BOSTON PUBLIC LIBRARY
NATIONAL RECOVERY ADMINISTRATION
3 9999 06542 005 9
DIVISION OF REVIEW
WORK MATERIALS NO. 17
TENTATIVE OUTLINES AND SUMMARIES OF STUDIES IN PROCESS
PART B: LABOR STUDIES
PART C: TRADE PRACTICE STUDIES
Work Materials No. 17 falls into the following parts:
Part A
Industry Studies
Part B
Labor Studies
Part C
Trade Practice Studies
Part D
Administrative Studies
Part E.
Legal Studies
Part F:
Contributory Materials
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December, 1935
« • • •
• • • • V «
• • • • •
C 0 N F I D E IT T I A L
ICEMORjUTLUM TO: SECTION HEADS DecemlDer 30
19 3 5
SUBJECT: WOM MTEPJALS NO. 17
TENTATIVE OUTLINES AJ^ID SUmARIES GE STUDIES 111 PIcOCESS
In order that those v/orking on one study may secaire access to
allied materials in other studies, these TENTATIVE OUTLINES AND SUM-
MARIES are rna,de available for confidential use within the Division
of Review.
Since these documents were prepared from work that is now in
process, they are highly tentative. The outlines are the present
operative tables of contents of the studies, out they are of course
subject to change as the vrark progresses. The sui.iaaries are, in
some cases, forecasts rather than, actual summaries of developed manu-
scripts. Notwithstanding their tentative character, tne documents
will serve to indicate in some detail the subject matter of the studies
now in process in the division. No one will think of these materials
as "findings" or "reports" in the usual sense of those terms.
It is expected tho,t these TENTATIVE OUTLINES AND SUlvIMARlES
will result in many conferences, both formal and informal, among
those working on the studies — to the ends that effective coordina-
tion of the studies may occur and duplication of effort will be
reduced to a minimum.
L. C. Marshall
Director, Division of Review
1 3 My 35 S
9347 -i-
STUDY SECTIONS OF THE DIVISION OF REVIEW
Administrative Studies
N.R.A. organization William W. Bardsley, Coordinator
Code Administration Harry Weiss, Coordinator
Foreign Trade Studies Section H. D. G-resham, Coordinator
Industry Studies Section M. D. Vincent, Coordinator
Labor Studies Section A. Ho v/ard Myers, Coordinator
Legal Studies Section Angus Roy Shannon, Coordinator
Enforcement Studies R. S. Denvir, Coordinator
Research Studies G. W. Kretzinger, Jr., Coordinator
Special Studies Section. G-. C. G-amble, Coordinator
Statistics Study Section W. J. l.iaeuire. Coordinator
Trade practice Studies Section CorY7in Ed^Tards, Coordinator
Deceinter, 1935,
9347 ~ii-
-263- .
LABOR SITJJIES (*)
Page
INTROIUCTION
Tatle of Contents 265
Summary 268
CONTROL OF HOUHS AND EEEMPLOTivIEITT
Table of Contents 269
• ' ' Summary » ^ r 277
CONTROL OF WAGES
Table of Contents : 282
Summary ". 288
CONTROL OF OTHER CONDITIONS OF ElIPLOYivlENT
Table of Contents '. ' 293
Summaiy 296
SECTION 7(a) OF THE ■RECOVERY ACT - (Lollie Carroll)
Table of Contents 301
Summary 302
LABOR ADVISORY BOARD - (A. Houard Myers)
Table of Contents 303
Summary 304
LEGAL ASPECTS OF CERTAIN LABOR PROVISIONS
MINIl'IUl^'I TfAGSS - (Durham E. Allen mid Larion Jennings)
Table of Contents 305
S"ammary 306
IvIAXIlvlUl.I HOURS - (C. G. Raphael)
Table of Contents 308
Summary 309
INDUSTRIAL H0ME?JCRE: - (Beverly Coleman)
Table of Contents 313
Summary 314
CHILD LABOR - (Beverly Coleman)
Table of Contents 516
Summary 317
RIGHT OF INDIVIDUAL ElIPLOYEES TO ENFORCE COLLECTIVE
BARGAINING AGREEl^NTS - (R. C. Marshall)
Table of Contents 319
Summary 320
(*) See also the follov/ing reports prepa,red in the Code Administration
Studies Section:
A. R. Cleary: Labor Compliance Activities of Code Authorities.
R. M. Wilmotte: Administration of Labor Provisions by Code
Authorities.
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Page
STATISTICAL AlIALYSIS OS' LABOR PHOVISIOlIS - (Ruth Reticker)
Tabic of Contents 321
Siunmarj'" 324
SUJ-aiARY AND' EVALUATION OF TKS RESULTS OF 17. R. A. LABOR
EXPERIENCE -. (Solomon Sarkin)
Table of Contents 329
Suamary 330
SURVEY OF LABOR CONDITIONS' IN THE TERRITORY OF HAWAII -
(Har.'aiian Territorial Staff)
Table of Contents 331
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LA.30R STUDIES - IITTEODUCTION
Taljle of Contents
I. SITUATION OF Al.iERiCAlJ LiLBOR PRIOH TO THE RECO\^ERY ACT.
A. Unemplo;n:ient in America ■■ '
B. Errolo^.^nent ai':ion,:5 Workers ''''-
1. Part Time ' . , ' ,
2. Volimie, "b^- Industry'- and Class of Employee
3. Technological Displacenent
^ C. Ho-QTs of Enploynent of Wage-Earners •
1. Average Ho-urs, "by Industry
■ '- 2. DistrilDuti^on of Hom-s, "by Industry and Locality
3. Prodn.ctiVity of Laoor
D, AlDuses In Industry
1. Child Lal)or
2. HomevTork
3. Wage Payment
4. Other Developments: Female Displacement; l^i^ht Work;
Cor. -or acting, Decentralization;
Older Worker Discrimination
E. La"bor Income
1. La"bor Income in Relation to national Income
(a) Amount
("b) Proportionate Share
2. Earnings of the Emplo2'"ed Worker
3. Real Income and Earnings of the Employee
E. Standard of Living and Savings of the Industrial Population
G. Status of the Unemployed
1. Relief and Ilon-Relief Classes
2. Standards of Relief ■■ ;
II. OBLIGATIONS IlIPOSED UPON THE PPJESIDEIIT BY THE RECOVERY ACT
A. Title I. Of The Recoverjr j\_ct
1. Purposes (Preamhle)
2. Methods (Sections 3,4, and 7)
3. Administration (Section 2)
B. Title II Of The Recovery Act.
III. OBLIGATIONS II.IPOSED OR II.iPLIED IN DISCUSSIONS PRIOR TO THE RECOVERY ACT
A. Lahor Measures
1. Thirt3^ Hour Bill
2." Relief Bill
3. Puhlic Works
4. Chetmher of Comyiierce Proposal
5. Lahor Bargaining Bills
6. Puhlic Hearings and Congressional DelDates
B. Industrial Planning Measures
1. La Pollette Ileasiires
2. War Industries Board
3. Puhlic Hearings and Congressional Dehates
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C. I:idustrial Control Measures
1. Licensing Bills
2. Volimtar;;'' Agroenents
3. Aiiti-Trust Ldxt Ercer.Tptions
4. Public Hearings and Congressional Detates
IV. EAIiLY FOEMUIATIOIT OF OBJECTIVES BY THE PRESIDENT
AND THE ADMINISTRA.TOR
A. To Reduce and Relieve UnennlojTient "by the Control of Hours
L. To Increase Purchasing Porrer "b:' the Control of Wages
C. To Improve Standards of Labor "b" the Control of Other Conditions
of Employment
D. To Induce and Maintain United Action of LalDor and Management
V. THE SIGNIEICAl^ICE OP THE mA SET-UP AND THE CHOICE OF METHODS AND
POTTERS WITH RESPECT TO THE NATURE OF THE LABOR PROGRAl^i
A. Sections 3, 4, and 7 of The Recover;^'- Act; Alternative Methods
of Procedure
1. The Meaning of Each Method
2. The Use of the Methods Vj N.R.A.
(a) Choice of Section 4: P.R.A.
