agents,  not  members  of 
the  industry,  to  investigate  complaints  of  violation. 
All  pertinent  information  so  collected  should  be  kept 
in  confidence  except  in  instances  when  the  alleged 
violation  was  substantiated,  in  which  event  the  in- 
formation should  "be  turned  over  to  the  Code  Authority 
for  proper  disposal. 

(c)   To  study  and  to  recommend  to  the  Administrator  any 
regulations  regarding  the  following: 

Uniform  Cost  Accounting; 
Limitation  of  Production; 
Limitation  of  New  Equipment; 
Industry  Merchandising  Plan; 
Simplification  and  Standardization; 
System  of  Exchange  of  Credit  Information; 
Inequalities  Affecting  the  Stability  of 
the  Industry. 

These  recommendations,  if  approved,  after  such  notice 
and  hearing  as  the  Administrator  deemed  necessary,  were 
to  becoi.ie  operative  with  the  same  force  and  effect  as 
any  other  part  of  the  Code. 

These  powers  as  measured  by  similar  provisions  in  other  Codes  were 
neither  unusual  nor  unreasonable.  The  Code  Authority  was  designated 
as  the  agency  to  administer  the  Code  and  the  procedure  to  be  followed, 
while  not  specifically  limiting  the  activities  of  the  administering  body, 
indicated  the  general  linos  of  those  activities.   How  successfully  the 
Code  pointed  the  way  can  best  be  determined  by  a  study  of  the  action  taken. 

C.   Foales  and  Regulations  promulgated  by  the  Code  Authority 

Rules  and  regulations  established  by  the  Code  Authority  are  too 
numerous  to  be  mentioned  individually.  Of  the  twenty-two  (22)  Code 
meetings,  few,  if  any,  were  adjourned  without  having,  passed  a  number  of 
rules  to  regulate  the  conduct  and  procedure  of  the  members  of  the  indus- 
try.  It  is  of  interest  to  note  that  fully  95  per  cent  of  these  rules  had 
to  do  with  the  filing  of  prices  or  customer  classification.  A  consider- 
able number  of  these  regulations  were  issued  as  explanations  or  interpreta- 
tions and  will  be  discussed  later.  (*) 

An  attempt  wil  be  made,  by  citing  a  number  of  examples,  to  indicate 
their  scope  and  the  great  latitude  covered  by  them. 

(*)   Infra,  p.  '•■ 


9826 


53S 

Hinutes  of  meeting,  3/27/35  \:.i 
Code  Authority,  with  concurrence  of  the  Administration 
lie  mbers  ruled  that  the  Industry  Members  must  file  with 
the  Code  Authority  fifteen  days  "before  the  effective 
date  a  list  giving  names  and  locations  of  trade  buyers 
who  would  receive  the  prices  and  terns  applying  to  the 
various  classifications  of  trade. 

Minutes  of  meeting,  9/3/3*4 

Code  Authority  rules  that  five  days  advance  notice 
must  be  filed  with  the  Code  Authority  -hen  equaliza- 
tion rath  unpublished  freight  rates  should  result  in 
a  decrease  in  the  net  cost  of  a  shipment  to  a  customer. 

Minutes  of  meeting.  5/l/3*+ 

It  was  ruled  that  new  items  added  to  a  member's  line 
of  products  must  be  filed  within  five  days;  members 
shipping  via  carriers  having  unpublished  freight 
rates  or  equalizing  against  such  rates  must  give 
publicity  to  the  rates  applying;  and,  product  life 
guarantees  must  be  filed  as  part  of  a  member's  prices, 
terms  and  conditions  of  sale. 

Minutes  of  meeting.  l/lZ/^k 

Code  Authority  ruled  that  in  classifying  customers, 
members  must  include  in  their  filing  each  location 
in  which  a  customer  had  a  place  of  business. 

Minutes  of  meeting.  U/9/3^1- 

Code  Authority  ruled  that  members  need  not  publish 

prices  beyond  the  third  deoimal  point.  (*) 

Minutes  of  meeting,  11/29/33 

Ruled  that  all  complaints  of  actions  of  an  agent  or 
agency  of  the  Code  Authority  made  pursuant  to  Sec- 
tion 2  (f)  of  Article  VI  should  be  made  in  writing 
and  addressed  to  the  New  York  office  of  the  Code 
Authority. 

Minutes  of  meeting.  11-/29/33  _ 

Ruled  that  to  prevent  secret  allowances,  the  members 
of  the  Industry  should  give  publicity  to  prices  of 
all  items  not  included  in  the  list  of  products  of 
Article  II,  Section  6,  in  order  that  there  would  be 
some  check  in  instances  of  mixed  shipments. 

A  recital  of  the  Code  Authority  rulings  could  be  continued  indefi- 
nitely. As  previously  noted,  by  far  the  greater  portion  of  these  rulings 
referred  to  some  phase  of  price  filing. 


(*)   The  Patent  and  Licensing  Corporation  at  about  the  same  time  issued 

the  same  ruling  to  gpvern  prices  of  patent  products. 
9S26 


~   539  - 
D.   Explanations  and  Interpretations 

Between  the  effective  date  of  tha  Code,  November  20,  1933  and  the 
Schechter  Decision,  May  27,  1935,  the  Code  Authority  issued  a  total  of 
thirty-three  Bulletins  and  Explanations,  twenty  of  which  were  concerned 
with  some  phase  of  price  filing   (publicity  of  prices,  tenns  and  con- 
ditions of  sale  or  customer  classification). 

Apparently  some  doubt  existed  in  the  minds  of  the  memoers  of  the 
Code  Authority  as  to  their  power  to  issue  instructions,  for  at  a  meeting 
of  that  "body  on  November  29,  1933,  it  voted  to  forward  to  the  Administrator 
copies  of  all  such  documents  thus  far  issued  and  all  that  might  be  trans- 
mitted to  the  industry  in  the  future.   The  vote  on  this  question  was  not 
unanimous,  L.  R.  Hoff  dissenting.  (*) 

The  Code  Authority  released  a  number  of  Bulletins  on  November  29, 
1933,  which  were  ordered  recalled  by  Assistant  Deputy  Administrator 
Lawson.(**)   It  does  not  appear  that  these  Bulletins  were  out  of  order 
nor  docs  the  demanded  recall  indicate  the  assumption  of  powers  not  deleg- 
ated. Mr.  Lawson  at  this  time  established  the  policy  of  reviewing  all 
instructions  issued  by  the  Code  Authority.   The  Bulletins  thus  held  in 
abeyance  were  reissued  under  date  of  March  10,  1934,  at  which  time  all 
such  documents  emanating  from  the  Code  Authority  office,  with  the  excep- 
tion of  Number  17,  were  circulated  to  the  industry. 

In  many  instances  it  is  difficult  to  distinguish  between  an  inter- 
pretationswith  the  exception  of  those  issued  by  the  Administration)  an 
explanation  and  what  was  designated  by  the  Code  Authority  as  a  Bulletin. 
Either  of  the  latter  two,  which  were  commonly  published  to  the  members 
of  the  industry  by  the  Code  Authority,  were  used  to  explain  and  interpret 
the  meaning  of  the  various  provisions  of  the  Code.   These  documents  are 
too  voluminous  to  be  quoted  here  in  toto  and  in  lieu  of  such  quotation  an 
attempt  will  be  made  to  summarize  the  rulings  so  issued  under  the  proper 
caption. 

1.  Bulletins 

The  first  reference  to  price  filing  was  in  Bulletin  Number  2,  ?/hich 
was  issued  for  the  purpose  of  instructing  members  in  the  method  of  filing 
and  time  of  filing  when  prices  were  changed.   The  introductory  paragraph 
stated:  (***) 

This  bulletin  is  for  the  purpose  of  providing  every  member 
of  the  industry  with  a  common  understanding  of  what  is 
required  in  connection  with  Publicity  of  Prices,  Terms  and 
Conditions  of  Sale  on  all  Sales  made  for  Delivery  within 
the  Northern  anxLSouthern  Sections. 


(*)   Minutes  of  Code  Authority  meeting,  11/29/ 33,  p.  2,  (in  NBA  files) 

(**•)■  Letter  dated  December  3,  1933  from  Assistant  Deputy  Administrator 
W.  M.  Lawson  to  Code  Authority  for  Asphalt  Shingle  and  Roofing 
Industry.   (in  NRA  files,  Code  Authority  Letters  Polder) 

(***)  Bulletin  No.  2,  3/ 8/ 34,  in  NRA  Piles,  Bulletin  Polder 


-  640  - 

The  bulletin  quoted  the  first  sentence  of  Article  VII,  Section  1,  and 
stated  that  this  publicity  applied  to  all  products  both  patented  and 
unpatented.   The  publicity  requirements  could  be  met  by  publishing  this 
data  in  part  on  price  lists  and  in  part  in  a  merchandising  plan,  provided 
that  in  this  manner  complete  information  was  furnished  to  -each  class  of 
trade.  In  order  to  furnish  complete  information  each  member  was  required 
to  publish  in  this  combined  manner,  provided  they  were  a  part  of  his  terms 
and  conditions  of  sale,  the  following;   trade  qualifications  and  definitions 
or  types  of  shipments;  terms  and  conditions  on  which  order  would  be  ac- 
cepted; trade  discounts,  commissions  and  quantity  discoxmts,  with  the 
basis  on  which  same  were  extended;  amount  and  term  of  each  discount;  and, 
freight  equalization  an"  freight  allowance  points  or  zones  with  outlines 
of  methods  and  conditions  cf  freight  equalization. 

The  Code  provided  for  the  filing  of  price  changes  as  designated  by 
the  Code  Authority,  with  the  reservation  that  the  date  of  filing  should 
not  be  in  excess  of  five  days  before  the  effective  date.   In  keeping 
with  the  authority  to  fix  the  time  of  filing  changes,  the  industry  was 
informed  that  when  the  effect  of  the  change  was  to  increa.se  prices  no 
notice  prior  to  the  efiectiv'e  date  was  required,  but  that  the  member  so 
changing  should  publish  to  the  trade  and  file  with  the  Code  Authority  on 
the  effective  "date.   In  the  event  that   the  change  in  prices,  terms  and 
conditions  of  sale  resulted  either  in  no  increase  in  net  price  or  in  a 
decrease  in  net  price  such  changes  were  to  be  filed  with  the  Code  Authority 
five  days  in  advance  of  the  effective  date.   Should  the  change  be  made  by 
any  member  other  than,  the  one  initiating  the  price  decline  and  should 
the  effect  of  such  change  in  no  instance  and  to  no  class  of  customers 
be  more  favorable  than  the  price  quoted  by  the  one  initiating  the  decline, 
these  price's  would  be  effective  on  the  same  date  as  would  be  the  prices  of 
the  initiator;  but  should  these  prices  in  any, instance  be  more  favorable 
to  any  class  of  customers  in  any  locality  they  would  not  be  effective 
until  a  lapse  of  five  days  from  the  date  on  which  they  were  filed. 

The  Bulletin  stated  further  that  if  it  were. the  policy  of  any 
industry  member  to  sell  to  any  consumer,  s\ich  as  general  consumer,  intra- 
state industrial  consumer,  etc.,  it  would  be  necessary  to  include  in 
prices,  terms  and  conditions  of  sale  published  to  the  trade,  the  prices, 
terms  and  conditions  of. sale  in  effect  to  all  such  tyDes  of  customer.   This 
necessary  data  could  be  included  in  either  the  price  list  or  the  merchan- 
dising plan.  In  connection  with  this  publicity  it  was  pointed  out  that 
while  the  Code  required  that  such  publicity  be  made  to  the  trade  concerned, 
it  did  not  require  that  this  publication  be  made  to  the  actual  consumers 
involved. 

Many  of  the  requirements  set  forth  in  this  letter  of  instruction 
seem  to  be  inconsistent  with  the  spirit  in  which  the  publicity  provision 
was  written  and  the  purpose  avowed  at  the  time  the  code  provision  was 
sought.   If  benefits  were  to  be  derived  from  enlightening  members  of  the 
industry  and  the  trade  concerned  as  to  the  prices  asked  and  received 
for  the  products  by  the  various  members,  why  should-  there  be  a  distinction 
between  changes  which  resulted  in  a  price  increase  to  the  trade  and  changes 
as  a  result  of  which  the  net  price  remained  constant  or  decreased?   In 
regard  to  publication  to  the  trade  concerned  how  could  the  purpose  be 
served  when  such  prices  were  kept  from  the  "actual  consumer  "  and  that 

9826 


-  541  - 

consigner  was  ■-.     ieriber  of  the  tr  de  concerned,  being  so  classified  by  the 
members  of  the  industry? 

Bulletin  No,  11,  officially  releasee-  Dr.  the  sane  date  as  the  above 
Bullletin,  sought  to  supplement  these  instructions  with  rules  governing 
filing  with  regard  to  prot<  ction  orders,  special  products  made  to  meet 
specifications,  combined  sales  of  industry  and  r.on-industry  products 
and  sales  to  employees.  When  a  member  sold  either  a  protection  order 
or  special  products  made  to  meet  specifications,  he  was  requested  to 
file  information  with  the  Code  Authority  which  would  describe  the  par- 
ticular job  and  the  products  to  be  used.   If  industry  products  were  sold 
in  conjunction  with  non-industry  products  the  member  was  required  to 
file  with  the  Oode  Authority  the  prices  of  the  non-industry  commodities 
included' in  the' order.  Finally,  sales  to  employees  were  subject  to 
the  same  publicity  requirements  as  other  sales.   The  purpose  of   these 
rules  was,  no  doubt,  to  keep  members  of  the  industry  from  using  such 
orders  as  ruses  under  which  they  might  at  times  violate  their  filed, 
prices. 

Bulletin  Number  3  explained  the  requirement::-  under  Article  VIII, 
Publicity  of  Trade  Qualifications,  in  much  the  same  manner  that  Number 
2  had  ex-plained  Article  VII.   It  was  ruled  that  it  was  necessary  for 
each  member  to  publish  his  trade  definitions  and  die  terms  and  con- 
ditions of  sale  applicable  to  each  class  of  trade  so  defined.   These 
definitions  and  applicable  terms  and  conditions  were  to  be  published 
to  the  entire  trade  rather  than  only  to  the  cla,ss  of  trade  concerned. 
In  the  event  any  change  was  made  in  a  member's  trade  qualifications, 
these  changes  were  to  be  given  the  same  publicity  as  the  original 
definitions.   It  was  noted  that  this  Article  required  each  member  to 
file,  with  the  Code  Authority,  the  names  of  his  trade  under  the  classi- 
fication to  which  such  member  of  the  trade  had  been  assigned.   The  names 
so  filed  were  to  be -compiled  into  an  alphabetical  list  by  states  and 
would  be  available  to  the  members  of  the  industry  without  revealing 
the  manufacturer  who  had  filed  the  names  in  the  respective  classes. 

Bulletin  Number  12  ruled  that  it  would  constitute  an  unfair  method 
of  competition,  in  respect  to  the  products  enumerated  in  Section  1-A 
of  the  proposed  Industry  Merchandising  Plan,  for  any  member  in  the  Northern 
or  Southern  Sections  to  enter  into  any  contract,  either  verbal  or  written, 
the  terms  of  which  were  effective  beyond  thirty  days  from  the  date  of 
execution.   It  was  further  held  that  this  rule  should  remain  in  effect 
until  revoked  by  the  Code  Authority  or  the  Administration,  or  until  the 
proposed  Merchandising  Plan  was  approved.   This  ruling  seemingly  made 
activities  of  the  members  dependent  upon  the  Merchandising  Plan  which 
had  not  yet  been  submitted  for  approval  and  which  was  never  approved  by 
the  Administration. 

Number  13  held  that -^guarantees  against  price  declines  were  terms 
or  conditions  of  sale  and  must  be  filed  with  the  Code  Authority  five 
days  in  advance  of  their  effective  date. 

Bulletins  Number  8  and  15  explained  Section  5  of  Article  IX  and 
ruled  that  purchases  from  customers  or  prospective  customers  at  prices 
above  the  market  price  constituted  a  rebate  or  allowance  and  was  prohibited 

QP9A 


-  543  - 

"by  Code. 

Bulletin  Number  10  sought  to  prevent  evasions  through  sales  to 
' exporters '  and  required  that  all  sales  for  exoort  purposes  he  accom- 
panied "by  a  statement  "by  the  "buyer  that  the  goods  purchased  would  not 
be  offered  for  sale  in  the  United  States.  Further  the'  buyer  was  re- 
quired to  agree  that  in  the  event  he  violated  the  provision  he  would 
pay  as  liquidated  damages  the  sum  of  five  hundred  dollars  (500)  per 
carload  or  portion  thereof  which  was  sold  in  violation  of  the  agreement. 

Bulletin  Number  16  required  full  publicity  with  regard  to  patent 
agreements  and  patented  ->roducte  when  the  patent  was  held  "by  non-members 
of  the  industry.   Such  publicity  vvas  to  include  prices,  terms  and  con- 
ditions oi'  sale;  a  statement  of  whether  the  license  agreement  involved 
"price  control";  a  full  description  of    product;  and  the  amount  of 
royalty  paid  to  the  non-member  of  the  Industry.  According  to  Mr.  Bryant, 
members  did  not  comply  with  this  railing  nor  did  the  Code  Authority  in- 
sist upon  such  compliance.  (*)   The  Code  Authority  believed  that  details 
of  royalties,  price  control,  etc.,  should  be  published  when  held  by 
members  of  the  industry,  but  that  the  filing  of  such  information  when 
the  patent  was  held  by  a  non-member  of  the  industry  would  serve  no  useful 
purpose.   ViTny  the  attitude  of  the  Code  Authority  changed  in  regard  to 
these  patent  agreements  is  not  known.  At  the  time  the  Bulletin  was  issued 
it  was  common  knowledge  that  practically  all  of  the  patents  governing 
the  products  of  the  industry  were  controlled  'by   the  Patent  and  Licensing 
Corporation,  a  non-membor  of  the  industry,  and  in  the  light  of  that 
knowledge  the  explanation  that  the  required  publicity  would  be  of  value 
only  when  the  patents  were  owned  by  members  of  the  industry,  appears  to 
be  rather  weak. 

Bulletin  Number  9  explained  to  the  members  of  the  industry  the 
meaning  of  "net  price"  as  used  in  Article  XII.   It  was  ruled  that  the 
term  meant  the  price  after  deducting  all  discounts  and  allowances 
extended  by  the  member,  including  transportation  allowances. 


2.  Explanations 

Of  the  fifteen  Explanations  issued  by  the  Code  Authority  between 
June  4,  1934  and  May  7,  1935  (it  seems  that  before  June  1934,  instruc- 
tions sent  out  by  the  Code  Authority  were  in  the  form  of  Bulletins  and 
that  from  that  date  such  instructions  were  issued  as  Explanations) 
thirteen  pertained  to  the  problem  of  price  filing.  By  and  large,  their 
purpose  was  to  explain  the  meaning  of  filing  of  "prices,  terras  anc] 
conditions  of  sale"  and  tended  to  broaden  the  meaning  of  that  expression. 
Thus  size  and  weight  became  a  term  or  condition  of  sale  as  did  conditions 
of  time  payments,  guarantees,  cooperative  advertising,  unpublished  freight 
rates,  inspection  service  and  gratis  training  of  salesmen.   It  would  seem 
that  whether  the  latter  two  constituted  discounts  or  premiums  would  de- 
pend upon  the  value  of  the  inspection  or  the  training,  but  in  either 


(*)  Letter  dated  May  15,  1934  from  J.  S.  Bryant,  Secretary  to  the  Code 
Authority  for  the  Asphalt  Shingle  and  Roofing  Industry  to  Assistant 
Deputy  Wil  lam  Lawson.   In  N3A  Piles,  Trade  Practice  Polder. 

9826 


•  -  543  - 

event,  they  were  deemed  a  part  of  the  "rice  and  as  such  would  have  been 
publishec1 . 

A  brief  summary  of  each  Explanation,  giving  the  number  and  the  date 
it  was  issued,  follows:  (*) 

So.  1,  issued  June  4,  1934,  required  the  publication  of 
dimensions,  weight  and  type  of  saturant ,  on  slate  roll 
roofing  offered  for  sale  in  jumbo  rolls. 

Ho.  2,. issued  June  4,  1954,  required  the  publication  of 
'.veight,  number  of  square  feet  and  dimensions  in  price 
publication. 

Ho.  3,  issued  June  4,  1934,  required  the  publication 
of  offers  to  train  salesmen  for  trade  buyers  as  a 
condition  of  sale, 

No.  4,  issued  June  4,  1934,  held  that  terms  and  conditions 
of  time  payments  should  be  published  as  a  condition  of  sale. 

No.  5,  issued  June  4,  1934,  held  that  when  completing 
materials  were  included  in  the  order  and  not  billed 
separately,  a  description  of  such  materials  should  be 
ublished. 

Ho.  7,  issued  June  4,  1934,  required  price  publication  for 
new  or  altered  items,  offered  for  sale. 

Ho.  8,  issued  June  4,  1934,  ruled  guarantees  issued  in 
connection  with  industry  products  a  condition  of  sale,  re- 
quiring publication. 

Ho.  9,  issued  June  4,  1934,  ruled  cooperative  advertising- 
offered  to  trade  buyers  a  condition  of  sale  which  required 
publication. 

Ho.  11,  issued  July  18,  1934,  reouired  publicity  of  un- 
published freight  rates. 

Ho.  12,  issued  August  22,  1934,  required  publicity  of  number 
of  decimal  points  used  in  deducting  discounts  or  computing 
delivery  charges.   (Release  by  HRA  said  not  to  constitute 
approval  of  freight  equalization,  insofar  as  explanation 
related  to  delivery  charges.) 

Ho.  13,  issued  December  26,  1934,  requested  each  member  of 
the  industry  to  publish  in  his  merchandising  plan  or  price 
list  tiie  date  on  which  invoices  were  issued.   If  that  date  was 
not  the  date  of  the  shipment,  each  member  was  required  to  give 
the  maximum  time  elapsing  between  the  shipment  date  and  the 
date  of  the  invoice. 


(*)   See  Explanations,  in  HPA  Piles,  Explanations  Polders 
9826 


-  544  - 

No.  14,  issued  February  5,  1935,  ruled  that  should  a 
member  of  the  industry  establish  prices  ,  terras  or  conditions 
of  sale  affecting  any  particular  trade  "buyer  or  class  of 
trade  buyers  not  previously  defined,  such  information  should 
he  filed.   This  might  be  done  in  his  merchandising  plan  or 
supplement  thereto.  Should  a  new  merchandising  plan  be  issued 
it  would  be  considered  that  this  new  plan  canceled  all  prev- 
iously issued  supplements. 

No.  15,  issued  May  7,  1935,  ruled  inspection  service, 
furnished  in  connection  with  sale  of  industry  products  for 
built-up  roofs,  to  be  a  condition  of  sale  and  as  such  should 
be  published, 

E.   Unauthorized  Activities 

The  opinion  as  to  what  constitutes  an  unauthorized  activity  varies 
a  great  deal  with  the  individual  interpretation  of  the  code  provisions 
from  which  the  source  of  power  rises.   According  to  the  interpretation 
of  the  Code  Authority,  that  body  was  at  all  times  well  within  bounds  of 
the  power  granted  it  under  the  Code.  At  the  same  time  some  less  generous 
or  less  biased  individual  might  have  questioned  many  of  their  rules  and 
regulations.   In  at  least  three  instance?  oil  out  the  Code  Authority  seem 
to  be  in  accord.   It  was  rather  generally  believed  that  in  its  activities 
in  relation  to  custome"'"  classification,  elimination  of  set-up  warehouses 
and  general  industry  advertising  program,  the  Code  Authority  was  either 
exceeding  its  power  or  was  engaged  in  activities  which  were  foreign  to 
the  power  delegated  to  it, 

1,   Misclassification  Meetings 

The  Code,  inArticle  VIII,  granted  to  each  member  of  the  industry 
the  right  to  classify  customers  inany  manner  that  it  saw  fit,  but  re- 
quired that  the  classifications  so  established  must  be  published  to  the 
trade  and  filed  with  the  Code  Authority.  Also  reserved  to  the  individual 
members  was  the  right  to  change  their  cla.~s  definitions  of  their  own 
volition,  providea  these  changes  were  published  in  the  sane  manner  as  the 
original  publication  and  filed  with  the  Code  Authority.  Article  VI,  Sec- 
tion 2  (e)  extended  to  the  Code  Authority  the  power  to  study  the  advis- 
ability of  a  uniform  merchandising  plan  and  to  make  recommenda.ti.Gns  to 
the  Administrator  concerning  this  problem.  Upon  the  receipt  of  these 
recommendations  the  Administrator ■ was  to  hold  such  public  hearings  as 
he  deemed  advisable  and  should  these  recommendations  be  aijproved  they 
would  operate  with  full  force  and  effect.   The  proposed  Uniform  Mer- 
chandising Plan  came  up  for  hearing  March  20,  1934  (*)  but  met  with  oppo- 
sition on  all  sides  and  was  never  approved. 

The  purpose  of  this  Plan  was  to  establish  uniform  customer  classes  and 
to  fix  uniform  terms  and  conditions  of  sale.   On  May  25,  1934,  the  Code 
Authority  announced  to  the  members  of  the  industry  that  in  June  there  would 
be  held  a  series  of  Hegiona.1  meetings  to  discuss  the  problems  of  misclassi- 
fication of  customers.   On  June  4,  1934,  the  A§sista.nt  Deputy  Administrator 

T*T  Infra,  p. 
9826 


-  545  - 

wrote  the  Co>  ;  Authority  (*)  requesting  that  prior  to  these  Regional 
meetings  the  Code  Authority  call  to  the  attention  of  industry  members 
the  fact  that  they  might  classify  customers  in  any  manner  they  wished;  - 
in  addition,  this  information  was  to  "be  made  known  to  them  in  the 
form  of  an  announcement  at  the  beg  inning  of  each  meeting. 

If  the  above  letter  was  intended  to  dissuade  the  Code  Authority 
from  holding  these  meetings  it  failed  in  its  purpose,  for  not  only 
were  the  meetings  held  in  June  but  others  followed.   In  August  notices 
were  sent  to  members  that  another  series  of  meetings  would  be  held  in 
September  and  it  was  requested  that  those  filing  complaints  of  mis- 
classification  should  bring  to  the  meeting  evidence  of  the  alleged 
violation  and  that  such  allegations  be  specific  and  refer  to  one 
instance  only.   For  some  reason  these  meetings  were  delayed  and  a 
letter  of  October  1,  1934  (**)  notified  the  members  that  the  subject  of 
Misclassification  had  been  up  for  discussion  at  the  'General  Industry 
Meeting5  on  September  13  and  that  regional  conferences  would  be  held  in 
November.   The  schedule  when  announced  allowed  for  sufficient  lapse  of 
time  for  an  agent  of  the  Code  Authority  to  attend  all  meetings.  (***) 
The  effect  of  and  the  reaction  to  these  meetings  can  best  be  summa- 
rized by  quoting  from  the  memorandum  from  Peter  Stone  of  the  Research 
and  Planning  Division.  (****)   In  the  memorandum  Mr.  Stone  pointed  to 
the  increases  in  prices  since  May  14  and  explained  them  in  the  light 
of  the  .  'Misclassification  Meetings': 

"For  some  time  past  we  have  been  receiving  complaints 
as  to  the  increased  prices  of  asphalt  shingles  and  as- 
phalt roofing.  Particularly  retail  lumber  dealers  have 
called  our  attention  to  the  fact  that  since  May  14 
three  price  increases  have  gone  into  effect  up  to 
July  12.   Since  the  volume  of  construction  and  hence 
the  volume  of  asphalt  shingles  has  decreased,  it  does  not 
appear  that  such  an  advance  is  justified  on  the  basis 
of  volume  moved  nor  on  the  basis  of  demand,  and  further, 
since  an  increased  price  will  have  a  tendency  to  slow 
down  recovery,  we  have  attempted  to  examine  the  sources 
of  unwarranted  price  increases  to  see  whether  any 
section  of  the  code  might  be  responsible  therefor. 

Data  has  been  obtained  on  certain  asphalt  roofing 
products,  showing  the  prices  from  October  4,  1933 
to  July  12,  1934.   The  following  table  shows 
comparable  prices: 

(*)      Letter  dated  June  4,  1934,  from  Assistant  Deputy  Administrator 
William  Lawson  to  the  Code  Authority  for  the  Asphalt  Shingle 
and  Roofing  Industry,  (in  LIRA  files,  Code  Authority  Letters 
Folder) . 

(**)     Letter  dated  October  1,  1934  from  the  Code  Authority  for 

the  Asphalt  Shingle  and  Roofing  Industry  to  Members  of  the 
Industry,  (in  KRA  files,  Trade  Practice  Folder) 

(***)    Ibid 

(****)  Memorandum  dated  Sept. 6, 1934  from  Peter  A.Stone,  Division  of 
Research  and  Planning  to  Bev  rly  Ober,  Deputy  Administrator. 
(In  KRA  Files,  Protests  Fold. r) 

9826 


-  546  - 

Price      Price     Price     Price 
11/30/33    5/14/34   6/5/34    7/12/34 

10"  Strip  Shingle    $4.20     $4.20     $4.38     $4.78 
553  Rolled  Roofing    1.45      1.45      1.50      1.70 

It  may  "be  noted  that  since  Lay  strip  shingles  have  ad- 
vanced 14/j  while  rolled  roofing  has  advanced  18-g^o. 
Construction  contracts  awarded  have  declined  in  a  similar 
period  from  $134,000,000  in  Hay  to  $119,000,000  in  July. 

An  examination  was  made  of  the  various  "bulletins,  inter- 
pretations and  circular  letters  issued  "by  the  Industry's 
Code  Authority  to  Members  of  the  Asphalt  Shingle  and 
Roofing  Industry  and  such  examination  had  revealed  the 
following  information: 

(l)   Of  the  various  "bulletins,  interpretations  and 

circular  letters  issued  "by  the  Code  Authority  to 
members  of  the  industry,  the  only  one  that  would 
tend  to  preserve  or  control  prices  is  the  one  of 
May  25,  1934,  which  was  directed  to  members  of  the 
industry  relative  to  classification  of  customers. 
This  letter  directed  the  calling  of  meetings  in 
various  parts  of  the  country  with  respect  to  quali- 
fications for  the  trade.   Such  meetings  appear  to 
be  a  device  for  bringing  about  the  uniformity  of 
classification  of  customers  and  classification  of 
discounts;  this  in  spite  of  the  fact  that  Article 
VIII  of  the  core  permits  an  individual  to  state  his 
own  classification  for  each  kind  of  buyer.   The 
fact  that  these  meetings  were  held  during  the 
period  of  the  price  increases  mentioned  above, 
indicated  that  there  may  be  some  connection 
between  these  original  meetings  on  classifica- 
tion of  customers  and  price  increases." 


2.   "Set-Up"  Warehouses 

On  September  21,  1934,  the  Code  Authority  sent  out  a  circular 
letter  listing  the  warehouses  of  the  industry  as  revised  September 
20,  1934.   Th  Asphalt  Shingle  and  Roofing  Industry  at  its  meeting 
in  White  Sulphur  Springs,  West  Virginia,  October  25. and  26,  1934, 
passed  a  motion  that  the  Code  Authority  study  the  problem  of  'set-up1 
warehouses  with  the  view  of  issuing  a  ruling  to  eliminate  them.  It 
would  appear  that  this  type  of  warehouse  is  in  a  sense  a  fictitious 
appendage  of  the  manufacturer  whereby  storage  space  is  rented  from  a 
favored  customer,  an  arrangement  which  might  be  used  as  a  means  of 
evading  the  published  prices.  Although  the  exact  relation  between 
the  meeting  and  the  list  is  not  apparent,  the  two  were  joined  in  the 
letter  of  December  7,  1934,  from  Assistant  Deputy  Plimpton  to  the 


QftPfi 


-  547  - 
Code  Authority  (*)   indicating  some  casual  relation. 

The  letter  from  Mr.  Plimpton  was  written  -at  the  suggestion  of 
Mr.  T.  R.  V-ughn  of  the  Legal  Division  and  it  requested  the  Code  Authori- 
ty to  cite  the  derivation  of  their  power  to  carry  on  this  activity.   Mr. 
Plimpton's  letter  follows:  (**) 

Our  attention  has  "been  called  to  the  circular  letter  sent 
out  by  your  Code  Authority  on  September  21  and  containing 
a  list  of  warehouses  revised  as  of  September  20,  1934. 
Apparently  the  sending  out  of  this  list  is  outside  the 
scope  of  the  Code.   You  can  appreciate,  of  course,  that  we 
are  not  in  any  position  to  approve  or  even  comment  on  action 
by  the  Code  Authority  unless  said  action  is  specifically 
authorized  by  the  Coce.  We  would  like  to  get  your  opinion, 
therefc.o,  as  to  just  why  the  Code  Authority  should  attempt 
to  pass  on  the  elimination  of  certain  types  of  warehouses 
assuming  that  there  is  an  enabling  provision. 

Mr.  J.  S.  Bryant,  Secretary  to  the  Code  Authority  responded  to 
the  above  query  on  December  12.   He  stated  that  the  authority  for  this 
activity  was  derived  from  Article  VII,  Section  2,  which  Article  and 
Section  governed  the  filing  of  changes  in  price,  terms  or  conditions 
of  sale.   Mr.  Bryant  pointed  out  that  any  such  warenouses  established 
in  the  neighborhood  of  a  favored  customer  would  result  in  a  more  ad- 
vantageous price  and  he  quoted  from  merchandising  plans  of  members  of 
the  industry  to  substantiate  this  assertion.  No  direct  attempt  was 
made  to  justify  the  elimination  of  these  warehouses. 

Apparently  this  explanation  was  not  satisfactory  to  Mr.  Plimpton 
for  on  December  15  he  called  the  matter  to  the  attention  of  the 
various  Advisory  Boards  and  asked  for  a  conference  on  December  19.(***)  . 

There  seems  to  have  been  a  difference  of  opinion  as  to  the 
'legality'  of  these  activities.  F.  J.  Parchell,  Administration  Member 
of  the  Code  Authority,  wiote  the  Assistant  Deputy  on  December  20  stating 
that  it  seemed  to  him  the  circular  letter  was  entirely  in  order  but 
that  if  the  Code  Authority  attempted  to  prohibit  the  use  of  'set-up' 
warehouses  it  would  be  a  matter  for  submission  to  the  Administration, 
The  Consumers'  Advisory  Board,  in  a  memorandum  of  January  22,  1935, 
suggested  that  the  Code  Authority  be  informed  that  any  attempt  to  eli- 
minate any  type  of  service  was  patently  beyond  their  power  and  that  a 
list  of  warehouses  and  application  of  other  price  terms  of  members  of 
the  industry  should  be  broadcast  to  the  trade  in  the  same  manner  as 
the  individual,  lists. 

(*)    Letter  dated  December  7,  1934  from  Assistant  Deputy  Administrator 
Plimpton  to  the  Code  Authority  for  the  Asphalt  Shingle  and 
Roofing  Industry,  in  NRA  files,  Merchandising  Plan  Folder. 

(**)    Ibid 

(***}  .  Memorandum  dated  December  15,  ,1934,  from  Assistant  Deputy  Ad- 
ministrator R.  B.  Plimpton  to  the, Advisory  Boards,  (in  1IRA 
files,  Trade  Practice  Folder) . 


-  548  - 

The  final  solution  of  this  pro"blem"is  not  known  though  it  would 
appear  that  the  Code  Authority  desisted  from  further  attempts  to  eli- 
minate these  warehouses  as  no  further  comment  is  found  in  the  files. 

3.   Industry  Advertising  Program 

In  September  1934,  Mr.  Plimpton  asked  the  opinion  of  the  Legal 
Adviser  as  to  the  legality  of  a  Code  Authority  activity  which  had  recent- 
ly come  to  his  attention.   The  Code  Authority  was  undertaking  to  spon- 
sor a  natioiial  advertising  campaign  of  the  products  of  the  industry. 
The  program  was  to  he  a  cooperative  on  which  would  tend  to  promote 
the  sale  of  the  industry  product  in  general  rather  than  those  of  any 
individual  company.   An  opinion  was  requested  of  the  Legal  Division  re- 
garding the  scheme  as  a  subject  of  review  or  control  by  NRA;  the  proper 
exercise  of  power  granted  the  Code  Authority  in  the  Code;   what  provision 
authorized  such  a  plan  and,  regardless  of  the  authorization,  what  con- 
sideration of  policy  or  public  interest  would ' justify  any  particular 
form' of  supervision  by  NRA.  (*)   To  these  interrogations,  Mr.  Price  of 
the  Legal  Division  replied  that  when  completed  and  in  operation  it  was 
not  a  matter  for  review  by  the  NRA  unless  the  Coce  Authority  continued 
to  sponsor  it,  that  it  was  not  a  proper  exercise  of  power  granted  in 
the  Code,  as  the  Code  conferred  no  such  power,  and  that  the  NRA  had  no 
right  to  supervise  unless  it  was  submitted  by  the  Code  Authority  under 
Article  VI,  Section.  2,.  (e)  .  Mr.  Price  stated  further  that  if  submitted, 
the  plan  would  not  have  the  approval  of  the  Legal,  Consumers'  or  Re- 
search and  Planning  Divisions  and  that  the  plan  should  be  discouraged. 
(**)   In  his  memorandum  Mr.  Price  went  on  record  as  being  of  the 
opinion  that  only  the  Federal  Trade  Commission  could  prevent  such  acti- 
vities on  the  part  of  the  industry. 

P.   Amendments 

During  the  life  of  the  Code,  the  Code  Authority  proposed  some 
twelve  to  fifteen  amendments,  the  final  disposition  of  which  fell  into 
four  classes;  those  approved,  those  not  approved,  those  withdrawn,  and 
those  pending  at  the  time  of  the  Schechter  Decision.   Some  of  these  pro- 
posals had  no  bearing  on  the  price  filing  activities  or  the  economic 
effects  thereof  and  for  the  purpose  of  this  discussion  will  be  ignored. 
An  attempt  will  be  made  to  treat  the  others  briefly,  giving  due  con- 
sideration to  the  significance  of  each  proposal,  whether  approved  or 
not. 

1.   Uniform  Merchandising  Flan 

By  authority  granted  in  Article  VI,  Section  2  (e)  the  Code  Author- 
ity was  empowered  to  study  the  problem  of  merchandising  plans  and  ma&e 
recommendations  pertaining  thereto.   The  Code  became  effective  November 
20,. 1933,  and  before  a  month  had  passed  (December  19,  1933)  (***)  a 

(*)    Memorandum  dated  Sept. 26,  1934  from  R.E.Plimpton,  Asst .Deputy 

Administrator  to  Chester  Price  of  the  Legal  Division,  (in  NRA 

files,  Trrsde  Practice  Polder) 
(**)   Memorandum  dated  Oct. 12, 1934  from  Chester  Price  of  the  Legal  Div. 

to  R.E.Plimpton,  Asst. Deputy  Administrator,  (in  NRA  files, 

Trade  Practice  (Folder) 
(***)   Memorandum  dated  Jan.  19,  1934  from  Asst.  Deputy  Administrator 
826        William  Lav/son  to  the  Administrator.  (In  NRA  files,  Central 


-  549  - 

preliminary  draft  of  a  plan  was  submitted  to  the  industry.  Copies  of 
this  plan  were  subjected  to  criticism  of  the  NBA  'advisors,  the  Depart- 
ment of  Justice  and  the  Federal  Trade  Commission. 

In  its  essence,  the  plan  was  the  same  as  that  under  which  the 
industry  was  operating  at  the  time  the  Bill  in  Equity  was  filed  against 
it.(*)   It  included  the  same  complicated  system  of  customer  classifi- 
cation, with  practically  identical  definitions  of  customer  classes  and 
the  same  intricate  scheme  for  related  discounts.   Its  complexity  all  but 
prohibits  an  explanation  and  discussion  here;  however,  the  comments  of 
the  Department  of  Justice  and  the  -Federal  Trade  Commission  will  indicate 
its  scope  and  meaning. 

The  Department  of  Justice  commented  that  in  deciding  to  approve 
or  disapprove  the  Blan,  the  Administration  must  determine  whether  it 
wished  to  authorize  "this  combination  to  fix  prices  and  to  black  list 
or  white  list  its  trade".  (**)   In  its  consideration  the  Department  enu- 
merated thre .  points  which  tended  to  make'  for  price  fixing.   It  was 
noted  that  competition  in  this  industry  had  in  the  past  been  on  discounts 
rather  than  on  basic  price  lists;   that  the  history  of  previous  re- 
stricting maximum  discounts  had  shown  that  the  maximum  figure  had  be- 
come the  fixed  figure;  and  that  the  third  major  fac'tor  of  legitimate 
price,  charges  for  transportation,  were  fixed  in  minute  detail.   In 
conclusion,  Mr.  Stephens  stated: 

"We  have  previously  drawn  attention  to  the  possibilities 
involved  in  placing  business  in  patented  products  under  a 
system  of  restraints  along  wita  the  non-patented,  and  to 
the  fact  that  one  of  the  largest  companies  of  the  group, 
the  owner  of  most  of  the  patents  previously  charged  with 
various  forms  of  unfair  prices,  particularly  chiseling  the 
business  of  its  licensees,  is  represented  on  the  Code 
Authority  to  which  these  licensees  report  the  names  of 
their  customers  and  every   detailed  information. 

On  the  whole  this  Department  is  forced  to  the  conclusion 
that  the  system  of  prices  outlined  by  the  proposed  plan 
cannot  be  carried  out  except  through  the  exercise  of 
monopolistic  control  by  the  combination." 

The  Department  took  occasion  to  make  further  comments  in  a  letter  of 
January  4,  1934.   At  this  time  the  attention  of  the  Administration  was 
called  to  the  striking  similarity  between  the  proposed  plan  and  the 
practices  covered  by  the  Government's  complaint.  Mr.  Stephens  wrote 
as  follows:  (***) 


(*)      Supr;  ,  p.  541.   • 

(**)    Letter  dated  December  23,1933  from  Harold  A.Stephens,  Assistant 

Attorney  General  to  NBA.  (Copy  in  Department  of  Justice  Files, 

Folder  7) . 
(***)    Letter  dated  January  4,  1934  from  Harold  M.  Stephens,  Assistant 

Attorney  General  to  Assistant  Deputy  Administrator  Lawson. 

(In  NBA  Files,  Trade  Practice  Folder). 


-  o50  - 

"The  practices  covered  by  the  government',  s complaint  are 
virtually -the  same"  as  those  covered  by  the  rules  submitted 
to  the  Administration.   The  action  was  be.^un  three  years 
ago  and  is  still  pending,  some  doubt  'has  arisen  as  to  the 
appropriate  method  of  procedure  in  the  light  of  present 
circumstances.   It  is  quite  apparent  that  the  government 
should  not  proceed  to  a  determination  of  the  matter  if 
the  proposed  practices  are  now  put  into  effect.  However, 
it  is  felt  that 'your  own  Administration  should  be  entirely 
free  to  take  such  action  in  connection  with  the  Oocle  and 
the  proposed  changes  as  it  may  deem  appropriate." 

The  attack  of  the  Federal  Trade  Commission  centered  on  the  practice 
of  freight  equalization  which  was  criticized  most  severely.   It  was 
alleged  that  this  practice  would  tend  to  freeze  channels  of  distribution, 
stifle  competition,  maintain  artificial  price  levels  and  unreasonably 
incre.ase  prices.   The  Commission  intimated  that  the  plan  could  be 
successful  (from  the  point  of  view  of  the  industry)  only  when  other  ele- 
ments of  price  fixing  were  present. 

When  the  proposal  came  up   for  public  hearing,  March  20,  1934, 
protests  were  made  by  members  of  the  industry,  the  Retail  Lumber  Dealers, 
reserve  supply  companies,  the  Hail  Order  Association  of  America  and 
wholesale  hardware  dealers.  (*)    In  every  instance  the  protests  con- 
sidered only  the  effect  of  approval  of  the  plan  on  the  particular  group 
represented  by  the  protestants;  consequently  it  was  charged  that  if 
approved  the  plan  would  be  discriminatory. 

Tlie  Advisory  3oards,  with  the  exception  of  the  Industrial  Adviser, 
recommended  that  the  plan  be  not  approved.   The  criticisms  from  this 
group  were  more  general  but  they  concentrated  on  the  opinion  that  the 
plan  would  result  in  price  fixing  and  that  in  Section  VII,  paragraph  D, 
an  attempt  was  being  mr.de  to  establish  resale  price  maintenance.  The 
latter  feature  was  an  innovation  since  the  Industry  Flan  of  1929. 

After  the  hearing,  numerous  conferences  were  held  between  industry 
representatives  and  the  Administration  though  nothing  tangible  resulted 
from  these  discussions.  Wo  definite  action  was  taken  and  the  plan  was 
never  approved  or  disapproved.  Despite  the  adverse  criticism  voiced 
on  all  sides,  the  Code  Authority  contended  to  the  end  that  no  disposition 
was  made  of  the  matter  and  that  it  was  still  pending. 

2.   Liquidated  Damages  Agreement 

The  only  amendment  successfully  proposed  by  the  Code  Authority 
provid.ed  that  members  of  the  industry  might  enter  into  an  agreement 
between  themselves  providing  for  liquidated  damages  in  cases  of  Code 
violations. 

The  proposal  as  submitted  deviated  from  the  Model  Code  Provision 
(O.M.II  -  1626.1)  in  two  instances.  A  surety  bond  ranging  from 
$5,000  to  $50,000  was  provided  for,  and  the  Code  Authority  was  empowered 

(*)   Transcript  of  Public  Hearing,  March  20,  1934 
9826 


-  5j1  - 

to  make  equitable  reductions  in  the  amount  of  damages.  Also  the  agree- 
ment fixed  penalties  with  regard  to  violations  of  the  labor  provisions 
of  the  Code  and  an  amount  equal  to  25  per  cent  cf  the  actual  selling 
price  of  the  products  involved  in  all  other  violations. 

The  Notice  to  be  Heard  (A.G.  99-15)  issued  January  16,1935, 
elicited  complaints  from  two  members  of  the  industry  who  expressed  the 
opinion  that  small  manufac triers  might  be  injured  and  that  the  amend- 
ment was  unnecessary  and  might  be  illegal.  (*)   The  Advisory  Boards 
were  equivocal  in  their  reports  expressing  satisfaction  with  parts  of 
amendment,  while  making  objections  to  other  parts;  also,  they  expressed 
dissatisfaction  with  the  failure  to  include  some  provisions  for  super- 
vision by  NHA.   The  Consum-rs'  Bonrd  requested  that  the  proposal  be 
submitted  to  the  Advisory  Council  for  an  opinion.   This  request  was 
granted  and  .he  Council  recommended  that  the  amenoment  be  not  approved. 
(**)   Despite  this  opposition  the  proposal  was  approved  as  Amendment 
No.  1,  March  21,  1935.  (A.O.  99-20). 

Thus  through  two  proposed  changes  or  additions  to  their  Code,  the 
Code  Authority  attempted  to  re-establish  the  plan  complained  of  by  t he 
Department  of  Justice.  Kad  it  been  successful  in  its  sponsorship  of  the 
Merchandising  Flan  there  would  have  existed  the  embarrassing  situation 
of  one  branch  of  the  government  approving  the  very  thing  complained  of 
by  another. 

3.  Miscellaneous  Proposed  Amendments. 

Two  changes  suggested  by  the  Code  Authority  were  designed  to  render 
more  difficult  evasions  of  filed  prices.   One  of  these  dealt  more  speci- 
fically with  the  question  of  secret  rebates  and  stated  that  the  offering 
or  making  of  any  discriminatory  payment  in  the  form  of  cash,  refund, 
commission,  services,  etc.,  would  constitute  a  violation  of  the  Code. 
This  proposal  was  made  early  in  the  period  of  Code  operations  but  was 
withdrawn  when  the  Cor^e  Authority  learned  that  if  the  Code  was  opened 
for  consideration  of  amendments  the  whole  document  immediately  became 
vulnerable.   The  second  of  these  proposed  alterations  would  have  re- 
quired members  of  .the.  industry,  when  quoting  or  selling  an  industry 
product  in  connection  ith  any  other  product,  labor  or  service,  to 
quote  and  invoice  these  other  products  or  services  separately  and  at 
not  less  than  their  respective  current  market  value. 

Two  further  proposed  mutations  of  the  Code  would  have  had  the 
effect  of  li  iting  the  freedom  of  members  in  determining  their  prices, 
terms  and  conditions  of  sale.   In  the  group  of  proposals  submitted  in 
the  spring  of  1934  (this  was  the  group  withdrawn  by  the  Code  Authority) 
appeared  one  which  would  have  permitted  the  Code  Authority,  if  they 
found  that  an  emergency  existed,  to  cause  to  be  determined  the  lowest 
reasonable  cost  of  products.   This  cost,  upon  approval  of  the  Adminis- 
trator, was  to  constitute  the  lowest  price  at  which  goods  could  be  sold 
or  offered  for  sale  during  the  emergency.   The  other  of  these  proposals 


(*)    Code  History,  F.  24 

(**)   Memorandum  dated  February  15,  1935  from  Willard  Thorp  to  NIHB. 
(in  NRA  files,  Amendments  Folder) . 


would  have  limited  the  amount  and  effective  length  of  bonds  and  guarantees. 
It  was  recommended  that  the  amount  of  the  guarantee  he  limited  by  the 
actual  cost  of  the  products  and  that  its  duration  not  extend  for  more 
than  two  years.   This  recommendation  was  pending  at  the  time  the  Code 
expired. 

One  suggested  addition  is  interesting  because  of  its  implications. 
Included  in  the  previously  mentioned  proposals,  which  were  withdrawn, 
was  one  permitting  "Secondary  Manufacturers"  to  quote  prices  and  sell 
products  at  a  net  price  lower  than  those  quoted  by  "Primary  Manufacturers". 
To  this  suggestion  the  required  two-thirds  majority  of  the  members  of 
the  industry  consented.   If  put  into  operation  this  plan  ir'ould  have 
allowed  small  manufacturers,  with  the  consent  of  the  other  manufacturers 
and  after  having  demonstrated  a  need  to  quote  and  sell  products  7-^   per 
cent  below  the  price  quoted  by  the  larger  concerns.   In  order  to  avail 
itself  of  this  opportunity  the  recipient  was  required  to  agree  to  throw 
his  bocks  open  to  investigation  every  three  months.   If  at  the  end  of 
any  peiiod  it  appeared  that  the  business,  of  the  favored  concern  was  in- 
creasing more  rapidly  than  the  of  the  industry  in  general,  the  differ- 
ential would  be  decreased  in  proportion.   Thougn  this  proposal  was 
never  presented  for  consideration  by  the  .Administration,  Mr.  Ralph 
fuller,  Vice  Fresident  of  the  Cooper  Company  (one  of  the  "Secondary" 
manufacturers)  stated  in  an  interview,  Jmuary  6,  1935,  that  the  prin- 
ciple had  been  put  in  operation  by  the  Code  Authority.   In  explaining 
the  reason  for  this  seemingly  altruistic  spirit  on  the  part  of  the 
larger  members  of  the  industry,  Mr.  Abrahans,  ( *)  Chairman  of  the  Code 
Authority  remarked  that  it  was  deemed  wise  to  "control"  in  this  manner 
the  small  members  rather  than  to  permit  them  to  operate  without  "control". 
The  first  problem  that  presented  itself  was  how,  in  the  absence  of 
fixed  prices,  coulr  the  "Secondary"  manufacturer  determine  the  price  at 
which  he  could  o_fer  his  products  for  sale.  Unless  the  prices  of  the 
"Frimary"  manufacturers  were  uniform  and  determined,  a  filed  price  that 
was  7i  per  cent  belov  the  price  of  one  manufacturer  might  be  more  or 
less  in  relation  to  the  prices  of  another. 

II.  ADMIIII  STRATI  ON  BY  II. R. A. 

As  measured  by  the  administration  of  other  codes,  that  exercised 
in  regard  to  the  code  for  the  Asphalt  Shirgle  and  Roofing  Industry  was 
rather  vigorous.  As  has  previonsly  been  mentioned,  Assistant  Deputy 
Administrator  Laws  on  in  the  beginning  established  the  policy,  which  was 
continued  during  the  life  of  the  Code,  of  reviewing  the  Bulletins  and 
Explanations  of  the  Code  Authority  before  they  were  distributed  to  the 
industry.  While  it  does  not  appear  that  the  contents  of  these  documents 
were  frequently  altered  as  a  result  of  these  previews,  the  fact  that  the 
Code  Authority  was  aware  of  this  supervision,  might  in  itself  have 
acted  as  a  desirable  influence.   It  should  be  noticed  that  the  Code 
Authority  rather  welcomed  this  supervision.   The  Institute  and  most  of 
the  members  of  the  Code  Authority  were  operating  under  the  cloud  of  the 
Department  of  Justice  complaint  and  were  glad  to  have  an  official 
approval  of  all  of  their  activities. 


( *)   Interview,  January  10,  1936 


9826 


-  55?  - 

When  it  -was  felt  by  the  NHA  officials"*  that  an  activity  or  under- 
taking of  the  Code  Authority  was  beyond  the  bounds  of  its  powers,  no 
hesitancy  was  displayed  in  calling  the  matter  to  the  attention  of  the 
responsible  parties.   This  spirit  was  exemplified  in  the  action  of  the 
Assistant  D',  ity  nnd  his  Advisers  in  regard  to  the  unauthorized 
activities;  (*)  and,  is  further  indicated  by  the  price  study  conducted 
by  the  Research  and  Flanning  Division.  (**) 

At  no  time  did  the  Administration  find  it  .necessary  or  desirable 
to  issue  any  unusunl  or  unique  Administrative  or  Executive  Orders. 
There  were  a  total  of  twenty-one  Administrative  Orders,  all  of  which, 
with  the  exception  of  Order  No.  99-20  approving  the  Liquidated  Damages 
Amendment,  were  routine  in  nature  or  pertained  to  wages  and  hours.   It 
is  felt  that  none  of  these  merit  special  attention. 


(*)    Supra,  p.  544  and  ff. 
(**)   Supra,  p.  545. 


9826 


•>-  554-«- 

CHAPTEP  VII 
COMPLIANCE 


At  first  glance  it  would  appear  that  the  proolem  of  obtain- 
ing compliance  witn  tne  trade  -practice  provisions  of  the  Code  was 
never  a  matter  of  great  concern.   Only  three  trade  practice  violations 
were  cited  to  the  Compliance  Division.   This  serenity,  however,  was 
apparent  rather  than  real.   In  most  instances  of  violations  the  Code 
Authority  preferred  to  handle  the  complaint  themselves  and  in  many  in- 
stances the  allegations  could  not  be  supported  by  evidence,   The 
reticence  of  the  Code  Authority  with  regard  to  submitting  alleged  vio- 
lations to  NP.A  for  settlement  may  have  been  occasioned  by  dissatisfac- 
tion with  the  disposition  of  the  few  cases  reported.   This  feeling 
grew  out  of  the  disposal  of  the  Fry  Cas-  (*)  wnich  was  a  thorn  in  the 
side  of  the  Code  Authority  throughout  the  life  of  the  Code. 

I .   ENFORCEMENT  AGENCY 

It  will  not  be  necessary  in  this  discussion  to  differentiate 
between  the  Code  Authority  as  an  enforcement  agency  and  the  Trade  Prac- 
tice Comolaints  Committee.   By  Administrative  Order  99-12  creating  a 
Trade  Practice  Complaints  Committee,  the  Code  Authority  was  named  to 
constitute  that  body  and  by  this  Order  the  Code  Authority  was  authorized 
to  appoint  such  committees  to  assist  in  the  handling  of  complaints  as 
were  de°med  necessary.   It  is  thought  that  this  privilege  was  seldom 
exercised,  the  Tr-de  Practice  Committee  itself  nandling  moot  of  the 
complaints . 

The  Ord^r  of  Approval  also  set  out  rul°s  to  govern  these 
agencies  in  the  handling  of  complaints.   In  general  the  procedure  re- 
quired that  wnen  a  complaint  was  filed  the  respondent  must  be  notified 
within  five  days  and  allowed  ten  days  in  which  to  file  a  reply.   If 
at  the  end  of  the  alloted  period  no  response  was  forthcoming  the 
respondent  should  again  be  notified,  this  time  by  regist-red  mail. 
Should  the  alleged  violator  plead  guilty  to  the  accusation,  and  there 
existed  extenuating  circumstances  wnich  would  have  the  effect  of  an 
avoidance  of  any  animus  f erandi ,  the  case  might  be  closed.   On  the 
other  hand,  should  the  accused  admit  the  act  alleged  but  tak"  issue  on 
the  legality  of  that  act,  he  should  receive  a  tnird  notification  citing 
the  provision  or  provisions  violated  and  fixing  the  time  and  place  of 
the  Hearing.   The  Hearing  held,  should  there  still  be  differences  of 
opinion,  the  case  could  be  appealed  to  the  Trade  Practice  Complaints 
Committee,  assuming  that  the  origin-1  hearing  was  held  by  one  of  their 
agencies;  or  the  case,  with  all  documentary  evidence,  could  be  sub- 
mitted to  the  ITEA  for  settlement. 

No  particular  effort  has  been  made  to  explain  the  tecnnicali- 
ties  of  procedure  under  which  complaints  were  adjudicated,  as  the 
question  of  jurisdiction  or  manner  of  handling  was  never  an  important 
issue  in  eitner  the  court  of  first  instance  or  in  tne  appellate  division. 


( *) Infra,  p.  355, 
9«26 


-  555  I'- 
ll.  METHODS  OF  GAINING  COMFLAINCE 

Most  violations  cit^d  under  the  Code  fell  into  the  class  of 
technical  infringements  arising  out 'of  honest  mistakes  in  filing  and 
estimating  discounts.   In  such  instances  the  problem  of  the  Committee 
was  simple.   The  error  was  Called  to  the  attention  of  tne  violator 
and  the  necessary  correction  was  made. 

In  the  more  stubborn  cases  the  threat  of  NBA  procedure  was 
used  to  obtain  compliance.   In  the  early  period  of  the  NRA  this  weapon 
was  reasonably  effective;  however,  as  the  Administration  comoliance 
activities  became  retarded  by  policy  determinations,  which  were  delayed 
in  their  appearance  and  which  were  even  slower  in  operation,  tnis 
tnreat  ceased  to  be  a  menace  to  violators.   It  is  possible  that  this 
condition  furnished  the  incentive  for  the  liquidated  damages -amendment. 
By  virtue  of  tnis  provision  members  of  the  Code  were  required  to  post 
surety  bonds  as  guarantees  of  adherence  to  the  Code  provisions,  and  in 
cases  of  violations  "fines"  could  be  levied  by  the  Trade  Practice 
Complaints  Committee.   Whether  or  not  tnis  would  have  b=en  an  efficacious 
instrument  c?n  be  judged  only  by  ore-code  experience,  as  its  proposal 
and  approval  occurred  so  late  in  the  Code  period  that  it  was  never  put 
into  operation.   The  success  of  such  an  agreement  under  the  Institute 
leads  to  the  conclusion  that  had  the  plan  been  out  into  operation  the 
number  of  violations  would  have  decreased  very  markedly. 

III.   NUMBER  OF  VIOLATIONS 

The  available  information  relative  to  complaints  and  procedure 
is  not  sufficient  either  in  quantity  or  quality  to  permit  an  enlighten- 
ed discussioii  of  tne  nature  of  the  cases  which  were  called  to  the  atten- 
tion of  th°  enforcement  agencies.   An  occasional  reference  in  the  Min- 
utes of  the  Code  Authority  indicate  only  that  the  problem  existed.   As 
far  as  possible  this  information  has  been  suoolemented  by  interviews 
with  memoers  of  the  Code  Authority.  (*) 

The  Minutes  of  the  Code  Authority  meeting  of  April  9,  1934, 
report  138  complaints  of  which  4?  were  pending,  and  the  Minutes  of 
May  1,  1934,  report  183  complaints  with  54  pending.  Little  can  be 
derived  from  these  figures  save  that  complaints  were  filed  in  con- 
siderable numbers.  What  happened  in  the  cases  disposed  of  and  the 
nature  of  the  accusations  are  not  shown. 

According  to  members  of  the  Code  Authority,  in  only  two 
instances  was  there  failure  to  file  prices  and  in  one  of  these  it 
appeared  that  the  respondent  did  not  know  that  this  was  required. 
The  other  refused  to  file  on  the  grounds  that  he  had  not  offered 
products  for  sale  but  in  the  event  ne  should,  prices  would  be  filed 
in  accordance  with  the  Code  provisions.   In  the  latter  instance,  the 
Lloyd  A.  Fry  Roofing  Company  of  Chicago  was  involved.   The  complaint 
is  difficult  to  analyze  since  the  case  was  probably  complicated  by 
personalities.   Tne  respondent  was  the  same  company  which  had  been 


!*)   Interviews  with  L.  R.  Hoff,  Herbert  Abrahams  and  Ralph  Muller, 
January  7-10,  1936 


-  556  -     " 

involved  in  differences  with  the  Institute  and  the  Patent  and  Licensing 
Corporation  in  1928,  and  it  may  be  that  the  difficulties  arose  out  of 
ill-will  or  persecution.   Seemingly,  Fry  was  engaged. in  manufacturing 
products  for  one  of  the  mail  order  houses  and  was  not  engaged  in  com- 
petition with  other  members  of  the  industry.   As  final • disposition  was 
never  mad"  of  the  case,  its  merits  can  hardly  be  discussed  here. 

More  vexations  but  less  serious  were  the  allegations  of  eva- 
sions of  filed  prices  and  misclassifications .   In  many  instances,  of 
course,  accusations  arose  out  of  loss  of  customers  or  failure  to  secure 
bids  and  they  lacked  substantiating  evidence  other  than  the  suspicions 
of  the  .complainant .   In  most  cases  where  actual-  violations  were  found 
they  were  shown  to  be  the  result  of  an  unintended  mistake.   As  evidence 
of  'this,  members  of  tne  Code  Authority  stated  that  there  were  very  few 
"repeaters".   There  were,  however,  some  half  dozen  "habitual • criminals" 
who  were  frequently  cited  for  having  granted  rebates  or  in  some  manner 
violated  their  filed  prices.  (*) 

IV.   SUCCESS  OF  ENFORCEMENT '.  aGETjC I ES 

From  the  above  information,  it  is  difficult  to  evaluate  the 
success  of  the  enforcement  bodies.   Briefly,  Che  facts  show  the  com-' 
plaints  filed  were' numerous,  but  measured  by  complaints  pending  and 
those  submitted  to  tne  NF.A  the  efforts  of  enforcement  were  cquite 
successful.   Tne  sponsorship  of  the  liquidated  damages  amendment  as  an 
agency  of  compliance  would  indicate,  however,  that  it  was  not  all  that 
it  might  or  should  have  been. 


( *) Interview  wita  members  of  the  Code  Authority,  January  7-10,  1936 


9826 


-  557  - 
CHAPTER  71 1 1 

ecoitc;;ic  lttlcts  of  phici:  r'iLi:;o 

A  conplete  discussion  of  the  ceo  .0  lie  effects  would  necessitate 
separate  consideration  of  the  interests  of  the  different  grouos  which 
night  he  affected  hy  the  pricing  practices  of  the  industry.  Among  the 
classes  which  '?ould  have  to  he  considered  pre  the  manufacturers,  dis- 
tri jutors  (including  the  varions  classes)  rid  consumers,   neither  tine 
nor  r,  ip.ee   will  permit  such  a  detailed  treatment  of  the  interests  of 
these  many  groups.   In  lieu  of  this,  detailed  consideration  '/ill  he 
given  here  the  more  general  aspects,  centere  ".  around  nrices  and  price 
•  love:  ients. 

i.    prohotio:?  or  piuch  stability 

The  ercpression  "orice  stability"  should  he  considered  in  a  re- 
lrtive  sense.   "Ton  any  other  ners  jective  there  is  seldom,  if  ever, 
such  s   thing  as  stahle  orices.   In  its  stricter  interpretation  the 
tern  signifies  a  fi:-:ed  and  i_i_  :ohile  level  that  vrould  lose  its  character- 
istic of  stability  irith  each  change.   Prices,  therefore,  will  herein 
he  considered  as  more  or  lasc.>  stable  as  nriee  changes  occur  nore  or 
less  frequently  curing  a  given  jeriod. 

According  to  testinony  given  in  the  suit  between  the  Patent  and 
Licensing  Corporrtion  and  TTeaver-TTall ,  nrices  normally  changed  in  the 
Industry  about  eight  or  ten  tines  a.  year.  (*)  Evidence  in  the  sane 
case  stated  that  prices  had  not  chrn  ;ed  between  1930  and  A:ril  11, 
1932.  (**)  Figures  Of  the  Bureau  of  Labor  Statistics  do  not  bear  out 
this  statement  of  no  price  changes  during  the  above  period,  but  do 
indicate  considerable  st  bility.   Throughout  the  twelve  months  of  1931, 
according  to  the  Jureau  of  Labor  Statistics,  the  ~verage  wholesale 
price  of  medium  roofing  was  $1.32  per  square  with  comparable  rigidity 
being  evidenced  in  other  products.  A  survey  of  this  compilation  from 
1926  through  September  1935  indie  tes  considerable  more  stability  dur- 
ing periods  of  vigorous  enforcement  of  the  price  filing  agreement. 
(See  table  page  12U.) 

It  may  be  said  without  too  much  fear  of  contradiction  th  t  price 
publicity  in  the  Asphalt  Shingle  and  Roof in   Industry  aided  in  the 
stabilization  0:"  prices.  I7b.eth.er  or  not  this  is  an  indictment  of  price 
filing  practices  is  largely  a  natter  of  opinion.  Eliminating  consider- 
ation of  orice  trends  or  nrice  levels,  strbility  of  trices  in  no  way 
aim  ears  vicious. 

Prices  can  hardly  be  treated  in  the  abstract  manner  just  indicated. 
The  tern  price  stability,  being  used  as  a  relative  one,  implies  some 
orice  movement.   The  more  important  question  is  the  direction  of  changes, 
were  these  few  fluctuations  uniformly  uoward  or  uniformly  downward  or 
were  they  as  ant  to  move  in  one  direction  as  the  other?   Some  light  will 
be  thrown  on  this  subject  la.te.r  in  the  discussion. 

(*)   Patent  and  Licensing  Corporation  7.  We&ver-Vall.   Tr  nscrint  of  the 

hearing,  o.  1053. 
(**)  Ibid.  n.  1049.  • 
9826 


-553- 

II.  PRICE  uITIEOEIlITY 

Prices  in  the  Asphalt  Shingle  and  Roofing  Industry  rTere  and  are 
unifom.   The  treatment  of  price  uniformity"  could  almost  start  and  stop 
with  that  sentence.   On  rare  occasions  and  for  short  -periods  of  tine 
it  is  possible  to  find  examples  of  lack  of  corrolete  uniformity,  "but 
those  instances  are  the  exceptions  rather  than  the  rule.   So  perfect 
was  this  record  that  generally  there  was  absolutely  no  variation  in 
prices,  terns  or  conditions  of  sale. 

The  identity  which  was  apparent  in  prices  also  existed  with  re- 
gard to  merchandising  plans,  which  were  a  part  of  the  price  filing 
practice  in  this  Industry.   In  the  earlier  agreement  the  Institute 
adopted  a  uniform  plan  of  customer  classification  and  attempted  'to  have 
one  included  in  the  Code.   Tailing  to  get  the  consent  of  the  Administration 
for  the  inclusion  of  this  provision,  the  individual  members  published 
a  plan  which  was  applicable  to  their  products  raid  customers.   The  in- 
ability of  the  sponsors  to  have  the  uniform  merchandising  plan  approved 
could  have  had  no  more  serious  results  than  inconvenience.   A  survey 
of  the  plans  published  ~oy   the  different  commies  verifies  the  fact  that 
they  coincided  almost  to  the  point  of  identity  of  verbiage.  (*) 

The  similarity  of  prices  is  best  pointed  out  by  citing  a  single 
instance,  during  the  Code  period,  when  there  appeared  to  be  a  lack  of 
uniformity.   The  first  filing  showed  a  list  price,  quoted  by  most  compan- 
ies, of  $4.55  per  square  for  individual  Shingles  to  wholesale  carload 
distributors,  with  a  2  per  cent  Cb.sh  discount  and  either  a  5  percent  sales 
discount,  when  the  merchandise  was  shipped  directly  to  the  consumer  or 
dealer,  or  a   3  per  cent  stock  discount  when  shipped  to  the  distributor, 
the  3  or  5  per  cent  deduction  to  be  applied  before  the  cash  discount. 
One  company  filed  a  list  price  of  $5.25  per  square  for  the  same  product 
to  which  pas  applied,  in  audition  to  the  above  discounts,  a  33.3  per 
cent  reduction  as  a  tra.de  allowance.   In  both  cases  the  net  price  cuoted 
vras  $4.13.  (**) 

This  uniformity  of  prices  is  not  conslusive  as  to  price  control. 
Products  in  the  Industry  were  standardized  to  a  -point  of  exactness;  the 
market  was  national  rather  than,  local,  and  the  price  structure  embodied 
the  principle  of  freight  equalization.   Each  and  all  of  these  factors 
would  tend  toward  a  uniform  price.  At  the  same  time  price  uniformity 
taken  in  connection  with  abnormally  high  prices  may  be  strong  evidence 
of  price  control. 

A.  ! if l- chandi sing  Plan s . 

It  has  already  been  noted  that  prior  to  the  Code  the  Institute  had 
sponsored  a  uniform  merchandising  agreement  and  that  efforts  were  ma.de 
to  have  such  a  plan  incorporated  into  the  Code,   It  was  provided  in 
Article  VIII  of  the  Code  that  each  member  of  the  Industry  should  issue 
his  own  merchandising  plan  free  and  independently  of  every  other  member, 
subject  to  such  changes  and  alterations  as  were  desired,  so 


(*)   In  'PPA  Piles,  Prices  Folder. 
(**)   See  Table,  p.  568. 

9826 


long  as  those  revisions  mere-- oublicised  Ln  bne  same  manner  a s  the  ori-i- 
ual  plan. 

In  the  light  of  the  previous  discussion  of  the  1929  merchandising 

Plan  and  its  comle'xit-  of  o  jcr-tion:U  -1  survey  of  t.iose  filed  uin'.er 
the  Code  may  he  of  value.   Again  uniformity  is  evident  and  the  plans 
are  so  lil:e  the  on^  of  1929  that  it  -rill  only  be  necessary  to  point 
out  the  differences.   Customer  classes  mere  laintained  pith  very  little 
qhange  in  title  and  with  no  grert  deal  of  difference  in  definition 
and  methods  of  qualifying.   The  former  jobbers  ^ere  noted  -as  TThole- 
sale  Onload  Distributors,  and  to  qualify  for  this  cl^ss  a  dealer  had 
to  meet  all  the  requirements  laid  domn  by  the  Institute  in  its  former 
.'•"•   lent,  v/ith  t,-ro  errcentions  —  (1)  it  rras  no  longer  left  to  the 
determination  of  Dun  and  Pradstreet,  and  (2)  rather  thai  maintain  an 
average  stoc1-  of  10,0  0  pounds  it  was  no- •  necesar;'-'  to  have  on  hand 
an  average  stoc1:  of  80,000  mounds.   Dor  other  customer  classes  there 
night  have  been  similar  uninmortant  differences.   The  identical  systems 
of  shimming  zones,  methods  of  transportation,  freight  equalization  and 
quantity  discounts  '-'ere  continued. 

in.  pfjc::  a:d  phice  ::0Y2lki:?s. 

An  intelligible  treatment  of  trices  as  evidence  of  the  economic 
effect  must  consider  de  ,  i  and  'production  costs',  as  they  -'ould  tend 
to  influence  nrices.   Certain  funda  ental  economic  theories  are  in- 
voled  which  -mil  aid  in  the  inter jret~tion  of  price  changes.   It  is 
generally  accepted,,  for  e:ca::ple,  that  with  suoply  remaining  constant, 
mrices  will  var:r  with  demand  an."  it  is  also  generall"'-  r-cne  ated  that 
prices  bear  some  relationshi  >  to  costs  of  mm  mart  inn.   A  brief  dis- 
c"asoio:i  of  these  two  factors  may  be  of  some  value. 

It  was  stated  in  Cap  iter 'II  above^*)  that  demand  for  the  -products 
of  the  Industry  arose  out  of  the  volume  of  business  of  the  building 
dividion  of  the  construction  industr/.   for      study  relative  fig- 
ures are  more  enlighten i   ig  than  mm  absolute  figures.   ureau  of  Labor 
Statistics  based  on  bu  Idi  .•  Demits  shorn  a.  decrea.se  in.  total  build- 
ing in  1933  of  about  10  ?er  cent,  and  increases  of  5  >.er  cent  and 
170  jer  cent  res mectivel"'-  in  1904  ->nd  1900.   These  f  i  ures  would  in- 
dicate that  the  lo  -  for  bu.ilc-.ing  consT,ructio:a  -as  reached  in  1953  and 
that  it  remained  fairly  constant  during  1933  and  1934.  Demand,  for  the 
-orouaccs  of  the  industr;''  failed  to  increase  bet  een  1900  and  1934, 
but  increased  aomreeia.bly  in  1905.   Prices,  assuming  they  mere  affect- 
ed by  no  other  factor,  should  have  reflected  the  chan  ;es  in  demand. 

Variations  in  cost:;  of  production  are  more  difficult  of  deter- 
mination.  In  its  remort  on  the  administration  of  the  Code,  the  Coue 
Authority  stated  that  labor  costs  had  increased  14  per  cent  during  the 
Code  FerioO  and  that  the  cost  of  ram  u teriais  had  inere  sed  in  amounts 

ypi-'in-:  from.  20  per  cent  to  ?0  mer  cent/***) 

(*)   Supra,  p.  506  &  ff . 

(**)   Supra,  p.  516. 

(***)  Report  of  the  Administration  of  the  Ccbe  of  "'air  Commetition  for 

the  Asphalt  Shin  ale  and  Roofing  Industry,  p. 24.  (in  ITHA  Files, 

Coo.e  Authorit"  Folder). 
9326 


-  550  - 

It  was  stated  at  that  tine  that  the  cost  of  dry  felt  haxi.  increased 
from  61^  per  hundred  pounds  to  $1.28,  after  which  there  ^as  a  re- 
duction in  -orice  to  Sl.OG.  Assunin .  ■  this  later  figure  to  be  the 
average  price,  the  percentage  increase  in  ths  cost  of  production 
TTOuld  he  a"opro::in."tely  15  per  cent,   (it  was  stated  at  the  sane  time 
that  the  cost  of  felt  represented  about  20  -oer  cent  of  the  total  cost). 
Labor  costs,  as  previously  sta.ted,  (*)  in  1-31  represented  about  9.0 
per  cent  of  the  value  of  the  product,  which  would  be  ap  mroxiriately 
6.3  per  cent  of  the  ccst  of  production.   The  14  per  cent  increase  in 
labor  costs  would,  applying  this  ratio,  represent  s:a   increase  in  the 
cost  of  production  of  .35  per  cent.   The  other  item  of  costs  mentioned 
in  the  report  was  flux  oil  which  had  increased  20  per  cent.   Granting 
that  the  cost  of  flux  oil  represented  as  large  a  percentage  of  the  total 
cost  as  did  felt,  which  is  probably  a  generous  assumption,'  this  would 
have  resulted  in  a  4  per  cent  increase  in  the  total  cost.   The  total 
increa.se  in  coses  is  estimated  at  ,18.85  per  cent  of  costs  or  12.54  per 
cent  of  the  value  of  the  product.   (1933  material  and  laoor  costs, 
including  fuel  and  purchased  electrical  power  represented  53.2  -oer 
cent  (**)). 

Price  movements  during  the  above  period  Maintain  sone  relation 
to  production  costs  but  appear  to  have  moved  in  opposition  to  demand. 
This  most  unusual  reaction  would  indicate  that  prices  might  have  been 
increased  on  a  falling  Market  to  maintain  profits.   Such  an  inference 
demands  a  closer  scrutiny  of  prices  and  shipments.   Tables  2  and 

3 seem  to  bear  out  this  assumption.   It  may  be  seen  from  these  tables 

that  almost  without  an  exception  when  demand  for  the  industry's  pro- 
ducts, as  measured  or  shipments,  decreased,  prices  increased,  and,  con- 
versely, when  demand  increase.".,  prices  decreased.   Such  a  condition 
would  seem  to  offer  only  one  conclusion;   controlled  prices  are  little 
effected  by  demand  and  the  tendency  is  to  try  to  maintain  profits  by 
increasing  oer  unit  profits. 

It  is  hardly  possible  to  comoare  price  movements  in  this  industry 
under  price  filing  with  price  movements  during  periods  when  no  price 
agreements  was  in  operation.   Since  1925  some  form  of  -orice  publicity 
has  been  in  effect  and  ->rice  data  are  n  t  available  for  earlier  years. 
The  comparisons  must  therefore  be  made  between  times  -hen  the  agree- 
ment was  observed  and  times  when  it  was  generally  not  observed.   The 
original  price  publicity  agreement  became  operative  at  the  beginning 
of  1925  and  prices  at  that  time  were  130.8,  based  on  1929  average. 
This  high  level  was  continued  until  about  "Tovember,  1927  and  no  doubt 
broke  down  because  of  orice  wars  in  the  Industry.   The  decline  in  the 
latter  part  of  1927  and  in  the  early  part  of  1928  occurred,  despite 
the  fact  that  juilding  construction  increased  during  that  period.  In 
the  light  of  what  has  previously  oeen  sta.ted,  this  movement  is  not 
surprising  and  is  apparent  through  the  oeriod  for  which  prices  are 
available,  though  seemingly  better  regulate  .  when  the  agreement  is 
being  more  closely  observed,   llore  enlightening  is  the  marked  decline 
between  the  months  of  October  and  Ifovember  of  1C27  and  the  great  in- 
crease between  iiay  and  June  of  1928.   In  conoariiv;  prices  in  these 
__   _______ 

(**)  The  Asohrlt  Shingle  nn.  hoofing  r.idu'tr-r,  Industry  Statistics 

Unit,  January  1956,  Table  IV,  p. 8.   (in  1JRA  Files). 
9326 


-  Del  - 

latter  two  months,  the  Industry  ieeti:.i ;  o;'  "ay  1928  should  be  recalled. 
It  has  oeen  sta.ted  that  _>rices  '^ere  discussed  at  this  meeting.   Such 
statements  have  been  ?uid  """ill  no  dou)t  continue  to  be  denied.   In  the 
face  of  these  conflicting  contentions,  it  see.:-,  ir>ossible  to  explain 
the  19.5  increase  in  price  on  any  grounds  otner  thrn  collusion.   Through 
a  close  analysis  of  prices  it  is  possible  virtually  to  trace  the  decree 
of  success.,  as  measured  by  ccnolia  ice,  with  which  price  publicity  has 
met. 

Absolute  orices  rose  sharply  during  the  Code  perioa.   Slate  sur- 
faced  roofing  increased  from  $1.43  ner  sonare  in  >y,  1933  to  PI. 77  per 
square  in  June,  1935,  or  an  increase  of  19.5  per  a.ent;   Strip  Shingles 
during  the  same  period  moved  from  13.34  per  square  to  $4.52,  or  an  in- 
crease of  33.3  oer  cent;   Individual  Shingles  iron  ;3.35  to  85.00,  or 
an  increase  of -29.9  oer   cent.   liedium  Prepared  Roofing,  alone,  decrea.sed, 
the  nrice  being  1.-7  per  square  in  hay,  1935  and  $1.44  in  June,  1935, 
or  a  decl-ne  of  2.0  per  cent.   The  increase,  as  measured  by  the  index 
of  wholesale  -orices,  for  the  Code  period  was  19.4  oer  cent. 

A  vOodly  portion  of  this  increase  was  accomplished  from  June  1933 
through  December  1934,  a.  period  during  which  demand  wrus  increasing  very 
slightly.   Prom  January  1135  to  June  1935  the  index  price  regained  fairly 
constant  fluctuating  between  112.4  and  114.9,  but  by  Se->te  uber  it  had 
dro  v-:ed  to  111.1.  During  tl:is  year  building  construction  increased 
170  r,er  cent  over  1934.   ho  dov.bt  'igures  for  iore  recent  months  would 
sho"  a  continued  decline  in  >rices.  (*) 

The  concl  ision  -  ,  to  the  effect  en  unices,  oh  nrice  filing  under 
the  Code,  must  >e  that  nrices  -ere  better  controlled  and  in  generr-1 
moved  in  ommosition  to  the  normal  trend  as  rffecte^  by  de  'and. 

Abnormally  increased  trices,  of  course,  affect  the  consumer  ad- 
"ersely.   An  increase  in  the  mrice  of  roofing  obviously  means  an  in- 
crease in  building  costs..  Little  complaint  was  voiced  by  consumers 
agaunst  mrices  because  the  costs  of  roofing  materials  represents  a  very 
small  per  cent  of  the  total  cost  of  a  building.   It  is  conservatively 
estimates  that  such  costs  arc  only  about  2.0  per  cent  of  the  cost  of 
a.  building,  a  twenty  per  cent  variation  in  the  mrice  of  roofing  ^ould 
then  result  in  only  .4  uer  cent  variation  in  the  total  cost  of  the 
structure. 

Despite  the  iiroyxceptibility  of  the  effects  of  irice  variations 
in  roofing  materials  on  the  total  cost  of  construction,  the  tendency 
of  irices  to  fluctuate  in  opt-qsition  to  de  land,  counled  "-it]!  similar 
movements  in  other  building  materials,  would  augment  the  seasonal  and 
cyclical  variations  and  would  rebound  to-the  Industry  by  changing  a 
malignant  condition  into  a  jernicious  one. 

IV.   P0SITI01!  OP  DISThlB-UTOllS 

The  position  of  distributors  wa.s  not  vitally  affected  by  price 

levels  or '-Trice  trends,  but  it  should  be  oorn  in  rind  that  the  mer- 

(*)  Hr.  duller  of  Coooer  Company  stated,  in  an  interview  January  10,  1936, 

that  there  had  been  14  nrice  changes  since  the  Schecter  decision  and 

that  each  of  these  changes  had  been  u.own-'ard. 
932  5 


-  562  - 

chandising  plans  were  a  definite  part  of  the  pricin  ;  structure  in  this 
Industry..  The  discussion  of  the  econonic  effects  of  price  filing  thus 
far  has  centered  around  prices,  with  the  position  of  distributors  Tien~ 
tioned  only  in  relation  to  uniforn  prices. 

By  the  individual  merchandising  slans,  distributors  were  pla.ced  in 
certriu  grottos  which  determined  the  amount  of  discounts  that  they  would 
,je  allowed.  The  tendency  of  these  plans  to  be  uniform  in  regard  to  cus- 
tomer classifications  definitely  fixed  the  position  of  these  consumers 
in  relation  to  one  another.   If  a  particular  distributor  was  placed  in 
the  Less  Then  C:  rlord  Wholesale  Distributor  class  by  one  member  of  the 
industry,  he  -^ould  be  so  placed  by  ail  members.   In  instances  where 
there  was  lack  of  uniformity  in  classifying,  these  differences  were 
generally  eliminated  at  the  "misclassification  meetings".   The  problem, 
therefore,  so  far.  as  the  distributor  was  concerned,,  was  an  individual 
one,  (*);  consequently  objections  were  from  single  distributors  whc 
conrolained  .of  the  injustices  of  their  position  rather  thrn  voicin  ;  any 
opposition  to  the  -vlan. 

A  further  exception  w?is  the  objection  of  Mail  Order  Houses.   This 
group  op  ,'os  >  the  systen  of  ;rice  filing  ps  well  as  that  of  customer 
classif icrtion.   Piling  was  opposed  on  the  ground  that  it  was  a  viola- 
tion of  a. confidence  which  affected  not  only  the  seller,  but  .also  the 
purchaser,  while  the  opposition  to  customer  classification  revolved 
around  the  fact  that  this  ~roup  was  in  urnger  of  losing  its  favored 
position  as  buyers.   Thou  h  Mail  Order  "louses  handled  only  about  5  per 
cent  of  the  Industry's  products,  it  was  contended  that  the-  deserved 
special  prices  rs  a  result  of  quantity  purchases.   These  objections  were 
of  no  av.ail  and  rs  a  result  iiail  Order  Houses  began  mrnufacturing.   One 
member  of  the  Industry  stated  that  -orice  filing  under  the  Code  def- 
initely put  hail  Order  Houses  in  the  roofing  industry. (**) 

V.   IHCR2ASE  III  THE  hUHJFH  Oh  : LJIUTA'TTUT-tZHS . 

In  addition  to  this  induction  of  hail  Order  Houses  into  the  field 
of  production,  the  Code  Authority  reported  that  five  companies  had  en- 
tered the  Industry  by  hay  3,  1934.  (***)   Uhether  more  new. capital 
came  in  between  Hay,  1534  and  Hay,  1955  is  not  known,  though  it  may 
logically  be  inferred,  since  the  report  was  made  following  the  Schecter 
decision  and  no  mention  was  made  of  companies  entering  the  field  after 
hay,  1934,  that  no  further  additions  were  made. 

(*)   One  exception  to  this  individuality  of  objections  is  the  crse  of 
retail  lumber  dealers,  who  have  or  yerrs  contended  that  they 
should  be  allowed  a  largff  discount,  in  view  of  the  fact  thnt  such 
concerns  handle  about  70  per  cent  of  the  soles  of  the  Industry. 
The  main  force  of  this  objection  preceeded  the  adoption  of  the  Code 
and  has  been  mentioned  previousl  ■  in  Chapter  V. 

(**)  Mr.  Ste  -man  of  TTerver-TTrll  in  an  interview,  January  13,  1933. 

( *  *  * )  Report  of  the  Administration  or"  the  Code  of  Fair  Corn-petition  for 
the  Asphalt  Shin-ale  and  Roo^in-';  Industry,  p.  8. 
(In  ISA  Files,  Code  Authority  Folder). 


9826 


-  563  - 

This  coining  in  of  new  crmitaJ.  is  significant  Then  it  is  recrlle  . 
that  money  m-  .  invented,  ■  roba  >ly,  more  ::autiously  during  this  period 
thf  1  at  o.ny   other  time  in  the  history  of  American  industrial  develop- 
ment.  The  relr  five  a  lount  of  capital  represented  by  the  five  new 
comoanies  c--n  not  be  ascertained.  17umerica.lly  they  represented  ah  out 
18.5  -ier  cent  of  the.  total  number  of  members  of  the  Industry.  Ko--- 
ever,  it  is  reasonably  certain  thrt,  as  Measured  by  ca.mital  inv  seed, 
it  --cul •".  he  onl  '  a  very  snail  mart  of  the  total  in  the  industry.  The 
evidence  is  only  indicative  rather  than  conclusive,  but  the  inolica- 
tions  should  not  be  lost. 

A.   Limitation  or  Control  of  ~h.-odv.ct ion. 

At  the  sane  time" that  ne'--  capital  was  coning  in,  an  amendment  to 
the  Co  be  ■  -as  >eing  sponsored  by  the  Code  Authority  to  limit  rnd  re- 
strict the  u  le  and  exSansioii  of  productive  eoui  inent*  An  inventory- 
had  been  i  .e  which  slio1  :■>■.  that  only  2.-.-:   mer  cent  of  the  productive 
crpacity  was  in  use  rnd  that  twelve  fully  equin  >ed  factories  were  then 
inoperative.   In  addition,  it  ^as  -tointe  out  thrt  twenty  factories 
had  been  closed  in  the  five  "errs  receding  the  Code.   It  is  quite 
certain  that  the  closed  factories  were  as  a  result  of  retirement  by  the 
producing  embers,  since  during  t  l;  t  period  only  six  factories  vent 
into  the  hands  of  receivers  and  there  were  mo  a  nkniptci.es. 

As  a  result  of  these  diametrically  opposed  movements,  there  arises 
an  a.iom.  lous  situation  which  all  but  defies  economic  interpretations* 
There  e::ists  an  industry  in  which  because  of  prices,  production,  etc., 
present  members  deem  it  economical!;7,  erzoedient  to  remove  productive 
equipment  from  the  active  field,  r,u".  which,  at  the  same  time  as  meas- 
ured  by  the  same  'actors,  remaims  imviti  \  :  encu  :h  to  attract  criital 
when  cap  it: 1  is  deaf  to  most  invitations. 

VI.   DIVERSION  OF  SALE  TO  SUBSTITUTE  PRODUCTS 

It  is  doubtful  whether  or  not  prices  of  rsmhr.lt  roof  in  •  materially 
affect  the  demand  as  measured  by  use  of  substitute  mroducts.   This  un- 
usual situation  is  true  for  several  reasons,  most  of  which  have  boon 
previously  noted  but  wi"1 1  be  repeated  here:   the  cost  of  roofing 
is  a  negligible  factor  in  the  total  cost  of  the  structure;   asphalt 
roofings  are  generally  thought  to  reduce  fire  hazards;  much  attention 
has  been  given  to  increasing  the  demand  by  increasing  the  esthetic 
apneal;  rnd.,    as  conware  to  other  roofing  materials,  excepting  wooden 
shingles,  asphalt  roofings  are  reasonable  in  mrice. 

The  tendency  fro::  1922  to  1934  was  for  a.sphalt  roofing  to  p- in 
business  at  the  expense  of  wood  shingles. (*)  It  seens,  therefore, 
to  resolve  itself  to  the  question  o'  "nether  demand  would  not  have 
increased  more  ra.midl  -  hi       >rice  been  reduced.   To  answer  that  ques- 
tion "oa1  d  necessitate  an  assumption  which  could  not  be  supported. 
The  only  noticeable  indication  thrt  the  Industry  'light  have  suffered 
to  the  benefit  of  substitute  products  is  the  decrease  in  shipments 

in  1934  as  conmrrod  with  1"." 3 3  -hen  buildi.v-:  increased  sli  htly. 

(*)   Suora,  p.  520. 

9326 


-  564  - 
CHAPTER  IX 

OPIiTIOUS  AMD  ATTITUDES  OF  I  P.  TESTES  PARTIES 

The  sajne  concerted  opinion  among  the  members  of  the  Industry, 
as  to  the  desirability  of  price  filing,  seems  to  have  existed  at  the 
end  of  the  Code  as  was  apparent  during  the  period  of  Code  formulation. 
In  no  instance  does  it  appear  that  a  member  operating  under  the  Code 
felt  that  the  plan  in  any  manner  worked,  a  hardship  on  any  individual 
firm  or  on  any  general  class  of  members.   This  fact,  better  than  any 
expressed  opinion,  depicts  the  attitude  of  the  industry  toward  the 
system  under  which  it  was  operating.   This  is  true  only  with  regard 
to  the  scheme  considered  is   a  whole  and  not  to  any  specific  pro- 
vision or  proposal*  As  previously  noted,  (*)  some  particular  phase, 
as  the  liquidated  damages  amendment  or  the  proposed  Merchandising  Plan, 
drew  opposition  from  among  the  membership  of  the  Industry.   From  time 
to  time  suggestions  were  made  toward  its  strengthening,  but  never  that 
it  should  be  discarded. 

This  unanimity  should,  in  itself,  incite  skepticism.   Under 
ordinary  or  even  unusual  circumstances  it  would  be  hardly  possible  to 
design  a  plan  which  would  be  so  eminently  satisfactory  to  evpry  mem- 
ber of  the  industry,  considering  both  their  independent  and  relative 
position.   All  but  the  most  naive,  when  presented  with  a  Utopia,  would 
look  around  to  see  who  was  paying  the  "piper".   Admittedly  prices  in 
the  industry  became  more  uniform  and  more  stable,  as  did  customer 
classes.   Those  factors,  alone,  would  not  prove  the  existence  of 
price  fixing,  but  when  coupled  with  abnormally  high  prices,  a  con- 
dition which  was  also  present  in  this  industry,  would  create  circum- 
stances which  would  permit  a  presumption  that  price  fixing  did  exist. 
That  members  of  the  industry  discussed  and  determined  prices  before 
they  were  filed  has  been  confirmed  by  one  of  the  members  (**)  who  also 
. stated  that  the  Code  plan  was  almost  identical  with  that  of  1929. 

PERSOIIAh  OPIITIUNS  OP  INTERESTED  I1*DIVIDUALS 

A.     F.    J.   Patchell,   Administration  Member  of  the   Code  Authority(***) 


(*)  Suora.   V'9'    ..545  .   and  ff 

(**)   Interview  with  Mr.  Stegman  of  Weaver-Uall  Company,  January  13, 
1936. 

(***)   Memorandum  dated  August  9,  1935,  from  F.J.  Patchell  to  Beverly 
Ober. 


9826 


-  565  - 

In  his  report  to  the  Deputy  Administrator  on  the  history  and 
administration  of  the  Code,  Mr.  Patchell  submitted  a  rehash  of  the 
Bulletin  prepared  in  the  office  of  the  former  Code  Authority,  then 
the  office  of  the  Institute.  -  In  this  Bulletin  it  '•'as  pointed  out 
that  price  filing  had  been  beneficial  to  the  industry  and  that  this 
was  accomplished  without  any  resulting  evil  effects,  e.g.,  high 
prices,  price  uniformity,  price  determination,  etc.   It  was  noted 
that  five  new  members  had  entered  the  industry  as  contrasted  with 
the  mortality  in  the  yea.rs  immediately  preceding  the  Code.   Prices 
for  a  given  period  were  quoted  which  tended  to  show  that  price  in- 
creases had  not  been  unusual  in  the  face  of  the  increased  costs. 

3 .   J.  S.  Bryant,  Secretary  to  the  Code  Authority  and  Manager 
of  the  Institute.  (*) 

Mr,  Bryant  is  of  the  opinion  that  price  publicity  is  a  very  de- 
sirable and  necessary  agency  in  this  industry.   The  plan  as  operated 
under  the  Code  was  quite  satisfactory  but  -puld  have  been  strengthened 
by  a  uniform  merchandising  plan,  which  was  never  approved,  and  by  the 
liquidated  damages  agreement,  which  was  aparoved  in  April,  1935. 
Though  not  admitting  that  the  five-day  waiting  period  might  lead  to 
coercion,  Mr.  Bryant  stated  that  the  industry  had  never  been  en- 
thusiastic over  it,  and  it  has  been  included  in  the  Code  only 
because  such  provisions  had  been  granted  other  industries. 