("b) Choice of Section 3 for All Codes
(c) Restriction of Section 7 ("b) to Geographical
Subdivisions
(d) Absence of Use of Section 7 (c)
3. Employer Proposed Codes and Code Authority Adi.iinistration
1, Employer Proposed Codes and Their Negotiation
(a) Submission iDy Industry
(l) Place of Union Contract
{2) Collective Bargaining Before Submission
(b) Pre-Hearing Discussions and Negotiations
(c) Pxiblic Hearings
(d) Post-Hearing Conferences
(e) Approvals and Disapprovals
2. Labor Policy in Code Making
(a) Relation of Objectives to Policy
(b) Extent of Eormu].ated or Unformulated Policy
(c) Contents of Policy''
(d) Influences of Policy on Code Making
(e) The Place of Exceptions to Policy
(f ) Administration of Policy
5. Code Authority Administration
(a) Functions of Code Authorities
(b) Labor Representation on Code Authority
(c) Activities of Code Authorities with Respect to
Labor Regulations
(d) Code Administration and N.R.A. Administrative
Organization
C. Labor Advisor;/ Board: Representative Bargaining and
Participation in Administration
1. Labor Participation in Code Mailing
2. Designation of Labor Representatives
5. Development of N.R^. Labor Policy and Administration
4. Administration of Codes
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D. Interpretation and Adi.iinistration of Section 7 (a)
1. Inteirpretation of Section 7 (a)
2. Administration of Section 7 (f"-)
E. The Relation of N.E.A. to Other Federal and State Government
Agencies
1. In Code Mailing
2. In Code Content
3. In Adr.iinistration
... 4. In ConTOliance
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LA.BOR STUDIES - INTRODUCTION
Preliminai7/ Sirnnar:/ of irincLin(g:s
Tlie National xlecover2'' Act v;as passed durin;'^ a period of wide-
spread ■oiiemplo^TTient, depressed rrages, and a "breairdovm of many of the
normal afjencies for industrial stability. The N.R.A. was set tip, in
the words of the Act, to "red^ice 0.116. relieve -aneinploynent, increase
piirchasing power iraprove the standards of lator (and) induce
and ina,intain united action of lalDor rjid raanagenent." Though these
objectives were explicitl;.- stated in the PreaiilDle, the Act itself in-
dicated onl;- vaguely the goals to "be attained or the specific means of
realizing them. These were more clearly and definitively outlined
lay the President and the Administrator.
Just as significant as oojectives and policy was the actual
administration. N.R.A. could choose among various methods. It relied
chiefly upon Section 3(a) of the Act. Tliis choice conditioned the re-
sults in so far as standards and collective "bargaining were concerned.
Similarly, the segregation of the administration of Section 7(a)
vitally affected the development of that provision of the Act, Tliese
conditioning administrative factors played a considerable part in de-
termining the results of N.R.A.
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COIITROL OF KOUliS MD HESI^'tPLOHvIENT
Table of Contents
I. PROBLEMS TO TOUCH THE COIITEOL OF HOURS GAVE RISE
A. Establishment of a Ba.sic Weekly Schedule
1. Reasons for Problem in N.R.A.
2. Situation in Pre-1I,R.A.
0. Who Raised problem in N.R.A.
4. Nature of the Problem
3. Seasonal and Peak Period Adjustment
1. Situation in pre-N.R.A.
2. Basic Hours and Seasonal and peak period Adjustment
3. Hov; Was problem Raised
4. Nature of the Problem
C. Limitations on Daily Hours and Days per Week
1. 7/ork Day and Week as Norms in pre-N.R.A.
2. Days Per Week as Definitive Regulation
3. Relation of Liuitations to Basic Week
4. Compliance Requirements of Codes
5. Nature of the problem
D. Occupationa-1 Differentials
1, Occupational Hour Patterns pre-N.R.A*
2, Ho'Y Was Problem Raised in N.R.A.
3, Basic Hour Negotiations and Occupational Exemptions
4, Nature of the problem
E. Control of Hours of O'^Tner-Operator
1. Reasons for problem: Free Competition and Control
2. provisions of the Act
3. Nature of the Problem
F. Defining of Working Time
1. Reason for ApP^-arance
2. Nature of the problem
C-. The Interrelation of the problems of Reemployment,
Regularization, Seasonal Adjustment and Adequate Compensation
II. PROBLEMS OF ESTABLISHING POLICY AND FORIuTJLATING PROVISIONS AND
THE NATURE OF POLICY
A. Introduction
B. Basic Full Time Work Week
1. The Act
2. Early position
3. Cotton Textile Code and P.R.A.
4. The Establishment of the patterns
5. Basic Hours and Exemptions
6. Efforts to Reduce Hours
(a) Diversity of Patterns
(b) Administra.tive and Labor Dissatisfaction with
Reemployment Effects
(c) Individual Code Approach
(d) General Movement - March 1934
(e) Efforts in Individual Groups of Industries
(1) Apparel
(2) Mining
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(3) Toxtilos
(4) Other Industries
(f) The Hovival of Goncral Movoment - January 1935
?• Efforts to Increase Hours
C, Occupational Differenti;jls
1, General Policy
2, ^lecific Classes
(a) Partial Exenptions
(1) Repair and Maintenance
(2) Continuous Process
(3) Outside Installation
(4) Delivery
(5) Shipping ??jid Stock
(6 ) Sup e rvi s 0 r y
(7) Professional ajid Technical Enplojees
(8) Key Workers
(9) Other Classes
Ch). .Complete Exemptions
(1) Managers
(2) Executives
(3) Traveling Salesmen
(4) Emergency Maintenance rnJ. Repair
D» Scar.onal and Peak Period Adjustments
1, IIIIA - An Instrument for "Elexibility"
2, Acceptance of Need for Specific Tolerance
(a^ Circumstances Hien AiXoroved
Co) Circumstances "^lien Disapproved
3# Methods of Tolerance
(a) Averaging
(h) Overtime
(1) Base for Overtime
(2) Hate for Overtime
(3) Maximum Limits
(c) Peak
(d) Emergency
(e^ Peak - Special Groups
4, Criteria for Determining Selection of Method for Tolerance
E. Daily Hours
1» Need for Sriecific Regulation
2. Desire for Tolerance
3» Norm Per Day
4, Maximum Per Day
5« Overtime Pay As a Control
Im Days Per YJeek
1, Legislative Control
2, Desire for Tolerance
3, Norms
4« Compliance
^t Uniformity of Policy
G-« Control of Ov/ner-Operator
.1 • Emergency and Economic Necessity vs Basic Legal and Social
Concepts
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a) Right of the Individual to En^^age in Commerce and Trrde
.b) Interpretiiig the rational Industrial Recovery Act in
Relation to the Problem
(c) Constitutional Limitations Involved in Attempted Regu-
lation of Certain Trades and Industries in which the
Ov/ner-Operators Abound
2, The OwnerrfOperator-Proprietor or Worker
(a) A Proble.xi for Trade Associations .ajad Trade Unions
(b) Effect of Re/^ulation upon Development of Cooperatives
(c) Subtcrfijges to Avoid Jurisdiction of the Recovery Act
3» The Owner-Operator and the Problem of Unemployment
(a) The Small Unit and Working Employer as Answers to
Technological Unemployment
(b) Factor^ Involving Public Relief
'■ * '4# P.R.A, SuDstitutions and Early Codes as G-L^ldes to Develop-
ment of Policy
5, Codification and N.R^A, Objectives as Affected by G-rouo In~
terests
(a) Trade Associations and Small Units
(b) Labor 5 Organized and Unorganized
H. Working Time
1» Deadheading
(a) Condxtions Under Which Issue Arises
(b) Conflict of Interests in Issues ,
(c) Conflicts of Precedents for Decision
(d) Efforts at Policy,'" Determinant ion
2, Waiting Time
(a) Condition Under '.Thich Issues Arise
(b) Policy Under iuR.A.