It  is  Mr.  Bryant's  belief  tha.t  publicity  prevents  price  wa„rs 
and  that  without  it  manufacturers  would  "be  at  the  mercy  of  "chiseling" 
buy e  r  s . 

C«   Mr.  Stegman,  Vice-President,  Vfeaver-T/all  Conmany  (**) 

Talking  with  less  reserve  than  did  Mr.  Bryant,  Mr.  Stegman 
stated  that  he  was  frankly  surprised  \-hen   Codes  were  being  drafted, 
to  find  that  the  administrative  ageacy  for  the  Asphalt  Shingle  and 
Roofing  Industry  was  to  be  dominated  by  that  institution  and  those 
individuals  against  hich  were  pending  government  indictments  charg- 
ing illegal  practices  in  restraint  of  trade.   His  comments  were  as 
follows: 

The  plan  was  dangerous.   It  was  subject  to  the  dic- 
tation of  the  large  members  and  would,  in  the  end, 
tend  to  eliminate  the  small  companies. 

There  was  collusion  in  prices,  discussion  generally 
taking  place  in  advance  of  Code  Authority  meetings. 
Prices  were  ah normally  high.  The  Weaver-Wall  Company 
made  more  money  in  1934,  than  ever  "before,  showing  a 
profit  of  from  15  per  cent  to  20  per  cent  on  in- 
vested capital  each  month  during  the  year. 


(*)     Interview,  January  8,  1S3S. 
(**)    Interview,  January  13,  1936. 


9326 


-  566  - 

A  strong  effort  r*ould  have  been  made  to  put  through 
the  Merchandising  Plan  had  the  Code  been  continued. 
This  plan  was  not  feasible  due  to  differences  in  mer- 
chandising policies  of  various  companies. 

The  price  publicity  system  was  almost  identical 
with  that  of  1929,  complained  of  by  the  Department 
of  Justice. 

If  the  principle  -'ere  justified  by  an  emergency, 
that  emergency  no  longer  e::ists. 

D.   Herbert  Abrahams,  Chairman  of  Code  Authority;  President, 
Ruberoid.  (*) 

In  discussing  the  Code  provision  and  its  administration, 
Ilr.  Abrahams  was  heartily  in  favor  of  price  publicity  but  thought 
that'  a  waiting  period  might  lead  to  coercion  and  was  of  question- 
able value.   Such  a,  plan  to  be  of  real  benefit  must  include  prices, 
terms  and  conditions  of  sale,  and  customer  classification  with 
names  and  location  of  customers,  and  should  provide  for  a  liquidated 
damages  agreement.  Mr.  Abrahams  further  commented  as  follows: 

Price  publicity  is  desirable  in  that  it  prevents 
"customer  advantages",  "price  discrimination"  and 
"ruthless  price  cutting". 

"We  want  to  get  as  much  as  our  competitors  will 
let  us." 

Prices  and  customer  classifications  became  more 
uniform  under  publicity. 

Equalization- of  freight,  rates  cannot  be  avoided. 

Smaller  companies  were  much  better  off  under  the 
Code  than  they  are  today.   There  were  no  complaints 
from  these  companies  under  the  Code,  but  they  are 
numerous  at  present. 

The  voluntary  agreement  now  before  the  Pederal  Trade 
Commission  is  not  practical  for  this  industry.   The 
ten-day  waiting  period  after  prices  go  into  effect 
before  they  are  published  is  not  possible  of  en- 
forcement.  "If  I  didn't  know  their  prices  the  next 
day  I  would  fire  my  salesmen. " 

"  E,   Ralph  Muller,  Vice-President  of  the  Cooper  Company  and 
Member  of  the  Code  Authority  (**) 

(*)   Interview,  January  9,  1936. 
(**)   Interview,  January  10,  1936. 


9826 


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-568- 

The  Cooper  Company  is  a  comparatively  new  mealier  of  the  in- 
dustry, having  "been  organized  in  1S31.  Both  Mr.  Muller  and  Mr. 
Cooper,  President  of  the  Company,  were  most  enthusiastic  in  their 
support  of  price  filing  as  it  operated  under  the  Code.   They  con- 
tended that  such  a  plan,  with  the  15  per  cent  mark-up,  prevented 
ruthless  prj.ce  cutting  and  permitted  a  fair  price.  Mr.  Cooper 
proposed  as  an  alternative  for  NRA  the  repeal  of  the  Sherman  Anti- 
Trust  Act. 

In  discussing  the  preferential  allowed  "Secondary"  manu- 
factures, Mr.  Muller  stated  that  in  the  "beginning  lower  list 
prices  were  quoted.   This  tended  to  disrupt  the  price  structure 
of  the  industry  and  the  method  was  changed  to  an  increase  dic- 
c count.   The  amount  of  the  preferential  for  the  Cooper  Company 
was  decreased  during  the  life  of  the  Code,  of  their  own  volition, 
from  10  per  cent  to  5  per  cent. 

Without  attempting  to  impeach  the  statements  of  the  various 
proponents  of  price  filing,  it  should,  "be  stated  that;  there  was 
price  uniformity  in  the  industry;  prices  were  high  and  they 
moved  contrary  to  demand;  and  there  uere  indications  of  price  con- 
trol. That  these  conditions  were  caused  "by  price  publicity  «annot 
"be  said  without  fear  of  contradiction;  in  fact  the  contradiction 
precedes  the  conclusion.   It  may  he  pointed  out  that  under  such  a 
condition  price  publicity  could  he  and  no  doubt  would  he  an  agency 
through  which  the  program  could  he  more  effectively  policed  and 
more  carefully  regulated. 

TABLE  2 

ASPHALT  SHINGLE  AND  ROOFING  INDUSTRY 
SHIPMENTS  :  PREPARED  ROOFING 


I-A   Total  Shipments  of  Prepared  Roofing  (Thousands  of  Squares)  a/ 

1926   1927   1928   1929   1950   1931   1932   1933  1934  1935 

Jan 
Fee 

Mai- 
Apr 
May 
Jun 
July 
Aug 
Sept 
Oct 
Nov 
Dec 

Average         5.045  5.322   2.325  1,881   1.897  2.061   2.016 
I-B  Shipments  of  Grit  Roll  Roofing  (thousands  of  squares)  p_/ 


2,141 

2,421 

2 ,  08  3 

1,395 

1,759 

875 

1,100 

1,277 

1,856 

3,375 

1 ,  556 

1,381 

1,724 

1,719 

1,051 

1,118 

4,277 

4,239 

2,240 

1,456 

1,375 

2,773 

2,221 

2,032 

3,672 

4,583 

2,727 

2,202 

2,274 

2,321 

2,946 

2,974 

3,648 

4,583 

2,714 

2,230 

1,610 

2,904 

2,357 

2,832 

4,196 

3,756 

2,384 

2,006 

1 ,  529 

2,137 

1,326 

2,213 

2,895 

3,325 

2,151 

2,017 

1,707 

2,793 

1,743 

2,321 

3,070 

2,903 

2,544 

2,237 

2,799 

1,881 

3,752 

2,768 

3,187 

3, nil 

3,506 

2,597 

3,103 

2,153 

1,944 

3,1^2 

3,453 

3,308 

3 ,  259 

2,302 

?,  573 

2,671 

2,426 

3,130 

2,470 

2,326 

1,484 

1,765 

1,202 

1,621 

1,941 

1,672 

2,035 

1,126 

983 

608 

889 

1,373 

TABLE  3  (Cont.) 
I-B   Shipments  of  Grit  Roll  Roofing  (Thousands  of  Squares)   h/ 

"  1926  .  1927   1928  ..   1929  1920   1931    1932  .  1933   1934 


1935 


Jan 

Feb 
Mar 
Apt 

May 

Jun 

Jul 

Aug 

Sept 

Oct 

Nov 

Dec 


514 

486 

1,237 

1,013 

995 

1,157 

830 

853 

841 

8  £4 

529 

330 


485 . 

717 

1,039 

1,118 

1,129 

983 

983 

829 

826 

836 

532 

509 


493 
338 
581 
S76 
731 
653 
612 
655 
872 
922 
372 
242 


322 
330 
333 
533 
570 
520 
532 
568 
711 
574 
374 
197 


335 
414 
491 
606 
377 
378 
389 
647 
764 
630 
271 
140 


198 
353 
532 
524 

214 
574 

693 
512 
504 
570 
337 
175 


220 
227 
430 
560 
600 
336 
407 

790 
547 
608 
462 

345 


368 
278 
464 
606 
585 
494 
576 

667 
834 
850 


Average 


801 


833 


59  i 


464 


458 


474 


461 


a/   Sum  of  Shipments  for  Grit  Roll  Roofing  (i-B),  Shingles,  All  Types 
(I-C)  and  Smooth  Roll  Roofing  (i-D). 

h/  Bureau  of  the  Census  monthly  release  Prepared  Roofing,  1933  to  date, 
prior  to  1933  data  taken  from  Survey  of  Current  Business. 


DIVISION  OF  REVIET7,    ISA  -    Industry   Statistics  Unit,   ELG.      1-15-36. 

TABLE   2      (cont.) 

ASPHALT  SHINGLE  AND  ROOFING  INDUSTRY 
SHIPMENTS  :  PREPARED  ROOFING 


I-C   Shipments  of  Shingles,  All  Types  (Thousands  of  Squares)  a/ 

1926   1927   1928   1929   1930   1931   1932   1933   1934   1935 


Jan 

428 

511 

665 

299 

282 

119 

155 

247 

Feb 

429 

859 

309 

337 

•  242 

•     329  ■ 

183  . 

257 

Mar 

1 ,  243 

1,116 

597 

421 

303 

528  • 

424  . 

555 

Apr 

1,153 

1,402 

860 

702 

528 

493  ■ 

748 

908 

iiay 

1,250 

1 ,  538 

894 

595 

•  502 

698  . 

637 

991 

Jun 

1 ,  31 3 

1,316 

807 

643 

431 

458 

406 

739 

Jul 

870 

1,004 

735 

612 

451 

.     641 

448 

535 

Aug 

9-60 

997 

868 

602 

.  703 

490 

850 

815 

Se-3t 

952 

954 

1,196 

689 

878 

451 

455 

756 

Oct 

1,025 

970 

763 

600 

■  656 

491 

559 

859 

Nov 

732 

633 

370 

393 

192 

352 

483  . 

Dec 

500 

576 

302 

214 

107 

164 

315 

Average 

905 

998 

S97 

517 

439 

434 

480 

I-D        Shipments 

of    Smoo 

th  Roll 

Roofing 

(TilOUS' 

->nds  of 

Squares) 

k/ 

9826 


1926        1927 


L£28 


TABLE  2   (cont.) 
1929        1930  1931        1932 


1933 


1934       1935 


J- a 

1,199 

1 ,  32b 

1 ,  224 

773 

1,092 

557 

725 

563 

Fell 

941 

1,799 

709 

714 

1,068 

1,038 

641 

585 

i  Li    X 

1,797 

2,084 

1,062 

702 

1,081 

1,712 

1,367 

1,012 

Aor 

1 ,  506 

2,063 

1,191 

967 

1,140 

1,304 

1,638 

1,460 

May 

1,403 

1,516 

1,088 

965 

732 

1,492 

1,120 

1,304 

Jun 

1,726 

1,452 

924 

043 

720 

1,105 

583 

980 

Jill 

1,195 

1,338 

803 

873 

867 

1,450 

889 

1.100 

Aug 

1,257 

1,077 

1,021 

1 

,067 

1,449 

880 

2,123 

1,286 

Sept 

1 ,  394 

1,251 

1,438 

1 

,198' 

1,451 

1,198 

941 

1,501 

Oct 

1 ,  604 

1,502 

1,575 

4 

r&8&" 

--l',287 

1,610 

1,158 

1,461 

Nov 

1,209 

1,161 

742 

998 

739 

932 

996 

Dec 

842 

950 

585 

571 

361 

550 

713 

Average 

1,339 

1,492 

1,030 

900 

1,000 

1,153 

1,075 

-     —  - 

2]     Bureau  of   the   Census  monthly  release  Prepared  Roofing.    1933     to   date, 
prior  to  1933  data,  taken  from  Survey  of   Current  Business. 

~bj     Bureau  of   the   Census  monthly  release  Prepared  Roofing.    1933  to  date, 
prior  to   1955  data  taken  from  Survey  of    Current  Business. 


DIVISION  OF  REVIE7;,    ERA  -   Industry   Statistics  Unit,   ELG.    1-15-56. 


TABLE  5 

ASPHALT   SHINGLE  AND  ROOFING   INDUSTRY 
PRICES   :    PREPARED  ROOFING 


II-A     Index  of  Wholes  le  Prices   of  Prepared  Roofing  (1929-100)   a/ 

1926  1927  1928.1929      1930        1951"       i'932        1953        193/4       1935 


Jan        150.8      152.0  115.9     91.6     99.0     106.0     100.5     100.0     109.2     115.6 


Feb  150.5  152.0   111.6     90.7     99.0  106.2  97.6 

Mar  151.8  150.3     99.5     90.9     99.0  105.2  98.5 

Apr  153.2  128.1  100.4     97.6     99.0  105.2  99.1 

May  154.7  128.7  100.6  102.5     99.0  106.2  97.0 

Jun  155.6  128.7  120.2  102.8      93.5  106.2  90.6 

Jul  155.9  128.5  122.2  105.8      99.5  106.2  83.8 

Aug  -135.9  129.1122.2  104.1100.1  106.2  86.4 

Sept  135.9  129.3  122.7  105.9   104.5  106.2  95.6 

Oct  155.9  129.5  125.5  105.9   109.8  106.2  102.6 

Nov  155.6  112.2  123.5  103.9   109.8  106.2  107.6 

Dec  135.4  115.1   100.6   105.9   109.8  106.2  107.6 


Ave  rage 

154.2 


86.9 

87.5 

88.5 

95.9 

100.7 

101.9 
104.5 

104.9 
107.0 
108.9 
108.9 


102.8 

97.0 

98.0 

105.1 

105.4 

107.6 
111.6 

115.2 
115.2 
112.8 
115.5 


112.8 

112.4 

112.5 

114.5 

114.9 

114..  5 
111.5 

111.1 


126.8   115.4  100.0  102.3     106.2        97.2        99.6      107.5 


9826 


CCont-1 


-  571  - 
TABLE  3.  (Cont.) 

II-B  Items  and  Weighting  Factors  ~bj 


Items  Vfei^hts 

Slate  Surfaces  Hoofing  11,599 

I.iedium  Prepared  Roofing  14,627 

Strip  Shingles  4,966 

Individual  Shingles  4,463 


a/   HELA,  composite  of  Bureau  of  Labor  Statistics  series  for  "Roofing", 
slate  surfaced,  (III-A),  medium  prepared,  (III-B),  strip  shingles 
(III-C*  ,  and  individual  shingles  (III-D)  weighted  as  shown  in 
II-B. 

h/   Weighting  factors  are  the  BLS  quantity  weights,  given  in  "Quantity 
weighting  factors,  used  in  calculating  Index  Numbers,  1890-1934," 
Llarch  1935. 


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APPEI.DIX  B 
PRICE  FILIHG  III  THE   STEEL   CASTIITG  ICTUS  TRY 
CHAPTER  I 
BACKGROUND  OP  THE   I1.DUSTRY 


I.      GEESEAI  CHARACTER  OP  THE  IEOTSTHI 

A.      Definition  and  Extent 

The  Steel  Casting  Industry  is  a  branch  of   the  Foundry  Industry. 
Its  products  are  -oroduced  "by  pouring  molten  steel   into  a  form  or  cast 
and  allotting  it    to  harden.      The  process   involved  is   described  in  more 
detail   in  Subsection  9,    page  B-ll   of   this   chapter  below. 


1, 


General  Statistics 


Salient  statistics  of  the  Industry  are  revealed  in  the 
following  table:  (*) 

Table  1 
KUlZBEa  OF  FIRI.IS,  EHPLCYEES  AUD  CAPITAL  INVESTED,  1929-1934 


Year 

1929 
1930 
1931 
1932 
1933 
1934 


Ho.  of 

Firms 

184 
182 
177 
172 
168 
174 


Ho .  of 
Employees 

50,052 
53,329 
47,707 
39,108 
20,038 
23,587 


Capital  Invested 

$272,000 
270,420 
265,000 
253,429 
220 , 737 
240,000 


Source:  Letters  exchanged  between  Code  Authority  and  Assistant  Depu- 
ty Administrator. 

The  decline  in  sales  during  the  depression  was  extremely  drastic; 
1933  dollar  volume  was  less  than  12  -oer  cent  of  the  1929  level.   Em- 
ployment dropped  60  -oer  cent  during  the  same  period. 

2.   Size  and  Distribution  of  Plants 

This  industry,  at  the  time  of  application  for  the  Code, 
August  17,  I1  "3,  consisted  of  about  179  active  members.   Table  II 
shows  their  distribution  according  to  capacity.   It  is  interesting 
to  note  that  86  per  cent  of  the  foundries  in  number  represented  only 
35  per  cent  of  the  total  capacity. 


(*)  Various  other  statistical  data  dealing  with  industry  operation 
and  price  filing  results  are  included  in  Exhibit  I,  of  this 
studT_. 


9826 


STEEL  FOUNDRIES 


-  ;,7o  - 

Table  II 

TIIE  LiITED  SIA: 


Size  of  Foundry 
Rated  Ca-oacity 
Net  Tons  per  Mo. 

1  to  100 
101  to  250 
251  to  500 
501  to  1,000 
1,001  to  2,500 
2,501  to  5,000 
Over  5,000 

TOTALS 


iAIIGED  III  (SOUPS  AOCOfeDIi-g  TO  SIZE 

■ITumber    Total    Average  Per  Cent  per  Cent 

of     Capacity  Capacity  of  Totsl  of  Total 

Foundries  of  Group  of  Group  Lumber  Capacity 


54 

2,421 

45 

GO 

2 

41 

6,988 

170 

23 

6 

34 

12,511 

368 

19 

12 

25 

16,795 

672 

14 

16 

15 

23,267 

1 

,551 

8 

21 

5 

18,058 

3 

,  611 

3 

16 

5 

29,698 

5 

,940 

3 

27 

179    109,733 


i  _ * ) 


100 


100 


Source:  Letter  to  the  national  Industrial  Recovery  Board,  dated  January 
2,  1935  from  Steal  Founders'  Society  of  America. 

Although  steel  foundries  are  to  he  found  in  nearly  every  state  in  the 
Union,  the  points  of  greatest  concentration  are  in  the  following  districts: 
Pittsburgh.,  Mil-yjaukee,  Chicago,  Cleveland,  Buffalo,  Eastern  Pennsylvania, 
Detroit  and  the  Pacific  Coast. 

In  a  letter  sent  by  the  Steel  Founders)  Society,  which  was  also  the 
Code  Authority,  to  the  members  of  the  industry,  on  August  17,  1934,  it 
was  stated  that  173  companies,  operating  189  active  foundries,  constitu- 
ted the  Steel  Casting  Industry.   The  tabulations  attached  to  the  letter 
showed  the  member  foundries  and  their  monthly  capacities  for  each  of  the 
eight  geographical  divisions  (erolanation  of  Divisions  below).   Presumably 
four  of  the  193  foundries  shov.ni  in  the  tabulation  were  not  active.   The 
tabulation  follows: 


TABLE   III 

UUIBER 

OF 

FOUNDRIES 

AID   TOTAL 

no: 

TTHLY  CAFACITIES, 

ACCORD] 

:iTG  TO  GI 

I0GPAPHICAL  DI7ISI01TS.    1954 

ITumber  of 

Per  Cent 

Total  Monthly 

Per   Cent 

Division 

Foundries 
31 

of  Total 
16.1 

Capacity 

of  Total 

I 

8,689   Tons 

7.9 

II 

10 

5.2 

11,085        » 

10.1 

III 

13 

6.7 

933        " 

.8 

IV 

25 

13.0 

15,549        " 

14.1 

V 

23 

11.9 

21,895        " 

19.8 

VI 

41 

21.2 

26,642        " 

24.1 

VII 

16 

8.3 

20,520        " 

18.6 

VIII 

34 

17.6 

5,025        " 

4.6 

U.    S.    To 

tal 

193 

100.0 

110.338   Tons 

100.0 

Source: 

Letter 

from  Ste 

lei 

Founders 

s< 

jciety  of  America 

to  all   foundries, 

dated  August  17,  1934.  (In  ERA  files). 


9826 


-  576 •- 
Location  of  Divisions: 

Geographical  Division  I  comrises  Federal  Reserve  District  To.  1 
and  Ho.  3  (except  that  -oart  of  Pe.v  nylvania  '-est  of  a  line  drawn 
north  and  south  through  Altoona,  Pennsylvania)  and  Fo.  5  (exceot 
TIest  Virginia  and  ITorth  and  South  Carolina)  and  Few  York  State 
east  of  a  line  drawn  north  and  south  through  the  most  westerly 
point  of  Schenectady,  Ifew  York. 

Geographical  Division  II  conrorises  Federal  Reserve  District  No.  2 
(except  that  -oortion  included  in  Division  Fo.  I)  and  Erie,  Penn- 
sylvania. 

Geographical  Division  III  comprises  Federal  Reserve  District  Fo.  6 
and  Fo.  11  (exce-ot  southeastern  Arizona,  .  southern  New  Mexico,  and 
Texas  west  of  a  line  drawn  north  and  south  through  Raymond,  Texas) 
and  all  of  North  and  South  Carolina,  Tennessee,  Mississippi,  and 
Alabama  (except  Jefferson  County). 

Geographical  Division  IV  conrorises  Federal  Reserve  Dostrict  Fo.  4 
(except  Erie,  Pennsylvania,  es-stern  Kentucky  and  Ohio)  and  TTes't 
Virginia,  and  that  part  of  Pennsylvania  not  included  in  Division 
I). 

Geographical  Division  Fo.  V  corn-crises  Federal  Reserve  District  Fo. 
4  (except  Pennsylvania) . 

Geographical  Division  VI  conrorises  Federal  Reserve  Districts  Nos. 
7  and  9. 

Geographical  Division  VII  comprises  Federal  Reserve  District  No.  8 
(except  Tennessee,  Mississippi  and  Arkansas)  and  Fo.  10. 

Geographical  Division  VIII  comprises  Federal  Reserve  District  Fo. 
12  and  that  part  of  FederalReserve  District  Fo.  11,  not  included 
in  Division  III. 

Companies  operating  two  or  more  foundries  and  the  divisions  in 
which  they  are  located  are  tabulated  on  the  following  page. 


9826 


■      -   577  - 

tablt:  iv 
co:;?Ai:i"s  or-RATii^c-  gyfc  qr  mors  fouctriss  akd 

TI '.S  DIVISIOIIS  Ii.:"T3iilC":  TIiSY  ARE  LOCATED 

^Including  Active  Foundries  Only) 

hunber  of  Four.dr ie s--Each  Divi  sion 


Coro~>any 


I   II   III   IV  V  VI   VII'  VIII   Total 


Bethlehem  Steel  Co.      2 
Eastern  Steel  Castings   2 
General  Steel  Castings -Co. 1 
American  Steel  Foundries 
Pittsburgh  Steel  Foundry 

Corporation 
Continental  Roll  and  Steel 

Foundry  Company 
Ohio  Steel  Foundry  Co. 
National  Mai  lea  Tale  and  • 
Steel  Castings  Co. 
Sivyer  Steel  Castings  Co. 
Columbia  Steel  Company 
Electric  Steel  Company 
Kay  B runner  Steel  Prod- 
ucts,, Incorporated- 
Western  Steel  Casting 
Co. 


1 
2 
2 


1  1 


2 
2 


1 
2 


2 
1 


2 
2 
2 
5 


3 

2 

3 
2 
2 
2 


Total 


0   0 


Source:   Compiled  "by  Statistics  Section  SEA  from  Daily  Price  Reports 
of  Steel  Founders'  Society  of  America 

Summarizing  the  above  table,  nine  companies  operated  two  foundries 
each,  two  companies  operated  three  foundries,  one  company  operated  four 
and  one  company  operated  five  foundries. 

The  largest  steel  casting  companies,  based  on  monthlj1'  rated  capa- 
city, are  shown  in  the  section  following. 

3.  Description  of  Im-oortant  Companies. 

Table  V  shows  the  more  important  corroanies  of  the  Steel  Casting 
Industry.   These  companies  operate  about  forty  of  the  foundries  or  about 
20  per  cent  of  the  total  number  in  the  industry  and  represent  over  60  per 
cent  of  the  total  capacity. 


9826 


TABlE  V 

PRINCIPAL  0OI.IPA1TI3S  BY  SIZE  AIT  UOl'TKLY  CAFACITY.    1954 

Monthly  Per  Cent 

Foundry  Capacity,  ,  of  Total 

IIo.  Ilarae   of   Company  Tons  Capacity 

402) 

503) 

602)  American  Steel  Foundries  Co.     18,717       17.0 

702) 

703) 

626)  National  Malleatiie  and  Steel 

627)  Castings  Company 

506)  Bucheye  Steel  Castings  Company 

204)  The  Bould  Coupler  Convoany 

712)  Scullin  Steel  Company 

605)  Bettendorf  Company 

)  Continental  Ifoll  and  Steel 

)        Foundry  Company 

407)  Euquesne  Steel  Foundry  Company    3,678         3.3 

424)  Wheeling  Hold  and  Foundry 

Company 

619)  Huhbard  Steel  Foundry  Company 

113)  General  Steel  Castings  Company    2,843         2.6 
705) 

517)  Ohio  Steel  Foundry  Company      '  2,468         2.2 
518) 

207)  Pratt  and  Letchnorth  2,128         1.9 

614)  The  Falk  Corporation  1,911        1.7 

416)  Pittsburgh  Steel  Foundry  Corp.    1,800        1.6 
417) 

805)  ColximMa  Steel  Company  1,550        1.4 

806) 


7,000 

6.3 

6,843 

6.2 

5,745 

5.2 

5,500 

5.0 

4,920 

4.4 

9826 


-  579  - 
IABL1  V 

PHirCIPAL  COi:FAITIES  BY  SISS  AID  hOITTKLY  CAPACITY,  1934 

( Continued) 

Foundry 

llo.  Ilane  of  Con'vn" 

105       Eirdsooro  Steel  Foundry  and 
Machinery  Company 

519       Otis  Steel  Company 

412       McConway  and  Torley  Corpora- 
tion 

616        Harrison  Steel  Castings  Co. 


633) 

Sivyer  Steel  Castings  Co 

1,188 

634) 

505 

Bonne;'-- Floyd  Conroany 

1  ,140 

420 

Sterling  Steel  Foundry 

Company 

1,030 

203 

Erie  Forge  Company 

1,028 

422 

Union  Steel  Castings  Com- 

jany 

960 

515 

Machined  Steel  Casting 

Comoany 

953 

Monthly 

Per  Cent 

Ce  acity, 

of  Total 

Tons 

Capacity 

1,544 

1.4 

1,420 

1.3 

1 , 331   . 

1.2 

1,224 

1.1 

1,188 

1.1 

1.0 

0.9 
0.9 
0.9 

0.9 

423       United  Engineering  end  Foundry 

Co.  900  0.8 

611       Detroit  Steel  Castings 

Company  875  0.8 

122        Penn  Ste3l  Castings  Corporation  679  0.6 

418       Pressed  Steel.  Car  Company       654  0.6 

All  other  companies  30,309  27.7 

Source:   Steel  Founders'  Society  of  America,  letter  dated  August 
17,  1934. 


-  580  - 
4.   Financial  Conditions'  of  Industry 

Table  VI  below  shows  a  summary  of  combined  earnings  for  the  years 
1924  to  1928,  for  a  selected  group  of  representative  foundries.   The 
number  of  conroanies  reporting  each  year  is  noted.  Earnings  are  shown 
both  as  percentage  of  assets  and  as  Toercentage  of  sales. 

TABLE  VI 

EARNINGS  AID  CAPITAL   TURNOVER  FOR  SELECT 
GROUP  01'  COLPAUIES,    1924-1928 

Ave  rage 

for  the 

1924   1925    1926   1927    1928       5  Years 

Earnings 

Per  Cent  of  Assets  3.80   4.50   6.70   3.40    5.70         4.80 


Earnings 

Per   Cent   of   Sales 

4.80 

5.30 

7.30 

4.30 

7.20 

5.80 

Caioital   Turnover 

.79 

.86 

.92 

.80 

.79 

.83 

Number  of  Conroanies 

Reporting  38      39     40     41      42         40 

Source:   The  Steel  Castings  Industry,  by  G.  P.  Sogers,  1930. 

The  figures  for  capital  turnover  given  above  were  commuted  by 
dividing  earnings  as  a  -oercentage  of  assets  by  earnings  as  a  oercentage 
of  sales. 

The  best  earnings  of  the  grouo  for  this  period,  it  will  be,  seen, 
were  shown  in  1926. 

5.  Failures  in  the  Industry. 

Statistics  on  failures  in  the  Industry  are  not  readily  available. 
The  Steel  Founders'  Society  stated  that  in  the  last  eight  years  there 
were  approximately  sixty  failures,  forty-eight  from  1927  to  1931  and 
twelve  from  1932  to  date.  (*). 

6.  Relationship  o'f  Earnings,  Prices  and  Volume. 

A  re-ocrt  ^re-oared  by  the  Consrjners1  Advisory  Board  contains  the 
following  statement: 

"The  selling  price;  (of  steel  castings)  today  (Sept.,  1933)  is 
about  $134  per  net  ton,  on  the  basis  of  which  the  industry  is  losing 
about  $48.50  per  ton,  com-oared  with  a  selling  -^rice  of  $164  a  ton  in 
1929,  when  net  earnings  were  about  $25.60  per  ton.   In  1929  the  net 


I  *  '\    T„  4-  , 


n  _-i  i  -: cx~~n   n~,,  —  J i   c»  -  „  4  ~  J —  tt„  — 


-  581  - 

tonnage  was  1,671,952  tons,  the  margin  of  profit  of  about  $10,000,000. 
In  193?,  present  comparable  figures  being  somewhat  higher,  produc- 
tion was  only  191,886  net  'tons,  on  which  there  was  a  loss  of  some 
$9,500,000."  (*) 

7.  Raw  Material  Prices. 

The  raw  materials  used  by  this  industry  are  primarily  pig  iron 
and  scrap  steel.   Preliminary  studies,  conducted  by  the  Division  of 
Research  and  'Planning,-  reveal  a  considerable  degree  of  flexibility 
in  the  prices  of  both  of  these  items.   'The  price  of  scrap,  expecially, 
is  very  sensitive  to  changes  in  the  market. 

The  price  of  steel  castings  does  not  reveal  the  same  degree  of 
flexibility  as  does  that  of  its  raw  materials. 

8.  Classes  of  ~roducts. 

Approximately  one— half  of  tne  steel  castings  produced  are  so-called 
"miscellaneous"  castings  and  the  other  half  are  "specialties.    The  mis- 
cellaneous group  includes  those  castings  which  are  usually  made  to 
order,  according  to  specifications,  designs,  and  patterns  furnished  by 
the  buyer;  and  are  usually  sold  in  the  rough. 

The  group  called  "specialties"  includes  castings  which  are  pri- 
marily designed  and  engineered  by  the  companies  producing  them,  ouite 
frequently  produced,  from  patterns  or  other  eauipraent  belonging  to  the 
producer,  and  sold  in  semi-finished  or  finished  form.   The  "specialties" 
are  chiefly  railway  equipment  products  such  as  side  arms,  draft  arms, 
bolsters,  couplers,  cast  steel  car  wheels,  etc.  and  automobile  products. 
The  patents  on  "specialties"  are  controlled  bv  a  "pool"  of  the  largest 
producers  of  this  class  of  products. 

Of  the  total  rated  monthly  capacity  of  109,753  net  tons  shown  in 
Table  II  above,  57,968  net  tons  represent  the  capacity,  of  20  foundries 
engaged  in  the  production  of  so- called  "railroad  specialties."  (**) 
The  very  largest  foundries  are  found  in  this  group. 

There  is  a  tendency  for  companies  to  specialize  in  tne  manufacture 
of  one  or  two  major  clasres  of  products.   For  example,  the  American 
Steel  Foundries  Company  produces  primarily  railroad  equipment,  such 
as  parts  for  cars  and  locomotives.   The  various  foundries  of  the 
Continental  Roll  and  Steel  Foundry  Company  are  tne  largest  producers 
of  rolling  mill  rolls.   These  and  other  major  companies  were  leaders 
in  establishing  price  levels  during  the  Code. 

9.  Methods  of  Manufacture. 

Manufacturing  methods  ir  this  industry  are  based  on  skill  and 

(*)   Consumers1  Advisory  Board  Report  by  L.  B.  Lovell-Sept..  7,  1933. 

(**)  Source:    Letter  to  the  National  Industry  Recovery  Board, 

dated  January  6,  193.r  from  Steel  Founders'  Society 
of  America. 

9826 


-  582  - 

secret  processes.   The  crai't  is  mastered  onlv  after  extensive  ex- 
perience- and  painstaking  research.   From  the  selection  and  treatment 
of  molding  sand  and  the  melting  of  raw  materials,  to  the  flogging  and 
cleaning  of  the  finished  product,  dexterity  and  a  ctsitive  knowledge 
of  proper  methods  learned  iroin  experience  are  essential  in  the  pro- 
duction of  these  castings. 

Four  principal  melting  processes  are  used — open  hearth  (basic 
and  acid),  electric,  converter  and  crucible.   The  last  two  are  de- 
creasing in  importance  while  the  electric  process  is  growing  in 
favor  and  the  open  heartn  -process  iB  maintaining  its  place.   Prac- 
ticallv  all  "specialties"  castings  are  produced  from  steel  made  in 
electric  furnaces.   These  casting's  are  usually  small  and  cost  more 
to  produce  per  pounc  that  the  "miscellaneous"  castings,  i"hich  are 
larger  and  made  of  open  nearth  steel.   Most  up  to  date  foundries 
use  heat  treating  processes  in  anneslirg  furnaces  to  develop  desired 
properties  in  tne  castings.   The  production  of  alloy  steel  Castings 
has  recently  become  of  increasing  importance.   In  manufacturing  alloy 
steel,  various  chemical  elements  are  addec  to  tne  ordinary  melt.   In 
pricing  these  castings,  the  cost  of  the  additions  in  making  alloy 
steel  are  added  to  the  regular  caroon  steel  price  as  "alloy  extras." 

A  brief  review  of  tne  processes  involved  in  the  production  of 
a  tvpical  casting  is  presented  below; 

A  foundry  receives  an  order  for  a  casting,  together  with  the 
design  and  specifications,   These  are  examined  and,  if  satisfactory, 
blueprints  are  prepared  and  sent  to  the  pattern  shop,  where  wooden 
pattern  of  the'proposed  casting  is  made.   The  pattern  is  then  sent  to 
"the  mold  shop.   For  the  ordinary  uniform  patterns,  halves  of  the 
patterns  are  each  laid  in  steel  flasks  or  ooxes.   These  flasks  are 
considerably  larger  than  the  pattern.   Seecially  treated  sand  is  then 
packed  in  the  flask  at  the  sides  and  under  the  wooden  pattern  .   When 
the  sand  completely  fills  all  the  volume  of  the  flask  not  token  up 
bv  the  pattern,  the  pattern  is  removed.   The  two  half-molds  in  the 
flasks  are  then  clamped  tightly  together.   The  complete  mold  is  now 
heated  and.  the  sand  harrened.   When  this  mold  is  ready,  the  steel  is 
poured  and  set  aside  to  cool.   "hen  ready,  the  flasks  containing  the 
sand  moldings  are  removed,  exposing  the  rough  casting. 

10.   Markets  for  Industrv  Products 

Steel  castings  are  utilized  in  the  manufacture  of  the  following 
products,  listed  in  their  relative  order  of  importance  in  1929: 

1.  Steam  railroads,  including  electric  locomotives 

2.  Rolling  mills,  including  some  steel  rolls 

3.  uckets,  snovels,  dredges 

4.  Tractors,  trailers,  and  industrial  cars 

5.  Cranes,  hoists  and  derricks 
'6.'  Refinery  and  oil  well  equipment 

7.   Valves  and  fittings 
'6.   Automotive  castings 

9,   Electrical  machinery 
10.   Roac-makin  -  .nachinery 

i 


-  583  - 

11.  Presses  (hydraulic  and  poi">  r) 

12.  Machine  tools 

13.  Agricultural  Machinery 

14.  Engines,  puiops,  and  compressors 

Source:   Special  Survey  of  Distrioution  of  Steel  Castings 
Sales  for  the  year  iy?9  "by  the  Steel  Founders' 
Society  of  America. 

Railroads,   the  largest  consumers,  which  normally  utilize  about 
50  percent  of  the  industry's  output,  consumed  only  5  to  10  percent 
of  the  total  output  during  the  depression.   This  furnishes  a  partial 
explanation  of  the  drastic  reduction  in  sales  during  that  period, 
(See  Chart  I  &  Exhibit  I,  Table  I -A) 

11,   Competitive  Products, 

Steel  castings  are  in  competition  with  gray  iron  and  malleable 
iron  products,  as  well  as  welded  steel,  forgings,  die  castings, 
stampings  and  non-ferrous  products.   Very  little  statistical  data 
showing  prices  and  production  are  available  on  these  products  with 
the  exception  of  Malleable  Iron  Castings.  (See  Exhibit  I,  Table  IV 
and  Chart  II.) 

II.   TRADE  ASSOCIATION  ORGANIZATION  AND  ACTIVITY 

A.   The  Steel  Founders'  Society  of  America 

1.   Membership 

The  only  organization  of  any  importance  w.tnin  the  industry  is 
the  Steel  Founders'  Society  of  America,  extablished  in  1902.   The 
membership  of  association  includes  all  of  the  large  and  many  of  the 
smaller  units  of  the  industry. 

In  1930,  the  membership  of  the  Society  represented  about  20 
percent  of  the  total  number  of  foundries  and  approximately  30-40 
percent  of  the  output  of  the  industry,  (*)' 

The  Society  has,  for  .'any  years,  been  actively  engaged  in  the 
collection  and  distrioution  of  statistical  material  covering  a  wide 
range  of  subjects. 

When  the  F.I.R.A.  was  passed,  the  Board  of  Directors  of  this  body 
immediately  assumed  the  responsibility  of  preparing  and  presenting  a 
code.   The  first  application  for  a  code,  dated  August  25,  1933,  indicates 
that  at  that  time  the  membership  oi  the  association  comprised  about 
65  percent  of  the  total  number  of  steel  foundries.   The  sales  of 
Society  members  for  the  year  1933  amounted  to  76  percent  of  the 
total  for  the  industry.  (**)   According  to  a  letter  from  the  Steel 

(*)   Federal  Trade  Commission-Open  Price  Trace  Association,  1929,  p,  387 

(**)  Research  and  Planning  Division  Report— Steel  Castings  Industry 
August,  1933. 

9826 


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9826 


1-586- 

Founders.'  Societ",  dated  August  17,  1934,  membership  on  that  date  re- 
presented C5  per  cent  of  the  industry  in  number  and  95  per  cent  in 
capacity. 

2.  Organization 

The  following  is  a  description  of  the  organization  of  the  Societ"  in 
1930.  (*)   It  is  "believed  that  the  organization  today  is.  the  sane,  with 
the  exception  that  there  are  not?  eight  geographical  divisions  whereas 
there  were  only  five  in  1330,   (See  Chart  III  ) 

"The  general  neribership  is  vested  with  authority,  through  its 
voting  ■oower,  to  regulate  broadly  all  general  policies  and  projects 
undertaken  ^oy   the  Society.   Theirs  is  the  right  to  vote  changes  in 
the  By-laws,  to  select  the  members  of  the  Board  of  Directors  and 
pass  upon  all  major  matters  facing  the  organization. 

"The  Board  of  Directors  are  chosen  by  the  members  to  represent 
them.  .Each  geographical  Division  of  the  Societ"  is  equally  re- 
presented on  the  Board,  thus  making  that  body  thorough!--  represen- 
tative.  To  them  are  referred  specific  questions  of  policy  and 
direction  for  more  expeditious  handling.   Their  duties  are  quite 
similar  to  those  of  Boards  of  Directors  in  commercial  corporations. 

"The  President  of  the  S.D.S.A.  is  chairman  of  the  Board  of 
Directors,  and  presides  at  all  Board  meetings  as  well  as  at  con- 
vention meetings. 

"Banking  nest  to  the  President  are  eight  Vice-Presidents, 
each  representing  a  geographical  division  of  the  Society,  who  are 
not  only  members  of  the  Board  of  Directors  but  also  Chairmen  of 
their  respective  divisions.   They  preside  at  all  general  meetings 
held  in  their  territory  or  division.   These  geographical  divisions, 
among  other  things,  are  set  up  to  better  enable  the  Society  to 
deal  with  local  oroblems  a„s  well  a.s  to  maintain  equitable  represen- 
tation of  the  membership  on  the  Board. 

"Under  the  Board  of  Directors  and  responsible  to  them  is  the 
Ilanaging  Director,  into  whose  hands  the  active  work  of  the  Society 
is  entrusted.  His  duties  corrorise  the  general  conduct  and  adminis- 
tration of  the  affairs  of  the  S.B.S.A. ,  management  of  its  office 
and  operating  staff,  handling  of  finances,  etc. 

"All  working  committees  ere   appointed  and  approved  yearly 
by  the  Board  of  Directors,  and  work  with  the  managing  Director, 
who  is  a  member  ex-officio  of  all  working  committees.  Beports 
of  committees  nay  be  made  in  any  of  four  different  ways,  depending 
upon  the  most  practical  disposition  of  the  problem  in  hand;- 

Birst:   Directlry  to  the  Board  of  Directors, 

Second:  Directly  to  the  membership, 
(*)   The  Steel  Castings  Industry,  G.  P.  Rogers,  1930. 

3326 


587  - 


Third:   To  the  Managing  Director,  who  in  turn  includes 

the  rerort  with  his  own  reco  mendations  delivered 
to  the  membership  or  to  the  Board,  or 

Fourth:  To  the  Managing  Director  1'or  his  specific 
guidance  in  handling  a  particular  proDlem. 


"If  a  situation  or  matter  arose  not  classified  under  the 
specific  subjects  assigned  to  each  working  committee,  or  if 
in  the  judgment  of  the  Board  of  Directors  the  matter  in 
Question  could  best  be  han<  led  by  a  special  committee,  provision 
is  made,  and  the  loard  empowered  to  appoint  such  special  committee. 

"It  is  planned,  that  tne  personnel  of  working  committees 
will  not,  as  a  rule,  exceed  three  members,  thus  permitting  of 
speedy  transaction  of  business  either  by  mail  or  throu-h  committee 
meetings.   In  many  instances  these  committees  function  largely  in 
an  advisory  capacity  to  the  Board  of  Directors,  the  Societv  and 
the  Managing  Director  while  the  detail  '-ork  is  handled  bv  the 
executive  office  of  the  Society. 

WORKING  COMMITTEES  AND  MATTERS  COMING 
UNDER  THEIR  JURISDICTION 

(Each  composed  of  three  members,  unless  otherwise  specified,  and 
all  appointed  by  Board  of  Directors  yearlv) 

Cost  Committee: 

Matters  pertaining  to  Uniform  Cost  System,  Comparative 
Cost  Studies  and  Re worts,  and  selling  of  sound  cost 
methods  to  the  industry. 

Finance  Committee: 

Examination  of  Society's  books,  and  matters  pertaining 
to  income,  expends,  budgets  anc  audit. 

Membership  Committee: 

Direction  of  membership  building,  passing  on  eligibility 
and  proper  classification  of  applicants  and  approval 
'     of  firms  seeking  membership,  subject  to  final  approval 
of  Board  of  Directors. 

Arbitration  and  Vigilance  Committee: 

Disputes  and  questions  involving  ousiness  ethics,  fair 
trade  -practices,  etc.,  conciliation  anc  promotion  of 
friendly  relations  which  cannot  be  successful1/  handled 
by  the  Managing  Director. 


9826 


-  o88  - 

Co-Oneration  and  Legislation  Committee: 

Contacts  with  government  departments,  tariff,  proposed 
legislation,  contacts  with  other  trade  organizations 
enC    associated  industry  contacts. 

Industrial  Research  Committee: 

Matters  relating  to  advancement  of  manufacturing  practice; 
trace  customs,  standardization,  simolif ication,  elimination 
of  wastes,  apprentice  training,  all  kinds  of  insurance, 
labor  and  employment,  traffic  problems  and  purchasing 
information,  etc. 

Technical  Research  Committee: 

Development  of  ne™  uses  lor  cast  steels  anc  standard 
specifications,   Conduct  of  tests  and  investigations, 
Chemical  ano  physical  research  to  improve  foundry  practice 
product.   Compilation  of  technical  manual,  etc. 

Statistical  Committee: 

Problems  relating  to  collection  of  data  and  figures  regarding 
the  industry,  production,  bookings,,  capacity,  earnings, 
shipments,  etc.,  market  and.  industry  surveys  and  production 
of  steel  foundry  directory. 

Entertainment  Committee:        •      .  . 

Matters  pertaining  to  the  social  phases  .of  conventions 
en<}    meetings.   Speakers,  programs,  recreation,  golf, 
accommodations,  banquets,  entertain  .lent  of  guests,  etc. 
The  promotion  »t  friendly  acquaintance  anions  memoers. 

Merchandising  Committee! 

Problems  regarding  advertising,  publicity  better  selling 
methods,  market  development,  Society  exhibitions  and  pro- 
duction 01  Society  merchandising  publications,  etc. 

Administration  -  General  Office: 

!  ndles  administration  and  operation  of  all  Society 
work  pr.c   projects:  carries  out  all  plans  and  under- 
takings, after  approval  by  the  Bo- rd  of  Directors; 
does  all  detail  work  incident  to  meetings  and.  con- 
ventions; comnxles  anc  distriuutes  rerorts;  publishes 
Society  Bulletin;  special  bulletin  letters  of  in- 
formation for  members;  releases  publicity;  conducts 
material  exchange,  traific  department  ?ri6   employment 
bureau,  assists  in  the  ';ork  oi  all  committees  and 
deal's  with  all  special  projects. 


9826 


-  589  ~ 


"The  entire  framework  of  organization  constitutes  a  simple 
effective  structure  adapted  to  the  successful  prosecution  of 
the  recommended  Program  for  the  Society."   (*) 

3.   Pricing  Practices  Prior  to  the  Code, 

a.  Introduction. 

The- ability  of  the  Steel  Pounders'  Society  to  introduce'  an  elaborate 
system  of  price  filing  differentials  and.  schedules,  within  sc  short  a 
time  after  the  approval  oi  the  Code,  reflect?,  its. .previous  experience 
in  this  field.   The  Federal  Trade  Commission  in  its  publication  (**) 
"Open  Price  Trade  Associations"  describes  some  of  the  experiences  with 
pricing  practices  attested  by  the  Society. 

b.  Ear""v  Forms  cf  Price  Listings  and  Practices,  1912' '1927 

As  early  as  1912,  a  svstem  war  inaugurated  under  which  members  sub- 
mitted reports  covering  all  phases  of  their  business  to  tne  central 
office  of  the  Eddy  Association — as  it  "'as  known  then.   This  association 
distributed  these  reports  to  all  members.   The  scheme  was  abandoned 
shortly  thereafter. 

Several  years  later,  "  a  plan  was  adopted  whereby  there  would 
be  no  exchange  of  any  price  data  until  after  all  business  or  any  in- 
quiry, had  been  closed  and  the  contract  let.  "  From  reports  released 
by  the  Society,  the  members  were  kept  informed  of  the  trend  of  the 
market  and  all  closed  transactions.   This  plan  was  not  followed  to 
any  great  extent  and  was  considered  of  little  value.   At  a  meeting  held 
on  May  2,  1934  it  was  decided  to  discontinue  this  practice. 

Daring  October,  1923  tne  Society,  for  a  time,  attempted  a  system 
of  reporting  "intentions  to  quote  and  orders  taken."  Each  bidder  would 
report  to  tne  secretary  that  ..its  were  being  submitted.   If  one  of  the 
bidders  was  awarded  the  contract,  he  furnished  the  prices  and  terms  to 
the  secretary  who  in  turn  rele-  red  this  information  to  the  other  member 
bidders.   In  July,  1924  these  reports  were  discontinued.   They  were 
renewed  on  June  19,  1925,  ant  again  discontinued  on  December  10,  1926, 
on  the  ground  that  no  benefits  were  derived  from  this  practice  and  be- 
cause very  few  operators  were  cooperating. 

Another  form  of  price  reporting  was  adopted  pursuant  to  a  resolution 
adopted  by  the  Society  on  tdarch  S3,  1923,   The  secretary  was  risked  "to 
have  printed  and  sent  out  to  the  members  a  book  of  'notification  levels' 
based  on  the  last  published  rriees  of  the  America-  Steel  Founders." 
In  May,  1923,  members  were  urged  to  report  regularly  on  ruot^tions  and 
orders  taken.   Apparently  this  request  was  made  to  show  that  memoprs  were 
not  using  the  "notification  levels"  as  t  e  price  to  oe  quoted,   Tne  term 
"notification  levels"  appears  to  nave  represented  a  compilation  oi  the 

X*)      Ibid,  page  47-49. 

(**)  Federal  Trade  Commission— Open-Price  Trace  Associations 
February  11,  1929,  pp.  3t7-3£8. 

9826 


-  590  - 

last  published  prices,  similar  to  the  Quarterly  Reports  released  by  the 
Society  during  the  Code  period.   However,  even  this  typt  of  price  reporting 
was  short-lived.   In  April,  1924  "price  level  notification"  was  abandoned 
because  of  the  opin  cf  most  operators  that  it  was  of  little  value. 

It  is  apparent  that  all  efforts  towarc. s  securing  the  filing  or 
distribution  of  price  data,  (advance  prices  or  even  b^ck  prices  on 
closed  business),  met  with  little  or  no  response  from  foundry  operators 
and  had  to  be  discontinued.   As  late  as  April  29,  1925,  Mr.  McKercher, 
counsel  for  the  Society,  expressed  the  opinion  that,  under  the  law, 
"no  collection  or  distribution  of  data  on  advance  prices  or  Quotations 
on  jobs  ere  permitted.  "(*) 

Not  until  the  early  part  ox  1927  was  any  success  achieved  in  this 
direction.   At  a  meeting  neld  an  January  21  of  that  year  a  member  inquired 
as  to  the  legality  of  reporting  to  the  Society,  for  investigation,  the 
name's  of  foundries  selling  castings  below  the  cost  of  -production,   Mr. 
McKercher  stated  tnat,  in  his  opinion,  such  investigation  could  be  made 
on  closed  business  only.   He  went  or  further  tu  say  that  "when  members 
learn  of  price  situations  that  can  be  fairly  and  generally  discussed,  they 
are  privileged  to  bring  uo  the  point  at  these  meeting. "   He  recommended 
further,  however,  that  "nothing  be  done  by  "ry  of  agreement  to  bring  such 
competition  to  a  normal  level."  (**) 

Members  "ere  becoming  more  en:  more  interested  in  price  and  its 
varying  oh^ses.   From  this  point  on  the  discussion  of  the  price  level, 
the  listing  oi    nrioes,  enc  other  phases  of  the  price  problem  found  a' more 
receptive  attitude  on  the  part  of  t:  e  members  than  had  prevailed  oefore. 

•  C .   Trade  Association  Activity  —  1929-1935 

1^  1929,  the  Steel  Fount  ers'  Society  conducted,  a  survey  of  pricing 
methods  in  the  Steel  Castings  Industry.  (***) 

It  was  found  that  42  percent  of  all  c.mcerns  included  in  the  survey 
quoted  principally  on  scnedule;  h2   percent  principally  on  pound,  or 
weight  basis,  and  "^   mrctnt  on  a  piece  or  unit  basis. 

In  the  early  d.evs  of  the  Industry  it  was  customary  for  foundries 
to  sell  their  products  at  a  flat  price  per  pound.   As  a  rule  this  covered 
anything  the  customer  renuired,  reg-rdless  of  pattern,  size  or  character. 

Subsecuently,  contracts  were  made  -t  one  mice  per  pound  for  castings 
above  r  crrtrin  weight  with  a  ligher  pound  price  oelo"-  that  weight.   Still 
later  ^ei^ht-  schedules  were  developed  in  crude  form.   Concerning  these 
schedules,  Mr.  0.  ?.  ivo-ers,  in  tae  1929  surdrt^j  is  ouoted  as  follows: 
.  "....In  later  rears  they  a've  been  refined  and  brought  up-to-date, 

so  that  in  some  few  instances  tney  may  be  considered  fairly  practicable, 

"Howev;  r,  flat  prices  or  weight  prices  a;  -'ell  as  scnedules 

are  still  used,  prd    t i^ere  is  no  standard  practice.   All  will  admit 

(*}  Ibid 
(**)  Ibid 
(***)G.  P.  Ho  :ers,  The  Steel  Castings  Industry— 1929-pp.  123-124. 

9826 


some  improvement  in  Methods  of  quoting  prices,  but  »e  pre  p   long  way 
form  ?n  intelligent  and  sound  solution. 

"Schedules  may  be  an  Improvement  on  the  old  flat  rate  method, 
but  it  is  far  from  a  scientific  way  of  selling  a  product. 

"It  does  not  follow  that  the  costs  of  production  on  castings 
of  the  same  wsight  are  identical.   One  may  be  compact,  using  simple 
cores  or  none  at  all,  easy  to  mold  and  clem,  with  little  hazard  as 
to  loss,  and  producing  large  tonnage  per  foot  of  foundry  space. 
Another  of  the  sa  me  weight  may  be  long,  with  thin  sections,  taking 
large  flasks,  requiring  the  setting  of  intricate,  cores,  having 
a  percentage  of  loss  and  producing  a  small  tonnage  per  foot  of 
foundry  space. 

"There  cannot  possibly  be  the  siaae  cost  of  manufacture,  and 
there  can  be  no  justification  as  sound  business  practice  for  selling 
these  castings  at  the  same  price  or  oy  a  schedule  of  prices. 

"The  only  reasons  I  can  see  f  _,r  present  aethods  of 
pricing  is  because  of  custom,  habit  and  lack  01  initiative 
to  develop  and  adopt  sounder  methods.   Yet  all  around  us 
we  fine  irdustry  pfter  industry,  from  the  farmer  to  the 
industrialist,  '"hose  methods  of  pricing  their  products  have 
entirely  charged  from  tiiose  prevailing  onlv  a  ie™  years  ago. 

"This  subject  is  not  nem,  but  it  is,  in  my  judgment, 
important,  -^nd  it  is  not-  receiving  from  the  industry  the 
consideration  or  attention  it  deserves. 

"It  is  folly  to  "mit  for  the  purchaser  of  castings,  or 
unforeseen  conditions,  to  automatically  adjust  this  situa- 
tion.  It  should  be  studied  carefully  by  the  industry  it- 
self, and  the  solution  f ounc ,  followed  by  t  :e  pioneering 
courage  to  put  it  into  operation. 

"In  my  judgment  it  has  been  no  small  factor  in  materially 
contributing  more  to  the  mice  and  pro! it  t:  ubles  of  the  aver- 
age steel  foundry  than  any  other  'one  thing,  unless  the  producer 
had  little  or  no  method  oi   cost  finding.. 

"No  lighting  equipment  manufacturer  ^ould  think  of 
selling  his  metal  fixtures  at  tiie  s?  ie  nrice  based  on  weight. 
You  do  not  buy ,  furniture  on  trie  basis  of  the  numoer  of  feet 
of  lumber  used  in  its  construction. 

"I  am  willing  to  go  on  record  against  the  soundness  of 
the  present  method  of  quoting  prices  on  steel  castings,  and 
to  predict  that  *  ith  thorough  study  tnis  condition  can  be  im- 
proved, and  once  new  methods  are  ojserved  will  oe  aore  satis- 
factory to  the  foundry  interests  and  the  industries  trey  serve 
than  present-day  oractice,   In  addition,  this  will  contribute 
much  tOTvprd  the  elimination  oi  factors  tnat  are  now  most  dis- 
turbing. 


9826 


-  592  - 

"The  production  of  castings  is  an  art,  not  a  standardized 
manufacturing  process,  and'  with  the  growing  tendency  ti"srd 
alloy  steel,  ulus  rapid  strides  in  production  methods  and 
improved  products,  as  well  as  new  uses,  it  is  going  to  become  an 
industrv  based  more  and  -lore  on  craftmanship  and  technical 
knowledge.   Consequently  now  is  a  most  opportune  time  for 
effective  consideration  of  this  proDlem. "  (*) 

A 'check"  study  01  the  Industrv 's  original  Pricing  Survey 
was  conducted  by  a  private  firm  of  engineers  during  1933.   The  fol- 
lowing quotation  is  an  exfrpct  from  this  check  report: 

"The  Engineer  requested  copies  of  all 
schedules  in  effect  in  1926,  these 
schedule  usually  being  for  individual 
customers  although  in  many  cases  several 
customers  operated  on  copies  of  the  same 
schedules, ..." 

"In  a  few  cases  tue  companies  were  not  selling 
on  schedules  in  1926,  therefore  general 
data  were  obtained  regarding  the  various 
classes  of  castings  which  tney  "'ere  making. 


u 


"During  tue  examination  oi  the  1926  selling 
prices...,  the  Engineers  found  that  in  many 
case^  the  schedules,  were  the  same  as  tnose 
which  were  in  effect  in  ly25,  1924  and  in 
some  instances,  even  in  1923...."  (**) 

Apparently,  during  the  period  preceding  approval  of  the 
code,  a  more  or  lesr  uniform  nominal  price  level-  ""as  maintained.   Price 
competition  took  the  form  of  indirect  concessions  through  changes  in 
terms  and  conditions  of  sale  rather  than  'by  changes  in  the  existing 
schedules. 

The  schedules  in  use  trior  to  tne  Code  did  not,  m  general 
provide  for  ouantitv  differentials.   Quoting  further  from  the  Engineer's 
report:  (***) 

"In  some  cases  the  company  would  allow  a 
general  reduction  oi  5  to  15  percent  for 
quantity.   In  other  cases  special  prices  were 
given  if  the  ourchaser  insisted  upon  it,  or  if 
the  company "felt  inclined  to  do  so.   The  prac- 
tice of  reducing  trie  selling  price  per 
pound  on  the  basis  of  the  number  of  cast- 
ings per  order  was  not  uniform. ..." 


(*)   G.  P,  Rogers  -  The  Steel  Castings  Inoustrv  -  1929  op.  123-124 
(**)  Ford,  Bacon  and  Davis  Co.  -  Engineers-Report,  Selling  Price  Sched- 

'■  ules  for  Miscellaneous  Steel  Castings-Dec,  29,  1933  -  p.  11 
(***)lbid,  p.  16 

9626 


-  593  - 


"rior  to  the  Code,  although  small  conoanies  may,  to  a  limited 
degree,  have  followed  the  price  schedules  oi  their  larger  co  roetitors, 
it  is  probable  that  they  ircouentl"  offered  substantial  discounts  from 
list  -prices  as  inducements  to  purchase.   Ti:.e  Code  Autnority  descrioed 
pre-code  prices  as  the 

"....result  of  'sweated'  laoor  conditions, 
chiseling  and  cut-throat  competition;  that 
when  the  Industry  »ps  operating  at  onlv  10 
percent  of  capacity,  as  it  did  during  the 
great  part  of  193?  and  1953,  the  foundries 
were  forced  to  *ive  their  castings  away,  if 
necessary,  simply  to  cover  as  much  of  tneir 
overhead  as  possible.... 

"For  example,  some  foundries  tnat  specialized 
in  medium  "/eight  and  very  heavy  castings  used 
to  attach  a  nuisance  value  to  small  orders 
for  very  light  castings. 

"Often  they  would  accept  a  blanket  order  con- 
sisting almost  entirely  oi  heavier  type  cast- 
ings but  including  a  few  lighter  ones.   In 
such  cases  an  8-cent  or  9-cent  price  on  the 
heavier  castings  might  be  consistent  with 
costs,  but,  frequently,  the  lighter  ones  were 
thrown  in  at  the  same  price  regardless  of 
whether  or  not  such  price  represented  a  loss. 
The  object  was  to  onset  such  losses  with 
profits  realized  from  the  sale  of  the  heavier  cast- 
ings.  The  lighter  castings  were  tnus  fre- 
quently solo  at  considerably  less  fcuan 
cost  as  'Loss  Leaders'  to  obtain  orders  on 
the  heavier  castings."  (*) 

The  following  ouotation  from  the  19£9  Industry  Report  indi- 
cates that  the  Society  was  anticipating  the  possibility  of  establish- 
ing standard  systems  of  pricing  for  the  Industry's  products: 

"Consequentlv  now  is  a  most  opportune  time  for 
effective  consideration  of  this  problem. 

"It  is  my  recommendation  that  this  matter  be  re- 
ferred to  the  Industrial  Kesearch  Committee  for 
study  in  cooperation  with  the  Society,  and  that  a 
definite  plan  be  evolved  for  the  establishment  of 
piece  prices,  and  that  the  question  not  onlv  be 
taken  up  aggressively  with  the  foundries  them- 
selves, but  that  regular  and  constant  publicity 
be  given  the  matter,  to  educate  both  the  pro- 
ducer and  the-  consumer  to  a  piece  price  basis 

, wherever  practical... 

(*)   Letter  from  Code  Autnority  to  members  of  Industry,  November  20,  1934- 
pages  5  and  6. 

9826 


594  - 


"Then,  -.if  schedules  must  prevail,  let  them  be  brsed 
ort  cuantitv  purchases,  not  on  weight  or  tonnage. "(*) 


However,  little,  if  anything,  prs  done  in  tnis  direction  during 
the  depression.  ,  Lack  oi  standardization  01  products  would  have  made 
any  action  to  stabilize  -prices  an  almost  hopeless  task.   The  classifica- 
tion of  ^roducts  accomplished  under  the  Code  was  really  the  back-bone  of 
the  entire  oren-price  nlan  in  this  Industry. 


(*)   G.  F.  Rogers — The  Steel  Castings  Industry — 1929,  pp.  124-125. 


4P2fi 


-  595  - 

CHAPTER  II 

FORMULATION  OF  TSS  .CODE  PROVISIONS 
I.   PROPOSALS  FOR  PRICE  FILING  TJ5iPER  THE  CODE 

A.  Indus t it  Program  for  Price  Filing  as  Submitted 

The  first  draft  of  the  Code  of  which  there  is  record  is  dated 
August  9,  1933,  Article  VII  -  "General  Provisions"  -  is  quoted  "below: 

Section  1: 


Subject  to  the  approval  of  Board  of  Directors,  industry  members 
may  group  themselves  for  administrative  purposes  into  various  subdivi- 
sions or  product  classifications  and  each  subdivision  may  appoint  its 
supervisory  and/or  administrative  agency. 

Section  2: 

Subject  to  the  approval  of  Board  of  Directors,  right  is  reserved 
to  Code  subscribers  to  nominate  representatives  who  may  meet  to  determine 
merchandising  policies. 

Section  5: 

Increases  in  productive  capacity  prohibited,  except  by  approval  of 
3/4  vote  of  the  Board  of  Directors. 

An  amended  version  was  submitted  on  August  23,  1933.   No  changes 
were  made  in  Section  1  and  3,  but  Section  2  was  altered  to  provide  for 
price  filing  in  the  following  manner: 

(a)  Power  was  vested  in  the  supervisory  or  administrative  agency  to  in- 
stitute price  filing  at  its  discretion. 

(b)  A  ten-day  period  was  stiirolated  during  which  members  were  required 
to  file  after  such  action  was  taken. 

(c)  Price  lists  were  to  be  individually  prepared. 

(d)  Price  lists  were  to  be  disseminated  to  other  producers  of  the  same 
product. 

(e)  Price  changes  could  be  filed  subject  to  a  minimum  waiting  period  of 
ten  days,  unless  the  agency  should  authorize  a  shorter  period. 

(f)  Competitors  were  permitted  to  meet  the  effective  date  of  the  first 
filed  price  change. 

(g)  Sales  below  filed  prices  night  be  prohibited  at  the  discretion  of 
the  siipervisory  agency.   (The  agency  exercised  its  power  by  prohibiting 
sales  below  filed  prices.) 


9826 


-  396..- 

TThen  this  original  draft  Code  was  submitted,  no  specific  statements 
were  nade  b3r  the  proponents  indicating  the  need  of  a  price  filing  provi- 
sion, the  intended  functions  of  sua1',  a  plan,  or  the  objectives  to  "be 
achieved. 

B.    Omosition  to  the  Proposed  Provisions. 

The  only  'industry  protest  regarding  the  price  filing  provisions  of 
the  Code  received  prior  to  approval  was  contained  in  a  letter  from  the 
Thew  Shovel  Company,  Lorain,  Ohio,  dated  August  29,  1933.   It  is  quoted 
below: 

"The  Steel  Foundrymen * s  Association  of  America  we  under- 
stand are  presenting  at  Washington  a  code  covering  the  general 
scope  of  their  industry,  end  in  it  is  a  "basic  price  list  cover- 
ing steel  castings  purchased  in  respect  to  cost  for  various 
industries. 

"In  the  new  price  set-up  are  provisions  for  the  Crane  and 
Shovel  manufacturers,  specifically  outlining  the  "base  price  of 
castings  sold  to  that  industry.   That  portion  of  the  code  is 
most  objectionable  and  dangerous  if  our  interpretation  of  it  is 
correct.   This  portion  would  force  all  foundries'  to  sell  cast- 
ings on  a  per  pound  basis  and  at  a  schedule  of  prices  classed 
Recording  to  the  weight  of  castings.   They  then  intent  to  classi- 
fy customers  according  to  industry  and  for  each  industry  they 
will  allow  a  blanket  discount  from  the  basic  schedule.  A  quanti- 
ty discount  is  proposed  of  appreciable  size,  but  only  applicable 
for  quantities  ordered  at  one  time  and  for  specified  deliverv. 

"As  we  understand  the  code,  ,  the  proposed  method  would  place 
a  decided  penalty  on  simplicity  of  design  and  will  not  give  the 
consumer  the  benefit  of  his  engineering  talent  and  experience  in 
designing  a  simpler  casting  for  foundry  production  over  a  casting 
of  corresponding  weight  that  may  be  more  intricate  in  design  and 
much  more  costly  to  produce. 

"llany  consumers  of  steel  castings  have  recognized  the  jus- 
tice and  advantage  of  purchasing  castings  on  a  piece  price.   It 
has  simplified  the  work,  has  resulted  in  no  hardship  to  the  foundry, 
and  reduces  the  possibility  of  being  placed  at  the  mere:,*  of  the 
unscrupulous  foundries  who  are  inclined  to  add  as  much  weight  to 
the  casting  as  possible  when  they  are  purchased  on  a  pound  price, 
T7e  consider  it  patently,  unfair  to  classify  castings  as  just  cast- 
ings.  Each  one  is  a  separate  piece  of  finished  product  varying 
from  all  other  castings  of  the  sane  weight  in  molding,  core 
labor,  flash  requirements,  etc."  1/ 


1/  Letter  to  Administration  from  Thew  Shovel  Co.,  Lorain,  Ohio — 
August  29,  1933— Code  hecords  Tiles. 


982S 


-  597  - 

Dae  to  the  fact  that  Administration  policy  in  regard  to  price  filing 
had  not  crystallized  at  the  time  this  Code  was  "being  negotiated,  there  is 
a  lack  of  Administration  comment  regarding  many  points  which  would,  have 
teen  subject  to  criticism  later.   'The  Research  and  Planning  Division  and 
Consumers'  Advisory  Board  did,  however,  submit  certain  objections. 

Under  date  of  October  11,  1933,  the  Research  and  Planning  Division 
submitted,  a  report  questioning  the  advisability  of  a  ten-day  waiting 
period  for  revised  prices,  contending  that  price  changes  should  go  into 
effect  immediately  after  notice  by  telegram.  (*) 

Under  date  of  September  9,  1933,  (two  days  after  the  public  hearing), 
the  Consiimers'  Advisory  Board  reported  that  it  did  not  object  strenously 
to  the  open  price  provisions,  although  it  believed  that  they  might  con- 
stitute the  first  basic  step  toward  price-fixing.   The  Board  suggested, 
that  a  provision  making  mandatory  the  amiling  of  price  schedules  to  all 
buyers  who  so  requested  be  included  in  order  to  "make  the  open  price 
schedules  truly  open  to  buyers  as  well  as  to  sellers."  (**) 

II.   TIE  PRICR-FILIHG  PLAIT  AS  APPROVED  Ala)  AMSKlCHD. 

A.  Analysis  of  the  0:0  en-Price  Provision  as  Approved 

The  Code  was  finally  approved  on  rlovember  2,  1953.   Section  1  and.  2 
of  Art,  VII  were  substantially  in  the  form  contained  in  the  August  23,(***) 
version.   Section  3  had  been  deleted  at  the  request  of  KRA.   Section  2  pro- 
vided tiiat  the  price  filing  system  could  be  inaugurated  for  any  subdivision, 
at  any  time,  at  the  discretion  of  the  agency  affected.   There  was  no  pro- 
vision for  Administrative  approval  nor  for  suspending  or  abandoning  the  plan. 

General  and  subdivisional  administrative  agencies  were  provided,  for 
as  follows: 

"The  Board  of  Directors  of  the  Society  shall  be  the  general 
agency  for  the  administration  of  this  Code "  (****) 


(*)  Research  and  Planning  Division  -  October  11,  1933  -  Files, 
Division  of  Review. 

(**)   Consumers'  Advisory  Board  Report  -  September  9,  1933  -  Code 
Records  Piles 

(***)   See  p.  595  supra. 

(****)      Code,   Art.    V,    Sect.    1,   page  304 


9826 


~  598  - 

"Members  of  the  Industry  having  a  common  interest  and  common 
problems  may  group  themselves  for  administrative  purposes  in 
various  subdivisions  or  product  classifications,  subject  to  the 
approval  of  the  Board  of  Directors.   The  majority  of  members  in 
each  subdivision  or  product  classification  may  appoint  its  agency 
with  supervisory  and/or  administrative  powers,  subject  to  the  Board 
of  Directors.   In  the  event  that  no  such  agency   is  so  appointed, 
then  the  Board  of  Directors  may  appoint  such  agency."  (*) 

llo  such  subdi visional  agencies  were  ever  set  up.   The  Board  of 
Directors  was  the  agency  which  actually  administrated  the  price  filing 
provisions.   Trie  only  duty  definitely  assigned  to  it  under  these  provisions 
was  the  immediate  distribution  of  each  price  list  filed  by  any  member  to 
all  other  members  engaged  in  the  manufacture  of  "such  specific  product. " 
In  actual  practice  the  Code  Authority  went  much  further  and  established 
an, elaborate  system  of  differentials,  and  rules  and  regulations  to  govern 
the  price  filing  activities  of  the  members  of  the  industry. 

There  was  no  provision  in  the  Code  requiring  administrative  approval 
of  the  rules  specifically  related  to  price  filing;  Section  4  of  Article 
V  however  states: 

"Any  action  taken  by  the  Board  of  Directors  or  other  group 
within  the  Industry,  for  the  purpose  of  making  effective  the 
provisions  of  this  Code,  may  be  submitted  to  the  Administrator 
for  approval,  and  shall  in  any  case  be  subject  to  the  disapproval 
of  the  Administrator.  " 

The  Code  contained  no  provision  specifying  the  types  of  products  for 
which  prices  were  to  be  filed,  nor  did  it  require  administrative  approval 
of  the  selection  of  products  to  be  subject  to  price  filing..  The  only 
products  which  were  actually  subjected  to  price  filing  requirements  were 
miscellaneous  castings,  covered  b3r  an  elaborate  system  of  classifications 
and  schedules. 

The  Code  contains  the  following  provision  as  to  filing  of  price 
changes: 

"Revised  price  lists  may  be  filed  from  time  to  time  there- 
after with  the  agency  by  any  such  member  of  the  Industry  to 
become  effective  on  the  date  specified  thereon "  (**) 

This  paragraph  was  so  worded  that  it  night  have  been  interpreted  as 
requiring  that  an  entire  new  price  list  be  filed  in  the  event  of  a  change 
in  price  on  any  individual  item;  however,  this  interpretation  was  never 
used  in  actual  practice.   Changes  in  individual  price  elements  were  filed 
regularly  by  members  of  the  Industry. 


(*)   Code,  Art.  VII,  Sect.  1,  page  307 
(**)   Code— Art.  VII,  Sect.  2,  Page  307 


-  599  - 


Price  changes  did  not  become  effective  -until  ten  days  after  the 
>   filing  date,  unless  the  agency  authorized  a  shorter  period,  and  a  pro- 
vision was  included  in  the  Code  permitting  competitors  to  file  prices 
meeting  a  change  on  the  same  effective  date. 

There  was  no  requirement  that  file  prices  should  continue  in 
effect  for  any  stated  period  before  being  superseded  by  new  filed  prices. 

The  Code  empowered  the  agency  to  decide  whether  products  could  be 
sold  at  less  than  filed  prices. 

All  of  the  rules  and  regulations  published  by  the  Code  Authority :- 
were  submitted  for  approval,  but  prior  to  the  issuance  of  Office  Memo- 
randum No.  336  (*)  no  formal  action  was  taken  by  the  administration. 

There  was  no  requirement  for  the  dissemination  of  price  informa- 
tion to  customers,  nor  for  the  dissemination  of  prices  by  members  them- 
selves. 

The  agency  was  required  to  distribute  information  "immediately", 
which  was  construed  by  the  Code  Authority  to  mean  "by  mail." 

There  were  no  regional  filing  limitations,  although  prices  were 
filed  by  regional  groups  of  foundries. 

The  price  data  were  made  available  to  members  through  a  series  of 
daily  and  quarterly  reports.   These  quarterly  reports  furnished  minimum 
or  prevailing  prices  filed  and  in  most  cases  the  key  numbers  and  the 
price  schedules  of  the  foundries  which  filed  prices  other  than  those 
generally  prevailing.   Sellers  were  clearly  identified  in  the  code  autho- 
rity' s  reports  by  a  list  previously  distributed  to  all  the  members  of 
the  Industry. 

All  prices  were,  by  custom  and  by  ruling  of  the  Code  Authority,  on 
a  "delivered"  basis,  that  is,  F.0.3.  foundry  with  freight  allowed  to 
destination. 

There  was  no  restriction  on  the  destruction  of  price  records.  No 
substitute  for  filing  with  the  central  agency  was  provided. 

B.  Amendments  Affecting  Price  Filing  Provisions. 

Early  in  1934  The  Code  Authority  submitted  several  amendments  to 
the  Code  designed  to  reduce  the  possibility  of  evasion  through  the  offer 
of  indirect  concessions.   Not  all  of  these  were  approved. 

Under  date  of  March  14,  1934,  the  Code  Authority  forwarded  a  letter 
from  which  the  following  paragraphs  are  quoted; 


(*)   Determination  Respecting;  Acts  of  Code  Authorities  and  Their  Agencies 
Which  are  Subject  to  Disapproval  by  U.S.A. — February  13,  1935. 


-  bUU  " 

"It  is  the  intention  of  the  Code  Authority  of  the  Steel 
Castings  Industry  shortly  to  petition  the  Administration  to 
make  several  amendments  to  our  Code.  Amongst  other  will  be 
one  having  to  do  with  terms  of  payments. 

"In  substitution  of  Section  7  of  Schedule  D  of  our  Code, 
it  is  proposed  to  substitute  a  Section  as  follows: 

'Allow  terms  of  payment  more  favorable  to  the 
customer  than  the  standard  terms  established  from  time 
to  time  by  the  agency  exercising  supervisory  and  admini- 
strative powers  over  the  Miscellaneous  Castings  subdivision 
of  the  Industry,  pursuant  to  Article  VII  of  the  Code.' 

"The  purpose  of  this  letter  is  to  inquire  whether,  in 
your  opinion,  such  a  general  clause  delegating  general  powers 
to  the  Code  Authority  would  be  approved.   If  not,  we  shall 
then  draft  another  clause  along  the  lines  of  the  terms  of  pay- 
ment of  the  Iron  &  Steel  Code,  being  specific  in  its  terms.   It 
would  be  desirable,  however,  to  have  the  general  authority  out- 
lined above,  if  possible."   (*) 

This  proposed  amendment  was  submitted  to  the  various  advisory  boards 
and  the  Code  Authority  was  advised  as  follows: 

"Replying  to  your  letter  of  March  14  regarding  the  pro- 
posed amendment  to  Section  of  Schedule  D  of  your  Code,  I  sub- 
mitted this  to  our  Legal  Division  which  has  replied  as  follows: 

'Replying  to  your  memorandum  of  the  15th  instant 
regarding  the  above,  I  do  not  approve  of  the  suggested 
amendment.   It  is  in  effect  delegating  to  the  administrative 
Agency  certain  legislative  powers. that  even  the  Code  Autho- 
rity does  not  possess.   It  is  couched  in  such  language  that 
discriminatory  terms  or  even  arbitrary  classification  might 
be  established. 

'In  replying  to- this  communication  I  would  respect- 
fully caution  you  not  to  commit  yourself  in  advance  to  an 
approval  of  any  proposed  amendment  similar  to  the  one  in 
the  Iron  and  Steel  Code  which  the  Society  mentioned  in 
its  letter. ' " 
The  Code  Authority  in  a  letter  dated  April  5,  1934,  submitted  a 
comprehensive  list  of  twelve  proposed  amendments  and  requested  that  a 
hearing  be  scheduled  for  their  consideration. 

The  first  proposal  amendment  provided  for  the  investigation  of 
prices  by  the  supervisory  agency.   This  amendment  was  never  approved  and 
was  apparently  abandoned  by  the  Code  Authority. 


(*)  Letter  to  H.R.A.  from  Steel  Founders'  Society  -  March  14,  1934. 


9826 


-  601  - 

The  next  amendment  submitted  constituted  a  revision  of  the  one 
earlier  proposal  for  deleting  Sections  6  and  7  of  Schedule  D  and  sub- 
stituting new  sections.   This  amendment  imposed  mandatory  uniform  cash 
discounts  on  all  members  of  the  industry,  a  small  discount  being  allowed 
for  payment  on  long  distance  shipments,  within  twenty-five  days  from 
date  of  invoice,  and  for  payment  within  ten  days  on  all  other  shipments. 

A  representative  of  the  Consumers'  Advisory  Board  who  attended  a 
conference  on  the  amendments  proposed  in  the  Code  Authority  letter  of 
April  5,  1934  made  the  following  comment  regarding  this  proposal: 

"It  would  also  seem  more  equitable  to  have  the  credit 
terms  applicable  to  shipments  from  East  to  West  be  made 
reversible  so  as  to  apply  also  from  West  to  East." 

Under  date  of  June  21,  1934  the  Consumers'  Advisory  Board  commented 
on  this  amendment  as  follows: 

"We  recommend  the  deletion  of  Section  7  which  attempts  to 
set  up  uniform  terms,  not  only  because  we  believe  that  it  un- 
duly interferes  with  an  individual  member  of  the  industry  in 
his  right  to  elect  his  own  terms,  but  such  enforced  uniformity 
has  assisted,,  and  will  assist,  an  industry  in  accomplishing 
price  fixing."  (*) 

The  Code  Authority,  in  a  letter  of  May  8,  1934,  accepted  the  first 
modification  suggested  by  the  Consumers  Advisory  Board  by  making  the 
credit  terms  applicable  to  .shipments  from  West  to  East. 

A  further  modification  of  the  proposal  was  made  by  the  Code  Autho- 
rity in  a  letter  dated  May  14,  1934,  to  include  all  shipments  from  any 
plants  in  the  United  States,  Alaska,  the  Canal  Zone  or  any  of  the  insular 
possessions  of  the  United  States. 

This  proposal  remained  unchanged  until  the  public  Hearing,  held  on 
June  14,  1934  at  which,  at  the  request  of  the  Code  Authority,  the  last 
provision  was  changed  to  read  as  follows:. 

"....;  provided,  however,  in  the  latter  cases,  that  any 
member  of  the  Industry. may  allow  such  discount  of  one-half  of 
one  percent  (i5o)  for  payment  within  10  days  on  the  basis  of 
settlements  twice  in  each  month  as  follows: 

"'(a)   On  invoices  dated  from  the  1st  to  the  15th, 
inclusive,  of  any  month,  such  discount  may  be  allowed  on 
payment  of  such  invoices  on  or  before  the  25th  of  such 
month; 

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


(*)   Consumers'  Advisory  Board  Memorandum  -  June  21,  1934  —  Code 
Records  Files. 


9826 


-  602  - 

prior  to  approval,  this  proposed  amendment  was  further  modified,  r 
A  provision  was  added  which  prohibited  the  dating  of  a  sales  invoice 
later  than  date  of  mailing  of  such  invoice,  or  later  than  the  third  day- 
following  date  of  shipment,  and  which  lengthened  the  cash  discount 
period  for  long  distance  shipments  from  25  to  30  days  from  date  of 
invoice.   Sales  to  the  United  States  Government  Departments  were  exemp- 
ted, with  the  proviso  that  terms  of  payment  to  the  Government  were  not 
to  be  more  favorable  than  those  prescribed  by  the  Government  pursuant 
to  law.   The  amendment  as  revised  was  approved  on  August  11,  1934.  (*) 

A  similar  provision,  specifying  maximum  cash  discounts  for  manganese 
steel  castings,  is  contained  in  Section  12  of  Schedule  G.   This  was 
approved  as  Amendment  III  on  October  2,  1934.  (**) 

The  next  amendment  proposed  by  the  Code  Authority  in  its  letter  of 
April  4,  1934  was  the  addition  of  the  following  new  Section  to  bo  added 
to  Schedule  D. 

"Sec.  8:"  It  shall  be  an  unfair  practice  to:   Quote  prices 
for  Steel.  Castings  for  railroad  and  railroad  equipment  repair  or 
maintenance  purposes  more  favorable  to  the  purchaser  than  f.o.b. 
freight  basing  point,  seller's  foundry,  with  the  freight  charges 
allowed  to  the  nearest  point  on  the  line  of  the  railroad  purchasing 
the  castings;  providedfhowever,  that  for  castings  for  new  locomotive 
or  car  equipment  to  be  built  in  the  railroad's  own  shop  or  in  a 
commercial  locomotive  and/or  car-building  plant,  prices  may  be 
quoted  f.o.b,  freight  basing  point,  seller's  foundry,  with  freight 
allowed  to  destination;  and  provided  further  that  new  equipment 
shall  be  defined  in  accordance  with  American  Railway  Association 
Rules. " 

This  proposal  was  modified  by  the.  Code  Authority's  letters  of  May 
8,  14,  and  31,  1934.   This  matter  was  referred  back  to  the  Code  Autho- 
rity with  the  request  that  a  ballot  be  taken  among  the  members  of  the 
industry,  in  order  that  an  exact  appraisal  might  be  made  of  their 
attitude  on  this  question.   Such  a  ballot  was  sent  put  and  a  majority 
of  the  members  of  the  industry  indicated  their  approval  of  the  proposal. 
However,  final  results  were  not  obtained  and  published  until  May  11, 
1935,  so  no  action  could  be  taken.. 

The  next  proposal  covered  the  quoting  of  prices  of  castings  on  a 
per  pound  basis,  as  follows: 

(it  shall  be  an  unfair  practice  to-) 

"Sec,  9.   Invoice  castings  at  prices  not  based  upon  the  actual 
weights  thereof  or  quote  or  charge  lump  sum  prices  or  prices  per 
piece  or  per  casting." 

(*)   Amendment  1,  Code  of  Fair  Competition.  Vol  XV,  p.  257 
(**)   Code  of  Fair  Competition,  Vol.  XVII,  p»  293. 


-603- 

This  proposal  was  nodified  in  the  letter  of  Hay  3,  1934  to  read 
as  follows: 

:       "Sec.  9.   Invoice  castings  at  prices  not  "based  upon  the 
actual  weights  thereof;  provided,  however,  that  ■■>iece  -orices 
;-.ia;r  he  otioted  if,  after  April  1,  1934,  a  member  of  the  In- 
dustry  has  produced  twenty-five  castings  or  more  from  approved 
pattern  eouipnent  applying  thereto  and  the  average  weight  of 
such  castings  are  used  in  computing  the  minimum  piece  -orices  by 
multiplying  the  vendor's  filed  price  per  pound  "cy  the  average 
v:eight  of  such  castings."  1_/ 

This  proposal  remained  unchanged  throughout  the  negotiations.  A 
public  hearing  was  held  on  June  14,  1934,  at  which  many  protests  were  sub- 
mitted. ';It  was  claimed  that  the  proposed  amendmend  would  discriminate 
against  the  small  foundries,  and  would  also  prevent  bidding  on  most 
government  work  in  view  of  the  general  requirement  for  lump  sum  prices  on 
steel  casting  bids.   The  amendment  was  never  approved. 

A  further  amendment  was  proposed  to  Schedule  E  of  the  Code  which 
dealt  with  unfair  trade  practices  relative  to  specialties.   It  imoosed  a 
system  of  mandatory  cash  discounts  on  domestic  sales  of  cast  steel  wheels, 
similar  to  that  discussed  above  in  connection  with  Schedule  D.  (*)  This 
proposal  was  approved  on  August  11,  1934, 

The  Code  Authority  letter  of  May  8,  1934,  contained  a  proposed  amend- 
ment to  Section  3  of  Article  VII,  (the  Section  prohibiting  Sales  below 
Piled  Prices) ,  by  the  insertion  after  the  words  "shall  sell"  of  the  words 
"or  offer  for  sale." 

This  change  was  designed  to  prevent  a  member  of  the  Industry  from 
mailing  a  quotation  below  his  filed  price  and  then  filing  a  reduced  price 
ten  days  before  the  delivery  date  of  the  materials  in  question. 

The  following  comments  were  received  from  the  advisory  boards  and 
divisions  regarding  the  entire  section: 

Prom  the  Legal  Division  May  14,  1934: 

"The  'waiting  period'  for  filed  price  lists  should  conform 
with  whatever  nay  be  adopted  by  the  Administration  as  a  new 
polic3r  or.  the  subject."  (**) 

Prom  the  Division  of  Research  and  Planning,  May  16,  1934: 

"Ue  feel  that  this  provision  should  be  amended  to  provide 
that  p.  11  orice  lists  shall.be  open  to  the  inspection  of  all  in- 
terested parties.   Tie  also  suggest  the  deletion  of  the  words  'at 
least'  in  the  twelfth  line." 

T[~    Letter  to  P.r..A.  -  from  Steel  Pounders'  Society  -  May  8,  1934  — 
Central  Record  piles. 

(*)  Page  599  supra.   • 

(**)  Code  Pecords  piles. 

9R?fi 


-  604  - 

From  the  Consumer's  Advisory  ^oard,  Mpy  21,  1934: 

"We  recommend  that  filed  -prices  shall  become  effective  immed- 
iately and  shall  he  made  available • to  all  interested  parties, 
and  that  prices  shall  be  filed  with  a  confidential  agency, 
obligated  not  to  identity  individual  concerns  in  distributing 
information. " 

Under  date  of  August  16,  1934,  the  Consumers'  Advisory  Board 
recommended  the  revision  of  the  entire  open  price  provision  to  conform  to 
Office  Memorandum  228,  because  of  evidence  ir  their  files  indicating  an 
almost  complete  uniformity  of  prices  at  higher  levels  than  before. 

When  these  amendments  were  forwarded  for  approval  the  fieview  Officer 
made  the  following  comments: 

"3.   Provisions  of  Article  VII  authorise  establishment  of 
subdivisional  or  grouo  agencies  within  the  industry.   Such  agen- 
cies are  tnen  empowered  to  declare  operative  open  price  systems 
for  their  respective  subdivisions,  at  their  option.   Power  is 
also  given  the  subdivisional  agency  to  prohibit  sales  below 
filed  prices  if  the  agency  so  decides.   A  'waiting  period '  of  10 
days  is  prescribed  as  an  interim  between  filing  date  or  price 
schedules  and  eifective  date  thereof.   No  provision  is  mace  for 
publicity  of  price  schedules  for  benefit  of  buyers  as  well  as 
sellers. 

"This  section  is  manifestly  objectionable  on  several 
grounds  including: 

"(a)   The  vagueness  and  uncertainty  of  iuture  conditions  which 
/surround  the  vesting  with  a  subdivisional  agency  the  right  to 
declare  in  operation  an  open  price  system  at  anv  time  and  to 
institute  a  prohibition  against  sales  below  the  price  filed, 
makes  the  provision  undesirable  from  a  general  administrative 
standpoint.   Even  though  no  other  ejection  appeared,  however, 
the  right  of  a  non-governmental  and  non-impartial  body  to 
declare  in  existence  the  'prohibition  against  sales  below  filed 
price  conflicts  with  the  policy  outlined  by  our  Legal  Division, 
with  respect  to  matters  involving  property  rights.  _  Since  sales 
below  filed  prices  may  effect  rights  of  property  of  some  mem- 
bers of  industry,  the  prohibition  is  feli  by  members  of  Legal 
Division  to  be  improper  until  confirmed  by  the  ret  of  a  gov- 
ernmental and  impartial  body. 

"(b)   The  'waiting  period'  x:rovision  is  vitiative  of  policy 
declared  by  Office  emorandum  No.  22fc  (which,  however,  is  not 
required  to  be  applied  to  approved  codes).  . 

"(c)   Failure  to  make  price  lists  available  to  buyers  as 
well  as  sellers  violates  conditions  set  forth  in  ^olicy  Memoran- 
dum of  Octoutr  25,  1933," 

Despite  these  aoverse  comments,  the  proposal  was  approved  in  unaltered 

QUOR 


-  605  -  ■ 

form  on  August  24,  1934. (*) 

C.   Functional  Aspects  oi  Other  Code  Provisions  Integrated  With  Price 
Filing  Provisions  as  Adopted. 

The  code  provisions  directly  integrated  with  the  nrice  filing 
provision  included:   Prohibition  of  absorption  of  pattern  costs,  insur- 
ance costs  or  inspection  charges,  anc  mandatory  uniform  cash  discounts. 

Sections  8,  9,  10,  11,  and  12,  of  Schedule  D,  which  were  approved 
by  amendment  on  August  24,  1934,  prohibited  the  absorption  of  certain  an- 
cillary costs.   This  was  done  to  prevent  members  of  the  Industry  from  in- 
directly selling  below  their  filed  prices.   These  provisions  follow: 

"  For  all  purposes  of  this  Code,  it  shall  be  an  unfair  trade 
practice  for  any  member. to  do  any  of  the  following  acts: 

"Section  t . iFurnish  pattern-  equipment  or  alterations  thereof 
at  less  than  the  actual  cost  pi  production;  provided,  however,  that 
if  trie  patterns  are  anc  remain  the  property  of  the  foundry  producing 
them,  it  shall  not  be  construed  as  a  violation  of  this  provis- 
ion for  such  foundry  to  absorb  the  cost  of  patterns  or  alterations 
in  quantities  of  500  or  ore  pieces  from  one  pattern  at  one  time. 

"Section  9,   Absorb  the  cost  of  any  insurance  that  may  be 
carried  to  protect  customers'  patterns  against  fire  and/or  the  ele- 
ments. 

"Section  1  .   Accept  responsibility,  where  there  is  no  liabili- 
ty, for  consequertial,  special  or  contingent  damages,  or  offer  to 
do  more  than  replace  castings  rejected  due  to  defective  workmanship 
and/or  materials. 

"Section  11.  Absorb  any  inspection  charges  incident  to 
inspection b/  outside  individuals  or  agent  performed  at  the 
request  of  the  customer. 

"Section  12.   Quote  or  communicate  to  customers,  directly 
of  indirectly,  a  price  before  the  effective  date  thereof  per- 
missible under  Tticle  VII  of  the  Code."  (**) 

Uniform  mandatory  cash  discounts  were  imposed  in  the  sale  of  mis- 
cellaneous steel  castings  and  cast  steel  wheels.  (**) 

In  addition  to  these  code  provisions,  . the  Code  Authority  from  time 
to  time  adopted  various  rules  and  regulations.   These  were  of  these  types: 
General  Resolutions,  Labor  Resolutions,  and  Co  nnercial  Resolutions.   Only 
the  last  are  of  importance  as  affecting  price  filing.   The  :iore  signifi- 
cant of  these  are  described  in  Exhibit  II,  below. 

(*")   Amendment  #2,  Steel  Casting  Code,  Aug.  24,  1934.   Codes  oi  Fair 

Competition,  Vol  XV,  p.  451. 
(**)  Amendment  2,  to  Code  of  Fair  Competition  for  the  Steel  Castings 

Industry  -  August  24,  1934.   Codes  of  Fair  Competition.  Vol.  XV,  p. 454 

9826 


-  606  - 
CHAPTER  III 
ORGANIZATION  AND  MECHANICS  OF  OPERATION  OF  OPEN  PRICE  PLAN 


The  preceding  chapter  has  dealt  with  the  adoption  and  later 
modification  by  amendment  of  the  price  filing  nlan,  and  certain  re- 
lated provisions.   In  the  following  pages  the  methods  employed  to  put 
the  plan  into  nractical  operation  will  be  discussed. 


THE  ADMINISTRATIVE  ORGANIZATION 


The  open  price  plan  for  this  Industry  was  administered  by  the 
Board*  of  Directors  of  the  Steel  Founders'  Society  of  America,  the 
trade  association  which  sponsored  the  code.   This  was  t>ursuant  to  the 
grant  of  cower  contained  in  Article  V,  Section  1,  of  the  Code  which 
provided  that  "The  Board  of  Directors  of  the  Society  shall  be  the 
general  agency  for  the  administration  of  the  Code." 

The  actual  administration  was  conducted  by  a  professional  staff 
consisting  of  an  Executive  Vice-President,  a  Secretary-Treasurer  and 
a  group  of  assistants.   The  first  two  positions  were  held  during  the 
Code  period  by  Col.  Merrill  0.  Baker  and  Mr.  R.  L.  Collier,  re- 
spectively.  Their  actions  were  at  all  times  subject  to  the  approval  • 
of  the  Board  of  Directors  which  constituted  the  Code  Authority.   This 
Board  originally  consisted  of  the  following  members: 

F.  A.  Lorens^  jr.,  Vice-President,  General  Manager  American 
Steel  Foundries,  Chicago,  111. 

Clarence  Tolan,  Jr.,  President,  Dodge  Steel  Corporation,  Phila- 
delphia, Pa. 

Keith  Williams,  Vice-President,  Pratt-Letchworth  Conroany, 
Buffalo,  N.Y. 

J.  W.  Glover,  President,  Glover  Machine  Works,  Marietta,  Ga. 

D.  C.  Bak^well,  President,  Duquesne  Steel  Foundry  Division, 
Pittsburgh,  Pa. 

R.  L.  Brooks,  Treasurer,  The  Sawbrook  Steel  Casting  Co., 
Cincinnati,  Ohio. 

J.  0.  Houze,  President,  National  Malleable  Steel  Casting  Co., 
Cicr-ro,  111. 

Paul  R.  Laussler,  Vice-President,  Omaha  Steel  Works,  Omaha,  Neb. 

J.  F.  Arnoldy,  Secretary,  Warman  Steel  Casting  Co.,  Huntington 
Park,  California. 

9826 


-607-- 

Each  of  these  members  was  selected  fron  one  of  the  geographical 
divisions  into  which  the  industry  was  divided,  in  accordance  with  the 
by-laus  of  the  Society. 

There  r/as  no  delegation  of  power  by  the  Board  of  Directors  to  the 
executive  officers  as  far  as  can  he  deduced. fron  the  records  available. 
The  tra.de  association,  The  Steel  Pounders'  Society  of  America.,  was,  to  all 
intents  and  "ourposes,  the  Code  Authority. 

Inasmuch  as  the  activities  of  this  Code  Authority  were  financed  by 
the  dues  ":>a.id  into  the  Society  by  its  members,  no  information  is  avail- 
able regarding  the  proportion  of  its  budget  which  was  employed  in  opera- 
tion of  the  ;orice  filing  "olan.   It  nay  be  assumed  that  a  considerable 
pro-oortion  of  the  income  of  the  Societ3"  was  expended  in  furtherance  of  the 
plan,  in  view  of  its  elaborate  and  complicated  na.ture  and  the  importance 
attached  to  it  by  the  industry  a.s  a  whole. 

II      H3QI-IAIJICS  07  OPEE  PRICE  0PERATI01I 

A.   Classification  of  Products 

The  Steel  Casting  Industr"  is  almost  entirely,  a  special  order  in- 
dustry.  Every  item,  with  a  ver]^  few  minor  exceptions,  is  made  and  pro- 
duced in  accordance  with  customers'  specifications.   There  is  no  manu- 
facture for  stock  or  inventory,  nor  can  "oredictions  anticipating  demand 
be  made  with  rjiy   degree  of  accuracy.   Every  casting  is  produced  from  a 
pattern  which  may  be  the  ~oromerty  of  the  customer  or  of  the  foundry. 
There  are,  literal^*",  hundreds  of  thousands  of  patterns  in  existence, 
each  differing,  from  a.ll  the  others  to  a.  grea/ter  or  lesser'  degree.   It  is 
obvious  that  such  a  lack  of  standardization  in  products  necessitated  a 
price  filing  system  differing  radical^  in  character  from  the  types  em- 
ployed by  industries  whose  products  are  more  uniform  in  character. 

The  filing  of-orices  uoon  individual  pa.tterns,  even  if  possible, 
would  have  been  too  unwieldy  to  prove  successful.   It  was,  therefore, 
decided  to  establish  specific  classifications  for  individual  consumer  in- 
dustries having  certain  similar  renuirements.   Members  were  permitted  to 
file  prices  covering  ail  castings  enbra.ced  in  such  classifications. 

Such  a  classification'  of  -oroducts  was  an  enormous  task.  '  Its  success 
depended  upon  the  activity  of  the  Definitions  and  Classifications  Com- 
mittee of  the  Code  Authority.   This  Committee,  though  a.t  first  not  under 
that  name,  functioned  during  the  entire  Code  period.  (*)  It  was  composed 
of  a  representative  from  each  of  the  eight  industry  divisions.   Erom  time 
to  time  it  met.  to  review  classif ica.tions  and  schedules  filed  by  members. 
Hew  cla.ssif ica.tions  required  approval  by  the  Committee  in  order  to  be- 
come effective. 

A  tabulation  conroiled  from  daily  and  quarterly  price  reports  (**) 
showing  the  increase  in  the  number  of  classifications  "between  December  5, 
1933  and  iiay  23,  1955  is  presented  in  Table  VII,  below. 

(*)    Commercial  Resolution  ]!o.  22  a.dopted  ila.y  7,  1934» 

(**)   See  Section  E,  Dissemination  of  Price  Pilings,  p.  621  below. 

9R?fi 


-  608  - 
Table  VII 


GR07TH  OF  NUMBER  OF  PRODUCT  CLASSIFICATIONS  DURING  THE 

CODE  PERIOD 


Date 


Number 


Quarterly  Report 
Number 


1933 


1935 


Dec.  5 
"   26 
March  51 
June  16 
Sept.  20 
Dec.  13 
March  27 
May  23 


532 
774 
1,117 
1,149 
1,130 
1,190 
1,241 
1,221 


aJ 

a/ 

1 

11 

111 

IV 

V 

V 


Source:   Compiled  by  Statistics  Section,  NPA  from  Daily  Price 
Reports  of  Steel  Founders'  Society  of  America, 
a/  Daily  Report 
by  Summary  Report  by  Society 


B .   Quantity  and  Weight  Differentials 

Product*  classifications  having  been  establisned,  it  was  next  con- 
sidered necessary  to  standardize  quantity  and  weight  differentials. 
The  Society  describes  the  steps  taken  in  this  direction  in  the  follow- 
ing terms: 

"The  second  major  step  in  the  design  of  a  superstructure  or  frame- 
work which  made  possible  the  orderly  filing  cf  prices  was  tc 
examine  the.  past  practice  of  the  Industry  regarding  differen- 
tials based  upon  various  weights  and  quantities  of  castings 
ordered.   A  study  of  this  matter  revealed  that  a  series  of 
weight  and  quantity  brackets  could  be  set  uo  which  would 
coincide  with  or  closely  parallel  practically  all  of  the 
schedule  structure  in  use  by  the  Industry.   The  following 
structure  resulted. 


9826 


••  -  609  - 

Table   VIII 

TJNTINIS  ID   STEEL   CASTINGS  -   PRICE  PIE  IS.   -  NET 

Quantity   is  determined  by   the   number   of  pieces   fron  one  pattern  ordered 
at   one   time 


Number   of  Pieces 

10-  25-   50-   100   250   500  1,000  2500 

WEIGHT  PEP,  PIECE  -   l-3   U-9  2h       ^    ij0j  to   ^     to    to   and 

L-'s-  2'!-S   U99    999  2U99  over 


1   tO   5  lbs.(*) 

Over  5   "  10  " 

"   10  »  25  " 

n   25   "  50  " 

»   50  "  100  lbs. 

11  100  »  250   » 
"  250'  "  500   " 

"  500  i'  1000  11 

"  1000  "  2500  " 
«  2500  II  5000  " 

"  5000   »  10,000  lbs. 
"  10,000  H  25,000  " 
11  25,000  "  50,000   " 
I'  50,000  'i  100,000  'I 

Over  100,000  lbs. 


"This  franevork  lends  itself  to  adequate  flexibility  as  far  as  prices 
being  filed  is  concerned  since  a  foundry  may  specify  'N.Q.D.'  —  ' Jjq  QUANTITY 
DIFFERENTIAL'  if  it  desires  to  apply  a  unit  price  regardless  of  quantity  but 


(*)   For  castings  under  1  lb.,  special  piece  prices  ':;\y  be  quoted. 
9S26 


-  510  - 

varying  as  to  weight  per  casting.   Sirr.ilr.rl7  '•T.0.D.  over  99  nieces' 
means  that  quantity  differentials  apply  out  as  far  as  99  pieces  but 
the  price  for  50-99  -oieces  would  apply  on  100  nieces  or  more, 

"The  nature  of  this  structure  indicated  the  reason  why  steel 
foundries  did  not  apply  so-called  'manufacturers  discounts.'   The 
manufacturer  who  ordered  in  larger  Quantities  secured  nis  discount 
or  price  differential  "by  reason  of  the  larger  quantities  taking  cor- 
respondingly lov,er  prices  oer   pound  justified  oy   lower  costs  attend- 
ant unon  Quantity  production,  whereas  the  casual  buyer  of  only  a  few 
cartings  Pays  more  per  pound,   Thus  the  natter  of  discounts  to  quan- 
tity buyers  is  taken  care  of  in  the  Drice  structure  itself."  (*) 

The  engineers  who  examined  and  spot-checked  the  "Price  Study"  (**), 
indicated  that  the  nractice  of  allowing  discounts  for  quantity  was  not 
uniform.   In  many  instances,  in  their  examination,  "the  quantities  at 
which  such  discounts  started  were  not  clearly  defined.  "  Evidently  the 
Society  was  able  to  obtain  more  complete  data  on  ouantity  differentials 
than  the  engineers  .vho  had  included  only  a  small  sarrole  of  foundries  in 
their  study.      * 

The  N.Q.D.  method  of  limiting  discounts,  described  above,  was  ex- 
tensively used  throughout  the  filing  of  -orices.   The  Society,  commenting 
on  the  adequacy  of  the  system  stated: 

"It  is  a  composite  of  the  best  experience  of  the  Industry  as 
regards  schedule  structure.   It  has  been  found  adequate,  thorougnly 
adaptable  and  satisfactory." 

C.   Suggested  Schedules  Based  on  "ffornal"  Price  Levels 

The  Society  next  took  steps  to  furnish  a  guide  to  members  as  to 
"fair  and  reasonable"  prices.   Quoting  from  its  own  summary  of  its  ef- 
forts in  this  direction. 

"The  third  major  problem  in  developing  a  price  structure  was  to  de- 
termine as  a  guide  to  the  Industry,  what  could  oe  considered  fair 
and  reasonable  prices.   This  phase  was  covered  by  an  extensive  sur- 
vey of  -orice  levels  which  required  many  months  of  work.   The  re- 
sults of  this  survey  were  later  verified  ~oy   an "outside  engineering 
organization  of  national  reputation  by  an  actual  survey  in  the 
field.   They  reported  that  the  methods  employed  were  sound  and  the 
conclusions  accurate. 

"The  -ooint  of  departure  in  determining  -orices  which  might  reasonably 
be  expected  to  attach  tu  the  products  of  the  Industry  was  a  normal 
level  of  -prices.   The  year  1926,  generally  regarded  as  a  normal 
business  year,  was  taken  as  a  ba.se  to  determine  normal  price  levels, 
in  spite  of  the  fact  that  statistics  for  that  year  showed  anything 
but  a  satisfactory  condition  in  the  Industry  as  regards  profitable 
operation. " 

(*)   Letter  from  Code  Authority  to  foundries  —  November  20,  1934  — 

Code  Records  Piles 
(**)  See  Chapter  one,  Sec.  II,  3b,  above. 

9826 


-  611  - 

"It  was  concluded  that  trices  'prevailing  in  1926  could  oe  converted 
.  into  prices  that  might  -reasonably  be  expected  to  prevail  in  the 
last  quarter  of  1933  (when  the  survey  nas  concluded)  by  applying 
the  index  composed  of  the. elements  of  labor  costs,  raw  material 
costs,  etc.   Such  an  index  was  developed  which  quite  accurately  re- 
flected foundry  production  costs  by  substituting  in  the  formula  the 
average  hourly  wage  rate  of  foundry  ervoloy'ees,  the  published  market 
auotations  on  the  principal  materials  entering  into  the  -oroduction 
of  steel  castings^,  etc.   Equating  this  index  at  100  for  the  year 
1926  it  was  found'  that  it  stood  at  87  in  the  fourth  quarter  of  1933. 
Thus  prices  current  for  the  latter  period  might  reasonably  be  ex- 
pected to  be  around  87  -oer  cent  of  the  levels  prevailing  in  1926." 

"The  next  step  was  to  segregate  all  of  the  classifications  which 
had  been  developed,  into  groups  which  normally  sold  at  approximate- 
ly the  same  level  of  price.   It  "as  found  that  there  were  21  such 
groups,  each  of  which  represented  a  differential  in  price  level 
from  that  of  the  Guiier  20.   This  dictated  the  necessity  of  provid- 
ing 21  different  levels  of  price  from  which  the  foundries  could  se- 
lect one  or  more  to  apply  to  each  classification  in  which  they  were 
interested. 

"The  following  steps  were  taken  in  evaluating  these  21  schedules: 

"First  -  a  master  pattern  was  developed  containing  values  in  the 
weight  and  quantity  brackets  previously  described,  such  that  each 
such  feature  of  this  master  pattern  was  the  fact  that  the  values 
inserted  in  the  framework  were  such  as  to  give  effect  to  the  nor- 
mal differentials  applying  to  various  weights  and  auantities. 

"The  prevailing  1926  -orices  for  the  21  groups  of  classifications 
were  then  expressed  in  terms  of  discounts  from  this  master  pat- 
tern of  values  (not  prices)  and  these  discounts  were  converted  in- 
to corresponding  1933  discounts  by  means  of  the  sliding  scale  in- 
dex, previously  explained.   Applying  the  resulting  differential 
discounts  of  1933  to  the  21  groups,  it  was  possible  to  construct 
21  schedules  representing  as  many  different  levels  of  price  ad- 
justed for  changes  in  production  costs  between  1926  and  1933. 

"This  was  the  genesis  of  a  series  of  schedules  from  which  foundries 
can  select  a  level  of  price  to  apply  to  any  one  class  of  castings." 
(*) 


(*)  Study  of  Schedules  for  miscellaneous  Steel  Castings  Based  upon  1926 
Levels.  —  Steel  Founders'  Society  —  November  10,  1933.  p.p.  3,  4. 


9826 


-  612  - 

Conies  of  this  report  were  submitted  to  all  members  of  the 
Industry  about  November  10,  1933.   Each  of  the  21  -orice  levels  re- 
ferred to  above  was  designated  by  a  letter  of  the  alphabet,  ranging 
from  A  through  U.   The  schedule  designated  by  A  was  the  highest  in 
price,  that  designated  by  U,  the  lowest.   For  each  t>rice  schedule  was 
shown  a  list  of  product  classifications  which  the  Society  considered 
apuropriate  to  it  at  the  time.   The  schedules  were  computed  on  a 
"delivered  tirice"  basis,  thus  having  the  effect  of  making  uniform  a 
practice  of  quoting  delivered  prices  to  point  of  destination,  whereas 
previously  f.o.b.  foundry  or  other  point;  or  f.o.b.  foundry,  freight 
•allowed  to  destination,  were  commonly  used. 

The  Society  invited  the  members  to  file  their  price  schedules  or 
actual  prices,  and  to  criticize  the  report.  Most  of  the  foundries 
indicated  ap-oroval,  though  a  number  of  changes  were  proposed.  Ap- 
parently these  suggested  modifications  were  averaged  with  the  original 
figures.  As  a  result  certain  of  the  schedules  included  in  the  original 
report  were  reduced  and  a  few  increased.   Many  new  classifications  were 
added*  Shortly  thereafter,  on  December  5,-  a  new  report  (*)  in  booklet 
form  was  issued  to  the  foundries  showing  the  revised  schedules  and 
classifications. 

Table  No.  IX  which  follows  gives  a  s-oecimen  of  the  nrice  schedules 
and  shows  the  actual  price  variations  given  for  certain  quantity  and 
weight  groups  under  each  of  the  alphabetical  classes. 


« 


(*)  Idem  —  Revised  Report  —  December  5,  1933 


9826 


613  ~ 


TABLE  IX 


Changes  in  Price  Between  Schedules  for  Various  Weights  and  Quantities  of  Castings 

(Price  per  Pound) 
SCHEDULE Weights  and  Number  of  Castings 


1  to  5  lbs. 


1  to  3   90-99 
•pes. pes. 


10  to  25  lbs, 


1  to  3 
pes. 


50-99 
•pes. 


50  to  100  lbs. 


250  to  500  lbs. 


1  to  3 
pes. 


50-99 

PCS. 


1  to  3 
pes. 


50-99 
pes. 


A 

$0,557 

$0,404 

$0,348 

$0,253    : 

$0,232 

$0,180   : 

$0,178  fl 

50.152 

B 

.469 

.340 

.294 

.213    : 

.196 

.152  : 

.150 

.128 

C 

.436 

.316 

.273 

.198   : 

.182 

.141    . 

.140 

.119 

D 

.408 

.296 

.256 

.186    : 

.171 

.132 

.131 

.112 

E 

.38;. 

.277 

.240 

.174 

.160 

.124 

.123 

.  .104 

F 

.362 

.262   : 

.227 

.165   : 

.151 

.117 

.116 

.099 

G 

.348 

.253 

.218 

.159    : 

.146 

.113 

.112 

.095 

H 

.335 

.243 

.210 

.153   ■ 

.140 

.103 

.108 

.092 

|     I 

.321 

.233 

.      .202 

.146 

.134 

.104 

.103 

.088 

*     J 

.308 

.224 

.193 

.140   : 

.129 

.100 

.099 

.084 

K 

.288 

.209 

.180 

.131 

.120 

.093 

.092 

.079 

L 

.275 

.199 

.172 

.125 

.115 

.089 

.088 

.075 

M 

.261 

.190 

.164 

.119 

.109 

.085 

.084 

.071 

N 

.248 

.180 

.  155 

.113 

.104 

.080 

:          .080 

.068 

0 

.235 

.170 

.147 

.107 

.098 

.076 

:          .075 

.064 

P 

.221 

.100 

.139 

.101 

.092 

.072 

:          .071 

.000 

Q 

.201 

.146 

.126 

.092 

.084 

.065 

:          .065 

.055 

R 

.188 

.136 

.118 

.085 

.078 

.061 

;          .060 

.051 

S 

.174 

.126 

.109 

.079 

.073 

.056 

:           .056 

.048 

T 

.152 

.112 

:          .097 

.072 

.067 

.053 

:          .052 

.045 

U 

.1.47 

.107 

:          .092 

.067 

:          .062 

.048 

:          .047 

.040 

Source: 

Price  Study,    Stee 

1  Founders 

1    Societ, 

/■  of  America,    Novem' 

ber,    1933 

♦ 


With  respect  to  -the  general  price  levels  represented  by  the  schedules, 
the  claim  made  in  the  second  paragraph  of  the  quotation  from  the  industry's 
Price  Study,  above,  that  1926  was  not  a  satisfactory  profit  year,  is  note- 
worthy in  view  of  the  earnings  data  presented  in  Chapter  One  of  the  present 
report  (*),  from  which  an  ouposite  conclusion  might  be  drawn.   Returns 
from  about  40  companies  tabulated  there  showed  earnings  during  1926  of  7.3 
per  cent  of  sales,  as  compared  with  5.3  per  cent  in  1925  and  4.3  per 
cent  in  1927. 


Ford,  Bacon  and  Davis,  Inc.,  Engineers,  who  reviewed  the  Industry's 
Price  Study,  made  the  following  comment: 


(*)  Table  VI,  Earnings  and  Capital  Turnover,  Chap.  One,  I,  A,  A, 


OROa 


-  614  - 

"During  the  examination  of  the  1926  selling  prices, 
the  Engineers  found  that  in  many  cases  the  schedules  used 
in  1926  were  the  same  as  those  which  were  in  effect  in  1925, 
1924  and  in  some  instances  even  in  1923.   Beginning  in  the 
latter  -oart  of  1926  the  selling  -prices  generally  scaled  down- 
ward and  in  most  cases  1927  and  subseauent  schedules  were  at 
lower  selling  -prices  than  those  of  1926."  ■(*) 

Prices  and  -profits  were  apparently  at  relatively  high  levels  in 
1926. and  1929.   The  latter  seems  to  have  been  the  better  year*  .especially 
for  " specialty"  castings*   It  is  also  interesting  to  note  that  orice 
levels  in  the  Iron  and  Steel  Industry  during  the  last  quarter  of  1933 
were  about  80  per  cent  of  the  1926  level;  and  in  the  Malleable  Iron 
Castings  Industry  about  65  per  cent  of  the  1926  level;   The  comoosite 
price  index  number,  published  by  the  National  Bureau  of  Economic 
Research,  on  "-producer '  s  goods  for  capital  equipment"  was  aooroximately 
80,  based  on  1929  as  100.   Durable  goods  -prices  on  the  average,  were 
slightly  lower  in  1929  than  in  1926.  (**) 

If  the  above  figures  may  be  taken  as  criteria,  the  87  -per  cent  of 
1926  prices  taken  by  the  Steel  Castings  Society  as  apnroximating  "normal" 
for  1933  may  have  been  a  relatively  high  level  for  the  industry's 
products. 

D.  Regulations  Concerning -Filing;  of  Prices  and.  Terms  of  Sale 

The  following  summary  describes  in  general  the  requirements  for 
filing  of  prices'  and  terms  of  sale  as  -prescribed  by  the  Code  and  the 
Commercial  Resolutions  of  the  Code  Authority,'  and  gives  a  comprehensive 
view  of  the  industry's  oricing  practices  so  -provided.. 

(l)   General  Rules  for  Filing  Prices 

(a)  Every  steel  foundry  was  reauired  to  file  a  list 
of  its  current  prices  with  Steel  Founders' 
Society,  comprising  all  classifications  of  castings 
in  which  it  was  interested  or  upon  which  it  would 
quote  were  it  requested  to  do  so. 

(b)  Every  steel  foundry  was  required  to  file  a  schedule 
of  extras  applying,  to  alloy  additions,  heat  treat- 
ments, '  specif  ications  ,  etc.,  which  were  to  be 
added  to  the  schedules  filed  to  cover  rough  carbon 
castings  only. 

( c)  Standard  machining  operations  on  Railway  Car 
Bolster  Center  Filler  Castings  were  included  in 
the  extras  upon  which  interested ' foundries  were 
to  file. 


(*)   Ford,  Bacon  and  Davis, Co.  -  Engineers  T  Study  of  Price"  Schedules.;/ in 
Steel  Castings-  Industry. 

(**)  Monthly  letters  from  National  Bureau  of  Economic  Research. 

9826 


-  61b  -  . 

(d)  Plain  carbon  casting  prices  filed  had  to  be  in 
terms  of  minimum  delivered  nrices  of  rough 
castings,  and  foundries  were  not  to  quote  below 
their  own  filed  -prices. 

(e)  Prices  filed  on  letter  schedules  related  to 
rough,  unfinished,  unmachined  miscellaneous  carbon 
steel  castings,  either  unannealed,  annealed  or 
normalized,  but  did  not  include  cost  of  pattern 
equinment,  machining,  carbon  and  alloy  additions, 
or  other  extras. 

(f)  A  foundry  had  to  file  unon  any  classification  of 
casting  before  it  was  privileged  to  quote  or 
accept  business  thereon. 

(g)  It  was  required  that  a  foundry  wait  ten  days  after 
filing  a  mice  lower  than  any  filed  by  other 
foundries  on  similar  castings  before  quoting  or 
using  this  price. 

(h)   A  foundry  was  allowed  to  quote  a  price  on  the 
same  day  it  filed  the  price  with  the  Society, 
provided  such  filed  price  was  not  lower  than 
prices  on  similar  castings  filed  by  any  other 
foundry.   If,  however,  a  foundry  filed  to  meet 
a  new  low  filing  of  some  other  foundry  that  did 
not  become  effective  until  ten  days  after  the 
other  foundry  filed  it,  the  foundry  filing  to 
meet  this  low  filing  was  not  to  quote  or  use  the 
new  low  price  until  the  date  the  price  filed  by 
the  original  filer  .thereof  had  become  effective. 

(i)   Foundries  desiring  to  establish  specific  new  clas- 
sifications were  to  make  application  for  approval 
thereof,  but  could  not  use  such  classifications 
for  pricing  purposes  until  the  Industry's  Defini- 
tions and  Classifications  Committee  had  an-oroved 
them. 

(j)   If  a  new  classification  was  filed  by  any  foundry, 
all  foundries  interested  in  -producing  and  selling 
castings  coming  under  such  new  classification 
were  required  to  file  their  current  price  thereon 
and  could  not  continue  to  classify  such  castings 
under  some  pre-existing  classification. 

(k)   The  burden  of  proof  that  a  lower  price  was  being 
filed  to  meet  competition  rested  with  the  foundry 
so  filing. 

(l)   If  a  foundry  had  made  a  contract  at  a  certain  price 
and  later  revised  its  price  upward,  it  was  to  file 
with  the  Society  full  details  regarding  such  con- 
tract, giving  effective  date,  expiration  dat*  or 


3826 


-  616  ~ 

termination  clause,  name  of  customer,  classifications 
cf  castings  covered,  and  trices  applying  \o   each 
classification. 

(2)  Quotations 

(a)   Quotations  were  not  to  be  matfe  at  -orices  less  than 
the  delivered  -prices  filed  with  the  Society. 

("b)   In  the  cr.se  of  castings  uoon  which  the  actual 

weight  was  unknown,  the  foundry  was  required  to 
quote  a  -oer  lb.  -orice  only  and  not  a  lunro  sum 
price,  and  in  the  event  the  weight  was  estimated 
to  fall  at  a  point  near  the  dividing  line  between 
two  weight  divisions  on  the  schedule,  it  was  to 
quote  the  per  lb.  prices  which  ar>t)lied  in  either 
circumstance,  i.e.,  if  the  actual  weight  was 
later  found  to  be  above  or  below  the  dividing 
,line  weight. 

( 3 )  Invoices  and  Bisounts 

(a)  Foundries  were  not  to  date  invoices  later  than  the 
date  upon  which  they  were  mailed  or  later  than  the 
third  day  following  the  date  the  castings  were 
shipped. 

(b)  Foundries  could  not  grant  discounts  greater  than 
provided  in  Section  7  of  Schedule  D  of  the  Code  as 
amended. 

(c)  The  maximum  discount  allowable  for  cash  was  1/2  of 
1  per  cent.   (See  new  Section  7,  Schedule  D,  of 
the  Code). 

(d)  There  were  no  so-called  manufacturers'  discounts; 
the  quantity  differentials  on  the  letter  schedules 
provided  for  customers  that  bought  in  larger  quan- 
tities. 

( 4 )  Quantity  on  Order 

(a)  The  quantity  on  an  order  was  normally  the  number  of 
castings  ordered  at  one  time,  from  a  specific  pa.ttern, 
which  was  required  to  be  shipped  or  invoiced  within 
90  days  from  the  date  of  the  order. 

(b)  The  foundry  could  not  negbtiate  a  contract  for  a 
larger  quantity  of  castings  and  deliver  a  smaller 
quantity  at  the  same  -orice  r>er  casting  applying 
to  the  larger  quantity. 


3826 


-  617  - 

(c)  Castings  that  were  ordered  in  pairs  or  sets  were 
priced  upon  the  quantity  of  each  individual  type 
of  casting  included  in  the  pair  or  set. 

(d)  Where  patterns  were  so  constructed  as  to  produce 
two  or  more  dissimilar  castings  joined  together, 
and  where  the  customer  ordered  such  combinations 
of  castings  shipped  in  one  piece,  the  number  of 
ea.ch  separate  component  casting  determined  the 
quantity  of  each,  and  the  prices  were  based  upon 
the  individual  weights. 

(e)  Where  patterns  were  so  constructed  as  to  produce 
multiple  castings  of  the  same  design  but  cast 
integrally  in  one  piece,  the  auantity  was  de- 
termined on  the  basis  of  the  total  number  of 
individual  castings  so  joined,  and  the  weight  of 
the  individual  casting  was  determined  by  dividing 
the  total  weight  of  the  integrated  castings  by  the 
total  number  of  individual  castings  so  joined. 

This  was  not,  however,  to  be  construed  as  preventing 
the  joining  of  members  of  an  assembly,  which  were 
previously  cast  separately,  but  which  could  be  re- 
designed in  integral  form,  to  be  used  as  received 
from  the  foundry  in  such  integral  form. 

(5)  Pattern  Equipment 

(a)  All  pattern  eauipme.nt  furnished  by  the  foundry  was  to 
be  billed  to  the  customer  at  not  less  than  what  it 
costs  the  foundry  to  make  it. 

(b)  Pattern  alterations  made  at  the  customer's  request 
could  not  be  charged  to  the  customer  regardless  of 
whether  the  -oat terns  belonged  to  the  foundry  or  the 
customer. 

(c)  Foundries  could  not  repurchase  pattern  equipment 
from  customers  in  violation  of  Section  2  of 
Schedule  D  of  the  Code. 

(6)  Machining  •  ■ 

(a)  All  machining  performed  by  the  foundry  was  to  be 
billed  to  the  customer  at  not  less  than  cost. 

(b)  It  was  not  permissible  to  partially  machine 
castings  without  charging  for  the  machine  work 
performed. 

(c)  Holes  drilled  in  lieu  of  using  cores  did  not  need 
to  be  considered  machining  within  the  meaning  of 
Section  4  of  Schedule  D  of  the  Code. 


982C 


~  61R  - 

( 7)  Inspection  Charges 

(a)   Foundries  were  to  charge  customers  for  expense 
incurred  for  inspection  by  outside  individuals 
or  agents  when  the  customer  specified  such 
inspection. 

(8)  Back  Charges  for  Welding 

(a)   Foundries  could  not  agree  to  accent  without 

reservation  any  and  all  hack  charges  for  welding 
by  the  customer.  Should  the  foundry  agree  to 
accept  such  back  charges,  such  acceptance  could 
cover  only  individual  castings  or  jobs  in  question. 

(9)  Pattern  Insurance 

(a)   Foundries  could  not  absorb  the  cost  of  insurance  on 
patterns  belonging  to  their  customers  and  were 
required  to  charge  the  customer  his  proportionate 
share  of  the  cost  of  "blanket"  policies  carried 
by  the  foundry.  . 

(10)  Responsibility  for  Damages 

(a)   Foundries  could  not  agree  to  accent  responsibility 
for  consequential,  special  or  contingent  damages 
when  otherwise  they  would  not  be  legally  liable 
for  such  damages. 

( 11)  Summary 

These  rules  operated  to  insure  a  uniform  relationship 
between  filed  and  actual  -nrices.   The  filing  agency 
realized  the  futility  of  attempting  to  gain  success  of 
operation  by  publicizing  only  one  or  two  elements  of  a 
pricing  structure,  such  as  list  prices  and  quantity 
discounts.   Instead,  from  the  start,  the  Agency  made 
mandatory  the  filing  of  nractically  every  conceivable 
element  in  the  structure,  including  even  contracts  in 
certain  instances;  and  defined  as  closely  as  possible 
all  merchandising  practices,  ruling  to  be  unfair  any 
that  might  interfere  with  attainment  of  the  ends  sought 
under  the  price  filing  -orovision. 


982G 


-  619  - 
E.    Filings  For  Different  Distribution  Channels 

The  principal  channels  of  distribution  for  castings  are    (l)    Sales 
Representative,    Manufacturer's  Agent  or  Commission   Salesman,    (2)  mid- 
dleman,   and   (3)  purchases  by  customer-users. 

1.  Sales  Representative,    Manufacturer's  Agent,    etc. 

A.    Sales  representative,   ^J  manufacturer's  agent  or  commission 
salesman  is  a  person,    firm  or  corporation   that    solicits  orders  for 
castings  on  behalf  of  a  foundry.      Such  orders  are  referred  to   the  foundry 
for  acceptance  or  rejection,    the  foundry  billing  and  shipping  direct   to 
the  buyer.      The  salesman  or  representative  guarantees  payment  of  the 
invoice,    assuming  all  or  part  of  the  credit  risk.      The  title  to  the 
castings  never  passes  at   any  stage  of  the  transaction  to   such  repre- 
sentatives or  salesmen. 

Prices  were  not   filed  with  respect   to   sales  handled  through  this 
type  of  distributor.      It  was  understood  that   the  prices   they  quoted 
were  to  be  not   less   than  those  filed  by  the  foundry  by  whom  they  were 
employed..      Nor  w\e  it  necessary  to   file  the  terms  of  any  contracts  with 
such  representatives  or  salesmen,    since'  these  persons  were  employees 
of  the  foundry,   who  were  remunerated  for  their  services   either  in  the 
form  of  a  commission,    salary,    bonus,    or  a  combination  of  these. 

2.  Middleman 

The  second  class  of  distributor,   known  as  a  Middleman,    (*)is  a 
person,    firm  or  corporation  that  performs  a  jobbing  function  for  the 
foundry,    buying  the  castings  outright  and  reselling  them  as  rough  steel 
castings,    in  the  same   condition  as  received  from  the  foundry,    to   the 
middleman's  own  customers.      The  middleman  does  the  billing,    and  assumes 
the  full  and  ultimate  credit   risk  on  the  resale  transaction.      A  pur- 
chaser may  not  be  classed  as  a  middleman  and  may  not   receive  a  discount 
in  the  event  he  machines, finishes,    processes  or  fabricates   the  castings, 
or  assembles  them  into   integrated  devices,   machines,    equipment  or 
products  of  any  sort. 


^J     Definition  contained  in   letter  sent   to   foundries  by  Code  Authority 
on  May  24,    1934 

(*)   Ibid 


-  6?0  - 

It  was  required  that  all  prices  to  middlemen  be  "filed.   They  could 
"be  expresred  in.  terms  of  discounts  off  regularly  filed  prices,  provided 
such  middlemen  agreed  to  resell  the  castings  at  not  less  than  the  prices 
filed  by  the  foundry  that  produced  them.   Such  filings  were  required  to 
give  the  following  information:  names  and  addresses  of  the  specific  ac- 
counts to  which  the  discount  was  to  apply;  the  character  of  their  "busi- 
ness; the  nature  of  the.  services  they  rendered;  and  the  precise  terras 
of  the  agreement  with  respect  to  the  orices  at  which  the  castings  were 
to  be  resold. 

The  purpose  of  providing  for  a  discount  in  the  case  of  middlemen 
was  to  permit  a  foundry  that  was  unable  to  cover  certain  territories 
economically  with  its  own  regular  sales  representatives  to  secure  busi- 
ness through  agencies  that  were  in  a  position  to  service  such  territories 
and  were  willing  to  assume  the  full  credit  risks  in  connection  with  the 
resale  of  the  castings.  The  extent  to  which  these  prices  to  middlemen 
were  filed  will  be  discussed  in  connection  with  statistical  analyses  in 
the  following  chapter. 

3.   Customer-User 

The  third  class  of  distribution  is  that  of  sales  made  directly  to 
user.  The  purchaser,  the  Customer-User  (*)  is  defined  as  a  person,  firm, 
or  corporation  that  purchases  castings  direct  from  the  foundry  or  from 
a  middleman  for  the  purpose  of  using  the  castings  either  as  a  proprietary 
article  of  commerce  in  the  same  condition  as  received,  or  as  parts  or 
components  of  integrated  structures,  machines,  assemblies,  devices,  or 
pieces  of  equipment. 

It  was  required  that  all  prices  to  customer-users  be  filed  in  terms 
of  the  letter  schedules  illustrated  above  (Table  IX).   Filings  in  cerms 
of  discounts  off  previously  filed  prices  were  not  acceptable.  Prices  of- 
fered to  specific 'customers  on  s-oecific  inquiries  or  orders  were  not  re- 
quired to  be  filed,  as-  it  was  understood  that  such  trices  were  to  be  not 
less  than  those  already  filed  by  the  foundry.  However,  where  a  quotation 
had  been  given  in  connection  with  a  specific  project  and  it  was  necessary 
for  the  foundry  to  wait  more  than  90  days  before  receiving  the  award  or 
release  to  produce  and  ship'"the  castings,  quotations  or  contracts  had  to 
be  filed.   In  such  cases  it  was  required  that  a  copy  of  the  quotation  or 
contract  be  filed  with  the"  Society  within  90  days  from  the'  date  thereof, 
indicating  the  reason  for  the  delayed  acceptance  or  release  of  the  ship- 
ment. 

There  are  no  statistics  available  to  indicate  the  volume  of  castings 
accounted  for  by  each  class  of  buyer  listed  above.  However,  it  is  safe 
to  say  that  by  far  the  major  part  of  the  Industry's  output  is  sold  direct 
to  user.   The  prices  filed  on  sales  or  quotations  to  users  are  those 
tabulated  in  the  Daily  Price  Reports. 

There  is  a  small  percentage  of  output  which  is  sold  by  various  found- 
ries to  affiliate  companies.  The  prices  on  such  sales  were  not  subject 
to  filing  regulations. 
(_)   _____  _ 

9826 


-  621  - 
F.   Dissemination  of  Price  Filings  (Publicity) 

The  Steel  Founders'  Society  of  America,  loca.ted  in  New  York  City, 
which  was  both  the  Code  Authority  and  the  Price  Filing  Agency,  was  the 
headquarters  for  the  receipt  and  dissemination  of  all  prices  filed  during 
the  Code.   Industry  members  sent  price  filings  and  revisions,  usually  by 
mail,  to  the  Agency, 

1.   Daily  Price  Reports 

The  Agency,  upon  receiving  the  filed  price,  reviewed  it  in  order  to 
determine  whether  it  was  a  new  low  price  for  the  Industry,  a  filing  to 
meet  competition,  or  simply  a  revision  of  a  price  previously  filed  on  the 
classification  in  question.  After  its  status  was  decided,  the  new  filing 
was  included  with  others,  and  typed  and  mimeographed,  usually  in  the  same 
language  as  received,  The  various  pages  of  filings  were  combined  to  form 
what  was  termed  the  Daily  Price  Report. 

During  the  Code  period,  386  of  these  reports  were  issued  to  the  mem- 
bers of  the  Industry.   The  first  daily  report  was  distributed  on  Decem- 
ber 15,  1933.   In  Daily  Reports  Ho.  1  to  29,  inclusive,  only  prices  which 
were  lower  than  those  contained  in  the  December  5  Report,  the  first  quart- 
erly report,  and  in  Daily  Report  l!o.  6  were  included.  As  has  been  stated, 
Daily  Report  No.  6  contained  price  schedules  which  were  lower  than  those 
tabulated  in  the  December  5  submission.   In  these  early  Daily  Reports  the 
effective  date  of  the  price  was  usually  indicated,  though  many  were  list- 
ed in  which  the  date  was  not  specified.   Beginning  with  Daily  Report  No. 
30,  the  Agency  reported  all  prices  filed,  whether  they  were  lower  or 
higher  than  the  Schedules  in  the  Reports  referred  to  above.   The  dates  the 
schedules  went  into  effect  were  also  consistently  tabulated. 

Daily  Price  Report  No.  60  initiated  a  revised  system  of  reporting 
by  the  Agency.  Thereafter,  •■throughout  the  Code  period,  reports  were  com- 
piled xn  the  following  form, 


EFFEC-  SCHED-  * 

FDY.   FILED  TlVE         CASTING  CLASSIFICATION  ULE 

NO.   1955   1935   FILED 

402&  3/18   4/l   File  same  classifications  and  schedules  for 
602  Railway  Cstgs.  as  filed  by  Foundry  105  and  re- 

ported in  Daily  Report  #333. 

407   3/18   3/18  Valve  Bodies  K   R 

11     "      "      "   Parts-Pressure,  NOCBN K   " 

11     "      "      "     "      "    -  Bonnets K   " 

"     "      "      "     "      "         "   (.With  Yoke  Cast 

Integrally) K 


1! 


»         »  »       _  r.a-na  V  II 


-  Ca-ps |£_ 


The  above  form  is  self  explanatory,  untib  the  exception  of  the  column. 
The  letter  in  this  column  indicates  the  status  of  the  filing  (L  for  new 
low  or  minimum  schedule;  T   for  nev'  classification,  T7  for  withdrawal,  and 
R  for  merely  a  revised  Schedule).   About  September,  1934,  the  following 
indications  of  status  were  included  in  the  reports:   DL  for  signifying  div4^ 
isional  low  schedule;  DN  for  divisional  new  classification;  and  H  for  a 
schedule  which  represented  a  price  increase  over  the  one  previously  filed. 


-  622  - 

In  addition  to  schedules  and "classifications,  various  notices  con- 
cerning price  filing  policy,  originating  with  the  Agency  and  designed  to 
emphasize  certain  rules  and  regulations,  were  included  in  the  Daily  Re- 
ports.  Other  such  Reports  contained  statenents  filed  by  members  con- 
cerning contract  relationships,  freight  allowances  to  railroads,  discounts 
allowed  to  middlemen,  extras,  and  similar  information.  These  reports  re- 
presented attempts  to  insure  a  maximum  of  publicity. 

According  to  information  supplied  by  the  Society,  filings  for  over 
150,000  items  were  made.   This  is  assumed  to  mean  not  only  filings  on  in- 
dividual classifications  of  various  products,  but  also  other  items,  .such 
as  withdrawals,  price  extras,  etc.   There  were  4,763  filing  schedules 
submitted  by  the  foundry  members.  Many  of  these,  of  course,  were  on  great 
numbers  of  classifications;  many  were  statements  on  discounts,  filing  of 
extras,  etc.  The  number  received  from  the  various  geographical  Divisions, 
follows: 

TABLE  X 

AVERAGE  NUMBER  OP  PILINGS  PER  FOUNDRY ,  BY  DIVISIONS  (*) 


Number  of 


Division 

I 

II 

III 

IV 

V 

vYI 

VII 

VIII 


Number 

of 

Number 

of 

Pilings 

Times 

Piled 

Foundr 

Les 

Per  Foundry 

739 

31 

23.8 

500 

10 

50.0 

199 

13 

15.3 

540 

25 

21.6 

1,025 

23 

44.5 

1,233 

41 

30.3 

180 

16 

11.2 

347 

34 

10.2 

Total 


4,753 


193 


24.6 


Source:   Compiled  by  Statistics  Section,  IT.R.A. ,  from  Daily  Price  Re- 
ports of  Steel  Founders'  Society  of  America. 

Divisions  V  and  VI  accounted  for  nearly  a  half  of  the  major  filings, 
while  foundries  in  Divisions  II,  V,  and  VI  filed  most  frequently.   Div- 
isions V  and  VI  also  accounted  for  over  40  per  cent  of  the  Industry's 
volume.   (See  Table  III  Page  575  Chapter  I) 

Table    of  the  appendix  gives  an  idea  of  the  approximate  number  of 
days  elapsing  between  the  date  a  price  was  filed  by  the  foundry  and  the 
date  of  its  inclusion  in  a  daily  price  report.   The  date  of  the  post-mark 
was  taken  as  the  date  of  filling.   This  table  was  developed  in  three  parts. 

(*)  While  this  compilation  does  show  satisfactorily  the  approximate  num- 
ber of  times  a  foundry  filed,  it  does  not,  in  any  manner,  indicate 
the  number  of  items  filed  uoon. 


9826 


623  -  624 

The  first,  Appendix  Table  V-A,  shows  the  average  number  of  days  ela-osed 
for  each  type  of  filing.   The  second  part,  Appendix  Table  V-B,  shows  a 
similar  average  based  only  on  filings  for  which  the  elapsed  time  was  less 
than  10  days,  (the  length  of  the  waiting  period  in  the  cases  of  new  and 
low  filed  schedules).   The  third  section,  Appendix  Table  V,  is  based  on 
cases  in  which  the  elapsed  time  was  tern,  days  or  longer. 

The  time  elapsed  between  receipt  of  schedules  and  their  dissemination 
to  the  industry  varied  with  the  distance  of  the  Division  from  the  New  York 
headquarters  of  the  Code  Authority.   For  the  Southern  and  Pacific  Division, 
(Divisions  III  and  VIII,  respectively)  the  period  was  longest.   For  Div- 
isions I  and  II,  the  Divisions  nearest  New  York,  the  most  common  type  of 
filing,  a  revision  of  a  previous  list,  was  usually  reported  to  the  Industry 
within  two  days  of  receipt; . 

The  third  part  of  the  table  presents  averages  of  filings  which,  for 
reasons  usually  not  known,  were  not  reported  to  members  within  ten  days 
after  their  filing.   There  were  145  such  filings,  some  of  which  were  not 
reported  until  after  two  or  more  months  had  elapsed.  The  agency  submitted 
explanations  with  reference  to  some  of  these  delays.  The  following  case, 
a  low  filing  for  six  classifications,  was  not  reported  for  18  days. 

"This  filing  was  made  on  January  20.   This  office 
attempted  to  secure  confirmation  but  received  no  response. 
A    Lingly  we  are  now  reporting  this  filing  to  the  industry 
hi  i  under  the  circumstances  it  must,  of  necessity  be  consider- 
ed as  effective  at  once,"  (*) 

The  second  case,  a  filing  listing  10  low  and  139  revised  schedules 
was  unreported  for  27  days: 

"In  Report  No.  95s  foundry  815  was  listed  as  filing 
the  same  prices  as  4  other  foundries.   Due  to  an  error 
in  checking  the   filing  we  erroneously  reported  their 
filings  as  being  identical  with  those  of  the  other  four 
foundries  mentioned  in  the  notice.  A  recheck  indicates 
that  Foundry  105  filed  the  same  prices  as  these  other 
foundries  with  the  exception  of  a  few  not  filed  upon 
and  a  number  of  additions."  (**) 

The  only  other  case  of  delay  explained  by  the  Agency  was  for  filings 
of  4  low  and  3  revised  schedules  which  were  not  reported  for  16  days. 

"NOTE:   On  July  10th,  Foundry  "o.  637  filed  the 
above  prices,  but  the  letter  was  mislaid  and  has  only 
just  cone  to  our  attention."  (***) 

(*)    Steel  Founders'  Society  of  America — Daily  price  Report 
No.  92,  April  10,  1934.   Code  Records  Files. 

(**)    Steel  Founders'  Society  of  America — Daily  Price  Report 
No.  112— May  4,  1934. 

(***)   Ibid— Daily  Price  Report  No.  176— July  26,  1934. 


9826 


-  &2o   - 

According  to  the  tabulation  there  were  24  instances  in  which  filings 
of  low  price  schedules  were  not  reported  for  an  average  elapsed  time  of 
20.4  days,  more  than  twice  the  normal  waiting  period.'  It  is  difficult 
to  explain  this  delay  in  reporting  of  filed  schedules.   In  one  instance, 
however,  a  foundry  submitted  a  notarized  statement  to  the  effect  that  it 
has  filed  prices  at  some  previous  date  which,  for  some  reason,-  had  not 
been  delivered  to  the  Agency.  • 

In  the  cases  of  filings  on  new  classifications  it  is  possible  that 
the  Definitions  and  Classifications  Committee  required  the  extra  time  to 
review  the  proposed  new  classification.  Usually,  however,  new  classifca- 
tions  were  published  in  4  or  5  days  and  "low"  schedules  in  approximately 
3  days. 

The  averages  in  the  second  part  of  the  table  are  far  more  representa- 
tive of  the  actual  elapsed  time  than  the  exceptions  just  discussed.  These 
figures  are  based  on  hundreds  of  filings.   In  most  cases,  it  can  be  con- 
cluded, filings  were  handled  and  disseminated  in  a  very  short  time,  much 
less  than  the  10  day  waiting  period. 

2.   Quarterly  Reports 

Another  important  method  used  by  the  Agency  in  disseminating  price 
information  was  the  publication  of  booklets  known,  as  Quarterly  Reports. 
These  booklets,  which  were  published  at  various  times  during  the  Code 
period,  had  as  their  major  purpose  the  publicizing  of  price  Schedules. 
They  were  summaries  of  the  prevailing  price  levels  and  exceptions  thereto 
included  in  the  daily  price  reports  during  the  quarterly  periods  preceding 
their  issuance.  They  included  the  most  recent  revisions  of  all  pricing 
practices.  Furthermore,  they  listed  the  price  schedules  prevailing  in 
the  Industry  for  each  classification  and  the  number  of  foundries  which  had 
quoted  exceptions  to  any  price  Schedule. 

The  foreword  of  the  quarterly  reports  usually  contained  such  informa- 
tion as  (l)  definitions  of  schedule  specifications,  quantity  on  order, 
industrial  applications,  price  extras,  etc.,  and  (2)  rules  concerning  fil- 
ing of  prices,  quotations  and  invoices,  etc.  Usually  a  section  of  the  re- 
port contained  a  tabulation  of  all  price  extras,  indicating  which  foundries 
had  filed  exceptions  to  them. 

In  addition  to  showing  the  prevailing  minimum  levels  on  all  miscel- 
laneous steel  castings  classifications,  the  "quarterly  reports"  usually 
showed  as  a  separate  tabulation  the  base  schedules  on  high  tensile  steel 
railway  freight  and  passenger  car  castings  and  their  extras.   These  were 
listed  separately  from  ordinary  miscellaneous  castings  because  of  their 
difference  in  tensile  strength. 

The  Quarterly  Reports  published  early  in  the  code  period  were  natural- 
ly not  as  complete  as  the  ones  compiled  later.   The  first  was  the  December 
5  report,  although  it  was  not  specifically  termed  a  quarterly  report  by 
the  Society.   It  was  published  before  the  filing  of  prices  was  formally 
"called".   It  contained,  as  previously  explained,  a  suggested  schedule  for 
each  of  532  classifications.  Only  one  schedule  for  all  eight  divisions 
was  indicated.   Starting  with  Quarterly  Report  No.  1,  separate  schedules 
for  each  division  were  included. 

9826 


-  626  - 

Daily  Report  Fo.  6,  December  26,  1933,  while  differing  in  form  from 
the  quarterly  reports,  was  used  for  a  similar  purpose.   It  contained  a 
summary  of  all  new  classifications  and  new  low  schedules  filed  in  Daily 
Reports  Fos,  1  to  5,  which  differed  from  those  included  in  the  December  5 
Report.   It  included  210  new  low  schedules  and  242  new  classifications. 

The  method  of  indicating  the  minimum  schedules  in  the  First  Quarterly 
Report  is  described  as  follows  in  the  booklet: 

"The  basis  upon  which  schedules  filed  are  reported 
in  this  booklet  is  to  indicate  as  clearly  as  possible  the 
minimum  levels  which  have  been  filed  by  foundries  in  the 
various  geographical  Divisions.   In  the  case  of  classifica- 
tion where  the  minimum  schedules  filed  do  not  rest  upon  a 
broad  base  an  effort  has  been  made  to  describe  the  exact 
situation  indicating  the  foundries  or  divisions  that  have 
filed  differential  minima. 

"In  the  case  of  classifications  on  which  the  minimum 
schedules  filed  by  foundries  in  all  Divisions  are  the  same, 
such  minimum  schedules  are  placed  under  the  caption  of 
'Minimum  Schedules  -  All  Divisions.1 

"In  a  few  cases  foundries  in  only  one  or  two  Divisions 
have  filed  schedules  on  certain  classifications  on  which  pro- 
duction is  apparently  confined  to  limited  areas.   In  such  cases, 
if  the  same  minimum  schedules  have  been  filed  by  at  least  one 
foundry  in  each  interested  Division  then  such  minimum  schedule 
is  also  placed  in  the  column  bearing. the  caption:   'Minimum 
Schedule  -  All  Divisions.'   The  term  'all  others'  usually  means 
minima  all  other  divisions."  (*)         , . 

Filed  -orices  for  eleven  hundred  and  seventeen  classifications  were 
published  in  the  first  quarterly  report.  For  913  of  these  classifications 
identical  price  schedule  were  shown  to  have  been  filed  by  all  members  of  the 
Industry.   The  remaining  204  classifications  had  several  different  price 
schedules  filed  on  each,  varying  according  to  weight  brackets  and  geogra- 
phical divisions.  Within  a  month  after  the  issuance  of  the  first  quarterly 
report,  the  Definitions  and  Classifications  Committee  met  and  declared 
that  a  great  many  of  the  above  204  classifications  were  being  improperly 
quoted.   In  a  publication  sent  to  the  members  on  April  25,  1934  (see  page 
Sr2Q2 ) ,  the  prices  on  these  items  were  revised,  generally  upward,  and  a 
level  set  below  which  no  foundry  was  "e::pected"  to  file.  This  is  one  of 
a  very  few  instances  of  similar  administrative  action  in  this  Industry. 
In  effect  it  established  a  "price  floor"  for  the  items  in  question  -  that 
is,  for  those  items  on  which  variations  had  appeared  in  the  price  filings. 

The  method  of  reporting  prices  in  the  Second  Quarterly  Report  was 
virtually  the  same  as  in  the  First  Report,   In  contrast  to  the  first,  in 
which  there  were  204  classifications  for  which  different  schedules,  vary- 
ing according  to  weight  and  to  location  of  the  foundry  had  been  filed, 

(*)   Steel  Founders'  Society  of  America —  First  Quarterly  Report— March 
31,  1934 


-  627  - 

only  71  such  classifications  were  so  listed.  One  minimum  schedule  for 
all  divisions  was  prepared  for  practically  all  items.  Almost  without 
exception  the  levels  aet  by  the  Agency   in  the  April  25  Bulletin  were  the 
schedules  quoted  in  the  Second  Quarterly  Report.  Extras  were  listed  for 
the  first  time  in  this  issue  -  the  formal  "call"  for  their  filing  was  made 
only  one  day  before  this  Report  was  released.  However,  it  is  assumed  that 
there  were  sufficient  filings  of  "extras"  already  on  hand  to  enable  the 
Agency  to  report  the  prevailing  levels.  Accompanying  the  booklet  was  a 
request  by  the  Agency  that  all  foundries  testify  as  to  the  correctness  of 
all  schedules  in  this  Quarterly  Report  which  they  had  filed  or,  if  errors 
were  noted,  to  report  them  promptly.  A  compilation  derived  from  the 
Daily  Reports  indicates  that  of  160  foundries  complying  with  this  request 
only  9  submitted  any  exceptions  to  the  schedules  in  the  Second  Quarterly 
Report.   Table  VII,  Exhibit  I  shows  that  relatively  few  new,  low  minimum 
schedules  v/ere  filed  during  the  months  following  the  publishing  of  this 
Report.  Apparently,  by  this  tine,  prices  had  been  relatively  well  sta- 
bilized at  levels  satisfactory  to  the  member  foundries. 

The  Third  Quarterly  Report  was  similar  to  the  second  in  form.  The 
schedules  prevailing  in  each  geographical  division  were  tabulated  in  se- 
parate columns.   This  permitted  distinctly  easier  reference. 

The  Fourth  and  Fifth  Quarterly  Reports  improved  upon  the  earlier  ones 
only  in  a  f  r.  reword  which,  was  slightly  more  explanatory  as  to  terms  and 
methods  of  filing,  and  in  more  complete  tabulations  of  "Price  Extras."  The 
Summary  Report  issued  on  the  last  day  of  the  Code  Period  was  the  last  com- 
pilation of  price  information  to  be  disseminated  by  the  'Code  Authority. 

These  quarterly  reports  were  apparently  the  most  useful  of  the  var- 
ious means  of  disseminating  price  information  used  by  the  Agency.  Members 
were  kept  informed  at  all  tines  of  prevailing  prices  and  exceptions  to 
such  prices. 

Only  member  foundries  were  eligible  to  receive  the  data  distributed 
by  the  Agency.  Members  were  discouraged  from  permitting  customers  to  re- 
view these  price  compilations.  Foundries  were  advised  not  to  mention, 
in  quoting  a  price  to  a  customer,  that  such  price  was  the  same  as  a  com- 
petitor' s. 

G-.   Filing  Methods  Enrol  oyed  by  Members 

During  the  operation  of  the  Code  the  following  three  distinct  meth- 
ods of  filing  were  used  by  members: 

(1)  Filing  schedules  or  statements  on  specific 
named  classifications  or  elements  of  the 
price  structure  (discounts,  contracts,  etc.). 

(2)  Filing  the  same  schedules  on  the  same 
classifications  as  some  other  foundry  had 
filed,  usually  naming  the  Daily  Report 
Number  in  which  latter  had  filed. 

(3)  Filing  all  or  part  of  the  schedules  listed 
9825  in  a  specific  Quarterly  Report.   These  were 

termed  "blanket  filings." 


-  625  * 

The  first  method  was  most  common.   In  the  early  Code  period  the 
foundry  would  list,  on  an  ordinary  letter  head,  the  classifications  and 
the  schedules  it  desired  to  file,  and  send  it  to  the  Code  Authority. 
Later  prices  and  information' were  submitted  on  a  special  form  provided 
"by  the  Code  Authority. 

The  second  method  was  also  extensively  practiced.   Such  filings 
often  took  the  form  of,  "Foundry  206  files  the  same  trices  as  Foundry 
210  in  Report  No.  326."  This  made  it  simple  to  meet  new  low  -orices  filed 
by  a  competitor.  This  method  was  used  very  frequently  in  the  filing  of 
"Price  Extras, " 

About  165  foundries,  some  of  them  quite  frequently,  used  the  third 
plan,  "blanket  filing."  (*)  The  Code  Authority  encouraged  the  use  of 
this  method  of  filing  schedules  identical  with  those  contained  in  the 
Quarterly  Reports.  Although  a  member  might  manufacture  only  a  small 
proportion  of  the  classifications  listed  in  the  Quarterly  Report,  it  was 
the  practice  to  file  all  prices  contained  therein  for  a  specific  Division. 
At  various  times  foundries  filed  "blanket,"  purporting  to  meet  all  minimum 
schedules  on  file  with  the  Code  Authority  or  that  any  time  were  filed  with 
the  Code  Authority.   In  Daily  Report  Ho.  50,  the  Code  Authority  ordered 
this  practice  discontinued,  as  not  in  compliance  with  the  Code, 

In  compliance  with  Code  Authority  rules  and  regulations,  in  addition 
to  price  schedules  information  was  filed  on  sales  contracts,  allowances  for 
freight  charges,  allowances  on  patterns  and  equipment,  discounts  to  other 
foundries  (middlemen)  and  other  allowances,  and  price  extras. 

In  Chapter  V  following  will  be  presented  a  statistical  analysis  of 
the  various  types  of  filings  received  and  reported  by  the  Code  Authority; 
and  in  Chapter  VI  a  similar  analysis  of  the  trends  of  price  changes  for 
certain  representative  Droducts  as  disclosed  by  these  filings,  . 

(*)  Authorized  by  Commercial  Resolution  No,  30,  October  10,  1934 


9826 


-  639  - 
CHAPTER  IV 
Discussion  Concerning  Operation  of  the  Open  Price  Plan 

I.  CO:  PLIANCE  Ml  ENFORCEMENT 

There  is  vevr   little  record  as  tc  compliance  with  or  enforcement 
of  the  price  filing  provisions  cf  the  Steel  Castings  code. 

On  January  22,  1954,  Administrative  Order  No.  82-7  authorized 
the  Code  Authority  to  handle  trade  practice  complaints.  No  record 
is  available  of  the  action  of  the  Code  Authority  in  handling  such 
complaints.  It  is  believed  that  a  large  majority  of  the  complaints 
submitted  were  handled  and  adjusted  informally.  The  records  indicate 
that  184  foundries  of  97  percent  cf  the  total  of  190  filed  their 
prices  with  the  Code  Authority. 

The  Compliance  Division  handled  only  five  trade  practice  comp- 
laints cases  of  i-'hich  three  were  adjusted  and  two  nere  found  to  be 
cases  of  non-violation.  No  Trade  Practice  cases  were  submitted  to  the 
Regional  Boards. 

II.  ATTITUDES  AND  OPINIONS  OP  INTERESTED  PARTIES 

On  April  7,  1934,  the  Administration  member  forwarded  the  fol- 
lowing letter  to  the  Division  Administrator,  pointing  out  certain 
loopholes  in  the  price  provisions  which  permitted  members  of  the 
Industry  to  evade  the  requirements  of  the  dole. 

"Three  technical  sources  of  evasion  of  the  observance  of  establi- 
shed fair  prices  in  bidding  on   manufactured  equipment  have  come  to  my 
attention: 

"1.  Where  the  bidding  ccmpan3^  operates  a  department  that  produces 
a  component  part  of  material  around  which  an  important  industry  has 
been  built  up.  If  the  component  parts  or  material  are  not  charged  into 
the  finished  product  at  a  price  in  keeiin^  with  the  filed  prices  cf 
the  industry  specializing  in  that  component  material  or  part,  the  latter 
industry  is  obviously  prevented  from  fairly  competing  for  such  business 
with,  other  manufacturing  firms  which  do  not  operate  a  department  capable 
of  supplying  the  material  in  question. 

"2.  If  the  manufacturing  company  has  an  affiliate  which  is  ex- 
empted from  observing  the  prices  filed  oj   the  industry  producing  the 
material  or  component,  the  result  is  the  same  as  above. 

"3.  Certain  manufacturing  concerns,  the  status  cf  which  is  not 
clear  in  specific  pieces  of  business,  as  to  what  particular  Code  they 
are  wcr'-ing  under,  may  '-ork  an  obvious  hardship  tc  an  important  ind- 
ustry by  claiming  to  come  under  a  Code  that  allows  the  action  they 
desire  to  take. 


9826 


-   630   - 

"fhe  result  will  be  the  sane;  The  production  and  use  of  material  at 
prices  which  are  ruinously  low  as  compared  with  the  filed  prices  of 
the   industry  affected. 

"Code  authorities  are  naturally  deeply  concerned  as  to  how  this  abuse 
may  be  promptly  and  effectively  remedied. 

"The   Steel  Casting  Industry  is  now  wrestling  with  a    typical   case,    that 
of  a    contract  for  twenty  pumps  taken  by  the  Bucyrus-Erie   Company  of 
Milwaukee  at   a  price  of  $156,000  as  against   the  next  lowest  bid  of 
$208,000.    The   steel  castings  alone,    at  filed  prices,    amounted  to 
$115,000  and   the  value   of  materials   only,    as  figured  by  other  bidders 
amounted  to   more    than  $156,000.    The   Bucyrus-Erie   Company  operates   its 
own  foundry,    so   it   is  evident   that   they  either  did  not  figure   their 
materials  in  at  filed  prices  or   ignored  their  fabricating  and  assem- 
bly costs. 

"On  'account  of   the  possible  wide  application  of   these   sources  of 
evasion, I  would  suggest   that  a   general  order  be   issued  to   the  effect 
that  no  manufacturing  company  bid  en  or  accept   contracts  for  material 
or  equipment  "here   raw  materials,    cc  nonent  parts  or  services  in- 
volved are  not  figured  in  conformity  with  the  filed  lists  of  the 
various  code  groups  directly  responsible   for   such  raw  materials,    com- 
ponent parts  or  services.    Such  an  order  ou?ht   to  prevent  much  chise- 
ling and  evasion  of  this  character,    and  would  ""■lace   in  the  hands  of 
injured  Code  Authorities   a   simple  and  effective  "eapon   to   combat   the 
practice."    (*) 

Apparently  the  price  filing  plan,   adopted  by  the   Code  Authority, 
was  not   satisfactory  to  all  members  of  the    Industry.   A  letter  from 
the  ¥.   M.   Pettis   Company  addressed  to  Senator  Alben  W,   Berkley  under 
date   of  February  27     1934  stated  that  the  price   schedules  were   set 
up  by  the  larger  foundries  and    -ere  acting  to    the  detriment  of  the 
consumer  and  the    small   business  man.    (**) 

This  letter  was   transmitted  to    General   Johnson,    who   replied 
under  dates  of  March  13,    and  17   stating  that   the  Administration 
Member  of  the   Code  Authority  had  been  requested  to  make  an  investi- 
gation of   the    situation  and  that  further  details  from  Mr.   Pettis 
would  be  appreciated.   A  letter  from  Mr.    Pettis   to   General  Johnson 
dated  February  23,    1934,    states   in  part; 

"My  business   is  forced  to  operate  under  the   Steel  Foundry 
Industry  Code  as  arranged  at  meetings  of  the   Industry     which     meetings 
were   dominated  by  the  large   interests.    In  connection  with  the   code, 
and  by  its  authority,    there  are   issued  a  number  of  Price    Schedules 
with  a   Classification  List,    under  which  everyone   in  the   business 
must  work  or  be  penalized. 

(*)   Letter  from  Code  Administration  Member    to   Division  Administrator 
April  7,    1934.    See  Price  Filing  Unit  Work  Sheets.-  Steel   Castings   Ind. 
(**)^Price  Filing  Unit  Work  Sheets  -  Steel   Castings   Industry. 

SS2$ 


-  631  - 

"However,    in  making  up   the    Classification  List  and  Schedules, 
the  large    Interests  very  shrewdly  divided  the   Steel   Castings  Business 
into    two   classes  of  work,   viz:   Miscellaneous  Castings  and  Specialties. 
Specialties   in  normal   times   being  practically,    I  would  say,    about 
ninety  percent  of   their  product,    while   the   Smaller  foundries  can  make 
only  Miscellaneous   Castings,    therefore,    the  Large   Interests  very  wisely 
did  not   include   specialties   in   the   Classification  List,    or  Schedules, 
leaving  a  free  hand  in  making  prices  on  them  but   tieing  up   the  makers 
of  Miscellaneous  Castings  hard  and  fast."    (*) 

Under  date   of  April  7,    1934,    the  following  letter  was  received 
from   the  Administration  Member  unto   reference   to   this   complaint. 

"Some   14   conroanies   in   the    industry'-  manufacture    specially  designed 
and  in  many  cases  patented  devices,    chief ly  intended  for  use   in  car 
construction.    Those   individually  engineered  products,    as   I  understand 
it,    make  up   the    'Specialty'    classification. 

"The   companies  making  such  products  have   signed  a  patent  pool- 
ing agreement  among  themselves,   under  which  they  exchange   cost  or 
price   data.    Prices,    however,    are  not  publicly  filed. 

"In  view  of   their  proprietary  rights   in   such  products,    and   the 
fact    that   they  are    cooperating  within   this_  particular   trade   division 
of ' the   industry  to  prevent  harmful  price    cutting,    I  do  not   see  how 
they  are   doing  harm  to    the   smaller  foundries  which  specialize   in  the 
making  of  competitive   contract  castings. 

"From  the   standpoint  of  protecting  the   consumer,    I  would  imagine 
that   the  railroads  and  car  manufacturers  are  protecting  themselves  by 
trading;    otherwise   they  would  complain."    (**)  On  June   9,    1934,    a 
letter  was  forwarded  to  the   Code  Authority  by  the  Assistant  for  Code 
Administration  quoting  a   complaint   received  from  the  Lewistown 
Foundry  and  Machine   Co.,   Lewistown,    Paw   This  complaint  made   the  fol- 
lowing specific  charges: 

"   1.    Prices  for  castings  previous  to   the   institution  of   the 
Code  were  materially  lower'than   they  are  at   the  present 
time. 

"2.     Prices  after   the  effectiveness  of   the   Code  were  excessive 
and  resulted  from  agreements  entered  into   by  producers 

"3.     Previous   to   the   institution  of   the   Code   certain  types 
of  buyers  were  given  different  price    schedules  whereas 
now  these   buyers  receive  no   consideration." 

(*)    Code  Records  Pile 

(**)   Letter  from  Code  Administration  Member  -  April  7,1934  -  See 
Code  Records'    Piles. 


9826 


-  632  - 

The  Code  Authority  replied  to  this  complaint  at  some  length  and ~ 
investigation  was  promised. (*)  The  statement  was  made  that  prices  of 
steel  castings  had  advanced  only  10.2  per  cent  since  July,  1933, 
although  production  costs  had  increased  approxiamtely  20  percent. 

On  June  18,  1934,  the  International  Clay  Machinery  Company  for- 
warded a  letter  to  General  Johnson  objecting  to  many  of  the  provisions 
of  the  Code. 

Excerpts  from  this  letter  follow; 

"The  Cast  Steel  Code,  therefore,  works  to  the  advantage  of  all 
concerns  not  operating  a  steel  foundry,  as  follows: 

1.  "A 'steel  foundry  with  a  machine  shop  attached,  can  either  put 
their  castings  in  a t  the  code  prices  and  charge  either  nothing,  flat 
labor,  or  flat  labor  and  partial  overhead,  in  making  their  bid.  Or, 
they  can  put  their  steel  castings  in  at  a  lower  price  .than  we  can  buy 
them,  and  then  change  anything  for  their  labor  that  they  please,  which 
means  that  we  and  all  similar  concerns  purveying  to  the  Government 

in  the  past,  are  automatically  out  on  the  quotation. 

2.  "A  steel  foundry  without  a  machine  shop  can  put  their  castings 
in  at  either  the  Code  price  cr  any  price  they  please,  and  then  get 
some  local  machine  shop  chisler  to  give  them  a  price  on  the  machining, 
which,  with  their  f.o.b.  destination  clause  in  the  Code,  cuts  everyone 
else  out  who  does  not  have  a  steel  foundry,  and  who  must  pay  freight 
from  one  location  to  another  on  the  raw  steel  castings. 

3.  "  A  concern  operating  a  general  manufacturing  plant  holding 
considerable  stock  in  a  steel  foundry  juggles  the  supposed  Code  price 
on  castings  as  obtained  ^rom  their  subsidiary  and  their  own  machine 
work  in  such  a  manner  that  we  who  are  not  associated  with  a  steel 
foundry,  cannot  meet  this  competition. 

HTo  back  up  our  statements  in  this  matter,  we  are  attaching  a 
series  of  bid  compilations  as  furnished  us  by  the  War  Department  in 
recent  months. "(**) 

III.  INDUSTRY  REACTIONS  TO  OFFICE  MEMORANDUM  223  AMD  EXECUTIVE  ORDER  6767 

Under  date  of  June  9,  1934,  the  Code  Authority  addressed  a  letter 
to  all  members  announcing  that  it  would  vigorously  oppose  any  amend- 
ment of  the  Code  to  conform  with  Office  Memorandum  #228 

(*)Letter  to  Division  Administrator  form  Steel  Pounders'  Society, 
Price  Piling  Unit  Work  Sheets  —  Steel  Castings  Industry. 
(**)  Letter  to  General  Johnson  from  International  Clay  Machinery  Co.- 
June  18,  1934.  Price  Piling  Unit  Work  Sheets  -  Steel  Castings  Industry 


9826 


-  633  - 

On  June  11,  1934,  a  telegram  on  this  subject  was  forwarded  to 
General  Johnson  asserting  that  the  waiting  period  was  considered  the 
very  essence  of  their  open  price  policy  end  its  elimination  would 
lead  to  "the  return  to  the  conditions  of  chaos"  in  their  industry. 
The  immediate  withdrawal  of  Office  Memorandum  #228  was  urged. (*) 

On  July  5,  1934,  the  Steel  Founders1  Society  of  America  forwar- 
ded a.  letter  to  General  Johnson  protesting  Executive  Order  No,  6767' 
and  petitioning  for  its  withdrawl.  Excerpts  from  this  letter  are  as 
follows:.. 

"Prices  on  the  average  represent  an  advance  of  about  lO^o  only 
by  comparison  with  those  of  July,  1933  while  costs  have  in- 
creased nearly  20^  and  current  prices  are  lower  by  approximately 
13$  than  in  192S,  a  normal  year.  It  may  not  therefore  be  asserted 
with  any  justification  that  the  general  level  of  current  prices 
in  this  Industry  is  unfair  and  unreasonable . 

"  .  .  .  »  The  government  may  not  fairly  assume  that  it  is  entitled 
to  preferential  treatment  by  being  accorded  prices  lower  than 
those  to  other  customers.  The  reverse  proposition  could  easily 
be  demonstrated. 

"  .  .  .  .  Government  requirements  are  mostly  of  a.  special  chara- 
cter calling  for  castings  of  an  individual  type  making  it  im- 
possible, weight  for  weight  of  castings  compared,  for  producers 
of  steel  castings  to  obtain  costs  comparable  with  those  of  pro- 
ducts sold  to  other  large  customers. 

"  ....  It  should  be  manifest  that  it  would  be  impossible  to 
maintain  a  differential  in  favor  of  government  castings  as 
against  castings  of  similar  weight  classifications  for  other 
users. 

"...  In  the  light  of  the  admitted  and  well  known  fact  that 
government  castings  are  more  costly,  how  could  such  a  differen- 
tial be  justified  and  maintained? 


(*)  Steel  Founders'  Society  -  Telegram  to  General  Johnson,  June  11, 
1934  -  Code  Records'  Files. 


9826 


-  ^34  - 

"...  It  is  not  necessarily  true  that  prices  are  collusive,  ex- 
cessive and  non-competitive,  merely  "because  they  happen  to  "be 
identical.   Though  identical,  or  approximately  so,  these  prices 
usually  represent  the  lowest  that  any  member  in  the  Indxistry  feels 
he  may  quote  in  any  circumstance. 

"...  It  is  contended  that  the  Executive  Order  of  June  29th  is 
unfair  "because  it  does  not  give  consideration  to  conditions  in 
individual  industry.  -  -  -  It  is  destructive  to  morale  in  industry 
at  a  most  critical  period  of  recovery  "because  it  is  a  definite 
invitation  to  the  "chiseling"  minority  again  to  resort  to  the 
tactics  -which  "brought  about  the  demoralized  conditions  of  1932  and 
1933.* 

On  August  13,  1934  a  formal  petition  regarding  exemption  of  the 
Industry  from  the  provisions  of  the  Executive  Order  was  filed  with  the 
Administrator.   In  subsequent  correspondence  the  Code  Authority  was 
advised  that  in  ord°r  to  secure  a  reduction  in  the  15$  tolerance  it 
would  be  necessary  to,  present  evidence  to  the  effect  that  the  Executive 
Order  had  resulted  in  destructive  price  cutting. 

There  appears  to  have  b°en  no  further  action  relative  to  this 
matter.   In  a  letter  of  November  9,  1934  from  the  Code  Authority  to 
members  of  the  industry  it  was  pointed  out  that  the  Executive  Orders 
did  not  apply  to  quotations  or  sal^s  to  contractors  or  subcontractors, 
even  though  the  castings  might  be  used  for  a  government  job.   It  was 
also  emphasized  that  the  Executive  Order  was  permissive  only  and  not 
mandatory  and  "that  members  of  the  Industry  have  the  right  to  ignore 
it  if  they  chose."   The  letter  reported  that  there  were  only  three  • 
instances  to  date  in  Hiich  the  members  of  the  industry  had  made  the 
price  concessions  permitted  by  the  order.  (**) 

IV.   LATER  CODE  AUTHORITY  AND  NSA  ATTITUDES 

On  January  25,  1935,  the  Steel  Founders '  Society  of  America 
addressed  a  brief  to  the  National  Industrial  Recovery  Board  on  the 
general  subject  of  the  open  price  plan,  presumably  in  connection 
with  the  hearings  being  held  at  that  time.   This  document  sets 
forth  clearly  the  attitude  of  the  industry  regarding  the  open 
price  plan.   Excerpts  are  quoted  below! 


{.    )      Letter  -  Steel  Founders'  Society  of  America  -  to  General  Johnson  - 
July  5,  1934  -  Code  Records'  File. 

(**)  Letter  to  foundries  from  Code  Authority  -  November  9,  1934  -  Code 
Records'  File. 


9826 


-  630  - 

"The  Steel  Casting  Industry  is  not  interested  in  -orice-f  ixing 
as  correctly  defined  and  properly  interpreted.   It  is.  intensely 
interested  in  the  O-o^n  Price  Plan  with  a  waiting  -period,  such  as 
it  has  operated  under  for  a  period  of  fourteen  months  through  its 
Code  of  Pair  Comoetition,  which  was  approved  "by  the  President  on 
November  2,  1933.   It  desires  to  go  on  record  with  regard  to  the 
following  propositions! 

"l.  That  th°  O^en  Price  Plan  with  the  waiting  r>eriod,  while 
undeniably  tending  toward  uniformity  of  prices, and  therefore 
stabilization 

(a)  Is  not  a  method  of  Price-Fixing; 

(b)  Does  not  necessarily  involve  coercion,  intimidation 
or  collusion; 

(c)  Does  not  eliminate  fair  competition; 

(d)  Is  not  oppressive  to  small  enterprises;  and 

(e)  Is  not  against  the  -oublic  interest. 

■"?.  That  the  Cpen  Price  Plan  without,  a  waiting  period  is 
meaningless  and  valueless.  s 

'"'3.  That  no  general  -orohibition  applicable  to  all  industries, 
against  the  use  of  the  0-oen  Price  Plan  with  a  waiting  period, 
should  be  prescribed.   Conditions  vary  as  between  industries. 
Each  industry  should  be  the  subject  of  independent  study  and 
consideration. 

"4.  That  the  use  of  the  Ooen  Price  Plan  with  a  waiting  period 
should  be  encouraged,'  If  an  industry  can  prove  the  desirability, 
and  in  certain  cas°s  the  necessity  of  the  Open  Price  Plan  with  a 
waiting  period,  it  should  be  accorded  the  privilege  of  operating 
under  such  a  plan. 

"5.  That  the  0-oen  Price  Plan  with  a  waiting  period  is 
needed  as  a  protection  against  unscrupulous  and  dishonest  buyers. 

"6.  That  most  buyers  are  imbued  with  a  sense  of  integrity, 
accept  the  Open  Price  Plan  and  believe  that  it  is  fair  to  all. 

"7.  That  One  Price  Plan  (a  very  good  example  of  the  Open 
Price  Plan)  has  become  an  established  institution  through  years  of 
use  in  department  store  merchandising.   It  has  been'  applauded  and 
hailed  as  the  fairest  known  method'  of  selling.   The  same  practice 
prevails  with  the  catalog  houses.   If  that  be  true  with  respect 
to  those  institutions,  there  is  no  logic  in  denying  the  probability 
that  the  same  will  be  true  in  industry. 

"8.  That  it  has  been  the  established  policy  of  Federal,  State, 
Municipal  and  other  governmental  agencies  to  make  public  a  list 
of  all  bidders,  together  with  their  -orices,  when  a  contract  is 
awarded  by  such  agencies.   This  practice  has  profoundly  influenced 
the  making  of  bids  and  has  usually  r°s\ilted  in  lowering  the  price 
levels  for  materials  sold  to  such  agencies.   Th*  Open  Price  Plan 


9826 


■ •         -  636  - 

with  a  waiting  oeriod  is  not  detrimental  to  the  interest  of  such 
agencies  and  generally  '-ill  likewise  result  in  the  lowest  obtain- 
ahle  levels  of  nrice, 

"9.  That  many  industries  without  the  stabilizing  effect  of 
the  Open  Price  Plan  with  the  waiting  period  cannot  support  the 
labor  -provisions  in  their  codes."  (*) 

Under  date  of  May  16,  19,35,  the  Consumer's  Advisory  Board  (**) 
revised  the  various  provisions  of  this  Cod°  and  recommended  that 
many  of  the  Commercial  Resolutions  issued  by  th<=  Code  Authority 
be  stayed  as  contrary  to  policy.   In  addition  the  Board  criticized  the 
Industry's  pricing  practices  as  follows: 

"The  members  of  the  Code  Authority  have  frequently  made 
statements  to  the  effect  that  industry  members  are  allowed  the 
•  utmost  freedom  in  p~ice  filing,  that  the  system  worked  out  by  the 
Society  provides  merely  for  more  intelligent  pricing  based  on 
knowledge  of  e*ach  other's  filings,  that  any  uniformity  of  prices 
as  a  result  of  the  system  has  been  a  uniformity  at  tha  noint  of 
lowest  filed  price,   and  that  -there  is  no  price— fixing,  etc. 
And  the  Consumers'  advisory  Board  has  had  great  difficulty  (in 
this  and  in  similar  situations)  in  finding  any  terminology 
that  can  b°  used  in  common  with  the  Code  Authority  in  such  a 
discussion.   What  this  Board  understands  by  "price  fixing"is 
price  control,  a  control  of  all  or  eny   of  the  -orice  factors 
making  up  the  net  nrice;  and  there  are  many  such  nrice  factors. 
Under  this  meaning  of  the  ^ord  nriee-f ixing,  there  has  been  no 
fixing  of  base  prices  in  the  Steel  Casting  Industry  but  there  has 
been  a  fixing  of  weight  and  piece  extras  and  deductions.   This 
latter  class  of  nrices  is  an  important  component  part  of  the  net 
price  as  is  any  other,  and  Commercial  Resolution  No.  16  very 
definitely  takes  this  factor  out  of  the  r°alm  of  nrice  filing  into 
that  of  nrice  fixing."  (**) 

.  "It  might  seem  a  far  cry  from  classification  to  -price 
fixing.   But  even  if  nrice  fixing  ^rs  not  involved,  the  assumption 
of  pow-=r  to  classify  nroducts  in  this  industry  can  be  justified  by 
no  provision  in  the  Steel  Casting  Code.   In  our  oninion  such  a 
nower,  wi°lded  as  the  code  authority  may  see  fit,  has  tremendous 
oossibilities.   Its  implications  include  the  ability  to  harass 
industry  members  who  are'  obstreperous,  although  observing  the 
letter  of  the  code.   But  it  has. price  control  implications  also, 
because  the  ability  to  out  classifications  on  a  common  basis  would 
surely  enable  the  influential  members  of  the  industry  to  exercise 


(*)   Brief  on  ?ric°  Control  Provisions  in  Codes  of  Fair  Competition  — 
Steel  Founders'  Society  of  America  —  January  25,  1935. 

(**)  Consumers'  Advisory  Board,  B.  3.  Lovell  Memorandum  to  J.  B.  Freund, 
Deputy  Administrator'-  May  16,  1935. 


9826 


-  637  - 

their  powers  of  price  leadership  to  function  to  the  fullest  °xtent. 
And  this  is  no  theory.   Such  a  succession  of  events  has  occurred 
in  other  industries,  with  ^ell  recognized  results.   Products 
classification  is  another  one  of  those  factors  the  control  over 
which  mak°s  it  so  much  harder  to  file  a  price  in  relation  to  your 
costs  and  your  market  and  much  easier  to  file  prices  identical  with 
those  considered  desirable  "by  certain  of  the  larger  foundries. " (*) 

Further:  discussion  or  action  with  resnect  to  the  subject  was 
halted  "by  the  Schechter  decision,  May  27,  1935,  declaring  the  ERA 
unconstitutional  and  voiding  the  codes. 


(*)   Consumers'  Advisory  Board,  L-  B.  Lovell  Memorandum  to  J«  B.  Freund, 
Deputy  Administrator  -  May  16,  1935. 


9826 


-  638  - 
CHAPTER  V 

STATISTICAL  ANALYSIS  OF  TYPES  OF  FILINGS  RECEIVED 

This  chapter  will  attempt  to  present  a  statistical  picture  of  the 
nature  and  frequency  of  the  different  types  of  filings  received  by  the 
Steel  Castings  Code  Authority  during  the  life  of  the  code,  as  obtainable 
from  its  ov/n  reports  of  these  filings. 

The  analyses  included  will  appear  in  the  following  order: 

I.  Analysis  of  Filings  Relating  to  Prices. 

A.  Frequency  of  Filing  of  Hew  Low  Prices  and  New 
Classification  Schedules. 

B.  Extent  of  Use  of  "Same  As"  Filings. 

C.  Extent  of  Use  of  "Blanket"  Filings. 

D.  Use  of  Withdrawals* 

II.  Analysis  of  Filings  Relating  to  Discounts  and  Allowances. 

A.  Disccuits  to  Other  Foundries 

B.  Allowance  of  Freight  Charges. 

C.  Allowances  on  Patterns  and  Equipment. 

III.  Analysis  of  Filings  Relating  to  "Price  Extras". 
IV.  Analysis  of  Filings  Relating  to  Contracts. 

I.   ANALYSIS  OF  FILINGS  RELATING  TO  PRICES  (FOR  CUSTOMER-Users) 

As  far  as  it  was  possible  to  determine  from  the  price  filings  quoted 
in  the  Daily  Reports,  the  following  data  were  obtained  and  tabulated  for  e 
each  steel  casting  foundry: 

(a)   The  number  of  times  filings  of  any  type,  price,  discounts, 
allowances,  etc.,  were  made  with  the  Society. 

The  number  of  new  low  minimum  schedules  filed  (L) . 

The  number  of  schedules  filed  on  new  claacificitions  (N)j 

The  number  of  divisional  low  schedules  filed  (,DL)  . 

The  number  of  divisional  new  classifications  filed  (DN) . 

The  number  cf  increased  prices  filed  (H). 

The  above  tabulations  all  refer  to  prices  filed  for  Customer-Users. 

Each  new  low  minimum  schedule  was  the  lowest  on  record  from  the  be- 
ginning of  the  Code  to  the  d~te  of  its  filing.   These  schedules  were  always 
subject  to  a  ten  dry  waiting  period  before  becoming  effective.   The  ten  day 
waiting  period  also  applied  to  new  classifications.  All  other  types  of  fil- 
ing became  effective  immediately,  except  that  filings  to  meet  competition 
did  not  become  effective  until  the  ten  day  period  applying  to  the  original 
filing  had  expired. 

Table  VI  Exhibit  I  shows  the  frequenc-"-  distribution  of  filings  by 
divisions.   Practically  all  foundries  participated  in  the  filing  of  prices 
Some  foundries  filed  very  frequently,  while  others  were  relatively  non- 
participant.   Those  foundries  which  did  not  take  part  in  the  filing,  as 

9826 


-  639  - 

indicated  by  the  daily  reports,  './ere  nos.  4Q6,  409,  610,  710,  716,  809, 
817,  829  and  833.   These  were  without  exception  very  small  conserns  with 
an  average  monthly  capacity  of  about  two  tons  each.  Wo  filings  were  re-_ 
corded  for  foundries  nos.  702  and  703,  operated  by  the  American  Steel  Foun- 
dries Company,-  the  largest  unit  in  the  Industry.   It  is  assumed  that  sales 
or  quotations  made  bv  these  foundries  were  filed  by  other  units  of  the 
company. 

This  record  of  the  total  number  of  filings  made  by  each  foundry  gives 
no  idea  of  the  actual  number  of  classifications  on  which  filings  were  made. 
As  most  of  the  filings  on  individual  classifications  '.7ere  merely  revisions, 
no  exact  statistical  tabulation  was  made.   However,  a  count  was  made  of  all 
other  important  changes  resulting  from  this  system  of  price  filing.   Table 
VI  Exhibit  I  shows  the  number  of  each  of  these  filings  for  each  geographical 
division.   Totals  of  these  tabulations  are  not  significant  when  considering  ' 
the  Industry  as  a  whole,  because  of  duplications.  A  number  of  times  three 
or  more  foundries  sent  in  identical  "low"  filings  on  a  number  of  schedules, 
which  were  recorded  in  the  daily  price  reports  as  one  filing.   In  view  of 
this  fact,  the  number  of  "L's"  or  low  schedules  placed  on  record  indicated 
that  only  one  foundry,  instead  of  sevr.:al,"  had  filed  classifications.   In 
this  tabulation,  such  filings  are  included  as  though  each  foundry  had  filed 
on  separate  classifications;  in  other  words,  the  number  opposite  each  foun- 
dry represents  the  number  of  times  it  participated  in  the  .creation  of  such 
filings,  regardless  of  whether  the  filing  was  made  alone  or  in  combination 
with  other  foundries. 

A.   Frequency,  of  Filing  of  New  Low  Prices  and  New  Classif ication 
Schedule s  ; 

As  recorded  in  the  price  reports,  less  than  half  of  the  foundries 
initiated  the  filing  of  new  low  prices.  A  considerable  number  of  the 
"lows"  that  were  listed  were  filed  by  the  smaller  members  of  the  Industry. 
Foundry  No.  705,  the  Duncan  Foundry  and  Machine  TJorks,  having  a  monthly 
capacity  of  less  than  ten  tons,  '..'as  responsible  for  almost  200  of  the  total 
of  approximately  800  "low' schedules. " 

An  explanation  of  this  record  of  unusual  filing  activity  is  included 
later  in  this  chapter. 

In  a  great  many  instances,  the  schedules  on  classifications  eatabli sh- 
ed early  in  the  Code  Period  were  not  changed.  TThile  the  price  reports  did 
not  disclose  the  names  of  the  foundries  which  filed  the  original  low,  it  is 
believed  that  on  the  more  important  classifications  the  large  and  the  most 
efficient  foundries  created  the  "level." 

•  Nearly  all  foundries  participated  in  the  filing  on  new  classifications. 
However,  foundries  in  Divisions  V  and  VI  filed  nearly  three-fourths  of 
these.   The  DL,  DN,  and  H  types  were  first  filed  toward  the  end  of  1934. 

Most  of  the  new  low  prices  and  new  classifications  were  filed  during 
the  first  few  months  after  the  Code  became  effective.  (See  Exhibit  I,  Table 
VII.)   While  there  were  in  all  about  1,200  classifications,  relatively  few 
price  reductions  were  filed  after  that  early  period.   This  is  an  indication 
of  the  stability  of  prices  during  most  of  the  Code  period. 


9826 


*i  '640  -< 

B.  Extent  of  Use  of  "Same  As" •Filings. 

Table  VIII,  Exhibit  I,  gives  a  sample  of  "same  as11  filings*   In  fil- 
ings of  this  type,  procedure  usually  followed  was  to  file  the  same  sche- 
dules or  information  included  by  another  foundry  in  a  specified  reports  thus 
meeting  competition.   This  type  of  filing,  according  to  the  Agency,  reduced 
the  amount  of  clerical  work,  which  in  some  other  types  necessitated  the  re- 
cording of  schedules  on  hundreds  of  classifications.  Filings  of  this  "same 
as"  type  also  tended  to  promote  uniformity  of  prices.  Data  appearing  in 
Appendix  Table  VIII  relating  to  price  filings  of  Extras,  Railway  Freight 
assumed  by  certain  companies  in  establishing  prices  for  these  items. 

That  "same  as"  filing  met  with  considerable  favor  was  indicated  by 
the  fact  that  it  was  used  by  15?  foundries,  at  one  time  or  another.   It 
was  in  general  use  only  where  a  considerable  number  of  classifications 
were  involved. 

C .  Extent  of  Use  of  "Blanket"  Filings 

The  "blanket"  filing  was  frequently  used.  (Appendix  Tat)le  IX.)  In  a 
filing  of  this  type,  the  foundry  merely  stated  that  it  filed  all  schedules 
for  a  specific  division  to  conform  with  those  shown  in  a  specific  quarterly 
report  or  bulletin  issued  by  the  Agency.  In  some  cases,  the  foundry  indi- 
cated that  it  filed  all  the  quarterly  report  schedules  with  certain  excep- 
tions or  additions  to  those  listed  in  the  quarterly  report.  There  were 
496  filings  of  this  type;  165  foundries  employing  it  at  least  once. 

D.  "Withdrawals" 

I.   The  Nature  of  Withdrawals 

The  practice  of  withdrawing  price  schedules  was  one  of  the  features 
of  the  Steel  Casting  Industry  open-price  system.   The  386  reports  of  the 
Steel  Founders'  Society  show  two  classes  of  withdrawals.   In  the  first 
class,  the  withdrawals  were  accompanied  by  a  refiling  for  the  same  product 
effective  the  same  date  as  the  withdrawal.   Apparently,  there  was  only  one 
real  difference  between  this  method  of  changing  a  price  schedule  and  the 
more  usual  one  in  which  the  product  and  its  appropriate  schedule  were 
listed  as  a  revision  without  the  formality  of  prior  withdrawal.   In  a 
revision  from  a  minimum  schedule,  the  minimum  schedule  still  remained 
the  permissible  low  market  price  regardless  of  whether  any  foundry  con- 
tinued to  file  at  that  level,  and  a  ten  day  waiting  period  was  not  re- 
quired should  any  member  wish  to  lower  his  price  to  such  minimum.  However, 
if  a  foundry  withdrew  its  low  schedule  and  filed  a  higher  one,  the  price 
schedule  was  removed  from  the  market  as  a  minimum  and  any  member  desiring 
to  quote  at  the  old  minimum  would  have  to  wait  ten  days  before  his  price 
could  become  effective. 

In  the  second  class  of  withdrawals  the  withdrawing  foundry  refiled 
the  item  or  items  either  in  a  later  report  or  not  at  all.  Under  with- 
drawals of  this  type,  a  period  of  time  elapsed  during  which  the  member  had 
no  designated  price  schedule  for  the  items  infolved.   During  this  period 
he  was  not  supposed  to  sell  or  quote  such  items. 

A  tabulation  was  made  of  the  122  instances  of  this  latter  type  of 


-  641  - 

withdrawal.   See  Table  (Xl)   (i) ,  below.  Only  withdrawals  of  schedules  have 
"been  treated.  Withdrawals  of  price  extras,  etc.,  were  omitted. 

table  (xi)  (i) 

dumber  of  Foundries  Filing 

GENUINE  WITHDRAWALS 
BY  DIVISIONS  AND  BY  MONTHS 


DATE 


Year;  Month 


DIVISIONS 
:  5  :  6 


Totals 


1933 

Dec. 

1934 

Jan. 

5 

Feb. 

2 

Mar. 

2 

Apr. 

3 

1 

May- 

1 

June 

2 

July 

3 

Aug. 

1 

Sept. 

Oct. 

Nov. 

Dec. 

1935 

Jan. 

Feb. 
Mar. 
Apr. 

May 

1 

4 

4 

1 

1 

3 

3 

1 

3 

4 

1 

4 

1 

2 

2 

1 

1 

6 

3 

2 

1 

5 

1 

3 

2 

3 

1 

6 

5 

3 

1 

3 

2 

1 

1 
1 

4 

1 

5 

1 

1 

1 

1 

1 

14 

10 

15 

10 

13 

9 

11 

16 

6 

2 

1 

4 

0 

1 

6 

3 


Totals 


12 


34 


42 


14 


122 


It  is  apparent,  first,  that  the  major  portion  of  these  withdrawals 
were  filed  during  the  months  from  January  to  August,  1934,  and,  second, 
that,  the  foundries  .in  divisions  V  and  Vl  together  filed  almost  twice 
as  many  withdrawals  as  all  of  the  foundries  in  the  remaining  six  divisions. 
The  frequency  of  withdrawals  during  the  first  half  of  1934  presumably 
resulted  from  changes  made  to  conform  with  the  standard  classifications 
specified  by  the  Definitions  &  Classifications  Committee. 

The  disproportionately  large  number  of ^ withdrawals  in  divisions  5 
and  6  may  be  explained,  in  part,  by  the  fact  that  there  were  more  found- 
ries in  these  divisions  than  in  the  average  division.   However,  allowing 
for  this,  there  were,  on  the  average,  1.8  withdrawals  per  foundry  in  these 
two  divisions  for  each  withdrawal  per  foundry  in  the  other  divisions. 