3, Split Shift
(a) Conditions Under Which Issues Arise
(b) Policy Under N.R.A*
4, Beginning Time
(a) Conditions Under TJhich Issue Arises
(b) Policy Under N.R.A,
5* Guaranteed Work Time
(a) Conditions Under Tilhich Issue Arises
(b) Policy Under 1I.R«A.
6. Lunch Interval
,a) Conditions Under Which Issue Arises
•b) Policy Under N.R«A,
7 • Summary
I, Regiilarization of Employment
1. Objectives of W.R.A.
2. W.R«A. Interest in Regularization
3. IT.R.A, Policy
J, l£ibor Policy on Control of Hours
III. PROBLEMS OF ADIIINI STRATI ON OF HOURS PROVISIONS
A» Nature of the Problem of Administration
B. Weekly Hours
1« Provisions Regulating Weekly Ho"uj:s
(a) Basic Full Tine Week
(l) P.R.A.
a. Original Agreement
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(2) Substitutions
(3) Reduction in Full Time Hours Effected by Substi-
tutions
2. 1T.H.A,
(a) Code Provisions
(b) Comparison of Full tine Hours Under P.R.A. and N«r.«A.
C. ',7eekl;r Hours and Tolerances
1. P.R.A.
(a) The Original Agreement
(b) The Substitutions
(c) The Hours Pattern for Basic and Clerical Employees
2. IT.R.A.
(a) Weekly Hour Patterns in H*R«A. Code oy Types of Toler^
ances
(b) Comparison of Hours in II.R.A. Codes and P.RJl.
(c) Contrast 'in Patterns Among Industries
o« Comparison of Tolerances and Seasonal Behavior of the In-
dustry
4. Significance of Tolerances
D» Adj-iinistrative Experiences with Var^ring Tyoes of Tolerancen
1, Averaging without Overtime
(a) Industrial Experience
(1) Exemption, Stc.ys, Exceptions
(2) Technique for Handling Exemptions
(3) Code Revisions
(4) Plant Experience
(b) Personnel Experience
(1) Lay-Off'
(2) Unions
(c) Administrative Experience
(1) Interpretations
(^). Code Conflicts
( 3) Compliance
(4) Enforcement
(d) Statistical Evaluation of Experience
2, Averaging YJith Overtime
(aO Industrial Experience
d) Exemptions, Stays, Exceptions
(2) Technique for Handling Exemptions
(3) Code Revisions
(4) Plant Experience
(5) Personnell Experience
• a. Lay-off
b. Unions
(b) Administrative Experience
(1) Interpretations
(2) Code Conflicts
(3) Compliance
(4) Enforcement
(c) Statistical Evaluation of Ejcperience
3, General Overtime 'Jith Max: nun Hours
(a) Industrial Exioerience
(1) Exem-ptions, Stays, Exceptions
(2) Technique of Handling Exemptions
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(3) Code Revisions
(4) Plant Experience
(5) Personnel E:qjerience
a. La,y-Off
b. Unions
(b) Administrative Experience
(1) Interpretations
(2) Code Conflicts
(3) CoTnpliance
(4) Enforcement
(c) Statistical Evaluation of Eroerience
4. General Overtime Vlith Unlimited Hoiirs
(a) Industrial Experience
(1) Exeiiiptions, Stays, Exceptions
(2) Technique of Handling Exemptions
(3) Code Revisions
(4^) Plant Experience
(5) Personnel Experience
a, La^^'^Off
b. Unions
(b) Administrative E:roerience
(1) Interpretations
(2) Code Conflicts
(3) Compliance
(4) Enforcement
(c) Statistical Evaluation of S:^•perience
5, Overtime Provision for Excepted Period
(a) Industrial Experience :
(1) Exem.pt ions, Sta^s, Exceptions
(2) Teclmique of Hai-dling Exemptions
(3) Code Revisions
(4) Plant Ei^qoerience
(5) Personnel E^iperience
a, La^-Off
b» Unions
(b) Administrative Experience
(1) Interpretations
(2) Code Conflicts
(3) Compliance
(4) Enforcement
(c) Statistical Evaluation of Experience
6» Flat Maximum Hours
(a) Adeqijiacy of the Methods to Meet Seasonal and Peal:
Periods
(b) Need for Exemptions
(1) Exemptions Granted
a. Criteria for Granting
b.« Conditions for Granting
(2) "Characteristics of Exemptions Granted
a, Emergencv
bo Industry Seasonality
c« Plant Seasonality
d» Others
(c) Adequacy of Exemption Teclinioue for Industrial Heeds
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(l) Organization
(•2) Methods and Procedure
(3) Promptness
E« ";7-.luation
IV. 0CC"JPA::]I01]aL DIFJ^hREIITIALS
-!• CoJ.e Provisions Governing;: Occimational Differentials
1, P.R«A. and Its Sutstitutions
2» Code Provisions
0. pattern of Occupations Exempted "b;'' Codes
4. Sigificance of Occupational Hour Differentials
(a statistica.1 Stud;?-)
5. Occuoational Differentials Before U.Ii.A. and Under Codes
(a Statistical Study)
B» Adi-iini strati on of Occupational Differentials
!• Industi*y*s Use of Occur)ational Differentials
2. Interpretations of Occuioation Exenption and the Contro-
versy of Extension of Class
Cm Stays, Exemptions and Exceptions
(a) Causes
(b) Extent
(c) Effect
4. Code Ivlaladjustments
C, Li:.i: tation of Daily Hours
1. Code Provisions Governing Hours Per Da;/-
(a) Arranged by Degree of Fleidbility
|"b) delation of Daily Hours to '.'eekly Hours
.c) OccuTDational Differentials
2« Administrative Eiaoerience With Dail^' Hours Provisions
(a) Methods of Liraitation
(1) Flat Maximum
a« Adequacy of Such Limitations
"b, L'eed for Sxerrotions
(2) Overtime Payment
a» Hours Worked in Excess of Basic Hours
"b. Administrative Problems
c» Conpliance Problems
(2) Unlimited Hours
a« Hears Vforked
b« Ad:iinistrative Problems
c, Com'oliance Problems
(4) Flexible Hour Arrangement
(5) Limitrtion Per Day vs T\7enty-Four Hour Period
D, Limitation of Days Per 7eek
1, Code Provisions Governing Dr.ys Per Week
(a) Arranged by Degree of Flexibility
(b) Rela-tion of llumber of Days to "Teekly Hours
(c) Occupational Differentials
2. Administrative Ex;oerience
(a) Exemptions
(b) Com;oliance
(c) Operative Information
E, Defining Working Time
1, Extent of Code Definition and Regulation
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(a) Dead]ie£,ding
(b) Waiting Tine
(c) S^lit Shift G
(d.) Beginning Time
(e) Guaranteed Work Time
(f) Lunch Interval
2, Administrative E:qperience
(a) Exem-otions
^"b) Enforcement
,c) Issues in Administration
E« Control of Ho'ors of Or,ner Operator
!• Controls Developed in the Codes
(a) Opening cjid Closing Hours
(b) Other Labor Provisions
(l) Employer's Hours
(c) Special Trade Practice Provisions
2. Administration of Code Provisions
(a) How II.R.A. Policies Functioned
(1) Local variations based on majority rule
(2) Exemptions and, Exceptions
(3) The Problem of Precedents
(b) Compliance and Enforcement
(1) Some practical considerations
(2) Legal Restrictions
(3) Enforcement Machinery
(4) State Recover-^ Acts and I.Iunicipal Ordinances a.s
h'.R.A. Au:dli8ries
(c) Effectiveness of Regulation
&• Regularization of Emplo^nnent
1. H.R.Aa Code Provisions
2» Hie Administration of Code Provisions
3. The Automobile Industr2-
4. Production Control and Regular! zat ion of Employment
H» Other General Adj.iinistrcative Problems
l*'.Xodo Conflict
2, Compliance And Roenf orcement
V. Summary and Evaluation of the Result of iI,R»A» Experience
A, Reemployment
It Unemployment 193.^-35
(a) Total by months
2» Employment 1933-35
(a) Total by Months
(b) Total by N.R«A. Industries, Other Industries,
Agriculture
(c) Totals by Specific N.R.A. Industries
(.1) Manufacturing
a. Class of Employee: Sa,laried and Wage-Earner
b. Specific Codes
(2) Other Groups
(d) Totals ''oy Codified and Uncodified Industries
(e) A Study of Production, Man Hears and Employment Trends
B, Hours Worked
1. Average Weekly Hours of Employers
9412
(a) Er Indus trj-
(1) Heduction in Average Hoiirs
(2) -\clation of ."^eduction to Production and Han Ko-jt
Trend
(3) Helation of Hed-'J-ction to 3rvolo;n-ient Trends
(4) Helation of Average Weekly Hours to Code Pro-
visions
(b) By Class of I]rroloyee
(1) Clerical
(2) Other S^jecial Groups
2. Distribution of Hours T7orked
(a) Average of Hours Worked
(1) By Industry
a» Proportion atta-ining full tine
b» Proportion e:;ceedinA: basic hours
i. By t^roe of class
ii. By t^^pe of provision
(b) Helation of Hange to P.H.A,
Pre 1T»H»A,
(1) By Glass of Enploj^er
a. Clerical
b. Other Special Groups
C« Elasticity and Heenployaent
D« Occupational Exeraotions and Heemploj/nent
E. Control of Hours and He:<;ularization of Ilriploynent
P. Control of Hours and Owner-Operator
941
n
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COIITROL OF HOUT^S AlID REEMPLOYMENT
preliminary Summary of Findinf;s
This study has dea,lt primaril^r v/ith the efforts of N.R.A. to liave per^
sons reemployed in private industry through the shortening of hours, of em—
plojT-ient, The araount of reeLiplo;^'Tnent is a function of the volume of i)usi'-
ness as well as of the restriction of working hours. The variety of the.' "
exer.rptions incorporated in and of the evasions made possible "by-the codes,
must all he interrelated in appreciating the final results. Managerial
proDlems were raised, of consequence to the proper conduct of the plants.