Of  the  122  cases  in  the  table  above,  representing  over  1,067  items, 
three  cases  lacked  data  showing  the  number  of  items  involved;  in  ten  cases 
the  date  of  the  original  filing  could  not  be  determined,  and  in  eleven 
cases  the  withdrawal  was  effective  on  the  same  date  as  the  original  -filing. 
The  remaining  98  cases  represented  888  items.   An  average  of  the  number  of 
days  these  schedules  were  effective  prior  to  withdrawal  was  calculated. 
This  was  found  to  be  37.4  days. 

Thirty- three  of  these  98  cases,  representing  52  items,  were  with— 


9826 


-642- 

drawals  of  classifications  of  items  not  recorded  in  the  third  Quarterly 
Report. 

Sixteen  cases  of  the  remaining  6^  cases  included  5  or  more  items 
each  and  represented  a  total  of  769  items. 

The  remaining  4-9  cases  comprised  67  items. 

The  use  of  withdrawals  as  a  means  of  protecting  en  established  price 
level  has  already  "been  mentioned.   It  remains  (a)  to  show  the  use  of 
withdrawals  for  the  purpose  of  removing  classifications  of  items  not  gen- 
erally accepted  as  standard  classifications  from  the  published  record; 
(b)  to  analyze  withdrawals  from  the  standpoint  of  the  length  of  time  the 
schedules  were  effective  before  withdrawal  and  the  length  of  time 
elapsing  before  the  schedules  were  refiled;  and  (c)  to  consider  the  price 
changes  affected  by  the  use  of  the  device. 

a.  Removing  Classifications 

By  the  time  the  third  quarterly  report  was  published  the 
classif ication  of  products  was  more  uniformly  established  than  in  prior 
reports.   For  this  reason  the  classification  of  products  as  given  in 
the  third  quarterly  report  has  been  chc sen  for  the  analysis  of  those 
withdrawal  cases  in  which  the  apparent  purpose  was  to  correct  discrepan- 
cies in  the  classification  of  items  already  filed. 

Approximately  one- third  of  the  withdrawal  cases  were  with- 
drawals of  classifications  and  specifications  not  regarded  as  standard 
according  to  the  third  quarterly  report.  For  example,  the  withdrawal 
of  "Drying  Car  'Theel  Castings"  by  the  Ohio  Steel  Foundry  Company 
eliminated  this  item  from  the  classification  list  entirely. 

The  withdrawal  of  "Automobile  Truck  Castings,  IT0C3N11  is  (*) 
especially  interesting  since  "confirmation"  of  this  filing  from  the 
foundry  was  requested  by  the  Society.   Eighty  days  elapsed  between  the 
effective  date  of  this  filing  and  its  final  publication,  which  was 
accompanied  by  a  note  from  the  Steel  Founders'  Society  stating  that 
several  requests  for  conf irmation  had  been  unanswered  by  the  foundry 
and  that  the  Society  felt  it  could  wait  no  longer  to  publish  the  class- 
ifications and  schedules.   The  day  following  its  publication  the  filing 
was  withdrawn  by  the  foundry.   Request  for  confirmation  of  filings  was 
apparently  not  a  usual  practice,  except  in  cases  where  grave  doubt 
existed  as  to  the  accuracy  of  the  filed  data. 

b.  Effective  Period  Before  Withdrawal. 

A  total  of  848  items  were  included  in  schedules  which  were  with- 
drawn and  then  refiled  at  a  date  later  than  that  of  the  daily  report  not- 
ing -their  withdrawal.   The  average  number  of  days  elapsing  between  the 
effective  dates  of  the  schedules  withdrawn  and  their  dates  of  withdrawal 
was  37.4  days.   i.Iany  of  these  items  were  combined  in  only  a  few  cases, 
so  that  this  average  is  very  heavily  weighted  by  a  few  cases.   If  sixteen 
cases  which  contained  five  or  more  items  are-  removed,  the  number  of  items 
is  reduced  by  769  leaving  79  items.   The  average  nunber  of  days  between 
effective  and  withdrawal  dates  for  this  smaller  group  of  items  was 
twenty-five.      About  one-fourth  of  these 


(*)   The  Symbol  "NCGBIT"  means  "not  otherwise  classified  by  name." 


r\  n  «-i  /* 


J5U3- 


were  between  one  and  ten  days;  another  fourth  between  eleven  and  twenty- 
twod  days;  another  fourth  between  twenty-three  and  fort  -four  days;  and 
the  others  between  fort" '-five  and  two  hundred  days. 

The  average  number  of  days  elapsing  between  the  date  of  withdrawal 
of  schedules  and  the  date  of  refiling  for  the  smaller  group  was  seventy- 
seven.   On  the  other  hand,  the  average  for  the  S4S  ite.  is  was  thirty-four 
and  a  half  days. 

c.  Price  Changes  Effected  by  withdrawals. 

Those  withdrawals  which  resulted  in  a  change  of  the  price  schedules 
are  of  particular  interest.  Of  the  seventy-nine  items  noted  above, 
thirty-eight  itens  or  forty-eight  per  cent  represented  withdrawals  of 
schedules  which  were  identical  with  those  listed  in  the  quarterly  re- 
ports.  Twenty-nine  items  or  thirty-seven  per  cent  were  withdrawals  from 
a  lower  price  schedule  than  the  one  listed  in  the  quarterly  report.   In 
these  cases  the  refiling  was  at  a  higher  schedule,  the  average  increase 
being  2.3  price  schedules  per  item.   Twelve  itens  or  fifteen  per  cent 
were  withdrawals  from  a  higher  price  schedule  than  the  one  listed  in  the 
quarterly  report.  The  refilings  were  made  at  an  average  decrease  of 
3.4  price  schedules  per  item. 

(1)   Lower  Price  Schedules  Withdrawn 

The  following  examples  are  cases  in  which  foundries  filed  low 
schedules  and  then  withdrew  them  after  the  price  had  been  effective  for 
a  short  period,  occasionally  for  only  one  day.  A  higher  price  effective 
on  the  withdrawal  date  or  soon  thereafter  was  usually  filed  concurrently. 

Item  1.   "Automobile  Body  Skid  Brackets  or  Posts" 

;  No.  of   Date  of    Price 
Action         Report   Ile'oort     Schedule 

Piled  9/7/34        209    9/17/3^  P 

'.Tithdrew  9/17/34     210    3/17/34  P 

P.efiled  9/17/34      211    3/12/34  M 

berly  Report  (Division  6  only)  M 

Schedule  P  was  the  first  filing  for  this  classification.   It  nay 
have  been  that  this  foundry  filed  Schedule  P,  transacted  business  at  the 
price  filed  and  withdrew  the  schedule  immediately  thereafter.   This 
would  have  the  effect  of  preventing  any  subsequent  .filing  at  the  same 
price  from  becoming  effective  prior  to  the  expiration  of  the  ten-day 
waiting  period. 

The  first  filing,  filed  September  7,"  effective  September  17,  was  not 
reported  until  September  l4,  while  the  withdrawal  was  filed  September  17, 
effective  September  17,  and  reported  September  17.   The  delay  in  the  first 
instance  may  have  been  due  to  the  fact  that  the  definitions  and  classi- 
fications committee  of  the  Code  Authority  delayed  taking  action. 

0826 


Effective 
Date 

Foundry 

Number 

9/17/34 
9/17/34 
9/17/34   ' 
9/20/34 

625 
625 
625 
Third  Qua 

-  644  - 
Item  2.   "Ball  (and  Rod)  Mill  Liners." 

Price 

Effective  Date  Schedule 

3/8/34      Foundry  811  filed  (Revision) U 

3/21/34     Foundry  811  withdrew  U  " 

3/31/34     First  Quarterly  Report  -  all  foundries  U 

6/15/34     Second  Quarterly  Report  -  2  foundries  S 

"   all  others     Q 
9/20/34     Third  Quarterly  Report  -  Divisions  6  and  8-     S 

-  all  others     Q 
11/26/34     Foundry  811  refiled  S 

This  item  represents  a  oa.4§  where  schedule  U  was  revised  upward  - 
part  of  the  foundries  filing  (Q)  and  the  others  filing  (s). 
Foundry  811  withdraw  intil  after  the  "price  level  had  'become  more  stabi- 
lised'. 


Item  3.   "Buoy  Castings  -  N.G.  C.B.N 


u 


Price 

Effective  Date  Schedule 

1/25/34     Foundry  410  filed  (Revision  "    R 

2/20/34     Foundry  410  withdrew  R 

3/31/34     First  Quarterly  Report  -  Div.3,7,8  K 

~  all  others  0 
6/15/34  Second  Quarterly  Report  -  all  divisions  filed  K 
6/29/34     Foundry  410  refiled  by  reference  to  quarterly 

reports  K 

A  number  of  foundries  withdrew  schedule  0  and  refiled  schedule 
K  in  the   same   daily  report,    revising  the  price  upward  in  the  process. 

Item  4.    •  "Dragline  Excavator  (Walking  Type)    Castings 
N.G. C.B.N." 

Price 
Effective  Date  Schedule 

5/2/34  Foundry  612  filed  (Revision)   — "         S 

6/15/34     Second  Quarterly  Report  -  all  foundries  S 

8/14/34    'Foundry  612  withdrew  S 

8/17/34     Foundry  612  filed;  (less  than  25#,N.Qi_Dfc  24 

pes. R 

(over  25#,  N.Q.D.24  pes.     P 
9/20/34     Third  Quarterly  Report  Div.l:  1~100#  -  I; 

over  100#  -  H 
Div.    5:    l-25#  ~  R;    over  25#  P-N.Q.D.24 
pes. 

Div. 6:    1 S 

Div.  8:'  1~100#  -  K;    100#  -  J 


It  appjars  that  Foundry  612  filed  schedules  in  order  to  match 
higher   competitive  prices   in  Division  5. 


-  645  ~ 
Item  5. 

Price 
Effective  Pate  Schddule 

12/28/33       Foundry  511  filed  0 

1/3/34        Foundry  511  withdrew 0 

3/31/34        First  (and  all  subsequent ) quarterly  reports   M 
4/9/34        Foundry  511  refiled  M 

■Whether  a  low  price  was  filed  for  a  few  days  to  secure  certain 
"business,  and  then  withdrawn,  or  whether  revision  was  to  natch  higher 
prices  "by  others,  is  not  clear. 


Item  6.  "Elevator  Castings  for  Buildings.  IT.  0.  C.  B.  N.  " 

Price 
Effective  Date  Schedule 

3/19/34        Foundry  116  filed  (Revision)  0 

3/28/34        Foundry  116  withdrew  0 

3/31/34       First  Quarterly  Report  Foundry  116  and 

Foundry  111,  (o)  all  others  N 

No  record  of  refiling  by  F.  116 

3/23/34        Foundry  111  filed  (revision)  0 

4/3/34        Foundry  111  withdrew  0 

3/31/34        First  Quarterly  Report  -  Foundry  116  &  111, 

(C)  all  others  N 

7/7/34        Foundry  refiled  by  reference  to  second 

quarterly  report - N 


These  two  foundries  filed  and  later  withdrew  schedules  wiiich  were 
lower  than  those  f;iled  by  other  members  of  the  industry. 


Item  7.  Gears  -  Cast  Tooth  and  Blank  1  to  250#; 
250#  &  over 


Effective  Date 

3/31/34  First  Quarterly  Report  all  foundries  v? M-/-G 

4/11/34  Foundry  105  filed  (Revision)  N/P 

4/23/34  Foundry  105  withdrew  N/P 

7/3/34  Foundry  105  filed  by  reference  to  2nd  Q. R. —  m/G 

This  is  another  example  of  prices  being  lowered  and  almost  immed- 
iately revised  upward  by  the  method  of  withdrawing  schedules  to  protect 
the  market. 

These  seven  examples  illustrate  the  withdrawal  of  price  schedules 
from  a  lower  bracket  and  the  eventual  refiling  of  higher  ones.  General- 
ization is  difficult  and  the  actual  motives  prompting  withdrawal  in  the 
various  cases  cannot  be  ascertained.  However,  when  the  industry  wished 
to  raise  the  price  of  some  product,  withdrawal  of  the  lower  schedule  was 
the  practice  resorted  to.  When  the  last  foundry  had  withdrawn  the  schedule  , 

9826 


-  646  - 

it    could  no   longer  function  as   a  minimum  price.    When  a  foundry  filed  a 
price   lower  than   the  minimum  for   the  purpose   of  obtaining   special   jobs, 
the  immediate  withdrawal  of   such  schedules  protected  the  market  by 
making  lower   schedules  filed  by  other  foundries  ineffective  until  the 
expiration  of  the  ten-day  waiting  period. 

(2).      Higher  price   Schedule  Withdrawn. 

The  following  examples  are   cases  of  lower  prices  being  substi- 
tuted for  higher  ones.      The  usual  expedient   would  be  merely  to   refile 
at   lo^er  schedules.      In  these   cases  higher  schedules  were  withdrawn 
prior  to  filing  lower  schedules. 


Item  1.      "Automobile  Transmission  Shift  Forks. 


Effective  Date                                                                                          Price  Schedule 

12/26/33  Foundry  207  filed  J 

1/13/34  Foundry  207  withdrew  J 

3/31/34  First  Quarterly  Report  K 

6/15/34  Second  Quarterly  Report K 

7/14/34  Foundry  207  refiled  by  reference  to  second 

quarterly  report  K 

This  appears  to  be  a  case  in  which  the  price  was  reduced  to 
the  level  established  by  other  member  of  the  industry. 

Item  2.   "Boiler  and  Tank  Castings  (Not  subject  to  pressure) 

N.G. C.B.N. 

Effective  Date  Price  Schedule 

2/17/34  Foundry  507  filed  "     K 

3/29/34  Foundry  507  withdrew  K 

3/31/34/  First  Quarterly  Report  M 

6/15/34  Second  Quarterly  Report  M 

7/3/34  Foundry  507  refiled  by  daily  report  —      M 


Item  3.    "Lock  and  Dam  Castings  N.O. C.B.N." 

Effective  Date  Price   Schedule 

3^/26/34  Foundry  418  Filed     " 

.  (less  than  50# N 

(over  50# Q 

3/31/34                   First  Quarterly  Report   6 

4/4/34        Foundry  418  withdrew  

(less  than  50# N 

'  (over  50# Q 

4/10/34       Foundry  418  refiled  by  daily  report  (no 

weight  class)  0 

This  case  illustrates  the  withdrawal  of  weight  differentials  and 
refiling  of  a  single  classification  in  accordance  with  the  practice  of 


-  647  - 
other  members  of  the  industry, 

These  are  typical  illustrations  of  withdrawals  for  the  purpose  of 
lowering  the  price  schedule.  It  appears  that  the  filing  foundry  mis- 
judged the  market  level  and  filed  a  higher  price  than  other  members  of 
the  industry,  and  was  forced  to  reduce  it  to  meet  competition. 

c.    Withdrawal  of  Identical  Price  Schedule 

(3).   A  Sample  Case  nf  a  Large  Number  of  Items  Withdrawn 

The  discussion  of  withdrawals  would  be  incomplete  without 
examining  at  least  one  case  in  which  a  large  number  of  items  were  iw 
withdrawn,  perhaps  the  uost  interesting  of  this  group  involoved  Foundry 
7£5,  Duncan  Foundry  and  Machine  Works, -which  was  one  of  the  smallest 
foundries  in  the  industry.  The  chronological  history  of  their  filings 
and  witbcrawals  is  as  follows: 


Effective    Foundry 
Date      Number 
3/16/34     705   filed  15  items   (Revision) 
3/26/34     705   filed  97  items   (New  Low  Schedules) 
3/27/34     7'~>5   withdrew  112  items  (Those  listed 

above) 
3/26/34     705   filed  record  of  sales  contract  with 

one  customer  for  two  items,  for  one 
year 
4/18/34     705   filed  108  items   (New  Low  Schedules) 
4/16/35     705   withdrew  108  items 
4/18/35     ■?05r   filed  record  of  3  months'  contract 

with  one  customer,  55  items 

Any  explanation  of  the  basis  for  these  moves  by  the  Duncan 
Foundry  is  necessarily  based  oh  conjecture.   It  is,  however,  plausible 
to  assume  that  this  concern  found  it  desirable  to  offer  a  price  differen- 
tial to  its  customers.  Under  the  terms  of  Commercial  Resolution  #38,  a 
member  could  continue  to  sell  his  product  under  the  terms  of  a  binding 
contract,  even  though  the  contract  price  was  lower  that  his  effective  „>.' 
fried  price.   It  appears  that  the  Duncan  Foundry  took  advantage  of  this 
method  of  selling  their  castings,  since,  in  the  case  of  the  first  with- 
drawal  they  seem  to  have  made  their  sale  at  the  filed  prioi  and  then  made 
a  contract  for  two  other  items  when  their  prices  were  withdrawing, in  the 
case  of  the  second  withdrawal,  they  withdrew  their  filed  prices  before 
they  became  effective  and  negotiated  a  contract  for  the  same  items  instead. 

(*) 


m 


( *)    The  55  items  mentioned  in  the  contract  probably  refer  to  the  same 
items  on  which  price  schedules,  were  filed.   In  the  price  Report  practic- 
ally every  item  was  given  two  schedules,-  one  for  a  small  number  of  pieces 
and  one  for  a  large  number  of  pieces.  This  explains  how  a  contract  for 
55  items  could  include  approximately 
/112  filed  items. 

9826 


-  648  - 

In  this  way  the  low  prices  quoted  "by  the  Duncan  Foundry  were  prev- 
ented from  'becoming  effective  and  disturbing  the  market.  Also  the  Duncan 
Foundry  was  able  to  establish  a  price  differential  suitable-  to  its  needs 
without  influencing  or  being  influenced  by  the;  prices  maintained  by  other 
members  of  the  industry. 

2.  purposes  of  Withdrawals 

The  objects  for  which  the  withdrawal  of  price  schedules  appear 
principally  to  have  been  employed  may  be  summarized  as  follows: 

a.  To  remove  from  the  published  price  record  those  classifications 
of  items  not  accepted  or  approved  by  the  Definitions  and 
Classifications  Committee. 

b.  To  remove  from  the  record  a  price  that  appeared  too  high  in 
comparison  with  prices  filed  by  other  members  of  the  Industry. 

c.  To  remove  from  the  record  those  prices  which  were  believed  to 

be  too  low  in  comparison  with  prices  filed  by  other  members  of 
the  industry. 

d.  To  remove  a  specific  minimum  schedule  from  the  published  prices 
so  that  a  waiting  period  would  be  necessary  before  that  schedule 
could  again  be  quoted. 

Further  statictical  analysis  of  uthe  sample  cases  presented  in  the 
table  abpve  adds  certain  results  which,  together  with  those  given  in 
connection  with  the  table,,  may  be  summarized  as  follows: 

a.  There  were  122  cases  of  wothdrawals,  excluding  those  for  which 
other  schedules  were  refiled  in  the  same  report.  Divisions 

5  and  6  filed  more  than  an  average  number  of  withdrawals. 

b.  The  great  majority  of  cases  were  withdrawals  of  less  than  five 
items. 

c.  Approximately  one-third  of  the  withdrawals  were  for  the  purpose 
of  removing  unapproved  classifications  from  the  published  price 
record. 

d.  Of  the  remainder,  16  cases  included  five  or  more  items  and  rep- 
resented a  total  of  769  items. 


9826 


•-  649  - 

Analysis  of  this  special  sample  siiows  that  nearly  one-half  of 
the'  items  were  withdrawn  at  the  same  schedule  (price  level)  as 
that  recorded  for  the  item  in  the  quarterly  report.  Ahout  one- 
third  were  withdrawn  from  a  lower  schedule  than  given  in  the 
quarterly  report,  and  the  remainder  from  a  higher  schedule  than 
there  shown. 

In  the  cases  where  items  were  withdrawn  from  a  lower  price 
schedule  and  refiled  at  a  higher  schedule,  the  average  rise 
(or  increase)  was  found  to  he  2.3  price  schedules  per  item. 
For  the^items  withdrawn  from  ai  higher  schedule  and  a  refiled  at 
a  lower  one  the  average  decrease  was  3.4  price  schedules  per 
item. 


g.  The  items  which  were  withdrawn  from  the  same  schedule  as  that 
given  in  the  quarterly  report  appear  in  all  cases  to  have  "been 
refiled  later  at  the  same  schedules,  the  reasons  for  such  a 
manoeuvre  not  "being  apparent. 


9R?.fi 


-  650  ~ 

II.   ANALYSIS  OF  FILINGS  RELATING  TO  DISCOUNTS  AID  ALLOWANCES. 

A.  Discounts  to  Other  Foundries  (Middlemen*) 

The  Society  required  that  all  discounts  to  midclemen  be  filed. 
These  were  then  published  in  the  drily  price  reports.   The  three  dis- 
count rates  most  commonly  filed  during  the  Code  were  (1*)  5  per  cent,  (2^ 
l\   per  cdnt,  and  (3*>  "not  over  10  -oer  cent".   These  were  granted  with 
the  stipulation  that  the  product  was  not  to  be  resold  at  less  than  the 
filed  price.   Exhibit  I  -  Table  X-A  shows  the  type  of  discount  filed  for 
each  foundry,  the  recipient,  and  the  effective  date.  Exhibit  I  -  Table 
X-B  shows  the  frequency  of  each  type  of  discount  filed  during  the  Code, 
listed  by  months. 

The  few  discounts  reported  by  the  Agency  before  i arch,  1934,  were  all 
fairly  high,  some  reaching  20  per  cent.  Beginning  with  Larch  and  April, 
1934, -when  the  Agency  formally  required  publicity,  discounts  fell  to  the 
5,  7-f  and  10  per  cent  referred  to  above.   There  is  a  record  of  120  filings 
distributed  as  shown' in  the  table. 

It  seemed  to  be  the  practice  of  foundries  to  grant  reciprocal  discounts 
to  each  other.   An  example  of  this  is  shown  in  the  table  (Exhibit  I  -  X-A"1 
opposite  Report  No.  102;  foundries  "Jos.  202,  2">1,  2n7  and  2^8  evidently 
participated  in  such  an  agreement.   It  probably  was  a  case  of  one  mill  dis- 
tributing another'  s  Rolling  Hill  Castings,  with  the  lattT  reciprocating 
by  handling  the  former's  Freight  Car  Castings. 

B.  Allowances  of  Freight  Charges  to  Railroads 

The  daily  price  reports  issued  orior  to  July  6,  1934,  include  71 
statements  made  b-r  foundries  concerning  freight  allowances  to  purchasers  cf 
railroad  castings.   Some  of  the  f.  undries  allowed  freight  to  railroad  com- 
panies to  the  nearest  point  on  the  line;  others  absorbed  freight  to  destin- 
ation.  There  were  approximately  ten  different  provisos  representing  differ- 
ent allowances  to  railroads.   In  most  cases,  members  allowed  complete 
freight  charges  to  destination  on  railraod  castings,  whether  for  new  equip- 
ment or  repairs.   Many,  however,  set  the  western  boundary  as  longitude  105, 
(the  meridian  through  Denver,  Colorado*!.   Exhibit  I  Tables  XI-A  and  B  show 
the  statistical  distribution  of  these  allowances. 

The  general  practice  before  the  Code  was  the  allowance  of  full  freight 
to  Railroads.   It  has  been  alleged  that  this  practice  was  occasionally  abused 
by  the  purciiasers  -  there  were  instances  of  the  railroad  requesting  delivery 
of  casting  at  a  point  far  distant  from  the  foundry,  requiring  long  hauls  over 
tbjft  lines  of  the  purchaser.  (**)   In  the  case  of  an  unusually  long  haul, 
tUe  freight  charges  sometimes  destroyed  the  profit  margin  on  the  sale.   When 
the  Code  became  effective,  it  was  suggested  that  the  limit  oft  freight  allow- 
ance to  railroads  be  the  point  on  the  line  nearest  to  the  foundry.   This 
suggestion  was  not  always  complied  with,  possibly  because  of  pressure  brought 


(*)  J.  2T.  Anderson  -  Coae  History,  oage  159 
9826 


-  651  - 

to  bear  by  the  railroads.  (*)   Statements  were  made  by  members  to  the 
effect  that  railroads  three  toned  to  take  away  iron  foundries  not  allow- 
ing freight,  certain  important  patterns  owned  by  the  railroads,   father 
than  lose  the  patterns  and  business,  foundries  often  allowed  full  freight. 
(See  filings  co-railed  on  'Exhibit  I-Table  XI-A). 

In  October  1954,  the  Cor.anitt.ee  of  the  Society  studying  transportation 
problems  recommenced  that,  on  sales  to  railroads,  freight  charges  to  the 
nearest  point  on   the  line  and  an  allowance  of  5  mills  per  ton-mile  over 
the  railroad's  lines  oe  allowed.   This  proposal  evidently  met  with  the 
approval  of  the  interested  foundries  and  was  adopted  by  the  Society  as  a 
Commercial  Resolution  in  December,  1934.  However,  as  far  as  can  be  learned, 
it  was  never  approved  by  the  Administration.   This  orr-ctice  was  never  fully 
standardized,  although  practically  all  foundries  filed  their  allowances 
accordingly,  and  it  is  generallv  supposed  that  competitive  bids  included 
nearlv  uniform  freight  allowances. 

C .   Allowances  to  Customers  en   Ratt-rns  .-nd  ^nujpment 

There  were  233  instances  of  filing  on  Patterns  -  their  distribution 
by  comaany  and  bv  mouth  is  compiled  in  "Sxhibit  I  -  Tables  XII  A  and  B. 
Nearly  all  of  the  filings  during  the  early  months  of  1934  were  of  the  fol- 
lowing types: 

"When  a  new  pattern  is  required  and  when  5'v^  or  more  miscellan- 
eous Railroad  castings  are  bought  at  one  time,  we  will  -absorb  oattern 
cost,  aattern  to  remain  cur  aroaerty. "  and,  (*) 

"".(hen  a  new  pattern  is  reauired  and  less  than  500  miscellaneous 
Railroad  castings  are  bought  at  cne   time,  we  will  make  an  extra  charge 
to  the  customer  at  not  less  than  cost."  (**"> 

Altogether,  there  were  123  such  filings  recorded  on  the  daily  arice 
reports.   However,  beginning  in  March,  1934,  and  continuing  through  August, 
80  foundries  filed  statements,  almost  all  identical  as  to  wording,  to  the 
effect  that, 

"'.','e  hereby  file  with  your  office  the  stipulation  where  any  orttern 
is  in  existence  and  owned  by  a  comoeting  coiiroany  we  will,  to  meet 
competition,  likewise  furnish  a  pattern  from  which  to  make  castings 
for  a  customer  without  anv  charge  we  to  be  the  judge  as  to  when  the 
pattern  is  to  oe  made  and  the  condition,  pattern  to  remain  our  prop- 
erty." (***) 

The  other  tyaes  of  filing  were  relatively  unim-ocrtant,  with  the  ex- 
ception of  one  instance  in  which  the  17  foundries  filing  reserved  the  right 
to  eoualiza  uattarn  transportation  charges  to  mee-t  comae  tit  ion. 

(*)   Statements  of  Industry  members  -  interview  December  22,  1935. 

(*'*)  Steel  Founders'  Society  -  Daily  Price  Reports 
(***)  Ibid 
(***N)  Ibid 


-  552  - 

It  is  interesting  to  ooserve  the  degree  of  leadership  revealed  by 
these  filings.   In  Report  Mo.  14,  Janus  ry  4,  1934,  two  foundries,  the 
Buckeye  Steel  Castings  Company  and  the  Ohio  Steel  Foundry  Comoany,  Found- 
ries Nos.  5  '6  and  517,  respectively,  both  large  producers,  filed  clauses 
of  the  tvpe  first  referred  to  above,   "."ithin  3'^   days,  more  than  rir> 
foundries  had  filed  statements  almost  identical  in  wording.   In  the  case 
of  the  second  clause  quoted,  the  Crucible  Steel  Castings  Company,  No.  5 ^9, 
filed  first  and  '.'as  followed  within  30  days  by  approximately  5'  *  foundries. 

Pursuant  to  an  amendment  to  the  Code,  effective  September  3,  1934,  (*") 
it  was  no  longer  permissible  for  foundries  to  furnish  pattern  equipment, 
or  alterations  thereof,  at  less  than  actual  cost  of  production;  except  that, 
in  the  case  of  i'iscellaneous  Railway  Car  Castings,  it  was  not  a  violation 
for  a  foundry  to  absorb  the  cost  cf  patterns  when  castings  were  ordered 
in  quantities  of  50'1  or  more  from  o^e  pattern  at  one  time.   Fatterns,  in 
this  case,  were  to  be  the  property  cf  the  foundry. 

The  amendment  had  the  effect  of  eliminating  all  other  provisions  and 
allowances  on  patterns  with  the  possible  exception  of  the  absorption  of       . 
pattern  transportation  costs  to  meet  competition.   There  is  no  indication 
that  this  allowance  was  discontinued.   The  fact  that  with  little  exception, 
allowances  on  patterns  to  Railway  Car  Builders  were  allowed  to  stand,  is 
another  indication  of  the  pressure  brought  to  bear  by  these  large  pur- 
chasing interests. 

III.  ANALYSIS  OF  THE  FILING  RELATING  TC- "PRICE  EZS&iS ." 

The  steps  taken  to  stabilize  another  element  of  the  price  structure, 
price  extras,  will  new  be  considered. 

The  Agency  defined  the  filing  of  letter  schedules  as  relating  to 
"rough  unfinished,  unmachined  miscellaneous  carbon  steel  castings,  either 
unannealed,  annealed  or  normalized,  but  not  including  cost  of  pattern  eauip- 
ment,  machining,  carbon  and  alley  additions  or  other  extras,"   The  practice 
of  adding  the  various  "extras"  to  the  schedule  prices  before  the  Code  was 
not  clearly  defined.   Available  records  show  varying  extras.   During  the      ■ 
Code  the  orice  extras  filed,  after  the  "call"  for  their  filing,  were  practi-  " 
cally  identical  and  uniform. 

A.   Descriptiot  of  Price  Extra  Practice. 

During  the  Code  Period  eight  different  types  of  price  extras  were  filed 
upon:   Carbon  extras;  Allov  extras,  (such  as  nickel,  chromuim,  manganese, 
molybdenum,  vanadium,  copper,  tungsten  and  titanium V,  extras  for  Hardness 
and  Tension  Specif icrtions;  Special  Test  extras  for  carbon  and  alloy  cast- 
ings; extras  for  Maching  and/or  Drilling  Bolster  Center  Filler  Castings  for 
Grades  A  or  B  and  High  Tensile  Steel;  and  extras  for  Radiographic  'Examinations 
and  X-Ray  Inspections. 

The  first  price  extra  filing  was  made  oy  the  Otis  Elevator  Company  of 
Biffalo,  New  York,  on  January  26,  1934.   At  this  time  it  filed  alloy  extras 
for  nickel  '  nd  nickel  chrome  steels,  molybdeno".,  chronium,  vanaduim,  manganese 


Amendment  2,  Codes  of  Fair  Competition,  Volume  X7 ,  P.  451. 


-  653  - 

and  molybdenum  steels,  ana  mild  u  i  ;anese  steels.   The  next  extra  filing 
was  submitted  by  the  3irdsboro  Steel  Foundrv  and  machine  Comoany  of  Penn- 
sylvania.  On  March  5,  1934,  it  filed  extras  for  Carbons,  Alloy  steels 
such  as  chronium,  nickel,  manganese,  nolvDdenum,  vanadium,  copoer  and 
tungsten,  Hardness  and  Tension  Specif ica.tions  and  Special  Tests  for  car- 
bon and  allo,r  castings.   Following  the  release  of  the  Sirdsboro  orice  extra 
list  in  Report  '61,  many  members  of  the  industry  filed  extras  "sane  as" 
the  Birdsboro  Ccmo  my,  and  filed  each  revision  or  addition  as  Birdsboro 
did.   In  Report  #74  the  latter  co  iianv  added  Titanium  alloy  extra  and  other 
companies  imnedi-  tely  followed.   Commercial  Resolution  #29,  adopted  June  13, 
1'  34,  issued  a  formal  call  for  the  filing  of  -orice  extras  by  members  of  the 
industry,   iiore  than  six  months  before  a  notice  had  appeared  in  Report  #3, 
da,ted  December  19,  1933,  which  stated,  "The  filing  of  extras  to  cover  allov 
additions,  etc.,  is  not  required  at  this  time  under  the  call  for  the  filing 
of  prices  during  the  -period  ending  Dec-mber  21,  1933."  However,  even 
though  not  required,  extras  had  been  filed  prior  to  the  adoption  of  the 
Resolution. 

B.   Methods  of  Filing:  price  Extra  Schedules 

As  in  the  case  of  filing  orice  schedules,  there  rere  three  general 
methods  of  filing  -orice  extras,  namely,  by  refer  ing  directly  to  the  type 
of  extras  and  giving  the  cost  of  each  item,  b~r   filing  "same  as"  some  other 
foundry,  and  b-r   referring  to  a  quarterly  report.   "Same  as"  filing  was 
most  common,  and  usually  referred  to  the  filing  of  Foundry  ITo.  105,  the 
Birdsboro  Company.   Perhaps  this  may  be  related  to  the  fact  that  the  chair- 
man of  the  Extras  Committee  of  the  Code  Authority  was  an  official  of  the 
Birusboro  Company.   As  far  as  can  be  learned  from  study  of  the  daily  price 
reports  and  subsequent  compilations,  there  '"as  litrle  or  no  disagreement 
with  the  Birdsboro  "Extras"  -  thev  became  the  established  levels,  were 
published  in  the  quarterly  reports  and  adopted,  almost  without  exceotion, 
by  every  interested  foundry.   Inspection  of  "Extras"  as  filed  by  the  Birds- 
boro would  be  representative  of  all  filings. 

This  foundry  issued  6  filings  during  the  Code.   The  first  and  second 
have  already  been  described.   The  third  extra,  filing,  which  was  submitted 
in  Daily  Report  #144,  reported  increases  for  chrome,  nickel,  vanadium  and 
■copoer  in  Alloy  Steel  castings.   The  next  extra  filing  was  made  in  Daily 
Report  #225,  it  included  the  extra  filings  as  submitted  in  Daily  Report 
#144  and  also  extras  for  the  U.  S.  Navy  Specifications  group  and  Radio- 
graphic examinations.  The  fourth  filing  was  e   withdrawal  of  the  U.  S.  Navy 
Specification  group.   The  final  filing  oy  the  Birdsboro  Company,  in  Report 
#333,  dated  ..arch  15,  1935,  was  for  Machining  and/cr  Drilling  Bolster 
Center  Filler  ca  tin^s  of  High  Tensile  Steel. 

In  each  case,  the  lead  of  the  Birdsboro  Company  was  widely  followed. 

Approximately  330  price  extra  filings  were  submitted  to  the  Agency, 
15  per  cent  of  which  were  filed  before  the  official  "call, "  June  13,  1934 
by  about  75  per  cent  of  the  foundries.   It  is  believed  that  ether  members 
adooted  the  Extras  published  in  the  quarterly  reports  and  did  not  refer 
to  them  specifically. 


9826 


~  654  - 


IV.   ANALYSIS  OF  FILINGS  RELATING  TO  SiiLI^  CO,; TRACTS 

Commercial  Resolution  No.  6,  adopted  November  27,  1933,  required 
members  of  the  Industry  to  file  sales  contracts  which  they  had  made  before 
December  11,  1933,  which  continued  in  ef ^ect  after  December  31,  1933. 
These  contracts  were  to  have  been  filed  concurrently  with  the  first  filing 
of  orices,  December  11  to  December  21. 

The  "Call"  required  that  the  foundry  file  information  giving  the 
effective  and  expiration  date,  name  of  customer,  the  class  or  classes  of 
castings  and  the  price  specified.   These  contracts,  if  any  were  filed, 
were  not  reported  in  the  daily  price  reports. 

The  minutes  of  an  Industry  meeting  held  in  Cincinnati,  Ohio,  on 
October  9  and  10,  1934,  reported  to  the  memoers  in  the  form  of  a  letter 
October  24,  1  '34,  are  quoted  in  parts: 

"It  was  stated  that  some  contracts  are  in  effect  between  certain 
foundries  and  their  customers  embracing  prices  lower  than  those 
currently  on  file  by  these  foundries.   flhile  these  contracts  were 
made  at  prices  actually  on  file  at  the  time  they  were  consummated, 
it  was  pointed  out  that  unless  the  terms  of  these  contracts  are  filed 
and  published  to  the  Industry,  the  Industry  is  misled  into  believing 
that  a.  higher  revised  price  is  the  prevailing  minimum  price  at  which 
the  castings  of  the  classes  in  question  are  currently  being  sold. 
The  Board  of  Directors  on  advice  of  Counsel  later  adoited  a  resolu- 
tion to  rectify  this  situation."  (*) 

The  following  section  of  Commercial  Resolution  #33  required  the  fil- 
ing of  all  unfilled  con.tra.cts,  wherein  deliveries  were  to  be  made  at 
prices  lower  than  current  filed  prices. 

Commercial  Resolution  ?f33: 

"RESOLVED,  that  in  cases  where  a  neiber  of  the  Industry  desired 
to  file  prices  for  current  new  business  which  are  higher  than  the 
prices  at  which  a  purchaser  is  entitled  to  recieve  deliveries  under 
an  unexpired  contract  or  contracts,  such  member  is  hereby  required 
to  file  with  the  Society  the  following  particulars  relating  to  each 
such  contract: 

1.  Name  of  purchaser 

2.  Date  contract  became  effective 

3.  Expiration  date  of  contract,  or  the  provisions  as  to  dur- 
ation, termination  or  cancellation 

4.  Classification  names  of  castings  involved 

5.  Prices  applying  to  each  clasrif ica.tion 

6.  Such  further  information  as  the  executive  officers  of  the 
Society  may  request 

"and  further 

"RESOLVED,  that  the  fore.?;oin£  particulars  as  to  such  contracts 


(*}      Steel  Founders'  Society  -  transcript  of  Proceedings,  Industry  Meeting, 
October  24,  1934. 


QfiOR 


-  655  - 

shall  be  given  the  same  circuit  fcio-n  among  members  of  the  Industry  as 
all  other  price  data,  )rovided,  however,  that  the  names  of  the  pur- 
chasers under  such  contracts  shall  not  be  disclosed  without  the  con- 
sent, in  writing,  of  the  rae  ibers  filing  the  contracts." 

Exhibit  I  -  Tables  XIII  A,  B  and  C  (Based  on  the  daily  price  reports 
issued  by  the  Agency}  reveal  that  under  this  resolution,  during  a  period 
of  six  and  one-half  months,  22  lembers  of  the  Society  filed  60  contracts 
covering  oeriods  ranging  from  2  months  to  1  year.   Many  of  the  agreements 
as  filed  showed  neigher  effective  date  nor  date  of  expiration,  making  it 
difficult  to  compute  the  average  length  of  the  contracts  filed. 

Contract  prices  were  filed  only  in  a  few  scattered  cases.   48  per  cent 
of  the  total  number  of  contract  filings  were  made  during  the  10  days  follow- 
ing the  formal  "call",  and  more  than  36  per  cent  were  filed  during  November 
and  December,  making  a  total  of  almost  85  per  cent  within  2  l/3  months. 

The  companies  situated  in  Divisions  V  and  'rI  submitted  the  greatest 
number  of  filings.   These  divisions  correspond  to  the  Chicago,  Cleveland 
and  Finneapolis  Feo.eral  Reserve  Districts.   Foundries  in  Division  ¥  filed 
20  uer  cent  of  the  contracts,  while  those  in  No.  VI  filed  more  than  ?n  per 
cent.   Contracts  were  filed  on   almost  50  different  oroducts,  most  of  which 
were  load  and  Street  Machinery  G-ear  Castings  and  various  types  of  automotive 
castings.   There  wore  two  other  products  for  which  filings  were  made; 
Agricultural  Machinery  and  Overhead  Travelling  Cran.?. 

Foundry  ITo .  705,  the  Duncan  Foundry  ana  machine  crks,  Alton,  Illinois, 
filed  a.  contract  granting  lo  prices  on  55  diff  Tent  heavy  type  products 
to  one  customer,  covering,  for  the  most  oart,  various  products  under  the 
Crane,  Overhead  Travelling  and  Charging  Machine  classification,  and  includ- 
ing such  products  .-.  s  Foundry  Eauipraent,'  "levator,  paper  Mill  and  Platform 
Truck  and  Trailer  Castings.   This  contract  was  in  effect  for  3  months,  term- 
inating July  17,  1935.   The  Deemer  Stool  Casting  Company  of  Hew  Castle, 
Pennsylvania,  filed  a  blanket  contract  on  Rnbb.r  Machinery.   This  contract 
covered  almost  100  products  of  this  major  classification,  and  although  the 
effective  date  was  not  specified,  it  t.  rminated  March  31,  1935.   The  Reed 
Foundry  and  Machine  Company  of  Kalamazoo,  Michigan,  filed  the  greatest  number 
of  contracts,  submitting  13  filings  cov  ring  20  customers  and  affecting  23 
products. 

This  Sales  contract  device  seem  d  to  b  used  as  '  moans  of  protecting 
the  orevailing  minimum  price  level.   A  foundry  desiring  to  file  or  quote 
at  levels  ; rich  below  the  orevailing  ones  was  evidently  forced  into-  a  contract 
ual  relationship  with  its  customer.   The  cr.se  of  the  Duncan  Foundry  and 
Machine  Works  is  an  example  f  this.   In  g  neral,  companies  using  the  sales 
contract  device  were  small  concerns  which  may  h^ve  benn  able  to  compete  only 
on  the  oasis  of  a  price  differential.   Commerci;  1  Resolution  #38  granted 
foundries  the  privilege  of  closing  contracts  a.t  prices  lower  than,  the  mini- 
mum on  file,  provided  such  contracts  were  reoor.ted  to  the  Agency, 

T*)   See  Exilic  it  I  -  Table  XIII  -C . 


9RP.6 


\ 


-  656  - 

CHAPTER  VI 

STATISTICAL  ANALYSIS  OF  .-C.ICHS  UUDER  TIB  OPEN  PRICE  PLAIT 

Turning  from  a  general   examination  of  the  degree  to  which  the  elaborate 
price-filing  system  set  up  in  this  industry  under  its  code  was  accompanied 
by  uniformity  in  pricing  practices,  an  attempt  will  be  made  in  this 
chapter  to  appraise  its  actual  effect  on  prices. 

I .   SUBJECT  MATTES  AHD  METHOD   OF  STUDY  EMPLOYED 

A.   Sanrole  of  Products  Selected  for  Study 

When  this  study  was  planned,  it  was  decided  to  center  the  statistical 
analyses  around  a  sample  of  products,  large,  medium  and  small  castings, 
which  it  was  felt  would  give  a  better  and  more  usable  basis  for  appraising 
the  effect  of  the  system  on  price  levels,  their  flexibilities  and  their 
uniformity,  than  would  a  more  extensive  survey  of  a  great  number  of 
products.   The  procedure  was  outlined  briefly  to  the  manager  of  the  Steel 
Founders'  Society  with  the  request  that  approximately  five  products, 
including  heavy,  medium  and  light-weight  castings,  be  suggested,  together 
with  the  names  of  five  representative  producers  of  castings  of  each  weight 
class  -  the  foundries  to  be  typical  large,  medium  and  small  producers  of 
the  particular  class  produced.  The  Society  responded  by  sending  a  list 
of  products,  included  below,  which  were  used  in  the  analysis. 

A  few  additional  products  were  selected  on  the  basis  of  other  factors, 
such  as  completeness  of  filing.   The  products,  arranged  in  the  order  in 
which  they  will  be  discussed  are: 

1.  Aeronautical  Castings 

2.  Agricultural  Machinery  -  Combine  Harvester 

3.  Automobile  Brake  Clutch  Pedal 

4.  Automobile  Axle  Housings 

5.  Automobile  Brake  Drums 

6.  Bread  Slicing  Machinery 

7.  Cylinders  -  Hydraulic  Accumulator 

8.  Dredge  Ball  &  Socket  Joint  Castings 

9.  Electrical  Machinery  &  Equipment 

10.  Gears  -  Cast  Tooth  &  Blank 

11.  Heat  Treating  Furnace  &   Equipment 
Carbonizing  and  Carburizing  Boxes 

12.  Railroad  Locomotive  Driving  Boxes 
(Friction  Type) 

13.  Refinery  Oil  Castings  -  Sectional  »U"  Bend  Only 

14.  Refractory  &  Brickyard  Roller  Tires 

15.  Rolling  Mill  &   Steel  Plant  -  Roll  Housings  &  Caps 
(UQp  over  2,499) 

16.  Power  Shovel  &  Dragline  Bases  -  Upper 

17.  Shoes  and  Treads 

18.  Valve  Bodies 

These   castings  are  practically  all  parts   of  equipment  manufactured  by 
other  industries  -  for  instance,    automobile-axle  housings  used  in  the 
automobile   industry,    agricultural  machinery  combine  harvester  castings,    xxscd 


-  657  - 

in  the  manufacture  of  mechanical  harv  sster,  power  shovel  bases  used  in  the 
construction  of  power  shovels,  etc.,  as  their  names  often  imply.  They  are 
considered  to  "be  standardized  products'  -  they  are  not  controlled  by  or 
under  patents,  so  far  as  is  hnov/n.  All  are  included  in  the  "Miscellaneous" 
products  group  -  the  only  products  for  which  prices  were  filed. 

B.   Method  of  Analysis. 

Tabulations  have  been  prepared  of  the  filings  for  each  of  these 
products,  based  upon  the  daily  price  reports  published  by  the  Code 
Authority.  Three  of  these  tabulations  -  those  for  Aeronautical  Castings, 
Locomotive  Driving  Boxes,  and  Power  Shovel  Shoes  and  treads  -  arc 
reproduced  in  the  Exhibit  I  of  this  appendix.   The  tabulations  for  the 
remaining  products  studied  show  similar  results,  and  their  inclusion  in 
detail  was  not  considered  necessary. 

In  the  following  pages  summaries  have  been  prepared  for  each  of  the 
specimen  products,  based  upon  the  tabulations,  and  designed  to  show  the 
degree  of  uniformity  of  the  prices  filed,  the  extent  and  sequence  of 
price  changes,  the  influence  of  leadership,  geographical  differentials, 
flexibility  of  the  price  structure,  and  other  factors  which  may  appear 
as  indicative  of  the  influence  of  the  filing  plan.   The  minimum  prevailing- 
schedules  published  in  the  Society's  quarterly  reports  will  also  be 
shown  at  approximately  quarterly  intervals,  to  indicate  and  accentuate 
more  clearly  the  various  movements  away  from  the  mean  or  prevailing- 
price  levels.  Where  available  from  the  daily  price  reports,  the  status 
of  each  schedule  filed  will  be  indicated  (  L,  IT,  DL,  DN,  etc.  -  See 
Chapter  III,  ?,1.  Daily  Price  Reports) 

During  the  code,  16.3  foundries  filed  "blanket  filings",  quoting  and 
referring  tc  all  schedules  contained  in  a  quarterly  report.   There  is 
no  way  of  determining  which  specific  classification  these  were  designed 
to  cover,  consequently  it  has  been  necessary  to  neglect  these  filings 
in  the  following  analysis. 

II.   ANALYSIS  07  TSS   TABUIATICIIS  01  PHICd;  FILIITGS 

A.   By  Individual  Product 

In   the   following   sub-sections   the  data   contained  in   the   tabulations 
prepared  for  each  of  the   18  products   listed  above  are  analyzed  and  summarized. 

1.  Aeronautical  C? stings,  1T.0.C.B.H. 

The  first  recorded  filing  on  this  classification  was  made  by  Foundry 
504,  the  Atlantic  Foundry  Company,  on  December  18,1933  (see  Exhibit  I, 
Table  XV).   The  schedule  placed  on  file  was  "C",  one  of  the  highest  prices 
filed  for  a  product  class.   This  is  somewhat  accounted  for  by  the  fact 
that  this  class  of  casting  is  usually  very  small  and- more  expensive  to 
cast  than  the  larger  ones. 

There  were  two  distinct  cases  of  following  the  leader  in  the  filing- 
en  this  product.   On  March  36,  1934,  Foundries  Hos.  832,  812,  SOI,  8.23,  and 
815  filed  "same  as"  schedules.   On  August  23,  Foundry  622  also  filed  C. 
This  was  followed  "oir   "same  as"  filing  by  22  companies,  all  in  Division  VI. 
There  were  oj   filings  in  all  recorded  with  the  Agency. 

QQOC 


-  658  - 

The  only  other  than  C  filed  for  this  product  during  the  entire  code 
Period  was  by  Foundry  303  on  April  18,  1934.   This  schedule  showed  an 
increase  in  price,  to  Schedule  3.   Later,  en  July  4,  this  foundry  went 
back  to  tho  C  schedule. 

It  is  apparent  that  prices  were  entirely  uniform  on  these  castings. 
With  the  one  exception,  referred  to  above,  the  levels  remained  unchanged. 

2.  Agricultural  Machinery  -  Combine  Harvester  Castings, 

II.  0.  C.B.N. 

In  the  report  of  December  5,  1933,  published  by  the  Steel  Founders' 
Society  of  America,  this  classification  was  listed  as  M.  Subsequent 
filings  were  at  lower  prices.   It  is  therefore  assumed  that  "M"  was 
considered  too  high  a  level,  since  it  was  never  filed  subsequently. 
The  first  filing  to  be  recorded  on  the  daily  price  reports  was  by 
Foundry  608,  Clark  Equipment  Company,  at  Schedule  P.   On  March  26,1934, 
five  foundries  in  Division  VIII  filed  J  and  K  for  over  and  under  100  lb. 
castings,  both  above  the  low  schedule  P.   Foundry  335  met  this  new  schedule 
on  April  7,  1934.   However,  most  of  the  filings  were  on  Schedule  II.   The 
general  adoption  of  this  level  is  indicated  by  the  fact  that,  on  June  16 
of  the  same  year.,  the  Second  Quarterly  Report  listed  the  schedule  as  II. 
The  schedule  listed  in  the  First  Quarterly  Report  had  been  P. 

On  August  23  Foundry  Ho.  622  filed  a  set  of  schedules,  new  "lows", 
effective  Sept.  4,  1934.   This  was  followed  by  "same  as"  filing  on  the 
part  of  18  foundries  and  the  filing  by  one  other  foundry  of  schedules 
which  referred  specifically  to  the  item.   The  Third,  Fourth  and  Fifth 
Quarterly  reports  indicated  this  last  schedule  as  the  prevailing  minimum 
in  Division  VI.   In  all  other  divisions  it  remained  N. 

The  following  may  be  considered  as  summarizing  the  filings: 

(1)  The  tendency  was  to  establish  price  differentials  according  to 
geographical  divisions. 

a.  Levels  in  Division  VIII  (California)  were  highest. 

b.  Levels  in  Division  VI  were  lowest. 

c.  Levels  in  other  divisions  varied  between  P  and  E,  with  N 
prevailing. 

(2)  Foundries  in  Divisions  VI  and  VIII  did  most  of  the  filing  and 
levels  were  quickly  established  by  the  practice  of  "following 
the  leader."   This  may  bo  traced  to  tho  fact  that  Division  VI 
was  the  largest  producer  of  Agricultural  Machinery,  with 
Division  VIII  also  a  fairly  large  producer.   The  high  prices  in 
the  latter  division  were  due  to  the  fact  that  competition  was 
localized;  long  distance  delivery  costs  prevented  foundries 
located  in  other  divisions  from  selling  their  products  at  lower 
prices. 

(3)  Host  of  this  product,  especially  during  the  last  half  of  the 
Code  Period,  was  sold  at  uniform  prices.   In  Division  VI  this  was 

.  especially  noticeable. 


9826 


< 


-  659  - 

(4)  Prices  in  the  Industry  went  down  from  M  to  ?,  then  up  to  H  and 
then  down  to  G,  P,  Q,,  R,  and  S,  as  established  in  Division  VI. 

(5)  Price  changes  were  not  met  during  the  waiting  period. 
3.  Automobile  -  Axle  Housings  (Banjo  Type) 

An  examination  of  data  with  reference  to  this  product  reveals  that: 

(1)  the  method  of  quoting  as  to  size,  weight,  etc.  was  not  uniform 
during  the  early  clays  of  the  Code; 

(2)  it  tended  to  become  uniform  as  time  passed; 

(3)  the  original  filing,  indicated  in  the  December  5  Report  as  0, 
was  undoubtedly  considered  too  low  in  all  divisions  except  ITo.o, 
since  higher  Trice  schedules  were  filed  from  the  start; 

(4)  lower  prices  were  usually  withdrawn  before  filing  higher  levels; 

(5)  the  most  usual  levels  "'ere  K  for  Housings  over  30  inches  in 
length  and  P  for  those  under  30  inches; 

(S)   Foundry  600,  the  Clark  Equipment  Company,  one  of  the  smallest 
firms  in  the  Industry,  tended  to  be  the  low  and  most  frequent 
filer,  accounting  for  all  three  of  the  instances  in  which  a  low 
was  filed  and  a  waiting  period  required;   (There  is  no  indication 
that  other  foundries  paid  much  attention  to  the  low  filing  of 
this  small  company, ) 

(7)  in  this  product,  as  in  other  products,  Foundry  Ho.  622,  the 
Milwaukee  Steel  Foundry  Company,  on  August  23,  1934,  made  a 
filing  of  K  and  P,  (over  and  under  30  inches  in  length)  which 
was  filed  "same  as"  by  24  foundries  in  Division  VI.   Foundry  608, 
referred  to  above,  fell  in  line  with  the  others,  filing  "same  as" 
Foundry  622; 

(8)  the  orevailing  levels  according  to  the  quarterly  reports  were 

K  and  P,  except  in  Division  VIII  in  which  it  was  3,  a  consider- 
ably higher  price  level; 

(9)  the  plan  resulted  in  uniformity  of  method  of  filing  and  of 
schedule  filed; 

(10)   the  uniformity  was  most  complete  in  Division  VI,  where  the 
production  of  this  prrduct.is  concentrated. 

4.   Automobile  Brake  Clutch  Pedal  and  Similar  Levers  (with  Foot  Pads) 

An  investigation  of  ;oricc  schedules  filed  for  this  product  revealed  the 
following: 

(l)   the  original  filing,  Schedule  3  on  a  new  classification,  was  made 
by  Foundry  Ho.  625*on  March  14,  1934,  effective  after  the  waiting 
period,  March  24,  1934. 
*    Hote:   The  first  number  in  the  foundry  number  indicates  the  location 
9826        (Division),  i.e.,  Foundry  Ho.  625  is  in  Division  VI. 


-  660  - 

(2)  Schedule  3  was  filed,  by  all  interested  concerns,  except 
Foundries  130,  109  and  112,  305  e.nd  70y  which  filed  Schedule  I, 
considerably  lower. 

(3)  On  August  23,  1934,  Foundry  622  filed  3,  followed  by  25 
foundries  in  Division  VI. 

(4)  On  October  5,  Foundry  S25  again  filed  Schedule  B,  followed  by 

7  foundries  all  from  Division  VI  -  this  established  the  level  of 
"B"  at  least  in  Division  VI,  the  center  of  production. 

(5)  The  quarterly  reports  list  the  prevailing  minimum  schedules 
for  all  divisions  as  "B". 

(6)  This  is  an  instance  where,  with  slight  exception,  the  level  was 
uniform  from  the  time  of  the  first  filing. 

5.  Automobile  Brake  Drums  -  1  to  100  lbs. 


For  this  product,  Schedule  I,  filed  originally  before  the  December  5 
Report,  was  the  established  level  throughout  the  Code  Period  in  all 
divisions.  Four  foundries  in  Division  VIII  had  filed  Schedule  K  on 
March  20,  1934,  but  in  a  matter  of  days  most  of  them  were  back  up  to  I. 
One  other  foundry,  Ho.  714,  filed  K  on  December  4,  1934  -  all  others  were 
I. 

Foundry  522,  which  filed  I  on  August  23,  1934,  was  followed  by  25 
foundries  in  Division  VI  which  filed  "same  as".   This  concerted  action 
was  responsible  for  the  establishment  of  uniform  prices  on  most  automobile 
castings. 

6.  Bread  Slicin.  Machinery  Castings,  II  0. C.B.I!. 

This  product  was  originally  filed  as  a  new  classification  by  Foundry 
No.  709  on  September  26,  1934,  effective  October  6.   The  schedule  was  K.     | 
During  the  Code  it  was  filed  by  only  two  other  foundries,  lTos.  64-1  and 
505,  both  as  Schedule  K. 

7.  Cylinders  -  Hydraulic  Accumulator  Type 

The  early  report  issued  by  the  Industry  oh  December  5  listed  this 
casting  on  Schedule  G,  '-here  it  remained  throughout  the  life  of  the  Code. 
Ho  foundry  filed  any  other  schedule  -  there  were  48  filings  at  "G",  including 
the  foundries  'in  Division  VIII,  which  in  this  instance  did  not  file  higher 
than  foundries  in  other  divisions. 

The  usual  concerted  action  by  foundries  in  Division  VI  followed  the 
filing  of  Foundry  622  on  August  23,  1934. 

8.  Pro fee  Ball  and  Socket  Joint  Castings.  Including  Cases.  Balls, 
and  Glrnds 

An  investigation  of  the  various  filings  revealed  that  until  May  23, 
1935,  the  prevailing  level  in  this  classification  in  all  divisions  except 
the  California  district  was  Schedule  L,  which-  was  the  level  included  in 


~  66-i  -   - 

the  Report  of  December  5,  1933.   Foundries  in  Division  VIII  quoted  J 
and  K,  respectively,  on  castings  over  and  under  100  It's,  in  weight. 
Following  the  filing  of  "L"  by  Foundry  622  on  August  23,  1934,  25 
foundries  in  Division  71  filed  "same  as,"  the  usual  procedure. 

On  May  13,  1935,  effective  May  23,  Foundry  205  filed  Schedules 
P  and  0  (over  and  under  1,000  lbs.),  new  low  or  minimum  schedules. 
During  the  10- day  waiting  period  6  foundries  filed  tc  meet  the  new 
low  schedules  and  four  days  after  the  new  prices  were  effective  another 
foundry  filed.   Whether  this  activity  disturbed  the  prevailing  "L" 
level  is  not  definitely  known,  since  it  occurred  near  the  end  of  the 
Code  Period. 

9 .  Electrical  Machinery  and  Equipment  -  Motor  Frame 
(Box  Type)  ~ 

The  filing  in  the  early  days  of  the  Code  was  not  uniform,  although 
most  foundries  quoted  on  both  over  and  under  500  lb.  castings.   The  most 
usual  filing  quoted  Schedule  K  on  both,  with  the  exception  of  foundries 
in  Division  V,  which  filed  Schedule  J  on  castings  under  500  lbs.  and  a 
number  of  foundries  in  Division  VIII  which  filed  I  and  J  (higher  prices). 
Most  of  the  filings  made  in  the  interim  between  the  First  and  Second 
Quarterly  Reports  listed  K  and  J  for  the  two  weight  groups.   These 
were  levels  published  in  the  latter  report.   However,  on  August  23, 
1934,  Foundry  522  quoted  K  for  both  weights.   This  was,  as  usual,  fol- 
lowed by  25  "same  as"  filings,  which  definitely  set  the  level  as  K  in 
Division  VI.   Subsequent  filings  in  Division  II  established  the  same 
levels  in  that  Division. 

10.  G-ears  -  Cast  Tooth  and  Blank 

The  original  filings  as  published  in  the  Report  of  December  5, 
1933,  were  Schedules  0  and.  M  on  castings  over  and  under  250  lbs,,  re- 
spectively.  During  the  Code,  filings  were  made  on  Ring  G-ears  as  such, 
and  a  composite  filing  for  all  other  types  of  gears.   The  schedule  most 
often  filed  on  Ring  G-ears  was  L,  although  later  in  the  Code  Period 
(about  August,  1934),  a  number  of  foundries  listed  N  and  L  for  Rings 
over  and  under  250  .lbs. 

The  filing  on  other  types  of  Gears  was  not  uniform  during  the  early 
months  of  the  Code.   Schedules  L,  0  and  P  on  over  250  lbs.  and  M,  N 
and, occasionally  0  on  castings  under  250  lbs.  were  most  consistently 
used.   The  prevailing  levels  about  April  1,  1934,  were: 

(1)  over  250  lbs.,  Divisions  II,  V  and  VI  -  P; 
all  others,  0; 

(2)  under  250  lbs,,  Divisions  III  and  IV  -  M; 
all  others,  K. 

On  March  21,  1934,  low  schedules,  0  and  M,  were  filed  by  Foundries 
407,  424  and  420,  effective  March  31.   Why  the  waiting  period  was  re- 
quired is  not  clear,  because  the  same  schedules  were  being  used  by  other 
foundries.   The  day  following  this  filing  (March  22,  1934),  Foundry  No. 
419  filed  the  same  schedules  (0  and  M),  which  were  allowed  to  become 

9826 


-  662  - 

effective  immediately.      There  were  two  other  instances  of  filing  0  and 
M  during  the  waiting  period,   prices  becoming  effective  on  the  same  day. 

Fifteen  foundries  filed   "same  as"  the  original  filing  of  Foundries 
407,   424  and  420,    some  effective  "before  and  others  after  the  original 
filing.      In  the  interim  between  the  dates *o£  publication  of  the  First 
and  Second  Quarterly  Reports,   most  of  the  filings  became  Schedules  0 
and  M,    although  several  foundries  in  Division  VIII   quoted -higher  sched- 
ules,   H  and  I,    for  castings  over  and  under  10<">  lbs.      Most  of  the  filings 
during  the  first  half  of  the  Code  period  added  N.Q.  D.   -  R.M.O.    (no 
quantity  discount  to  Rolling  Mills). 

On  August   23  and  25,    1934,    Foundry  622  filed  0  and  M  on  Gears  - 
Cast   Tooth  and  Blank,    and  N  and  L  on  Ring  Gears;      this  was  followed  by 
the  usual  25    "same  as"  filings  by  members  in  Division  VI.      During  the 
last  half  of  1934,   prices  of  this  product  appear  to  have  been  uniform. 

11.  Heat   Treating  Furnace  and  Equipment,    Carbonizing 
and  Carburizing  Boxes 

Although  Schedule  K  was  listed  as   the  prevailing   level  for  this 
product   in  the  Report  of  December  5,    1933,    no   foundry  filed  it   during 
the  first  few  months  of  the   Code.      Schedules  M  and  N    (over  and  under 
500   lbs.)   and  L  were  most   consistently  quoted.      Six  foundries  in  Div- 
ision VIII    quoted  H  and  I   for  the  weights  over  and  under  100   lbs.      On 
April  23,    1934,    Foundry  N.   416  filed  K;    this  was  followed  by  similar 
filings  by  a  number  of  foundries. 

On  July  10  of  the  same  year,    Foundry  63  filed  Schedule  M,    effective 
ten  days  later,    on  July  20.      This  was   evidently  considered  a  new  low 
although  it  had  previously  been  filed  and  there  is  no    evidence  of  a 
withdrawal.      Foundry  622  filed  M  on  August  23,    1934,    followed  by  the 
usual   "same  as"  filing  on  part  of  25  foundries.      This  fixed  M  as  the 
prevailing  level   in  Division  VI. 

The  First  Quarterly  Report,   published  March  31,    1934,    listed  the 
prevailing   schedules  as  follows:      over  500   lbs.   -Divisions   IV,    V  and 
VIII  -  M,    all  others,    K;  under  500   lbs.,    Divisions   IV,    V  and  VIII  = 
N,    all  others,    K.      The  Second  Quarterly  report  listed  K  for  all  divisionsi 
In  Aigus't  the  levels  were  established  as  M  in  Divisions   I,    II,    V  and  VI, 
and  K  in  Divisions   III,    IV,    VII  arid  VIII.      This  differential  prevailed 
during  the  remainder  of  the  Code  Period.      In  Division  VI,    especially, 
these  schedules  were  uniformly  quoted. 

12.  Railroad  locomotive  -   Driving  Boxes    (Friction   Type) 

The  study  of  prices  for  this  class  of  casting  revealed  an  interest- 
ing manipulation  of  prices  within  a  schedule  by  use  of  the  N.Q.  D.    (No 
Quantity  Discount)  principle.      Examination  of  Exhibit   I  -   Table  XVI 
shows  that   the  schedule  published  in  the  Industry  Report  of  December 
5,    1933,   was  P  with  N.Q. D.   -   this   status  made  operative  only  the  prices 
under  the  1  to   3  piece  column  of  the  schedule,    with  no   reduction  in 
price  for  any  quantity  on  order. ■    The  first  record  of  any  filing  was 
on  December  30,    1933,    when  Foundry  402,    American   Steel  Foundries 

9826 


-Ot^- 


Corapany,  filed.  On  March  2,  193^+.  a  foundry  in  Division  VIII  filed 
schedule  F  with  the  P.y.D.  moved  cut  to  99  pieces.   This  was  soon  follow- 
ed by  other  members  of  Division  VIII  and  constituted  in  effect  a  price 
reduction^*)  as  reference  to  the  actual  schedule  will  indicate.  During 
the  next  six  nonths  many  foundries  in  other  divisions  also  filed  "P" 
with  P.Q.D.  over  g$  pieces.  On  October  29,  193!4-,  foundries  ^07,  105  and 
U22  filed  jointly,  effective  November  8,  Schedule  p  with  IT.Q.D.  over  2^9 
pieces  -  a  new  lo--  price. 

"hen  the  Fourth  rniarterly  Report  was  published,  December  13,  193^i 
the  above  schedule  and  L7.Q..D.  over  2U9  pieces  was  the  prevailing  level 
in  all  divisions  er.cept  "do.  VIII.   On  January  2,  193 5 1  Foundries  8O5  and 
806  jointly  filed  the  new  level  ( IT.Q.D.  over  2k$   pieces).   Pive  other 
foundries  in  Division  VIII  followed  with  "same  as"  filings.   The  Fifth 
Quarterly  Report,  issued  on  March  23,  1935.  indicated  complete  uniform- 
ity in  all  divisions  at  the  new  level. 

13.   Refinery  Oil  Castings  -  Sectional  "IJ"  Bend  Only 

The  Report  of  December  5»  1933.  and  the  very  early  filings  by  mem- 
bers specified  Schedule  I  and  made  no  differential  for  "eight  classes. 
However,  Foundry  "do.  206  filed  on  February  28,  193^»  effective  March  10, 
low  schedules  L  and  U   (over  and  under  100  lbs.).   Shortly  after  this, 
effective  March  17,- Foundry  626  filed  low  schedules  M  and  N.   About  that 
time  several  foundries  in  Division  VIII  filed  the  higher  levels,  H  and 
I.   However,  the  prevailing  level  was  L,  indicated  in  the  Pirst  Quarter- 
ly Report  and  again  in  the  Second.   The  L  and  M  schedules  were,  however, 
filed  consistently  during  July  and  August  of  that  year, 

On  August  25,  193^-1-,  Poundry  622  filed  "L"  for  all  weight  classifi- 
cations.  Again  the  same  25  foundries  followed  this  filing  establishing 
the  prevailing  level  as  !,L"  for  division  VI.   The  differentials  prevail- 
ing during  the  remainder  of  the  Code  Period  after  August,  193^»  were  as 
follows: 

Castings  over  100  lbs.  -  Schedule  L,  all  divisions 

Castings  under  100  lbs.  -  Divisions  I,  II,  IV  and  VII  -  M 

Divisions  III,  V,  VI  and  VIII  -  L 

lk.      Refractory  and  Brickyard  Roller  Tires 

Pith  few  exceptions  the  prevailing  schedule  used  on  this  classifi- 
cation was  "?•!".   On  April  13,  193^ »  several  foundries  in  Division  VIII 
put  into  effect  a  new  low  schedule  "0."  Within  a  month  this'  "low"  was 
withdrawn  and  the  higher  schedule  M  substituted.   On  Jul"  13 ,  Foundry 


(*)  In  the  sched-.les  the  price  per  lb.  is  lower  for  quantities.  There- 
for the  allowance  of  quantity  discount  up  to  SZ  pieces  is  in  effect 
a  lower  price  than  when  there  is  P.Q.D.  (no  quantity  discount); 


982S 


-  664  - 

420  filed  "0"  effective  July  23,  a  new  low  price,  because  the  previous 
filing  of  "0"  had  been  withdrawn.  (*)   This  filing  by  Foundry  420  was 
withdrawn  on  August  28. 

The  filing  of  Foundry  No.  623  and  other  foundries  in  Division  VI 
on  schedule  M  completed  the  filing  on  this  product,  resulting  in  un- 
iformity without  exception. 

15 .  Rolling  Mill  and  St  eel  Plant  -  F.oll  Housings  and  Caps 

Here  again  price  changes  were  effected  by  utilization  of  quantity 
discounts.   The  December  5  Report  issued  by  the  Industry  quoted  schedule 
Q  for  this  product.   In  February,  1'934,  Foundries  501,  508  and  713 
filed  the  same  schedules,  but  without  quantity  discounts.   Foundries 
407,  424  and  420  jountly  filed  schedule  Q,  and  all  quantity  differentials 
availabe  therein  (new  low  prices)  on  March  21.   This  change  became  effect- 
ive in  ten  days,  on  March  31.   Subsequently  Foundries  419,  122  and  105 
filed  the  same  schedule,  effective  before  the  waiting  period  was  com- 
pleted on  the  original  filing.   Forty-four  foundries  filed  "same  as" 
.clauses  to  the  filing  by  Foundries  407,  424  and  420,' above.   The  First 
Quarterly  Report  established  the  level  as  Q,  (all  discounts  available) 
for  all  divisions. 

f 

However,    in  the  Second  Quarterly  Report   the  Agency  indicated  the 
prevailing   level  as   schedule  Q  (N.Q.D.    over  2,499  pieces).    (**)      Since 
the  records   show  no   filing  of  this  NQD  arangement,    it   is  assumed  that   the 
Code  Authority  was  responsible  for  its   institution.      On  August  25,    1934, 
Foundry  622,    followed  by  the  25  members  of  Division  VI,    filed  the 
schedule  Q,  and  the  1T.Q.D.    2,499  pieces.      The  Fourth  and  Fifth  Quarter- 
ly Reports  listed  the  same  arrangement  as  prevailing  without   exception 
in  all  divisions.      For  this  product,    leadership   in  this   survey  was  ap- 
parently accorded  to  ^Foundries  407  and  424,   both  divisions  of  the  Con- 
tinental Roll  and  Foundry  Company,    largest  producers  of  Rolling  Mill 
equipment   in   the  Industry. 

16.  Power  Shovel  and  Dragline  Bases  -  Upper 

The  schedule  suggested  in  the  Report  of  December  5,    1933,    as 
appropriate  for  this  product  was    "L".      This   evidently  was   the  prevail- 
ing level  in  Divisions   I,    III    and  VII,   being  indicated  as   such  in  the 
First   Quarterly  Report    (March  31,    1934).      The  filings  on   Schedule  M 
to  be  representative  of  all  other  divisions.      One  filing  of  a  lower 
schedule   "P"  was  not  met  by  any  other  foundry.      A  few  foundries  in 
Division  VIII    filed  H  and  I    (over  and  under   100   lbs.)  but   the  common 
level  was  lower,    at  M. 


(*)      The  withdrawal  of  a   "low"  price  eliminates  it  as  a  filing  -   see 
explanation  of  withdrawals,   pages  -    640  &  ff . 

(**)    See  page  6^9 for  explanation  of  1I.Q.D. 


9826 


-  655  - 

Division  VI  established  its  level  at  M  by  the  usual  concerted 
action  of  26  foundries.   Tne  latter  part  of  October,  1934,  found  all 
foundries  quoting  at  t!  except  those  in  Division  VII,  in  which  "L"  was 
still  the  prevailing  level. 

:17.   Shoes  or  Trerds  -  Power  Shovel  and  Dragline 

The  study  of  the  prices  (Exhibit  I  -  Table  XIV)  of  this  product 
classification  reveal: 

(1)  The  elimination  of  filing  on  weight  classes, 
i.e.,  over  and  under  100  lbs.,  following  the 

I  ruling  of  the  Definitions  and  Classifications 

Committee  on  April  25,  1934, 

(2)  The  trend  of  prices,  was 

(a)  first  schedule  0  -  December  5  Report: 

(b)  then  down  to  0  and  P,  which  most  foundries 
filed; 

(c)  down  another  step  to  P,  filed  by  only  a 
few  foundries; 

(d)  Foundry  509  filed  R,  then  withdrew  E  and 

(e)  filed  high  schedule  Q; 

(f)  several  foundries  in  Division  VIII  filed  J 
:,and  K;; 

(g)  Foundry  509  withdrew  Q,,  and  P  became  the  "low" 
again ; 

(h)  after  May,  1934,  there  was  no  filing  on  weight 
classes; 

(i)  the  levels  became  schedule  0  in  Divisions  I, 
III,  VII  and  VIII  and  "P"  in  Divisions  II,  IV, 
V  and  VI,  with  the  exception  of  2  foundries  in 
No.  Ill  and  3  foundries  in  Ho.  V  which  quoted  Q. 

(3)  Although  divisional  differentials  were  prevalent, 
complete  uniformity  was  effected  within  the  div- 
isions which  produced  most  of  the  product.   Div- 
ision VI  is  an  example  of  this  and  exhibits  the 
usual  concerted  filing  by  members  following  Foundry 
No.  622. 

(4)  There  is  evidence  of  the  Agency  allowing  a  price, 
filed  to  meet  competition,  to  become  effective 
before  the  waiting  period  on  the  original  "low" 
was  completed.   In  cases  of  this  sort  the  company 
filing  the  second  schedule  was  usually  located  in 
a  division  other  than  the  company  filing  the 
original  low. 

(5)  The  withdrawal  device  was  effectively  used. 

18.   Valve  Bodies 

For  this  classification,  the  following  items  are  noted: 

(1)  Filings  during  the  early  Code  Period  quoted  various 
schedules  on  various  weight  and  quantity  specifica- 
tions.  Some  filed  L  and  K  for  over  and  under  50  lbs; 

9826 


-   666   - 

others  filed  on  over  and  under  50  pieces;    some  "based 
their  prices  en   classes  of  over  and  under  250  lb. 
castings  and  still  others  quoted  just  one.  schedule 
for  all  weight  groups.      Schedules  H  and  I    quoted 
in. California  were  the  highest  prices  -   I,J,K,L 
and  M  were  often  quoted  by  foundries  in  other 
divisions.      This  gives  an  idea  of  the  lack  of  un- 
iformity,   at   least  between  devisions,    which  prevail- 
ed during  the  early  Code  period. 

(2)  After 'the  issurance  of  the  First  Quarterly  Report 
on  March  31,    1934,    and  subsequent  rulings  by  the 
Code  Authority  on  April  25  and  May  5,    foundries 
were  not  allowed  to   file  on  the  various  weight 
classifications.      As  a  result,    from  that  time  on, 
only  single   schedules  were  filed  on  all  weights  of 
valve  bodies. 

(3)  From  May  5,    1934  until   the  end  of  the   Code  only 
two   schedules,    I    and  K,    were  filed  -  the  I 
schedule  predominating.      This  was  the  one  suggested 
in  the  Bulletin  of  April  25,    1934,    as  a  minimum. 
However,    3  foundries   in  Division  I,    5  in  Division 
II,    1   in  Division  III,    5   in  Division  IV,    2  in 
Division  V.    and  2  in  Division  VIII,    a  total  of  19, 
filed  K  schedules,    which  evidently  were  accepted 
by  the  Agency.      Divisions  VI   and  VII  were  uniform 
on   schedule  I.      The  procedure  of  25  foundries 
filing  the   "same"  as  a  "leader"  foundry  in  Div- 
ision VI    established  a  uniform  level  there. 

B.    G-eneral   Summary  of  the  Price  Data 

The  cases  presented  in  the  preceding  analyses  and  similar  but  more 
fragmentary  data  concerning  other  products  may  be  summarized  as  follows: 

a.  Filings   in  most  imstances  were  not  uniform  in  the 
early  days  of  the  Code. 

b.  Prices  did  tend  to  become  uniform,    especially  in 
the  last   eight  months  of  the  Code  period. 

c.  This  uniformity  was   facilitated  by  administrative 
action,    reducing  the  number  of  weight   classifica- 
tions,   etc.,    and  the  concerted  action  by  many  pro- 
ducers  in  filing   "same  as,."   some  other  foundry. 
Especially  in  Division  VI,    source  of  a  large  pro- 
portion of  the  Industry's  volume,    did  this  proced- 
ure prevail.      On  582  products,    26 . foundries. out 

of  41  in  Division  VI   filed  the   "same  as"  Foundry 
No.    622  after  Auguat   23-25,    1934. 
d;        There  was  this  and  other  evidence  of   "follow- the 
leader"  practice. 

e.  The  filing  of  prices  on  the  important   classifica- 
tions,   for  example,    Rolling  Mill   equipment,  usually 
"followed"  the  most   important  producer. 

f.  On  certain  occasions  ten  or  more  foundries  from  the 
same  division  would  file  on  the  same  day,    to  become 

9826 


-667- 

effective   on   the   same   date,    identical    schedules  for 
the   same   group  cf  classifications. 

g.    In  several   instances  levels  were   stable   during  the 
entire  period  and  uniformity  practically  complete 
from  the    start. 

h.    There  was  usually  no   definite    trend  of  prices   in 
achieving  uniformity  and  stability.      In  most   of   the 
cases   studied  the  prevailing  level  did  not  change 
during  the   Code  period. 

i.   Prices,    based  on  number  of  changes,    were  more  flex- 
ible during  the  first  few  months  of   the   Code   than 
during  the  balance  of   the  period.      With  the   increase 
in  uniformity  and  stability,    as    the   system  became 
more   completely  operative,    the   entire  price   struc- 
ture,   including  terms  of   sale,    tended  to  exhibit 
more   rigid  characteristics. 

j.    There    is   evidence   of  a    small  foundry  filing  new  low 
prices   en  a  product  and  net  being  met   by  other 
foundries.     A  possible  explanation  for  this  lack  of 
action  en   the  part   of    the   other  members   is   that   the 
small  foundry's  production  capacity  was  of  little 
significance   and  did  not  affect   the  prevailing  OTice 
level.      Several   times   this  foundry  cut   to   lower 
schedules.      However,    when  uniformity  among  other 
foundries  was  achieved,    it  apparently  decided  to 
conform. 

k.    There   are    instances   in   the  price   filing  experience 
of   this   Industry  that  new  low  prices  were  filed 
effective   in  10  days.      During  the  waiting  period 
other  foundries  filed  low  to  meet   the   competition; 
apparently,    because  of   this  competitive  filing,    the 
first  foundry  withdrew,    before   the   end  of   the  wait- 
ing period,    and  refiled  higher  prices.      In  such  cases 
it  appears   that  the  existence  of  a  waiting  period 
did  deter  the    tendency  to   revise  prices  downward. 

1.   Ordinarily  a   new  "low"  price   required  a   ten-day 
waiting  period  before   becoming  effective.     However, 
there  ?;ere   occasions  when  a   foundry  in  another  di- 
vision filed  the   same    "low"  price   on  the    same   date 
or   shortly  after   the   original  filing,   and  the  price 
of   the   former  was  permitted  to   become   effective    im- 
mediately. 

m.    There  ^ere  many  cases  of  differentials   in  filed  price 
seemingly  based  on   geographical   location;    (*)   for 
example,    levels   in  the   California  Division,    No.   VIII 
usually  higher   than  others.      This  may  be   explained   in 
pert  as   the   result  cf   higher  production  costs   based 
on   (l)    inaccessibility  of   raw  materials,    and   (2)   more 
complete   unionization  of  plant  personnel,    with  higher 
labor  charges.      Another  factor  advanced  as   the   cause 
of   the   higher  levels   is   the  lack  of   competition  from 
producers   in  other  areas,    mainly  because   of  long  hauls 
to   the  market. 


(*)      See    Chart    III  following. 
9326 


~Wi 


668 


*.*■ 

UJ0 

>t- 

UJ  o 

(r  ui  0) 

<     if)  a> 

ZI-2 

O<0 

031- 

>S 

Q« 

«l 


co 


CD 


D>1 


*: 


o 


L±J 

*l 

U_  H 
O  CO 

z> 

CO  Q 


a 


H 


x° 

<  UJ 

cr  uj 
^  h- 

°  CO 
UJ  UJ 

CD 


^ 


o 


r 


u 


o 


o 


,>>  I 


Uj 


i 


-  669  ~ 

n.   Price  differentials   to   different   classes  of  customers 
were  apparently  reduced  by  the  use  of  a  system  of 
standard  quantity  discount  brackets  and  by  the 
occasional  practice  of  quoting  prices  without  any 
quantity  discount.      However,    it  is  believed  that  the 
railroad  group  of  customers  was  relatively  success- 
ful in  preserving  the  differentials  enjoyed  in  the 
pre-code  days.      Threats  by  this  group  to   shift   cer- 
tain owned  patterns  to   rival  foundries  and  fear  of 
losing  railroad  business  were  the  pressures  which 
forced  concessions  from  seme  foundries.      These  con- 
cessions took  the  form  of  additional  freight  allow- 
ances for  on-line-haul,    allowances  for  patterns  and 
equipment,    etc. 

o.    The  establisliment  of  a  system  of  filing  delivered 
prices  brought  about  a  uniformity  in  the  treatment 
of  geographical  price  relationships  which  had  not 
existed  before  the   Code,    when  not  all  producers 
quoted  on  a  delivered  basis. 

Filed  prices  in  this  Industry  for  the  most  part   represented  a 
fixed  relationship  to   a  suggested  cost   floor.      Price  levels   supposed 
to  be  87  per  cent  of  the  levels   in  1S26  were  suggested  by  the  Code 
Authority  in  its  report   to   the  members  on  December  5,    1933.      These 
levels  prevailed,   much  as  originally  suggested,    throughout  the  Code 
Perlo die ^Evidence  seems"  to. -point   to  the  fact   that  these  levels  were 
higher,    especially  on  the  small  castings,    than  those  in     ffect   im- 
mediately prior  to   Code. 

The  trend  of  prices  in  this   Industry  was  downward  immediately 
following  the  Code.      This   statement   is  based  on   figures   submitted  by 
the   Steel  Founders'    Society  and  presented  in  Exhibit  I   Table  II  and 
Chart   II.      It  is  believed  that   the  same  condition  prevailed  at  this 
time  as  the  period  immediately  following  the  price  reporting  activ- 
ities  employed  by  the  Society  in  the  year  1923  to   1926  inclusive. 
It  will  be  recalled  that   the  Engineers  who   examined  the  Industry's 
code  pricing  system  made  the  following  statement   concerning  prices 
in  those  years: 

"During  the  examination  of  1926   selling  prices,    the  Engineers 
found  that   in  many  cases   the  schedules  used  in  1925  were  the  same 
as   those  in  effect   in   1925,    1924  and  in   some  instances   even  in  1923. 
"    ...    ..Beginning  in  the  latter  part  of  1926..."      (price  reporting  was 

discontinued  in  December,    1926)      "...the     selling  prices  generally 
scaled  downward  and  in  most   cases  1927  and  subsequent   schedules 
were  at   lower  selling  prices  than  those  of  1926. " 

This   seems  to   indicate  that   schedules,    among  members,    were  uniform 
during  the  price  reporting  days  of  1923-1926  and  that   following  the 
end  of  reporting  the  levels   scaled  downward;    this  experience  practically 
parallels   the  experience  of  the  industry  during  the  Code  and  Post-Code 
period. 


9826 


-  670  - 


Examination  of  Tables  II  and  III  in  Exhibit  I.  and  Chart  IV.  and  V. 
impresses  one  with  the  fact  that  prices  of  Steel  Castings  during  the 
period  of  the  Code  increased  almost  twice  as  fast  as  costs;  increases 
were  18  percent  for  prices  and  about  9>;  percent  for  costs.   During  the 
same  period  prices  of  "Froducers  goods  for  capital  equipment"  \j   advanced 
less  than  4  percent,  which,  when  compared  with  the  increase  for  steel 
castings,  gives  the  impression  that  latter  went  up  more  than  the  average* 


1_/  National  Bureau  of  Economic  Research. 
9826 


671 


AVERAGE   SELLING  PRICE  OF  STEEL  CASTINGS 

1933-1935 


100 


80 


60 


40 


20 


OPEN      HEARTH 


J I I I l_ 


M                      J                      S                      D 

1933 

SOURCE 

STEEL     FOUNDERS' SOCIETY    OF    AMERICA 

9S2G 

1934 


1935 


100 


80 


60 


40 


20 


N.R.A. 

DIVISION    OF  REVIEW 

STATISTICS   SECTION 

NO  507 


UJ  O 

o  o 

IE  I 

Ul 


o 

CD 


LU 

o 


o 
o 


I- 
w 
o 
o 

_l 
< 
I- 
o 


■■■■■*■■ 


9826 


-672- A- 


EXKIEIT  I 


Tables  I  to  XVI 


9828 


673 


R-P 

-28 

TABIE   I -A 
Production  of  Conmeroial  Steel 
(Thousands   of  short  tons 

Castings  a/ 
) 

1926       1927       1928 

Total 
1929       1930     lSfel 

1932 

1933 

1934 

1935 

JAN 

97 

87 

74 

93 

109 

46 

18 

14 

28 

29 

FEB 

96 

89 

88 

98 

108 

50 

19 

12 

29 

30 

MAR 

116 

103 

94 

115 

113 

57 

20 

13 

39 

32 

APR 

114 

95 

86 

122 

111 

48 

17 

12 

46 

32 

MAY 

103 

87 

93 

127 

105 

43 

14 

19 

57 

31 

JUN 

99 

88 

92 

116 

91 

35 

13 

27 

50 

28 

JUL 

91 

80 

79 

118 

79 

32 

11 

29 

46 

31 

AUG 

85 

87 

88 

121 

.     64 

30 

12 

31 

44 

SB 

SEP 

R3 

70 

7fi 

107 

62 

27 

11 

2K 

32 

35 

OCT 

83 

§3 

.88__ 

121 

60 

24 

13 

25 

29 

.43 

NOV 

89 

59 

82 

110 

44 

23 

14 

23 

2fi 

.'36 

DEC 

fiS  . 

59 

82 

106 

46 

22 

14 

22 

24 

3fi 

192b       1927       1928 

Miscellaneous 
1929        1930     1931 

1932 

1933 

1934 

1935 

JAN 

58 

53 

45 

57 

61 

33 

13 

11 

21 

2X 

FEB 

53 

54 

50 

58 

63 

36 

15 

10 

23 

?.« 

MAR 

66 

62 

56 

66 

65 

43 

Ifi 

in 

27 

Pi. 

APR 

68 

56 

53 

69 

66 

35 

13 

9 

2R 

2K 

MAY 

57 

52 

56 

68 

fi?. 

SI 

11 

lfi 

74 

P!f? 

JUN 

fi2 

53 

fil 

fi?. 

5« 

?.« 

11 

R5 

«1 

?.s 

JUL 

58 

47 

51 

66 

53 

24 

R 

as 

?.ft 

PR 

AUG 

57 

55 

61 

68 

43 

21 

in 

J>A 

?rfi 

PR 

SEP 

59 

44 

51 

62 

44 

an 

a 

91 

*3b 

25 

OCT 

56 

41 

K9 

71 

44 

17 

i" 

-39 

?0 

31 

NOV 

64 

40 

51 

50 

32 

16 

in 

Ifi 

ifi 

26 

DEC 

55 

40 

56 

71 

32 

16 

11 

17 

lfl 

1926         1927         1928 

Railroad  Specialties 
1929        1930     1931 

1932 

}933 

_JL324  . 

19SS   l 

JAN 

39 

34 

29 

36 

48 

13 

5 

3 

7 

« 

FEB 

43 

35 

38 

40 

45 

14 

4 

?. 

fi 

« 

MAR 

50 

41 

38 

49 

48 

14 

4 

3 

12 

A 

APR 

46 

39 

33 

53 

45 

13 

4 

s 

lfl 

t 

MAY 

46 

35 

37 

59 

43 

12 

3 

s 

23 

E 

JUN 

37 

35 

31 

54 

33 

9 

2 

4 

lfl 

JUL 

33 

33 

28 

52 

26 

8 

3 

6 

18 

Y  8 

AUG 

28 

32 

27 

53 

21 

9 

2 

7 

18 

8 

SEP 

24 

26 

25 

45 

.   18 

7 

3 

'    5     ' 

11 

10 

OCT 

27 

22 

29 

50 

16 

7 

3 

6 

9 

12 

NOV 

25 

19 

31 

50 

12 

7 

4 

4 

7 

10 

DEC 

,.2,Q 

19 

?.K 

35    , 

14 

6 

3 

fi 

fi 

in 

Source 

Survey  of  Current  i 
See  note,  p» 

Business. 

DIVISION    OF    REVIEW,     NRA 

9826 


i 


« 


-  674  - 

a/   Compiled  by  the  U.  S,  Department  of  Conferee,  Bureau  of  the  Census, 
from  reQorts  of  130  identical  firms,  including  reports  collected 
through  the  Steel  founders'  Society.   These  firms  have  a  monthly 
capa.city  of  146,900  tons,  at  oresent  representing  over  80  Dercent 
of  the  capacity  of  the  industry  for  com?iercial  castings  (as  dis- 
tinguished from  castings  ased  in  further  manufacture  in  the  same 
plant),  of  which  67,570  tons  are  usually  devoted  to  railway  specialties 
and  represent  the  complete  capacity  of  that  branch,  while  79,330  tons 
are  generally  devoted  to  miscellaneous  castings.   Railway  specialties 
include  such  items  as  bolsters,  side  arms,  drafts  arms,  couplers,  and 
cast-steel  car  wheels.   Owing  to  reports  from  additional  firms,  these 
figures  represent  revisions  of  those  shown  in  the  Record  Bock  of 
Business  Statistics.   Metals  and  Machinery  Section.   The  revisions  in 
detail  appeared  in  the  March,  1928,  issue  (No.  79),  p.  20,  including 
annual  averages  from  1913  through  1920. 


675     676        677 


R-  V 

-28 

TABLE    I-B 
Per  Cent  of  Capacity  Utilized   in  the 
Production  of  Commercial  steel  Castings  a/ 

192b        1927        1928        1929        1930      1934        1932        1933        1934        1935 

JAN 

69 

60 

51 

64 

7b 

32 

13 

10 

ia 

24 

FEB 

69 

o2 

60 

67 

75 

34 

13 

8 

18 

25 

MAR 

83 

71 

64 

79 

79 

39 

14 

9 

?.k 

27 

APR 

81 

66 

58 

84 

77 

33 

12 

8 

an 

27 

MAY 

74 

60 

63 

87 

73 

30 

10 

IS 

37 

?K 

JUN 

71 

bl 

62 

80 

63 

24 

9 

IP 

RJ> 

as 

JUL 

65 

55 

53 

81 

55 

22 

ft 

?.n 

Sn 

p.tf 

AUG 

bl 

60 

60 

83 

45 

21 

8 

21 

?.fi 

?.q 

SEP 

59 

49 

51 

73 

43 

19 

8 

17 

?.a 

an 

OCT 

59 

43 

60 

83 

41 

17 

9 

17 

19 

3fi 

NOV 

(34 

41 

56 

7b 

31 

lfi 

9 

15 

17 

3D 

DEC 

61 

4i 

56 

73 

32 

15 

9 

IK 

IS 

RS 

JAN 

FEB 

MAR 

APR 

MAY 

JUN 

JUL 

AUG 

SEP 

OCT 

NOV 

DEC 

JAN 

FEB 

MAR 

APR 

MAY 

JUN 

JUL 

AUG 

SEP 

OCT 

MOV 

DEC 

Source:     Survey  of  Current  Business. 

Capacity  is  based  on  the  average  monthly  shipments  for  the  best 
six  consecutive  months   since    January   1.    1919. 

DIVISION    OF    REVIEW,     NRA 

9826 


« 


-  678  - 


TABLE  II 


Average  Selling  Price  of  Steel  Castings 
from  July,  1933,  to  September,  1935 

(Dollars  oer  Ton) 


Year  and 

Combined  Oven   Hearth 

Month 

Open  Hearth 

Electric 

and  Electric 

1933 

July- 

a/ 

a/ 

137.00 

August 

a/ 

a/ 

144. 00 

September 

a/ 

a/ 

144. 00 

October 

a/ 

a/ 

159.00 

November 

111.66 

171.64 

December 

115.03 

169.90 

1934 

January 

116.40 

181.00 

February 

120.00 

184.50 

March 

116.00 

187.20 

April 

123.00 

188.00 

o 

May 

122.40 

188.30 

c+ 

June 

125.00 

184.40 

% 

July 

124.00 

183.60 

August 

120.00 

191.00 

h-1 
P5 

September  '. 

122.00 

194.40 

October 

128.40 

193.60 

CD 

November 

134.00 

185.00 

December 

131.00 

193. 50 

1935 

January 

127.00 

195.00 

February 

126.40 

195.60 

Mar  ch 

131.60 

199.00 

April 

131.60 

190.00 

May 

131.60 

190.00 

June 

130.00 

192.00 

July 

128.00 

193.60 

August 

126.^0 

190.80 

September 

125.00 

191.20 

Source:   Steel  Founders'  Society  of  America. 
a/     Not  available. 


9826 


-  679  - 


TABLE  III 


Changes  in  Production  Costs  of  Steel  Castings 
January,  1933,  to  October,  1935 
(1S26  -  100  percent) 


III 

Total  Raw 

I 

II 

Materials  Total  of 

Year  and 

Fixed 

Labor 

Vari- 

Pig 

and      Sum  I , 

Month 

Cost 

Cost 

ables 

Scrap 

Iron 

Variables  "I,  III 

1926 
1933 


15.0 


50.0 


14,0 


13c  0 


8.0 


35.0 


100.0 


January- 

15.0 

41.0 

22.4 

78.4 

February 

15.0 

40.9 

22.2 

78.1 

March 

15.0 

40.5 

22.0 

77.5 

April 

15.0 

40;  0 

22,2 

77-2 

May 

15.0 

39.8 

24.8 

79.  b 

June 

15.0 

38.5 

25.1 

78.6 

July 

15.0 

33-6 

26,1 

79.7 

August 

15.0 

39.4 

27.8 

82.2 

September 

15o0 

42.2 

27.8 

85.0 

October 

15.0 

44.0 

27.7 

86.7 

November 

15.0 

43.2 

27.5 

85.7 

December 

15.0 

44.2 

27.9 

87.1 

1934 

January 

15.0 

45.0 

28.3 

88.3 

February 

15.0 

44.6 

28. 4 

88.0 

March 

15.0 

45.4 

29.5 

89.9 

April 

15.0 

45.6 

29.6 

90.2 

May 

15.0 

47.4 

29.7 

92.1 

June 

15.0 

47.9 

29.0 

91.9 

July 

15.0 

48.3 

13.0 

10.0 

6.0 

29.0 

92.3 

August 

15.0 

49.2 

12.6 

10.1 

6.0 

28.7 

92.9 

September 

15.0 

49.0 

12.5 

9.4 

6.0 

27.9 

91.9 

October 

15.0 

48.5 

12.0 

9.0 

6.3 

27.3 

90.8 

November 

15.0 

49.7 

12.5 

9.3 

6.0 

27.8 

92.5 

December 

15.0 

49.0 

1205 

9.5 

6.5 

28.5 

92.5 

1935 

January 

15.0 

49.0 

12.6 

10.0 

6.5 

29.1 

93.1 

February 

15.0 

49.5 

12.4 

10.0 

6.0 

28.4 

92.9 

March 

15.0 

49.5 

12.4 

10.0 

6.0 

28.4 

92.9 

April 

15.0 

49.2 

12.4 

10.0 

6.0 

28.4 

92.6 

May 

15.0 

50.0 

12.4 

10.3 

6.0 

28.7 

93.7 

June 

15.0 

50.0 

12.5 

10.0 

6.5 

29.5 

94.0 

July 

15.0 

50.0 

12.4 

10.0 

6.5 

28.9 

93.9 

August 

15.0 

50.5 

12.9 

10.0 

6.5 

29.4 

94.9 

September 

15.0 

49.5 

12.9 

11.0 

6.2 

30.1 

94.6 

October 

15.0 

49.5 

12.9 

11.0 

6.-3 

30.2 

94.7 

Source:   Steel  Founders'  Society  of  America. 


680 


R-P 

-26 

TABLE  IV 

Price  and  ProduotioxJjbf  Malleable   Iron  Castings 
i and  Per  Cent  of  Capaoitv  Utilized 

Number  of  Short  Tons 

1926         1927         1928         1929         193n         1931       193?.         1QMC          1934         1QSR 

JAN 

66.776 

56.627 

61.072 

73.125 

62f33£31,665 

22,216 

l?.,fi3fl 

sn  4i7 

43, Ann 

FEB 

71,161 

62,335 

65,359 

73,875 

66,909  34.076 

21.578 

13 '.7  80 

33.939 

41  ,377 

MAR 

80,116 

72,205 

70,070 

83,365 

64.38S35.758 

19r597 

9.959 

_4J^43_a 

42,f!0fl 

APR 

72,241 

64,612 

63,380 

83,744 

62, 945136. 682 

16,758 

18 f 566 

40,742 

42,035 

MAY 

65,106 

62,747 

67,903 

81,641 

54. 277)31. 964 

17 r 430 

2&+S2&- 

37,lfifi 

34,729 

JUN 

66,358 

64,310 

67,090 

72,232 

39*971 
31.318 

24.245 

15_*143_ 

31,118 

28,340 

27,548 

JUL 

60,384 

53,046 

60,290 

70,600 

20,223 

9.703 

30,865 

ii^aa, 

28,915 

AUG 

62,218 

57,096 

68,606 

69,173 

25.93318.831 

7.038 

3_l*filL 

23,910 

KB,?.*.*! 

SEP 

63,399 

50,807 

62,665 

59,087 

26,83918.485 

10.168 

27,078 

li^Ml, 

36,996 

OCT 

62,321 

52,458 

70,054 

65,526 

29,10120,444 

12,586 

24.381 

25r317 

43 r 467 

NOV 

50,946 

46,698 

63,560 

46.459 

27.47017,984 

J3.912 

21,944 

28,515 

44,277 

DEC 

55,561 

53.824 

59.428 

46.029 

30.79C21.503 

14.128 

21.870 

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1926        1927        1928Pel"lSl9lt   °?9§8paCi&l       1932        1933        1934        lORR 

JAN 

57.4 

52.0 

62.7 

77.7 

61.5 

31.4 

23.5 

14.9 

35.8 

50.8 

FEB 

61.1 

57.8 

66.8 

77.1 

67.2 

34.4 

23.1 

16.2 

40.1 

49.9 

MAR 

68.9 

65.7 

73.0 

87.7 

64.5 

35.9 

20.5 

11.4 

49.9 

52.0 

APR 

62.7 

59.1 

66.0 

87.8' 

63.0 

36.3 

18.0 

21.8 

47.9 

51.1 

MAY 

56.9 

57.2 

70.7 

83.7 

53.7 

32.1 

18.7 

29.0 

42.7 

41,1 

JUN 

57.3 

58.5 

69.9 

74.9 

40.2 

24.5 

16.3 

35.8 

33.4 

33.5 

JUL 

52.9 

49.3 

63.1 

■  73.5 

30.9 

20.0 

10.7 

36.3 

27.6 

34.3 

AUG 

54.6 

52.4 

72.1 

70.6 

26.1 

18.9 

7.7 

36.6 

27,9 

42.5 

SEP 
OCT 

56  r4 

47.6 

66.3 

61  o2 

27.1 

18.6 

10.9 

31.6 

25.6 

44,7 

55  .5 

50.0 

73.4 

66.7 

28.8 

20.4 

13.8 

28.4 

30.3 

51.0 

NOV 

45,9 

44.4 

56.8 

47.7 

27.7 

13.3 

15.3 

25.0 

33.5 

53.1 

DEC 

40,4 

51.2 

S3. 4 

47.3 

31*o_ 

o-\    c 

16.2 

25.6 

38. 7 

, 

Average  price  per  Ton  (f.o.b.  Plant)      (In  Dollars) 
1926        1927        1928        1929        1930        1931     1932        1933        1934       1935    , 

i 

JAN 

177 

143 

150 

346 

137 

131 

115 

112 

135 

118 

FEB 

177 

148 

150 

146 

137 

131 

115 

,107 

135 

na 

MAR 

177 

148 

150 

146 

137 

131 

115 

104 

135 

119 

APR 

MAY 

177 

148 

150 

146 

137 

124 

115 

98 

1     135 

123 

177 

148 

150 

146_ 

137 

124 

115 

100 

123 

127 

J'JN 

177 

148 

IfiO 

148 

137 

124 

96 

100 

119 

12fi 

JUL 

177 

148 

150 

146 

137 

117 

107 

104 

120 

l?.fi 

AUG, 

T —     — 
177 

148 

150 

146 

137 

117 

115 

U.2 

121 

124 

3£P 

177 

148 

150 

146 

137 

117 

120 

121 

120 

124 

OCT 

177 

148 

150 

146 

137 

115 

115 

114 

119 

122 

NOV 

177 

148 

150 

146 

137 

115 

115 

123 

115 

119 

DEC 

177 

_14fL_ 

150 

146 

137 

115 

115 

113 

115 

Source:     "Survey  of  Current  Business,"  Foreign  and  Domestic  Commerce; 
"Wholesale  Prices,"  Bureau  of  Labor  Statistics, 
a/           Compilod  by  the  UiS.  Department  of  Commerce..  Bureau  of  the  Census 
representing  reports  from  130  identical  establishments,   covering 
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-  684  - 


TABLE  VI 


Number  of  Low,  New  and  High  Price  Filings  and  All 
Tyoes  of  Filings  Made,  by  Livision 


Number  of  Products  on 

wh: 

Lch 

Filings 

:  were  Made 

a/ 

Total,  b/ 

All  Types 

Division 

L 

DL 

N 

DN 

H 

of  Filings 

Aggregate 

897 

299 

1,470 

789 

701 

4,763 

I 

8 

31 

110 

■  72 

62 

739 

II 

25 

23 

177 

136 

72 

500 

.III 

41 

27 

25 

8 

4 

199 

IV 

299 

35 

66 

80 

48 

540 

V 

105 

•  36 

■  402 

.   74 

268 

1,025 

VI 

162 

18 

602 

30 

235 

1,233 

VII 

205 

25: 

18 

357 

8 

180 

VIII 

52 

104 

G6 

32 

4 

347 

Source:   Compilation  by  Statistics  Section  of  ERA  from  Daily  Price  Reports 
Steel  Founders'  Society  of  America. 

a/    Frequencies  represent  number  of  products  filed  upon  by  a  single 
foundry  or  in  combination  with  others,  which  were  given  in  the 
status  according  to  the  following: 

L  -  New,  low  or  minimum  schedule 
DL  -  Divisional  low  or  minimum  schedule 

N  -  New  classification 
DN  -  Divisional  new  classification 

H  -  Increased  orice 

b/    Total,  All  Types  -  number  of  times  a  foundry  filed  prices  or 

other  required  material,  i.e.,  discounts,  etc.   Does  not  refer 
to  number  of  oroducts  filed  at  e^.ch  time. 


9826 


-  685  ~ 
TABTE  VII 

lluraber  of  Low,  New,  and  High  Price  Filings 
and  All  Types  of  Filings,  "by  Months 


Number  of  Products 
on  which  Filings 

were  made  a/  Total,  All 

Year  and  Types  of 

Month L        PL      N DN H   Filings  b/ 


1933 


1934 


Aggregate        897     299     1,470     789     701    4,763 

December  15  to  31  731  136 

January 

February 

March 

April 

May 

June 

July 

August 

September 

October 

November 

December 


4 

94 

305 

17 

80 

316 

468 

162 

410 

68 

76 

425 

20 

27 

364 

11 

54 

526 

42 

24 

295 

14 

53 

228 

31 

18 

9 

153 

40 

6 

22 

6 

55 

204 

10 

39 

21 

159 

25 

232 

17 

38 

19 

392 

80 

209 

1935 


3 

116 

15 

89 

172 

280 

19 

24 

18 

17 

65 

169 

16 

28 

18 

42 

237 

186 

107 

18 

21 

65 

47 

201 

& 

30 

17 

19 

11 

124 

January 

February 

March 

April 

May 


Source:   Compilation  by  Statistics  Section  of  ERA  from  Daily  Price  Reports 
of  Steel  Founders'  Society  of  America* 

a/    Frequencies  represent  number  oi  items  filed  upon  by  a  single 
foundry  or  in  combination  with  others,  which  were  given  the 
classification  according  to  the  following: 

L  -  New  low  or  minimum  schedule 
DL  -  Divisional  low  or  minimum  schedule 

N  -  New  classification 
DN  -  Divisional  classification 

H  -  Increased  price 

b/    Total,  all  ty^es  -  number  of  times  a  foundry  filed  prices  or 

other  required  material,  i.e.,  discounts,  etc.   Does  not  refer 
to  number  of  products  filed. 


9826 


TABLI  VIII 


Report 
Number 


Kx ample  of  "Same  As"  Filings:  SJ    "Rolling  Mill 
and  Steel  Plant  Castings' 


Effective 
Date 


Foundry 
Number 


Filed  Sans  In  Report 
Is  Founlry   Number 


BffeotlTe 
Data 


iJosptlons  A4dl*lom« 


50    1934,  February  16 
55  24 


«5 
87 

89 
90 

91 

9* 
96 

97 
104 

108 

111 
117 
119 

121 

125 
172 


Usiob 


April 


116 

502 


31   504 

(422 
1    413 


203 
619 
109 
(501 
(508 
606 
4oS 
310 
126 
207 

517 


4l4 


12 

11 

13 

23 

205 

306 
(415 

626 
(627 

620 

27 
28 

(512 

May 

1 

9 

11 

"21 
401 
113 

14 

602 

21 

(204 
(209 

July 

17 

707 

423 

1*23 

(407 

(420 

(424 

(407 

(420 

(424 

407 

407 

407 

407 

407 

407 

U07 

407 

407 

(407 

(420 

424 

(407 

(420 

(424 

420 

407 

407 

(407 
(424 
(407 
(420 
(424 

407 

407 
(407 

424 
(407 

424 
(407 
(420 

424 
(407 
("20 

424 


3 

(' 
(76 


76 

7S 
J! 

7i 

I 

76 

76 


76 

7f 
76 

76 

(76 


(76 

76 

I76 
76 


76 


76 


1933,  December  19 

19 

1934,  March    31 


31 

31 
31 
31 

31 

31 
31 
31 
31 
31 

31 


31 

3D- 

31 

31 
31 

31 
31 


31 


31 


1 
17 


Source:   Compilation  by  Statlstloe  Ssotion,  HRA,  from  Dally  Price  Reports  of  Steel  Foundere' 
Society  of  America*. 

a/    In  Reports  90,  96  and  125,  and  89,  97,  104  and  119,  the  filings  had  exceptions  and 
additions  to  the  "same  as"  filings  submitted. 

Note:  This  method,  "same  as  filing,"  was  used  very  frequently  by  various  foundries  In  placing 
prices  on  rscord  with  the  Code  Authority.  The  practice  was  mersly  to  submit  a  statemsnt 
to  the  Agency  to  the  effect  that  the  foundry  files  the  same  prioes  as  another  specified 
foundry  in  a  specific  report. 

9826  _~ 


T3 


oc 

CO 


J 


-  687  - 


TABLE  IX 


Frequency  Distribution  of  Foundries  Submitting 
Blanket  Filings,  by  Quarterly  Reports 


Number  of 
Daily  Report  Filings  Quarterly  Report 


Total  496 

1  to  49  19  a/ 

50  to  99  8  I 

100  to  149  2  b/ 

150  to  199  121  II 

200  to  249  61  II 

250  to  299  133  III 

300  to  349  70  IV 

350  to  386  82  V 


Source:   Compilation  by  Statistics  Section  of  1IRA  from  Daily  Price  Re- 
ports of  Steel  Founders'  Society  of  America. 

a/    December  5,  1933,  Bulletin. 

b/    April  25,  1934,  Bulletin. 


9826 


TABLI  I-A 


Type  of  Discounts  Granted  to  Other  Foundries 
and  Effective  Dates 


Companies  Companlae 

tffectlTe    Foundry  Type  of    Receiving       effective    Foundry  Type  of    Receiving 
Date      Number   Discount   Dleoount         Date       Number   Discount   Discount 


»•©.  29,  193? 


Feb.  23,   1934 

m»t.  13 

Feb.  27 

Mar.  5 

Mar.  14 

Mar.  23 

Mar.  30 

Apr.  10 

Mar.  30 

Apr.  12 

Apr.  12 

Apr.  13 
Apr.  18 

Apr.  It 

Apr.   20 

Apr.   20 

Apr.  23 
Apr.  25 
Apr.   25 

Apr.  24 

Apr.  26 

Apr.  25 

Apr/  26 

Apr.  27 


Apr.   27 

Apr.   27 
Apr.   30 
May  9 
May  8 

May  9 
May  1* 
May  14 
May  16 
May  18 
May  16 
May  19 
May  20 
May  26 
May  29 
■ay  29 
June  1 


826-808) 
818-807) 
820-822) 
8?4 
824 
819 
207 
601 
636 
696 
512 
620 
310 


206 

202-207) 
201-208) 


509 
*202 

201 

2C7 

208 

126 
50? 


513 
201 
123 
62S 
2C6 


519 


$ 


14 


519 

i09 

407 
429-119 
626 
4l6 
422 
504 
401 
111 
419 
102 
521 
102 


All 

All 
All 


All 
516 

515 

District  2 
District  2 

519 

201-207 
(208-210 
(202-206 
(207-208-210 

201-202 

206-208-210 
(201-202 
(206-207-210 

105 

(402-411 

(416-423 
625-512 
Aome  Steel 
105 

513 

(201-202 

(207-208 

(210 
411-515 

(509 
All 

Dlatrlot  4 
423 

Dlatrlot  1 
Dlatrlot  4 
Dlatrlot  1 
410 
All 

Dlatrlot  4 
Dlatrlot  4-5 
Dlatrlot  U 
Dlatrlot  1 
District  4 
Dlatrlot  1 
All 
All 


June 
June 
June 
June 
June 
June 
June 
June 
July 
Aug. 
June 
Sept 
Sept 
Sept 
Oot. 
Oot. 
Oot. 
Oot. 
Oot. 
7ov. 
Nov. 

NOT. 

Dec. 
Dao. 
Deo. 
Deo. 
Deo. 
Jan. 
Jan. 


7,  193* 

11 

9 

a 

19 

22 
26 
30 


12 

14 

7 

12 
1 
5 

11 
19 
25 
1 

12 
28 

10 
18 
21 
26 

8. 
28 


iK 


121 
105 
309 
304 

108 

515 

819 
616 

,  6l' 
204-209 

819 

61U 

126 

636 

625 

516 

J1? 

6?9 

402-602 

636 

520 

20J 

635-304 

101 

412 

101 

807 

825-826) 

827-828) 

602 

208-818 

805-806 

822 


All 
126 

New  Orleans 

309 

All 

Dlatrlot  5 

All 

All 

6 
2 


b 

Dlatrlot 

b 

Dlatrlot 

f 

All 

b 

622 

b 

123 

0 

All 

b 

All 

b 

All 

b 

All 

b 

HI 

0 

All 

b 

All 

c 

All 

b 

All 

b 

All 

b 

All 

f 

All 

b 

All 

a 

All 

0 

*)latrlot 

0 

All 

Fab.  11 

825 

-826) 
-828) 

0 

All 

827 

Feb.   18 

210 

0 

All 

Feb.   19 

208 

b 

All 

Feb.   18 

705 

c 

All 

Fab.   19 

311 

0 

All 

Mar.   2 

612 

b 

All 

Feb.    19 

805-8( 

0 

All 

Feb.   21 

416 

b 

All 

Mar.   6 

210 

b 

All 

Mar.   11 

621 

b 

All 

Feb.   19 

821 

0 

All 

Feb.    22 

607 
824 

0 

All 

Mar.   15 

0 

All 

Mar.   20 

832 

0 

All 

Apr.  9 

401 

a 

All 

Apr.  11 

421 

a 

All 

Apr.   26 

812 

b 

All 

May  3 

306 

b 

All 

May  ?3 

504-5C 

b 

All 

May  23 

619 

a 

All 

All 
All 

Dlatrlot  8 
All 


Source!   Compilation  by  Statlatloa  Seotlon,  HRA,  from  Dally  Prloe  Reporta,  Steel  Foundera' 
Society  at   America. 

Type  of  Discount) 
a  -"We  will  allow  off  of  our  regular  prloea  discounts  of  5%  when  the  castings  are  re- 
sold by  the  customer  without  further  processing  at  prloea  not  lower  than  file  prloea." 

b  -"We  reserve  the  right  to  sell  to  ...  and  grant  7-W  discount  on  condition  that  the  pro- 
ducta  be  reaold  at  not  leea  than  filed  prloe.' 

0  -"We  reserve  the  right  to  Bell  to  ...  and  grant  not  more  than  10%  dleoount  on  the  con- 
dition that  the  product  be  reaold  at  not  laae  than  filed  prloe." 

d  -"Subjeot  to  maximum  dleoount  of  20%." 

a  -"Maximum  dleoount  allowed  from  sobedule  la  15$  on  the  flrat  two  columns,  that  la, 
'1  off  and  '2-5  off  columns,  and  10%  on  the  balanoe." 

f  -"Allow  maximum  15$  dleoount  and  on  Railroad  oaatlnga  and  Bridge  castings  make  a 
mlnlmva  prloe  of  5^  per  pound." 

g  -"On  crder,  for  miscellaneous  castinge  where  the  agent  furnlshea  the  patterns,  Inspection, 
and  carrlee  the  accounts,  we  will  al'ow  5$  commission  on  sales,  eald  5*  commleslon  to 
be  figured  on  the  net  value  of  the  castings  shipped.   Where  patterns  are  furnished  by 
the  cuetomer  or  by  ue  we  will  allow  the  agents  3?$-" 


9826 


-  G89  - 

TABLE  X-B 
Frequency  of  Type  of  Discounts,  by  Months 


Type  of  Discount 
Year  and 
Month        Total      a      b      c      d    e     f     g 


Total        120     31     45     32 


December 

9 

1934 

January 

February 

2 

March 

6 

1 

3 

1 

April 

22 

20 

o 

May 

14 

3 

11 

June 

10 

3 

3 

4 

July 

1 

1 

August 

2 

2 

September 

3 

2 

1 

October 

5 

4 

1 

November 

4 

3 

1 

December 

6 

1 

4 

1 

1935 

January 

6 

1 

5 

February 

18 

2 

16 

March 

5 

3 

2 

April 

3 

2 

1 

May 

4 

1 

3 

2 
1 


Source:   Compilation  by  Statistics  Section,  NBA.,  from  Daily 
Price  Reports,  Steel  Founders'  Society  of  America. 


Type  of  Discount:   (See  notes  to  Table  X-A. ) 


9826 


«90 


TABLE  XI-A 

Type  of  Freight  Allowances  Granted  to  Railroad* 
and  Effective  Dates 


Effective 

Foundry 

Type  of 

Effective 

Foundry 

Type  of 

Data 

Number 

Allowance 

Date 

■umber 

Allowanoe 

Deo.  29,  1933 

All 

e 

June  4,  1934 

i18 
418 

a 

Dec.  27 

506 

e 

June  4 

d 

Dec  28 

306 

a 

June  4 

126 

d 

Jan.  28,  193* 

501-508 

a 

June  5 

519 

a 

Feb.  1 

311 

1 

June  5 

517 

d 

Feb.  5 

606 

g 

June  6 

108 

d 

Feb.  20 

636 

a 

June  6 

205 

a 

504 

1 

June  6 

128 

a 

Feb.  25 
Mar.  23 

3°5 
504 

407-424 

e 
j 

June  6 
June  7 
June  6 

111 
516- 

a 
a 

Mar.  23 

a  and  b 

518 

« 

Apr.  11 

105 

204-209 

a  and  b 

June  6 

506 

d 

May  3 

k 

June  6 

408 

d 

May  1 

812 

k 

June  7 
June  6 

• 

May  4 

801 

k 

635 

a 

May  9 

51" 

k 

June  8 

113 

a 

May  14 

832 

k 

June  6 

602 

« 

May  15 

506 

a  and  b 

June  14 

207 

a 

Ma*   28 

105 

e 

June  14 

520 

d 

May. 28 

407-428 

c 

June  14 

623 

d 

May  31 

109 

d 

June  19 

201 

a 

June  1 

412 

d 

June  18 

601 

d 

June  1 

.11 

e 

June  20 

1XJ 
206 

d 

June  1 

122 

e 

June  22 

d 

June  2 

202 

• 

July  1 

208 

a 

June  1 

102 

e 

June  25 

704 

e 

June  1 

410 

c 

June  2b 

511 

a 

June  1 

126 

a 

July  3 

64o 

d 

June  2 

4i4 

t 

July  5 

130 

a 

Jum  1 

619 

a 

July  6 

805 

a 

June  1 

626-627 

d 

July  6 

112 

a 

Source: 


Compilation  by  Statistics  Seation,  SKA,  from  Dally  Prloa  Reports,  Steal 
Founders'  Society  of  Aaerica. 


Type  of  Freight  Allowance: 

a  -  In  caaes  of  Railroad  castings  for  repair  or  maintenance  purposes, 
these  prices  are  f.o.b.  freight  basing  point  seller's  works  with 
freight  charges  allowed  to  the  nearest  point  on  the  line  of  the 
railroad  purchaser. 

b  -  In  cases  of  Railroad  castings  for  new  equipaent  to  be  built  either  la 
Railroad  shops  or  commercial  oar-builders'  plants,  the  prloes  are 
f.o.b.  freight  basing  point  seller's  works  with  freight  charges 
allowed  to  destination. 

0  -  In  cases  of  Railroad  castings  for  repair  or  aalntenanoe,  these  prloes 

are  f.o.b.  freight  basing  point  seller's  works  with  freight  charges 
allowed  to  destination  in  any  case  providing  such  destination  la  east 
of  Longitude  105,  passing  through  Denver,  Colorado. 

d  -  In  cases  of  Railroad  castings  whether  for  new  equipaent  or  repairs, 
are  f.o.b.  our  works  with  freight  charges  allowed  to  destination, 
provided  such  is  east  of  Longitude  105,  through  Denver,  Colerado. 

e  -  In  casae  of  Railroad  castings  whether  new  equipaent  or  repairs,  our 
pricea  are  f.o.b.  freight  basing  point  our  works  with  freight  charges 
allowed  to  destination. 

f  -  In  cases  of  Railroad  castings,  frslght  charges  allowed  to  destination 
on  orders  of  150  lbs.  or  aore. 

g  -  Allow  freight  charge  east  of  Mississippi  and  north  of  Ohio  Rivera. 

h  -  We  reaerve  right  to  equalize  pattern  transportation  oharges  with  any 
competing  foundry. 

1  -  Published  freight  rates  will  be  allowed  within  radius  of  150  alles  froa 

Akron,  Ohio. 

i  -  Published  freight  ratea  will  be  allowed  within  radlua  of  250  alias  froa 
Akron,   Ohio. 

k  -  Reaerve  right   to  aeet   coapetltion,    to  equalise  by  freight  allowanoe. 


<1  fc  9  a 


-  691  - 


TABLE  XI-E 


Frequency  of  Type  of  Freight  Allowances, 
by  Months 


Year  and 
Month 


Total 


Type  of  Allowance 


Total 


71 


3  19 


1  6 


1933 


1934 


December 

2 

January 

3 

February 

5 

I  arch 

8 

Aoril 

2 

I  ay 

9 

June 

37 

July 

5 

.augus  t 

Seotenber 

October 

^ov-mber 

December 

2 
1 
1 


2 

1 
1 


1 
1 


17  18 


11 
2 


8 
1 


1 
1 


1935 


January 
February 
March 
April 

May 


Source:   Compilation  by  Statistics  Section,  MA,  from  Daily  Price 
Reports,  Steel  Foun^rs'  Society  of  America. 

Type  of  Allowance:   (See  Notes  to  Table  XI-A. ) 


9826 


TABLE  III-A 
Type  of  Pattern  Allowances  Granted  to  Foundries  and  Effective  Dates 


Tear  and 

Foundry 

Type  of 

Taax  and 

Foundry 

Type  of 

Month 

luabex 

Allowance 

Month 

Number 

Allewanoo 

Dec.  2g,  1933 
Jan.  4,   193* 

302-307-313) 
506-517 

b 
0 

and 

d 

Max. 

Apx. 

31,  193* 

607 

a  -  0  -  t 

Jan.   5 

(at.    Malleable 

Apr. 

4 

521-109  v 

Cleveland,    Ohio 

f 

and 

C 

Apx. 

5 

128-122) 

Jan.  9 

602-416) 
407-42*) 

c 

and 

d 

Apx. 

2 

107-808) 
808-812 

■    129 

b 

Apr. 

5 

705-314-311 \ 
813-815) 

Jan.   11 

20U-422 

0 

and 

d 

Jan.  16 

611-412) 

Apr. 

6 

619-310) 

101-202-413) 

407-424) 

c 

aad 

d 

Apr. 

9 

105-805 
206-801) 

Apr. 

11 

Apr. 

10 

124) 

Jan.   17 

201-117 

0 

and 

d 

Apr. 

13 

204-209 ) 

Jan.   IS 

616-207 

0 

and 

« 

834-102-132) 

Jan.   19 

629-709) 

0 

and 

d 

Apr. 

16 

412 

616-207) 

Apr. 

IS 

SZ 

c  and  d 

Jan.   20 

408-109) 

Apr. 

19 

Jan.    22 

509-205) 

0 

and 

4 

Apr. 

3 

109 

128-420) 

Apr. 

832 

Jan.   24 

641-106) 

0 

and 

d 

Ma  r  1 

405 

421-614) 

May 

5 

615 

Jan.   25 

102-126) 
601-311) 

May 
May 

L 
» 

812 
801 

Jan.   26 

638-605) 

0 

and 

d 

May  9 

516 

Jan.   27 

505-131) 

May 

LI 

123 

Jan.   28 

.301 

b 

May 

14 

832 

131 

c 

and 

4 

May  14 

816 

Jan.   31 

108 

0 

and 

4 

May  23 

822 

Feb.  1 

127-714 

c 

and 

4 

May 

28 

811 

Fab.   3 

713-306) 
805) 

c 

and 

4 

Jon* 

14 

306 

June 

14 

623 

Tab.    5 

816 

c 

and 

d 

June 

19 

602 

606 

1 

June 

22 

512-206 
408-619 

629 

0 

and  4 

June 

23 

**b.  8 

511 

0 

June 

27 

108-306 

Fab.  9 

701 

0 

and  d 

July 

2 

127-302 

Feb.   12 

£2 

0 

and  4 

July  7 

504 
208-20JJ 

I 

July  10 

Fab.  19 

% 

e 

and 

4 

Fab.   21 

1 

Jvily 

11 

207 

Max.  5 

63. 

b 

July  13 

203 

Bar.  9 

509 

a 

July  13 

202-205 

a  and  a 

129 

b 

July  13 

201 

a  and  a 

Mar.   1* 

es 

a 

July 

16 

621-629 

a  and  a 

a 

July 

27 

502 

a  and  e 

■ax.  17 
Mar.  19 

ss 

0 

a 

Aug. 
Aug. 

I 

630 

a  and  a 

Max.  20 

504-202 

a 

Aug. 

17 

S3 

Max.   21 

639 

a 

and 

0 

Aug. 

21 

416 

Max.   22 

637 

a 

Aug. 

22 

306 

111 

0 

Aug. 

24 

513 

Max.   23 
Max.    24 

612 

a 

and 

0 

Aug. 

13 

105 

814 

823-416 

a 

Aug. 

28 

Max.   26 

626 

0 

and 

4 

Sept 

.  12 

112 

Max.   28 

205-71* 
620 

a 
a 

Sept 
Dae. 

.    29 

m 

Max.   30 

310 

a 

Dae. 

26 

627-415 

Max.   28 

131 

a 

Source: 


Compilation  by  Statntlce  Seotton,  ISA,  from  Dally  .Price  Reports,  Steal 
Foundera'  Society  of  Aaerloa. 


Typo  of  Pattern  Allowancee: 

a  -  'Wo  hereby  file  with  your  office  the  etlpulatlon  where  amy  pattern  la  In  exle- 
tenoa  and  owne4  by  a  competing  company  we  will  to  meet  competition  llkewlee 
furnleh  a  pattern  from  which  to  make  castings  for  a  cuatoaer  without  any  charge. 
wa  to  be  the  Judge  ae  to  when  the  pattern  is  to  be  made  and  the  conditions, 
pattern  to  remain  our  property. ■ 

b  -  "Castings  requiring  Intricate  mouldings  and  castings  to  be  made  from  ewaap 
skeleton  or  other  Incomplete  pattern  equipment  castings  having  a  thin  metal 
eeomon  ...  will  be  subject  to  nagotlatlona  onprloa." 

o  -  "When  a  new  pattern  la  required  and  when  500  or  more  miscellaneous  Railroad 
oast  Inge  axe  bought  at  one  time,  wa  will  absorb  the  pattern  cost,  pattern  to 
remain  ourproperty. " 

-  "Then  a  new  pattern  is  required  and  less  than  5°0  miscellaneous  castings  (Rail- 
road) are  bought  at  one  time,  we  will  make  an  extra  charge  to  the  cuetomer  at 
not  lsaa  than  cost.' 

-  "We  reserve  the  right  to  equalise  pattern  transportation  chargee  with  any  com- 
peting eteal  foundry." 

-  "When  patterne  are  available  in  stock  there  will  be  no  charge  to  customer  -  if 
new  pattern  la  required  customer  will  be  charged.' 

-  "fe  will  make  no  charge  for  patterns  on  Railroad  Car  castings  when  orders  axe 
fox  pxoduction  quantities.   Till  charge  ox  require  cuetomer  to  furnish  patterne 
in  cass  orders  are  for  Jobbing  quantities.' 

-  'We  reeerre  right  to  supply  pattern  at  no  coat  when  auch  are  for  standard  paxts. 


9826 


-  693  - 


TA3LF  XII-B 


Frequency  Distribution  of  Allowances 
on  Tattersn,  by  Months 


Year  and 

Month 


Total 


Total 


233 


80 


Tyoe  of  Allowance 


b 
7 


64   59 


17 


1933 


19; 


1935 


December 

4 

January 

95 

February 

24 

iw'arch 

27 

' IApril 

33 

May 

10 

June 

6 

July 

20 

August 

9 

September 

2 

October 

November 

December 

2 

January 

February 

March 

April 

May 

17 
31 
10 

6 
14 

2 


46 

11 

6 

1 


46 

10 

2 

1 


1 
3 


6 
7 
2 


Source:   Compiled  by  Statistics  Section,  ERA,  from  Daily  Price  Re- 
ports of  Steel  Founders'  Society  of  America. 

Type  of  Fattern  Allowance:   (See  Notes  to  Table  XIII-A. ) 


9826 


694 


TABLE  ZIII-A 

Foundries  Tiling  Salts  Contraots  Specifying  Price*  Lower 

than  Current  Filed  Prices,  number  of  Customers, 

Produots  Affected,  and  Length  of  Contracts 


Date  of 
Report 


foundry 
Humber 


Contract 


Iff sot It* 


Ixplras 


Length  of 
Contract 


Huaber  of 
Products 


Hunber  of 
Customers 


Oot.  20,  193* 
Oot.  2J 
Oct.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 

8 


Oot 
Oot 


Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  23 
Oot.  25 
Oot.  25 
Oot.  25 
Oot.  2* 
Oot.  29 
Oot.  29 
Oot.  29 
Oot.  29 

Hot.  22 
Hot.  22 
Hot.  22 
Hot.  22 
Hot.  22 
Hot.  22 
Hot.  28 
Hot.  28 
Hot.  28 
Hot.  30 

Dec.  11 
Dec.  11 
Dec.  11 
Dsc.  11 
Doc.  11 
Dsc.  11 
Dsc.  11 
Dsc.  11 

Dsc  17 

Dsc.  17 

Dsc  22 

Jan.  2,  1935 

Jan.  7 

Jam.  17 

Jan.  23 

Jan.  31 
Mar.  8 
Mar.  il 

Apr.  18 
Apr.  18 


518 

Oct.  13,  193* 

Dsc. 

31,  193* 

620 

4/ 

Jan. 

1,  1935 

•20 

tJ 

Jan. 

1 

620 

y 

Jan. 

1 

620 

y 

J.sm. 

1 

620 

aJ 

Jan. 

1 

620 

y 

Jan. 

1 

622 
622 
622 
622 
622 
622 

i 

i 

626 

Aug.  16 

S/ 

626 

705 

Aug.  16 
Uar.  26 

Uar. 

*  . 

519 

JUBS  30 

Dae 

31,  193* 

«3« 

1/ 

Jan. 

1,  1935 

«3» 

*/ 

Jan. 

1 

638 

&/ 

Jan. 

1 

51' 

Oct.  5 

Dso. 

31.  193* 

51' 

*/ 

Dsc. 

31 

619 

l/ 

Dsc. 

31, 

609 

609 
609 

i 

1 

609 
509 
628 

July  7 

i 

631 

Hot.  10 

Apr. 

1,  1935 

«31 

Hot.  10 

Apr. 

1 

631 

Hot.  10 

Apr. 

1 

631 

Hot.  10 

Apr. 

1 

631 

Hot.  10 

Apr. 

1 

631 

Hot.  10 

Apr. 

1 

635 

Sspt.  20 

*/ 

635 

Sept.  20 

*/ 

635 

Sept.  20 

*/     „ 

505 

Sept.  17 

Dae 

31,  193* 

505 

Sept.  17 

Dec 

31 

§31 

Hot.  10 

Apr. 

l,  1935 

5'1 

Hot.  10 

Apr. 

1 

631 

Hot.  10 

Apr. 

1 

«3l 

Hot.  10 

Apr. 

1 

631 

Hot.  10 

Apr. 

1 

S'1 

Hot.  10 

Apr. 

1 

631 

Hot.  10 

Apr. 

1 

826 

Dsc  30,  1933 

a/ 

616 

Dsc  12,  193* 

&, 

616 

Dsc  7 

W 

7!J 

Jan.  1,  1935, 

Juna  y 

516 
619 

Dsc  31.  193* 

Apr. 

1 

Jan.  3.  1935, 

Uar. 

31 

5l« 

Dsc  28,  193* 

Mac 

31 

108 

A> 

Uar. 

31 

51? 

Jan.  28,  1935 

Uar. 

31 

51* 

Jan.  26 

Apr. 

1 

511 

Feb.  18 

Dae 

31 

50* 

Apr.  11 

Dae 

31 

705 

Apr.  18 

July 

18 

2  monthe  -  17  daya 

I 

1  year 

6  months 

t 

2  monthe  - 

I 

V 

*  months  -  20  daya 

*  aontha  -  20  daya 

*  monthe  -  20  daya 

*  monthe  -  20  daya 
* 
4 


21  daya 


months  -  20  daya 
months  -  20  daya 

i 

3  monthe  - 


* 

* 


20 
20 
20 


months 
months 
months 
months 
months 
.  months 

*  months 

*  months 
60-day  olause, 

either  party 

i 

6  monthe 
3  monthe 

2  monthe  - 

3  monthe  - 


13  daya 

13  days 

20  daya 

daya 

daya 

daya 

20  daya 

2»  daya 

20  days 


28  days 
3  days 


2  months 

2  months 
9  months 
7  months 

3  months 


3  d*rs 
5  days 

10  days 
19  days 


3 

2 

1 
2 

1 
1 
1 
2 
2 
1 
1 
1 
1 
2 
2 
2 


1 

1 

1 

10 

5 

1 
2 
2 
1 
1 


2 

10 

1 

Blanket   , 

filing  2/ 

2 

1 

9 

1 

55 


2 

1 

2 

1 
1 
2 
2 

3 
1 
2 
2 

1 
1 
1 
1 
1 
1 
1 

1 
1 
1 
1 
1 
2 
1 

1 
2 
2 

1 

1 


Souroa:   Compilation  by  8tatletics  Section,  HRA,  from  Dally  Price  Reporte,  Steal  Foundsre' 
Society  of  America. 


a/    Hot  specified. 

b/    In  sffsot  until  further  notics. 

iJ         Fourth  Quarterly  Report. 


9826 


-  695  - 

tabl:-:  xiii-b 

Frequency  oi   C   rr.  ract  i 
Customer k  Filed,   'by  Months 


Year  nnd 

Mo nth  C  in t  r r  ,c t s  C\ \ z  u o raer  s 


Total  50  91 

1934 

October  29  46 

Ho  v ember  11  21 

December  11  12 

1935 

January  5  6 

Februrry  C  0 

March  2  4 

Aoril  2  2 


Source:      Compilation  by  Statistics   Section,    1-IHA,    from  Drily  Price 
Reports,    Steel  Foionders1    Society   of  America. 


-  696  - 
TABLE  XIII-C 

Frequency  of  Contracts,    Classified  "by 

Length  of  Dy.rr.tion, 


ITumber  of 
Duration  Contrrcts 


To  tal  50 

2  to  3  months  5 

3  to  4  months  5 

4  to  5  months  13 

5  to  6  months  0 

6  to  7  months  2 

7  to  8  months  1 

8  to  9  months  0 

9  to  10  'months  1 

10  to  11  months  0 

11  to  12  months  0 

12  months  and  over            .  1 

Hot  specified  32. 


Source:  Compilation  by  Statistics  Section,  ERA.,  from  Daily 
Price  Heports,  Steel  Founders'  Society  of  Americr. 


9826 


ITlaa   3ehadula 

Qrar   100t       D»*»r    100?        Mot  Uyt.<Lll*l 


(823 
(601 

(616 
(B32 


IBM,  r*b.  u     1934,  Kb.  21 


1 


(634 

(626  Jui*   27  July     7  P  -   L 

(622 

(«fl 

636  July      6  P 

819  July     8  July    9  P  -  R 

112  July     9  July    9  0  -  R 

60T  July   12  July   12  P  -  R 

619  July  16  July  16  P  -  B 

612  July   14  July   14  0  -  R 

(501  July   16  July  16  t  -  3 


July  16 
July  17 
July  20 

July  20 
July  24 
July  24 
J.ily  25 
July  23 
July  30 
Aug.    14 


521 

July  16 

707 

July   17 

(519 

July  20 

(929 

60* 

July  20 

306 

July  24 

206 

July  24 

July  26 

901 

July  23 

July  30 

lug.   1* 

622 

Au£.  26 

602 

Sap.   12 

(634 

(639 

(Ml 

(619 

Sap.   17 

(602 

(626 

(621 

[6M 

(614 

Sop.    17 

(626 

(640 

(613 

S*p.   19 

(639 

(630 

Sap.   19 

(609 

(629 

l».*.»fl 


(624 

21 

(636 

604 

Sap. 

SO 

636 

26 

314 

Sap. 

M 

0»°.   13 

«th  4. 

a. 

(j  Iv.     7 
Apr.  22 

Apr.  2E 

1936.  Mai. 

toy 
toy 

T 

e 

z 

Mar.   23 

6th  q. 

1, 

p 

-  R 

F 

-  R 

0 

P 

-  R 

P 

-  B 

P 

I 

-  Ot 

f 

-  DL 

P 

-  B 

P 

-R 

(Di.l. 

T.6-0) 

(■.*. 

S.B"f1 

Jl.l.T.B-O) 
ggg|g| 


lota.  Tha  latter  1  with  aubaonpt  lndloataa  a  'iw  aa'  miagi  for  anuf>la,  i(Ij  aaaaa  that 
tfaa  foundry  la  thda  inataoo*  filaa  the  iu>  aohadula  or  prloa  aa  aajthar  foundry  tbora 
Mrtad    i,i    In  raport  flV9,   ata. 


i    -    ntlii™  DL   -    8 


A  (7) 

21S 

a  (y) 

214 

a  (y) 

21S 

a  (y) 

222 

a  (y) 

226 

a  (y) 

a  (y) 

241 

698 


TABLE     XT 
Price  Schedules  Tiled  on  Aeronautical  Castings  -  NOCBN 


511 

Apr.  9 

Apr.  9 

855 

Apr.  7 

Apr.  7 

806 

Apr.  10 

Apr.  10 

709 

Apr.  12 

Apr.  12 

130 

Apr.  16 

Apr.  16 

616 

Apr.  23 

Apr.  23 

303" 

Apr.  lg 

Apr.  18 

836 

Apr.  7 

Apr.  7 

516 

May  4 

May  4 

621 

Hay  12 

May  12 

SU 

May  25 

May  26 

514 

June  1 

June  1 

607 

June  6 

June  6 

June  16,  Seoond 

Quarterly  Report 

126 

June  22 

June  22 

303 

July  4 

July  4 

112 

July  9 

July  9 

117 

July  7 

July  7 

512 

July  14 

July  14 

622 

Aug.  23 

Aug.  23 

(634 

1934, 

Sept.  17 

At  Onoe 

(629 

(641 

(619 

(602 

(626 

(621 

(638 

(614 

(628 

(640) 

Sept.  19 

At  Once 

(613 

(639 

(606 

Sept.  19 

(630 

(609 

(628 

September  20,  Third 

Quarterly  Report 

644 

Sept.  20 

(624 

Sept.  21 

(636 

636 

Sept.  26 

1934, 

Sept.  26 

608 

Oct.  3 

620 

Oct.  8 

625 

Oct.  5 

Oot.  5 

609 

Oct.  29 

Deoember  13,  Fourth 

Quarts 

rly  Report 

310 

1936, 

Jan.  31 

Jan.  31 

March 

23,  Fifth 

Quarterly  Report 

iViee  3cne3Sf 


Not 

Sp 

eclfied 

C 

C 

C 

-  R 

C 

-  R 

C 

-  R 

Report                Foundry  Filed  Effective 

2  '          664  1933,  Deo.  18 

5            206  Deo.  26 

60           (601  1934,  Feb.  19       1934,  Feb.  19 

(508 

87            512  Apr.  2  Apr.  2 

95  (1)        (832  Mar.  26  Mar.  26 
(812 
(801 
(823 
(816 

March  31,  First  Quarterly  Report 

96  511  Apr.  9  Apr.  9                  C  -  R 
A  (x)                 835  Apr.  7  Apr.  7                  C 

97  806  Apr.  10  Apr.  10                0  -R 

C  -  R 

98  130  Apr.  16  Apr.  16  C  -  R 
104  616  Apr.  23  Apr.  23  C  -  R 
106            303"  Apr.  18  Apr.  18                 B  -  R 

A  (x)   112            836  Apr.  7  Apr.  7                  C 

116            516  May  4  May  4                  C  -  R 

120            621  May  12  May  12                  0  -  R 

130            SU  May  25  May  26                  C  -  R 

135           514  June  1  June  1                 C  -  R 

141           607  June  6  June  6                 C  -  R 


151  126  June  22  June  22  C 

162'  303  July  4  July  4  C  -  R 

164  112  July  9  July  9  0  -  R 

166  117  July  7  July  7  C  -  R 

170  512  July  14  July  14  C  -  R 

196  (y)  622  Aug.  23  Aug.  23  0  -  R 

A  (y)  210  (634      1934,  Sept.  17  At  Onoe  C 


A  (y)     212 

A  (y) 


C 

c 

c 
c 

0 

c 
c 
c 

>,  Jan.   31  Jan.   31  C   -  R 

C_ 

Hotel     The  letter  A  with  a  subsoript  indicates  a  "same  as"   filing.     For  example,    A  (yj  means  that 

the   foundry  in  this  instanoe  files  the   same   sohedule   or  prioe  as  another  foundry  above  marked 
(y)  in  report  #196,   etc.     In  column  "price  schedule"  as  in  the  oase  of  "C  -  R"  in  report 
#307  the  first  letter  is  the  price   sohedule  and  the   second  letter  speoifloations  as  followsi 

R  -  revision 


9826 


TABLS  XVI 


Price  Schedules  Filed  on  Railroad  Locomotive 
DrlTlng  Boxee,  Friction  Type 


Price  Schedule  «/ 

Report 

Foundry 

Filed 

Effective 

Specified 

Remarks  . 

5/ 

/ 

1933, 

Decenber  5 

P 

IQD 

12 

402 

December  30 

At  once 

Price  given 

24 

208 

1934, 

January  18 

At  onoe 

P 

NQD 

60 

(501 
(508 

February  19 

1934,  February  19 

P  -  R 

IQD 

nqd 

62 

805 

March  2 

March  2 

P  -  W 

NQD 

Uarct 

1  31.  Flret  Quarterly  Report 

P 

MOP 

91 

805 

12" 

April  3 

April  3 

P  -  R 

HQD 

over 

99 

pee. 

95(x) 

(S1S> 

(801 

823 

(815 

March  26 

March  26 

P  -  R 

IQD 

over 

99 

pes. 

96 

lU 

April  9 

April  9 

P  -  R 

IQD 

over 

99 

pee. 

*(x) 

835 

April  7 

April  7 

P  -  R 

NQD 

over 

99 

pee. 

97 

70? 
124 

April  12 

April  12 

P  -  R 

IQD 

over 

99 

pee. 

109 

April  21 

April  21 

P  -  R 

IQD 

over 

99 

poe. 

A(x]i112 

835 
304 

April  7 

April  7 

P 

NQD 

over 

99 

poe. 

117 

124 

Bay  3 

May  3 

P  -  R 

NQD 

over 

99 

pc». 

6i4 

May  15 

May  15 

P  -  R 

IQD 

126 

103 

May  21 

May  21 

P  -  R 

NQD 

over 

99 

pee. 

132 

J1i 

May  25 

May  25 

P  -  R 

IQD 

over 

99 

poe. 

i4o(y) 

128 

June  6 

June  6 

P  -  R 

IQD 

over 

99 

pea. 

2C3 

June  t 

June  8 

P  -  R 

IQD  ever  99 

pee. 

l4l 

507 

June  6 

June  6 

P  -  R 

NQD 

over 

99 

pea. 

1*3 

641 

June  11 

June  11 

P  -  R 

IQD 

over 

99 

poe. 

June  16.  Second  Quarterly  Report 

£ 

IQD 

ever 

99 

PCfl 

*(y)i5l 

206 

June  22 

June  22 

P  -  R 

NQD 

over 

99 

poe. 

152 

6l4 

June  22 

July  1 

P  -  R 

NQD 

over 

99 

pee. 

157 

712 

June  27 

June  27 

P  -  R 

IQD 

over 

99 

pee. 

158 

306 

June  29 

Jujb  29 

P  -  R 

IQD 

over 

99 

pee. 

165 

112 

July  9 

July  9 

P  -  R 

IQD 

over 

99 

pee. 

172 

707 

J"ly  17 
July  1* 

July  17 
July  l4 

P  -  R 

IQD 

over 

99 

poe. 

189 

835 

(No  price  ei 

jhedu] 

e) 

September  20.  Third  OuarterlT  Report 

£ 

NQD 

over 

99 

pee, 

216 

303 
516 

September  22 

September  2£ 

!  P  -  R 

IQD 

•war 

99 

poa. 

III 

October  19 

Ootober  19 

P  -  R 

IQD 

over 

24g 

poe. 

105 

407) 

422 

Ootober  29 

November  8 

P  -  L 

NQD 

over 

poa. 

242(a) 

Ootober  29 

November  8 

P  -  L 

NQD 

over 

?H9 

poa. 

246 

502 
4i9 

November  3 

November  J 

P  -  R 

-*■ 

*(«)2t«   / 
252  2/ 

November  6 

November  8 

P  -  L 

IQD 

over 

2Uq 

pea* 

502 

November  13 

November  13 

P 

259 

502 

November  19 

November  19 

P  -  H 

IQD 

over 

21*9 

poe. 

260 

502 

4l8 

November  22 

P  -  DL 

IQD 

over 

?l*9 

pee. 

261 

November  21 

November  21 

P  -  R 

IQD 

over 

2ft9 

poa. 

271 

304 

December  6 

December  6 

P  -  DL 

IQD 

over 

?l*9 

poe. 

December  11.  Fourth  OuarterlT  Rerort 

£ 

(£ 

over 

?*o 

poa.  exoept 

D8 

(806 
808 

1935, 

January  2 

1935,  January  2 

P  -  DL 

IQD  over 

99  DOB. 

285(w) 

IQD 

over 

2*9 

poe. 

»(w)  29< 
*(w  303 

January  18 

January  18 

P  -  DL 

IQD 

over 

2U9 

poe. 

814 

January  25 

January  25 

P  -  DL 

X%D 

over 

2 1*9 

poa. 

»(w)  308 

(812 
(813 

811 

February  1 

February  1 

P  -  DL 

IQD 

over 

?Vj 

poe. 

•.<»)  316 

February  13 

February  13 

P  -  DL 

IQD 

over 

?\a 

1  poa. 

March  23.  Fifth  Quarterly  Report 

£ 

IBS 

over 

21*9 

P°«t 

Source: 


Compiled  by  Statlftioi  Section,  IRA,  from  Dally  Price  Report  of  Steal  Founders' 
Society  of  America. 


5/ 


P  -  DL,  in  Report  #316  -  the  flret  letter  le  the  prloe  quoted  and  the  eecond 
letter  or  lettera  are  epeclf loatlone  ae  follows: 

L  -  new  low 
DL  -  new  divisional  low 
R  -  revision 
B  -  new  high 


al 

Note: 


ff  -  withdrawal 

IQD  -  No  Quantity  Discounts  allowed. 

"In  Report  #246,   filing  by  Foundry  502,    echedule 
as  a  new  low,    effective  November  13- " 


P'    ehould  have  been  ahown 


The  letter  A  with  a  eubecrlpt   Indicates  a  "same  ae  filing. '     For  example, 
A(-)  meane  that  the  Foundry  in  thle   lnetanoe  fllee  the  eaae   echedule  or 
price  sb  another  foundry  above,   marked   (w)   In  Report  #285,    etc 


9826 


-   700   - 

e::ti?it  ii 
soi  ferci;x  rssol"  tio^s 


The  rules  and  regulations  prescribed  by  the  Code  Authority  in 
its  administration  of  the  Code  -Tore  designated  as  Resolutions.   These 
were  of  three  types;  General  Resolutions,  Labor  Resolutions,  and  Com- 
mercial Resolutions.   The  Commercial  Resolutions  embraced  most  of  the 
regulations  affecting  price  filing  p.nd  the  more  important  of  these  are 
summarized  below,  grouped  according  to  subject  matter. 

I.   Price  Filing  Procedure 

A.  Formal  "Call"  for  Price  piling 

Commercial  Resolution  ITo.  5  was  adopted  on  November  27,  1933  and 
sent  to  all  nonbers  of  the  industry.   This  resolution  represented  the  first 
formal  call  for  the  filing  of  prices  and  established  December  11,  1933  as 
the  deadline  for  filing. 

B.  Waiting  Period  for  Price  Revisions 

Commercial  Resolution  ITo.  7,  dated  January  10,1934,  established 
a  ten  day  waiting  period  before  a  filed  "now  low  current  price  schedule 
on  a  specific  classification  or  -  current  prices  on  an  entirely  new  classi- 
fication" would  become  effective. 

Commercial  Resolution  Ho.  18,  adopted  May  7,  1934,  roplaccd 
a  resolution  of  the  same  number  adopted  February  13,  1934,  and  provided: 

"that  no  member  of  the  Industry  shall  quote  or  com- 
municate to  custonors,  directly  or  indirectly,  a 
price  on  Miscellaneous  Castings  before  the  effective 
date  thereof  permissible  under  Article  VII  of  the  Code." 

Under  date  of  March  27,  1934,  the  Legal  Division  made  the 
following  comments  on  the  original  resolution:   (This  original  resolution 
is  not  available  in  the  records). 

"I  do  not  believe  that  this  resolution  is  in  order  nor 
that  the  Code  Authority  (Board  of  Directors)  or  any  agency 
appointed  by  a  Subdivision  of  the  Industry  can  indicate  to  the 
industry  when  it  shall  or  shall  not  communicate  prices  to 
customers.   The  restriction  with  reference  to  filing  price 
lists  other  than  prices  themselves  is  restricted  only 
in  so  far  as  the  effective  date  is  concerned." 

This  resolution  was  withdrawn  by  the  Code  Authority  as  a 
result  of  this  opinion. 

C.  Prohibition  of  S^les  3elow  Filed  Prices. 
3*26 


-  701  - 

Commercial  Resolution  No.  24  of  May  7,  1934,  confirmed  the 
prohibition  of  sales  below  filed  prices  for  member::  of  Kiscellaneous 
Castings  Branch,  as  decided  infor  ially  by  the  Board  on  or  about  November 
28,1933. 

The  regulnti'm.  is  clearly  v/itliir.  the  >owers  granted  to  the  Code 
Authority  ~oy   section  3  of  Article  VII  of  the  Code,  No  infornation  is 
contained  in  the  record  regarding  the  incident  which  prompted  the  Code 
Authority  to  emphasize  the  prohibition  of  sales  below  filed  prices. 

D.   Status  of  Rer>air  and  Reol.ncer.ent  Parts 

Cor.inercial  Resolution  No.  2  adopted  November  27,  1933,  read  as 
follows: 

"RESOLVED,  that  Cast  Steel  Parts  for  nev.'  Locomotives  or 
other  finished  products,  built  by  companies  affiliated 
with  the  steel  foundries  producing  such  parts,  are  not 
subject  to  the  Steel-  Casting  Code,  but  reaair  and  replace- 
ment parts  for  such  finished  products  are  subject  to  said 
Code." 

It  may  be  informative  at  this  ooint  to  discuss  the  background 
which  lee.  to  this  Resolution  and  eventually  to  a  request  for  an  inter- 
pretation.  It  had  been,  for  many  years,  the  practice  of  the  railroads 
of  the  country  to  service  and  repair  their  O'tl  locomotives  in  their  own 
shoms.   In  the  course  of  such  repairs,  it  mas  ^moarontly  their  general 
practice  to  buy  such  steel  castings  as  were  required  from  favorably  3it*» 
dated  jobbing  steel  foundries  equipped  to  supply  such  material.   There 
appears  to  be  no  doubt  that  the  mreoonderar.t  tonnage  of  such  parts  was 
furnished  by  independent  jobbing  steel  foimdries.   In  1928,  locomotive 
builders  (Baldwin  Locomotive  Company  and  American  Locomotive  Company) 
appear  to  have  decided  upon  a  change  in  policy  which  "as  probably  motivated 
by  the  fr.ct  that  few,  if  any,  locomotives  '.'ere  being  purchased  by  the 
railroads.   This  policy  appears  to  h^ve  included  a  plan  for  increasing 
the  locomotive  builders'  mart icim^t ion  in  the  supply  of  repair  and  re- 
placement parts.   In  furtherance  of  this  no 1 icy,  the  General  Steel 
Castings  Corroany  ma.s  organized  and  a  new  and  large  steel  foundry  was 
constructed  in  Eddystone,  Pa.,  adjacent  to  the  works  of  the  Baldwin 
Locomotive  Company.   The  General  Steel  Ca.stings  corroany  was  admittedly 
subject  to  the  erovisions  of  the  Steel  Casting  Code.   However,  under  the 
code  definition  ox'  the  industry,  (*)  it  became  possible  for  the  locomotive 
builders  to  acquire  steel  castings  from  their  affiliate  foundry  com- 
pany, (General  Steel  Castings  Company),  at  any  price  they  saw  fit.   They 
could  then  be  resold  to  the  railroads  at  prices  bearing  no  relation  to 
those  filed  by  the  General  Steel  Castings  Company. 

As  a  result,  one  of  the  largest  of  the  Steel  Casting  In- 
dustry markets  uas  being  supmlied  with  competitive  products  at  prices 
which  were  unkno-.7n  to  the  members  of  the  Industry.   This  was  contrary 
to  the  principle  of  an  open  market  for  the  products  of  the  Industry. 

Commercial  Resolution  No.  2  indicated  the  attitude  of  the  Steel 


(*)   See  Sections  5  and  4  of  Article  VI  of  Steel  Castings  Code. 


-  702  - 

Founders'  Society  on  this  question.   This  resolution  was  protested  by 
the  loconotive  builders  at  hearings  on  April  2  and  May  2,  1935,  but  the 
Schechter  decision  was  handed  down  before  any  action  could  be  taken 
by  the  Administration  in  regard  to  this  question. 

E.  Filing  of  Sales  Contracts. 

Resolution  No.  6,  adopted  November  27,  1933,  called  for  t^e 
filing  of  sales  contracts  made  prior  to  December  11,1933,  cand  which 
were  continued  in  effect  after  December  31,  1933.   The  dpta  so  filed  were 
to  be  submitted  concurrently  with  the  other  price  lists  and  were  to 
specify  (l)  date  contrpct  was  made,  (2)  name  of  customer,  (3)  class  of 
castings  involved,  (4)  prices  specified  and  (5)  date  on  which  contract 
would  expire. 

Commercial  Resolution  No.  35,  adopted  October  10,  stipulated' 
that  all  contracts,  at  prices  below  current  filed  prices,  must  be  filed, 
A  statistical  tabulation  and  summary  of  the  effects  of  this  Resolution  is 
submitted  in  another  section  of  this  report.   (See  pages  654  ff.  .) 

The  Code  Authority  undov.btedlj'-  felt  that  the  Drovision  of  the 
Code  which  empowered  it  to  make  rulings  governing  the  filing  of  prices  (*), 
also  grp.nted  it  authority  to  require  the  filing  of  contracts. 

Commercial  Resolution  No.  38  which  superseded  Resolution  "To'.  33 
provided  that  sales  under  long  term  contracts,  pt  nrices  below  the  filed 
price  for  current  sales  of  the  same  type  of  product,  did  not  constitute 
a  code  violation  if  such  meriber  filed  with  Cede  Authority  either  a  copy 
of  contract  or  summary  of  terms.   It  further  provided  that,  with  the  ex- 
ception of  the  name  of  purchaser,  the  particulars  as  to  such  contr-cts 
were  to  be  disseminated  among  industry  members,  in  the  same  manner  as  all 
other  price  data. 

F.  "Blanket  Filings" 

A  number  of  tines  during  the  Code  period,  until  about  February 
13,  1934,  the  Code  Authority  accepted  and  reported' filings  made  by  found- 
ries to  the  effect  that  "we  amend  our  minimum  price  schedules  to  minimum 
prices  thus  far  filed  with  the  Steel  Founders'  Society,  or  which  at  any 
future  time  may  be  filed,  such  prices  to  become  effective  as  of  sane  date 
as  the  lower  prices  so  filed  become  effective." 

Commercial  Resolution  No.  17,  February  13,  1934,  eliminated  the 
above  as  Code  practice,  by  the  following  p.ction: 

"RESOLVED,  that  the  filing  of  'blanket'  revisions  of 

price  schedules  purporting  to  meet  all  minimum  schedules 

filed  by  all  other  steel  foundries  shall  not  be  acceptable 

and  that  all  revisions  must  be  made  in  writing  individually 

setting  forth  the  names  of  the  classifications  to  nhich 

they  respectively  apply,  and  the  corresponding  revised  schedules." 

(*)  Article  V,  Section  1,  (c) 
982S 


-  703  - 

A  continuation  of  this  practice  would  have  "been  a  deterrent  to 
the  success  of  the  nrice  filing  plan.  Allowing  a  foundry,  to  file  such 
sweenin?;  provisions  would,  in  effect,  have  relieved  the  foundry  of  the 
responsibility  of  filing  current  prices. 

Commercial  Resolution  No.  30,  adopted  October  10,  1934,  replaced 
the  above  Resolution  No.  17  and  again  permitted  the  making  of  so-called 
"blanket  filings"  by  allowing  any  member  of  the  Industry  to  meet  the 
minimum  prices  filed  in  his  division  by  a  mere  statement  to  that  effect. 
This  -orocedure  would  seem  to  tend  to  the  establishment  of  nrices  at  the 
level  filed  by  the  majority  of  the  members  in  the  division,  -and  published 
by'  the  Code  Authority  in  the  "Quarterly  Report."  This  Quarterly  Report 
was  a  publication  issued  quarterly  by  the  Code  Authority,  containing  the 
minimum  and  in  some  cases  the  prevailing  prices  filed  by  all  members  of 
the  industry,  and  indicating  exceptions  to  the  prevailing  levels  by  the 
name  of  the  foundry  filing  such  exception.   The  foundries  which  filed  e.t 
the  minimum  or  prevailing  levels  were  not  mentioned  specif ically. 

G.   Filing  of  Frices  to  Meet  Specific  Competition 

Commercial  Resolution  iTo.  12,  adopted  January  10,  1934,  defined 
industry  policy  on  "meeting  competition"  as  follows: 

"No  foundry  is  nernitted  to  sell  or  offer  for  sale 
steel  castings  at  less  than  the  prices  slwn  on 
schedules  filed  by  such  foundry  with  the  Societ3f. 
If  a  foundry  desires  to  meet  a  price  of  a  competitor, 
it  is  necessary  that  the  price  be  first  filed  with 
the  Society  by  the  foundry  desiring  to  meet  such  competi- 
tive price.   If  -a  foundry  has  not  filed  on  a,  specific 
classification,  their  'Miscellaneous,  N.O. C.B.N. ,  schedule 
must  be  used." 

Commercial  Resolution  No  30,  (*)  in  addition  to  permitting 
"blanket"  filings,  also  stated  that  it  was  possible  to  file  the  sane 
schedules  as  another  foundry  had  previously  filed,  by  merely  filing  with 
the  Code  Authority  a  statement  to  that  effect  and  listing  the  name  of  the 
foundry  and  the  date  on  the  Dally  Report  in  which  the  foundry's  filing- 
was  published. 

Proposed  Commercial  Resolution  No.  39  emphasized  the  above  re- 
quirement and  provided  that  a  member  of  the  industry,  in  filing  to  meet 
a,  competitive  price  with  the  sane  effective  date  as  the  first  filed  price, 
must  name  the  conoetitor  whose  Drice  he  was  meeting. 

II.  Terms  and  Conditions  of  Sale 

A.   Subsidizing  or  Financing  of  Customers 

Commercial  Resolution  No.  34,  effective  February  19,  1935,  pro- 
hibited the  ca.rrying  of  insurance  on  customers'  patterns  without  charge 
to  the  customer  and  provided  that  where  covered  by  a  blanket  insurance 
policy,  a  share  of  the  cost  of  such  blanket  policy  must  be  charged  to  the 

cus-tomers. 

(*)        See    above. 
9826 


-  704  - 

3.      Furnlshi'v;  Free  Service  -■.nd  Goods 

About  march  32,  193:     rop  :  3  C   eroial  Resolution  dealing 
with  the  filing  of  prices  on  pattern  equiunent  and  machining  was  sub— 
nitted  for  approval.   This  Resolntio>  ,  ■liich  -■.■     »osed  to  make  effect- 
ive the  Code  provision  prohibiting  t  .■  absor  '  ;  of  all  or  any  part  of 
the  cost  of  pattern  eqi.iio.ient  or  nachi.iin g,  required  the  filing  of  in— 
formation  ^retaining  to  orders  received  and  aece  ted  for  new  pattern 
equipment  or  machining  upon  forms  supplied  by  the  S.F.S.A.  and  such 
information  was  to  be  available  to  any  industry  member  on  request. 

There  is  no  indication  in  the  record  as  to  whether  this  reso- 
lution was  approved  or  not.   Such  a  requirement  would  be  a  logical  ex- 
tension of  the  price  filing  plan  to  include  another  element  of  trices 
which  might  have  been  employed  to  induce  sales  at  less  than  filed  prices. 
Without  such  a  requirement  the  price  of  pattern  equipment  or  machining 
"it  have  been  used  as  an  inducement  to  purchase  castings. 

On  May  14,  1935,  a  letter  was  sent  by  the  Code  Authority  . 
to  all  members  of  the  industry  requesting  a  ballot  on  this  proposition. 
The  letter  consisted  of:an  elaboration  of  the  original  proposition  as 
contained  in'  the  proposed  resolution. 

C.  Guaranteeing  Delivery  Date. 

Commercial  Resolution  No.  40,  effective  February  9,  1935  re  - 
presented  an  attempt  to  close  a  loophole  in  the  regulations  which  per- 
mitted members  to  sell  belo^  filed  prices.   This  Resolution  cautioned 
industry  members  that  the  practice  of  promising  delivery  on  dates  "which 
they  could  not  arid  'knew  that  they  could  not  meet"  and  the  paying  of  a 
fictitious  penalty  for  delay  in  such  deliveries  night  result  in  a  vio- 
lation of  the  code. 

D.  Lump  Sun  lidding 

Commercial  Resolution  Ho.  37,  effective  February  9,  1935,  app- 
arently prohibited  the  quoting  of  lump  sum  prices  by  members  of  the  in- 
dustry and  required  them  to  quote  on  a  per  pound  basis  only.   This  Reso- 
lution, although  approved  by  the  Administration,  "as  protested  by  a 
member  of  the  industry.   In  answer  to  this  protest  the  Assistant  Deputy 
Administrator  submitted  the  following  reply,  which  clarifies  the  Resolu- 
t  i  on : 

"I  wish  to  repeat  that  there  is  no  provision  in  the  Code 
that  would  prevent  a  member  from  quoting  you  a  firn  price 
on  a  specific  lot  of  castings.   It  is  true  that  such  a 
member  is  preparing  his  quotation  to  you  on  a  firn  basis 
would  necessarily  have  to  make  the  quotation  large  enough 
to  surely  cover  the  maximum  possible  weight  of  the  cast- 
ings delivered  since  the  member  would  be  violating  the 
Code  if  he  delivered  castings  to  you  at  actual  pound  prices 
which  were  below  the  filed  prices." 

E.  Quantity  on  Order 


-  705  ~ 

Comnercial  Resolution  No.  01 ,  adopted  Hay  7,  1934  defined  the  term  ' 
"quantity,"  used  in  connection  -ith  the  filing  and  quoting  of  prices  for 
steel  castings,  as  the  number  of  castings  ord°red  at  on°  time  from  a 
specif ic  pattern.   The  castings  "">re  to  be  shipped  or  invoiced  within 
90  days  from  the  date  of  the  ord  s.r,  except  in  the  ciase  of  specific 
projects  and  in  cases  "here  it  was  physically  impossible  for  the 
foundry  to  manufacture  the  total  rvuantity  specified  within  the  above 
prescribed  time.   In  these  cases,  it  was  required  that  copies  of  quo- 
tations be  filed  with  the  Code  Authority. 

Commercial  Resolution  No.  27,  May  7,  1934  clarified  the  method 
of  computing  "quantities' in  order"  when  paired  patterns  are  included. 

"RESOLVED,  that  in  the  case  of  -patterns  which  are  paired,  that  is, 
consisting  of  right  and  left  hand,  or  upper  and  lo^er  members, 
quantities  are  to  be  computed  separately  on  °ach  such  memb°r  in 
accordance  with  Commercial  Resolution  No.  21,  and  the  quantities 
of  such  members  may  not  be  combined  for  the  purpose  of  determining 
the  quantity  or  quantities  on  ord^r," 

Quotations  involving  estimated  weights  were  dealt  "ith  in  Com- 
mercial Resolution  No.  32,  adopted  October  10,  1934,  specifying  that 
quotations  shall  be  made  on  a  per  pound  basis  only  and 

"In  th°  event  the  actual  weight(s)  of  the  Casting(s)  is  (are) 
different  frorp  the  estimated  weight(s)  used  in  this  quotation 
the  actual  weight(s)  will  "be  used  as  a  basis  for  billing."' 

III. Distributive  Relationships 

Commercial  Resolution  No.  10,  adopted  on  January  10,  1934,  defined 
"sal°s  or  commission  agents,"  and  established- regulations  for  selling 
through  these  agents,  in  the  following  terns! 

"RESOLVED,  that  a  sales  or  commission  agent  shall  be  defined 
as  any  person,  firm  or  corporation  employed  by  a  member  of  the 
Industry  to  sell  steel  castings  to  the  trade,  und°r  such  terms 
and  conditions  that  such  agent  does  not  become  at  any  stage  of 
the  transaction  the  purchaser  of  the  castings,  and  that  the  .  • 
castings  are  sold  and  billed  by  the  member  of  the  Industry, 
to  the  ultimate  customer,  not  to  the  agent  and  farther 

"RESOLVED,  that  in  all  cases  castings  sold  through  agents  or 
commission  sales  representatives  shall  be  sold  at  trices  not 
less  than  th°  prices  filed  by  the  foundry  which  produces  the 
castings. " 

IV.   Geographical  Price  Structure 

Commercial  Resolution  No.  4,  adopted  on  November  27,  1933, 
provided  that  prices  must  be  filed  ^n  a.  delivered  basis. 

Commercial  Resolution  No.  36,  superseding  Commercial  Resolution 
No.  4,  covered  th°  delivery  practices  of  members  of  th°  industry  in 
s°lling  to  railroads  and  prohibited  th^  selling  "at  a  price  "hich 


-  706  - 

results  in  a  delivered  price  to  th°  purchaser  that  is  less  than  the 
schedule  of  minimum  delivered  -oriels  of  rough  castings  fil°d  "by  the 
s°ller"  and  further  prohibited  th°  selling  "which  results  in  a  net 
price  to  the  railroad  l°ss  than  the  scheduled  pric°  filed  by  the 
seller,  with  freight  allowed  to  the  nearest  point  of  road  with  addi- 
tional freight  allowances  of  five  mills  per  ton  mile  for  the  on  line 
haul." 

The  most  important  phas-^  of  this  resolution  is  the  additional 
allowance  of  five  mills  p^r  ton-mil*  for  the  on  line  haul.   The 
previous  freight  allowance  was  on  the  basis  of  destination  as  nearest 
point  on  the  road.   At  the  Industry  meeting  h°ld  in  Cincinnati,  Ohio, 
on  October  9-10,  1934,  the  matter  of  allowing  this  concession  to 
Railroads  was  discussed.   The  Code  Authority's  letter  to  the  Members  on 
October  16  gave  the  following  report: 

"The  Special  Committee  appointed  to  study  the  problem  of  freight 
allowances  on  railroad  castings  made  the  following  recommendation 
to  the  Society: 

"'That  all  Railroad  Castings  for  direct  shipment  to 
railroad  customers  bv  sold  on  the  following  delivery  basis; 
"Freight  basing  point,  seller's  works  (location)  with 
freight  allowed  to  nearest  point  on   lin°  of  road,  plus 
cost  of  the  on-haul  of  five  mills  per  ton  rail0  via  shortest 
route  from  the  point  where  customer  road  rec°ives  the 
shipment  ,  to  destination." 

"It  was  explained  that  no  cm  foundry  has  more  than  15  to  17 
railroad  customers  a^d  the  locations  of  the  destinations  (shops) 
are  »11  known  to  th-m  so  that  it  would  be  a  relatively  simple  . 
matter  to  s°t  "p  a  schedule  of  freight  charges  to  cover  all 
combinations. 

"The  committee's  recommendations  met  with  a  diversity  of 
opinion  and  no  action  was  taken  thereon.   Instead  it  was 
referred  to  the  rroup  comprising  manufacturers  of  railway  car  and 
locomotive  castings  for  acceptance  or  rejection.   The  matter  has 
not  yet  be°n  settled."' 

It  was  known  that  the  Railroad  interests  ^ere  clamoring  for  an 
additional'  freight  allowance;  this  concession  was  the  outcome. 

Under  date  of  January  9,  1935  the  Legal  Division  suggested 
that  the  code  authority  b°  request0^  to  submit  a  Cod°  Amendment  covering 
this  subject  or,  alternatively,  that, 

"A  Resolution  requiring  a,  break-down  of  prices  to  be  quoted  to 
railroads  so  that  such  prices  may  be  readily  compared,  ^ould  be 
acceptable  to  the  Legal  Division.   It  could  properly  provide 
that  prices  on  sales  to  railroads  must  be  filed;  that  sach 
price  lists  must  show  the  delivered  price  (  delivery  to  the 
nearest  point  of  the  purchasing  Mr  to  be  deem?d  delivery)  and 
the  freight  allowance  per  ton  mil^,  if  any,  from  the  point  of 
delivery  to  the  ultimate  destination;  and  that  5  mills  p«r  ton 

98?6 


-  707  - 

mile  shall  b°  d^m-^d  th->  freight  allowance  unless  th°  member  of 
the  Industry  otherwise  designates.   Such  a  resolution  would 
afford  an  adequate  "basis  of  comparison  without  unalterably 
establishing  any  of  th°  elements  of  price." 

This  au^stion  was  submitted  to  the  Industry  for  "ballot,  which 
resulted  in  an  overwhelming  vote  in  favor  of  th°  proposal.   This 
question  was  latT  "brought  up  as  an  amendment,  "but  was  not  disposed 
of  "before  the  ^nd  of  the  Code. 

Proposed  Commercial  Resolution  Ho.  43  was  a  restatement  of  the 
material  contained  in  Commercial  Resolution  Nos.  4  and  36  and  in  an 
effort  to  meet a certain  objections  raised  "by  the  Administration.   This 
Resulution,  which  was  received  "by  the  Administration  on  April  16,  1935, 
provided  as  follows? 

"That  on  sa"i  °s  of  miscellaneous  castings  to  purchasers  other  than 
railroads,  the  requirement  of  Commercial  Resolution  No.  4  that 
filed  prices  shall  bD  on  a  'delivered  "basis'  is  h°re"by  declared 
to  mean  that  such  prices  are  charged  for  the  rough  castings  f.o.b. 
seller's  foundry,  with  an  allowance  equal  to  the  actual  charges 
for  delivery  to  the  purchaser,  provided,  however,  that  such 
allowance  shall  in  no  ^vent  exceed  the  railroad  freight,  at 
the  published  rate  applicable  to  the  shipment,  from  the  seller's 
foundry  to  the  railroad  switching  point  or  terminus  nearest 
to  the  plant  of  the  purchaser,  exclusive  of  local  trucking  or 
other  transportation  charges  from  such  point  or  terminus  to  the 
plant  of  the  purchaser;'  and  further 

"RESOLVED  that  on  sales  of  miscetlaneus  castings  to  railroads, 
the  requirement  of  Commercial  Resolution  No.  4. declared  to  mean 
that  such  prices  are  charged  for  the  rou£h  castings  f.o.b. 
seller's  foundry,  with  an  allowance  equal  to  the  actual  charges  for 
delivery  to  the  purchasing  railroad  at  the  point  on  its  linQs\  which 
is  nearest  to  the  -olant  of  the  seller,  provided,  ho"°var,  that 
such  allowance  shall  in  no  ev°nt  exceed  the  railroad  freight, 
at  the  published  rate  applicable  to  the  shipment,  from  the 
seller's  foundry  to  such  point  on  th°  lines  of  the  purchasing 
railroad  which  is  nearest  to  the  plant  of  the  seller;  and  further 

"RESOLVED  that  this  resolution  shall  become  effective  on 
July  1,  1935  and  shall  be  applicable  with  respect  to  all  sales 
mad0  after  that  date,  including  sales  und°r  contracts  which  are 
in  effect  before  that  datD,  if  such  contracts  are  made  the 
fifth  day  following  the  date  upon  which  approval  of  this 
resolution  .is  received  by  the  Society  from  the  National  Indus- 
trial Recovery  Board." 

Under  date  of  May  15,  1935,  the  Legal  Division  approved  this 
Resolution,  stating  that  "it  is  proper  that  freight  allowances  be 
limited  to  the  delivery  costs  actually  incurred  "and  that  for  the 
purpose  of  comparison  it  is  easier  "to  regard  all  allowances  as  being 
fixed  and  confine  price  variations  to  the  basic  charge."   However,  in 
view  of  the  effective  date  nf  the  Resolution,  it  was  suggested  that 

9826 


-  703  - 

final  approval  be  withheld  pending  n°.w  NRA  legislation. 

V.   Product  Classifications  . 

Commercial  Resolution  No.  8  dated  January  10,  1934,  nads  as 
follows! 

"RESOLVED,  that  classification  1-iio^n  as  'Miscellaneous  Castings, 
N.O.C.B.H. '  shall  "nbrac^  only  such  castings  as  have  not  h^-n 
specifically  classified  "by  name  bv  any  ijqnVr  of  th--  Industry, 
and  that  the  filing  of  a  new  classification  not  hitherto  filed  by 
any  member  of  th=  Industry  shall  'be  considered  a  revision  of  the 
classification  knoxm  as  ''Miscellaneous  Castings,  N.O. C.B.N.1 
and  may  riot  therefore  become  effective  until  ten  days  after  the 
date  upon  which  such  new  classification  and  schedule"  ™°ro  filed, 
and  further 

"RESOLVED,  that  if  any  of  the  castings  -produced  by  a  member  of 
the  Industry  are  such  that  they  cannot  be  properly  classified  un- 
der some  one  or  more  of  the  classifications  hitherto  fil^d  by  any 
other  members  of  the  Industry,  such  member  of  th°  Industry  must 
file  a  schedule  covering  'Miscellaneous  Castings,  N.O. C.B.N. ' 

This  Resolution  indicates  that  the  system  of  classifications 
and  schedules  referred  to  above  was  already  in  us°  at  this  early  date. 
The  records  available  do  not  contain  any  officio,!  notification  to 
the  industry  that  this  system  was  to  be  employed. 

Commercial  Resolution  No.  13  dated  February  '12,  1934,  provided 

"That  no  member  of  the  Industry  shall  sell  or  offer  for  sale 
Miscellaneous  Steel  "Castings  which  have  been  'specifically 
classified  by  name  by  at  least  on^'oth^r  foundry,  without  having 
filed  a  schadule  of  prices  applying  to  such  specific  Classifica- 
tion." 

The  object  of  this  resolution  was  to  promote  comparability. 

In  the  course  of  a  general  review  of  the  Commercial  Resolutions, 
dated  January  17,  1935,  th-=  Legal  Division  made  the  following  comments 
in  regard  to  this  Resolution! 

"No,  13,   The  Legal  Division  recommends  that  this  Resolution  be 
supplemented  by!  > 

"Provided,  however,  that  members  of  th°  Industry  who  have 
previously  filed  the  prices  of  such  specif ically  classified  Cast- 
ings as  "Miscellaneous"  may  s°ll  or  offer  to  sell  such  castings  in 
accordance  with  thQir  previously  filed  schedule  until  the  effective 
date  of  the  revised  schedul0  required  to  be  fil^d  by  th^m  by  the 
foregoing  paragraph. "' 

"This  nroviso  is  considered  necessary'  in  ord°r  that  the  foundry 
filing'  the  specific  classification  may  not  thereby  prevent  other 

9826 


~  709  - 

members  of  th"  Industry  from  selling  the  casting  in  question  until 
their  revisnd  schedules  b.^cojv  effective." 

"It  is  further  r°connende.d  th-t  action  on  this  Resolution  be 
withh°ld  p->ndinr  the  outcome  oJ-  the  recent  price  hearings 
conducted  "by  th=  Board." 

Under  date  of  Karen  22,  1934,..  a  member  of  the  Legal  Division 
made  the  following  comment,  concerning  th°  Resolution  explained  above: 

"It  would  seem  to  me  that  this  resolution  is  not  only  undesirable 
and  indicates  an  att°mpt  to  control-the  free  filing  of  prices,  hut 
also  I  douht  if  th°  Code  Authority  has  any  authority  to  pass  any 
resolution  which  is  in  5xc°sa  of  the  po^°rs  granted  it  by  the  Code. 

On  April  2,  1934,  a  letter  was  received  from  the  Code  Authority 
containing  the  following  paragraphs* 

"W<=  have  received  your  letter  of  the  28th  advising  that  the 
Legal  Division  of  the  National  Recovery  Administration  disapproves 
of  Commercial  Resolutions  Nos.  12  and  13  as  adopted  on  February 
13,  1934,  by  the  Board  of  Directors  of  the  Ste=l  Founders'  Society 
of  America. 

"Accordingly,  ™*   have  advised  th°  Industry  that  these  resolutions 
are  not  effective." 

Commercial  Resolution  No.  16  dated  February  16,  1934,  stated 

"that  on  and  after  April  .1,  1934  all  schedules  of  prices  for  the 
various  castings  classifications  shall  be  fil°d  in  accordance 
with  schedules  represented  by  letters  as  pet  forth  in  "A  Study  of 
Schedules  for  Miscellaneous  Castings  Based,  upon  Levels  of  1926" 
iss\i°d  by  Steel  Found -rs'  Society  of  America  under  date  of 
D=5coml)^r  5,  1933,  provided  that  schedules  filed  with  the  notation 
N.Q.D.  or  any  other  terms  filed  Uniting  the  quantity  or  weight 
differentials  shown  on  above  'study'  shall  not  be  construed  as  a 
non-compliance  with  this  resolution." 

This  Resolution  enforced  the  price  filing  system  and  made  it 
mandatory  that  members  of  the  industry  should  file  prices  in  accordance 
with  the  price  filing  plan  and,  in  a  measure,  enforced  the  system 
of  quantity  and  weight  discounts  ^hich  were  an  inherent  part  of  the 
system.   As  a  result  of  this  resolution  no  member  of  the  industry  was 
able  to  create  his  otti  system  of  quantity  and  weight  discounts,  nor  was 
he  able  to  file  different  prices  for  different  products  '-uthin  a 
classification.   In  other  iTrords,  th3  same  schedule  or  prices  was 
automatically  applied  to  all  of  the  products  falling  within  a  classi- 
fication unless  a  foundry  '"ished  to  file  a  n^  classification 
specif ica,lly  exempting  certain  products  from  an  existing  classification 
and  grouping  them  in  a  new  classification.   This  resolution  is  referred 
to  in  the  minutes  of  the  Board  me°ting  of  January  29,  1935,  as  follows* 


QBOC 


It 


-  710  - 

"It  was  the  sense  of  the  meeting  that  the  filing  of  a  price 
specifying  a  letter  schedule  out  indicating  that,  for  example, 
one  to  forty-nine  pieces  snail  take  the  prices  specified  in 
the  ten  to  twenty-four  piece  column  does  conform  to  the 
requirements  of  Commercial  Resolution  No.  16,  and  is  entirely 
permissible. 

"There  was  a  discussion  of  a  question  of  drafting  a  proposed 
resolution  making  a  low  price  filed  for  use  in  a  specific 
contract  the  open  price  of  the  contracting  foundry  for  the 
effective  period  of  such  contract,  even  though  an  upward 
price  revision  is  filed  by  such  foundry  following  the  con- 
summation of  such  contract.   It  was  pointed  out  that  this 
question  is  covered  by  a  resolution  (No.  38)  already  sub- 
mitted to  NRA  for  approval." 

This  resolution  was  supplemented  by  Commercial  Resolution  No.  26, 
adopted  on  May  7,  1934,  which  provided  that  current  prices  to  users 
of  steel  castings  "shall  be  filed  in  terms  of  letter  schedules  as  pro- 
vided in  Commercial  Resolution  No.  16." 

On  June  7,  1934,  a  report  was  received  from  the  Research  and  Plan- 
ning Division  regarding  these  two  resolutions.   It  strongly  recommended 
the  rescinding  of  any  approval  which  might  have  bean  given  to  Resolution 
No.  16,  pointing  out  that  it  prohibited  industry  members  from  filing 
prices  in  accordance  with  their  individual  pricing  practices. 

Commercial  Resolution  No.  22,  dated  May  7,  1934,  established  a 
Committee  on  Definitions  and  Classifications  to  meet  at  least  once  each 
quarter  for  the  purpose  of  reviewing  all  classifications  filed  and  with 
power  to  disallow  such  classifications,  to  formulate  definitions  to  apply 
to  any  classification,  and  to  require  members  to  define  new  classifications. 

Even  prior  to  the  official  establishment  of  this  Committee  by  the 
above  resolution  a  letter  (*)  was  forwarded  to  the  members  of  the  Industry 
giving  an  account  of  the  functioning  of  this  Committee  and  setting  up  a 
number  of  new  classifications  in  accordance  with  its  recommendation. 
This  Committee  had  undoubtedly  been  operating  for  several  months.   It  is 
believed  that  most  of  the  work  on  classifications  was  accomplished  by 
the  Definitions  and  Classifications  Committee.   A  casual  examination  of 
its  duties  and  functions  would  immediately  point  to  its  great  importance 
in  the  operation  of  the  Open  Price  Plan.   Comments  made  by  various 
members  (**)  indicate  that  subcommittees  in  the  geographical  Divisions 
assisted  in  the  work  of  classifying  products. 

(*)   Letter  from  Code  Authority  to  members  of  the  Industry,  April  25, 

1934.  *  • 

(**)  Interviews  with  members  -  field  trips  -  December  22,  1935. 


9826 


-  711  - 
VI  .   Price  Extras 

Commercial  Resolution  No.  19  of  March  9,  1934,  provides  that  the 
filing  of  price  extras  for  alloys  could  not  he  made  by  trade  name  and 
that  either  chemical  com.  osition  or  physical  properties  should  he 
specified.  This  was  a  further  attempt  on  the  part  of  the  Code  Authority 
to  clarify  the  competitive  situation  so  that  nil  members  of  the  industry 
might  have  exact  information  regarding  the  operations  of  their  competitors. 

The  first  call  for  the  filing  of  price  extras  was  issued  in  Commercial 
Resolution  Mo.  29,  adopted  June  13,  1934,  and  reads  as  follows: 

"RESOLVED,  that  there  be  issued  a  call  for  the  filing 
<  of  price  extras  by  the  Industry  on  or  before  a  date 
ten  (10)  days  after  the  date  of  such  call." 

This  represents  a  further  step  in  securing  the  filing  of  all  price 
data.   Hor-ever,  nearly  all  types  of  extras  had  been  filed  before  this 
call. 


-  712  - 

APPENDIX  C 
Exhibit  I 
METHODOLOGY  A3  ID  SUGGESTIONS  ?OR  FURTHER  RESEARCH 
Pertaining  to  Price  Piling  Study 

A.   The  Code  Sam-pie 

This  study  is  limited  in  industry  coverage  to  a  basic  sanrole  of 
57  codes,  selected  from  the  total  of  444  NRA  codes  containing  open 
■orice  provisions.   This  code  sample,  referred  to  throughout  the  study, 
includes  the  following  industries: 

4  Electrical 

18  Cast  Iron  Soil  Pipe 

20  Salt  Producing 

23  Underwear  and  Allied  Products 

31  Lrrae 

37  Builders'  Surrolies 

39  Farm  Equipment 

59  Marking  Devices 

67  Fertilizer 

78  Nottingham  Lace  Curtain 

80  Asbestos 

81  Cotroer   and  Brass  Mill  Products 

82  Steel   Castings 

88  3\isiness  Furniture 

90  Funeral    Suxroly 

92  Floor   and  Wall   Clay  Tile 

98  Fire  Extinguisher 

99  Asphalt  Shingle  and  Roofing 

102  Shovel,  Dragline  and  Crane 

103  Machine  Tool  and  Forging 
107   Ladder 

109  Crushed  Stone,  Sand  and  Gravel 

114  Scientific  Atroaratus 

120  P^-per  and  Pulr> 

123  Structural  Clay  Products 

128  Cement 

134  Gas  Appliances 

136  Vitrified  Clay  Sewer  Pipe 

153  Valve  and  Fittings 

156  Rubber  Manufacturing 

167  Set  Up  Paijer  Box 

175  Medium  and  Low  Priced  Jewelry 

176  Paner  Distributing 
193  Folding  Paper  Box 
202  Carpet  and  Rug 

204  Plumbing  Fixtures 

205  Metal  Window 
220  Envelope 
234  Macaroni 


-  71.-7  - 

249   Tag  Manufacturing 

265   Coffee 

275-1  Agricultural   Insecticide 

275-2  Indiistri.nl  Alcohol 

275-3  Carbon  Dioxide 

291   ',/ood  Cased  Lead  Fe  lcII 

303   Cordage  and  Twine 

311   Ready  Mixed  Concrete 

333   Canvas  Goods 

344   Metal  Lath 

349   Mayonnaise 

366   Retail  Monument 

401   Cooper 

410   Retail  Tire 

421   Marble  Quarrying  and  Finishing 

445   Baking 

458   TTholesale  Confectioners 

463   Candy  Manufacturing 

The  industries  within  this  sanple  have  not  been  accorded  equal 
attention,  since  it  has  "been  impossible  to  complete  separate  case 
studies  of  price  filing  experience  in  all  of  them.    Illustrative 
material  from  other  industries  has  been  incorporated  in  some  instan- 
ces, but  the  report  is  based  primarily  on  experience  records  for  the 
above  sample  of  codes. 

B .   Selection  of  the  Code  Sample 

The  choice  of  a  sample  of  57  codes  represented  a  compromise  be- 
tween a  broad . coverage  of  all  often  price  codes  and  detailed  studies 
of  price  filing  experience  in  a  fe"?  industries. 

3ecause  of  the  number  and  complexity  of  price  filing  provisions, 
and  the  diversity  of  industry  and  code  environments  in  which  they 
operated,  it  seemed  advisable  to  use  a  sample  sufficiently  large  to 
counteract  the  possible  bias  that  would  result  from  a  small  sample. 
This  approach  was  further  indicated  because  price  filing  has  been 
accented  and  for  the  most  Dart  administered  under  the  5RA  as  a  reg- 
ulatory device  capable  of  wide  and, general  application. 

Prior  to  IffiA  there  had  been  no  experience  with  mandatory  price 
filing  plans,  nor  much  with  the  reporting  of  present  or  future  pricesi 
The  prevalence  of  such  plans  under  the  T1RA  suggested  that  an  over-all 
survey  of  experience  would  Prove  more  useful  than  detailed  studies. 

Accordingly,  at  one  point  in  the  development  of  the  study,  one 
hundred  and  ninety-one  codes  were  selected  as  the  prospective  sample. 
The  codes  selected  are  listed  in  Exhibit  III.  This  number  was  event- 
ually reduced  to  fifty-seven,  following  an  investigation  of  materials 
available  and  a  realization  that  research  facilities  would  not  permit 
the  use  of  a  larger  sample. 

The  final  selection  of  57  codes  represented  an  effort  to  select 
codes  which  would  be  representative  of  the  total  number  of  open  price 

9826 


-  714  - 

codes  and  would  cut  across  as  many  of  the  significant  criteria  as  pos- 
sible, thus  serving  to  focus  the  evidence  on  doubtful  issues  of  admin- 
istrative policy  and  economic  effects. 

To  these  ends,  codes  were  selected  illustrating  (l)  the  dif- 
ferent structural  features  of  price  filing  plans,   (2)  different 
industry  groupings,  (3)  different  competitive  situations,  and  (4)  varied 
types  of  experience  in  operation.   Factors  considered  under  the  first 
point  were  types  of  information  reported,  types  of  central  agency,  geo- 
graphical scope,  presence  or  absence  of  a  waiting  period,  conformity  of 
■orice  filing  provisions  to  Office  Memorandum  No.  228,  presence  of  min- 
imum price  provisions,  or  the  other  trade  practice  provisions  such  as 
bid  filing,  basing  points,  product  standardization,  etc.   Secondly, 
codes  were  chosen  from  the  several  industry  groups,  such  as  Basic  Mat- 
erials, Equipment,  Chemical,  Manufacturing,  and  Distributing  Trades,  and 
for  different  types  of  products.   Under  the  third  consideration,  codes 
were  selected  for  industries  with  varying  degrees  of  price  leadership, 
or  for  other  loosely  organized,  with  numerous  units.   Finally,  on  the 
oasis  of  operating  experience,  there  were  included  industries  that  had 
had  Varying  degrees  of  success  with  price  filing  and  others  in  whicn 
a  complete  breakdown  of  price  filing  had  occurred. 

Aside  from  this  effort  to  insure  the  representative  character  of 
the  sample,  certain  factors  of  expediency  influenced  the  final  choice. 
Codes  selected  for  study  by  other  Units  in  the  Trade  Practice  Studies 
Section,  or  ay   the  Industry  Studies  Section  of  the  Division  of  Review, 
were  included  in  preference  to  other  onen  price  codes,  because  of  the 
opportunity  to  obtain  significant  information  relative  to  price  fil- 
ing from  the  work-sheets  and  analysis  of  these  studies.   The  willing- 
ness of  trade  associations  in  the  Fertilizer,  Electrical  Manufacturing 
and  Coffee  Industries  to  make  their  price  files  available  for  specific 
statistical  studies  instituted  by  the  Division  of  Review,  led  natur- 
ally to  their  inclusion  in  the  sample.   A  survey  of  the  adequacy  of 
NBA  file  materials  prompted  the  inclusion  of  certain  industries  and 
the  exclusion  of  others  tentatively  selected. 