The N.R.A. supplemented the Black Thirty -Hour Bill and the Perkins
amendment for a flexihle hour regalation under a licensing system. The
code system was to provide a flexible instrument "by which the regulation
of hours might he adapted to individual industries, even though no defi-
nition of standards to guide the determination were included in the Act,
The result of the P,R,A, substitutions was to convert the "basic thirty-
five hour v/eek for productive employees into a general forty hour week.
The original P,R,A. provided for a forty hour maximum week for non-
productive employees ar d a thirty- five hour week for productive workers.
Employers were given the right to v;ork their employees for forty hours,
however, during an^'- six weeks "before Decem'ber 31, 1933, the initial ter-
mination date of the Agreement, This tolerance was removed by Executive
Order from all agreements signed on and after October 1, 1933,
A total of 382 substitutions to the original P.R,A, were apiproved.
Among these were 353 substitutions v/hich modified the hours of labor of
productive or factory emplo^'^ees, and 234 which modified the hours of
non-productive labor. Substitutions modifying the wage provisions of
the Agreement were significantly fev/er. There were only 56 modifica-
tions of non-productive emploj^-ees ' wages, and 239 modifications of pro-
ductive wage rates. Industry's greater concern" with hour regulations
is th.i.s evidenced.
An examination of the revised hours reveals that less than 10 per-
cent of the employees in industries operating under P.R.A, substitu-
tions vrere subject to a flat maximum of forty hours per week. Another
seven per cent were subject to flat maximums ranging from thirty-five to
fifty per v/eek. The remaining 83 per cent v/ere subject to more flex-
ible types of hour limitations.
The great bulk of clerical v;orkers were allowed, under the P,R,A,
substitutions, a forty hour v/eek. About 250 substitutions established
flat m3::iimum v/eekly hours. Most of these were for forty hours, but thejr
ranged from forty-four to fifty-four.
The code set-up yielded similar results. While a small number of
codes had basic weeks of less than forty hours, there v/as a much larger
number v/ith more than that number. Furthermore, the codes were so
written that most of those providing for forty-hour weeks permitted, in
actus,l practice, much longer ^'^orlcing v/eeks,
9412
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ReemiDloyinent v/as most rapid during the early days of the codes, Tdb-
fore industry vjas adjusted to the plan of surmounting the regulation of
hours by efficiency methods and by exemptions, Mr, Whiteside *s statement
of Iloveraher, 1933, marks the high point of this phase. To assure its a^D-
plicction the hearings of March, 1934 v/ere held* The President made a
plea for a 10 per cent reduction in hours and only tv/o industries realljr
responded. Officially N,H,A, did not again definitely espouse shorter
hours. Labor continued the effort and succeeded in several cases *- par-
ticularly in the coal, the cotton garment, and the milliner^'- industries.
In the cotton textile industry a national strike for a thirty-hour noek
failed of its objectives, I-h the slate industry the effort rzas begun too
latQ, In the boot and shoe industry the project \7as sent for studj'" to a
special research commission,
A study has been made of the exemptions from the basic work ueek es"
tablished in the codes. The occupational differentials, though less
striking at first blush than the seasonal and peak exemptions, vrere more
permenent, and continued through the entire period and the year. The ±n-
dustries a,sked for these exemptions on the ground that the persons af-
fected T7ere necessary to develop opportunities for the reemployment of
others, frequently, normal basic hours v/ere accepted by an industry onlj?"
because such exemptions v/ere granted. However, it often happened not
only that the exempt classes vrere vaguely defined, but also that they em-
braced large and significant numbers of v^orkers. From the statistical
studies completed to date it may be estimated that 12 per cent of the em-
ployees covered were excluded by limited occupational exemptions, while
another 12 per cent w.ere given total exemptions from the hour provisions.
The Administration's policy on the subject v/as practically unformulated,
even though precedents firmly established the exemptions as justified.
In individual industries the exemptions affected more th^an 50 per cent
of the employees. In part the situation was due to the loose drafting of
the codes, as well as the need for compromise in negotiations. In other
cases it v/as due to sheer ignorance of the significance of these exeiiip—
tions, cjid to the Deputies* impatience to have codes approved.
The situation with respect to the seasonal and pealc allowances is
even more confused. Policy was present, but the enforcement of it was
lax. Standards of enforceability were absent. All types of tolermce
in the basic' hours were permitted in most codes, 115 codes did ha.ve flat
mai^dmun hours, but otherv;ise the exemptions tended to nullify the basic
hour provisions.
The experience with the flat maximum hour codes indicates that most
of the exemptions were not due to the seasonal character of the demand.
Accidental factors' which are not directly associated with the seasonal
peaJc, however, v/ere rightfully handled by exemptions. The exemption
procedure in these cases, though faulty in some particulars, was routin—
ized sufficiently to answer the real needs.
The e^qoerience with daily hour regulation and its relation to total
weekly hour control stands out as of importance. The most significant
project unoertoken has been a -study by the Bureau of Public Roads on the
effect of ,the length of the day on productivity, N,R,A, files contain
little. These findings may be summarized as follows:
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"In deadheading the conditions conducive to the problem are
rather well defined. An a"bund?nce of material is availahle v/hich
e:rposes the practice from all angles. The industries v;here this
pro"blera malces its axjpearance are Trucking, Railroads, Motor Vehicle
Retailing, sjid others v;here transportation is a mp.jor labor opera-
tion. The material on iT,H,A, policy regarding this pro"blera is
scarce, "being confined to compliance action. The report of the
off-duty and deadiieading committee undoulDtedly would have led to
some formal action, proloaTDly in the nature of an amendment to
codes, hrd not the action of the Supreme Court ended all moves in
that direction*
"The legal regulations pertaining to this pro^blem are chiefly
state laws, iDut the recent rmendment to the Interstate Commerce Act
will uiidoulDtedly do much to make for uniform handling and enforce-
ment. The issues merge into the question of what constitutes off-
duty hours, and m.?jiY different agencies have rendered opinions on
the ouestioii. Courts, labor unions, the Department of Labor, in-
dustries and others have gone on record with definite statement of
their opinions. The results h^.ve been found to include (l) the ef-
fect -of regulation on reemployment, which is very minor, but tends
to stabilize employment for those already employed; (2) the ^'ffect
of regTLlation on tmioloyees' health; and (5) safety for other motor-
ists on the road,
"The absence of a.dequa.te code regulation under the 1nI»R,A, v/ould
seem to indicate that either (l) the problem presented too many
angles to be dealt v.dth hurriedly' under the short life of the codes,
or (2) opposing influences were strong enough to prevent nny adequate
coverage of the problem on a nation-wide basis,
"In the problem of waiting time or interruptions of work the mat-
ter assumes varying forms, depending on the type of industry or the
occupations affected, For instance, in line t^rpes of operation we
note the occurrence of waiting time when the line breaks dovm, \:hen
materials run short, or for other reasons peculiar to the type.