C.   The  Work  Outline 

The  preliminary  work  outl:'  ie  for  the  study  is  incorporated  in 
this  Appendix  to  indicate  the  focus  of  the  research  on  price  filing 
operations  in  individual  industries.   It  was  originally  contemplated 
that  available  evidence  for  all  the  industries  in  the  sample  would  be 
_ assembled  and  organized  in  a  series  of  case  studies  reflecting  the 
operation  of  price  filing  against  the  industry  background  and  code 
setting. 

These  case  studies  were  to  have  follcv/ed  the  work  outline 
as  here  presented;  with  the  final  report  representing  a  cross-analysis 
of  evidence  to  focus  experience  for  purposes  of  comparison  and  gen- 
eralization. 


9826 


-  715  - 

Limitations  of  time  and  personnel  made  it  necessary  to  abandon 
this  procedure,  except  for  a  few  industries.   Consequently,  the  work 
sheet  data  were  assembled  and  indexed  in  accordance  with  the  attached 
outline,  but  the  final  report  was  written  directly  from  the  indexed 
work  sheet  rather  than  from  complete  and  integrated  case  studies. 

The  disadvantages  of  this  method  are  numerous  and  fairly  obvious 
in  character.   The  significance  of  much  qualitative  evidence  on  price 
filing  appears  only  through  a  survey  of  the  entire  industry  and  code 
situation.   The  interdependence  of  methods  of  filing,  administration 
and  industry  organization,  and  the  resultant  experience,  has  been  in- 
dicated throughout  the  report. 

The  possibilities  for  over-all  comparisons  and  appraisals  were 
distinctly  limited  by  this  method  of  treatment.   It  is  at  best,  ex- 
ceedingly difficult  to  identify  and  isolate  the  effects  of  price 
filing.   In  the  aosence  of  such  integrated  case  histories,  it  becomes 
even  less  "oossible  to  discern  casual  and  functional  relationships  be- 
tween component  elements  of  price  filing  and  other  regulatory  and 
industry  factors. 


9326 


-716- 


^:-3Li::i::xr-:.:  outlihe  jo?,  opsk  p~-ice  ftvestigatioi1 

(lndividni.a.l  industry  abroach  -  organization  of 
material  in  finished  report  '-ill  -orobably  "be 
along  different  lines) 


P^-E-CODE  TTTSTCT.Y  0?  ??.ICE  FILI1I0 

I.    Industry  and  regulatory  setting. 

(See  "Some  Partial  Tyoes  .'.  Sources  of  Inf or.nation  for  Us^  by 
On  en  Price  Group"  for  indicated  pertinent  data.)  (o.  744  below) 

II.    Inception  of  -irice  filing  experiments 

A.  Functions  intended  to  "be  achieved  -  "both  expressed  and 
implied  -  e*g. , 

1.  Eliminate  ignorance  on  -mrt  of  buyers  and/or  sellers 
a.   Misrepresentation  anc?  resulting  suspicion 

2.  Eliminate  "confusion"  in  market  and  Tornote  comparability 

of  -orice  and  terms 


9826 


-717-  - 

3.  Lessen  intensity  of  erratic  or  rapid  fluctuations 

4.  Harrow  the  range  of  competitive  prices  "by  eliminating  quotations 

below  a  profitable  level 

5.  Lessen  discrimination  in  favor  of  large  buyers- 

6.  Use  as  device  for  actual  price  control  at  a  specific  time  and 

place 

7.  Use  as   device   to   change  relative  competitive  positions   of  units   or 

groups    in  the   industry 

8.  Police  private  agreements   already  existing,    etc. 

9.  Complement   and  complete   existing  forms    of   control 

B.      Specific   industry  problems    that   may  have   led  to  adoption   of  plan,    e.g., 

1.  Declining  market 

2.  Excess  capacity 

3.  Instability  due  to  technological  change  or  shift  in  industry 

4.  Instability  due  to  varied  distribution  methods 

5.  Destructive  price  cutting  from  other  causes 

6.  Unusual  buyer  dominance 

III.  Agency  undertaking  price  filing  activities 

A.  Trade  association 

1.  Scope   of  membership  and  activities,    e.g., 

a.  Location  regional  associations 

b.  product   divisions 

c.  National  associations 

2.  Administrative  set-up  as  related  to  operation  of  plan,  e.g., 

a.  Staff  personnel-executive  secretary 

b.  Procedure  as  to  confidential  handling  of  reports,  etc. 

B.  Non-association  agencies,  e.g., 

1.  Government  bodies 

2.  Management  engineers  ' 

3.  Trade  journals 

IV.  Price  filing  plans  developed 

(See  Section  V  of  outline  for  code  period  for  expanded  detail  of 
analysis  to  be  applied  if  experiments  are  elaborate  in  character) 

A.  Types  of  reporting 

1.  Past  transactions  only 

2.  Current  prices 

3.  Future  price  reporting  (with  waiting  period) 

B.  Types  of  information  filed,  e.g., 

1.  Price  and/or  terms  and  conditions  of  sale 

2.  Prices  plus  general  data  on  production,  shipments,  stocks, 

3.  Information  on  pricing  practices,  e.g.,  freight  allowances 

4.  Products  and  areas  covered 


-718- 
C.   Requirements  as  to  filing  and  dissemination 

1.   Forms  used,  etc. 

(See  V-G   of   outline   on   code  period) 

V.      Sanctions   and  controls   employed 

A.      Moral  suasion,    e.g., 

1.  Group  opinion 

2.  Appeals  to  self— interest 

3.   Economic  sanctions,  e.g., 

1.  Liquidated  damage  agreements 

2.  Threats  of  hovcott-of  supply,  and/ or  demand 

3.  Black  lists  -  white  lists 

4.  Threats  of  law  suits,  prosecution 

5.  Threats  of  predatory  price  cutting 

6.  Refusal  to  grant  patent  licenses 

C.  Procedural  checks  and  supervision 

1.  Reports  of  invoices,  orders,  etc. 

2.  Inspection  of  hooks,  etc. 

VI.  Performance  and  reasons  for  non-perf ornance  under  ;olan 

A.  Actual  scope  of  filing  as  to  areas  and  products 

B.  Participation  of  members 

C.  Completeness  of  data  filed 

D.  Sources  of  difficulty  in  operation  -  e.g., 

1.  In  industry,  product  or  competitive  set-up,  e.g., 

Non-comparability  of  ite'is,  too  many  small  units, 

2.  In  administrative  technioue,  e.g., 

distrust  of  code  authority 

3.  In  compliance  activities 

4.  Legal  or  other  difficulties 

E.  Remedies  employed  to  overcome  difficulties  encountered 

F.  Subsequent  history  of  plan,  e.g., 

1.  Abandonment  -  reasons 

2.  Modification  of  original  lolan 

VII.   Status  of  price  filing  experiments  with  respect  to  government  regulation 
A.   General  position  under  anti-trust  laws  and  deaisions,  i.e., 


-719- 

1.  Precedent 

2.  Briefs 

B.  Inroact  of  courts,  Federal  Trade  Commission,  Department  of  Justice,  on 
price  filing  plans  used,  e.g., 

1.  Prosecutions,  cease  and  desist  orders,  consent  decrees 

2.  Findings  on  complaints  and  investigations 

C.  Encouragement  or  discouragement  of  voluntary  activities,  e.g., 

1.  Trade  practice  conferences 

2.  Other  government  participations,  Department  of  Commerce, 

3.  Experience  with  War  Industries  Board,  if  any 

VIII.   Attitudes 

A.  Of  participating  members 
1.  Minority  groups 

B.  Of  non-participating  members 

C.  Of  customers 

D.  Of  administrative  agency 

IX.   Economic  Results  of  Price  Filing  plans 

(See  Section  XI.  in  outline  for  code  period  for  detail) 


CODE  HISTORY  OF  PRICE  FILING 

I.   Industry  and  regulatory  setting  immediately  -prior  to  code 

(See  "Some  Partial  Types  and  Sources  of  Information  for  Use 
by  Open  Price  Group"  for  pertinent  data) 

A.  Effects  of  depression 

B.  Degree  of  industry  organization  at  this  time 

C.  Comparison  with  period  of  any  pre-code  urice-f iling  experiment 
II.   Industry  Program  for  price  filing  as  submitted 

A.   Nature  of  proposals 

3.   Reasons  to  support  need  for  device 

C.   Functions  intended  to  be  achieved 

(See  detail  under  II-A  in  outline  for  Pre-Code  History) 
9326 


-780- 

D.  Legal  cronsiderations  involved 

E.  Proposals  discarded  before  submission  to  NRA 
1.   Seasons  for  discard 

III.   Controversies  arising  during  code-making  period 

A.  Between  members  of  industry,  e.g., 

1.  Objections  of  small  units 

2.  Objections  of  members  using  special  selling  practices 

3.  Objections  of  other  minority  groups 

B.  Between  members  of  industry  and  customer  groups,  e.g., 

1.  In  distributor  relationship,  e.g. 

a.  Influence  on  position  of  privileged  middlemen 

b.  Facility  for  resale  price  maintenance 

c.  Fear  that  distributors'  margins  would  be  lowered 

d.  Technical  objections  to  details  of  plan,  e.g., 

waiting  period,  suggested  customer  classification 

2.  In  consumer  relationship,  e.g., 

a.  Influence  on  position  of  privileged  large  buyers 

b.  Piye,.     excessive  prices 

c.  Reduced  incentive  to  lower  prices 

(1)  ror   particular  transactions 

(2)  ..For  long- run  period 

d.  Technical  objections  to  details  of  plan,  e.g.,  waiting 
•period,  suggested  customer  classif ication 

C.  Between  industry  and  a  competitive  industry,  e.g., 
1.  Fear  of  adverse  effects  of  price  control,  e.g., 

a.  On  raw  materials  of  another  industry 

b.  In  diverting  sales  to  a  substitute  product 

D.  Between  industry  and  N.R.A. ,  e.g., 

1.  General  Itf.R.A.  policy 

2.  Objections  of  consumers1,  labor,  industrial  advisory  boards 

3.  Objections  0^'  legal  division  and  research  and  planning  division 

E.  Changes  effected  in  original  proposal 

1.  Provisions  added 

2.  Provisions  deleted 

IV.   Relation  of  open  price  pro\rision  to  other  code  provisions  considered 
and/or  accepted 

9f!V, 


A.  Compromise  after  efforts  for  minimum  prices,  -production  control,  eto. 

B.  Other  provisions  supplementing,  implementing  or  modifying  open 
price  provision 

C.  Open  price  provision  as  a  device  to  implement  other  regulations 
of  prices,  credit  terms,  allowances 

V.  Analysis  of  open  price  provisions  as  approved 

A.  Establishment  of  open  price  system 

1.  Mandatory  under  code 

a.  At  fixed  date 

b.  At  specified  date 

2.  Optional  under  code 

a.  To  be  adopted  by  majority  vote  of  members 

b.  At  discretion  of  code  authority  or  divisional  body 

(l)   With  administrative  approval 

3.  Right  to  suspend  or  abandon  plan 

a.  In  whole  or  in  part 

b.  At  discretion  of  code  authority 

c.  By  vote  of  members 

4.  Areas  and  divisions  included 

B.  Agency  to  administer  price  filing 

1.  Agency  designated 

a.  Code  authority 

b.  Trade  association 

c.  Executive  secretary  of  code  authority  or  trade  association 

d.  Confidential  and  disinterested  agent  -  e.g.,  management 

engineers,  etc. 

(1)  Named  in  code 

(2)  To  be  appointed  by  code  authority 

(3)  Appointed  or  approved  by  administrator 

e.  Government  or  other  agency 

f .  Regional  or  divisional  agencies 

2.  Powers  and  duties  imposed  by  code 

a.  General  powers  that  might  affect  price  filing,  e.g., 
insoectron  of  books 

b.  Specific  powers  over  price  filing 

(1)  To  issue  rules  and  regulations 

(2)  To  prescribe  form  of  schedule 
qop_            (3)  To  investigate  and  void  prices 

(4)  To  select  products  for  filing 


-722- 

(3)  To  investigate  and  void  prices 

(4)  To  select  products  for  filing 

c.   Obligation  not  to  disclose  confidential  filings 

(1)  To  code  authority 

(2)  To  other  members 

C.  Compulsion  on  individual  members  to  file 

1.  All  members  raus t  file 

2.  Member  nay  file 

3.  Members  may  abide  by  lowest  price  o:a  file  if  they  desire 

a.  After  original  filing 

b.  At  all  times 

4.  Members  exempted  from  filing 

5.  Requirement  that  filings  must  be  withdrawn  and  new  filings  made 
at  stated  intervals 

D.  Transactions'exenrpted  from  regular  filing  requirements,  e.g., 

1.  With  mail  order  houses 

2.  With  chain  stores 

3.  With  governments  r^„ 

4.  With  other  large  buyers 

5.  With  other  types  of  buyers 

6.  For  export  purposes 

7.  For  own  use  or  inter-industry  sales 

E.  Products  subject  to  price  filing  requirement 

1.  All  products 

2.  Goods  customarily  sold  from  price  lists 

3.  Code  authority  to  prescribe 

a.  With  administrator's  auoroval 

4.  Determined  by  vote  of  members 

5.  Standard  products  only 

a.   Code  authority  to  define  standard 

6.  Standard  and  selected  non-standard  products 

a.  Code  a\ithority  to  determine 

b.  Majority  vote  to  determine 

c.  Criteria  set  by  code 

7.  Other  inclusions  and  exclusions  -  e.g.,  job  lots,  custom 
products, 

8.  No  reference  in  code  to  kinds  of  products  included 


93^6 


-723-  •' 

Information  which  must  toe  filed 

1.  Enumerated  in  code 

a.  Prices,  terms,  rates,  tariffs,  price  lists,  price 
terms,  net  price  lists,  toase  price,  list  prices, 
schedule  of  prices,  all  conditions  of  sale,  fixed 
terms  of  payment,  schedule  of  rates,  individual 
pricing  practices,  all  terms  of  sale 

to.   Credit  terms,  discounts,  discount  sheets,  cash  discounts, 
trade  discounts,  duality  discounts'." 

c.  Allowances,  freight  allowances,  service  allowances, 
trade-in  allowances,  advertising  allowances 

d.  Delivered  prices;  f.o.to.  factory  prices 

e.  Prices,  trials,  rebates,  premiums,  toonuses,  free- 
deals,  commission,  consignment  sales 

f .  Guarantee  policy,  sample  policy,  returned  goods 
policy 

g.  Names  of  customers  and  their  classifications 

(1)  Availatole  to  industry 

(2)  Withheld  from  industry 

h.  Buyer's  name  (past  transactions) 

i.   Invoices 

j.   Estimating  schedules, 

2.  Code  authority  may  alter  requirement 
a.  With  administrative  approval 

3.  Code  authority  to  prescritoe  information  required 
a.  With  administrative  approval 

4.  Code  authority  to  prescritoe  form 
a.   With  administrative  approval 

5.  Information  on  past  transactions  only 
Requirements  as  to  filing  and  dissemination 

1.   Numtoer  of  copies  of  price  lists  to  toe  filed  with  agency 

a.   Enough  for  distritoution  to  all  memtoers 

to.  Enough  for  distritoution  to  all  memtoers  and  customers 

c.   One  copy 


93*36 


qn;?fi 


-724- 

(1)  Central  agenc'y  makes  copies  distribution 

(2)  Central  agency  makes  summary  for  distribution 

(a)   Code  prescribes  nature  of  suiamary.   Specify 

2.  Piling  of  price  changes 

a.  TJord  "filing"  defined  so  as  to  require  entire  new  price  list 
for  each  instance  of  price  change 

b.  Word  "filing"  defined  so  as  to  require  change  only  of 
part  of  list  affected. 

c.  Other  definitions  of  filing.   Specify. 

3.  Requirements  covering  dissemination  by  central  agency  to  members 

a.  Distribution  mandatory 

b.  All  filed  data  to  be  forwarded  to  all  members 

(l)   Members  to  bear  expense 

c.  Composite  or  individual  price  lists 

d.  Ho  provision  for  distribution  but  data  available  for  inspec- 
tion by  members 

e.  Dissemination  only  to  producers  of  similar  products 

f.  Dissemination  only  to  members  of  same  region 

g.  Dissemination  only  when  specifically  requested 
h.  Dissemination  only  of  upward  revisions  of  prices 
i.  Dissemination  only  of  lowest  price  on  file 

j.   Code  authority  ;iven  complete  discretion  concerning 

data  disseminated  to  members 
k.   Data  neither  distributed  nor  available  to  members 

4.  Requirements  covering  dissemination  by  central  agency  to  customers 

a.  Notice  of  all  price  changes  to  be  forwarded 

(1)  Only  when  specifically  requested 

(2)  Only  to  those  paying  cost 

(0)  Simultaneously  with  distribution  to  members 

(4)   To  members  upon  filing  and  to  customers  on  effective  date 

b.  Data  open  to  inspection 

(1)  By  certain  classes  of  customers  only 

(2)  Only  of  one  item  at  a  time.   Specify 

c.  Degree  of  dissemination  to  custoners  discretionary 

with  code  authority 

d.  No  provisions  covering  dissemination  to  customers 

5.  Requirements  of  dissemination  by  members  themselves 

a.   Members  upon  each  price  change  must  distribute  copies 
(in  addition  to  central  filing) 


-725- 

(1)  To  members 

(2)  To  members  and  customers 

b.   Members  must  "publish"  price  changes  in  addition  to 
filing 

6.  Means  and  speed  of  dissemination  to  members  required  of 
central  agency. 

a.  By  mail 

b.  By  telegraph  or  equally  speedy  means 

c.  "Immediately"  or  "promptly" 

d.  Trade  periodical 

e.  Other  provisions.   Specify 

f.  Ho  provision  covering  this  point. 

7.  Provision  forbidding  release  to  one  member  before  all 

8.  Provision  forbidding  inclusion  or  interpretations  or  com- 
ments by  central  agency  in  dissemination  of  information 

H.  Provisions  relating -to  identification  of  seller  end  buyer 

1.  Code  requires  agency  to  include  seller's  name  when  dis- 
tributing filed  prices 

2.  Code  forbids  inclusion  of  sellers'  name 

3.  Optional  with  code  authority  whether  or  not  seller's  name 
disclosed 

4.  Symbols  to  be  used  to  identify  sellers 

5.  No  provision  concerning  identification  of  seller 

6.  Buyer's  name  withheld  from  other  members  (Applying  only 
when  past  transactions  reported) 

I.   Waiting  periods  and  effective  date  of  filing 

1.  No  waiting  period  required 

a.  Prices  not  effective  until  filed 

(1)  Effective  upon  receipt  by  agency 

(2)  Effective  only  when  agency's  acknowledgement 

received 

b.  Prices  changes  effective  at  once  even  before  filing 

2.  Code  authority  may  establish  waiting  period  though  code 

required  none 

a.   Specify  under  what  conditions,  if  any,  prescribed 

3.  Waiting  period  after  filing  required  before  price  becomes 

effective 

a.  On  all  price  changes 

b.  Only  when  prices  are  lowered 


■982E 


•738- 


c.  Only  when  prices  are  raised 

d.  Before  paying  of  rebates,  allowances,  commissions 

e.  Before  other  special  actions.  Specify 

4.  Waiting  period  may  "be  waived 

a.   To  meet  non-member  competition 

t>.   If  newly  filed  price  is  not  lower  than  the  lowest  of 
the  already  filed  prices  of  other  members 

5.  Length  of  required  waiting  period 

a.  Specify  number  of  days  of  waiting  period 

b.  Code  authority  may  lengthen  waiting  neriod 

(1)  With  administrator's  approval 

(2)  Other  conditions.   Specify. 

c.  Code  authority  may  shorten  waiting  period 
(l)  -Specify  conditions,  if  any 

d.  Waiting  period  may  be  shortened  to  meet  revision  by 

another  member 

(1)  Effective  on  same  date  as  first  filer's  price 

(2)  Effective  on  same  date  as  first  filer's  price 

if  not  below  his  price 

(3)  Effective  on  same  date  as  first  filer's  price, 

if  revised  filing  made  before  certain  part 
of  waiting  period  has  elapsed.   Specify  part. 

e.  No  provision  whatsoever  for  shorter  waiting  period 

6.  Procedure  on  price  changes  if  waiting  period  required 

a.  Declines  retroactive  on  shipments  during  waiting  period 

b.  Orders  for  delayed  shipments  may  be  accepted  at  existing 

price  during  waiting  period  before  an  advance 

(l)  Maximum  number  of  days  ahead 

c.  Other  variations.   Specify. 

J.  Prices  must  be  in  effect  for  specified  minimum  period 
bafore  new  -orice  nay  be  filed 

1.  Specify  number  of  days 

2.  Minimum  period  for  downward  but  not  upward  changes 

3.  Minimum  period  for  upward  but  not  downward  changes 

4.  Exceptions  to  rule.   Specify 

5.  Limitation  on  number  of  price  changes  in  a  given  period. 

Specify. 

E.     Pi7  '  1  price  and  effoctive  prices 


-727- 

1.  Member  must  sell  at  filed  price  terms  only. 

2.  Member  may  sell  above  filed  price  terms 

a.   In  certain  cases  only.   Specify 

3.  Ma'"'  sell  below  in  certain  instances 

a.  At  a  lower  price  filed  by  another  member 
(l)  After  reporting  to  Code  Authority 

b.  Other  instances.   Specify 
L.  Area  of  uniformity  of  price 

1.  Member  permitted  to  file  different  prices  for  different 

regions  of  the  country 

2.  Code  or  Code  Authority  sets  up  regions  for  price 

reporting  purposes,  check  which  one 

a.  Member  of  one  region,  when  selling  in  another  region, 
may  not  sell  below  lowest  price  filed  by  members 
of  latter  region 

3.  Specific  provision  requiring  uniform  prices  in  all  regions 

4.  No  provisions  concerning  variations  as  between  areas 

M.  Destruction  of  price  records  by  central  agency  forbidden 
without  Administrator's  consent 

N.   Substitute  for  filing  with  central  agency 

1.  Prices  must  be  posted 

a.  May  not  sell  below  posted  price 
(l)   Specify  any  exceptions 

b.  Prices  must  be  in  effect  specified  period  before 

being  revised.   Specify  number  of  days. 

2.  Members  must  exchange  prices  directly  (and  do  not  file 

with  central  agency) 

a.  May  not  sell  below  prices  reported 
(l)   Specify  any  exception 

b.  Specify  when  price  changes  effective 

c.  Prices  must  be  in  effect  specified  period  before 

being  revised.   Specify  number  of  days 

d.  Revised  prices  must  be  sent  to  customers  also 


9836 


-72.8- 

3.  Publication  in  trade  periodical  used  in  place  of  central 

filing  system 

0.  Bids  outstanding  at  tine  of  revision  of  filed  price  list 

1.  When  prices  increased 

a,.  Bid  must  be  increased  also 

b.  Bid  must  be  registered  but  need  not  be  increased 

2.  When  prices  decreased 

a.  Bid  mas'-  be  decreased  accordingly 

b.  Bid  may  not  be  changed 

P.  Pilings  required  ty   other  trade  practice  provisions,  e.g., 

1.  Premiums 

2.  Prizes 

,3.   Special  services  or  favors 

4.  Price  concessions,  e.g., 

a.  Allowances 

b.  Commissions 

c.  Rebates 

5.  Deviations  from  credit  terms 

6.  Sale  of   seconds,    sub-standard  goods,    trade-ins,    etc. 

VI.     Functional  aspects  of  other  code  provisions  directly  integrated  with 

price  filing  provision  as  written,    e.g., 

A.  No   selling  below  cost  provision 

B.  Minimum  prices  or  fixed  elements  of  prices 

C.  Provisions  governing  transportation  allowances 

1.  Freight   equalization 

2.  Delivered  or  F.O.E.   prices 

3.  Zoning  or  anti-dumping,    etc. 

D.  Uniform  or  limited  cash  discounts 

E.  Uniform  or  limited  quantity  discounts 

F.  Mandatory  classification  of  customers 

G.  Mandatory  differentials  or  mark-ups 

1.  Between  trade  factors 

2.  Between  base  products,    etc. 

H.     Resale  price  maintenance 
9836 


-729- 

I.   Uniform  contract 

J.  Advertising  allowances 

VII.  Operation  of  price  filing  plan  as  modified  and  administered 

(This  section  should  record  all  variations  between  the  code  provision 
as  written  (analyzed  in  Section  V)  and  as  actually  operated) 

A.   Code  Authority  or  other  agency  administering  plan 

1.  Organization,  e.g., 

a.  Committees,  staff 

b.  Procedure,  by-laws 

c.  Delegation  of  powers 

d.  Cooperative  arrangements  with  trade  association 

e.  Methods  of  financing  price  filing  activities,  pro- 

portion of  total  budget,  etc. 

2.  Rules  and  regulations,  instructions  and  suggestions 

a.  Purpose  and  authorization 

b.  Occasion,  issues  and  controversies,  e.g., 

persons  involved,  economic  or  administrative 
developments  leading  to  change 

c.  Adoption  and  dissemination 

d.  Substance,  e.g., 

(1)  Prescribed  reporting  form,  e.g., 

(a)  Contents  of  form 

(b)  How  issued 

(c)  Predetermining  or  restrictive  nature 

(d)  Changes  made 

(2)  System  of  product  specifications  or  standards  ' 

(3)  Prescribed  terms  and  conditions  of  sale  to  be  filed 

(4)  Prescribed  customer  classifications  and/or  trade 

factor  differentials 

(5)  Prescribed  elements  of  cost  or  standards  of  accept- 

able costs  or  prices 

(6)  Rules  as  to  challenge,  rejection  and  investigation 

of  prices  filed 

(7)  All  other  rules  and  regulations,  instructions  and 

suggestions 

3.  Procedures  instituted  in  pursuance  of  code  powers  or  with- 

out specific  authorization,  e.g., 

a.  Practices  as  to  form  and  promptness  of  dissemination 

of  information  filed 

b.  Practices  discriminating  between  members  and  buyers  or 

between  classes  of  members  and/or  buyers,  as  to 
form,  completeness,  promptness,  e.g., 

'  9836 


-730* 

(1)  Premature  or  partial  disclosure  of  nrice 

filing 

(2)  Delay  or  withholding  of  prices 

c.      Practices  as   to   closed  "bids,    refiling  of  prices,   etc. 

4.  Amendments   considered  and/or  presented  to   NRA 

a.      Occasion,    issues,    controversies  and  procedure 

5.  Exemptions  and   stays 

a.   Occasion,  issues,  controversies  and  procedure 

6.  Interpretations  and  explanations 

a.   Occasion,  issues,  controversies  and  procedure 

7.  Other  actions,  e.  g. , 

a.  Collusive  or  coercive  activity 

b.  Special  assessments  for  price  filing 

c.  Assumption  of  powers  not  conveyed  by  code,  e.g., 

(l)  Requisitions  of  records,  invoices,  as  a  means 
of  checking  filed  prices  against  cost  or 
othensrise 

8.  Sanctions  used  to  secure  compliance  with  Code  Authority 

Requirements  (i.e.,  2,  3,  5,  6,  and  7  above). 

a.  Moral  suasion 

b.  Threats  of  boycott 

c.  Threats  of  prosecution 

d.  Liquidated  damage  agreements 

c.      Threats  of  predatory  price   cutting 

f .      Comparative  use   in  pre-code  and  code  periods 

B.   N.R.A.  Administration 

1.   Supervision  and  control  of  code  authority  actions.   (For 
actions  listed  under  2,  3,  5,  6  and  7  in  VII  A  there 
should  be  answered  the  following) 

a.   What  was  the  date  of  action? 
.b.   Was  the  action  sanctioned  by  the  code  provision? 

c.  Were  proposals  ever  submitted  to  N.R.A.  for  approval? 

For  review?  For  record? 

d.  Were  any  of  them  specifically  disapproved  prior  to 

adoption? 

e.  Were   any  of  them  reviewed  and  cancelled?      Why?     By 

what  method  (e.g.,    formal  order,    letter,    deputy, 
division  administrator)?     After  how  long  in  op- 
eration? 


9821! 


-731- 

f.  Did  any  of  these  actions  lapse  or  disappear  without 
N.R.A.  initiative?  Why?  After  how  long  a  time? 

2.  Amendments 
a.   Occasion,  issues,  controversies 

3.  Exemptions  and  stays 
a.   Occasion,  issues,  controversies 

4.  Interpretations  and  explanations     •  . 

a.   Occasion,  issues,  controversies 

(List  dates  of  all  actions  under  2,  3  and  4  above 
pertaining  to  open  price  plan.  Develop  for  each  the 
occasion,  issues  and  controversies  involved.   Indi- 
cate for  each  the  nature  of  -orior  or  subsequent 
action  "by  the  code  authority,  if  any.  -  e.g.,  refus- 
al to  approve  an  excemption  requested  "by  a  member  of  the 
industry;  recommendation  that  a  particular  exemption  or 
interpretation  be  made;  the  issuing  of  interpretations 
or  granting  of  exemptions  which  have  been  approved  by  the 
Adminiatration;  the  granting  of  an  exemption  which  has 
been  denied  by  the  Administration,  Etc.) 

5.  Special  forms  of  N.R.A.  administration,  e.g., 

a.  Investigations,  warnings 

b.  Assumption  of  price  filing  function 

6.  General  administrative  or  executive  orders,  e.g. 

a.  Stay  on  waiting  period 

b.  Administrative  order  X-48 

c.  Executive  order  6767 

III.   Compliance  and  enforcement 

A.  Agencies  established  by  code  authority  for  compliance  purposes 

B.  Record  of  cases  handled  by  code  authority  and  its  agencies, 

including  Trade  Practice  Complaints  committee  and  other 
bodies 

C.  Compliance  procedure  under  Trade  Practice  Complaints  Committee 

or  other  agency  of. code  authority,  e.g. 

1.   In  handling  complaints,  e.g. 

a.  Concealment  of  names 

b.  Opportunity  for  hearing  ,.■ 


9826 


-733- 

2.   In  initiating  complaints,  e.g. 

a.  Evidence 

b.  Complaint  forms 

5.   Sanctions  employed,  as  to  kind,  frequency  of  use  and 
relative  success 

4.  Methods  of  appeal,  e.g. 

a.  To  higher  "bodies  in  the  industry 

b.  To  H.R.A. 

5.  Informal  handling  of  compliance  problems 

6.  As  compared  with  procedure  and  attention  to  other  trade 

practice  complaints 

<7.   As  compared  with  procedure  established  in  code  or  oursuant 
thereto 

D.  N.R.A.  compliance  activities 

1.  Record  of  cases  handled 

2.  Procedure 

3.  Appraisal  of  effect  of  1-J.R.A.  comoliance  activities 

on  efficacy  of  device 

4.  Development  of  legal  approach  to  compliance  in  open  price  plan 

5.  Cases  referred  for  court  action 

E.  Measure  of  compliance  obtained,  e.g. 

1.  Volume  and  nature  of  complaint?-  received,  adjusted  and  on  hand 

2.  Devices  used  to  evade,  without  legal  penaltjr,  the' price 

filing  provision 

3.  Reports  of  field  investigators 

4.  Analysis  by  areas  or  type  of  establishment 

5.  As  compared  with  other  provisions  of  the  code 

IX.  Performance  and  reasons  for  non-performance,  e.g. 

A.  Actual  scope  of  filing  as  to  areas  and  products 

B.  Participation  of  members 

C.  Completeness  of  data  filed 

D.  Sources  of  difficulty  in  operation,  e.g. 

1.  In  industry,  product  or  competitive  set-up,  e.g., 

non-comparability  of  items,  too  many  small  units, 

2.  In  administrative  technique,  e.g.,  distrust  of  code 

authority, 

3.  In  compliance  activities 

4.  Legal  or  other  difficulties 


-733- 

X.  Attitudes  and  opinions  of  interested  parties,  e.g.,  trade  associa- 
tion, code  authority,  N.R.A.  deputy,  advisory  "boards,  Research 
and  Planning,  Legal  Division,  Administration  Members,  Members 
of  the  industry,  distributor  customers,  industrial  and  ultimate 
consumers. 

A.  At  time  of  adoption  of  the  provision,  as  to: 

1.  Function  of  the  provision  and  the  adequacy  of  the  one 

adopted 

a.  Objection  of  the  provision 

b.  Place  of  the  provision  in  relation  to  other 

provisions  in  the  code  affecting  prices 

c.  Scope:   inclusion  or  exclusion  of  middlemen 

2.  Authorization  of  Act  as  to  relaxation  of  Anti-Trust  Laws 

B.  During  operation  of  the  code,  as  to: 

1.  Function  of  the  provision 

2.  Proper  role  of  code  authority,  e.g. ,  as  administrative 

agency  only,  as  director  and  leader 

3.  Proper  role  of  N.R.A.  in  supervision  and  control,  e.g., 

deputy,  administration  member 

4.  W.R.A.  policy  announcements,  e.g.,  X-48,  Office  Memorandum 

228,  Executive  Order  6767 

5.  Performance  of  members  of  the  industry 

a.  Compliance 

b.  Cooperative  or  destructive  efforts 

6.  Dominance  of  code  authority  or  other  group  on  prices  filed 

and  conformance  of  other  members  to  them 

7.  Sanctions  employed 

8.  Adequacy  of  the  provision 

a.  In  coverage 

b.  In  looseness  or  loopholes  permitting  coercive  practices, 

etc. ,  evasion  or  identification  or  prices 

c.  In  terms  of  support  from  other  provisions 

9.  Success  of  the  provision  in  terms  of  its  declared  functions 

10.  Economic  effects 

(As  listed  in  Section  XI  of  Outline  for  Code  Period) 

C.  At  termination  of  the  code,  as  to: 

1.   Success  of  the  code,  in  terms  of  its  functions 
9P,?.r, 


2.  Economic   effects 

3.  Desirability  of  continuance 

a.  In  what  form? 

b.  Under  what  authority? 

c.  With  what  degree  of  compulsion? 

XI.   ECONOMIC  RESULTS  OF  OPEIT  PRICE  FILI1IC-,  in  Terms- of  Functions  and  Per- 
formance 

A.  Elimination  of  ignorance  on  oart  of  buyers  and,  sellers 

1.  To  what  extent  was  publicity  actually  achieved,  e.g;, 

(a)  Did  each  member  of  the  industry  receive  all  price  in- 
formation or  only  that  pertaining,  to  the  products  manu- 
factured by  him  and  to  the  classes  of  customers  served 

by  him?         :  ■  • 

(b)  Did  the  Code  Authority. or  its  agency  combine  or  other- 
wise, edit  the  price  filings  before  dissemination  to 
members  or  to  customers?   If  so,  in  what  way,  and  to 
what  extent  did  this  limit  the  actual  price  publicity 
afforded  under  the  plan? 

(c)  Was  price  informa.tion  limited  to  the  highest  filed  price, 
the  lowest  filed  price  or  to  partial  information  of  any 
other  character?. 

(d)  Has  the  Code  Authority  or  its  agencies  exempted  members 
from  filing  information  covering  transactions  with  cer- 
tain classes  of  buyers,  sucji  as  mail  order  houses',  chain 
stores,  governmental  agencies,  etc.?   If  so,  specify. 

(e)  How  has  the  resulting  publicity  of  price  information  com- 
pared with  the  publicity  of  prices  prevailing  before  the 
open  price  plan?  To  members  of  the  industry?  To  cus- 
tomers? 

(f)  What  organized  sources  of  price  information,  such  as 
trade  journal  ojuotations,  were  available  to  members  prior 
to  the  introduction  of  the  open  price  plan?  To  customers? 

(g)  Has  the  failure  of  the  code  to  make  adequate 'provision 
for  dissemination  of  pricevinfarmation  to  customers  pre- 
vented any  real  elimination  of  ignorance? 

(h)  Where  the  code  provides  that  price  lists  shall  be  made 
"available"  to  customers,  what  has  been  the  practice  of 
the  Code  Authority  or  its  agencies  in  this  regard? 

(i)  Where  the  code  provides  that  price  lists  shall  be  made 
"available"  to  customer,  to  what  extent  have  customers 
availed  themselves  of  this  privilege  through  inspection 
or  through  requests  for  filed  prices? 


-735* 

(j)  Have  customers  received  all  price  information  or  only 
that  part  pertaining  to  their  own  particular  classi- 
fication? 

2.   What  have  "been  the  results  of  the  increased  publicity  of 
prices  and  price  terms? 

(a)  What  evidence  is  there  that  price  publicity  has  had  a 
tendency  to  diminish  competitive  risks  "by  eliminating 
certain  types  of  business  uncertainty?   e.g.,  as  to 
prices  charged  "by  competitors?  as  to  customer  classi- 
fications followed  "by  competitors?  Through  increased 
stability  of  prices?  Through  provisions  for  adjusting 
prices  on  forward  contracts? 

(b)  Has  the  open  filing  of  prices  of  products  used  as  raw 
materials  in  other  industries  had  an  effect  on  the  sta- 
bility or  level  of  costs  for  such  materials?  If  so, 
has  this  effect  been  reflected  in  price  changes  in  the 
product  of  the  industry  buying  the  materials? 

(c)  Has  publicity  of  prices  resulted  in  any  change  in  buying 
practices,  such  as  the  elimination  of  bid  shopping,  of 
speculative  buying,  changes  in  the  size  of  inventories, 
length  of  advance  contracts,  etc. 

(d)  Has  it  enabled  members  of  the  industry  to  combat  cus- 
tomers' misrepresentation  of  competitor's  prices? 

(e)  Has  the  publicity  or  stabilization  associated  with  the 
plan  resulted  in  strengthening,  stabilizing  or  increasing 
the  production  or  prices  of  a  sup-p lying  industry,  i.e., 
in  industries  where  we  ale  prices  in  the  finished  product 
react  on  the  prices  of  raw  materials? 

B.  Elimination  of  confusion  and  the  promotion  of  comparability  and  uni- 
formity of  price  quotations  and  terms  and  conditions  of  sale 

1.   To  what  degree  were  terms  and  conditions  of  sale  uniform  prior 
to  the  adoption  of  the  open  price  plan?  Prior  to  the 
depression?   To  what  extent  were  filings  of  terms  and 
conditions  uniform  when  the  open  price  plan  was  first 
put  into  operation?  To  what  extent  were  they  uniform 
just  prior  to  the  termination  of  the  codes? 

(2)  Have  open  prices  promoted  comparability  and  uniformity,  e.g., 

(a)  Through  the  detail  required  in  the  reported  form  pre- 
scribed by  the  Code  Authority? 

(b)  Through  a  system  of  product  specifications  prescribed  by 
the  code  or  Code  Authority  for  the  purposes  of  price  filing? 

(c)  Through  the  requirement  by  the  code  or  the  Code  Authority 
of  a  uniform  sales  contract? 


983f 


-738- 

(3)  To  what  extent  has  the  -..rice  filing;  plan,  or  the  rules 
and  regulations  established  pursuant  thereto,  altered  or 
modified  previous  industry  practice  as  to  terns  and  con- 
ditions of  sale? 

(4)  Has  the  requirement  of  price  filing  acted  to  encourage  a 

lack  of  uniformity  in  terms  and  conditions  of  sale  to  counter- 
act a  uniformity  in  the  nominal  price  i.e.,  have  differences 
in  real  price  tended  to  take  the  form  of  filing  varying  terms 
and  conditions  of  sale  or  in  fine  distinctions  between  prod- 
ucts rather  than  differences  in  the  nominal  price? 

(5)  Has  standardization  effected  by  a  price  filing  provision  been 
a  factor  in  price  stabilization  and  price  uniformity? 

(6)  Does  standardization  developed  under  an  open  price  plan  tend 
toward  certain  ideal  standards,  (i.e.,  quality  or  simplifica- 
tion) or  toward  the  identification  and  price  classification 
of  existing  products,  or  toward  those  of  the  most  effective 
competitor  in  the  industry? 

C.   Changes  in  the  freruenqy  and  abruptness  of  fluctuations  in  -price  levels 

(1)  Do  price  changes  follow  changes  in  volume  of  production  or 
volume  or  sales  as  closely  under  the  open  price  plan  as  prior 
to  its  adoption? 

(2)  Do  prices  under  the  open  price  plan  change  more  or  less  fre- 
quently than  formerly? 

(3)'  Do  prices  under  the  open  price  plan  change  more  or  less  violent- 
ly (i.e.,  are  the  price  changes  greater  in  magnitude)  then 
formerly? 

(4)  What  has  been  the  effect  on  frequency  of  price  changes  of  a 
requirement  that  filed  prices  must  remain  in  effect  for  a 
certain  period  before  a  new  price  may  be  filed? 

(5)  What  tendencTr  is  there  for  price  changes  to  be  limited  to  the 
meeting  of  competition  of  a  lower  filed  price?  To  undercutting 
below  that  price? 

(6)  Has  a  trend  toward  uniformity  in  terms  and  conditions  of  sale 
under  open  price  filing  led  to  more  frequent  changes  in  the 
list  price  of  products  than  formerly? 

(?)  Did  price  changes  previously  take  the  form  of  changes  in  the  list 
price  pr  in  the  changes  in  discounts  or  other  conditions  of  sale? 

(8)  Have  price  changes  under  the  open  price  plan  been  through  a  series 
of  small  changes  brought  about  by  several  re-filings  or  have 
changes  been  centered  in  single  changes  upward  or  downward? 


noor 


t737~ 

(9)  Has  the  publicity  afforded,  "by  an  open  price  plan  led  to  the 
elimination  of  erratice  price  movements  arising  from  rumored 
price  changes  on  the  part  of  one  or  more  members  of  the  in- 
dustry? 

D.  Maintenance  of  nrices  at  high  levels 

(1)  Through  reduced  incentives  to  lower  prices,  for  particular 
transactions,  or  for  long-run  period 

(a)  Is  there  any  evidence  that  prices  have  been  maintained 
at  a  higher  level  under  an  open  price  plan  because  the 
reduction  of  a  price  to  secure  a.  particular  order  or 
class  of  order  would  result  in  the  lowering  of  the  price 
for  all  other  customers  in  that  category? 

(b)  Is  there  any  evidence  that  the  knowledge  that  price  re- 
ductions will  immediately  be  known  and  followed  by  com- 
petitors has  deterred  a  member  from  filing  a  reduced 
price  even  when  such  a  reduction  was  economically 
possible? 

(2)  Through  follow-the-leader  practices  to  raise  prices  to  more 
profitable  levels 

(a)  Have  members  tended  to  follow  the  leadership  of 
dominant  members  in  raising  prices? 

(b)  Have  upward  changes  been  more  frequent,  and  of  greater 
magnitude  than  downward  changes? 

(c)  Have  re-filings  to  meet  upward  changes  occurred  more 
rapidly  than  in  the  case  of  downward  changes? 

(d)  Did  prices  advance  to  any  marked  degree  in  anticipa- 
tion of  open  price  filing  or  immediately  thereafter? 
If  so,  have  these  prices  been  maintained  or  increased? 

E.  Reduction  of  prices  to  unprofitable  levels  through  increased  price- 

cut  t  ing 

(1)  Has  the  open  price  plan  tended  to  lower  the  going  level  of 
prices  to  the  level  of  the  lowest  cost  producer  or  to  that 
of  the  traditional  lowest  pricing  member? 

(2)  Have  prices  been  lowered  by  the  tendency  of   sellers  to  under- 
cut published  prices?     To  what  erctent  have  no  selling  below 
cost  provisions  been  used  to    stop  this   tendency? 

(3)  Was  price  cutting  more  or  less  prevalent  than  before  the 
open  price  plan? 

(4)  To  what   extent   is  a  provision  against    sales  below  cost   or 
destructive  price  cutting  necessary? 


9826 


-738- 

(5)  To  what  extent  arc  the  provisions  in  Office  Liemorandum 
228  a  satisfactory  protection  against  destructive  price 
cutting? 

P.   Narrowing;  of  the  range  of  competitive  -prices  by  the  elimination - 
of  quotations  "below  a  profitable  level 

(1)  What  evidence  is  there  that  price  publicity  has  had  a 
tendency  to  narrow  the  range  of  competitive  prices  which 
have  prevailed  in  the  past? 

(2)  Has  this  narrowing  of  the  range  of  competitive  prices 
occurred  through  the  elimination  of  quotations  "below  a 
profitable  level  or  through  the  elimination  of  t he  higher 
quotations  previously  existing  in  the  industry? 

G.  Effect  upon  the  maintenance  of  resale  prices 

,  (l)  Has  the  establishment  of  uniform  trade  discounts  in  con- 
nection with  open  price  plans  led  to  an  increase  in  resale 
price  maintenance? 

(2)  What'  effect  has  the  failure  of  the  price  filing  plan  to 
include  middlemen  had  in  making  re-sale  price  maintenance 
less  possible  by  those  manufacturers  having  their  own  re- 
tail outlets?   Selling  direct? 

(3)  Has  resale  price  maintenance  been  furthered  by  the  practice 
of  filing  the  names  of  distributors  entitled  to  certain 
customer  classifications? 

H.   Use  of  the  device  for  temporary  control  of  price  movements 

(1)  Has  the  open  price  plan  been  used  to  further  control  over 
price  movements  in  the  industry  by  preventing  changes  without 
advance  notice?  By  delay  in  distributing  or  accepting 
filed  prices? 

(2)  What  evidence  is  there  that  cost  provisions  in  the  code  have 
been  used,  either  before  or  after  approval,  as  a  club  against 
members  filing  low  prices?  How  was  this  accomplished? 

(3)  To  what  extent  has  customer  classification  aided  in  control 
of  the  price  structure? 

(4)  Has  control  of  prices  on  particular  transactions  been  effected 
by  comparison  of  bids  before  submission,  or  by  the  use  of  a 
bid-checking  bureau? 

(5)  Has  control  over  the  price  structure  been  furthered  by  the 
requirement  either  in  code  or  through  Code  Authority  that 
filed  prices  must  include  certain  fixed  or  suggested  dif- 
ferentials, charges  or  other  elements  or  price? 


.QRPr, 


-739* 

(6)   In  what  respects  have  open  price  plans  gone  "beyond  the 
function  of  publicity  of  prices  to  control  of  prices  or 
pricing  practices? 

I.  Use  of  the  device  to  -police  private  agreements 

(1)  Did  members  of  the  industry  exchange  information  regarding 
prices  or  terms  to  be  filed  under  an  open  price  plan  "before 
it  was  put  into  effect? 

(2)  Were  the  prices  first  filed  under  the  code  uniform? 

(0)  Have  simultaneous  changes  of  price  filings  occurred  after 
the  plan  was  set  up? 

(4)  Is  there  any  evidence  that  filed  prices  "bear  a  fixed  rela- 
tionship to  a  suggested  cost-floor,  an  existing  price  agree- 
ment or  any  other  established  base? 

(5)  Is  there  any  evidence  of  efforts  to  keep  members  priees  in 
line  with  a  predetermined  schedule,  e.g.,  by  systematic 
challenges  of  prices  below  that  schedule?  By  pressure  upon 
a  member  to  raise  a  filed  price?  By  threats  of  boycott? 

Of  citation  for  code  violation? 

(6)  Is  there  any  evidence  that  members  of  the  industry  have 
agreed  to  follow  the  price  leadership  of  one  or  more  members 
in  the  industry? 

(7)  To  what  extent  does  price  uniformity  occur  above  the  lowest 
price?  What  evidence  is  there  to  show  any  direct  relation- 
ship between  such  uniformity  and  collusive  activity  of  one 
kind  or  another? 

(8)  To  what  extent  has  price  filing  been  used  as  a  cloak  or  a 
device  to  implement  collusive  price? 

J.   Alterations  in  the  -position  of  favored  buyers  or  classes  of  buyers 

1.  by  the  elimination  of  secret  rebates  or  secret  con- 
cessions 

2.  by  lowering  of  previous  differentials 

(1)  Was  the  granting  of  secret  rebates  or  special  concessions 
prevalent  in  the  industry  prior  to  the  adoption  of  the  open 
price  plan? 

(2)  Is  there  any  evidence  to  indicate  that  such  rebates  have  per- 
sisted or  have  been  eliminated  under  the  open  price  plan? 

(3)  What  other  forms  of  discrimination  by  the  individuals  or 
special  classes  of  buyers  existed  prior  to  the  open  price 
plan? 


9826 


(4)  Has  the  open  price  plan  served  to  eliminate  these  forms  of 
discrimination? 

(5)  What  evidence  is  there  that  price  publicity  has  had  a 
tendency  to  stimulate  the  use  of  indirect  or  secret  forms 
of  price. competition  in  cases  where  it  is  specifically 
required  that  all  terms  and  conditions  of  sale  "be  reported 
in  price  lists?  Where  it  is  not  so  required? 

(6)  What  special  terms,  services  and  favors  still  appear  as 
forms  of  discrimination  between  customers  of  the  same  class? 
Between  customers  of  different  classes? 

(7)  Has  the  failure  to  extend  the  price  filing  requirement  to 
certain  types  of  transactions  such  as  chain  stores,  mail 
order  houses,  permitted  the  continuance  of  favored  treat- 
ment? When  such  transactions  are  covered  by  the  price 
filing  plan  are  special  prices  filed  for  this  class  of 

.  buyers?  What  changes  have  actually  "been  effected  in  the 
position  of  these  "buyers? 

(8).  Has  the  publicity  concerning  price  differentials  to  different 
classes  of  trade  led  to  a  lowering  of  previous  differentials 
for  any  class  of  consumers  or  distributors?-i.e.  through 
pressure  from  less  favored  groups?  Through  uniform  treat- 
ment by  members? 

(9)  Have  previous  classifications  of  customers  and  the  trade 

factor  differentials  applying  to  such  classifications  been 
altered  by  the  establishment  of  a  uniform  classification 
established  by  the  Code  Authority? 

K.   Changes  in  the  relative  competitive  -positions  of  units  or  groups 
in  industry 

(1)  Has  publicity  of  prices  resulted  in  a  shift  in  the  volume 
of  sales  between  members  of  the  industry  -  through  customer 
knowledge  of  cheaper  sources  of  supply?  Through  actual 
changes  in  the  relative  prices  of  members  through  meeting 
competition?   Through  the  shifting  of  customer  preference 
under  the  existence  of  uniform  prices? 

(2)  Have  previous  price  differentials  disappeared  -  e.g., 
between  large  and  small  members?  Between  different  areas? 
Between  known  and  unknown  brands?  Between  inferior  and 
superior  quality  goods? 

(3)  Has  this  been  due  to  increased  price  competition  or  to 
the  nature  of  the  price  filing  requirements  themselves 
as  regards  product  classification,  etc.? 

(4)  Has  the  failure  of  the  code  to  include  middlemen  under 
the  jurisdiction  of  the  code  proved  discriminatory  against 
members  of  the  industry  performing  their  own  distribution 
functions  when  the  latter  are  required  to  abide  by  filed 

982G 


-741- 

prices?   In  what  way?  What  means  were,  or  could  be  used 
to  eliminate  this  difficulty? 

(5)   Is  there  any  evidence  that  open  price  plans,  alter  the 

focus  of  price  leadership  in  the  industry?   i.e.,  from  the 
small  unit  to  the  dominant  producer,  or  vice  versa?  Does 
it,  on  the  other  hand,  strengthen  the  influence  of  a 
former  price  leader? 

L.  Diversion  of  sales  to  substitute  products 

1.  Through  filed  prices  becoming  a  target  for  under- 
selling on  competitive  products 

2.  Through  diversion  in  demand  because  of  increase 
in  price 

(1)  Have  there  been  any  diversion  of  sales  to  substitute  prod- 
ucts because  the  mere  openness  of  prices  have  encouraged 
undercutting  on  competing  products? 

(2)  Has  this  undercutting  been  facilitated  by  higher  prices 
under  the  open  price  plan? 

(3)  Has  diversion  of  sales  been  facilitated  by  inflexibility 
and  r estrictive  features  of  the  price  filing  plan? 

M.  Use  in  conjunction  with  other  provisions  in  the  code  or  other 
merchandising  methods  existing  in  the  industry 

(1)  Has  the  presence  of  previous  merchandising  plans  in  the 
industry  -  such  as  uniform  cost  figures,  discount  sheets, 
uniform  extras  or  differentials,  contributed  to  the  uni- 
formity of  prices  under  the  open  price  plan?  To  the 
inflexibility  of  the  parts  o""  the  total  price  structure? 

(2)  What  is  the  interdependence,  in  performance  and  in  results 
between  open  price  filing  and  other  price  restrictive 
provisions  in  codes? 

(3)  What  supplementary  provisions  covering  prices  or  other 
forms  of  control  are  considered  necessary  to  the  successful 
operation  of  the  open  price  plan  in  terms  of  its  various 
functions? 

Miscellaneous  Points  of  Inquiry. 

(1)  Has  the  existence  of  a  mandatory  waiting  period  discouraged 
individual  sellers  from  initiating  price  changes  because  of  their  anti- 
cipation that  such  changes  would  be  promptly  made  by  competitors? 

(2)  G-ive  evidence,  if  any,  that  where  there  is  a  mandatory  wait- 
ing period  individual  members  have  been  discouraged  from  initiating  price 
changes  because  of  the  opportunity  furnished  competitors  to  exercise  pres- 
sure or  to  practice  collusion.  . 

9826  -  . 


~?4&: 

(3)  Has  the  Code  Authority  ir.  any  wny  altered  the  length  of  the 
waiting  period  prescribed  in  the  code  or  in  the  absence  of  a  waiting 
period  introduced  one  by  instructions  or  interpretations  with  respect  to 
the  time  prices  shall  become  effective? 

(4)  Has  the  presence  of  a  waiting  period  "by  offering  opportuni- 
ties to  meet  a  competitive  price  on  the  same  effective  date,  resulted 
in  more  uniformity  of  prices  and  terms  and  conditions  of  sale? 

(5)  Is  the  waiting  period  an  important  element  in  coercive  prac- 
tices?  Is  its  absence  or  presence  in  the  code  itself  significant  or 
can  the  same  results  be  achieved  by  administrative  tactics? 

(6)  Has  the  identification  of  sellers  names  in  open  price  filing 
led  to  pressure  on  individual  sellers  to  alter  filed  prices? 

(7)  To  what  extent  is  the  identification  of  the  seller  necessary 
to  the  functioning  of  an  open  price  plan?   In  what  types  of  industries 
(as  to  products,  concentration,  size  and  distribution  of  units,  etc.) 
does  such  identification  become  necessary  in  order  to  permit  comparabil- 
ity of  prices  filed? 

(8)  Did  legal  sanctions  generally  replace  moral  suasion  and  eco- 
nomic sanctions  in  the  open  price  plans  under  the  codes,  or  did  they 
only  supplement  such  sanctions?  Were  the  economic  sanctions  listed  in 
Section  Y  B  of  the  outline  for  the  pre-code  period  employed  to  a  lesser 
extent  under  the  codes? 

(9)  Fnat  were  the  comparative  results  of  plans  that  provide  only 
price  filing  and  those  that  have  collected  and  utilized  more  complete 
data  on  market  conditions  -  production,  shipments,  stocks  on  hand,  etc.? 

(10)  What  evidence  is  there  to  show  the  comparative  effects  of 
mandatory  price  filing  under  the  codes  with  participation  of  the  entire 
membership  as  contrasted  with  voluntary  price  filing  schemes? 

(11)  Is  there  any  evidence  to  show  that  previous  experience  with 
open  price  filing  was  conducive  to  more  successful  operation  of  an  open 
price  plan,  either  because  of  the  perfection  of  the  mechanics  of 

price  filing  and  disseminatio  ,  or  b ecause  of  the  attitudes  of  the  members 
participating? 

(12)  What  have  been  the  deterring  factors  that  kept  code  price 
filing  plans  inactive  even  when  authorized,  in  the  code? 

(13)  What  difficulties  or  considerations  have  led  to  the  abandon- 
ment or  staying  of  open  price  filing  in  specific  cases?  Were  these 
dependent  upon  the  plan  itself,  the  nature  of  the  industry  or  products, 
or  upon  difficulties  in  administration? 

(14)  What  differences  in  the  operations  and  economic  results  of  open 
price  plans  can  be  traced  to  the  presence  or  absence  of  a  trained  executive 
secretary  or  industrial  management  agency?  —  e.g.,  as  to  smoothness  of 
operation,  as  to  compliance,  as  to  control  and  direction  of  prices  and  terms 
and  conditions  of  sale? 

0826 


-743=- 

(15)  What  criteria  have  been  developed  for  the  review  and  rejec- 
tion of  prices  that  are  "below  cost,  incomplete  or  otherwise  contrary 
to  the  open  price  plan  as  written?  What  provisions  have  "been  made  for 
appeal  in  such  cases? 

(IS)   Is  there  any  substantial  evidence  of  abuse  or  misuse  of 
price  information  by  Code  Authority  members  or  others  having  access  to 
price  filings  before  their  dissemination  to  the  industry  as  a  whole? 

(17)  What  procedures  have  been  developed  to  check  violations  under 
the  mandatory  open  price  plans  in  codes?  Which  of  these  could  be  recom- 
mended and  what  safeguards  should  be  present  to  prevent  intimidation 

of  members  and  other  abuses? 

(18)  Does  the  type  of  agency  employed  have  any  direct  bearing 
on  the  degree  to  which  price  filings  are  held  confidential? 

(19)  What  criteria  of  the  "successful"  operation  of  an  open  price 
plan  have  been  set  up  in  the  various  industries?  Which  of  these  can- 
be  accepted  as  a  guide  to  public  policy? 

(20)  If  open  price  plans  are  to  be  adapted  to  fit  individual  in- 
dustries, what  criteria  can  be  set  up  from  the  nature  of  the  industry 
itself?  From  the  past  record  of  the  operation  of  price  filing  in  the  in- 
dustry? 

(21)  Can  causal  or  coincident  relationships  be  discovered  between 
"types  of  industries  and  products  and  types  of  performance  and  results^ 
under  open  price  plans? 

(22)  In  what  respects  have  open  price  plans  gone  beyond  the  func- 
tion of  pub  licit:/  -  into  prescribing  or  regulating  pricing  practices  or 
prices  themselves? 

(23)  Can  open  price  systems  feasibly  be  confined  to  the  function  of 
providing  price  publicity?  What  are  the  limiting  factors  to  accomplish- 
ing this?  What  are  the  safeguards  -  positive  and  negative,  that  might 

be  necessary  to  accomplish  this  end? 

(24)  What  current  information  about  prices,  etc.,  should  be 
available  for  government  supervision  of  open  price  plans,  e.g., 

(a)  Statistical  reports 

(b)  Administrative  reports 

POST-CODE  PERIOD  OF  PRICE-?  II I1TG-  EXPERIMENT 
I.     Attitude   concerning  continuance  of  code  and  open  price  plan 

A.  Code  Authority 

B.  Industry  members 

C.  Customer  groups 

982G 


-744- 

II.     Relation  of   code  price  filing  provision  to   changed  legal   stauts 
under  Anti-Trust  Law. 

A.  Analysis  of  provisions   contrary  to   anti-trust   laws 

B.  Necessary  changes 

III.   Efforts  to  continue  code  or  related  plan  for  price  filing 

A.  General  appeals  to  members 

3.  Submission  of  voluntary  code 

C.  Trade  association  organization 

D.  Liquidated  damage  agreements 

IV.  Price  filing  plan  as  continued  or  reorganized 

A.  Agency  to  administer  plan 

B.  Scope  of  plan 

•  1.  As  to  products 
2.  As  to  areas 
5.   As  to  items  filed 

C.  Requirements  as  to  filing  and  dissemination 

1.  Description  of  reauirements 

2.  Changes  from  previous  code  rulings 

D.  Other  provisions  used  to  supplement  O'oen  price  plan 
1.  Uniform  terms,  etc. 

E.  Administration  of  plan 

1.  Points  of  variance  from  code  plan 

2.  Sanctions  and  controls  employed 

V.  Performance  and  reasons  for  non-performance 
(See  outline  for  code  period  for  detail) 

A.  Comparison  with  pre-code  and  code  periods  as  to  effectiveness 

B.  Difficulties  encountered 

C.  Suggested  remedies 

VI.  Present  and  potential  economic  results 

(See  section  XI  on  outline  for  code  period  for  detail) 

SOi.iE  PARTIAL  TYPES  OP  IET0RI.IATI0N 
FOR  USE  BY  OPEIT  PRICE  GROUP 

A  -  Descriptive  industry  materials  -  Historical  -picture  of 

1  -  Size  of  industry  -  (e.g.,  number  of  concerns  and  plants  and  their 
relative  size,  volume  and  value  of  production) 


-745-- 

2  -  Geographical  distribution  of  industry 

3  -  Processes  -performed  by  industry 

4  -  Product  characteristics  -  (e.g.,  extent  of  product  differenti- 

ation, standardization,  role  in  production  or  consumption,  perish- 
ability, indlucing  style) 

5  —  Technological  development 

6  -  Types  of  distribution  -  (e.g.,  extent  of  direct  selling,  use  of 

independent  intermediaries) 

7  -  Financial  structure  of  the  industry 

a.  Assets  and  liabilities 

b.  Capital  and  surplus 

c.  Income  and  disbursements 

d.  Profits 

e.  Financial  relationships  between  members  and  between 

members  and  related  industries 

f .  Bankruptcies  and  insolvencies 

8  -  Competitive  structure  of  industry  -  (e.g.,  dominance  of  large 

members,  concerted  movements  in  adoption  of  trade  practices, 
collusive  price  and  production  activity,  patent  controls,  relative 
consumer  acceptance,  concentr  tion) 

9  -  Exports  and  imports,  tariff  protection 

10  -  Nature  of  the  market 

a.  Elasticity-response  of  price  to  changes  in  supply  and  demand 

b.  Susceptibility  of  product  to  changes  in  supply  independently 

of  price 

c.  Nature  of  demand;  elasticity;  dependency  on  seasonal  or 

other  occasional  factors,  etc;  dependency  on  other 
industrial  activity  or  demand,  etc. 

11  -  Production  trends  -  (e.g.,  plant  and  productive  capacity,  volume 

of  production,  shipments  and  inventories) 

12  -  Price  trends  -  (e.g.,  wholesale  and  retail  price  levels,  changes 

in  terms  and  conditions  of  sale) 

13  -  Cost  trends  -  (e.g.,  labor,  raw  materials,  overhead,  taxes) 

14  -  Changes  in  industry  condition  durin,;;  depression  period 

15  -  Organization  of  industry  for  trade  association  work,  cooperative 

and  educational  activities 

16  —  Impact  of  the  anti-trust  laws  on  the  economic  development  of 

the  industr:/  -  (e.g.,  cease  and  desist  orders,  merging  of  assets) 


9826 


-  746  - 

D.   Srmrc.es  r,f  Information  and  Research  Procedure 

Relevant  material  on  price  filing  experience  in  each  of  the  fifty- 
seven  industries 'was  assembled  from  KRA  files.  This  information  was 
trasncribed  to  work  sheets  by -investigators, 'and  constituted  the  major 
body  of  material  in  this  report.   These  files  contained  transcripts 
of  public  hearings,  correspondence  between  NRA,  and  code  authorities, 
industry  members,  an<  other  interested  parties ;.  intra-17 RA  memoranda ; 
correspondence  between  code  authorities  and  industry  members;  protests 
of  members  and' non-members'- to  LIRA  or  other  ■governmental  agencies'; 
minutes  of  code  authority  and  industry  meetings;  code  authority  bulletins 
to  members  of  industry;  price  lists  r.nc  filings;  and  uniform  reporting 
forms  used  in  some  industries.  The  files  ;w.ete  characteristically." in- 
complete with  respect  to  the  latter  types  of  data,  but  did  contain  a 
substantial  amount  of  information  of  a  qualitative  and  descriptive 
character.   In  most  cases,  the  files  for  industries  included  in  the 
sample  were  covered  by  investigators  of  the  Price  Filing  Unit,  but  in 
some  instances  work  sheets  were  received  from  other  studies  in  progress 
in  Hal. 

A  thorough  search  was  made  in  NBA  files  for  price  filings  which 
had  been  collected  by  iTRA.  The  discouraging  results  of  that  search 
have  been  noted  in  Chapter  VI  above. 

Usable  sets  of  price  filin";s  '  a  .-  .  lii able' 'only'  for-  a  few 
industries.   Those  for  the  Asphalt  .Shin  :le  and  ""loafing  and'-for  the 
Steel  Castings  industries  have  beer  analyzed  in  the  case  histories 
set  forth  in  Appendices  A  and  3  -'boye...  Those '.for  Fiectrical  Manufac- 
turing, Fertilizer,  and  Coffee,  anion  were  used  at  the  respective 
trade  association  offices,  served  as  the  basis  for.reports  independent 
of  this  study,  but  some  of  the  evidence  obtained  from  these  filings 
has  been  incorporated. 

In  addition  to  primary  source  materials,  such  as  memoranda, 
correspondence,  and  transcripts,  extensive  use  has  been  made  of  certain 
of  the  Code  Histories  written  under  the  Division  of  'Review  and  of 
preliminary  reports  of  industry  studies.   Material  from  previous 
reports  of  the  Division  of  Research  and  Planning  and  of  the  Consumers1 
Advisor;;  Bo,  rd,  and  the  Federal  Tr  tde  Commission  report  on  Open  Price 
Associations  has  also  "Qeen   utilized'. 

Field  interviews  were  restricted-  to  only  two*  of-  the- industries 
in  the  sample,  Asphalt  Shingle  and  Roofing  and  Steel  C-  stings.   However, 
partial  reports  of  field  work  done  in  connection  with  other  studies 
have  been  made  available  to  the  Unit,  specifically  -for  the  .Fleetrical  " 
Manufacturing,  Fertilizer,  Coffee,  Sr.lt  Froducing,  Paper  Distributing, 
and  Agricultural  Insecticide-  and  Fungicide  Industrie's-.   In  none  of 
these  instances  was  there  any  detailed  cov  ra   of  the  experience  with 
open  price  filing,,  nor  any  general',  contact  with  industry  members. 

Sore  interviews  were  also  made  for  this  stud;-  by  the  iTRA  Field 
Division.  A  series  of  questions  was' prepared  by  the  Unit , .which  the 
field  staff  submitted  to.  former  local  code  authority- officials  of 
those  industries  which  had  been  organized  on  a  regional  basis.  These 
interviews  covered  eighteen  industries,  only  seven  of  which  were  in 


-  747  - 

the  code  sample.  He turns  from  195  interviews  were  reported.  A 
typical  questionnaire,  for  the  Crushed  Stone,  Sand  and  Gravel  and  Slag 
Industry,  is  included  "below.  (*)  . 

Two  other  questionnaires  wer    nt  out  in  connection  with  the 
study.  (**)   One  of  these  was  addressed  to  persons  that  had  been  cited 
to  the  NRA  Compliance  Division  for  some  violation  of  the  Code  provisi- 
sions  on  open  prices.  The  mailing  list  included  all  names  on  the 
Compliance  face  sheets  for  the  period  between  August,  1934,  and  May, 
1935,  except  that  a  maximum  of  25  names  was  circularized  for  any  one 
industry.   These  names  were  those  of  alleged  violators;   the  inclusion 
of  a  name  on  a  list  did  not  signify  that  a  violation  had  actually 
occurred.   It  was  hoped  through  these  questionnaires  to  obtain  first- 
hand information  concerning  the  reasons  for  nonperformance  and  non- 
compliance with  the  price  filing  requirements.   The  returns  were  scanty 
in  number  and  contained  little  information  of  value. 

A  second  questionnaire  concerning  */ne  operation  and  effects  of 
price  filing  plans  was  mailed  in  January,  1936,  to  secretaries  or 
executive  officers  of  former  Code  Authorities  for  some  330  codes  which 
contained  price  filing  provisions.  For  administrative  reasons,  the 
mailing  list  was  limited  to  representatives  cf  code  authorities  for 
those  industries  not  otherwise  contacted  by  the  Division  of  Review, 
and  hence  did  not  include  many  of  the  more  important  open  price  codes. 
Also  excluded  from  the  mailing  list  were  those  industries  which  it  was 
known  had  not  put  their  filing  plans  into  effect. 

Approximately  70  replies  were  received,  many  of  which  contained 
useful  data,  chiefly  in  respect  to  mechanics  and  to  performance 
under  price  filing  plans.   These  have  een  incorporated  at  various 
points  in  the  report. 


(*)    See  pages  748  -  752.  ■ 

(**)    Copies  of  these  are  included  below. 


-748- 

QUESTIONNAIRE   TO  LOCAL  Al-iD  REGIONAL   CODE  AUTHORITIES 

CRUSHED  STOKE,    SAND  AND  G^YEL,,AND  SLAG  INDUSTRY 
(Applies  to   State,    Regional  and  District   Committees) 

A.  General 

1.  Name  and  address  of  Committee. 

2.  ITame  of  person  interviewed  and  former  connection  with  Committee. 

3.  How  many  concerns  were  under  the  jurisdiction  of  this  Committee? 

4.  How  many  concerns  voted  in  the  last  election  for  membership  on  the 
Committee? 

5.  How  often  were  meetings  held  by  the  Committee? 

6.  Where  are  the  records  of  the  Committee  and  are  they  available  for  in- 
spection by  representatives  of  the  National  Recovery  Administration? 

B.  Compliance. 

1.  How  many  complaints  were  received  on  trade'  practice  violations  from 
.sources  outside  of  the  Committee  itself?   How  many  labor  complaints? 

2.  How  many  trade  practice  complaints  of  violation  were  initiated  by  the 
Committee  or  its  representatives?   How  many  labor? 

3.  Describe  briefly  the  procedure  used  in  handling  complaints. 

4.  Was  it  customary  to  inspect  members'  payrolls  and  other  records  at 
periodical  intervals?  Was  it  done  in  all  cases  when  conrolaints  were 
charged  against  members?   If  not,  how  often?   What  action  was  taken  if 
members  objected  to  such  inspection? 

5.  Was  restitution  always  demanded  for  adjustment  of  labor  violations?   What 
was  required  for  violations  of  maximum  hour  provisions?   How  much  restitu- 
tion money  was  collected  by  this  Agency?  What  disposal  was  made  of  this 
money?   Was  restitution  required  for  all  employees  affected  by  violations 
or  only  for  complaining  employees? 

6.  In  cases  of  trade  practice  violations  what  type  of  adjustment  was  re- 
quired in  order  to  consider  a  case  satisfactorily  adjusted^ 

7.  Was  the  respondent  always  given  the  opportunity  of  a  hearing?   If  so,  be- 
fore what  body"?  What  notice  of  the  hearing  was  given  to  the  respondent? 
How  was  the  hearing  conducted?   Was  it  open  or  closed?   How  were  the 
charges  presented?   Was  the  identity  of  complaining  employees  withheld 
from  the  respondent?  Of  other  complainants? 

8.  How  many  labor  and  trade  -oractice  cases  were  referred  by  the  Committee  to 
the  National  Code  Authority?   How  many  to  State  NRA  Office? 

9826 


-749-> 

9.  Estimate  for  "both  trace  practice  and  lat>or  provisions  the  degree  to  which 
compliance  was  secured.   Rate  as  excellent,  fair,  poor,  complete  breakdown. 

10.  With  what  code  provisions  did  compliance  "breakdown  completely?   To  what 
do  you  attribute  this  breakdown? 

11.  Did  the  agency  have  the  services  of  any  paid  staff  for  compliance  work? 
How  many  persons  were  employed"  What  compensation  did  they  receive?  Were 
they  authorised  to  settle  complaints  without  the  approval  of  the  agency? 
fere  the  funds  available  for  compliance  p>ork  adequate? 

0.   Relationship  with  Other  Agencies 

1.  Was  this  Committee  adequately  informed  of  code  developments  by  the  National 
Code  Authority? 

2.  On  what  matters  did  the  Committee  exercise  discretionary  powers?   (Ex- 
planations?  Interpretations?  Exceptions?   Collection  of  statistics? 
Collection  of  assessments?) 

3.  On  what  matters  did  the  Committee  report  regularly  to  the  National  Code 
Authority? 

4.  What  were  the  most  common  criticisms  of  this  Committee  by  members  of  the 
Industry? 

5.  Did  this  local  Agency  have  the  benefit  of  Trade  Association  funds  and  the 
use  of  Trade  Association  staff? 

D.   Price  Filing 

1.  What  considerations  led  to  the  establishment  of  the  price  filing  provi- 
sion within  your  District?  If  none  was  so  established,  what  considera- 
tions made  it  seem  unnecessary  or  impractical  to  have  price  filing? 

2.  What  special  difficulties  did  you  have  in  the  administration  of  the  price 
filing  plan?   To  your  mind,  was  there  any  possible  solution  to  these  diffi* 
culties? 

3.  What  specifically  were  the  difficulties  which  arose  out  of  the  Executive 
Order  6767  permitting  15$  reduction  on  government  contracts?   How  did  you 
meet  these  difficulties? 

4.  What  complaints  or  protests,  if  any,  were  raised  because  of  the  fact  that 
filings  were  disseminated  only  to  members  selling  within  the  District? 

5.  How  quickly  was  it  possible  for  the  District  Committee  to  issue  the  fil- 
ings, that  is,  get  them  into  the  hands  of  members? 

6.  Give  an  index  or  estimate  of  the  extent  to  which  customers  availed  them- 
selves of  the  privilege  of  inspecting  the  filed  prices. 

7.  Do  you  think  that  the  requirement  that  five  days  must  elapse  "between  fil- 
ing and  effectiveness  of  price  prevented  temporary  price  cuts?   Was  this 
provision  evaded  in  any  way?   How? 


8.  Did.  the  ability  of  all  competitors  to  meet  the  lowest  filed  prices  act  to 
discourage  or  eliminate  price  cutting?   C-ive  any  evidence  you  have  on  this 
po  int , 

9.  Give  any  index  or  estimate  of  the  extent  to  which  members  in  your  region 
conrolied  with  the  -price  filing  provision, 

10.  What  procedure  was  followed  in  drafting  rules  and  regulations  relating  to 
price  filing,  terms  and  conditions  of  sale;  that  is,  by  whom  were  they 
drafted,  with  what  committee  or  administrative  (ERA)  assistance  or  colla- 
boration, etc?   (Note  to  interviewer:   Please  ash  for  a  copy  of  all  rules 
and  regulations  relative  to  price  filing  issued  by  this  agency). 

11.  Give  an  index  as  estimate  of  the  extent  to  which  members  in  your  District 
complied  with  the  price  filing  provision.   To  what  was  any  failure  (1) 

to  file  or  (2)  to  sell  at  filed  prices  principally  due?  Many  small  com- 
petitive units?   Lack  of  standardization  of  product  or  service?   Distur- 
bance of  ordinary  distributive  or  customer  relationship?   Was  the  failure 
to  sell  at  filed  prices  open  or  through  indirect  rebates,  secret  conces- 
sions, etc.? 

12.  To  what  purpose,  ^other  than  orice  publicity,  were  you  able  to  put  price 
filings?   To  furnish  statistical  information  to  the  Code  Authority? 
Would  you  consider  price  filing  desirable  even  if  there  were  no  dissemina- 
tion required?   Why? 

13.  What  protests  did  you  receive  concerning  either  the  price  filing  plan  it- 
self or  its  administration?   Were  any  protests  directed  specifically  at 
the  use  of  a  District  organization  in  the  administration  of  the  plan? 

If  so,  in  what  resnect?  Do  you  prefer  an  industry  organization  to  re- 
ceive price  filings  or  an  independent  one?  Why? 

14.  What  differences  have  come  to  your  knowledge  between  your  practices  and 
experiences  and  those  of  other  Districts,  in  relation  to  the  price  filing 
provisions?   To  what  do  you  attribute  these  differences? 

15.  Did  the  open  price  provision  in  your  code  meet  the  neculiar  conditions  in 
your  Industry0   If  not,  in  what  respects  did  it  fall  short  of  a  satisfac- 
tory appr  >aeh  to  your  ^ro'ble?.-;? 

Capacity  Control 

1.   For  those  states  of  the  division  in  which  permissive  areas  were  approved 
by  the  Administration: 

a.  How  many  applications  were  there  to  increase  capacity?   What  was  the 
tyoe  and  amount  of  capacity  involved?   Did  it  represent  recently  con- 
structed equipment  or  equipment  to  be  moved  from  some  other  place? 

b.  In  addition  to  formal  applications,  what  other  proposals  were  there  to 
.  introduce  new  capacity  which  did  not  reach  formal  amplication?   Why 

not? 

c.  What  disposition  was  made  of  the  formal  applications?   Granted?   With- 
drawn?  Denied?   Did  all  those  who  were  granted  permission  use  it? 
Upon  what  basis  were  decisions  reached  to  grant  or  recommend  to  the 
Code  Authority  denial  of  applications? 


d.  Were  any  of  the  applications  made  by  members  with  a  view  to  being 
"bought  off"?  Had  this  practice  existed  in  the  area  prior  to  the  Code? 
If  so,  describe  when,  and  extent. 

e.  What  difficulties,  if  any,  'rose  because  of  competition  by  operators 
outside  of  the  permissive  areas,  or  by  contractors  or  others  within 
the  permi«sive  area,  who  did  not  come  under  this  provision  of  the  code? 

f.  What  has  been  the  effect  of  the  abandonment  of  the  code  provision  on 
the  introduction  of  new  capacity? 

g.  What  is  the  present  opinion  in  the  industry  with  regard  to  the  wisdom 
of  the  code  provision  regarding  capacity  control? 

2.   For  those  parts  of  the  division  in  which  permissive  areas  were  not  approv- 
ed "oy   the  Administrator; 

a.  Was  there  any  demand  for  the  establishment  of  a  permissive  'irea?  On 
what  grounds? 

b.  Describe  efforts  to  establish  a  permissive  area  and  explain  obstacles 
and  reasons  why  this  was  not  done. 

Geographic  Relations 

1.  Pre-code  period 

a.   Approximately  how  many  stationary  plants  and  how  many  portable  plants 
were  located  in  your  district?   How  did  each  group  quote  prices;  f.o.b 
or  delivered?   Was  this  a  uniform  practice  for  all  plants,  for  all 
"olants  of  one  type,  and  for  all  products?   If  not,  what  variations 
were  there?   Did  producers  take  advantage  of  Code  provisions  which 
enabled  them  to  meet  competition  prices  and  terms  of  sale? 

2.  Code  period 

a.      Did   the   district   committee   adopt  uniform  rules   for   the   filing  and 

quoting  of  prices?      If   so,    were    they  f.o.b.    or  delivered,    or  did  the 
committee   leave    it  optional?      If  no   mandatory  method  was  adopted,   what 
tens  were    customarily  used  by   the   different  producers?      Did  these 
apply  to   both  portable   and  stationary  plants?      To   all  products?      Did 
these   represent  a   shift   from  pre-Code  practice?      Why  was   the   change 
made? 


2b. 


a.   Were  products  shipped  into  your  market  from  distances  which  you  consi- 
der excessive?   If  so,  cite  illustrative  cases.   How  were  such  product 
shipped  -  by  railroad  or  truck?   What  proportion  of  the  products  sold 
in  your  market  carae  from  an  excessive  distance?  Were  the  products 
shipped  on  an  f.o.b.  or  delivered  basis?   If  shipped  "delivered"  was 
the  price  realised  at  point  of  shipment  less  than  the  price  realized 
on  sales  in  the  normal  marketing  area  of  shipper?  Explain, 


~752~ 

b.  Did  producers  in  your  market  ship  products  beyond  their  normal  market? 
If  so,  cite  illustrative  cases.   What  proportion  of ,  gross  tonnage  pro- 
duced in  your  area  was  shipped  excessive  distances?  How  were  such 
products  shipped  -  by  railroad 'or  truck?   Were  such  shipments  made  on 
an  f.o.b.  or  delivered  basis?   How  much  of  such  product  was  "dumped" 
into  other  market  areas  (that  is,  sold  at  a  price  which  net  the  ship- 
per less  than  he  received  for  his  product  in  his  own  market)?  When 
products  were  dumped  into  other  markets,  cite  any  illustrative  cases 
which  show  freight  absorption  or  price  cutting  below  shippers  price 

in  home  market, 

c.  Were  sales  outside  of  normal  marketing  areas  more  frequent  or  less 
frequent  during  the  code  period  than  during  the  pre-code  period? 
Give  reasons?   Than  during  the  post  code  period?   Give  reasons: 

Misrepresentation  and  Deception 

1.   Prior  to  N.R.A.  were  any   of  the  following  practices  disturbing  factors  to 
your  industry:   Inaccurate  advertising,  price  misrepresentations,  or  mis- 
representations of  competitive  goods,  etc.?   What  efforts  were  made  to 
curb  these  practices?   With  what  success?   Specifically,  did  the  industry 
seek  the  cooperation  of  the  Federal  Trade  Commission,  and  if  so,  with  what 
success?   Did  your  ILR.A.  code  provisions  concerning  misrepresentation  and 
deception  serve  effectively  to  check  the  practices?   If  not,  what  princi- 
pal difficulties  of  enforcement  were  encountered?   Did  you  have  a  definite 
procedure  for  collecting  evidence  of  violation  preliminary  to  making  the 
formal  charge?   If  so,  please  explain  in  detail  what  this  procedure  or 
procedures  was. 


DR-14  Confidential  Government  Report  Pile  No. 


Return  to:  NATIONAL  RECOVERY  ADMINISTRATION 

Division  of  Review, 
Washington  D.   C. 


QUESTIONNAIRE  ON  EXPERIENCE  WITH  OPEN  PRICE  PROVISIONS 

We  desire  to  make  our  studies  on  the  operation  of  the  National  Recovery  Administration 
as  complete  as  possible  -  indicating  both  sides  of  the  difficulties  which  were  involved. 
In  this  regard,  the  views  of  persons  who  were  not  in  agreement  with  certain  activities  are 
just  as  Important  as  the  views  of  those  who  favored  them.  We  understand  that  you  either 
disagreed  or  had  a  misunderstanding  with  the  code  compliance  agency  regarding  the  provision 
on  open  prices,   so  we  would  like   to  have  your  story  -  your  side  of  the  argument. 

The  Information  which  you  submit  will  be  considered  confidential  and  your  name  or  the 
name  of  your  firm  will  not  be  disclosed  In  our  reports. 


Name  of  Respondent 

.  Date 

Address 

(Street) 

(City) 

(State) 

I.  Indicate   (<r)    the  total  volume  of  sales  for  this  establishment  in  1934: 

□  Under  $25,000  \J  $100,000   to  $500,000 

□  $25,000   to  $100,000  Q   $500,000  and   over 

II.  A.    (•)   Check     one  or  more  of  the  following  to  indicate  the  subject  of  your  disagreement 

or  misunderstanding  with  the  Coie  Authority: 

□  Failure  to  file,  post,  or  publish  prices  as  required 

□  Selling  at  prices  lower  than  filed  prices 
Q   Failure  to   file  complete  data  on  prices 

□  Failure  to  observe  prescribed   terms  and  conditions  of  sale 
Q   Filing  prices  which  were  allegedly  below  cost 

Q   Failure  to   fellow  customer  classification' 
[J    Others    (specify) 

B.   Indicate   (')in  what  manner  you  were  notified  of  the  above  condition. 

Q  By  mail  □  By  direct  personal  contaot 

□  BY  telephone  □  Other  (specify) 


C.  Indicate  (r)  who  filed  the  original  oomplaint  resulting  in  the  disagreement: 

□  Competitor  □  Other  (specify) 

□  Code  Authority  rj  Do  not  know 

D.  We/e  you  requested  to  appear  before  Code  Authority  for  a  hearing?  Q  Yes;   □  No. 

If  yes. did  you  appear?  □  Yes;  Q  No.  Before  what  committee? 


III.  Indicate  (/)  whether  your  disagreement  resulted  from: 

Q  Specific  open  price  provisions  embodied  in.  the  Code 

fj  Rules  or  regulations  on  open  prices  formulated  by  the  Code  Authority 

If  your  disagreement  on  open  prices  was  due  to  the  rules  or  regulations  formulated 
62  i&2  Code  Authority,  please  answer  the  following: 

A.  Had  you  been  Informed  of  the  rules  or  regulations  formulated  by  the  Code,  Authority 
on  open  prices  before  the  complaint  was  made  against  you?Q  Yes;  Q  No.  If  yes, 
please  state: 

1.  In  what  manner  were  you  informed  of  the  rules  or  regulations  formulated  by.  ike. 
Code,  Authority  on  open  prices  (/): 

□  By  Hall  Q  By  direct  personal  oontaot 

□  By  telephone  □  Other  (specify) 


2.   Approximately  how  many  days  after  you  were  informed  of  Uigge.  £o.de  Authority 
rules  or  regulations  on  open  prices,  were  you  notified  of  the  complaint  made 
QJJOO   against  vou?  days. 


754 


IV.  Indicate  (v)  below,  ho*  your  ca9e  was  disposed  of: 

n  You  agreed  to  comply  Q  Payment  of  fine 

J   Blue  Eagle  withdrawn              □  Case  was  dropped  by  Code  Authority  or  HRA 
Q   Case  pending  on  May  27.  1935        fj  Other  (specify) 


A.  Did  the  Code  Authority  make  any  particular  efforts  to  get  you  to  oomply?  rn  Yes; 
Q  No.  If  yes,  please  explain  the  nature  of  the  efforts. 

V.  Indicate  (r)   below,  what  iou  think  was  the  real  reason  for  the  complaint  against  you: 
\H\   Misunderstanding  on  part  of  person  making  the  complaint 
Q  Misunderstanding  on  your  part 

□  Conflict  over  Code  jurisdiction 

n  Complaint  was  intended  to  get  you  to  comply  with  other  Code  provisions  or  Code 

□  Authority  regulations  not  directly  related  to  price  filing 

□  Complaint  was  intended  to  get  you  to  follow  some  price  or  other  policy  of  Code 
Q  Authority  or  of  dominant  members  of  the  Industry 

□  Others  (specify) 

VI.  A.  Would  compliance  with  the  Code  or  with  the  Code  Authority  regulations  have  made  it 
necessary  for  you  to  change  your:  (Use  Check) 

□  Customary  prices  □  Customary  terms  of  payment 

□  Customary  quantity  discounts  Q  Customer  classification 

D  Customary  allowances (advertising,  etc. )   Q  Other  terms  and  conditions  of  sale 


(specify). 


Please  explain  briefly,  what  changes  would  have  been  necessary. 


B.  Approximately  how  long  had  you  observed  such  terms  or  conditions  of  sales  prior  to 
to  the  time  the  complaint  was  made?  years 

VII.  Would  you  have  preferred  to  file  prices  with  some  agency  other  than  the  one  designated 
in  Code  for  receiving  and  distributing  prices?  □  Yes;  □  No.  If  yes,  state  what 

agency _^ __ 


VIII.  A.  Were  the  price  filling  provisions  being  generally  observed  in  your  marketing  area 
by  some  members  and  ignored  by  others?  □  Yes;  □  No.  Explain  briefly. 


Were  you  influenced  in  non-compliance  by  the  belief  that  your  competitors  were  not 
complying  with  the  price  provisions  of  the  Code? 


IX.  Would  you  have  been  more  inclined  to  comply  with  the  open  price  provisions  of  the  Cod* 
if  they  had  been  different  in  some  respect?  Q  Yes;  □  No.  If  yes,  lndioate  below 
(•),  in  what  respect  you  think  the  open  price  provisions  should  have  been  changed: 

□  Range  of  products  for  which  prices  were  to  be  filed 

□  Waiting  period  before  revised  prices  could  be  effective 

□  Filing  of  prices  on  past  transactions  as  opposed  to  filing  prices  which  were 

currently  offered 

□  Identification  of  seller  in  filing 

□  Others  (specify) __^_____. 


Please  explain  the  nature  of  the  change,  and  give  reasons. 

X.  Were  you,  at  the  time  the  complaint  was  made  against  you.  a  member  of  the  Trade  Associ- 
ation which  sponsored  the  Code?  □  Yes;  Q  No. 

Please  feel  free  to  attach  any  comments  you  may  wish  to  make. 

9826 


-   7.35  - 
E-2-2U Confidential   C-o-vornment   Eeport .Tile  Eo.  . . . 

ee?A2T!;e:tt  o:  oo;:ibce 

Office  of  the  National  Zecovery  Administration 

■  'i  'ton,  E.  C. 

:i  I'fi   •:  ::  *  V  ..  $  ;<:;:;  ;,:  ;,;  *  #  * 

QUEST IOHNAIEE  OK  0JF3H  PEICE   l-ILIIIC    AMD  1JSPSPEESEHTATIVE 

PRACTICES 

Pealizing  that  you  nay  not  have  precise  information  on  many  of  the 
following  questions,  we  are  requesting  your  informed  opinions. 

Your  cooperation  in  filling  out  this  schedule  "ill  he  of  material 
assistance  in  our  study  of  open  price  filing  and  riisrepresentative 
■practices. 


Name p£ 

Address  .  .    


Code  reported  on  (repcrtion  on?  only)^ 


SECTION  I  -  0?EN  FEJCE 'FILING 


1.  Eate  of  first  filing  of  prices-  under  the  Industry  Code.  (l!onth, 
day  and  [''ear) 


2.  Annual  dollar  sale  s.  .v.ol-une-  of  -t-'ris  Indus  try-l93M  rough 
estimate) .  G 

3.  a. Did  price  filing  apply,  to  all*  "product's"  under  this  Code?     Yes  : 

Eo.   If  no,  please  answer  the  following: 
h.   Approximately  -"hat  percentage  of  the  total  foliar  sales  of  this 

Industry  was  subject  to  price  filing? ' 

c.  List  the  products  or  hinds  of  products  of  this  Industry  which 

were  excluded  from  the  price  filing  requirements, 


h,    a.  State  the  total  number  of  iembers  in  this  Industry  during-.  133^ 

(estimate) . 

t>.  Estimate  what  per  cent  of  the  total  members  filed  prices  as 
required  by  the  Code  during: 
First  half  of  price  filing  period. p 


Second  half  of  "orice  filing  period. 


o 


c.  Estimate  "hat  per  cent  of  the  total  dollar  sales  of  this  Industry 
was  represented  by  the  members  who  filed  prices  during: 

First  half  of  price  filing  period. p 

Second  half  of  price  filing  period. , . 


5.  a.  In  addition  to  prices,  what  terms  and  conditions  of  sale  were 
ordinarily  filed  by  members  of  this  Industry. 

b,  TThat  other  information  was  ordinarily  (i.e.  sales  and  production 
data,  names  of  distributors  or  customers,  etc.) 


)f:26 


...  -  756  - 

-.  a.  Indicate  (   )  in  '.That  form  prices  '7ere  filed  "by  members  of  this 
Incus try: 

List  prices  with  discounts 

Discounts  from  Industry 'cross  or  master  list  prices 

Base  prices  with  extras 

Set  prices  to  various  classes  of  customers 

Other  (specify) 

"b.  List  the  classes  of  customers  of  this  Industry  (jobbers,  whole- 
salers,  dealers,  etc.  for  which  prices  were  ordinarily  filed. 

c.  List  the  classes  of  customers  of  this  Industry  for  which  ;orices 
were  not  ordinarily  filed. 

7«  a.  Indicate  (   )  the  net hods  actually  used  in  the  dissemination  of 
the  price  infor  nation  to  members  and  customers  of  this  Industry 

Method  of  dissemination        To  members  of   To  customers  of 
of  price  information  this  industry   this  industry 

Hailed  upon  request,  without  charge 

Hailed  upon  request,  at  cost 

Hailed  regularly,  without  charge 

Hailed  regularly,  at  cost 

Available  for  -inspection  only 

Direct  exchange  among  nenbers XXX 

Ho  dissemination  of  price  information 

frices  available  to  customers  of  sane 

classification  ohl^r XXX 

Prices  available  only  to ...  memo  o'r  in 

direct  competition .XXX 

Other  method1  s  (Specify 

b.  Please  explain  briefly  wo  what  extent  cus toners  availed  them- 
selves of  the  opportunity  to  inspect  or  request  prices? 

S.  a.  Here  prices  ordinarily  filed  on:   Delivered  basis:   3T.0.B.  basis 
b.  If  on  an  P.O.".'.  basis,  die  price  quotations  apply:   Nationally: 
Regionally. 
S.  a.  TTere  prices  filed: 

With  one  national  agency  and  .disseminated  nationally 
With  Regional  agencies  an<?  disseminated  regionally, 
b.  If  filed  on  Regional  basis,  how  many  regions  were  established? • 

10.  a.  Did  distributors,  not  members  of  this  Industry,  file  prices  with 

the  filing  agency  for  this  Industry?   Yes:    No. 
b.  If  no,  did  distributers  ordinarily  adhere  to  manufacturers  suggested 
resale  prices? 

11.  a.  What  benefits  did  proponents  of  the  Code  eroect  to  obtain  by 

;  establishing  an  open  price  system? 

b.  Please  explain  how  the  proponents  of  the  Code  expected  the  open 
orice  system  to  achieve  the  above  benefits? 

c.  What  is  your  opinion  as  to  the  extent  to  which  these  expected 
benefits  rrere  actually  realized? 


-  757  - 

12.  What  off  net,  in  your  opinion,  aid  the  operation  of  the  open  price 
system  in  this  Industry  have  on  the  following: 

a.  Level  of  prices  -  higher  or  lower. 

b.  Extent  of  price  uniformity  among  co  voetitcrs. 

c.  Degree  of  price  steadiness  as  contrastec1  with  frequent  and  abrupt 
chan,'jes. 

d.  Relative  competitive  position  of  industry  members. 

e.  Relative  competitive  position  of  classes  of  liuyers. 

13.  In  your  opinion  to  what  extent  was  the  "Publicity  given  to  prices 
and  terns  of  sale  (as  distinguished  fron  other  code  provisions  such 
as  "no  selling  below  cost")  responsible  for  the  effect*-  v/hich  you 
stated  in  que-tion  12. 

lU.a.  What  T7ere  the  principal  difficulties  experienced  in  the  effective 
operation  of  the  open  price  system? 

b.  Hou  night  they  have  been  remedied? 

15.   What  is  your  opinion  of  the  value  of  a  price  filing  system  in  which 
the  filing  of  prices  by  members  -Tould  be  voluntary,  as  a  means  to 
a  more  stabilized  price  structure  in  your  Industry? 


SUCTION  II  -  hISZEIPRESEITTATlOU 


l6.   Indicate  (   )  which  of  the  following  hinds  of  nisrepresentation  and 
others,  were  a  serious  problem  in  this  Industry  before  the  N.H.A. . 
code.  Also  indicate  (   )  iiether  such  nisrepresentative  practices 
•jere  still  of  a  serious  nature  during  the  code  and  after  the  code. 
Kind  of  misrepresentation    before  Code   Daring  Code   After  Code 

Deceptive  advertising 

False  marking  or  branding 

Deceptive  packaging 

Other  (specify) 


a. Please  explain  briefly  the  nature  of  the  above  practices  which  were 
or  are  a  seriou-S  problem  to  this  Industry  during  any  of  the  above 
periods, 

17.   Did  the  provisions  in  your  Code  prohibiting  misrepresentations  serve 
materially  to  lessen  the  prevalence  of  practices  of  the  hind  which 
you  have  indicated  in  Question  l6. 


SS2S 


,.-  758  - 

IS.  tfas  the  Code  Authority  able  to  obtain  compliance  with  such  provisions 
without  recourse  to  N.R.A.  enforcement? 

19.   TThat  -7ere  the  chief  obstacles  encountered  to  effective  functioning 
of  the  Code  provisions  concerning  misrepresentation  of  the  kind  you 
have  indicated  in  question  l'S? 


q£26 


-   759  - 

E.      Statistical  Program  for  the  Prico  Filing  Unit 

X' 

The  statistical  projects  of  the  Pric-o  Filing  Unit  included  analyses 
of  the  price  filing  of  only  two  industries  -  Asphalt  Shingle  and  Roofing 
and  Steel  Castings.   (These  studies  '/ere  based  in  large  part  on  a  com- 
prehensive outline  for  statistical  analysis,  prepared  by  the  Unit  as  a 
basis  for  intensive  studies  of  price  filing  experience  in  separate  in- 
dustries.  This  outline  covers  subject  -.natter,  methodology,  and  material 
specifications  for  such  statistical  studies  below.  An  outline  for  briefer 
inspection  studies  is  included: 

Outline  of  the  Statistical  Program 
for  the 
Price  Filing  Unit 

Subject  Latter 

The  following  outline  is  meant  to  suggest  various  questions  which 
the  Price  Filing  Unit  of  the  Trade  Practice  Studies  Section  wishes  to 
have  answered,  so  far  as  practicable,  by  the  intensive  statistical  stud- 
ies of  particular  industries.   It  is  not  expected  that  the  outline  can  be 
followed  in  exact  detail  "oy   any  particular  study;  on  the  other  hand,  it 
should  suggest  certain  questions  which  each  can  answer  in  some  fashion 
or  to  some  degree,  if  not  in  the  form  indicated  by  the  outline. 

ECOITOUIC  AHD  ADLilHISTRATIVE  EFFECTS  OF  OPEIT  PRICE  FILING 

I .  Effect  on  Prices; 

A.   Uniformity 

(1)  Direction  of  price  changes  in  achieving  uniformity. 

(a)  Where  Goes  the  greatest  degree  of  uniformity  occur  - 
at  the  top,  middle,  or  bottom  of  the  price  range? 

(b)  Is  there  any  evidence  showing  relationship  between 
such  uniformity  and  collusive  activity  of  one  kind 
or  another? 

(2)  Has  publicity  re:  price  differentials  to  different  classes 
of  customers  led  to  changes  in  these  differentials? 

(a)  Through  uniform  treatment  by  members? 

(b)  Through  pressure  from  less  favored  groups? 
If  so',  what  kind  of  pressure? 

(3)  Has  open  price  activity  caused  alterations  in  the  price 
status  of  competitors? 

(a)   Through  customers  learning  of  cheaper  sources  of 
supply? 


9826 


■  -  760  - 

(b)  Eirough  actual  changes  in  the  relative  prices  of  nem- 
"bers  in  meeting  conpetition? 

(c)  Through  shifting  of  customer  preference  under  exis- 
tence of  uniform  prices? 

(d)  Have  these  developments  (if  present)  brought  about 
changes  in  the  respective  volume  of  competitors' 
sales? 

(4)  Are  variations  in  price  due  to  - 

(a)  Lack  of  standardization  of  products? 

(b)  Advertised  and  non-advertised  brands? 

(c)  Large  and  snail  members? 

(d)  Integrated  and  non-integrated  members? 

(e)  Location  -  Hast  and  lest?, 

(Lut  suggestive  but  not  exhaustive) 

(5)  Have  previous  price  differentials  disappeared  - 

(a)  Between  large  and  small  members? 

(b)  Between  different  areas?         :.-,'.' 

(c)  Between  advertised  and  non-advertised  brands? 

(d)  Between  inferior  and  superior  quality  goods? 
(List  suggestive  but  not  exhaustive) 

(6)  What  has  been  the  effect  of  the  clause  allowing  the  meeting 
of  competition? 

(a)  Has  competition  been  met  at  the  mill  or  at  destination? 

(b)  Is  this  a  change  from  previous  practice? 

(7)  Has  the  tendency  toward  list  price  uniformity  been  offset 
by  a  growing  lack  of  uniformity  in  terms  'or  conditions  of 
sale,  in  service,  or  the  quality  of  the  products? 

(3)  Has  a  tendency  toward  uniformity  in  terms  and  conditions 

of  sale  under  open  price  filing  led  to  more  frequent  changes 
in  the  list  price  of  products  than  formerly? 

(9)  Are  prices  showing  a  tendency  toward  uniformity  for  products 
sufficiently  standardized  to  justify  such  a  tendency? 

(10)  How  early  did  "uniformity"  occur? 

(a)  Were  the  prices  first  filed  under  the  Code  uniform? 


9826 


-  751  - 

(11)  Is  there  a  tendency  for  manufacturers  with  incomplete 
lines  to  sell  at  lower  prices? 

(12)  Is  there  an;"-  relationship  between  trends  in  the  dis- 
persion of  competitors'  prices  and  trends  in  prices? 

(13)  Is  there  any  relationship  between  trends  in  the  dis- 
persion of  cdmpetitors'  prices  and  the  frequenc7  of 
price  changes? 

(14)  Breakdowns  and  over-all  comparisons  (this  list  is 
merely  suggestive  and  not  exhaustive) 

(a)  What  types  of  open  price  systems  have  been  most 
effective  in  bringing  about  uniform  prices? 

1.  With  or  without  waiting  period. 

'  2.  Data  filed: 

a.  prices  only.' 

b.  more  complete  data  (production, 

sales,  stocks,  etc.) 

3.  Methods  of  collection  and  dissemination. 

(b)  "hat  relationship  has  adr.iinistra.tion  of  the 
open  price  system  had  to  its  effectiveness 
in  promoting  price  uniformity? 

1.  Types  of  administration. 

a.  By  Code  Authority. 

b.  By  Confidential  Agent. 

c.  By  Trade  Association  Secretary. 

2.  'Efficiency  and  sincerity  of  administration. 

a.  Very  efficient. 

b.  Moderately   so. 

c.  inefficient. 

(c)  what  effects  has  combination  with  other  price 
provisions  had  on  the  effectiveness  of  open 
price  filing  in  promoting  price  uniformity? 

1.  With  minimum  price. 

2.  With  production  control. 

3.  With  cost  provisions. 

4.  Other  provisions  such  as  to  freight, 
cash  terns,  etc. 

(d)  In  what  types  of  industries  have  ODen  price 
provisions  been  most  effective  from  the  stand- 
point of  promoting  price  uniformity? 


-  762  -   •• 

(e)  What  effect  has  pre-code  price  filing  exper- 
ience had  on  effectiveness  in  establishing 
price  "uniformity  under  open  price  codes? 

(f)  Other  similar  comparisons  would  be  - 

1.  Mandatory  vs.  Voluntary  O.P.F.  schemes. 

2.  Codes  affected  by  O.M.  228  vs.  those 
not  affected. 

3.  Plans  with  and  without  customer  indent i- 
fication. 

4.  Those  with  and  without  seller  identi- 
fication* 

5.  Codes  which  exempted  certain  members  vs. 
those  which  dia  not. 

6.  Codes  where  members  were  permitted  to 
meet  the  lowest  prices  filed  vs.  others 
without  this  provision* 

7.  On  the  basis  of  the  area  of  price  uni- 
formity. 


B.   Bipiidity  and  Flexibility 

(1)  Frequency 

(a)  Has  open  price  activity  affected  the' 

■  frequency  of  price  changes?  If  so,  how? 

(b)  What  has  been  the  effect  of  waiting  periods 
on  the  frequency  of  price  changes? 

1.  Does  existence  of  a  waiting  period 
deter  the  tendency  to  revise  prices 
downward? 

2,  Have  upward  changes  been  more  frequent 
than  downward  changes  under  open  price 
codes? 

a*  With  waiting  periods? 
b.  In  general? 

(2)  Amplitude 

(a)  Has  open  price  activity  affected  the  ampli- 
tude of  price  changes?  If  so,  how? 

(3)  Relationship  between  Frequency  and  Amplitude 

(a)  Has  open  price  practice  affected  the  relation- 
ship "between  the  frequency  and  amplitude  of 


1.  TJhat  is  the  relationship  between  the 
duration  of  a  filed  nrice  and  the  mag- 
nitude of  a  succejding  change? 

2.  Uhat  is  the  influence  of  the  magnitude 
of  the  initial  price  change  on  the  fre- 
quency and  amplitude  of  succeeding  changes? 

3.  How  does  the  general  trend  or  direction 
of  prices  affect  the  frequency  and  ampli- 
tude of  price  changes? 

a.  Yiihat  is  the  relationship  of  this  to 
the  fact  that  upward  or  downward 
changes  were  fovmd  to  he  most  frequent? 
(See  (b),  2,  under  "frequency"  ahove.) 

(4)  Miscellaneous 

(a)   Do  price  changes  follow  changes  in  volume  of 
production  or  volume  of  sales  as  closely  as 
under  a  secret  price  system? 

(h)   Effect  of  price  stability  on  business  volume 
and  profits? 

(c)  What  is  the  relationship  "between  the  stability 
of  filed  prices  and  the  stability  of  trade  dis- 
counts and  other  conditions  of  sale? 

(d)  Does  the  stability  produced  by  open  prices  (if 
it  occurs)  extend  to  the  price  structure  of 
other  stages  of  the  productive  process,  -  i.e., 
is  it  reflected  in  more  stable  prices  in  the 
svipplying  and  in  the  buying  industries? 

(e)  What  evidence  is  there  of  price  leadership  in 
the  price  changes? 

1.  Simultaneous  changes  after  the  plan  was 
set  up? 

2.  If  not;.  order  of  changes  by  competitors? 
a>  1  •"'  noipal  coup  ■;  ti  tors? 

b,  S  -a.1.  co:ape  c  J-o:  :-'•: 

Co  On  downward  charges,  does  the  changed 
price  approach;  meet  or  undercut  a 
previousl3r  changed  orice? 

d.  What  happens  or.  upward  changes? 

e.  Character  of  firms  initiating  price 
change  s  ? 

f.  Market  covered  by  the  new  price? 

Part  of  company's  old  market? 
All  of  company1 s  old  market? 
A  new  market  for  which  the  company 
appears  to  be  fighting? 


-  734  - 
(f)  Rapidity  with  which  filed  prices  were  met? 

1.  Were  refilings  to  meet  upward  changes 
more  or  less  raoid  than  those  to  meet 
downward  changes? 

2o  Relationship  to  general  price  trend? 

(5)   Breakdowns  and  Over-all  Comorrisons  -  (Similar 

to  those  listed  under  "Uniformity";  also  additional 
ones  pertaining  especially  to  stability  such  as  - 
(a)  Codes  covering  one  step  in  fabrication  or  dis- 
tribution and  effects  of  the  Code  provisions  on  ,the 
preceding  or  succeeding  steps  or  stages.) 

C.   Level  and  General  Direction 

(1)  Is  there  an:/  evidence  that  filed  prices  bear  a  fixed 
relationship  to  a  siiggested  cost  floor,  existing 
price  agreement,  or  other  established  base? 

(2)  Relation  of  price  movements  to  the  time  when  effective 
price  filing  began  or  ended?   Did  price  advance  to  any 
marked  degree  in  anticipation  of  open  price  filing  or 
immediately  thereafter?   Was  there  an  immediate  effect 
on  price  when  open  price  filing  was  discontinued? 

(o)   Comparison  of  levels  of  comparable  open  and  secret 
price  groups  during  same  period  of  time. 

(4)  Comparison  of  price  levels  for  specific  products  during 
time  open  price  system  was  effective  with  previous  or 
later  periods  when  it  was  not. 

(5)  Breakdowns  and  over-all  comparisons: 

Similar  to  those  listed  under  "Rigidity  and  Flex- 
ibility" and  "Uniformity". 


II.  Effects  of  Ooen  Price  Filing  on  Production,  Sales  and  Employment 

A.  Has  a  waiting  period  (especially  in  the  durable  goods  in- 
dustries) operated  to  prevent  greater  production  and 
greater  employment? 

B»  Have  open  prices  resulted  in  larger  or  smaller  inventories? 
Have  they  led  to  a  change  in  the  size  of  individual  orders 
through  more  rigid  classifications  of  discounts  and  trade 
factors  or  simply  because  of  the  publicity  accorded  to  such 
discounts  and  the  fact  that  they  can  be  obtained  by  any 
customers  qualifying? 


9826 


C.   Question  of  the  reaction  of  potential  equipment  and  capacity 
in  the  Industry  under  open  price  practice: 

(1)  Have  new  increments  of  supply  appeared? 

(2)  Are  these  due  to  new  units  in  the  Industry  or 
expansion  of  era  sting  units? 


III.  Effects  of  Open  Price  Filing  on  Consuir.'otion: 

A.  Has  open  price  activity  in  certain  industries  resulted  in 
the  diversion  of  sales  to  substitute  products? 

(1)  Has  mere  openness  of  prices  encouraged  undercutting 
on  competing  products? 

(2)  What  has  been  the  relationship  between  changes  in 
filed  prices  and  the  movements  of  prices  of  important 
substitutes? 

(3)  What  has  been  the  relationship  between  sales  of 
"principal"  and  "substitute"  -orodvLcts? 

(4)  Question  of  the  reaction  of  potential  equipment  in 
the  "substitute"  industries. 

(a)  Have  new  increments  of  supply  appeared? 

(b)  If  so,  are  they  due  to  - 

1.  Hew  Units  in  the  Industry? 

2.  Or  increased  output  of  existing  units? 

B.  The  problem  of  the  general  effect  of  open  price  filing 
practice  on  consumers. 

(1)  Has  it  resulted  in  higher  prices  to  them? 

(2)  If  so,  are  these  higher  prices  to  consumers 
offset  or  justified  by  the  other  general  effects 
of  open  price  filing? 


IV.  Effects  of  Q-pen  Price  Filing  on  the  Conroetitive  Structure   . 
of  Industry 

A.   Has  the  failure  of  the  Code  to  include  middlemen  under 

the  jurisdiction  of  the  Code  proved  discriminatory  against 
members  performing  their  own  distributive  functions? 

B»   Is  there  any  evidence  that  open  price  plans  a.lter  the 

focus  of  price  leadership  in  the  Industry?  That  is,  from 
the  small  unit  to  the  dominant  producer,  or  vice  versa? 
Does  it,  on  the  other  hand,  strengthen  the  influence  of 
a  former  price  leader? 

9826 


-  766  - 
2.  METHODOLOGY 


(For  detailed  suggestions  regarding  Subject  Matter  and  Material 
Specifications,  see  the  separate  outlines  on  these  two  subjects). 

The  general  supposition  on  which  this  outline  is  based  is 
that  the  final,  complete  report  on  each  intensive  study  of  price 
filing  in  a  particular  industr"  or  under  a  given  code  will  probably 
consist  primarily  of  the  following  or  similar  divisions: 

(1)  An  introductory  section  which  will  include  a 
statement  of  the  problem  and  a  brief  outline 
of  the  plan  of  attacking  it. 

(2)  A  summary  of  the  information  necessary  to  give 
.,  the  layman  the  background  needed  in  order  to 

understand  the  general  character,  organization 
and  operation  of  the  Industry., 

(3)  A  summary  of  pertinent  provisions  in  the  Code 
"bf  Fair  Competition  and  a  brief  historical 
account  of  the  negotiation  of  the  Code,  the 
source  of  any  opposition,  any  controversies 
which  arose,  the  members  or  sections  of  the 
Industry  intered  or  affected,  and  the  real 

or  stated  reasons  for  including  the  open 
price  and  related  -ore-visions  in  the  Code. 

(4)  An  exact,  detailed  description  of  the  price 
structure  and  pricing  practices  in  the  Indus- 
try plus  an  explanation  of  how  these  have 
functioned.  ,  : 

(5)  A  detailed  presentation  of  the  results  of 
the  statistical  analyses  of  the  price  filings 
together  with  a  full  explanation  of  the 
methodology  used  in  obtaining  these  results. 

(6)  Conclusions  on  as  many  of  the  points  listed 
in  the  Subject  Matter  Outline  as  it  is 
possible  to  give  in  each  case. 

I.   BACKGROUND  KHO'VLEDG-S  OF  THE  IHJUSTHY; 

A.   General  Character  of  the'  Industry: 

(1)  Size?  Number  of  employees?   Capitalization?   ,  . 
•  Output ?   Sale  s ?  C  apaci  ty ? 

(2)  Stage  in  the  general  industrial  process? 

(3)  General  importance  in  the  industrial  process? 
national  importance? 

(4)  Hew  or  old  Industry?   General  trend?  Expanding 
or  dying? 


-  767  - 

(5)  State  of  technology?   Extent  of  research  and 
experimentation?  Rate  of  obsolescence? 

(6)  Financial  structure?  Methods  of  financing? 
Finance  as  a  control  device?  History  of  profits? 

(7)  Stable  or  fluctuating?   If  latter,  cyclical? 
Seasonal? 

(8)  Complex  or  simple?  Degree  of  integration? 
B.  Relationship  to  Other  Industries: 

(1)  Character  of  the  ran  material  market? 

(a)  Are  the  prices  of  the  industry's  principal 
raw  materials  flexible  or  rigid?   Otherwise 
controlled? 

1.  Causes? 

a.  Nature  of  the.  supplying  industry? 

b.  Elastic  or  inelastic  supply? 

c.  Others. 

(b)  Nature  of  the  prices  of  products  or  other 
industries  using  the  sa-me  kinds  of  raw 
materials? 

(2)  Nature  of  the  market  for  the  industry's  products? 

(a)   Are  the  -or ices  of  good  manufactured  from  the 

industry's  products  flexible  or  rigid?  Other- 
wise controlled? 

1.   Causes? 

a.  Types  of  buying  industries? 

b.  Are  they  confronted  by  an  elastic  or 
inelastic  demand? 

c.  Others. 

(3)  Character  of  the  Competition  of  this  industry  with 
other  industries? 

C.   Nature  of  the  Competition  in  the  Industry: 

(1)  Approximate  number  of  competitors  within  the 
Industry? 

(2)  Character  of  the  principal  companies? 

(3)  Representative  large,  small,  and  medium-sized 
firms? 


-  768  - 

(4)  Relationship  of  these  to  each  other?   To  the 
Industry  as  a  whole? 

(a)   Any  evidence  of  leadership? 

(5)  Competitive  practices? 

(6)  Effects  of  business  cycles  and  seasonal  movements 
on  the  nature  of  the  competition? 

D.  Products: 

(1)  Representative  products  of  the  Industry? 

(2)  In  general,  how  they  are  made: 
(a)   Raw  materials? 

(t>)  Processing:  How  and  to  what  stage? 

(c)  Finishing? 

(d)  By-products  or  joint-products? 

(3)  General  character  of  the  products  selected? 

(a)  Degree  of  standardization? 

(b)  Patents? 

(4)  Uses: 

(a)  Hhere?  For  what?  How?  Extent  of  each  use? 

(b)  Competitive  or  substitute  products?  Extent 
of  substitution  possible? 

(5)  Marketing: 

(a)  General  character  of  the  market? 

(b)  Methods  of  distribution?  Favored  or  usual  one? 

(c)  Sensitivity  of  demand? 

(d)  Nature  of  the  competition  as  it  affects  the 
particular  products  selected? 

II .   Summary  of  the  early  Code  History: 

(See(B)  of  the  introductory  statement,  Page  1  of  this 
outline). 


9826 


-  769  - 

III.  Price  Structure  'and  Pricing  Practices; 

In  general,,  this  section  should  include  everything  that  is 
necessary  to  enable  the  research  staff  to  determine  the  net 
prices  received  for  the  representative  products  of  the  selected 
companies* 

Specifically,  the  following  information  is  set  forth  as  a  guide 
to  v;hat  is  necessary  the  various  items  will,  of  course,  vary 
from  industry  to  industry: 

A.  List  Prices: 

(1)  Of  what  type; 

(a)  Standard  established  list  prices  with  discounts 
and  plus  percentages? 

(b)  Quoted  list  prices?  How  quoted? 

(c)  Special  schedules?  and  30  forth. 

(2)  On  what  bases  are  the  list  prices? 
(a)   F.O.B.,  delivered  basis,  etc. 

B.  Discounts; 

(1)  Trade? 

(a)  Customer  classification? 

(b)  Favored  or  usual  method  of  distribution? 

(2)  Quantity  discounts? 

(2)      Special  discounts?  t 

(4)   Cash  discounts?  Hate?  Net  Period?  etc. 
C •   Other  terns  and  conditions  of  Sale : 

(1)  Deferred  payment  plans? 

» 

(2)  Rental  plans? 

(3)  Other  credit  plans,  terms,  etc. 

If  possible,  it  would  probably  be  quite  helpful  to  set 
up  charts  showing  the  changes,  if  any,  in  the  various 
elements  of  the  price  structure  during  the  Code  period 
(Contrast  the  situation  at  or  near  the  beginning  with 
that  at  the  end  of  the  period). 


9826 


-  770  -  771  - 
IV.  PRELIMINARY  ANALYSIS  OF  THB  PRICE'  FILINGS; 

A»   Selection  of  representative  products  and  companies. 

B.  Collection  and  consolidation  of  all  price  filings 

(for  the  products  and  companies  selected)  in  NBA  files. 
This  step  will  not  be  necessary  ercept  for  the  studies 
on  Steel  Castings  and  Asphalt  Shingle  and  Hoofing. 

C.  Listing  of  all  price  filings  on  the  selected  products 

by  representative  companies  and  by  dates  (where  the  filings 
are  numbered  consecutively,  as  in  the  case  of  Steel  Castings, 
this  listing  is  not  necessary  inasmuch  as  it  is  possible  to 
determine  whether  or  not  the  filings  are  complete  without  it. 
Neither  is  it  necessary  in  the  case  of  the  Electrical,  Fer- 
tilizer, and  Coffee  studies). 

D.  Checking  with  the  Code  Authority  in  order  to  locate  and  fill 
in  any  gaps  in  the  filings  in  NBA  files  for  the  companies  and 
products  selected. 

E.  Show  for  individua.1  companies  the  list  orices  and  discounts 
for  the  various  classes  of  customers. 

F.  Determine  the  net'  -orice  (or  the  nearest  possible  approach  to 
it)  received  for  each  product  by  each  company  for  different 
customer  classifications,  different  quantities  sold,  and 
different  credit  terms,  etc. 

(1)  At  the  time  of  original  filing  and 

(2)  Near  the  close  of  the  Code  period. 

The  procedure  under  F  will  vary,  considerably  from  industry 
to  industry  since  the  price  structure  and  practices  of  each 
are  usually  different  in  a  number  of  important  respects. 

Where  possible, '.it  will  undoubtedly  be  helpful,  at  this 
point,  to  set  tip  charts  showing  the  following: 

(1)  The  net  prices  to  various  classes  of  customers 
by. ';  individual  companies  (l)  at  the  beginning  and 
(2)  end  of  the  Code  period. 

(2)  The  same  for  each  customer  classification,  including 
all  selected  companies. 

(o)   The  list  and  net  prices  for  the  various  quantity 
groupings  for  the  same  periods'  or  dates  as  in  (l) 
above  and  by'  companies. 

In  some  cases,  figuring  the  net  price  for  a  hypothe- 
tical standard  transaction  may  prove  to  be  a  useful 
device,  especially  when  actual  volume  figures  are 
not  available. 


-  772  - 

V.  BASIC  ANALYSIS  0?  THE  PRICE  FILIITGS: 

A.   Utilizing  the  results  of  Sections  III  and  IV,  it  should  be 

possible  at  this  stage  to  make  comparisons  and  tests  to  answer 
the  following  questions: 

(1)  Was  there  an  increase  or  decrease  in  the  Uniformity 
(as  among  competitors)  of  net  orices  during  the  code 
period? 

(a)  If  so,  which  of  the  following  price  elements 
changed,  in  what  way,  and  with  what  effects? 

1.  List  prices 

2.  Discounts 

3.  Other  terns  or  conditions  of  sale 

(b)  Which  element  (1,2,  or  3)  was  chiefly  responsible 
for  any  changes  in  net  prices? 

In  this  connection,  it  should  be  possible  to  compile 
a  "Running  Account"  or  "Calendar  of  Changes"  in  List 
Prices,  Discounts,  and  other  Terms  which  will  indi- 
cate the  nature  of  changes  during  the  code  period, 
the  reasons  for  the  changes  (such  as  to  meet  com- 
petition) ,  etc. , 

(2)  Did  net  prices  tend  to  become  more  or  less  flexible 
during  the  code  period? 

(a)  7ere  changes  more  or  less  frequent? 

(b)  Did  the  magnitude  of  the  changes  become  greater? 
or  less? 

(c)  Which  of  the  price  elements  mentioned  under  1, 

(a)  above,  was  chiefly  responsible  for  the  changes? 

(d)  Was  there  any  change  in  the  apparent  relationship 
between  the  frequency  and  magnitude  of  the  changes? 

(3)  What  was  the  general  trend  or  direction  of  net  prices 
during  the  code  period?   Of  each  of  the  price  elements? 

(a)  Which  of  the  price  elements  was  chiefly  responsible 
for  the  trend  in  net  prices? 

(b)  How  significant  is  any  trend  which  may  be  discovered 
in  net  prices? 

(l)   Has  the  Industry  been  giving  the  consumer  more 
or  less  value  per  dollar? 


9826 


«.  773  - 

2.  How  does  the  value  given  compare  with  that  in 
other  similar  industries? 

(4)   In  some  casus,  where  the  necessary  quantity  figures  are 
not  available,  it  may  only  "be  possible  to  establish  the 
upper  and  lower  limits  within  which  the  net  -orice  falls. 
This  range,  however,  should  afford  something  in  the  way 
of  answers  to  most  of  the  questions  listed  above, 

VI .   SECOmftZY  AIJaLYS-S: 

Note:   These  analyses  are  termed  "secondary"  only  in  the  sense  that 
they  are  to  be  derived  chiefly  from  the  results  of  the  basic  analyses 
under  V  above.   These  results  (with  respect  to  price  uniformity,  Flexi- 
bility, Level  and  General  Direction)  should,  when  subjected  to  further 
purposeful  analysis,  yield  much  of  the  information  necessary  to  answer 
some  of  the  important  questions  listed  in  the  Subject  Matter  Outline' for 
these  studies  (See  "Outline  of  the  Statistical  Program  for  the  Price 
Filing  Unit,  Subject  Matter") •   The  sections  on  breakdowns  and  over-all 
comparisons,  will,  of  course,  have  little  significance  for  single  studies 
except  in  the  case  of  the  more  complicated  industries,  such  as  Elec- 
trical Manufacturing,  where  some  20  or  25  different  products  will  be 
studies).  •         ' 

Many  of  these  questions  can  be  answered  largely  by  earful  inspection 
of  the  results  obtained  under  Section  V.   For  example,  the  "Running 
Account"  or  "Calendar  of  Changes"  should  afford  some  evidence  regarding 
price  leadership,  the  rapidity  with  which  filed  prices  were  met,  direction 
of  the  changes  in  achieving  uniformity,  how  early  uniformity  occurred, 
etc. 

Other  questions  will  require  further  statistical  analysis,  including 
the  introduction  of  supplementary  data  and  information.   Thus,  in  any 
cases  where  price  filing  has  apparently  exerted  considerable  influence 
on  the  price  of  a  product,  secondary  effects  may  show  up  in  the  form  of 
new  increments  of  supply,  increased  employment,  changes  in  consumption 
(including  shifts  to  substitute  products),  alteration  of  the  status  of 
particular  competitors  or  groups  in  the  industry  or  market,  etc. 

In  other  instances,  certain  open  price  code  provisions  or  adminis- 
trative practices  may  appear  to  have  exerted  considerable  influence  more 
or  less  directly  upon  competitor  relationships  and  the  competitive 
structure  of  the  industry. 

The  problem  here  will  be  to  determine  the  relationship,  if  any, 
between  such  price  changes,  code  provisions,  or  administrative  practices 
and  the  changes  noted  in  production,  consumption,  sales,  or  other  phases 
of  the  industrial  set-up.  The  exact  methodology  will  probably  vary 
considerably,  from  case  to  case.   "There  sufficient  data  adapted  to  the 
purpose  are  available,  some  type  of  correlation  analysis  may  be  useful; 
otherwise,  more  general  information  will  have  to  suffice, 

PRE-CODE  ATS  POST-COSE  ANALYSES 

It  is  assumed  that  wherever  possible  the  analyses  outlined  for  the 
code  period  will  be  extended  into  the  pre-code  and  post-code  periods  in 
order  to  obtain  a  better  picture  of  the  influence  of  the  code  on  the 
industry,  especially  on  prices  and  pricing  practices. 


9826 


RSGIOILxL  COiffARISOMS 

It  is  also  assumed  that,  wherever  relevant,  comparisons  will  "be 
made  between  representative  regions  in  those  industries  which  have  a 
regional  set-up. 

(Material  Specifications) 
Master  List  of  Materials  lveeded 


This  list  is  given  as  a  general  guide  to  the  data  and  other  in- 
formation needed  in  order  to  follow  the  Methodology  and  Subject  Matter 
outlines  of  the  Statistical  Program.   The  exact  materials  needed  will, 
of  course,  vary  considerably  from  one  individual  to  another. 


I.     Effects  on  price: 

The  principal  materials  needed  for  statistical  study  of  the  effects 
of  open  -orice  filing  on  price  are  the  data  necessary  for  the 
computation  of  net  prices;  ordinarily  this  includes  the  list  prices, 
discounts,  and  other  terms  and  conditions  of  sale  for  each  company 
and  for  each  customer,  quantity,  or  other  classification  used  in 
marketing  the  products  selected. 

A.  Unifor:..iity; 

1.  Reliable  information  regarding  representative  products 
under  each  code  studied  will  usually  be  needed  from 

•  experts  on  that  particular  industry.   In  some  cases 
these  experts  may  be  found  within  HRA;  however,  in  a 
good  many  cases  it  "ill  probably  be  necessary  to  con- 
tact the  Code  Authority,  trade  a ssociation,  or  outside 
individuals  especially  well-informed  about  the  products, 
their  uses,  and  their  market. 

2.  Reliable  information  regarding  the  size,  competitive 
status,  type,  and  representativeness  of  the  competitors 
in  the  industry  is  also  necessary  in  order  to  permit 

of  their  selection  or  proper  classification  in  making 
the  statistical  analysis*  In  some  instances  this 
information  is  available  from  experienced  and  well-in- 
formed deputies,  from  industry  studies,  or  others  within 
1PA.   Zor  certain  industries  it  -/ill  have  to  be  secured 
from  outside  sources 


•  o. 


In  most  crises  the  information  called  for  under  1  and  2 
above,  if  not  known,  can  be  obtained  by  the  members  of 
the  statistical  stiff  themselves  through  studies  of  the 
industries.   This  will  require  considerable  time,  however, 
and  since  we  may  not  receive  much  servicing  from  the 
Industry  Studies  or  others  during  the  early  period  when 


we  are  forced  to  select  representative  products  and 
companies,  the  logical  short-cut  is  expert  advice 
where  needed  on  these  orobleins. 

3.  Complete  'rice  filings  or  comparable  price  lists  of 
all  important  competitors  (in  some  cases  of  represent 
tative  competitors),  on  representative  products  selected 
from  each  industry,  for  the  code  period. 

Where  possible;  similar  price  series  covering  a  pre- 
code  neriod  or  periods  (preferably  all  of  1929  and 
pre-code  1933)  and  the  post-code  months. 

Where  the  filings  are  not  numbered  consecutively,  it 
is  impossible  to  tell  if  they  are  complete  for  each 
competitor  without  checking  our  list  of  such  filings 
against  the  Code  Authority's  or  trade  association's 
complete  list.   Ihis  makes  it  necessary  to  contact 
the  Code  Authority  at  an  early  date  for  this  inform- 
ation.  Hie  success  and  accuracy  of  the  statistical 
analysis  depends  largely  upon  the  completeness  of  the 
data;  if  certain  price  filings  are  missing,  the  con- 
clusions drawn  from  the  analysis  may  be  very  misleading. 

The  above  step  will,  of  course,  not  be  necessary  in 
the  case  "of  the  Electrical,  Fertilizer,  and  Coffee 
Studies. 

Where  the  members  of  the  industry  filed  by  regions 
or  zones,  data  are  needed  for  representative  competi- 
tors in  each  region  or  zone  selected  for  study;  it  will 
also  probably  be  necessary  to  obtain  the  prices  filed 
by  certain  companies  in  several  regions  or  zones  where 
there  are  companies  selling  in  more  than  one  geographi- 
cal division. 

4.  Information  -  statistical  or  otherwise,  preferably  the 
former  -  regarding  discounts  and  other  terms  and  con- 
ditions of  sale.   This  information  is  the  necessary 
complement  of  the  data  on  list  prices;  until  both  are 
known  it  will  be  impossible  to  determine,  in  any  pre- 
cise manner,  what  happened  to  the  prices  actually  paid. 

This  information  should  be  obtained  for  each  represen- 
tative competitor  and  product  and  for  each  customer, 
quantity,  and  other  classification  used. 

Where  available,  information  as  nearly  comparable  as 
it  is  possible  to  obtain  should  be  secured  for  a  pre- 
code  period  and  the  post-code  months. 

B«   Flexibility  or  Rigidity: 

\m     In  the  main,  the  data-  listed  under  the  material  speci- 
fications for  the  study  of  price  uniformity  can  be 
made  to  serve  for  the  study  of  price  flexibility  or 


-  77G  - 

rigidity.  An  analysis  of  the  changes  which  took  place 
in  the  net  prices,  list  prices  and  discounts  and  other 
terms  and  conditions  of  sale  of  representative  competi- 
tors will  give  r,  good  indication  of  the  frequency  and 
extent  of  changes  in  the  different  price  elements  during 
the  code  period,,.  If  the  necessary  data  can  he  obtained 
for  the  pre-code  and  post-code  periods  ( nee  the  third 
paragraph,  Section  4,  under  "Uniformity") ,  it  will  also 
be  possible  to  compare  the  frequency  and  extent  of  price 
.  changes  before,  during,  and  after  the  code  period.   The 
details  of  the  analysis  will  probably  vary  considerably 
from  one  industry  to  another. 

C.   Price  Levels  and  Trends: 

1,  Most -.of  the  conditions  outlined  under  "Flexibility  or 
Rigidity"  above  also  apply  to  the  study  of  the  general 
direction  and  level  of  prices. 

While  in  some  cases  it  might  be  possible  to  combine 
the  net  prices  (or  values  of  the  particular  price  element 
under  consideration)  of  the  various  representative  com- 
panies, into  one  price  series  which  would  be  representative 
of  the  industry  and  might  be  used  in  an  analysis  of  price 
flexibility,  level,  or  trend,  it  will  probably  not  be 
feasible  to  attempt  to  do  this  in  most  cases.   The 
question  of  weighting  offers  one  very  troublesome  problem 
in  this  connection. 

In  most  instances,  the  trend  of  prices  for  one  or  more 
representative  companies  should  serve  to  indicate  the 
trend  for  the  industry;  where  this  does  not  hold,  there 
apparently  is  no  well-defined  trend  for  the  industry  as 
a  whole . 

it  is  assumed,  of  course,  that  the  price  trends  for  each 
customer,  quantity,  and  other  important  classification 
will  be  determined  for  each  representative  company  wherever 
possible.   The  further  classification  and  comparison  of 
these  results  should  provide  considerable  information 
relative  to  general  price  trends  in  the  industry. 

D.  Effect  of  Open  Price  Filing  on  Production.  Sales.  Employment. 
Consumption,  and  the  Competitive  Structure  of  the  Industry. 

An  attempt  to  study  the  secondary  effects  of  price  filing 
and  the  more  or  less  direct  effects  of  certain  administrative 
code  provisions  or  Code  Authority  practices  will  call  for  the 
following  data  in  addition  to  that  mentioned  in  the  preceding 
sections  of  this  outline: 

1.  Production  data,  (in  some  cases  for  the  industry  as  a 
whole  and  in  others  for  individual  members  if  possible; 
for  separate  products  for  certain  purposes  and  for  all 
products  for  others). 


-  777  - 

2.  Sales  data  on  the'  same  ''basis  as  1.   It  na:^  also  be  neces- 
sary to  have  information  on  stocks  and  /  or  inventories. 

3.  Figures  on  employment  and  /  or  payrolls  for  the  entire 
industry;  also  probably  for  important  individual  members 
in  some  instances. 

4.  Information  on  the  consumption  of  - 

a.  The  principal  products  being  considered. 

b.  Important  substitutes. 

5.  Price  data  for  the  substitutes  considered;  this  should 
probably  be '  for  the  'oeriods  covered  by  the  price  data 
for  the  principal  products  with  which  the  substitutes 
compete. 

4.  III5FECTI0II  STUDY  OF  P.xICE  FILING 

I.   CHRONOLOGICAL  IIJF0,3.1ATl0iI 

The  first  step  in  surveying  a  file  of  prices  is  to  determine  the 
order  of  time  in  which  the  filings  were  made,  if  any.   (Arrange- 
ment of  the  files  by  companies  is  assumed.)  At  one  extreme  are 
those  price  filings  which  were  filed .. only  pri  certain  dates,  while 
at  the  other  extreme  are  those  price  filings  which  do  not  appear 
to  have  any  relation  to  specific  filing  dates,  that  is,  they  do 
not  cluster  about  any  given  date. 

what  is  the  chronological  nature  of  the  available  p*rice  filings? 
Did  the  filings  cluster  about  certain  specific  dates  (periodic) 
or  were  they  scattered  uniformly  throughout  the  period  in  which 
price  filing  provision  was  in  effect  (non-periodic)? 

A.  Periodic  Filing 

The  fact  that  prices  '/ere  filed  periodically  does  not,  in 
itself,  indicate  why  they  were  filed  in  this  manner.  Any 
one  of  a  number  of  reasons  may  explain  subsequent  periods 
of  filing  after  the  first  one. 

After  the  first,  what  are  the  reasons  which  explain  the 
subsequent  periods  of  filing?   That  is,  was  the  refiling 
due  to  reclassification  of  products,  inclusion  of  new  items, 
changes  in  the  filing  system,  to  make  changes  in  terms  or 
conditions  of  sale,  to  revise  prices  or  discounts,  or  to 
meet  competition',  etc? 

B.  Non-Periodic  Filing 

A  description  of  non-periodic  filing  involves  special  treat- 
ment for  each  case.  An  attempt  should  be  made  to  classify 
the  results  in  one  or  more  ways. 

"That  length  of  time  was  required  for  a  complete  first  filing? 


~  778  - 

Does  the  classif ication  of  companies  "by  certain  types  of  pro- 
ducts show  any  temporal  relationship  with  respect  to  filing 
dates? 

Cm        Frequency  of  Piling  by  Companies 

Regardless  of  periodic  or  non-periodic  filing,  a  set  of  files, 
when  tabulated,  may  show,  for  example,  80  companies  which 
filed  once,  40  companies  which  filed  twice,  and  15  companies 
which  filed  three  times. 

What  evidence  does  this  chronological  array  indicate  with 
respect  to  changes  in  prices,  terms,  conditions  of  sale, 
customer  classification,  etc? 


II.  TIB  M3CHANI5M  OF  P2IC5  FILI1T& 

Price  filing  assumed  a  great  variety  of  forms  with  respect  to  the 
mechanism  by  which  filing  was  achieved.  Not  only  was  the  mechanism 
subject  to  a  variety  of  forms  among  industriej,  but  also  it  was 
often  not  uniform  in  many  ways  among  members  of  an  industry.   This 
latter  case  is  one  of  the  methods  whereby  "net"  price  variations 
were  actually  achieved  without  altering  other  factors,  such  as, 
the  "gross"  price.  .The  mechanism  may  have  failed  to  provide  for 
the  filing  of  terras;  half  the  companies  filing  price  information 
may  have  filed  their  terms  and  the  other  half  may  have  omitted  this 
information. 

In  general,  what  does  the  available  material  indicate  with  respect 
to  the  nature  of  the  mechanism  of  the  system  employed? 

Was  the  information  recorded  on  standa,rd  forms  or  on  individual 
company  price  lists? 

What  was  the  nature  of  the  variety  of  products  involved? 

A»  .  The  Form  Used  to  Record  Information 

The  nature  of  the  form  used  to  record  the  price  filing 
information  is  of  material  importance  in  ascertaining  the 
mechanism  of  the  system.  There  a  degree  of  standardization 
among  companies  has  been  achieved  with  respect  to  the  product, 
one  might  expect  to  find  more  often  some  standardization  of 
price  filing  form. 

Was  the  price  information  filed  on  standard  forms? 

Or  was  the  price  information  filed  in  some  non-standard 

manner  such  as  individual  company  price  lists? 

B,   The  Nature  of  the  Products 

Price  filing  involves  information  relative  to  the  product, 
such  as  the  variety,  of  the  products,  which  is  not  "price" 
information,  as  such.   The  information  is  sometimes  of  such 


oaoa, 


-  779  - 
■ 

a  nature  that  the  identification  of  the  product  for  purposes 
of  comparison  is  very  difficult,  if  not  impossible.  In  other 
cases  this  information  is  the  key  to  any  analytical  attack. 

a  It  V  ti 

That  is  the  extent  of  the  variety  of  the  products? 

What  methods  are  used  for  identification  or  description? 

Are  product  classifications  used? 

To  what  extent  has  product  standardization  taken  place? 

1.   Variety  of  Products 


Variation  among  products  may  exist  either  as  a  variation 
in  the  product  anong  companies,  or  as  a  variation  in  the 
product  within  each  company. 

What  variation  in  the  product  exists  among  companies? 
What  is  the  chief  characteristic  of  the  variation? 
Design?   Use?  Patent?  Trade  Mark?  i.Iaterial  Content? 

Are  there  a  variety  of  products  within  each  company? 
Is  the  variation  according  to  design,  (shape,  color, 
size);  or  according  to  use,  (Heaters:  water  heaters, 
fireplace  heaters,  etc.);  or  according  to  material 
content  (-Fire  extinguishers;  wet  chemical,  powder, 
etc.)? 

To  what  extent  does  the  variety  extend  throughout  the 
industry? 

2»   Idontif ication  or  Description. 

The  description  or  identification  of  a  product  may  he 
achieved  in  a  great  many  different  ways.   Some  of  these 
wavs.  make  the  identification  of  the  product  among 
companies  very  easy;  some  of  them  are  of  little  or  no 
value  in  identifying  the  product  among  companies. 

What  are  the  methods  used  to  identify  the  product? 
Which  are  comparable  among  companies? 

3.   Product  Classification 

A  more  or  less  complete  product  classification  is  often 
applied  to  price  filing*   The"  extent  of  product  classi- 
fication is  an  important  step  in  the  analysis  of  •price 
filing. 

What  is  the  nature  of  the  product  classification,  if  any? 
To  what  extent  is  it  uniform  among  companies? 
■  What  is  the  degree  of  refinement  of  the  classification? 
Is  the  classificatipn  an  aid  to  identification  of  items? 
Or  is  it  obscure  with  respect  to  identification  of  items? 


9826 


4.   Product  Standardization 

The  final  step  in  uniformity ■ with  respect  to  the  products 
of  an  industry  is  the  degree  of  standardization.   This 
standardization  forms  the  basis  upon  which  nan"'  trade  .- 
pra.ctices  ultimately  rest.   Obviously,  uniformity  in  ■ 
price  is  much  more  difficult  to  achieve  in  the  case  of 
non-standardized  products  than  in  the  case  of  highly 
standardized  products. 

To  what  extent  has  product  standardization  taken  place? 
What  is  the  apparent  relation  of  the  product  standard- 
ization to  the  structure  or  mechanism  of  the.  price  filing 
system? 


III.  CKARACTIRISTICS  OF  THE  PHICE  INFORMATION 

The  inspection  of  the  mechanism  of  price  filing  by  means  of 

which  price  information  was  obtained,  is  one  thing;  the  inspection 

of  the  characteristics  of  the  information  obtained  is  another. 

The  inspection  of  the  characteristics  of  the  information  is 
not  intended  to  be  an  analysis  cxf  the  filings,  but  rather  the 
discovery  of  the, kinds  of  information  that  were  obtained..  "1 

What  kind  of  customer  or  distributor  classification  was>use&?. 
What  kinds  of  prices  were  filed? 

What  kinds  of  terms  and  conditions  of  sale  were  employed? 
What  was  the  nature  of  the  quantity  classifications  used? 

A.  Kinds  of  Prices  Filed 

A  variety  of -methods  were  used  to  achieve  the  actual 
filing  of  prices,  some  of  which  were  the  prices  themselves, 
discounts  from  a  standard  list  price,  minimum  prices,  etc.. 

What  kind  of  price  was  filed? 

Was  the  practice  uniform  among  companies? 

Was  the  price  information  filed  comparable  among  companies? 

Was  it  adaptable  to  statistical  manipulation? 

B.  Customer  Classification 

Customer  classification  may  or  may-  not  vary  among  companies. 

The  chief  characteristics  are  the  kind  of  classification 

used  and  the  degree  of  uniformity  with  which  the;''  were  em- 
ployed. 

What  kind  of  classification  was  used? 

To  what  extent  was  it  uniform  among  companies? 

C.  Quantity  Discounts 

Quantity  discounts  are  so  common  that  this  form  of  altering 
the  list  price  merits  special  treatment.   The  quantity 
classifications  and  the  associated  discounts  are  the  chief 
characteristics  of  this  kind  of  information. 


-  781  -• 

TJere  the  quantity  classifications  uniform  for  all  members  of 
the  industry? 

Were  the  discounts  for  the  quantity  classifications  likewise 
uniform? 

Tfere  the  quantity  classifications  comjarable  among  the  products 
of  the  industry?   That  is,  was  a  10$  discount  given  on  one 
dozen  fire  extinguishers,  size  one  quart,  "by  one  company  while 
another  conroany- gave  a  10$  discount  on  one  dozen  fire  extin- 
guishers, size  one  gallon? 


D. 


Terms  and  Conditions  of  Sale 


Terms  of  payment  and  conditions  of  sale  involve  a  great 
variety  of  methods  whereby  the  list  price  is  altered.  One 
list  price  for  a  single  item  may  resolve  itself  into  a  large 
number  of  net  arice  to  various  customers.   Terms  of  payment 
and  conditions  of  sale  are  largely  determined  by  the  policy 
of  the -industry  as  a 'whole  and  finally  "oy   the  police  of  the 
industry  member.   The  customary  treatment  of  these  matters 
by  the  industry  as  a  whole,  often  establishes  precedent  upon 
which  the  policy  is  based, 

What  are  the  terms  of, payment  erroloyed? 

TJhat  are  the  conditions  of  sale?  -  The  Sales  Policy? 

1.   Terms  of  Pa,rment 


Did  the  sales  policy  involve: 

a.   Guarantees  and  similar  provisions,  such  as, 


Product  guarantees, 
Rettirn  of  defective, 
and  damaged  merchan- 
dise , 

Allowance  or.  obsolete 
and  discontinued  lines, 
Price .Guarantee, 


Resale  guarantee, 
Repurchase  guarantee, 
Assuming  liability 
for  errors  in  plans, 
patent  infringement, 
non-controllable 
factors,  etc. 


Other. 


b.  Additional  goods,  such  as, 

Free  deals, 
Preriiuns , 
Samples, 
Containers, 


Labels, 
Advertising, 

Other. 


c.   Service,  sixch  as, 
Demonstrating, 
Estimating, 
Installing, 


Maintenance  and  re- 
conditioning, 
'Tarehousing  and 
Storing, 

Lending  or  leasing 
of  equipment. 


982fi 


d.      Financial   assistance,    such  as, 

Gifts,  Paving  buyers'    per- 

sonal  charges,   etc. 


-  ?8C  - 

e.  Shipment,  such  as,      Shipments  less  than 
Split  shipments,        specified  minima, 
Odd-Lot  shipments,      Other, 

f.  Consignment  goods, 

g.  Commissions  and  fees,  such  as, 

To  brokers,  To  customers, 

r 

h.  Allowance  for  service  rendered  by  buyer, 

such  as , 
Trade-in  allowance,     Catalogue  allowan- 
Label  allowances,       ces, 
Advertising  allowances,  Cartage  allowances, 

Other, 

i.   Substitute  or  obsolete  foods,  such  as, 
Seconds,  Damaged  goods, 

Used  goods,    -         Scrap, 

j.   Transportation  charges,  such  as, 

Basing  points,  Freight  equaliza- 

TJarehouse  sales,        tion, 

F.  0.  "i.  Basis,        Sales  in  other 

zones  below  lowest 
•F.  P., 

F.  0.  3.  basis, 
freight  allowed, 

k.  Resale  rjrice,  such  as, 

In  relation  to  brokers  or  agents, 

In  relation  to  consignees, 

In  relation  to  customers, 

Respecting  maintenance  of  manufacturer's 

list  price, 

Minimum  price, 

Other, 

3.   Filing  of  Terms  and  Conditions  of  Sale 

It  will  be  impossible  to  say  conclusively  what 
were  the  actual  terms  and  conditions  of  sale 
in  most  cases.   Some  of  the  terms  and  conditi- 
ons of  sale  may  have  been  filed  uniformly  by 
all  members  of  the  industry  while  other  terms 
that  Y/ere  not  filed  by  these  members  may  have 
played  an  important  part  in  determining  actual 
price »   The  inspection  can  hooe  to  show  only 
the  visible  conditions  in  this  respect,  that 
may  be  observed  from  the  files  available. 

To  what  extent  were  terms  and  conditions  of 
sale  filed  by  all  members  of  the  Industry? 
Did  price  competition  apparently  center  about 
terras  and  conditions  of  sale? 


9826 


-  783  - 

!7ere  statements  confined  tc  "announcements"  or  were 
they  descriptive.   For  example,  was  a  statement  made 
that  free  deals  wo  ild  bo  given,    or  did  the  statement 
actually  set  forth  the  free  deals  to  be  given? 

IV.   APPRAISAL  OF  THE  INSPSCTIiN 

Insofar  as  possible  a  comparison  should  be  made  of  the  original  and 
the  final  filings.   It  is  particularly  important  to  observe  changes 
which  took  place  in  the  nature  of  the  information  files,  especially 
with  respect  to  uniformity  or  lack  of  uniformity  that  developed 
among  the  members  of  an  industry. 

The  various  individual  characteristics  that  will  probably  appear  in 
any  one  inspection  should  be  noted  and  related  to  the  material  in 
the  outline. 

F,   Suggestions  for  Further  Research 

The  Statement  of  the  Problem  in  Chapter  II  of  the  report  reveals,  in 
general,  the  limited  scope  of  the  present  study  and  obviates  the  necessity 
for  nny   lengthy  discussion  of  future  research  at  this  point.   Three 
specific  suggestions  can  be  made. 

1.  The  series  of  individual  case  studies  originally  contemplated 
should  be  completed  along  the  lines  of  the  Preliminary  Outline  to  afford 
further  examples  of  "going"  open  price  olans,  and,  more  important,  to 

lend  a  perspective  to  the  descriptive  and  illustrative  material  utilized 
in  the  present  study.  Sach  case  studies  would  offer  a  basis  for  compar- 
ative analysis  far  beyond  what  was  possible  in  the  present  study. 

2.  The  information  assembled  from  NRA  files  should  be  supple- 
mented by  extensive  interviews  and  questionnaire  data  from  members  of  the 
industries  participating  in  the  Open  Price  plans.   Lack  of  access  to 
Code  Authority  records,  and  to  the  experience  and  reactions  of  industry 
members,  was  perhaps  the  greatest  handicap  of  the  present  survey  of  price 
filing  experience. 

3.  Intensive  statistical  analyses  of  price  filings  for  other 
industries  in  the  sample  would  afford  further  opportunity  to  check  the 
suggested  "tests"  for  evaluating  the  effects  of  price  filing  on  an  in- 
dustry's price  structure  and  competitive  relations.   Every  effort  should 
be  made  to  extend  those  studies  to  a  continuous  record  of  price  changes 
beyond  the  code  period,  both  for  those  industries  continuing  price 
filing  on  a  voluntary  basis  and  for  those  abandoning  price  publicity. 
Tne  absence  of  comparable  pre-code  price  data,  and  the  inadequacy  of  any 
current  price  series  for  such  purposes,  suggests  that  some  provision  for 
continuous  collection  and  analysis  of  price  quotations  is  a  necessary  part 
of  any  comprehensive  survey  of  the  effects  of  price  filing. 

Other  trade  statistics,  for  production,  volume  of  sales,  etc.,  are 
of  course  desirable  for  any  such  analysis.   The  statistical  outline 
devised  by  the  Unit,  and  included  above,  suggests  the  scope  and  detail 
for  such  a  research  program. 


-   784  - 


"    EHH1MT    II 


Analysis  of  Price   Piling  Provisions   Contained  in  ERA  Codes 


9828 


785 


EXHIBIT  II 
444  OPEN  PRICE  C  DES  BY  DIVISIONS,  BY  SIZE 
ACCORDING  TO  NUliBER  ■■&   EMPLOYEES, 
AND  BY  TIME  ON  CODE 
OPERAT ION 


DIVISION 


B 


D     E 


MONTHS 


o  o  oo  oo  oo  oo  o 

.     O  O  OO  OO  OO  OO  O    U  O 

mo  o  oo  oo  ooooooocuo 

o)     ••          *  o  •»    »  o     •.    »  o     •»    •»  -p     •»    #»  -p  •'d  o 

>  O  O-POO-POLO-POO  LT\LP\  OP!  « 

OlT>  O  LTMC\  OW  LTAH  CM  ri   lb  in 

CM  H  OJ  H 


Over   13 
12  -   18 
lANUFACTUETNG  -   88        6-12 
, , ,_Ua&ex_iL 


EQUIPMENT  -   112 


Over   18 

12  -   18 

6-12 

Unrlnr  ,6, 


BASIC  MATERIALS- 68 


Over   18 
12  -   18 
6-12 
Ilnfter  ii. 


TEXTILES  ~ 


Over   18 
12  -  18 
6-12 
■Uiiiifir  6. 


DISTRIBUTING  -   23 


Over  18 
12  -  18 

6-12 


CHEMICALS  -  51 


Over  18 

12  -  18 

6-12 

TTn  rlp.r  6 


FOOD  -  31 


Over  18 

12  -  18 

6-12 

TTn  rim-  6 


2 
1 


7 
1 


3 

2 


2  1 
2  8 
2 
L. 


5  5 
1   1 

L 


1 
6 
1 


1 

2  1 
1 


3  1 
1 


1  6 


1  3 


1 

1 


2 
3 


32 

37 

_2- 


1 
31 
48 


1 
31 
10 

•?, 


12 
5 
_2_ 


6 
7 


30 

6 


5 
10 

-JL 


o 


2 

44. 

40 
—2- 


46 
50 


2 
50 
13 
_2- 


6 
20 


2 

13 

8 

0 


1 

41 

8 


1 

7 

21 


PUBLIC  UTILITIES^ 


I/nnp.r. 


CONSTRUCTION  - 

•   8 

6-12 
TTnrlp.r    fi 

1 

2 

3 

9 

6 

GRAPHIC  ARTS 

12   -    13 

.     \     .  . 

1,  . 

RECREATION 

12  -   18 

1 

1 

J826 


CLASS  _A__  C(  DES  -  OVER  250 ,  000  EMPLOYEES 


DIVISION 


Over  18  Mo . 


12  to  18  Ho, 


6  to  12  i.io , 


Under  6  Ho. 


MFG.  Fabricated  Ketals 

Ecuipraent   Automobile 

BASIC  HAT.  Iron  &  Steel 

TEXTILE     CbUomEextile 

DIST.  TRADE  Retail  Solid  Fuel 

Wholesale  Dist.  Trade 
CHE,  JCAL 
FOOD 

PUB.  UTIL..    "  Trucking  .  .. 

CONSTRUCTION  Construction 

GRAPHIC  ARTS  Graphic  Arts. 


CLASS  _B_  CODES   -  100,000  to  850,000  EMPLOYEES 

MAMJFAC. 

EQUIPiiEHT 

BASIC  MAT. 

TEXTILE     Silk  Textile 

'Tool  Textile 
DIST  TRADE  Builders'  Suopl.  Motor  Vehicle  &   F 

Retail  Lumber 
CHEMICAL  Paper  &  Pulp 

FOOD       Ice  3akery 

PUB.  UTIL.  House.  G.M.&  ST. 


CLASS  __C_  CODES  -   50,000  to  100,000  EMPLOYEES 


MANUF. 
EQUIPLiENT 

BASIC  MAT. 

TEXTILE  Underv'.&A.p! 
DIST.  TRADE 
CHE..ICALS 

FOOD 


FU3.  UTIL. 


Photog..  &   Phot  of . 
Gray  Iron  Found. 
Steel  Casting 
Copper  Mfg. 
Structural  Clay 


Chemical  Mfg. 
Rubber  Mfg. 


Motor  Bus. 


Bottled  S.  Drink 
Canning  Industry 
Cigar  Mfg. 


NOTE;  -These  tables  are  subject  to  error,  for  a  number  of  reasons 

ex-olained  in  the. -text.  Until  checked  and  made  perfect,  they 
are  -not  to  be  published. 


982S 


(V  ( 


CLASS 


~'o 


>i  ,000  to  50.000EMPL0YESS 


DIVISION 


Over  13  uo, 


MAEUFAC . 

EQUIP;  XXT     Farm  Eoiip, 
Oil  Burner 
BASIC  MAT. 


TEXTILE      Throwing 
DIST.  TRADE 


CHEMICAL 

FOOD 

PU  -.  UTIL. 


CLASS 


13  to  13  Mo. 


6  to  12  Mo.   Under  6  IIo, 


Plunb.  Fixtures 
Valve  &  Fittings 
American  Glassware 
Cement 

Concrete  Masonry 
Copper  &  B  Mill  P. 
Crushed  Stone  S.  &   G. 
Carpet  &  RuL; 
Ra/on  &   Silk  Dye 
Ind.  Sup.  &  Mach. 
Faper  Dist.  Trade 
Retail  Monument 
Set-U-o  Paper  Box 


Mdse. Thole.    Tr, 


Retail  Rubber  T. 


Candy  Mfg. 


CODES     -        10,000   to   25,000  EMPLOYEES 


MANUFAC3 


EQUIPiEKT- 


Boiler  Ilfg. 


BASIC  IiAI 


TEXTILE 
DIST.   TRADE 
CHEMICAL 


FOOD 


9826 


Bedding 

Dental  Lab. 
Tuner al   Supply 
Med.&LO.Pr . Jevel. 
Precious  Jerrel 
Sraall  Arms  &  Am. 
Toy  &  Plaything. 
Am-.petroleum  Eq. 
Anti-Friction  3eai 
Cast    Iron  Boiler 
Cooking  &  Heat ihg 
Gas  Appliance 

-;C  O  t  X   -  (  J  Li  - 

Printing  X  . 
Scientific  Appar. 
Shovel,  Dragline& 
Asbestos 
Limestone 
Linen  Import. Tr 
Refractories 
"'ood  Keel 
Hat  Mfg. 
Outdoor  Adv. 
Corrug.&  S.F.S.C. 
Envelope 
Fertilizer 
Folding  Paper  Box 
Oxy~.Ace  tylene 
Preformed  Plastic 


Elect. &ITeon  S. 


Boatbuilding 
Drop  Forging 


..hoi  .Mon. Granite 


Candlev/ick  3edsp. 

Loose  Leaf  &  3.B. 
Pacha  e  Medicine 


Canned  Salmon 
'.hoi.  Confec. 
TThol.  Tobacco 


—    i  do  •» 


CLaSS      f    codes 


5,000   to   10,000  EMPLOYEES 


DIVISION 


Over  13  Mo. 


12   to   18  Mo. 


6   to   12  i.!o, 


Under  6  Mo. 


MANUFaC. 


EQUIPMENT 


BASIC  FAT. 


Cast   Iron   S.P. 
Heat  Exchange 
Pump  Mfg. 
Lime 


TEXTILE  . Textile   Bag 


DISTRIB.  TR. 

CHEMICAL     Salt  Prod* 

POOD 


PUB.    UTIL. 
CONSTRUCTION 


Brush  ivif  g. 

Bus.   Furniture 

Porcel.   Br.   Furn. 

Gear  Mfg. 

Steam  Heat.   Eq. 

Warm  Air  Furnace 

Asphalt   Sh.&Rocf.   Gypsum 

Coal  Dock 

Floor  &  Wall  C.T. 

Vit.  Clay  Sewer  P. 

Window  Glass 

7ood  Turning 

Canvas   Goods 

Cotton  Cloth  Glove 

Lace  Mfg. 

Light  Seeing  Ind. 

Nottingham,  L.  Curt. 


Optical  Whol. 
Specialty  Acct. 


Batting  &  Padding 
Leather  Cloth  &c. 


Paper  stationery 
Import.  Date  Pack. 
Macaroni 


Cordage  &   T;:ine 
Ready  Mixed  Cone. 
Radio  Broadcast. 


Cocoa  &  Choc. 

Coffee 

Ref ri g. Warehouse 


CLASS        G     CODES 


Under  5,000  EMPLOYEES 


manufacturing 


Cop  &  Closure 
Marking  Devices 


9826 


All  Metal   Ins.S. 

Beauty&Barb.   Mfg. 
Beverage  Disp. 
Buff&Polish.   Wh. 
Chain  Mfg. 
Col laps.    Tube 
Crovm  Mfg. 
Cutlery 

Fishing  Tackle 
Forged  Tool 
Hacksaw  Blade 
Horseshoe  &  A. P. 
House. Ice  Ref rig. 
Lightening  Rod 
Mach.   Ap.    Staple 
Mach.   Knife 
Metal  Lath 
Metal    Treating 
Metfl  Window 
Metal  Wall   Struc. 
Porcelain  Enam. 
Rolling  Steel  D. 
Saw  &  Steel  Prod. 
Shoe   Shsnk 


Artificial  Limb  Arch. 

Oman.   &c. 

Blackboard&c. Metal  Hosp.  F. 

Bright  Wire  Goods 

Cap  Screw 

Cut  Tack 

Dental  Goods 

Drapery  &  C.  Hdw. 

Elect.    Plating 

File  Mfg. 

Filing  Supply 

Fire   Res.    Safe 

Flex.  Metal  Hose 

Floor  Mach. 

Fly  Swatter 

Galvanized  Wire 

Hand  Bag  Frame 

Hog  Ring 

Job   Galvanizing 

Mach.    Screw 

Mach.  Screw  Nut 

Metal  Etching 

Milk  &  I.  C.  Can 

Open  Steel  Floor 

Perforating  Mfg. 


-  789  - 
(CL..5S     _G_  COPZS     -     IT~Z.   5.000  Z  RLOVhhS  -  Continued) 


Over  18  ilo. 


12  to   18  Ho. 


8   to   12  lio. 


Under  6  ho. 


Co. Tores  seel  Air 


Public  Seating 

Pipe   Tool 

Pulp  &  P.::.   Wire  C 
Socket   Screw  Prod 
Standard  Steel  Bbl. 
Upholstery  Soring   Steel  Package 
Wood  fcs?  L.   Pone   Tutmlar  Split  Rivet 


Slid:    Fastener 
Snao  Fas tenor 
Steel   ITool 
Tool  &  In  )lement 
Umbrella  Frar.is 


Wrench  Hfe 


Door 


are 
Parts 


Air   Valve 
Alloy   Casting 
Canning  J:  Pack.' 
Card  Clothing 
Clay  keck. 
Con.  Refrig. 
Oni  inder  \  o  uld 
Slec.    Ind.    Tr. 
Fire  h::t.   Aop.. 
Foundry  Sup"oly 
Funeral  Vehicle 
Gas    Co  ck 
Gasoline  Pump 
Hand   Chain  Eoist 
Ind.    Sefety  Eq. 
Mach.    Tool 
hot or  7ire  App, 
H~Fe  rrous  H . h . T . 
E-Ferrous    Steel   C 
Pipe  hi  rale 
Po\7er  u   Gang  L.h. 
R.R.    Special   Tracl 
Reduction  ilach. 
Road  Ilach. 
Rock   Crasher 
Snray  Painting 


Upward  Act. 
Vis-  Mfg. 
Vit,    Snanel 

Wash.   Mach. 
Wire  Rope 
Wood  Screw 
Air  Filter 
.auto   Hot.W.    Heat 
Beater  &  Jordan 
Brass  Forging 
Cast.&  Floor   Tr. 
Chen.    Sng.    Eq. 
Cold  Storage  D. 
Concrete  Mixer 
Contractors  Pump 
Conveyor  &  c. 
Cutting  Die 
Diamond  Core  Drill 
Diesel   Engine 
Electric  Hoist 
Gas  P.    Ind.    Tr. 
Hoist   Builders 
Hoist  Engine 
Jack  !ifg. 
Kiln  Cooler  &  Dry 
Laundry  &  Dry  CI. 
Leaf   Spring  Mfg. 
:  Lift   Truck 
Marine  Equip. 
Liquefied  Fuel 
Median.   Lubric. 
Mechan.   Press 


Steel   Tabu  &  F.B.   hulti-v  Belt   Dr. 


Stone  Finishing 
Tackle  Block 
Unit  Heater 
Uire   Rod  &  T.D. 


Oil  F.   Pomp.    Eng. 
Paper  Bo::  Machine 
Port   Elect.    Lamp 
R.    R.   Appliance 
Refrig.  Mach. 
Refrig.    Ind. 
Refrig.    Valves 
Ring  Traveler 
Rock  &  Ore  Crush. 
Roller  &  S.    Chain 
Rolling  Mill  Mach. 
Sawmill  Mach. 
Shuttle  Mfg. 
So rocket  Chain. 


Auto   Shop  Equip. 
Can  Labeling 
Cereal  Mach, 
Gasket  Mfg. 
Power  Tranmnis. 
Wheel  &  Sin 
Wiring  Device 


-  790  - 

i 

'  (CLASS  _G_  COPES  -  UNDER  5,000  EMPLOYEES  -  Continued) 
DIVISION    Over  18  Ho.     12  to  18  Ho.       5  to  12  Ho. 


Under  6  Ho. 


equipment 

Continued. 


3ASIC  HAT.  Plumbago  Cruc. 


TEXTILE 


Asphalt  &.Am.  Tile 
Chinarrare-&  Pore. 
Clay  Drain  Tile 
Clay  &  S.R.Tile 
Earthenware 
End  Grain  Strip 
Excelsior 
Feldsnar 
Fibre' Wall  3d. 
Fullers  Earth 
Grinding  Wheel 
Ind. — Brass  &  Br. 
Insu.lation  Board 
Ladder  I.ifg. 
Hica 

Hop  Stick 
Ornament.  Hould. 
Picture  Would. 
Preformed  Plast. 
Quicksilver 
Hock  <"-.  Slag  W. 
Roofing  Gran. 
Sand  Lime  Brick 
Sandstone 
Secondary  Alumir.. 
Shoe  Last 
Slate 

Talc  c:  Soapstone 
Venitian  Blind 
Whol.  Hon.  'Marble 
Wood  Insl.  Pin 
Animal  Soft  Hair 
Cotton  Converting 
Covered'  Button 
Fibe:-  MWC  Button 
For  Dealing  Tr. 
Hair  Cloth  Hfg. 
Hair  &  Jute  Felt 
Milk  Filtering 
Ready  Made  Slip  C. 
Rug  Chem  Process. 
Sanitary  5:  W,  Spec, 
Wool  Felt 


Trailer  Hfg. 
Warm  Air  Furnace 
Warm  Air  Register 
TJater  Meter  Hfg. 
Waterpo-jcr  Sq. 
Yfater  Softener 
Woodwork  Hach. 
Abrasive  Grain 
China  Clay  Prod. 
Dowel 
Dor/el  Pin 
Flex.  Insul. 
Hangane  s  e 
Harble  parrying 
Natural  Cleft  St. 
Soft  Lime  xiock 
Woven  Wood  Fabric 


Bias  Tape 
Curled  Hoir 
Grass  &  F.  Ru 
Papermakers  Felt 
Shoe  Pattern 


Bitu;:.Road  H 
Wood  Plug 


Brattice  Cloi 
Canvas  St, Bel 
Horse  T"airDrc 


9826 


(CLASS   S  CODES  - 


-  701  - 
UNSET.  5.000  ",'TLOYBBS  -  Continued) 


DI VI  SI  01 


Over  18  I'.o, 


DISTRIB.  TR 


CHEMICAL 


FOOD 


CONSTRUCTION 


12  to  10  Mo. 


6  to  12  Ko, 


Under  6  Mo. 


Advert.  Display   Ind.  './hoi. Plumb. 
Beauty  iBarber  Eq.  Private  K.S.  School 
Gov:  :erc.  Stationery  Radio  TTholesale 


Liquefied  C-as 
Mac  line  '.'aste 
Upholstery  3c  S.F. 


Amer.  Match 

Bleached  Shellac 

Bulk  Drink.  Stra 

Condi  e  Mfg. 

Carton  Black 

Cloth  Reel 

Cyl.  LTP.  Contain. 

Fibre  Can  &  Tube 

Fluted  Cup. 

Food  Dish 

Glazed  &  F.  Paper 

Gummed  Label 

Gumming 

Hardwood  Distil. 

Insect,  co  Disinfec. 

Lye 

Open  Paper  Disc.  M.B.C. 

Photo,  Mount 

Pyrotechnic 

Reclaimed  Rubber 

Rubber  Tie 

Sarnie  Card 

Sanitary  Milk  B.  C. 

Sanitary  Napkin 

Tag 

Transparent  M.  C. 

'.Tat  s  rp  roof  Pap  er 

7/axed  Paper 

Chewing  Gum 

Fresh  Oyster 


S  cho  o 1  Supp lies 
Sheet  Metal  Dist.T. 
T/hol.  Jevelry 
¥nol.  Stationery 
Ag.Ins.  c:  Fung. 
Auto  Chem  Spec. 
Ind.  Alcohol 
Pac.C.Soap  &  Gl. 
Stereo. Dry  Hat. 
Sulmhonated  Oil 


Mayonnaise 

Peanut  Butter 
TThol.  Lobster 


Carbon  Dioxide 


Cork 

Elect.  Contract 

Re  info  r  c  i  ng  Hat . 


Blue  Crab 
Col.  Sardine 
Dog  Food 
Ice  Cream  Cone 
Malt  Prod. 
N.Eng.  Fish 
Preserve,  Etc. 
Process. Fish  Oil 
Spice  Grinding 
Trout  Farming 
Corrug.  R.M.C.  Pipe 
Steel  Joist 


N.Eng. Sardine 


NOTE;      These  tables   are  subject   to    error,    for   a  number  of  reasons   explained   in 
the   text.      Until   checked  and  made  perfect,    they  are  not   to   be  published. 

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0S26 


-  793  - 

•EXHi:  IT   III 

Al-ohabeticrl  List   of  1S1   Codes   in 

Over-All   Scrrole   for  Price 

Piling  Study 


-  794  - 
E  X  H  I  3  IT  III' 

ALP'- a'  -/  IOa.  LIST  IE  191  CODES  III  OVER-ALL  SAMPLE  FOR  P^I OE  FILING  STUDY 


No. 


Code 


Division 


275A  AGRICULTURAL  INSECTICIDE  &  FUNGICIDE  - 
div.  of  Chemical  Mfg.  Ind. 

112  ALL  METAL  INSECT  SCREEN  INDUSTRY 

85  AMERICAN  PETROLEUM  EQUIPMENT  IND.  &   TRADE 

80  ASBESTOS  INDUSTRY 

150  ASPHALT  AMD  MASTIC  TILE  INDUSTRY 

99  ASPHALT  SHINGLE  AND  ROOFING  INDUSTRY 

105A'  AUTOMOBILE  HOT  WATER  HEATER  MFG.- 

Sup.  Automotive  Farts  &  Equipment  Ind. 

445  BAKING  INDUSTRY 

201D  BEAUTY  &  BARBER  EQUIPMENT  MFG.  -  Div.  Wholesale 
or  Distributing  Trade 

530  BITUMINOUS  ROAD  MATERIAL  DISTRIBUTING  TRADE 

403  BLEACHED  SHELLAC  MANUFACTURING  INDUSTRY 

38  BOILER  MFG.  INDUSTRY 

459  BOTTLED  SOFT  DRINK  INDUSTRY 

37  BUILDERS'  SUPPLY  TIADE 

96  BUFF  &  FOLISHING  WHEEL  INDUST  >Y 

88  BUSINESS  FURNITURE  STORAGE  EQUIPMENT  & 
FILING  SUPPLY  INDUSTRY 

302  CANDLE  MFG. IND.  &   BEESWAX  BLEACHERS  &  REFINERS 

463  CANDY  MANUFACTURING  INDUSTRY 

429  CANNED  SALMON  INDUSTRY 

446  CANNING  INDUSTRY 

333  '  CANVAS   GOODS   INDUSTRY 

58  CAP  AND   CLOSURE  INDUSTRY 
9826 


Chemical 

M  anuf  ac  tur  ing 

Equipment 

Basic  Material 

Basic  Material 

Basic  Material 

Equipment 
Food 

Manuf ac  tur  ing 

Basic  Material 

Chemical 

Equipment 

Food 

Distri outing 

Manufacturing 

Manuf ac  tur ing 

Chemical 

Food 

Food 

Food 

Textile 

Manufacturing 


-  795  - 


No. Code 

269   CARBON  3IACK  INDUSTRY 

275B  CARBON  DIOXIDE  IND.  -  Div.  of  Chemical  Mfg.lnd. 

222  CAHD  CLOTHING  INDUSTRY- 

202  CARFET  AND  HUG  MFG.  INDUSTRY 

258  CAST  IRON  30ILSE  &  CAST  IRON  RADIATOR  INDUSTRY 

■ 

18  CAST  IRON  SOIL  PIPE  INDUSTRY 

128  CEMENT  113).  (See  Portland  Cement  Ind.) 

84C  CHAIN  MFG.  II©.  -  Div.  Fabricated  Metal's 

275  CHHaaCAL'MAIIUFACTU3I]-TG  INDUSTRY 

520  CHINA  CLaY  PRODUCING  INDUSTRY 

467  CIGAR  MANUFACTURING  INDUSTRY 

389  CLAY  &  SHALE  ROOFING  'AID  TILE  INDUSTRY 

364  CLAY  DRAIN  TIL".-:  MFC-.  INDUSTRY 

265  Coffee  Industry 

201C  COMMERCIAL  STATIONERY  &  OFFICE  OUTFITTING  TRAD! 
Div.  Whole,  or  Dist.  Trade 

84L1  COMPLETE  WIRE  &  IRON  FENCE  IND.  _ 
Div.  Fabricated  Metals 

55  COMPRESSED  AIR  INDUSTRY 

133  CONCRETE  MASONRY  INDUSTRY" 

81  COPPER  &  BRASS  MILL  PRODUCTS  IND.' 

401  COPPER  INDUSTRY 

303  CORDAGE  AND  TUINE  INDUSTRY 

199  CORK  INDUSTRY 

245  CORRUGATED  &    SOLID  FIBRE  SNIFFING  CONTAINER 

511  CORRUGATED  ROLLED  METAL  CULVERT  FIFE  IND. 

187  COTTON  CLOTH  MFG.  IND. 

1  COTTON  TE  "TILE  INDUSTRY 

9826 


Division 

Chemical 

Chemical 

E  quipment 

Textile 

Equipment 

Equipment 

3asic  Material 

M  anuf  ac  tur  i  ng 

Chemical 

Basic  Material 

Food 

Basic  Material 

Basic  Material 

Food 

Distributing 

Manuf  ac  taring 

Equipment 

Basic  Material 

Basic  Material 

Basic  Material 

Construction 

Construction 

Chemical 

Construction 

Textile 

Textile 


-  796  - 


No. 


Code 


Division 


77  CBOWN  MFG.  INDUSTRY 

109  CRUSHED  STONE', SAND  '&   GRAVEL  &  SLAG  INDUSTRIES 

423  DROP  FORGING  INDUSTRY 

322  EARTHENWARE  MFG.  INDUSTRY 

4  ELECTRICAL  i  ANUFAC TURING  INDUSTRY 

186  END  GRAIN  STRIP  '..'COD  BLOCK  INDUSTRY 

220  ENVELOPE  MFG.  INDUSTRY 

146  EXCELSIOR  AND  EXCELSIOR  FR0DUCT3  INDUSTRY 

39  FAR: .  EQUIP!  ZW2   INDUSTRY 

67  FERTILIZER  INDUSTRY 

326  FIBRE  WALL30ARD  INDUSTRY 

88B  FILING  SUPPLY  IND.  Sup.  Business  Furniture , etc. 

98  FIRE  EXTINGUISHING  APPLIANCE  MFG.  IND. 

88A  FIRE  RESISTIVE  SAFE  IND.   Sup.  Bus.  Furniture 

92  FLOOR  &   WALL  CLAY  TILE  MFG.  IND. 

193  FOLDING  PAPER  BOX  INDUSTRY 

90  FUNERAL  SUPPLY  INDUSTRY 

224  FURNITURE  &  FLOOR  WAX  &  POLISH 

S4A1  GALVANIZED  WARE  MFG.  IND.  Div.  Fabricated  Metals 

134  GAS  APPLIANCES  &  APPARATUS  IND. 

70  GAS  COCK  INDUSTRY 

1051  GASKET  MFG.  IND.   Sup.  Auto.  Farts  &  Equip. 

26  GASOLINE  PUMP  MFG.  IND. 

117  GEAR  MFG.  IND. 

248  GLAZED  AND  FANCY  PAPER  INDUSTRY 

287  GRAPHIC  ARTS  INDUSTRIES 

COMMERCIAL  RELIEF  PRINTING 

NON-METROPOLI TAN  NEWSPAPER 

PERIODICAL  PUBLISHING 
9826 


Manuf ac  tur  irig 

Basic  Materials 

Equipment 

Basic  Materials 

Equipment 

Basic  Materials 

Chemical 

Basic  Mat  -rials 

Equipment 

Chemical 

3asic  Materials 

Manufacturing 

Equipment 

Manufacturing 

Basic  Materials 

Chemical 

Manufacturing 

Chemical 

Manufacturing 

Equipment 

Equipment 

Equipment 

Equipment 

Equipment 

Chemical 

Gra. Arts. Div. 


-  797  - 


ITo.    Code 


Division 


!  ]  •  GRASS  r   FIBRE  RUG  IEDUSTRY 

277  GRAY  IRON  FOUIIDRY  IED¥STRY 

17  GRI1SI1TG  WIIZEL  MFG.    IS). 

223  GUMMIHG'IEDUSTRY- 

4-20  GYPSUM  II.DUSTSY 

73  HAIR  £   JUTS  FELT  IEDUSTRY 

110  HARDWOOD  DISTILLATI01T  IHD 

56  HEAT  EXCHAITGE   INDUSTRY 

183  HOUSEHOLD  ICE  REFRIGERATOR  IEDUSTRY 

43  ICE  IEDUSTRY 

275C  INDUSTRIAL  ALCOHOL  -Di v. Chemical  Mfg.    Ind. 

315  113.  SAFETY  EQUIP.  112). &  IKD.  SAFETY  EQUIP. TRADE 

391  IKSECTICIDE  £  DISIEFECTAITT  MFG. IHD. 

11  IROK  &    STEEL   I ED. 

6  LACS  I  IPC.    INDUSTRY 

107  LADDER  MFG.    IED. 

34  LAUEDRY  £-.  DRY  CLEAITIHG  IiACEIi"  RY  MFG.    HID. 

105C  LEAP  SPRIEG  I.E''G. -Sun .Automotive  Parts  £-.  Equip, 

51  LIME   INDUSTRY 

113  LIMES TOES  INDUSTRY 

104  LIQUEFIED  GAS   IEDUSTEY 

412  LOOSE  LEAF  L  BLAISE  BOOK  INDUSTRY 

300  LYE  INDUSTRY 

234  MACARONI   IEDUSTRY 

103  MACHINE   TOOL  &  FORGIEG  MACHINERY   INDUSTRY 

149  I.iAC HIKED  WASTE  MFG.    IHD. 

421  MARBLE  QUARRYING  &  FINISHING  IEDUSTRY 
9826 


Textile 

Equipment 
Basic  Materials 
Chemical 
Basic  Materials 
Textile 
Chemical 
Equipment 
Manuf ac  tur i  ng 
Food- 
Chemical 
Equipment 
Chemical 
Basic  Materials 
Textile 

Basic  Materials 
Equipment 
Equipment 
Basic  Materials 
Basic  Materials 
Distributing 
Chemical" 
Chemi  cal 
Food 

Equipment 
Distributing 
Basic  Materials 


-  798  - 


ITo .   Code 


Division 


59  MARKING  DEVICES  INDUSTRY 

349  MAYONNAISE  INDUSTRY 

175  MEDIUM  cn;  LOW  PRICED  JEWELRY  MFG.  IND. 
232  MERCHANDISE  WAREHOUSING  TRADE 

344  METAL  LATE  MFG.  HID. 

84A  METALLIC  WALL  STRUCTURE  IND. -Di  v.  Fab. "Metals 

205  METAL  WINDOW  INDUSTRY 

108  MOTOR  FIRE  APPARATUS  MFG.  HID. 

519  NATURAL  CLEFT  STONE  INDUSTRY 

271  'iTOKFERROUS  AND  STEEL  CONVECTOH  MFG.  IND. 

84N  NONFERROUS  HOT  WATER  TALE  MFG.IND.-Div.Fab.Met , 

78  NOTTINGHAM  LACE  CURTAIN  INDUSTRY 

25  OIL  BURNER  INDUSTRY 

448  OPTICAL  WHOLESALE  IND.  AND  TRADE 

430  PACKAGE  MEDICINE  INDUSTRY 

120  PAPER  AND  PULP  INDUSTRY 

230  PAPER  BAG  MFG.  HID. 

176  PAPER  DISTRIBUTING  TRADE 

361  PERFUMES, COSMETICS  &  OTHER  TOILET  PRPS.IND. 

290  PHOTOGRAPHIC  MOUNT  INDUSTRY 

524  P ICICLE  PACKING  INDUSTRY 

131  PIPE  NIPPLE  MFG.  IED. 

63  PLUMBAGO  CRUCIBLE  INDUSTRY 

204  PLUMBING  FIXTURES  INDUSTRY 
239  ■  PORCELAIN  BREAKFAST  FURNITURE  ASSEMBLING  IND. 

4B  PORTABLE  ELECTRIC  LAMP  &  SHADE-  Subdiv.Elec. 

359  PREFORMED  PLASTIC  PRODUCTS  INDUSTRY 
9826 


Manufacturing 

Food 

Manufacturing 

Public  Utilities 

I  ^anuf ac  tur  i  ng 

Manufacturing 

Manufacturing 

Equipment 

Basic  Material 

Equipment 

Equipment 

Textile 

Equipment 

Manufacturing 

Chemical 

Chemical 

Chemical 

Distributing 

Chemical 

Chemical 

Food 

Equipment 

Basic  Materials 

Equipment 

Lianuf  ac  turi  ng 

Equipment 

Basic  Materials 


-  799  - 


No . Code 


Division 


257  PRINTING  EQUIPMENT  INDUSTRY  &  T1ADE 

500  PROCESSED  OR  REFINED  FISH  OIL  INDUSTRY 

57  PUMP  MANUFACTURING  I1IDUSTRY 
148  PYROTECHNIC  1 ANUFACTURING  INDUSTRY 
105J  RADIATOR  MFG.  -Div. Auto. Parts  and  Equipment 
201G-  RADIO  WHOLESALING  TRADE  -Div. Whole,  or  Dist. 
172  RAYON  &  SILK  DYEING  &  PRINTING  INDUSTRY 
311  READY  MIXED  CONCRETE  INDUSTRY 
168  REFRACTORIES  INDUSTRY 

4A  REFRIGERATION  -Subdiv. Electrical  ilfg.Ind. 

127  REINFORCING  lATERIALS  FABRICATING  IND. 

105B  REPLACE1.IENT  AXEL  SHAFT  -Supp.  Automotive  parts 

33  RETAIL  LUMBER,  LUi.SER  PRODUCTS,  BUILDING 

MATERIALS  AND  BUILDING  SPECIALTIES  TRADE 

366  RETAIL  MONUMENT  INDUSTRY 

410  RETAIL  RUBBER  TIRE  &   BATTERY  TRADE 

280  RETAIL  SOLID  FUEL  INDUSTRY 

68  ROAD  MACHINERY  I.IANUFAC TURING  INDUSTRY 

171  ROLLING  STEEL  DOOR  INDUSTRY 

156  RUBBER  1.IA1TUEAC TURING  INDUSTRY 

174  RUBBER  TIRE  MEG.  IND. 

20  SALT  PRODUCING  INDUSTRY 

200  SANITARY  NAPKIN  &  CLEANING  TISSUE  IND. 

274  SAW  L   STEEL  PRODUCTS  MEG.  IND. 

114  SCIENTIFIC  APPARATUS  INDUSTRY 

167  SET  UP  PAPER  BOX  MEG.  IND. 

201P  SHEET  METAL  DISTRIBUTING  TRADE  -Div.  Whole. 


EQUIPMENT 

Food 

Equipment 

Chemical 

Eauipment 

Distributing 

Textile 

Construction 

Basic  Materials 

Equipment 

Construction 

EQUIPMENT 

Distributing 

Distributing 

Distributing 

Distributing 

Equipment 

Manufacturing 

Chemicals 

Chemical 

Chemical 

Chemical 

Manufacturing 

Equipment 

Chemi  cal 

Distributing 


-  800  - 


No.   Code 


Division 


102  SHOVEL,  DRAGLINE  &.   CRANE  IND. 

48  SILK  TEXTILE  INDUSTRY 

84Z  STAiDARD  STEEL  BARREL  &  DRUM  MFC-.-Div.Fab.L'Iet , 

278  stem:  HEATING  EQUIPMENT  INDUSTRY 

82  STEEL  CASTING  INDUSTRY 

62  STEEL  TUBULAR  &  EIRE  BOX  BOILER  IND. 

313  STEEL  WOOL  INDUSTRY 

158  STONE  FINISHING  MACHINERY  £  EQUIPMENT  IND. 

123  STRUCTURAL  CLAY  PRODUCTS  INDUSTRY 

469  .SULPKONATED  OIL  I ANUFAC TURING  INDUSTRY 

249  TAG  INDUSTRY   • 

54  THROWING  INDUSTRY 

36  TOYS  AND  PLAYTHINGS  INDUSTRY 

382  TRANSPARENT  MATERIALS  CONVERTERS  II©. 

23  UNDERWEAR  AND  ALLIED  PRODUCTS  MFG.  I  ID. 

272  UNIT  HEATER  AID/OR  UNIT  VENTILATOR  MFG. IND. 

502  UPWARD- ACTING  DOOR  INDUSTRY 

153  VALVE  &  FITTINGS  MAIiUFACTURIMG  INDUSTRY 

136  VITRIFIED  CLAY  SEWER  PIPS  MFG.  I  ID. 

137  WARM  AIR  FURNACE  MANUFACTURING  INDUSTRY 
472  WARi.i  AIR  REGISTER  INDUSTRY 

295  WATERPROOF  PAPER  INDUSTRY 

166  WAX  PAPER  INDUSTRY 

105D  WHEEL  &   RIM  MFG. -Sup. Auto. Parts  &  Equip. 

458  WHOLESALE  CONFECTIONERS  INDUSTRY 

201U  WHOLESALE  COPPER,  B  PASS,  B  BONZE  &  RELATED 
ALLOYS  Div. Wholesale  or  Distributing  Trade 


Equipment 
Textile 

Manufacturing 

Equipment 

Equipment 

Equipment 

Manufacturing 

Equipment 

Basic  Materials 

Chemical 

Chemical 

Textile 

Manufacturing 

Chemical 

Textile 

Equipment 

Manufacturing 

Equipment 

Basic  Materials 

Equipment 

Equipment 

Chemical 

Chemical 

Equipment 

Food 

Distributing 


9826 


-  eoi  - 


ITo.  Code 


Division 


449  WHOLESALE  LI0HUKEHI4L  GHANIEB  IHDUSELY 

484  WHOLESALE  MOHUlIEilTAL  ItfBBLE  IEDUSTRY 

508  WHOLESALE  PLUMBING  PRODUCTS,  EEATIilG  PRODUCTS 
AND/ OH  DISTRIBUTING  PIPE,  FITTINGS  &   VALVES 

462  WHOLESALE  TOBACCO  TRADE 

8481  WIRE  ROPE  &   STRAND  MEG-.  IND  .-Div.Fat). Metals 

4C  WIHI1IG  DEVICES-  Sub di v. electrical  mfg.ind. 

291  WOOD  CASED  LEAD  PENCIL  IITDUSTRY 

3  WOOL  TEXTILE  INDUSTRY 

383  WOOD  TURNING  &   SHAPING  INDUSTRY 


Basic  Materials 
Basic  Materials 

Distributing 

Food 

M'anuf  ac  tur  i  ng 

Equipment 

Manufacturing 

Textile 

Basic  Materials 


9826 


-  803  - 

EXHIBIT  IV 

OPEN  PRICE  PLAIT  FOR  THE  FOLDING-  PAP2R  BOX  INDUSTRY 

FOLDING-  BOX  AUTHORITY 
19  West  Forty-Fourth  Street, 
New  York,  IT.  Y. 


October  22,  1934 
Bulletin  No.  29-H 
Ouen  Price  Plan 


TO  ALL  IviSIIBERS  OF  THE  FOLBIHG  PAPER  BOX  INDUSTRY 


The  Code  Authority  has  declared  all  products  of  the  Industry 
subject  to  the  Open  Price  Plan  of  Selling  frith  the  exce-otion  of  those 
products  exempted  in  Order  Ho.  12-B.   Order  No.  12-F  was  issued  imder 
and  pursuant  to  the  provisions  of  Article  VI,  Accounting-Selling,  of 
the  Code  of  Fair  Competition  for  the  Folding  Paper  Box  Industry,  ap- 
proved "by  the  President  on  December  30,  1935,  and  sets  forth  the  method 
of  operation.   The  purpose  of  this  Bulletin  is  to  explain  in  detail  the 
optional  courses  of  -orocedure  provided  in  the  Open  Price  Plan,  any  one 
of  which  the  members  of  the  Industry  may  choose,  and  to  show  what  in- 
formation the  members  will  receive  from  the  Code  Authority  in  connec- 
tion with  the  plan.   The  information  in  this  Bulletin  supersedes  that 
given  in  Bulletins  29-A  and  29-B. 

OPEN  PRICE  PLAIT 

In  order  to  sell  a  particular  product  to  a  particular  customer  in 
full  accordance  with  the  provisions  of  the  open  -orice  plan,  each  mem- 
ber shall  sell  or  offer  for  sale  any  particular  product  to  a  particular 
customer  by  making  use  of  any  of  the  following  methods  prescribed  in 
the  plan: 

1.  Register  Customer  and  Product 

2.  Register  Inquiry. 

3.  Quote  Price  in  accordance  with  Estimating  Manual. 

1.   Register  Customer  and  Product 

A  member  becomes  a  Registered  Liember  on  any  product  when  he  files 
Customer  Registration  and  Product  Registration.  All  Registered  Hembers 
will  receive  notification  of  all  Registered  ITembers,  inquiries  and 
declarations  of  price  concerning  the  product  on  form  listed  on  page  4. 

A  member  registered  on  a  particular  product  proceeds  as  follows: 

1.  When  no  price  has  been  declared, 

a.   Sells  or  offers  product  for  sale  immediately, 
at  any  price  he  chooses  which  is  not  below  his 
own  cost  and  without  notification  to  Code 
authority;  or 


9826 


-  GO?  - 

b .  Declares  a  price,  not  "bellow   his  own  cost,  end 
sells  or  offers  product  for  sale  immediately 
at  price  declared. 

2.  When  Price  has  been  declared, 

a.  Soils  or  offers  product  for  sale  immediately, 
and  without  notification  to  Code  Authority, 
at  lowest  declared  price  on  or  after  its  effec- 
tive date  providing  he  has  no  higher  price  on 
file  himself.  In  the  latter  esse  he  must  use 
his  ovm  price  until  such  tine  as  he  withdraws 
his  price  or  files  a  different  price;  or 

1.  Declares  a  price,  not  "below  his  own  cost.   If 
this  price  is  higher  than  the  lowest  declared 
price,  it  becomes  effective  immediately.   If 
this  price  is  lower  than  the  lowest  declared 
price,  it  becomes  effective  five  days  from  re- 
ceipt in  Zone  Office  in  which  customer  is  located. 
If  this  -orice  is  lower  than  the  lowest  declared  price 
hut  higher  than  one  declared  which  is  awaiting  its 
effective  date,  the  new  price  "becomes  effective  on 
the  same  date  as  the  one  awaiting  its  effective  date. 

Prices  once  declared  remain  effective  until  withdrawn  or  super- 
seded.  To  place  any  product  on  a  closed  price  "basis,  all  declared 
prices  must  he  withdrawn. 

2.   Register  an  Inquiry 

When  a  member,  not  registered  on  a  -oroduct,  receives  a  "bona  fide 
inquiry  from  a  customer,  he  shall  file  a  Registration  of  Inquiry.   The 
Zone  Agent  will  immediately  notify  the  inquirer  regarding  the  complete 
status  of  the  account  including  the  members  who  are  registered  or  have 
made  inquiries  on  the  product  and  any  prices  which  have  "been  declared, 

A  member  who  has  registered  an  inquiry  on  a  particular  product 
proceeds  as  follows: 

1.  When  product  has  not  beer  registered  by  any  other 
member. 

a.  Sells  or  offers  product  for  sale  immediately,  at 
any  -orice  he  chooses  which  is  net  below  his  ovm 
cost  and  without  notification  to  Code  Authority; 
or 

b.  Declares  a  price,  not  below  his  own  cost,  and  sells 
or  offers  product  for  sale  immediately. 