There is the problem for service men who are on call, even though work
to keep them fully occupied may not be available. Mechanics in garages
and other typ^es of repair shops do not always have an even flo\/ of
work, yet must bo constantly on hand if they expect to share in a.vail-
able jobs. Truckers must 'wait for loading and unloading; construction
workers a,re victims of weather, lack of materials, etc,; longshoremen
must wait for ships to dock or sail; and many other tjrpes of labor
find waiting time a constant threat to their pay envelopes,
"The lJ,Rt,A« .was very definite in its policy on this point. There
were 16 or more codes which specifically made the 'availa,bility of the
employee a sufficient reason for pajnnent for all hours on duty, whether
actively engaged or not. Administrative Orders X-124, 154-7, 118-38,
44-6, 399-lC, and 82-12 all dealt specifically with this problem. In-
terpretations and decisions of the Advisory Council, the Compliance
Council and the Code Advice Committee all expressed definitely the
H,R,A, policy. The unions in many of their agreements have provisions
covering this practice,
9412
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"ffaiting time is a uuch ersier pro"bleT.i to re^ilate tlip.n dead-
heading, . since violations CLn uore easily "be uncovered rjid repoi'ted.
Then too this natter ccn "bo directly legislated a-£ainst, -.vhereas the
deadheading problem must "be regulated "by regulating consecutive hours
on duty and "by the stipulation of mininrum hours iron and off. the
vehicle,"
The findings with regard to the ov-ner-operator proTDlem nay "be sun-
marine :1 as follo'js:
"The difficulties involved in the attempted regulation under
the codes of many trades and industries'TPor; trrceahle to the e::ist-
ence of a. large number of small entrepreneurs, lcnc\7n as one-mcji
operators or cnner-Gperr.tcrs, as well as by other titles. The task
of classifying those individuals, and of establishing their status
as employers or workers, was specially perplexing, and caused a
great deal of concern to industry and to organized labor in a number
of fields. These entrepreneurs nominally worked for themselves, but
frequently employed one or several workers on a limited or relative-
ly permanent basis. In the latter ca.se the common practice wa,s for
such prcprietor-workers to a.ssume a dual capacity - i,e,, as owner
and as worker or operator,
"Competitive problems affecting both industry and labor arose.
Under approximately 120 codes it was found necessary'- to attempt regu-
lation of the sta.rting end. finishing hours of these employer-workers
and o\:ner-operators, in order to protect \/orkers' standards pud., pre-
vent unfair competition. In addition, a number of other la.bor and
fair trade practice provisions were inserted into the codes for the
purpose of attempting some mea^sure of control ever owner-opera.tors,
and sometimes over members of their families who v;orked in their es-
tablishments. Practical and legal difficulties in administration and
enforcement arose from time to time, and efforts were made to esta-b—
lish policies to deal with them,
'"Owner-operator competition, v;hile found in a number of fields,
became a ma^ior problem in the service trades in the trucking, print-
ing and food industries, in the retail groups, in the construction
trades and in small specialty manufacturing enterprises. The extent
of ovmer-ope-rator activities, and their effect upon proprietors and
workers, is revealed by a statistical analysis, covering a number of
trades and industries,
"It bccaine increasinly evident that enforcement of o'..ner-opera.-
tor code provisions was difficult and unsatisfactory, especially in
those fields xihere Labor was not organized. Also, in cases such a.s
the service trades where, because of the intrastate nature of their
operations, it/.vas doubted if regulation and enforcement could pro-
ceed on a legal basis, attempts were made to decentralize actual
acjninistration and enforcement by encouraging the formulation of
State Recovery Acts and municipal ordinances based on the police
pov/er,
"Some vitally importa.nt issues are involved in this problem,
which touch deeply on the historical, legal and social tra.dj-tions
-281-
of the coimtry. Attempted regalation of these persons and groups
v;as decried "by many as an invasion of rights which the Constitution
and the Recover^/ Act protected. On the uhole organized lahor as
uell as industry pleaded for regulation as a matter of economic
necessity. It was contended that regulation of owner-operators
would increase employment, eliminate unfair competition and thus
promote the purposes of the Recovery Act, On the other hand, vocal
and powerful opposition developed, "based on the fear that_ these
very small units would "be crushed,
"Several months prior to the original expiration date of the
Recovery Act the situation V7as still characterized "by uncertainty
and confusion; and the invalidation of the codes pro'bahly prevented
this ojiestion from receiving really serious consideration as a
"basis for future policy,"
The pro"blem of the regulo.rization of employment is of special
interest, K,R,A, was impressed v;ith the need for reemplojinent^ "but
within the organization the annual income of workers also "becajne a mat-'
ter of serious interest. In the early code hearings this pro"blem was
discussed^ especially in the construction and automo"bile industries,
Hov/ever, little was done "by the code authorities. It was the reopening
of the codes in Novem"ber, 1934, that led to the study of the matter hy
industries, and the promise of definite action. Many codes contain pro-
visions on the suhject, "but N,R,A, failed to help "by setting up an
agency to assist in the development of plans. Production control does
not necessarily lead to regularization of . employment. It frequently
merely places the "burden of irregularity on the workers, and results in
a mere sha,re— the-work program, • .
9412
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CONTROL OF WAGES
«
Table of Contents
I. PROBLEMS TO WHICH THE CONTROL OF WAGES GAVE RISE
A. Setting the Minim-um Wage
1. Means of Stopping Deflation of Wages
2. Effect of Method of Establishing Rate on Actual Mininrum
3. Setting Minimum Wage, "by Other Legislative Bodies
4. Nature of the Problem in N.R.A.
B. Wages Below the Minimum
1. Position of the Inexperienced Worker Before N.R.A.
(a) Types of Training Required
(b) Problem of Supply
(c) Problem of Remuneration
(d) Relation of the Inexperienced and the Experienced Worker
2. The Inexperienced Worker in State Minimum Wage Legislation
3. Negotiation Aspects of the Problem
4. Need for Inexperienced Workers versus Increases in Minimum
Wage
5. Sex Differentials: Their Bases and Problem in N.R.A.
C. Geographical and Population Differentials
1. Area Differentials Before N.R.A.
2. Objectives of N.R.A. and Rate of Increase of Minimum Wage
3. Industry Assent and the Reconciliation of Areas
4. Other Aspects of Problem in N.R.A.
5. Color Differential: Their Basis and Problems
D. Wages Above the Minimum
1. Control of Such Wages Under Minimum Wage Laws
2. Appearance of the Problem in N.R.A.
3. Purposes of N.R.A: Conflicts" of Interests
4. Relation to Purchasing Povzer Concept
II. PROBLEI>;I OF ESTABLISHING POLICY AND FORMULATING PROVISIONS AND THE
NATURE OF POLICY
A. Introduction
1. Definition: the Nature of Policy
2. Sources of Policy
3. The Determination of Policy
(a) Formative Period to April 9, 1934
(b) Pormulative Period, April 9, 1934 - May 27, 1935
3. Minimum Wage
1. Policy
(a) The Law
(b) General Statement of Policy and Objectives
(1) By the President
(2) By the Administrator
(c) The First Code
(d) Policy as Indicated by the P.E.A.
(e) Subsequent N.R.A. Policy
(1) Amount of the Rate
(2) Form and Scope of the Minimum Wage Rate
a. Definiteness
b. Hourly and Weekly Rates Pother Than Piece Rates
c. Piece Rate Coverage
d. Coverage
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2. Standards
(a) Criteria
(b) Conflict of Criteria
3. Code Provisions
4. Theoretical Issues Underlyins Policy
C. Wages BelovT the Minimum
1, Learners and Apprentices - Inexperienced Workers
(a) Policy
(1) The Act
(2) The First Code
(3) The President's Reemployment Agreement
(4) Subsequent K.R.A. Policy
a. First Model Code
Id. . Second and Third Model Codes
c. Executive Order
d. Findings of Review Division
6. The Basic Code
f. Confidential, Tentative Formulation of Labor
Policy
g. Advisory Council Decisions
h. Significant Changes in Learner Policy
i. Federal Apprenticeship Committee Letter
j. Attitudes of the Boards
i. Industrial Advisorj- Board
ii. Research and Planning Division
iii. Labor Advisory Board
iv. Consumers' Advisory Board
k,. Administrative Order No. X-137
1. The Code Planning Committee
(b) Code Provisions in Relation to Policy Changes
(1) Apprentices
a. Before and After Executive Order #6750-C of
June 27, 1934
b. TjrTfical Provisions in Line with Policy Changes
c. Increasingly Careful Use of Term
(2) Learners
a. No Marked General Change in Provisions
b. Typical Provisions in Line i;7ith Policy Changes
(3) Bargaining Determinants
a. The Inexperienced Work«r Problem in Collective
Bargaining Codes
b. In Codes with Representative Bargaining and
Union Support
(c) Theoretical Issues Underlying Policy
2, Aged, Handicapped, and SIot^ Workers
(a) Policy
(1) Prior to Executive Order
(2) Regulation by Executive Order
(b) Theoretical Issues Underlying Policy
3, Special Classes (Office Boys, Office Girls, Juniors, Special
Occupations)
(a) Policy
(b) Standards
(c) Theoretical Issues Underlying Policy
4, Female and-Light and Repetitive Occupations
(a) Policy
9412
9412
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(1) Rates for Females
(2) Rates for Light Occupations
(3) Equal Pay for Equal T^ork
(b) Standards
(c) Theoretical Issues Underlying Policy
D. Geographical and Population Differentials
1, Policy
(a) Policy in Code Writing Period
(1 ) The National Industrial Recovery Act and Interpre-
tations
(2) The First Code and the P.R.A.:
(3) Other Important Codes; the Administrator's Letter
(4) Statements on Administration Policy in the Code
Making Period
a. The President, April 22, 1934
"b. The Administrator: Retail Code Exemption
c. Dr. Gustav Peck, Administrative Assistant to
Executive Officer, April, 1935
(5) Conclusions on Policy in the Code Writing Period
a. Population Differential
"b. Geographic Differential
("b) Development of Policy in the Code Administration Period
(1) The Problem Before the Advisory Council
a. The McLaren Rubber Company
b. Proposed Code for the Pacific Coast Dried Fruit
Industry
(2) Attempt to Formulate a Definite Policy
a. L. C. Marshall, -Assistant Deputy Administrator
for Policy, June 6, 1934
b. L. C. Marshall, Assistant Deputy Administrator
for Policy, August 26, 1934
c. Committee on Labor Policy, October 25, 1934
d. Revised Model Code, January 7, 1935
(3) Conclusions on Attempt to Formulate Policy
2, Standards
3, Theoretical Issues Underlying Policy
E. Wages Above the Minimum
1, Introduction
(a) The Meaning of the -Term
2. Policy
(a) The Normative Period
(1) Statement by the President
(2) Provisions and Interpretations of the President's
Reemployment Agreement
(3) The First Code
(4) The Policy Memorandum of October 25, 1933
(5) Model Codes, October 25th and November 6th, 1933
(b) The Formulative Period
(1) Policy GrbuiD Period
a. Labor Policy Group
b. Basic or General Code
c. Tentative ForrnvJation of Labor Policy
d. The Electric and ITeon Sign Industry Case
(2) Advisory Council Period
a. The Steel Casting Industry Case
b. Questionnaire to N.R.A. Field Offices
-285-
# c. The Electric and Neon Sign Industry Case
d. The Bedding Manufacturing Industry Case
(c) The N.R.A. Advisory Boards
(1) The Lator Advisory Board
(2) The Legal Div?.sion
(3) The Consumers' Advisory Board
(4) The Division of Research and Planning
(5) The Industrial Advisory Board
(d) The Code Planning Committee
3, Standards
4, Analysis of Factors in Determining the Code Provisions
(a) The Code Bargaining Scene
(h) Cost of Lahor
(c) Wages Established by Other Regulations
(d) Compromise for Market Practice Provisions
(e) Superiorities of Industrial Groups
(1) Unionization of Employees
a. American Federation of Labor
b. Independent Unions
c. Company Unions
d. No Union
(2) Organization of Management
a. Chambers of Commerce
b. Associations of Allied Industries and Trades
c. Trade Associations
d. Financial Controls of Individual Enterprises
(3) Domination by Large Units of Enterprise
(4) Domination by Centralized Groups
(f) The N.R.A. Advisory Boards
5, Collective Bargaining Alternative
(a) Sub-Sections 4 (a), 4 (b), 7 (a) and 7 (b) of the Act
(b) Area Agreements
6, Theoretical Issues Underlying Policy
III. PROBLEMS OF ADMINISTRATION OF WAGE PROVISIONS
A. Nature of the Problem of Administration
B. Minimum Wage
1. Code Provisions
2. Problems of Administration
(a) Amendments
(b) Stays, Exceptions, Exemptions
(c) Interpretations
(d) Compliance
(e) Enforcement ■■ • ;■ ■ ,
(f) Code Conflict .'.. ^
C. Wages Below the Minimum
1, Inexperienced Workers (Learners and Apprentices)
(a) Code Provisions
(b) Problems of Administration
(1) Amendments
(2) Stays, Exceptions, Exemptions
(3) Interpretations
(4) Compliance
(5) Enforcement
(6) Code Conflict
(7) Executive Orders
(8) Special Administrative Machinery
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2. Aged, Kandicapped and Slow Workers
(a) Code Provisions
(Id) Problems of Administration
(1) Amendments :_
(2) Stays, Exceptions, Exemptions
(3) Interpretations
(4) Compliance
(5) Enforcement
(6) Code Conflict
(7) Executive Orders
3. Special Classes
(a) Code Provisions
(b) Problems of Administration
(1) Amendments
(2) Stays, Exceptions, Exemptions
(3) Interpretations
(4) Compliance
(5) Enforcement
(6) Code Conflict
(7) Executive Orders
4. Female and Light Occupations
(a) Code Provisions
(b) Problems of Administration
(1) Amendments
(2) Stays, Exceptions, Exemptions
(3) Interpretations
(4) Compliance
(5) Enforcement
(6) Code Conflict
(7) Executive Orders
D. Population and Geographical Differentials _ •_
1. Problem of Adaptation and Interpretation
(a) Amendments
(b) Stays
(c) Exemptions
(d) Interpretations
2. Code Conflict and Code Harmonization
3. Compliance and Enforcement Problems
E. Wages Above the Minimum
1, Problems of Application and Interpretation
(a) Amendments
(b) Stays
(c) Exemptions
(d) Interpretations
2, Code Conflict
3, Reporting
4, Compliance and Enforcement Problems
P. General Compliance and Enforcement Problems .
IV. SIB/MARY AND EVALUATION OF RESULTS OE N.R.A. EXPERIENCE
A. Experience Under N.R.A.
1, Wage Movements and Trends
(a) In Relation to Specific Aspects of Wage Provisions
(1) Minimum Wages
(2) Wages Above the Minimum
(3) Wages Belo\7 the Minimum
(4) Geographical Differentials
9412
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w
In Relation
to
the P.R.A.