2.  When  product  is  registered  and  a  price  declared, 

a.  Sells  or  offers  product  for  sale  immediately,  and 
without  notification  to  Cod.e  Authority,  at  lowest 
declared  price  on  or  after  its  effective  date;  or 


932, 


-  804  - 

b.   Declares  a  price,  not  below  his  Dun  cost.   If  this 
price  is  higher  than  the  lorest  declared  price,  it 
becomes  effective  immediately.   If  this  price  is 
loner  than  the  lowest  declared  price,  it  "becomes 
effective  five  days  from  receipt  in  Zone  Office 
in  which  customer  is  located.  If  this  price  is 
lower  than  the  lowest  declared  price  hut  higher 
than  one  declared  which  is  awaiting  its  effective 
date,  the  new  -orice  "becomes  effective  on  the  same 
date  as  the  one  awaiting  its  effective  date. 

3.  When  product  is  registered  hut  no  price  declared. 

At  end  of  three  days  from  receipt  of  first  Inquiry 
on  this  product  still  effective  in  Zone  Office  of  zone 
in  which  customer  is  located,  inquirer 

a.  Sells  or  offers  product  for  sale,  at  any  price  he 
chooses  which  is  not  below  his  own  cost  and  with- 
out notification  to  Code  Authority;  or 

h.  Declares  a  price,  not  below  his  own  cost  and  sells 
or  offers  product  for  sale  at  this  price. 

An  inquiry  member,  except  for  the  three  day  period  outlined  in 
"3"  above,  has  the  same  status  as  a  Registered  Member  for  a  period  of 
thirty  days  from  receipt  of  inquiry  in  Zone  Office  of  zone  in  which 
customer  is  located  and  will  receive  same  information  as  a  Registered 
Member.   If  inquiring  member  makes  the  sale,  he  should  register  the 
customer  and  product  and  become  a  permanently  Registered  Member. 

When  II  forms  are  sent  to  members,  the  forms  will  show  the  complete 
and  up-to-date  status  of  the  account  and  will  suoersede  any  previous 
notification  concerning  the  same  customer  and  product.  When  a  member 
is  only  registrant  or  inquirer  on  a  particular  product  the  acknowledg- 
ment copy  of  the  Registration  of  Product  or  Registration  of  Inquiry 
will  be  returned  stamped  "Product  not  Registered  -  Llay  Quote  at  Once" 
and  no  IT  sheet  will  be  sent. 

3.  Use  Manual 


It  is  advisable  for  a  member  to  register  all  his  customers  and  pro- 
ducts so  that  he  may  receive  prompt  information  concerning  any  activity 
on  all  his  accounts. 

However,  in  lieu  of  such  registering,  any  m&mber  shall  sell  or 
offer  for  sale  any  product  to  any  customer  at  any  time  and  without  any 
notification  to  the  Code  Authority  providing  the  price  is  at  least  equal 
to  the  cost  computed  on  the  basis  of  the  rates  included  in  the  Basic 
Estimating  Manual  plus  the  material  cost  as  issued  by  the  Code  Authority 
and  plus  the  lowest  filed  percentage  for  the  zone  in  which  purchase  is 
made . 


9826 


FORMS  USED  I  IT  OPEIT  PRICE  FLAK 

Forms  Sent  "by  Members  to  C.A.  Forms  Sent  to  Members  b^-  C.A. 

1.  When  Customer  is  being  Registered 

Registration  of  Oust  oner  Acknowledgment  Cory 

RC-1  •  rid  RC-2  RC-2 

2.  When  Product  is  being  Registered 

Registration  of  Product  a..  Acknowledgment  Copy,  RP-2 

RP-1  and  RP-2  b.  Notification  of,  li-1 

1.  Other  Registrants 
2»  Inquiries 

3.  Price  Declarations 

4.  Price  Withdrawals 

3.  When  Inquiry  is  being  Registered 

Registration  of  Inquiry,  a.  Acknowledgment  Copy,  RI-2 

RI-1  and  RI-2  b.  For  a  30  day  period,  sane 

notifications  as  sent 
Registered  llembers,  IT— 1 

4.  When  Price  is  being  Declared 

D e cl ar at i or.  of  Price,  a.  Acknowledgment  Co-oy,  D-2 

D-l  and  D-2  b.  Same  notifications  as  sent 

Registered  Members,  N-l 

5.  When  Declaration  of  Price  is  being  Withdrawn 

Withdrawal  of  Price,  a.  Acknowledgment  Copy,  W-2 

W-l  and  W-2  b.  Same  notifications  as  sent 

Registered  Members ,  N-l 

6.  When  Percentage  is  being  Declared 

Declaration  of  Percentage  Acknowledgment  Copy,  DPC-2 

DPC-1  and  DPC-2  Notice  of  Lowest  Filed 

Percentages 


982G 


-  806   - 

simjary  of  esseittial  f-wire'vi'ts    . 
for  effective  operation 
of  qpetj  price  plait 

A.   Register  your  products  and  customers  on  the  forms  provided  "by  the 
Code  Authority: 

1.  Furnish  all  the  information  called  for  on  these 
forms.   This  is  absolutely  essential  in  order  that 
members  may  he  advised  of  other  product  registrants 
and  of  other  activity  on  the  particular  product. 

Ii.IPORTAITT  -  Dimensions  of  boxes  should  he  given  as 
follows: 

1.  Length-  Larger  dimensions  at  opening 

2.  Width  -  Smaller  dimension  at  opening 

3.  Depth  -  Remaining  dimension 

In  the  absence  of  conppete  information  on  the  forms 
prescribed,  it  becomes  practically  impossible  for 
Zone  Agent  to  determine  the  similarity?-  of  products 
manufactured  by  more  than  one  member. 

2.  It  is  important  that  the  customer's  name  on  bo.th 
the  customer  and  product  registration  shovild  be 
correctly  spelled,  inasmuch  as  all  records  in  Zone 
Agent's  files  are  filed  alphabetically,  and  errors 
will  result  in  misfiling  and  confusion  of  records. 
If  customer  is  hnown  by  more  than  one  name,  all 
names  should  be  sho-m  on  forms. 

3.  It  is  important  that  you  furnish  the  name  and  style 
of  carton  as  designated  in  Section  2  of  the  Basic 
Estimating  Uanual . 

4.  In  registering  customers  and  -oroducts,  the  address 
given  for  the  customer  should  be  that  '"here  the 
purchasing  agent  of  the  customer  is  located  so  that 
your  registration  may  be  filed  in  the  proper  zone. 
On  product  registrations,  furnish  address  of  cus- 
tomer where  purchasing  agent  is  located  and  also 
point  of  delivery,  whenever  known. 

5...  Registrations  for  affiliated  or  subsidiary  products 
are  cross-indexed  to  parent  cor/maiiy. 

6.  Registration  of  -products  sold  through  jobbers  shall 
be  registered  and/or  declared  with  cross  reference, 
in  the  name  of  both  the  jobber  and  the  jobber's  cus- 
tom- r. 


9326 


-  8C7  - 

7.  A  member  who  has  registered  his  specific  products 
and  customers  in  accordance  with  the  Open  Price 
Plan  need  not  declare  an  open  price  for  any  speci- 
fic product  where  no  competitive  situation  exists. 

&.  A  Registered  Member  should  file  his  declaration 
of  ririce  only  "hen  he  fells  that  the  nature  of 
the  s-oecific  product  for  the  particular  customer 
requires  open  price  dealing. 

9.  A  member  who  has  declared  an  open  price  may  not 
quote  a  lower  -orice  to  meet  an  o-oen  price  on 
file,  unless  he  withdraws  or  supersedes  his  pre- 
viously declared  open  price. 

10.  No  member  shall  file  a  declaration  of  price  un- 
less one  of  the  following  requirements  have  "been 
met: 

1)  Bona  fide  registration  of  product  and 
customer  has  been  filed;  or 

2)  Bona  fide  registration  of  inquiry  has 
been  filed. 

Very  truly  yours, 

FOLDIi'G  BOX  AUTHOPJTy 

(signed)  A.   E.   Murphy 

Agent  Representative 


982P 


-  808  - 
PH03L3MS  A1TD  PROCEDURE  ARISING  UNEER 

Tin  open  pbigs  plai;  •    . 


There  are  many  questions  and  -or  obi  ems  that  arise  from  the  opera- 
tion of  the  Open  Price  plan.  ¥e  have  listed  several  of  the  most  re- 
curring situations,  so  that  the  practical  operation  of  the  Open  Price 
Plan  can  be  seen. 


CASS  1T0.  1 


1.      FACTS 

1.  Member  A  registered 

on  Product  X  for  Custome: 

Y. 

2.  IIo  other  registrants 

3.  lib  inquirers 

4.  No  -or ice  declarations 


PROCEDURE 

Member  A  nay  immediately 
quote  a  price  on  Product  X 
for  Customer  Y  without  de- 
claring such  price  with  the 
Zone  Agent , 

a)  Such  -nrice  must  not  be 
below  member  A's  cost. 


2.  Member  A  nay  declare  with 
the  Zone  Agent  a  price 
below  which  he  will  not 
quote  to  Customer  Y  on 
Product  X. 

a)  Member  A  nay  quote  de- 
clared price  immediate- 

b)  Such  price  must  not  b« 
below  member  A's  cost. 


********  ** 


CASS  170.  2 


1.  Members  A  &  B  regis- 
tered on  Product  X  for 
Customer  Y. 

2.  No  -orice  declaration 


1.  Members  A  &  B  may  immedi- 
ately quote  a  price  to 
Customer  Y  without  declara- 
tion to  Zone  Agent. 

a)  No  price  may  be  below 
the  quoting  Member's 
cost, 


9826 


CASE  i:o.  3 


FACTS 


PROCEDURE 


1.  LI  embers  A  &  33  regis- 
tered on  Product  X 
for  Customer  Y. 

2.  Member  A  declares  price 
on  Product  X  for  Cus- 
tomer Y  which  is  only 
price  declaration  on 
file 


Declaration  of  price  by  Mem- 
ber A  immediately  becomes 
open  price  for  Product  X  for 
Customer  Y  for  all  regis- 
trants. 

a)  Such  price  must  not  he 
"below  own  cost  of  Member 
A. 


Zone  Agent,  upon  receipt  of 
such  declaration,  will  imme- 
diately so  notify  memhers 
A  &  3  * 

LI  ember  3  may  immediately 
quote  the  same  price  as  de- 
clared by  Member  A. 

If  LI  ember  3  desires  to  quote 
a  price  lower  than  the  de- 
clared price  of  Member  A, he 
must  file  such  price  with 
the  Zone  Agent 

a)  Such  price  must  not  be 
below  his  own  cost. 

b)  I.Iember  3  must  wait  five 
days  after  receipt  "by 
Agent  before  quoting  such 
lower  price  to  Customer  Y 


***** 


CASE  HO.  4 


1.  Member  A  registers 
inquiry  on  Product  X 
for  Cut tome r  Y. 

2.  Ho  other  Inquirers 

3.  Ho  registrants 


1.  Member  A  will  he  informed  "by 
the  Zone  agent  that  there  are 
no  registrants  or  inquirers 
on  Product  X  for  Customer  Y 

2.  Member  A  may  immediately 
quote  a  price  to  Customer  Y 
on  Product  X  without  declar- 
ing such  price  to  the  Zone 
Agent 

a)  price  must  not  be  below 
Member  A's  own  cost 


9826 


-  810  - 


CA£ 


FACTS 


PROCEDURE 


1.  Liember  A  registers  inquiry 
on  product  X  for  Customer  Y 

2.  1.1611113 er  B  is  registered  on 
Product  X  for  Customer  Y 


Liember  B  will  be  notified 
immediately  "by  Zone  Agent 
that  Li  ember  A  has  registered 
an  inquiry  on  Product  X  for 
Custoner  Y. 


3.   Ho  declaration  of  -orice 
by  Iie:-iber  B  on  file 


2.  The  Zone  Agent  vri.ll  immedi- 
ately notify  Liember  A  that 
Li  ember  3  is  registered  on 
Product  X  for  Customer  Y. 


4.   Declaration  of  price 
by  Llember  B  on  file 


If  there  is  no  declaration  by 
Liember  B  on  file,  Liember  A 
may  not  quote  any  price  except 
Lianual  until  3  days  after  re- 
ceipt of  inquiry  in  Zone  Of- 
fice, Saturday  and  Sunday  ex- 
cluded. 


4.  If  Llember  B  has  declared  a 
"orice  on  Product  X  for  Cus- 
tomer Y,  iiember  A  is  notified 
by  the  Zone  Agent  of  sxich 
price  and  effective  date  and 
Liember  A  may  quote  such  price 
without  declaration  on  such 
effective  date 

5.  Liember  A  may  file  a  lower 
price  than  the  one  declared 
by  Liember  B 

a)  Such  price  shall  not  be  be- 
low his  own  cost 

b)  iiember  A  must  wait  five  days 
after  receipt  by 'Zone  Agent 
before  quoting  such  .  price 


$  *  i'fi  ^c  :<  $fi  ^c  *  ste  *  sje  :fc  *  aje 


2. 


CASE  170.    6 


Liember  A  registers  inquiry 
on  Product  X  for  Customer  Y 

Liember  A  declares  -orice  on 
Product  X  for  Customer  Y 


1.  Liember  A  -.'ill  be  informed  by 
the  Zone  Agent  that  there  are 
no  registrants  or  inquirers  on 
Product  X  for  Customer  Y 


9826 


-811- 


3,  ::o  other  registrants 

4.  IJo  other  inquirers 


2.  Member  A  nay  immediately  quote 
his  declared  price  to  Customer 
Y  on  product  X 

a)  Such  price  shall  not  he  be- 
1ot7  his  o~rn  cost 


CASE  ICO.  7 


FACTS 

1.   Members  A  &  B  regis- 
tered on  Product  X 
for  Customer  Y 


PROCEDURE 


2.  Member  A  declares 
first  price  ($10.00) 
effective  Uovember  5th. 

3.  Henber  3  declares 
price  ($8.00)- 

Declaration  received 
in  Zone  office  November 
10  th 

Declaration  effec- 
tive iTov  ember  15  th 


1.  L:ember  D  is  notified  of  dec- 
laration of  Member  A 
($10.00) 

2.  Member  A  is  notified  of  dec- 
laration of  Member  3 
($3.00) 


Member  A  withdraws  his 

price  — 

Withdrawal  received 
in  Zone  Office  ITo- 
venber  12th 


3.   Member  3  is  notified  of  with- 
drawal of  declaration  of 
Member  A  ($10.00)  and  noti- 
fication will  show  effec- 
tive date  of  declaration 
of  Member  B  ($3.00)  moved 
up  to  effective  d?te  of 
withdrawal  of  declaration 
of  Member  A. 


9826 


-  312  - 
EXHIBIT  V 
ifflA  FOLICY  STATELEJT 
EXHIBIT  "A11 

OPEil  PRICE  FILING- 

1.  ERA  policy  favcrs  properly  drawn  open  price  provisions  in  codes 
where  desired  by  the  industry.   The  attached  draft  Article  reflects  ap- 
proved policy  and  should  be  susbtantially  followed: 

2.  The  objective-is  to  achieve  fair  cempe.tition,  based  on  knowledge 
of  competitive  factors  to  the  fullest  extent  oossible  without  unduly  cur- 
tailing private  initiative  or  destroying  incentives  to  any  individual 
legitimately  to  extend  his  business. 

3.  jjhere  industries  believe-  th  t  sone  waiting  period  is  essential 
in  order  to  accomplish  the  objectives  outlined,  the  matter  will  be  treat- 
ed on  its  uerits  °s  in  the  case  of  any  proposed  departure  from  announced 
policy., 

J' ARTICLE ;  OPEil  FRICE 

"Section  1.   Each  member  of  th-  trade/industry  shrll  file  with  a 
confidential  and  disinterested  agent  of  the  code  authority  or,  if  none, 
then  with  such  an  agent  designated  by  the  Administrator,  identified  lists 
of  all  of  his  prices,  discounts,  rebates,  allowances,  and  all  other  terns 
or  conditions  of  sale,  hereinafter  in  this  r.rticle  referred  to  as  'price 
terns',  which  lists  shall  ccnpletely  and  accurately  conform  to  and  repre- 
sent the  individual  pricing  practices  of  said  member.   Such  lists  shall 
contain  the  price  terns  for  all  such  standard  products  of  the  industry  as 
-.r   sold  or  offer  :1  for  sale  by  sail  member  and  for  such  non-standard 
products  of  said  nenber  as  shrll  be  designated  by   the  code  authority. 

Said  price  terHs.sha.il  in  the  first  instance  be  filed  within days 

after  the  date  of  approval  of  this  provision.   Price  terms  and  revised 
price  terns  shall  become  effective  immediately  upon  receipt  thereof  by 
said  agent.   Immediately  upon  receipt  thereof,  sal    ;ent  shall  b^   tele- 
graph or  other  eoually  prompt  aeans  notify  said  member  of  the  tine  of  such 
receipt.   Such  lists  and  revisions,  together  with  the  effective  tine  there- 
of, sha.ll  upon  receipt  be  immediately  and  simultaneously  distributed  to 
all  members  of  the  industry  and  to  all  cf  their  customers  who  have  applied 
therefor  and  have  offered  to  defray  the  cost  actually  incurred  bv  the  code 
authority  in  the  preparation  and  distribution  thereof  and  be  available 
for  inspection  bv  any  cf  their  customers  at  the  office  of  such  agent. 
Said  lists  or  revisions  or  any  part  thereof  shall  not  be  made  available 
to  any  person  until  released  to  all  members  of  the  industry  and  their 
custoners,  as  aforesaid;  provided,  th:t  prices  filed  in  th;  first  instance 

shall  not  be  released  until  the  expiration  of  the  aforesaid day  period 

after  the  approval  of  this  code.   The  code  authority  shall  maintain  a 
permanent  file  of  all  orice  terns  filed  a  herein  provided,  and  shall  not 
destroy  any  part  el   such  records  except  upon  written  consent  of  the  Ad- 
ministrator.  Upon  request  the  code  authority  sh;  11  furnish  to  the  Adminis- 
trator or  any  duly  design;  t   a  ;ent  of  the  Administrator  copies  of  any 
such  lists  or  revisions  of  price  terns. 

9826 


-  813  - 

"Section  2.  When  an;.'  member  of  the  trade /in  ust.y  has  filed  any 
revision,  such  member  snail  not  file  a  hi  ;her  price  within  forty-eight 
(48)  hours. 

"Section  3.  Un   member  of  the  trade /industry  shall  sell  or  offer 
to  sell  any  produc  ts/services  to  the  trr.de/industry,  for  which  price 
terms  have  been  filed  purt;u;  t  to  the  provisions  of  this  article, 
except  in  accordance  with  such  price  terms. 

"Section  4.   No  member  of  the  industry  shall  enter  into  any  agree- 
ment, understanding,  combination  or  conspiracy  to  fix  or  maintain  price 
terms,  nor  cause  or  attempt  to  cause  any  member  of  the  industry  to 
change  his  price  terms  by  the  use  of  intimidation,  coercion,  or  any 
other  influence  inconsistent  with  the  maintenance  of  the  free  and  open 
marhet  which  it  is  the  purpose  of  this  Article  to  create." 


)826 


-  814  - 

OFFICE  MEMORANDUl.1  NO.  260 
July  16,  1934 

APPLICATION  OP  GENERAL  POLICY 


1TRA  is  endeavoring  in  the  light  of  its  experience  to  formulate 
general  policies  so  that  interested  parties  and  the  organization  itself 
may  know  end  work  toward  definite  1IRA  aims. 

This  does  not  near,  that  every  code  in  process  and  not  approved  at 
the  tine  of  announcement  of  a  general  policy  must  conform  -  in  the 
sense  of  including  the  type  of  provision  favored  by  policy.   Under 
certain  circumstances,  it  might  he  manifestly  unfair  to  require  sub- 
stitution of  a  new  clause  after  lengthy  negotiations  have  finally 
resulted  in  assent  by  the  industry  to  a  supposed  final  form  of  the 
code.   It  would  he  equally  unfair  to  the  members  of  an  industry  to 
approve  a  provision  and  thus  cause  them  to  adjust  their  practices  to 
conform  thereto,  when  the  provision  is  so  framed  as  to  require  sub- 
sequent change  or  elimination. 

Change  in  codes  designed  to  bring  them  into  conformity  with  policy 
will  be  required,  only  to  the  following  extent: 

1.  As  to.  sending  co de s : 

When  in  final  form  and  assented  to  by  the  Industry,  before  the  date 
of  announcement  of  a  general  policy,  the  code,  if  otherwise  acceptable, 
will  be  approved.   However,  provisions  flatly  inconsistent  with  the 
essentials  of  such  policy  will  be  stayed,  to  the  extent  of  such  in- 
consistence, until  the  Industry  shows  why  such  portions  should. not  be 
permanently  stayed  or  made  to  conform  in  substance  to  such  policy. 

2.  As  to.  approved  codes: 

(a)  There  will  be  no  change  so  long  as  such  a  provision  is 
causing  no  difficulty,  but  in  such  cases  the  Research  and  Planning 
Division  and  Deputies  must  observe  operation: 

(b)  Whenever  desired  by  the  Industry  or  whenever  the  occasion  is 
appropriate  changes  will  be  effected: 

(c)  Whenever  such  observation  reveals  that  such  a  provision  in 
operation. is  troublesome  administratively  or  is  "not  operating  in  harmony 
with  the  purposes  of  the  Act,  the  matter  must  be  taken  up  with  repre- 
sentatives of  the  industry  and  thereafter  stayed  unless  a  satisfactory 
modification  can  be  effected  with  sufficient  promptness. 

By  direction  of  the  Administrator: 


G.  A.  Lynch, 
Administrative  Officer. 


9826 


-  815  - 

EXECUTIVE  ORDER 


MODIFICATION  OF  EXECUTIVE  ORDER  NO.  C646  OE  MARCH  14,  1954,  ETC. 

Ev  virtue  of  and  pursuant  to  the  authority  vested  in  me  under 
title  I  of  the  National  Industrial  Recover:-  Act  of  June  16,  1953  (ch. 
90,  45  Stat.  195),  and  in  order  to  effectuate  the  purposes  of  said 
title,  it  is  hereby  ordered  rs  follows: 

1.   Any  person  submitting  a  "bid  to  any  agency  or  instrumentality 
of  the  United  States,  or  any  State,  municipal,  or  other  public  author- 
ity, to  furnish  goods  or  services  at  prices  which,  in  accordance  with 
the  requirements  of  one  or  more  approved  codes  of  fair  competition, 
must  have  been  filed,  prior  to  their  quotation,  with  the  Code  Authority, 
or  other  designated  agency,  shall  be  held  to  have  complied  adequately 
with  the  requirements  of  such  code  of  fair  competition:  (a)  If  said 
"bidder  shell  qurte  a  -rice  or  trices  not  more  than  15  percent  below 
his  price  or  prices  filed  in  accordance  with  the  requirements  of  such 
code  or  codes;  and  (b)  if,  after  the  bids  are  opened,  each  bidder 
quoting  r.  price  or  prices  below  his  filed  irice  or  trices  shall  im- 
mediately file  a  copy  of  his  bid  with  the  Code  Authority  or  other 
appropriate  agency  with  which  he  is  required  to  file  prices. 

?..      If  upon  cormlaiut  made  to  the  Administrator  for  Industrial 
Recovery,  he  shall  find,  after  due  investigation,  that  the  tolerance 
of  15  percent  provider  in  this  order  is  resulting  in  destructive  price 
cutting  in  a  particular  trade  or  industry,  he  is  hereby  authorized  to 
issue  an  administrative  order  reducing  said  tolerance  of  1'5  percent 
for  such  trs.de  or  industry  to  the  extent  he  shall  find  necessary  to 
prevent  such  destructive  price  cutting,  but  in  no  event  to  a  tolerance 
of  less  than  5  percent. 

3.  The  Administrator  for  Industrial  Recovery  is  directed  to  cause 
a  study  to  be  made  of  the  effects  of  this  ord"r  upon  the  maintenance  of 
standards  of  fair  competition  in  spies  to  public  and  private  customers 
and  to  report  to  the  President  thereon  within  six  (6)  months  of  the 
da.te  of  this  order. 

4.  All  prior  Executive  orders,  including  Executive  Order  No. 6646 
of  March  14,  1954,  arc  hereby  modified  insofar  as,  and  to  such  extent, 
as  they  may  be  in  conflict  or  inconsistent  with  this  order. 

FRANKLIN  H.  ROOSEVELT. 


The  White  House, 

June  29,  1934. 


(No.  6767) 


9R9fi 


-  616  - 
0  R  D'E  R 

GRANTING  LIMITED  EXEMPTION  FROM  PROVISIONS  OF 
CODES  OF  FAIR  COMPETITION  111  CONNECTION  WITH 
QUOTATIONS  MADE  TO  GOVERNMENTAL  AGENCIES 

Administrative  Order  ITo.  X-48 


WHEREAS,  certain  provisions  cf  Codes  of  Fair  Competition,  ap- 
proved under  Title  I  of  the  National  Industrial  Recovery  Act,  are  in 
conflict  with  statutory  provisions  or  well  established  procedure  re- 
latin^.;  to  contracts  awarded  by  the  United  States,  the  District  of 
Columbia,  and  the  various  States  "or  political  subdivisions  thereof- 
(all  of  which  are  hereinafter  described  as  governmental  agencies);  and 

It  appearing  to  me  that  the  exemption  hereinafter'  granted  is  in 
furtherance  of  the  public  interest  and  will  tend  to  effectuate  the 
policy  of.  said  Title  of  said  Act; 

Pursuant  tc  the  authority  vested  in  me  under  said  Title  of  said 
Act  by  Executive  Orders  of  the  President,  including  Executive  Order 
ITo.  6343-A,  dated  December  30,  1953,  and  otherwise,  it  is  hereby 
ordered  that  members  of  industry  subject  to  codes  of  fair  competition 
who  bid  or  niay  bid  on  contracts  to  be  awarded  by  governmental  agencies 
be  and  they  are  hereby  exempted  from  compliance  with  any  provisions  of' 
such  codes  governing  the'malring  of  quotations  to  governmental  agencies 
which  prohibit  any  of  the  following  -nracticcs  and  such  members,  not- 
withstanding such  prohibitions  contained  in  such  codes  may: 

.  (a)   Quote  prices  and  terms  of  sale  to.  governmental  agcnci'es  as 
favorable  as.  those  permitted  to  be  quoted  to  any  commercial  buyer  for 
like  quantities; 

(b)  Quote  definite  -orices  of  terns  of  sale,  not  subject  to  ad- 
justment resulting  in  increased  costs  during  the  life  of  the  contract, 
for  definite  quantities  and  for  definite  periods  not  to  exceed  three 
months  (unless  a  longer  period  is  not  ncrnit  '"•  cd  by  any  such  code); 

(c)  Quote  definite  nrices  or  terns  of  sale,  not  subject  to  ad- 
justment resulting  in  increased  costs  during  the  life  of  the  contract, 
for  indefinite  quantities  and  for  definite  periods  not  to  exceed  six 
months  (unless  a  longer  period  is  now  permitted  by  any  such  code); 

(d)  Quote  prices  and  terras  to  apply  on  contracts  to  become 
effective  not  more  than  sixty  days  from  the  date  of  the  opening  of  bids; 

(.)   Quote,  prices  F.O.B.  point  of  origin  and/or  F.O.B.  destination. 

PROVIDED,  HOWEVER,  that  the  exemption  hereby  granted  shall  be 
limited  to  and  operative  only  in  connection  with  quotations  made  by  such 
members  to  governmental  agencies;  that  nothing  in  this  order  contained_ 
slia.ll  operate  to  ;oermit  deviation  from  or  abandonment  of  open  price  and 
cost  protection  provisions  nor  or  hereafter  contained  in  any  such  code; 
and  that  nothing  in  this  order  contained  shall  relieve  any  such  member 
at  any  tine  from  the  duty  of  complying  with  all  other  provisions  of  such 
codes. 
Washington. D.  fi.  wrTfW  q.  .TDPTr.qrYM 


-  .-.  J.  (   - 
OFFICE  LM.iOi-A.liiU::  110.  267 

JULY  30,  1934. 

CLASSIPICATIOli  CF  customers. 


The  following  clause  reflects  ERA  policy  on  this  matter  and 
should  he  substantially  followed  wherever  provisions  for  classification 
of  customers  are  included  in  codes: 

"The  Code  Authority  shall  cause  to  he  formulated  and 
keep  current  a  classification  of  all  types  of  customers 
of  the  industry.   Such  classification  shall  be  subject 
to  the  disapproval  of  the  Administrator  and  shall  con- 
tain:  (a)  A  complete  list  of  all  of  the  classes  of 
customers  of  the  industry,  including  a  class  to  cover 
every  known  type  of  customer;  and  (b)  definitions  or 
descriptions  of  the  several  classes  in  terms  of 
functions  performed,  or  in  other  appropriate  terms 
such  as  purchasers  of  defined  quantities. 

"After  submission  to  the  Administrator,  if  there  is 
no  disapproval  or  request  for  suspension  of  action 
within  twenty  (.30)  days,  full  information  concerning 
the  classification  shall- be  made  available  to  all 
members  of  the  industry.   lTo  one  shall  by  intimidation, 
coercion,  or  other  undue  influence  cause  or  attempt 
to  cause  the  inclusion  of  any  customer  in  or  the 
exclusion  of  any  customer  from  any  class  of  customers 
from  the  classification.,  or  the  use  of  uniform  or 
stipulated  prices.,  discount,  or  differentials  and  each 
member  of  the  industry  may  at  all  times  classify  his 
own  customers  in  accordance  with  his  own  judgment." 

Ho  such  -~>ro;nosed  code  provision  nor  any  classification  there- 
under shall  be  approved  if  the  same  is  designed  or  would  tend  to  fix 
uniform  prices,  discounts  or  differentials  or  to  establish  resale 
price  maintenance,  eliminate  or  suppress,  or  discriminate  against  any 
customer  or  class  of  eustomers. 

Other  proposed  provisions  concerning  classification  of  customers 
are  presumed  to  be  contrary  to  policy. 

3-  direction  of  the  Administrator: 


G.  A.  LY1TCH 
Administrative  Officer. 
10304. 


982G 


-  813  - 

OFFICE  l.Ei.IORAi'DUM 

l*o.  316  (*) 
December  6,  1934. 
PEEiilUIIS  AID  "FREE  DEALS" 

'The  following  policies  will  govern  clauses  in  codes  relating  to 
premiums  or  "free  deals." 

1.  There  should  be  no  general  provisions  prohibiting  the  use  of 
premiums  or  "free  deals." 

2.  Certain  uses  of  premiums  or  "free  deals"  would  constitute 
methods  of  evading  trade  practice  provisions;  for  example,  open  price 
provisions.   The  proper  way  to  prevent  such  evasion  of  any  trade 
practice  provision  is  careful  drafting  of  the  provision  in  question. 
For  example,  in  an  open  price  provision,  it  should  be  required  that 
all  terns  and  conditions  of  sale,  including  premiums  or  "free  deals" 
and  conditions  relating  thereto,  must  be  filed. 

3.  Although  there  should  be  no  general  prohibition  against  the 
use  of  premiums  or  "free  deals,"  the  use  of  premiums  or  "free  deals" 
in  the  following  ways  may  be  prohibited: 

(a)  The  use  of  premiums  or  "free  deals"  in 
ways  which  involve  commercial  bribery  in 
any  form. 

(b)  The  use  of  premiums  or  "free  deals"  in 
ways  which  involve  lottery  in  any  form. 
The  term  ''lottery"  should  be  construed  to 
include,  but  without  limitation,  any  plan 
or  arrnagement  whereby  the  premium  or 
"Free  deal"  offered  differs  substantially 
in  value  from  customer  to  customer  of  the 
same  class,  except  as  a  result  of  differ- 
ences in  quantities  purchased. 

(c)  The  use  of  premiums  or  "free  deals"  in  ways 
which  involve  misrepresentation,  or  fraud, 
or  deception  in  any  form.   It  should  be 
noted  that  the  use  of  the  word  "free", 
"gift",  "gratuity",  or  language  of  similar 
import  in  connection  with  premiums  or 
"free  deals"  cannot  be  declared  deceptive 
in  and  of  itself.   It  will  be  proper,  ho?:- 
evcr,  to  prohibit  the  use  of  this  or  any 
other  language  with  intent  to  deceive,  or  in 
such  a  way  that  it  does  in  fact  mislead  or 
deceive  customers  in  some  material  particular. 


9826 


-  819  - 

(d)  The  giving  of  premiums  or  "free  deals"  to 
any  customers  when  such  premiums  or  "free 
deals"  are  not  offered  to  all  customers  of 
the  same  class  in  the  trade  area. 

Office  Memorandum  "Jo.  232  is  hereby  superseded. 

By  direction  of  the  National  Industrial  Recovery  Board: 


VT.  A.  HARRIMAN 
Administrative  Officer. 


[*)  Note — The  substance  of  this  memorandum  will  be  incorporated  in 
the  1IRA  Office  Manual  under  "Code  Making  and  Amendment,  Part  II, 
1736." 

2423. 


9826 


-  820  - 

OFFICE  L33JDRA1TDD1I  1T0.  326* 

JA11UARY  5,  1935 

ADVERTISING  ALLOiTAFCES 


Manufacturers  or  other  vendors  selling  goods  to  distributors 
frequently  find  themselves  desiring  to  purchase  from  their  customers 
an  advertising  or  promotion  service  v,rhich  their  customers  can  render. 
In  purchasing  such  services  the  vendors  have  become  accustomed  to 
make  payment  by  "allowing"  a  certain  reduction  from  what  would  other- 
wise he  the  price.   The  payments  thus  me.de  have  "become  known  as 
"advertising  "allowances". 

Code  provisions  declaring  the  giving  of  advertising  allowances  an 
unfair  practice  would  not  change  the  basic  facts  that  sellers  must 
urice  their  goods  to  buyers  and  that  certain  buyers  have  promotion 
services  which  they  are  desirous  of  selling  for  which  those  who  sell 
to  them  are  willing  to  pay.   The  remedy  for  such  suspicion,  secrecy, 
confusion,  and  misrepresentation  as  may  be  connected  with  advertising 
allowances,  lies  in:, 

(?,)   Clearly  separating  and  thus  establishing 
the  distinct  identities  of  the  two  ac- 
tivities which  are  involved  in  giving  ad- 
vertising allowances. 

(b)  Causing  that  part  of  the  advertising  allow- 
ance which  is  actually  a  price  reduction  to 
appear  in  prices  -  reported  prices,  if  the 
industry  or  trade  has  an  open  price  plan. 

(c)  Causing  that  part  of  the  advertising  allow- 
ance which  is  actually  a  payment  for  ad- 
vertising or  promotion  service  to  appear  as 
such  with  definite  description  of  the 
service  for  which  it  is  given,  and  with  such 
publicity,  where  publicity  is  practicable,  that 
it  is  unlikely  that  the  payment  will  be  more 
than  the  competitive  worth  of  the  services 
involved. 

Accordingly,  it  is  MA  policy  that  an  industry  desiring  to 
regulate  advertising  allowances  should  not  be  permitted  to  do  so  by 
general  prohibitions,  by  restrictions  on  the  basis  of  products  or  types 
of  distributors,  or  otherwise  than  in  accordance  with  the  following: 

1.   That  no  member  of  an  industry  or  trade  shall  designate  as  an 
"advertising  allowance",  "promotion  allowance"  or  similar  term,  any 
price  reduction,  discount,  bonus,  rebate,  or  other  form  of  price 
allowance  or  concession,  or  any  consideration  for  advertising  or  pro- 
motion services  offered  or  given  by  him  to  any  customer. 


9826 


-  821  ~ 

.?,.  That  no  member  of  an  Industrjr  or  trade  shall  offer  or  give 
any  consideration  for  advertising  or  promotion  services  to  any  customer 
except  for  definite  and  specific  advertising  or  promotion  services. 

3.  Agreements  to  purchase  advertising  services  from  customers 
shall  be  made  in  written  contracts  separate  from  sales  contracts. 

4.  Such  contracts  shall  specifically  and  completely  set  out  the 
promotion  services  to  be  performed,  together  with  the  practice  con- 
sideration to  be  naid  therefor,  the  method  of  determining  performance, 
and  all  other  terms  and  conditions  relating  thereto. 

5.  Some  arrangement  for  -publicity  may  be  ma.de,  where  effective 
machinery  therefor  can  be  devised.   In  considering  any  arrangement  for 
publicity,  care  should  be  taken  to  avoid  machinery  so  cumbersome  that 
its  cost  will  outweigh  benefits  to  be  gained. 

There  is  attached  a  draft  section  (Exhibit  A)  suggested  for  use 
in  codes  in  which  it  is  desired  to  regulate  advertising  allowances. 

By  direction  of  the  national  Industrial  Recovery  Board: 


W.  A.  HA.RFJMAN, 
Administrative  Officer, 


*Hote— The  substance  of  this  memorandum  will  be  incorporated  in  the 
NBA  Office  Manual  under  "Code  Making  and  Amendment  -  Basic  Code  -  Trade 
Practices  -  Part  11-5031.15"  when  released  in  Office  Manual  Form. 


123 


9826 


EXHIBIT  A 

Section .  !To  member  of  the  trade/ industry  shell  designate  as 

an  "advertising  allowance",  a  "promotion  allowance",  or  by  a  similar 
term,  any  price  reduction,  discount,  "bonus,  rebate,  concession,  or  other  ■ 
form  of  allowance,  or  any  consideration  for  advertising  or  promotion 
services,  offered  or  giver,  by  him  to  any  customer. 

!Io  member  of  the  trade/industry  shall  offer  or  give  any  considera.- 
tion  merely  for  "pushing",  "advertising",  or  otherwise  than  for  definite  . 
and  specific  advertising  or  promotion  services.   Such  consideration  shall 
be  given  only  pursuant  to  a  separate  written  contract  therefor,  which 
contract  shall  specifically  and  completely  set  forth  the  advertising 
or  promotion  services  (in  such  manner  that  their  specific  character  may 
be  understood  by  other  members  of  the  trade/ industry  and  their  customers) 
to  be  performed  by  the  recipient  of  said  consideration,  the  precise 
consideration  to  be  paid  or  given  therefor  by  said  member,  the  method 
of  determining  perforrna.nc.es,  and  all  other  terms  and  conditions  re- 
lating thereto. 


'The  following  are  examples  of  provisions  for  publicity  which  may 
be  found  workable  and  desirable  by  particular  industries: 

Exarrnl el.  Immediately  upon  the  making  of  any  such  contract  for 
advertising  or  promotion  services  by  any  member  of  the  trade/industry, 
a  true  copy  thereof  shall  be  filed  by  said  member  with  a  confidential 
and  disinterested  agent  of  the  Code  Authority  (as  provided  for  in  this 
code),  or,  if  none,  then  with  such  an  agent  to  be  designated  by  the 
ITational  Industrial  Recovery  Board.   Said  agent  shall  maintain  all 
copies  of  such  contracts  on  file  until  six  (6)  months  after  the 
termination  thereof,  and  shall  make  the  same  available  at  his  office 
for  inspection  at  all  reasonable  times  by  all  members  of  the  trade/ 
industry,  and  all  of  their  customers  and  shall  distribute  a  true  copy 
of  any  such  contract  to  any  member  of  the  industry  or  any  customer  who 
applies  therefor  and  offers  to  nay  the  cost  actually  incurred  by  the 
Code  Authority  in  the  actual  preparation  and  distribution  thereof;  pro- 
vided, that  no  such  inspection  or  cony  shall  be  permitted  or  made  avail- 
able to  any  person  until  permitted  or  made  available  to  all  members  of 
the  industry  and  their  customers,  as  aforesaid.  Upon  request,  said 
agant  shall  furnish  to  the  National  Industrial  Recovery  Board,  or  any 
duly  designated  agent  of  said  3oard,  copies  of  any  such  contract. 

Exrnrol e  2.  Immediately  upon  the  making  of  any  such  contract  for 
advertising  or  promotion  services  by  any  member  of  the  trade/industry,  a 
true  copy  thereof  shall  be  filed  with  a  confidential  and  disinterested 
agent  of  the  Code  Authority  (as  provided  for  in  this  code),  or,  if  none, 
then  with  such  an  agent  to  be  designated  by  the  National  Industrial 
Recovery  Board.   Said  agent  shall  thereupon  proceed  to  have  copies  of 
such  contract  published  in  a  journal  or  journals  or  other  appropriate 
medium  of  general  circulation  among  members  of  the  trade/ industry. 


123 


9826 


-  323  - 
OPTICS  LIEIuORAlTSuII  ITO.  327* 

January  10,  1935 

LIMIT  AT  101'  OT  POKBARD  COITTRACTS 

?he  following  statement  v.-ill  govern  provisions  in  codes  relating 
to  forward  contracts: 

1.  IJSA   policy  generally  docs  not  favor  code  provisions  which 
would  limit  the  permissible  period  of  forward  contracts  to  sell.. 

2.  Policy  favors  provisions,  having  the  purpose  of  improving 
competitive  conditions,  which  require  the  filing  by  each  member  of  an 
industry,  in  accordance  with  the  open  price  provisions  of  Office 
Memorandum  Ho,  228,  of  his  practices  as  to  forward. contracts  to  sell. 

3.  In  cases  in  which  it  is  reasonably  clear  that  the  requirement 
for  filing  would  be  ineffectual,  -irovisicns  which  would  limit  the 
duration  of  forward  contracts  to  .-ell  may  be  approved,  if  the  follow- 
ing conditions  are  met: 

(a)  The  maximum  contract  period  set  is  reasonable, 
with  respect  to  the  nature  of  the  industry's 
products  find  its  trade  practices. 

(b)  Such  provisions  arc.  note  more  stringent  than  the 
customary  practice  within  the  industry  over  a 
preceding  period  of  at  least  one  year. 

(c)  Adequate  consideration  is  given  to  the  question 
of  necessity  of  including  a  provision  as  to 
special  types  of  contracts  which  may  require 
exceptional  treatment,  such  as  contracts  to 
furnish  materials  for  a  specific  project  cr 
"cost  plus"  contracts. 

(d)  Compliance  can  be  reasonably  anticipated  to  a 
degree  which  will  rvoid  any  substantial  increase 
in  the  administrative  and  enforcement  burden  of 
ERA. 

(e)  The  provision  in  operation  will  not  tend  to 
render  production  and  employment  less  stable. 

(f)  Adequate  consideration  is  given  to  the  effect 
of  the  provision  u^on  purchasers. 

By  direction  of  the  national  Industrial  Recovery  Board: 


W.  A.  HAERILiAK 

Administrative  Officer. 
*lTote — The  substance  of  this  memorandum  will  be  incorporated  in  the 
ERA  Office  Manual  under  "Code  Hairing  and  Amendment,  Part  II  - 

440 
9826 


OFFICE  iiEiJORAtlDUM 
Ho.  334* 

January  31,  1955 
FRESCRIBI1TG-  PROCEDURE  FOP.  STATISTICAL  RIPORTI1TG 
She  following  procedure  is  prescribed  for  statistical  reporting: 

(1)  The  Research  and  Plannin;  Division  is  designated  as  the  only 
NBA  division  authorized  to  collect  statistics  from  code  authorities; 
all  statistical  reports  and  correspondence  relating  thereto  now  re- 
siding in  other  1TRA  files  to  be  transferred  to  said  division;  and  for 
the  purpose  of  statistical  reporting  said  division  to  make  its  first 
contacts  with  code  authorities  through  the  Deputies  and  thenceforth 
deal  directly  therewith; 

(2)  The  Research  and  Planning  Division  is  charged  with  the  duty 
of  cooperating  with  the  Compliance  Division  in  developing  reports  for 
compliance,  with  the  understanding  that  the  malting  of  decisions  as  to 
the  extent  and  form  of  all  statistical  reporting  be  lodged  with 
Research  and  Planning; 

(3)  The  Research  and  Planning  Division  will  request  code  author- 
ities to  submit  their  statistical  forms  and  procedures,  and  changes 
therein,  to  the  Research  and  Planning  Division  for  review  and  advice, 
and  to  deposit  with  the  said  division  two  copies  of  all  summaries  of 
price,  production,  labor  and  other  statistical  data,  which  they  have 
collected,  promptly  upon  preparation; 

(4)  The  Research  and  Planning  Division  is  hereby  empowered  to 
investigate  the  reporting  systems  of  code  authorities  and  to  audit  the 
statistical  reports  submitted  by  them; 

(5)  The  Research  and  Planning  Division  is  hereby  authorized  to 
collect  directly  from  members  of  the  industry  such  special  inf ormation, 
not  available  elsewhere,  as  is  necessary  from  time  to  time  for 
recommendations  on  questions  of  policy. 

By  direction  of  the  national  Industrial  Recovery  Board. 


W.  A.  HARRIMAN 
Administrative  Officer. 

*Uotc— The  substance  of _this  memorandum  will  be  incorporated  in  the 
1JRA  Office  Manual  under  "Code  Administration — Planning,  Fact  Finding 
and  Education — Fact  Finding  and  Collection  of  Statistics— Part  III- 
2200"  when  released  in  Office  Manual  form. 

1631 


9826 


-  82j  - 

Atiril  23,  1935 

NATIONAL  INDUSTRIAL  ESC0VER7  BOARD 

ADMINISTRATIVE  FOLICY 

New  Series  No.  1 

Administration  of  codes  requires  the  farther  clarification  and 
extension  of  certain  administrative  policies.   The  National  Industrial 
Recovery  Board  has  caused  special  studies  to  "be  made  within  NRA  and  has 
held  public  Hearings  to  aid  in  this  development. 

To  expedite  administrative  procedure,  announcements  of  "broad 
policies  will  be  made  when  statements  in  p.-nrj   particular  area  are  ready. 
These  broad  expressions  of  policy  will  be  later  supplemented,  "hen 
necessary,  b^  more  detailed  statements. 

Three  statements  follow.   Two  are  of  a  general  character;  and  one 
is  the  first  of  a  series  dealing  with  specific  problems: 

II   Administrative  Ste-os  for  tne  Application  of  Policy. 

Hi   Introduction  to  General  Price  Policy. 

III.   The  Problem  of  Open  Price  Filing. 


QCOC 


-  826  - 

I 

ADMINISTRATIVE  STEPS  FOR  APPLICATION  OF  POLICY 

A.   General  Administrative  Guidance 
(connection  with  ■orivisions  contrary  to  announced  policy) 


The  Board  recognizes  that  a  policy  is  not  self -operative,  and  that 
its  announcement  necessitates  ry  program  of  ways  and  means  to  render  it 
effective.   The  following  is  for  general  administrative  guidance  in  deal- 
ing with  cases  in  which  proposals  of  code  provisions  are  contrary  to 
announced  policy. 

(1)  If  approval  is  asked  of  a,  proposal  which  is  contrary  to 
announced  policy  and  i.nsufficent  ground  is  shown  for  exception  from  such 
policy,  the  deputv  will  give  the  applicant  a  prompt  decision  to  that  effect, 
Tnis  decision  will  be  accompanied,  if  possible,  with  suggestions  for  the 
modification  of  the  proposal  designed  to  cause  it  to  conform  to  policy. 

(2)  If  a  provision  in  an  existing  code  is  contrary  to  announced 
policy,'  and  if  further  action  by  MA  is  required  to  make  it  operative,  the 
provision  will  be  left  inoperative  sending  Congressional  decision  concern- 
ing the  jurisdiction  and  objectives  of  the  HRA,  unless  the  industry  for- 
mally requests  earlier  action.   If  such  request  is  made,  an  opportunity 
will  be  furnished  the  sponsors  of  the  provision  to  show  sufficient  cause 
why  it  should  be  made  operative,  with  or  without  modifications.   After 
adequate  opportunity  to  be  heard  has  been  given  interested  parties,  de- 
cision will  promptly  be  made  whether  to  make  the  provision  operative  or 

to  delete  it. 

(3)  If  a  provision  contrary  to  announced  policy  has  been  tem- 
porarily approved  for  a  trial  period,  an  opportunity  will  be  furnished  the 
sponsors  of  the  provision  to  show  sufficient  cruse  for  (a)  extending  the 
period  of  trial  or  (b)  making  the  provision  permanent.   After  adequate 
opportunity  to  be  heard  has  been  given  interested  parties,  decision  will 
promptly  be  made  whether  to  continue  the  provision  or  to  allow  it  to 
lapse  at  its  next  expiration  date. 

(4)  If  a  provision  contrary  to  announced  policy  is  now  fully 
operative  in  an  existing  code,  there  may  be,  pending  legislative  redefini- 
tion of  the  jurisdiction  and  objectives  of  HRA.  either  of  two  t^oes  of 
situation,  leading  to  different  courses  of  action: 

(a)    If  no  adequate  showing  has  been  made  to  HRA  that 
such  provision  is  in  conflict  with  the  interests 
of  the  public  or  the  justifiable  interests  of  any 
group,  arrangements  for  observation  will  be  made; 
but  no  other  action  will  be  taken  in  the  first  •■  .. 
instance. 


-  827  - 

(b)    If  there  is  adequate  reason  to  relieve  that  such 
a  provision  is  in  conflict  "ith  the  interests  of 
the  public  or  the  justifiable  interests  of  any 
group,  the  industry  will  be  offered  an  opportunity 
to  negotiate  with!  1IHA  or  to  be  heard  -on  the  subject. 
If,  after  such  a  hearing  or  negotiation  such  con- 
flict still  appears  and  a  oronrot  solution  cannot 
be  reached,  the  provision  in  question  will  be  de- 
leted, or  suspended,  or  temporarily  modified,  nend- 
ing  atroroval  of  a  satisfactory  substitute  or  modi- 
fication. 

(5)   After  Congressional  redefinition  of  the  jurisdiction  and 
objectives  of  KRA,  operative  or  ino'oer  tilre  code  prpvisions  which  are 
inconsistent  with  the  new  Act  will  be  "ororrotl  r  reconsidered. 

3.   Supervision  and  Observ  tion  of  Policies 

Supervision  of  the  application  of  policy  decisions  has  Qeen   de- 
legated to  the  Code  Administration  Director.   He  will  be  responsible 
for  conveying  to  the  members  of  industry,  through  -proper  organization 
channels,  announced  policies  and  the  considerations  underlying  them. 

At  least  three  -persons  who  will  aid  in  the  interpretation  of 
policy  to  divisional  and  de-puty  administrators  will  be  appointed.   One 
will  specialise  en  price  and  other  trade  practice  policy,  one  on  labor 
policv  and  one  on   code  administration  p  lic,r.   Their  duties  "ill  not 
be  administrative.   They  "ill  submit  to  the  Code  Administration  Director 
regular  reports  on  problems  requiring  treatment,  and  suggestions  con- 
cerning the  nature  and  frequency  of  reports  which  should  be  made  upon 
the  operation  of  nodes  by  divisional  administrators,  deputies  and  ad- 
rainistration  members. 

All  executives  and  major  staff  officials,  especially  division 
and  de-outy  administrators  rnd  administration  members  who  are  in  continual 
touch  with  the  problems  of  industry,  'fill  observe  the  actual  operation 
of  policy  decisions. 

Special  research  and  collection  of  the  results  of  observation 
of  the  operation  of  codes  "ill  be  organized  Q-j   the  Research  and  Planning 
Division  under  the  direction  0"  the  Board.   Reports  and  surveys  will  be 
made  to  the  Board  and  will  be  made  available,  as  appropriate,  for  the 
use  of  the  administrative  and  advisor-'  personnel.   In  the  discretion  of 
the  Board  such  reports  and  surveys  will  be  issued  by  the  Board,  with  or 
without  its  recommendations  or  conclusions,  for  the  information  of  in- 
dustry and  the  -public. 


-  S28  - 
11 
IN'TRODUCTICH?  TO r  GEITEPAL  PRICE  POLICY 


Industry  is  tlie  instrument  tnrou,  ;:h  which  goods  or  services 
are  supplied.   The  producer,  the  laborer,  and  the  consumer  alike  have 
a  stake  in  its  efficient  and  orderlv  operation.   The  facilitating  of 
adjustments  among  these  several  interests  and  tneir  individual  members 
is  the  function  of  price.   Price  also  facilitates  adjustments  among  the 
many  industries  whose  products  compete  with  one  another  for  the  consum- 
er's dollar.   Unless  price  operates  effictively  to  determine  these  working 
arrangemnts  among  the  interested  Parties,  some  deliberate  arrangement 
or  planned  control  must  he  -oermitted  or  established.   Tnis  would  necessari- 
ly limit  severely  the  area  of  the  individual  business  man's  discretion. 

In  regard  to  orices  and  pr ice-making,  industries  present  the 
greatest  variety.   But  in  so  far  as  government  policy  is  concerned,  they 
fall  roughly  into  three  distinct  groups.   The  first  group  —  of  which 
education,  the  highways,  the  nostril  service,  and  the  police  are  typical 
examples  —  are  government  undertakings.   In  their  operation  the  charge 
for  the  service  has  little  relation  to  the  cost;  -orice,  if  there  is  an_r, 
has  been  fixed  by  the  government  according  to  some  such  principle  as 
the  encouragement  of  the  wide  use  of  the  service.   The  second  grout)  — 
generally  called  public  utilities  —  includes  industries  usually  private- 
ly owned,  monopolistic  in  tendency,  and  subject  to  regulation.   In  such 
cases,  a  government --1  commission  usually  fixes  rates  ■oredicated  upon  "a 
fair  return  uoon  a  fair  value."   The  third  group  —  comprehending  the 
greater  -oart  of  business  activity  —  is  free  enterprise.   In  this  domain 
government  has  customarily  limited  its  efforts  to  maintaining  and  regulat- 
ing competition.   It  has  left  the  actual  making  of  price  to  the  market. 

This  third  group  —  much  of  which  is  in  the  jurisdiction  of 
the  NRA  —  price  is  not  fixed  bv  a  government'  1  autnority.   It  is  supposed 
to  be  determined  in  an  open  market  where  it  is  assumed  to  emerge  from  the 
operation  of  all  the  competitive  forces  which  are  included  in  the  shorthand 
words  "supply"  and  "demand".   The  system  is  one  of  crude  checks  and  bal- 
ances.  Producers  are  balanced  against  consumers;  and'  the  efforts  of  buyer 
or  seller  to  drive  too  hard  a  bargain  are  presumably  checked  by  the  com- 
petition of  other  buyers  or  sellers  in  the  same  or  in  competing  bussinesses. 
In  so  far  as  either  party  is  able  to  go  elsewhere  in  search  of  a  better 
bargain,  he  has  some  protection  against  the  bargaining  power  of  the  other 
party.   The  principle  of  price-making  by  competition  in  a  free  and  open 
market  is'  established  in  the  common  law,  the  anti-trust  acts,  and  oublic 
policy. 

The  competitive  system  is  often  sooken  of  as  "an  automatic  self- 
regulating  mechanism.   Government  and  business  are  said  to  have  separate 
provinces;  government  is  to  keep  hands  off  and  leave  the  determination  of 
questions  affecting  business  to  the  market.   But  as  a  matter  of  fact  the 
economic  order  is  not  now,  and  never  was,  self-regulating.   To  the  end 
of  securing  an  orderly,  efficient,  and  humane  industrial  system,  the 
regulation  of  competition  ha^.  proceeded  along  three  distinct  lines. 


QROP, 


-  329  - 

First,    government   intervenes  to   secure   the  maintenance  or  restora- 
tion of   competitive   conditions.      An  understanding-  among  interested 
business  men  may  prevent   the  establishment  of  a   competitive  price.      In 
consequence,    monopoly,    combination  and  conspiracy  in   restraint  of   trade 
is   illegal.      In  the   anti-trust  acts  an  attempt   is  made   to   keep   indus- 
tries open   to   all  who  •  will    take   their  chances,    and   to  maintain  "  a.  fair 
field  and  no   favors".      The  prohibition  against  monopoly  is   written   into 
the  anti-trust  laws,    the  National    Industrial  Recovery  Act,    and  the   codes. 

Second,    government  undertakes   to   regulate    the  plane  of  competition 
in   the  field  of .  wages  and  working  conditions.      In  nany  instances  a    sm-1!! 
minority,    who    seek   to   gain  by  disregard  of  labor  standards,   may  have 
their  way  against   the  wish  of   the   great  majority  in  the   industry.      They 
may  make  labor   suffer  unduly  low  wages,    long  hours,    and  intolerable  work- 
ing conditions.      Accordingly,    government   steps   in  to   fix  standards  of 
safety  and  health,    to   establish  workmen's  compensation  and  to   regulate 
hours  of  labor.      The  labor  provisions  in  the   codes   represent  a  fuller 
development  of   such  necessary  intervention. 

Third,    government  undertake-s   to   regulate   the  plane   of  competition 
in  the  field  of   trade  practices.      In  the  -conduct  of  business,   practices 
grow  up  which  are   the   customs  of  the   industry.      These  practices  are  among 
the   rules   of   the   game   for   the    competitive   struggle,    and  the   function   of 
government   is   to    intervene    to    insure  fairness  of  opportunity.      In   the 
heat   of   the    struggle,    a   few  firms  may  resort   to  unfair  practices  —   such 
as  the  misrepresentation  of  goods  and  secret   discriminations  —  which 
their  competitors  are  'forced  to   adopt.      Thus  a  minority  has   it   in   its 
power  greatly  to  affect,    and  sometimes  to   determine   the   conditions  of 
survival.      Government,    therefore,    must    see   to    it   that   trade  practices 
are   freed  from  abuse  and  are  made  proper   instruments  of   business   and 
public  policy. 

A  price  policy  should  of  necessity  be    stated   in   genoral   terms.      Its 
end  is   to    cause  price   to  perform   its  essential   functions.      The   standard 
alike   in   the   law  of   the   land  and  in  public  policy  is   a   competitive  price 
made    in  an  open  market.      It    should  not  be  perverted  by   such  influences 
as   ignorance,   malice,    deception,    or  collusion.     Such  barriers  to    the 
effective  operation  of  competition  must  be   removed;    the  forces  which  tend 
to   destroy  standards  and  to   create  unfair  methods  must  be   controlled;    and 
trade  practices  must   be  harnessed   to   the    industrial  and   social   ends    they 
should  serve. 

The  establishment  of  a  plane   of  competition  involves  a  consideration 
of  all   the   arrangements,    usages,    and  customs  under   which  prices  are   made. 
These   characteristic's  of  a.  business  are   just   as    significant  as   the   tech- 
nology employed  in   the  physical  process   of  production  or  marketing.      They 
consist  of  devices  and  procedures  — •  such  as  a  free  market,   open  price 
filing,    quantity  discounts,    cost  accountancy,    and  the  like.     All  of  these 
are   mechanisms;    no   one   of   them   is  good  or  bad  in  itself;    the  merit   or   de- 
merit of  each  comes  from  the  use    to  which  it   is  actually  put,     Nor  can  any 
device   or  procedure   be   judged  alone,    for   it   always  appears   in  combination 
with  other  devices.     Moreover,    in  considering  the    totality  of  a   business 
in  operation,    all   these   devices   together  must  be   judged  in  relation   to 
its   technical   operations  and   the    character  of   its   growth, 

9826 


-  830  - 

A  great  many  of  these  devices  and  procedures  are  the  inventions 
of  business.   A  group  of  them  have  now  the  approval  of  administrative 
todies  and  the  courts.   Such  "fair  practices"  may  be  eraoloyed  freely. 
Another  grout)  are  still  on  trial;  their  range  of  usefulness  and  their 
accord  with  public  policy  have  not  yet  been  fully  demonstrated.   They 
should  be  cautiously  employed,  and  the  burden  of  proof  is  upon  the  in- 
dustry wishing  to  use  them.   A  third  group,  forged  in  the  heat  of  the 
competitive  struggle,  must  be  freed  of  their  capacity  for  unfair  use 
before  they  can  be  generally  employed.   One  of  the  great  tasks  of  the 
NRA  is  to  develop  trade  practices,  observe  carefully  their  operation, 
and  fit  tnem  for  service  in  the  larger  task  of  maintaining  order  and 
fairness  in  industrial  relations. 

It  follows  that  a  general  statement  of  policy  can  present  no 
more  than  an  approach  to  a  specific  problem.   Industries  are  far  from 
being  enough  alike  to  permit  identical  treatment.   They  differ  in  struc- 
ture, in  organization,  in  the  usages  of  business,  and  in  their  places 
in  the  national  and  the  international  economy.   They  are  currently  at 
very  different  stages  of  development.   They  are  susceptible  to  different 
degrees  and  types  of  supervision.   In  some  instances  stated  policy,  how- 
ever appropriate  to  the -.usual  case,  night  not  accomplish  the  desired 
results  if  applied  to  a  particular  industry.   Therefore,  in  certain  ex- 
ceptional cases,  provisions  usually  in  accord  with  policy  may  be  limited 
or  avoided  in  the  case  of  certain  industries.   In  other  exceptional  cases 
provisions  usually  contrary  to  policy  may  be  acceptable.   But  all  such 
departures  from  stated  policy  must  be  justified  by  the  values  which  com- 
petition is  intended  to  serve. 

But,  whatever  the  necessity  for  variation  in  detail,  the  gen- 
eral objectives  of  price  policy  are  definite.   It  must  promote  fairness 
between  the  parties  to  an  industry  and  make  its  contribution  to  the 
betterment  of  the  standard  of  living.   A  control  of  production  is  in- 
evitable under  any  industrial  system.   A  long  experience  has  led  us  to 
leave  that  problem  to  the  open  market.   In  a  few  industries,  in  which 
competition  has  proved  unusually  disorderly,  it  may  be  necessary  to  inter- 
vene to  bring  production  into  line  with  demand;  but  such  intervention 
should  avoid  "restriction  of  output"  and  should  aim  at  the  kind  of  equa- 
tion between  production  and  consumption  as  the  market  is  supposed  to 
effect.   The  strategy  of  policv  must  find  e-oression  in  a  multitude  of 
decisions.   But  its  end  is  single  —  an  economy,  not  of  scarcity  but  of 
plenty. 

In  other  words,  means  and  ends  must  not  be  confused.   Means 
should  be  flexible,  requiring  the  use  of  a  miscellany  of  devices  and 
procedures.   Objectives  should  be  stable.   The  goal  sought  is  the 
establisnment  of  conditions  under  which  in  a  free  and  open  market 
competiticnmay  determine  a  fair  price. 


-  831-.- 

III 

THE  PROBLEM  OF  OPE;t  PBICE  PILING 

A.   End  To  Be  Served 

Open  price  filing  is  a  mere  device.   Its  potentialities 
for  benefit  or  mischief  depend  upon  the  purpose  to  which  it  is  put  and 
the  methods  which  rttend  its  use.   The  standard  by  which  its  promotion 
should  be  judged  is  price  making  similar  to  that  which  would  be 
afforded  b^  an  open  andcompetitive  market  such  a„s  an  organized  com- 
modity exchange.   In  such  a  riarket  all  the  forces  of  demand  and  supply 
converge,  the  transactions  are  a  matter  of  public  record,  buyer  and 
seller  can  accommodate  their  activities  to  the  course  of  events,  every 
factor  of  significance  has  a  chance  to  be  registered,  and  a  changing 
price  represents  all  that  affects  the  current  value  of  a  commodity. 

The  ideal  of  an  open  and  competitive  market  can  seldom  be 
fully  attained.   The  conditions  under  which  various  industries  are 
carried  on  are  diverse;  the  obstacles  to  open  and  free  competition  are 
many;  and  the  devices  and  -orocedures  for  maki lg  markets  open  have  been 
inadequately  developed.   In  general  the  open  market  is  currently  limited 
to  starile  commodities,  capable  of  standardiza/tion,  and  objects  of  a 
continuous  flow  of  trade.   Cotton  and  wheat  aro  examples  of  wares 
susceptible  to  open  market  operations. 

But  where  there  is  no  open  market,  its  functions  still  need 
to  be  performed.   Their  performance  ma."  be  rendereo  difficult  or  im- 
possible by  the  local  character  of  trade,  -irregularity  or  infrequency 
of  purchase,  restraint  of  trade,  or  some  other  condition. 

HRA  has  hoped  to  approximate  the  objectives  of  the  open  mar- 
ket by  a  system  of  0"oen  price  filing  to  be  applied  under  appropriate 
circumstances.   This  takes  the  form  of  the  collection  and  general  cir- 
culation of  the  price  quotations  at  which  members  of  an  industry  indi- 
cate a  readiness  to  sell.   A  "file"  is  not  a  market,  and  the  process 
of  record  and  circulation  lacks  the  speed  and  completeness  of  a  con- 
tinuous report  of^a  series  of  commodity  excnange  transactions.   But  it 
is  possible  for  the  open  file  to  allow  buyers  and  sellers  to  accommodate 
their  activities  to  competitive  conditions,  to  fix  limits  to  the  spread 
of  quotations  at  any  given  time,  and  to  tend  to  make  price  nerform  its 
industrial  function. 

To  these  ends  o_oen  price  filing  should,  so  far  as  possible, 
be  made  to  furnish  a  public  record  of  price  movements,  provide  a  check 
on  discrimination  among  customers,  reduce  the  amount  of  deception  among 
buyers  and  sellers,  give  the  parties  concerned  a  fuller  knowledge  of 
conditions  affecting  the  market,  and  oromote  and  safeguard  the  integrity 
of  the  -orocess  of  co'roetitive  "arice  making.   It  should  be  used  to  remove 
the  ignorance  which  the  small  enterpriser  has  about  the  activities  of  his 
larger  competitors,  -and  thereby  to  insure  him  a  measure  of  protection 
against  their  rivalry. 


QROP. 


-  832  - 

The  open  market  is  the  desired  institution;  open  price  filing 
1  -  an  imperfect  substitute.   The  open  market  fixed  the  standard  of  per- 
formance for  open  price  filing. 

Like  all  other  procedures,  open  price  filing  is  not  immune  to 
abuse.   In  combination  with  otlier  "orocedures  and  understanding  it  may 
be  employed  to  maintain  a  price  fixed  "by  a  combination  of  "oroducers. 
It  may  be  used  to  expose  to  trade  minishment  or  the  damaging  ill  will  of 
his  competitors  the  individual  whose  trices  are  out  of  line.   But  in 
such  instances  the  evil  almost  inv.~ria.blv  lies  in  extra-code  arrangements 
which  limit  competition  and  for  wnich  the  open  price  filing  device  becomes 
a  convenient  instrument. 

It  was  hardly  to  be  expected  that  open  price  filing  should 
immediately  attain  its  fullest  possible  usefulness.   Abuses  such  as 
have  appeared  in  a  number  of  industries  v,ere  to  be  anticipated.   These 
abuses  must  be  overcome.   However,  the  experience  of  }TRA   has  indicated 
the  po-ssibility  of  developing  saf  eguards ,  and  much  of  the  testimony  at 
the  January,  1935,  hearings  of  price  policv  confirms  the  belief  that 
further  experiment  with  o-oen  -prices  is  desirable.   Time  will  be  required 
to  -perfect  the  device,  discover  its  full  possibilities,  and  contrive 
ways  to  guard  it  agaihst  abuse.   Ingenuity  will  be.  required  to  ada"ot  it 
to  many  industries  in  whicn  products  and  conditions  of  sale  are  diverse. 
A  continuous  and  intelligent  observation  of  its  operation  and  a  prompt 
correction  of  abuses  are  essential  to  its  fullest  usefulness. 

3.   Essential  Characteristi.es  of  an  Open  Price  Provision 

Price  filing  should  be  p.dmins,itered  to  serve  the  ends  of  a 
free  and  o-pen  market.   An  impartial  and  confidential  Dody  should  be 
the  administrative  agency  in  order  that  -price-lists  may  be  distributed 
to  members  of  the  industry  and  their  customers  without  partiality  and 
without  efforts  to  influence  the  quotations.   The  trices  must  be  gen- 
uinely available  to  all  customers  and  members  of  the  industry.   If  the 
body  with  which  prices  are  filed  is  a  -private  agencv,  its  activities 
must  be  subject  to  the  immediate  oversight  of  the  government.   It  is 
also  essential  to  the  purposes  of  open  price  filing  that  the  filed  prices 
be  those  at  which  sales  are  actually  fro  take  place  rather  than  merely 
minima  above  which  members  of  an  industry -may  secretly  vary  their 
prices  as  they  choose  or  maxima  from  which  discounts  are  to  be  allowed. 

The  general  -presumption  must  be  against  the  use  of  the  wait- 
ing period  and  the  burden  of  proof  is  upon  the  industry  which  wishes 
to  employ  it.   A  protracted  experience  with  the  waiting  period  has 
revealed  sftortcomings,  for  which  no  one  is  consciously  to  blame  and 
which  are  not  easily  avoided  or  corrected.   Awaiting  period  is  likely 
to  freeze  a  competitive  process  which  should  be  kept  active  and  to 
impair  the  very  purpose  for  Which  sealed  bids  are  used.   In  an  open 
market  there  is  no  counterpart  of  such  a  device,   '/hen  prices  are  rising 
a  flood  of  orders  during  the  waiting  period  may  unsettle  a  future  market. 
When  prices  are  too  high  the  incentive  to  reduce  them  in  order  to  got 
more  volume  of  sales  may  be  lessened  by  the  knowledge  that  price  reduc- 
tions will  not  become  effective  until  competitors,  by  similar  reductions, 
have  destroyed  most  of  the  sales  advantage. 


9RPfi 


-  853  - 

Probably  the  best  case  for  p.   uniting  period  can  be  made  for  in- 
dustries in  which  spies  are  of  large  size  and  snail  number,  members  are 
many  and  widely  sc  ttered,  and  information  about  orices  cannot,'  for  some 
reason,  be  quickly  circulated.   But  even  in  such  industries  the  burden  of 
oroof  must  oe  uoon  those  "ho  wish  to  employ  a,   waiting  period. 

In  industries  wh'er,e  prices  immediately  effective  are  manipu- 
lated for  the  ouroose  of  allowing  large  discriminatory  discounts  to 
privileged  customers,  it  may  be  necessar*'"  to  impose  some  limit  uoon  the 
frequency  of  orice  change.   In  such  rare  cases  this  can  be  done  by  oro- 
visions  requiring  that  a  orice,  one  effective,  must  stay  in  effect  for 
some  reasonable  minimum  period.  Awaiting  period  before  the  orice  De- 
oomes  effective  is  not  necessary  in  dealing  with  this  problem. 

C.   The  ?ield  for  the  Use  of  Ooen  Pricing 

Ooen  orice  systems  s.-ould  not  ue  indiscriminately  a"0"jlied  to 
the  entire  range  of  ,,'vmeric  n  industry.   In  some  industries  the  technical 
oroblems  oresented  by  an  OD-en  orice  system  would  oe  insuperable.   If 
commodities  differ  so  widelv  in  quality,  character,  and  accom-oanying 
service  that  orices  are  likely  to  vary  with  each  sale,  or  if  the  number 
of  concerns  and  products  is  very  large,  an  ooen  orice  filing  system  may 
require  much  effort  and  give  little  usable  information.   If  through 
custom  or  convenience  -orices  remain  stable  and  market  changes  lie  mostly 
in  the  character  of  the  goods  sold,  orice  reoorting  may  be  a  meaningless 
process.   If  commodities  are  highly  perishable  and  their  surely  fluc- 
tuates raoidly,  even. the  quickest  system  of  recording  current  orices 
would  oe  a  burden  uoon  many  rasi-iess  men  and  consumers.   The  feasibility 
of  an  open  price  system  increases  in  so  far  as  price  cc roetition  is 
active,  the  products  of  tne  industry  can  be  clearly  identified,  and 
orice  changes  are  frequent  without  being  incessant. 

A  nrice  is  not  just  p   orice,  but  a  price  of  something.   It  is 
meaningless  aoart  from  information  about  the  quality  of  the   oods  and 
the  terms  of  sale.   Accordingly,  to  be  informative,  all  the  factors  that 
help  to  give  identity  to  a  price  should  be  reported.   In  industries  in 
which  this  connot  be  done  it  is  questionable  whether  an  ooen  price  system 
can  be  effectively  used.   It  is  difficult  to  provide  properly  for  such 
information.   Identification  of, articles  and  their  qualities,  descrip- 
tion of  how  doscounts  are  rel  ted  to  quantity  and  to  the  classification 
of  customers,  indication  of  the  way  in  which  prices  vary  with  varying 
transportation  costs  -  these  are  eo-rolicated  matters.   Yet  any  one  of 
the  terms  of  sale  may  oe  used,  not  only,  by  the  unscrupulous  but  even  by, 
the  independent  minded  merchant,  in  a  way  which  imoairs  the  achievement 
of  the  open  market  purposes  contemplated  in  tne  use  of  tne  device.   It 
is  possible,  for  example,  to  confuse  tne  meaning  of  the  schedule  of 
orices  by  withholding  an  adequate  definition  of  classes  of  customers. 
Therefore,  the  relation  of  quality,  quantity,  class  of  customer,  and 
various  terras  of  sale  to  open  price  filing  will  later  be  given  separate 
treatment. 


9R?fi 


-  834  ~ 

Observation,  ingenuity,  and  patience  may  permit  the  extension 
o^  o'ien  price  filing  iiito  what  at  the  moment  seems  to  he  i!.Toracticable 
territory.   Even  now  it  may  be  applied  to  industries  in  which  goods  are 
not  strictly  standardized;  for  the  members  of  an  industry  have  a  pricti- 
cal  knowledge  of  each  other's  ,T,ares,  and  customers  can  be  educated  to 
the  larger  differences  among  grades  and  brands.   However,  in  most  of 
these  cases  the  difficulties  which  arise  from  variations  of  product  and 
service  are  such  that  open  ■price  systems  might  confuse  rather  than  re- 
veal what  is  happening  in  the  market.   The  meaning  of  a  "orice  may  depend 
upon  who  quotes  it.   The  name  of  the  seller  may  be  necessary  to  an  iden- 
tification of  the  quality  of  the  product.    It  may  be  necessary  to  indi- 
cate whether  the  article  in  the  requisite  quantity  can  be  supplied  or 
whether  the  price  is  only  nominal.   Hence,  to  make  open-pricing  effec- 
tive, the  identy  of  the  seller  often  needs  to  be  revealed. 

In  certain  industries  open  price  systems,  though  feasible, 
involve  such  probabilities  of  serious  abuse  that  tney  should  be  avoided. 
These  are,  industries  in  which  the  need  is  to  preserve  competition  against 
attack  rather  than  to  provide  facilities  by  which  competition  may  be 
made  more  informed.   An  industry 'in  which  the  dominance  of  an  enterprise 
or  group  is  intimidating  to  smaller  independents  is  not  a  suitable  field 
for  open  pricing;  for  the  identification  of  the  smaller  concern's  prices 
would,  in  such  cases,  be  inconsistent  with  the  preservation  of  its  free- 
dom to  make  whatever  prices  it  may  choose.   Industries  in  which  the  chief 
obstacle  to  collusion  is  the  difficulty  of  devising  machinery  for  price 
understanding  are  equally  unsuitable  to  open  price  systems,  since  even 
the  best  open  price  system  may  be  used  as  a  collusive  device.   The  field 
for  open  pricing  is  that  in  which  competition  tends  to  be  active  but  ill- 
informed  and  chaotic;  not  tnat  in  which  competition  tends  to  evolve  into 
monopolistic  restraint. 

D.   Price  Statistics  as  an  Alternative 

There  may  be  many  industries  in  which  the  ends  of  public  policy 
will  be  adequately  served  by  price  filing  or  reporting  as  it  was  under- 
stood generally  and  accepted  by  the  courts  even  prior  to  NBA,   Such  are 
systems  for  the  open  reporting  of  price  summaries,  price  ranges  and  sales 
volumes  or sed  upon  records  of  past  transactions.'   Such  a  reporting  system 
involves  neither  the  same  technical  problems  nor,  if  the  identities  of 
sellers  are  concealed  in  the  summaries,  as  great  dangers  of  abuse  as 
necessarily  appear _ with  current  price  filing.   In  such  industries,  when 
names  of  sellers  are  not  to  be  disclosed,  a  form  of  su  iraary  statement 
must  je  devised  adapted  to  the  circumstances  and  detailed  enough  to  serve 
those, concerned.   The  contrivance  of  this  form  reauires  a  nice  balance 
between  the  safeguards  of  secrecy  and  the  necessity  of  information. 

E.   Price-Filing  not  Price-Eixing 

It  is  hardly  necessary  to  say  that  open  price  filing  is  not 
price-fixing.   Nor  should  evidence  of  collusion  in  their  making  be  in- 
ferred from  a  uniformity  in  the  prices  which  are  filed.   Competition 
is  supposed  to  effect  uniformity  of  prices  through  an  open  market;  and 
approximation  to  uniformity  is  almost  certain  to  result  from  the 
oroper  maintenance  of  open  price  filing.   It  is  when  the  prices  quoted 
by  the  members  of  an  industry  move  in  concert  faster  than  competitors 


-   335  - 

can  easily  accomodate   themselves   to  each  other's  activities  or  when 
prices  move   uniformly  and  sharply  upward   in   contrast   to   trends   in  re- 
lated industries  that  evidence  of  collusion  is  present.      Open  price 
filing  is  a  device;   price-fixing  is  a  "business  policy  in  operation. 

F.      The  iveecl  for  Flexibility 

Open  price   filing   should  he  applied  to  .specific   industries   in   the 
light  of   the  particular  circumstances   rather  than  as  a   rigid  formula.      In 
each  case   attention  should  he   given   to    such  considerations  as   the   fre- 
quency and  extent   of  price   change,    the   complexity  of   terms   of   sale,    the 
difficulty  of   identifying  an   article,    the  number  and  geographical   diffu- 
sion of  members  of  the    industry,    the  degree   of  price   competition,    and 
the  economic   importance  of   the  article.      In  certain  instances,   for  example 
where   the  finished  product  of  one   industry  is   the   raw  material  of  another, 
it  may  be  necessary  to   take  account  of   conditions   in  correlative   indus- 
tries.    But  however  difficult  may  be   the  accommodation  of   the  device    to 
industrial   circumstances,    the   ends  which  the   open  market    should  serve   are 
definite   guides. 

The  National   Industrial  Recovery  Board  feels   that  the   device  of  open 
price  filing  should  be  perfected,    guarded  against  abuse   and  applied  with 
discrimination  in  the   industries  to  which  it   is  appropriate.      In  certain 
industries  and  for  certain  commodities  for  which  en  organized  open  market 
is  not  practical,    the  virtues   of  an  organized  commodity  exchange   may  be 
approximated  through  the  device  of  open  price   filing. 


OFFICE  OF  THE  NATIONAL  RECOVERY  ADMINISTRATION 

THE  DIVISION  OF  REVIEW 

THE  WORK  OF  THE  DIVISION  OF  REVIEW 

Executive  Order  No.  7075,  dated  June  15,  1935,  established  the  Division  of  Review  of  the 
National  Recovery  Administration.   The  pertinent  part  of  the  Executive  Order  reads  thus: 

The  Division  of  Review  shall  assemble,  analyze,  and  report  upon  the  statistical- 
information  and  records  of  experience  of  the  operations  of  the  various  trades  and 
industries  heretofore  subject  to  codes  of  fair  competition,  shall  study  the  ef- 
fects of  such  codes  upon  trade,  industrial  and  labor  conditions  in  general,  and 
other  related  matters,  shall  make  available  for  the  protection  and  promotion  of 
the  public  interest  an  adequate  review  of  the  effects  of  the  Administration  of 
Title  I  of  the  National  Industrial  Recovery  Act,  and  the  principles  and  policies 
put  into  effect  thereunder,  and  shall  otherwise  aid  the  President  in  carrying  out 
his  functions  under  the  said  Title.  I  hereby  appoint  Leon  C.  Marshall,  Director  of 
the  Division  of  Review. 

The  study  sections  set  up  in  the  Division  of  Review  covered  these  areas:  industry 
studies,  foreign  trade  studies,  labor  studies,  trade  practice  studies,  statistical  studies, 
legal  studies,  administration  studies,  miscellaneous  studies,  and  the  writing  of  code  his- 
tories.  The  materials  which  were  produced  by  these  sections  are  indicated  below. 

Except  for  the  Code  Histories,  all  items  mentioned  below  are  scheduled  to  be  in  mimeo- 
graphed form  by  April  1,  1936. 

THE  CODE  HISTORIES 

The  Code  Histories  are  documented  accounts  of  the  formation  and  administration  of  the 
codes.  They  contain  the  definition  of  the  industry  and  the  principal  products  thereof;  the 
classes  of  members  in  the  industry;  the  history  of  code  formation  including  an  account  of  the 
sponsoring  organizations,  the  conferences,  negotiations  and  hearings  which  were  held,  and 
the  activities  in  connection  with  obtaining  approval  of  the  code;  the  history  of  the  ad- 
ministration of  the  code,  covering  the  organization  and  operation  of  the  code  authority, 
the  difficulties  encountered  in  administration,  the  extent  of  compliance  or  non-compliance, 
^.nd  the  general  success  or  lack  of  success  of  the  code;  and  an  analysis  of  the  operation  of 
code  provisions  dealing  with  wages,  hours,  trade  practices,  and  other  provisions.  These 
and  other  matters  are  canvassed  not  only  in  terms  of  the  materials  to  be  found  in  the  files, 
but  also  in  terms  of  the  experiences  of  the  deputies  and  others  concerned  with  code  formation 
and  administration. 

The  Code  Histories,  (including  histories  of  certain  NRA  units  or  agencies)  are  not 
mimeographed.  They  are  to  be  turned  over  to  the  Department  of  Commerce  in  typewritten  form. 
All  told,  approximately  eight  hundred  and  fifty  (850)  histories  will  be  completed.  This 
number  includes  all  of  the  approved  codes  and  some  of  the  unapproved  codes.  (In  Work  Mate- 
rials No^  18,  Contents  of  Code.  Histories,  will  be  found  the  outline  which  governed  the 
preparation  of  Code  Histories.) 


(In  the  case  of  all  approved  codes  and  also  in  the  case  of  some  codes  not  carried  to 
final  approval,  there  are  in  NRA  files  further  materials  on  industries.  Particul  rthy 
of  mention  are  the  Volumes  I,  II  and  III  which  constitute  the  material  officially  submitted 
to  the  President  in  support  of  the  recommendation  for  approval  of  each  code.   These  volumes 


-  iii  - 

Women's  Apparel  Industry,  Some  Aspects  of  the 

Trade  Practice  Studies 

Commodities,  Information  Concerning:   A  Study  of  NRA  and  Related  Experiences  in  Control 

Distribution,  Manufacturers'  Control  of:   Trade  Practice  Provisions  in  Selected  NRA  Codes 

Distributive  Relations  in  the  Asbestos  Industry 

Design  Piracy:   The  Problem  and  Its  Treatment  Under  NRA  Codes 

Electrical  Mfg.  Industry:   Price  Filing  Study 

Fertilizer  Industry:   Price  Filing  Study 

Geographical  Price  Relations  Under  Codes  of  Fair  Competition,  Control  of 

Minimum  Price  Regulation  Under  Codes  of  Fair  Competition 

Multiple  Basing  Point  System  in  the  Lime  Industry:   Operation  of  the 

Price  Control  in  the  Coffee  Industry 

Price  Filing  Under  NRA  Codes 

Production  Control  in  the  Ice  Industry 

Production  Control,  Case  Studies  in 

Resale  Price  Maintenance  Legislation  in  the  United  States 

Retail  Price  Cutting,  Restriction  of,  with  special  Emphasis  on  The  Drug  Industry. 

Trade  Practice  Rules  of  The  Federal  Trade  Commission  (1914-1936):  A  classification  for 

comparision  with  Trade  Practice  Provisions  of  NRA  Codes. 

Labor  Studies 

Cap  and  Cloth  Hat  Industry,  Commission  Report  on  Wage  Differentials  in 

Earnings  in  Selected  Manufacturing  Industries,  by  States,  1933-35 

Employment,  Payrolls,  Hours,  and  Wages  in  115  Selected  Code  Industries  1933-35 

Fur  Manufacturing,  Commission  Report  on  Wages  and  Hours  in 

Hours  and  Wages  in  American  Industry 

Labor  Program  Under  the  National  Industrial  Recovery  Act,  The 

Part  A.   Introduction 

Part  B.   Control  of  Hours  and  Reemployment 

Part  C.   Control  of  Wages 

Part  D.   Control  of  Other  Conditions  of  Employment 

Part  E.   Section  7(a)  of  the  Recovery  Act 
Materials  in  the  Field  of  Industrial  Relations 
PRA  Census  of  Employment,  June,  October,  1933 
Puerto  Rico  Needlework,  Homeworkers  Survey 

Administrative  Studies 

Administrative  and  Legal  Aspects  of  Stays,  Exemptions  and  Exceptions,  Code  Amendments,  Con- 
ditional Orders  of  Approval 

Administrative  Interpretations  of  NRA  Codes 

Administrative  Law  and  Procedure  under  the  NIRA 

Agreements  Under  Sections  4(a)  and  7(b)  of  the  NIRA 

Approved  Codes  in  Industry  Groups,  Classification  of 

Basic  Code,  the  —  (Administrative  Order  X-61) 

Code  Authorities  and  Their  part  in  the  Administration  of  the  NIRA 
Part  A.   Introduction 
Part  B.   Nature,  Composition  and  Organization  of  Code  Authorities 

9768—3. 


-  IV  - 

Part  C.  Activities  of  the  Code  Authorities 

Part  D.   Code  Authority  Finances 

Part  E.  Summary  and  Evaluation 
Code  Compliance  Activities  of  the  NRA 
Code  Making  Program  of  the  NRA  in  the  Territories,  The 
Code  Provisions  and  Related  Subjects,  Policy  Statements  Concerning 
Content  of  NIRA  Administrative  Legislation 

Part  A.  Executive  and  Administrative  Orders 

Part  B.   Labor  Provisions  in  the  Codes 

Part  C.   Trade  Practice  Provisions  in  the  Codes 

Part  D.   Administrative  Provisions  in  the  Codes 

Part  E.   Agreements  under  Sections  4(a)  and  7(b) 

Part  F.   A  Type  Case:   The  Cotton  Textile  Code 
Labels  Under  NRA,  A  Study  of 

Model  Code  and  Model  Provisions  for  Codes,  Development  of 

National  Recovery  Administration,  The:  A  Review  of  its  Organization  and  Activities 
NRA  Insignia 

President's  Reemployment  Agreement,  The 

President's  Roemployment  Agreement,  Substitutions  in  Connection  with  the 
Prison  Labor  Problem  under  NRA  and  the  Prison  Compact,  The 
Problems  of  Administration  in  the  Overlapping  of  Code  Definitions  of  Industries  and  Trades, 

Multiple  Code  Coverage,  Classifying  Individual  Members  of  Industries  and  Trades 
Relationship  of  NRA  to  Government  Contracts  and  Contracts  Involving  the  Use  of  Government 

Funds 
Relationship  of  NRA  with  States  and  Municipalities 
Sheltered  Workshops  Under  NRA 
Uncodified  Industries:  A  Study  of  Factors  Limiting  the  Code  Making  Program 

Lepal  Studies 

Anti-Trust  Laws  and  Unfair  Competition 

Collective  Bargaining  Agreements,  the  Right  of  Individual  Employees  to  Enforce 

Commerce  Clause,  Federal  Regulation  of  the  Employer-Employee  Relationship  Under  the 

Delegation  of  Power,  Certain  Phases  of  the  Principle  of,  with  Reference  to  Federal  Industrial 
Regulatory  Legislation 

Enforcement,  Extra-Judicial  Methods  of 

Federal  Regulation  through  the  Joint  Employment  of  the  Power  of  Taxation  and  the  Spending 
Power 

Government  Contract  Provisions  as  a  Means  of  Establishing  Proper  Economic  Standards,  Legal 
Memorandum  on  Possibility  of 

Industrial  Relations  in  Australia,  Regulation  of 

Intrastate  Activities  Which  so  Affect  Interstate  Commerce  as  to  Bring  them  Under  the  Com- 
merce Clause,  Cases  on 

Legislative  Possibilities  of  the  State  Constitutions 

Post  Office  and  Post  Road  Power  —  Can  it  be  Used  as  a  Means  of  Federal  Industrial  Regula- 
tion? 

State  Recovery  Legislation  in  Aid  of  Federal  Recovery  Legislation  History  and  Analysis 

Tariff  Rates  to  Secure  Proper  Standards  of  Wages  and  Hours,  the  Possibility  of  Variation  in 

Trade  Practices  and  the  Anti-Trust  Laws 

Treaty  Making  Power  of  the  United  States 

War  Power,  Can  it  be  Used  as  a  Means  of  Federal  Regulation  of  Child  Labor? 
9768—4. 


-  V  - 

THE  EVIDENCE  STUDIES  SERIES 

The  Evidence  Studies  were  originally  undertaken  to  gather  material  for  pending  court 
cases.  After  the  Schechter  decision  the  project  was  continued  in  order  to  assemble  data  for 
use  in  connection  with  the  studies  of  the  Division  of  Review.  The  data  are  particularly 
concerned  with  the  nature,  size  and  operations  of  the  industry;  and  with  the  relation  of  the 
industry  to  interstate  commerce.  The  industries  covered  by  the  Evidence  Studies  account  for 
more  than  one-half  of  the  total  number  of  workers  under  codes.  The  list  of  those  studies 
follows: 


Automobile  Manufacturing  Industry 
Automotive  Parts  and  Equipment  Industry 
Baking  Industry 

Boot  and  Shoe  Manufacturing  Industry 
Bottled  Soft  Drink  Industry 
Builders'  Supplies  Industry 
Canning  Industry 
Chemical  Manufacturing  Industry 
Cigar  Manufacturing  Industry 
Coat  and  Suit  Industry 
Construction  Industry 
Cotton  Garment  Industry 
Dress  Manufacturing  Industry 
Electrical  Contracting  Industry 
Electrical  Manufacturing  Industry 
Fabricated  Metal  Products  Mfg.  and  Metal  Fin- 
ishing and  Metal  Coating  Industry 
Fishery  Industry 
Furniture  Manufacturing  Industry 
General  Contractors  Industry 
Graphic  Arts  Industry 
Gray  Iron  Foundry  Industry 
Hosiery  Industry 

Infant's  and  Children's  Wear  Industry 
Iron  and  Steel  Industry 


Leather  Industry 

Lumber  and  Timber  Products  Industry 
Mason  Contractors  Industry 
Men's  Clothing  Industry 
Motion  Picture  Industry 
Motor  Vehicle  Retailing  Trade 
Needlework  Industry  of  Puerto  Rico 
Painting  and  Paperhanging  Industry 
Photo  Engraving  Industry 
Plumbing  Contracting  Industry 
Retail  Lumber  Industry 
Retail  Trade  Industry 
Retail  Tire  and  Battery  Trade  Industry 
Rubber  Manufacturing  Industry 
Rubber  Tire  Manufacturing  Industry 
Shipbuilding  Industry 
Silk  Textile  Industry 
Structural  Clay  Products  Industry 
Throwing  Industry 
Trucking  Industry 
Waste  Materials  Industry 
Wholesale  and  Retail  Food  Industry 
Wholesale  Fresh  Fruit  and  Vegetable  Indus- 
try 
Wool  Textile  Industry 


THE  STATISTICAL  MATERIALS  SERIES 


This  series  is  supplementary  to  the  Evidence  Studies  Series.  The  reports  include  data 
on  establishments,  firms,  employment,  payrolls,  wages,  hours,  production  capacities,  ship- 
ments, sales,  consumption,  stocks,  prices,  material  costs,  failures,  exports  and  imports. 
They  also  include  notes  on  the  principal  qualifications  that  should  be  observed  in  using  the 
data,  the  technical  methods  employed,  and  the  applicability  of  the  material  to  the  study  of 
the  industries  concerned.  The  following  numbers  appear  in  the  series: 
9768—5. 


Asphalt  Shingle  and  Roofing  Industry  Fertilizer  Industry 
Business  Furniture  Funeral  Supply  Industry 
Candy  Manufacturing  Industry  Glass  Container  Industry- 
Carpet  and  Rug  Industry  Ice  Manufacturing  Industry 
Cement  Industry  Knitted  Outerwear  Industry 
Cleaning  and  Dyeing  Trade  Paint,  Varnish,  ana  Lacquer,  Mfg.  Industry 
Coffee  Industry  Plumbing  Fixtures  Industry 
Copper  and  Brass  Mill  Products  Industry  Rayon  and  Synthetic  Yarn  Producing  Industry 
Cotton  Textile  Industry  Salt  Producing  Industry 
Electrical  Manufacturing  Industry 

THE  COVERAGE 

The  original,  and  approved,  plan  of  the  Division  of  Review  contemplated  resources  suf- 
ficient (a)  to  prepare  some  1200  histories  of  codes  and  NRA  units  or  agencies,  (b)  to  con- 
solidate and  index  the  NRA  files  containing  some  40,000,000  pieces,  (c)  to  engage  in  ex- 
tensive field  work,  (d)  to  secure  much  aid  from  established  statistical  agencies  of  govern- 
ment, (e)  to  assemble  a  considerable  number  of  experts  in  various  fields,  (f)  to  conduct 
approximately  25%  more  studies  than  are  listed  above,  and  (g)  to  prepare  a  comprehensive 
summary  report. 

Because  of  reductions  made  in  personnel  and  in  use  of  outside  experts,  limitation  of 
access  to  field  work  and  research  agencies,  and  lack  of  jurisdiction  over  files,  the  pro- 
jected plan  was  necessarily  curtailed.  The  most  serious  curtailments  were  the  omission  of 
the  comprehensive  summary  report;  the  dropping  of  certain  studies  and  the  reduction  in  the 
coverage  of  other  studies;  and  the  abandonment  of  the  consolidation  and  indexing  of  the 
files.  Fortunately,  there  is  reason  to  hope  that  the  files  may  yet  be  carec  for  under  other 
auspices. 

Notwithstanding  these  limitations,  if  the  files  are  ultimately  consolidated  and  in- 
dexed the  exploration  of  the  NRA  materials  will  have  been  sufficient  to  make  them  accessible 
and  highly  useful.  They  constitute  the  largest  and  richest  single  body  of  information 
concerning  the  problems  and  operations  of  industry  ever  assembled  in  any  nation. 

L.  C.  Marshall, 
Director,  Division  of  Review. 
9768—6 . 


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