(o)
In Relation
to
Specific Industry Codes
(d)
In Relation
to
Cost of Living
(e)
In Relation
to
General Industry Recovery
(1) Hourly Earnings
(2) Weekly Earnings
(3) Annual Earnings
2. Payroll Experience and Trends
3. Labor Income During the N.R.A. Period
4. Relation of Wage Movements to Industry's Ability to Pay
(a) Labor Cost
(1) Relation to Total Cost
(2) Relation to Selling Price of Product
(3) Relation to Other Cost Items
(b) Significance of Code Wage Increases in Increasing Labor
Costs
(c) Industry' s Ability to Pay as Evidenced By
(1) Profits
(2) Interest and Capital Payments
(3) Possibilities of Shifting Costs to Consumers or to
Other Producers
(d) Relation of Labor Cost to Industry's Abilitjr to Pay
Increased Wages
B. Evaluation of Results of N.R.A. Experience
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CONTROL' CF TyAGBS
Preliminary Summary of Findings
Minimum \^at'^es.
The problem of increasing the purchasing power of labor by setting
minimum rates fcr workers in industry through codes of fair competition
raised a series of questions: (1) Wliat was administration policy in regard
to setting the minimum rate? (2) What were the standards followed in draft-
ing the minimum wage provisions of codes? (3) What were the actual code
provisions? (4) What were the theoretical implications and issues involved
in the whole problem of setting minimum rates for all industry? (5) Were
the minimum rates as adopted in codes actually effective, or was administra-
tion so weak as to render them in many cases inoperative? (6) What were
the actual effects of the code provisions in raising wages?
The objective of the minimum wage legislation was to increase
purchasing power. The method was that of minimum rates incorporated in
codes for specific industries. The rates were determined by a process of
negotiation and bargaining between industry on the one hand and labor and
the Administration on the other, where labor was strong and well-organized,
and between industry and the Adr:iini,stration, where labor was weak. The
Deputy Administrators were aided by Labor Advisers, who were themselves
under general insisructions to increase purchasing power.
Tliis general plan was in advance of all precedent so far as minimum
wage legislation in this country was concerned. Though it was in line with
the development and practice of the Wage Boards in Great Britain, it was
much more sv.-oeping in scope and more varied in its plan of operation. It
was, however, much less well worked out in detail and in effective policy
than the British Wage Boards.
Policy with respect to the fixing of minimum wages in codes of
fair competition tended to insist (l) that they should represent a substan-
tial increase in minimum rates of pay over those prevailing in June, 1933,
(2) that they should not unduly burden industry, and (3) that they should
allow the maintenance of a decent standard of living. The P.R. A. indicated
that 40 cents for 40 hours was the basic idea of a satisfactory wage. In
practice the above standard was exceeded in relatively few codes, and was
departed from in many cases where industries pleaded that they could not
afford such high rates. Rates as low as 15 cents an hour were approved,
provided it was shown that they represented a substantial improvement, and
that industry could not afford to pay more. Other important principles
which were more or less systematically applied included (1) refusal to re-
duce rates below the P.R. A. substitution, (2) the maintenance of weekly
wages, and (3) the setting of comparable rates in similar and competing
industries.
In general, the minimum wages in the codes were negotiated rates, in
which industry bargained with Labor and the Administration in cases where
Labor was organized and relatively strong, or with the Administration (in
which case the interests of labor were represented only indirectly by the
Labor Advisory Board) in instances where Labor was unorganized or relatively
9412
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weak. In pursuance of the objective of securing fair trade practice
provisions in codes to eliminate the evils of unregulated competition,
industries were willing to concede higher minimum rates for lahor than
would otherwise have been the case. Deputies were under general instruc-
tions to secure rates that would mean substantial increases in wages, in
order to carry out the purposes of the Act. The minima in the codes were,
then, essentially bargaining rates of wages.
Wages Below the Minimum
The problem involved in wage rates below the minimum was one of how
to take care of workers who were unable to earn the minimum, when the
latter was set at such a level as to mean a considerable increase in wages.
The questions were at what rates these subminimums should be set, what
limits should be placed on their application, and whether they could be
administered in such a way as to afford a reasonable relaxation of the
standards to take care of substandard workers, without leading to a general
brealcdown of the minimum rate structure.
The policy with respect to apprentices working under arrangements for
over 2,000 hours training allowed them to continue, under the general
supervision of the Secretary of Labor, in accordance with an Executive
Order dated June 27, 1934. No limitation as to the rate of pay or the
number of such apprentices were set in the codes.
'The policy with respect to learners, who were defined as persons who
had had no previous experiences in an industry, tended, in general, to
limit them to five per cent of the total number of employees, to require
wages equal to at least eighty per cent of the basic minimum, and to pro-
vide a learning period of six weeks or less. The learner was a person who
was learning the operation of a particular machine or a single process.
Actual provisions for learners and apprentices varied from these
general standards where longer periods were deemed necessary for learning
a number of operations. Of the 578 codes 213 contained learner provisions,
and 70 contained apprentice provisions.
In the administration of these provisions . special exemptions were
sometimes granted to allow the number limitation to be exceeded in the case
of new establishments, or to talce care of emergency or peak period demands.
Policy with respect to aged and handicapped workers was embodied
in an Executive Order which permitted wages below the minimum for those
certified by State Departments of Labor designated to administer this ex-
ception. Four-fifths of the codes had such a provision.
A few codes had a special clause allowing the employment of slow
workers at less than minimum rates.
Special occupations were often listed in codes at specified rates be-
low the minimum, or in some cases at a percentage of the basic rate. In
273 codes there were special provisions for office boys, subject to definite
wage minimums and to limits on the numbers or proportions of employees who
could be so classified. A number of codes included office girls in this
class without special definition. Watchmen who worked long hours often had
9412
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special rates "beiow the minimum. Helpers for route salesmen or drivers -
these bein^' /groups which operated in most cases without limit of hours -
were often except ed from .a minimum wa^e provision with, a subminiiiiira in
terms of a percentafje of the "basic rate e. j^r , eighty per cent. Other
similar classes were cleaners, janitors, outside workers, etc. Special
minima were i;)rovided in some codes for persons wlio received tips, for minors,
juniors, newspaper delivery "boys, and similar occupations.
In general, policy pennitted concessions to industry with respect to
these occupations, when accompanied "by safe^^ards prescribing the actual wage
or percentage of the minimuin, and limiting the nUi:iber of persons who might be
employed under ony such concession. Tnere such provisions were written into
the codes, an opportunity developed for bargaining between industry, labor
and the Adi:iinistration as to the actual rates, as well as to the form of the
safeguard.
Area Differentials
The Administration set minimum wages in codes of fair competition
as a means of increasing purchasing power. The Administrator interpreted
Section 7(c) of the Act as permitting differentiation in such minimum rates
according to the locality of. employments In the exercise of this power the
South was recognized, as a low wage area. In general the differentials al-
ready existing between the high and. low wage areas were decreased by the
greater increases in wage rates in the latter; while in the case of codes
having many wage districts they were, reduced by narrowing- the spread in the
district minimum rates. This greater increase in wage rates in the low wage
districts was considered by the Administration to be necessary to place
workers in these districts on a. decent standard of living.
In particular industries the, extent to which existing differentials
were nari'owed was influenced (1) by the ability of the members of the indus-
try in the low wage, districts to pay the higher rates; (2) by the need of
avoiding undue disturbance of comi:)etitive conditions among the various pro-
ducing areas of an industry; (3) .by the necessity of preserving the competi-
tive balance between industries; (4) by the preservation of the purchasing
power of the farmer, which limited the rise in wage rates in industries
directly affected agriculture; and (5) by the cost of living in the low wage
area. Special circumstances, as in the Bituminous Coal and Textile Indus-
tries, justified a differential rate structure. In general, the extent to
which- differentials were narrowed depended also on the relative bargaining
power of the members of an industry in- its various sections, since the power
to differentiate in minimum wages according to locality was one of the most
effective m.eans available to the Administration to secure voluntary accept-
ance of a code.
Any si-piificant study of area differentials, which includes population
and geographic differentials, must be primarily concerned with the adoption
of the codes for the major industries in the first few months of the
National Recovery Administration, . as this set the mold for the differential
rate structure. The development of Administration policy on area differen-
tials in the code administration period is of minor importance.
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Wafi-es Above the Minimum
The Administration did not formally or completely explain the meaning
of the term "wages above the minimum". It was commonly applied to the
workers other than those in the lowest pre-code wage class. The issue was
far-reaching and concerned a majority of the workers under codes and a
considerable share of the wage bill.
The two major elements of industry, management and labor, had opposing
views on the subject. Labor sought an industrial law to protect the wage
structure, particularly one which would reinforce the workers' freedon of
action and the processes of collective bargaining. It opposed legislation
that tended to encroach on or to lessen the force of collective bargaining.
Management, on the other hand, opposed legislation that interfered with
the self-regulation of business.
The Recovery Act appears to have provided sufficient basic law for
the enactment of a complementary law to protect the entire wage structure.
A policy that consideration should be given to the inclusion in codes
of some positive provision for wages above the minimum appears to have
been established by the Presidential Order accompanying the approval of the
first code, that for the Cotton Textile Industry, on July 9, 1933. No pro-
vision had been included in the code as proposed. The Presidential Order
modified the code to provide for the maintenance of certain existing
differentials.
The policy that consideration should be given to this matter appears
to have been reaffirmed on July 19, 1933, by the President's Reemployment
Agreement, though the clauses on the subject were vague. There was no
official announcement that such a provision was required, nor was a pattern
to be followed prescribed.
The model code issued for the guidance of industry continued to
indicate that provisions with regard to wages above the minimum were desir-
able, though not mandatory. The patterns offered were indefinite and
conflicting.
Notwithstanding the definite affirmation of the President with
respect to the first code approved and, later, the President's Reemployment
Agreement, no official announcement on policy followed. This may be account-
ed for by the apparent lack of a well-organized administrative machine in
the early days of codification. Neither was there any subsequent announce-
ment, however, which stated that such a provision was mandatory, nor did
the Administration offer any definite pattern.
A large number of the executives charged with the responsibility
of developing codes appeared to consider that the inclusion of some
provision, inoperative though it might be, was necessary to conform to
the unwritten policy. Eighty-seven codes, however, were approved without
any positive provision for wages above the minimum; and of these thirteen
contained no provision on the subject whatever.
The Administration formally announced only one statement of general
policy on this matter. This declaration was negative, incomplete and
9412
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indefinite. It was the decision of the original Policy Board, contained
in Par. No. 8 of the confidential Policy Memorandum issued on October 25,
1933, as follows:
"No union agreements are to "be written into codes
nor are schedules of wa^'es to be included in codes.
The latter does not forbid two or three basing
rates."
The terms "wage schedules" or "basing rates" were not defined. This
decision did not prescribe what, if anything, should be incorporated in
a code.
Labor's Income Daiing the NRA Period
The year 1934, the culmination of the N.R.A. code period, witnessed
an increase in National and Labor income for the first time since 1020;
and in addition a larger per cent of the national income went to Labor
than ever before. National income increased 11.3 per cent over the pre-
ceding year, while Labor's income gained 13.7 per cent.
This latter gain was more than sufficient to offset a 2.5 per
cent rise in the cost of living from December, 1933, to November, 1034,
with the result that Labor's real income or purchasing power increased,
in 1013 dollars, 11.1 per cent.
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CONTROL OF OTHER CONDITIONS OF EMPLCYMEFT
Tn."ble of Contents
I, The PrclDlem of Other Conditions of Employnent Arose in the Effort
to Control La"bor Standards
A. Relation of Control of Other Conditions of Employment to
Regulation of Wa-ges and Hours
B, Problems of the Regulation or Prohibition of these Conditions
II. Child Labor
A* Origin of Problem,
1, Child La.bor Amendment
2, Revolt of the. Child V;'orker
3, Minim-urn Wages and the Child Worker
4, Child Labor in the Debates on the NIRA
5, State Legislation on Child Labor
B. N.R.A, Policy on Child Labor
1, Cotton Textile Code Provision
2, The President's Reemployment Agreement
3, Formulation of Policy in Model Code Provisions
4, Movement for Elimination of Exemptions from 16 Year
Minimum
C. Code Provisions on Child Labor
1, General Minimum
2, Exemptions from Minimum
3, Minima for Hazardous Occupations.
(a) Specifically Enumerated in Codes
(b) Code Provisions Requiring Listing . ■
D. N.R.A* Lists of Hazardous Occupations ,.
E. N.R.A, Administration of Provisions , ,
1, Exemptions
2, Compliance and Enforcement
P, Administration of Certificate System by States
G-, Effect of Child Labor Provisions on. Employment of Child Workers
H, Eva-luation of N.R.A, Experience
III, Safety and Health Programs Under N.R.A,
A, Origin
B, Accident and Disease in Modern Industry
C, Nature of State and Trade Union Regulation
D, N.R.A, Policy
E, The Committee on Safety and Health: Organization and Progr?iu
P. Safety and Health Provisions in the Codes
G. Crystallization of N.R.A, Policy
H, Progress in the Adoption of Safety and Health Standards
I, Evalua-tion of N,R,A, Activities
IV, Contracting
A, Raison d'Etre of Contracting
B, Conditions Favoring Contracting
C, Types of Contracting
D, Abuses of Contracting
E, Regulation of Contracting Prior to N,R,A#
-294-
1, Industrial
2, Trade Union
P. Abolition of Contracting
1, Economic Conditions Bearing upon Abolition
2, Legislative Means
G-. N.P-.A. Policy on Contracting
H. IT.E.A, Regulation of Contracting
1,. Mechanisms
2, Organizations
:3. Sffect
I, Piece Workers and Contracting Systems
J. Methods of Dealing with Problem
V, Industrial Homework
A, Introduction
1, The Problem of Industrial Homework
2, Homework and the No.tional Industrial Recovery Act
3, Development of IT.R.A, Homework Policy
B, Code Experience
1, Summary and Analysis of Code Homework Provisions
2» Industry Studies
(a) Introduction
(b) The Method of Regulation
(1) Lace Industry
(2) Furniture Industry
(3) Ncedlevrork Industry in Puerto Rico
(4) Fresh Water Pearl Button Industry
(5) Candlewick Bedspread Industry
(c) The Method of Partial Prohibition
(1) Cotton Garment Industry
(2) HandJier chief Industry
(3) Hosiery Industry
(4) Infants* and Children's Wear Industrj?-.
(5) Knitted Outerwear Industry
(d) The Method of Prohibition
(1) Men^s Clothing Industry^
(2) Artificial Flower and Feather Industry
(3) Pleating, Stitching, Bonnaz and Hand Embroider^^
Industry
(e) Miscellaneous Methods
(1) Fabricated Metal Industry
3, Compliance: Problems and Technique
4, Summary of Code Experience
C, II, R, A, Efforts at Standardizing the Control of Homework
1* The N,R,A. Homework Commit-tee
2» The Executive Order on Homework
3, Administration of the Executive Order
4, Conclusions
D, Conclusions and Recommendations
1« Critique of the Code System
Other Attempts to Control Homework
(a) State Legislation
(b) Union Agreements
(c) Social Agencies
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3, Final Summary and Suggestions
(a) Jactors Making for Persistence of Homework
("o) Factors Tending to Eliminate Hono-'ork
(c) A Heu Method of Control - Interstate Compacts
(d) Conclusions
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CONTROL OF OTITR COITDITIOUS OF ElvIPLOYI.lENT
Prelirainc-ry Siiinmary of Findinr^jS
A host of conditions affecting standards of labor nere regulated
Tdj'" code provisions. When the question of the method to be used in deal-
inj^- '..'ith these arose, it hecajie necessary to c'ecide '.^'hether an ahuse 'jas
to he re.'-'ulated or abolished. The decision ^70uld, of course, be govern-
ed in each instance by the circumstances. Houever, even in c?ses \7here
prohibition was possible, jolitical and tactical reasons frequently
dictated re.^ulation as the wiser course. Prohibition rras delayed imtil
a later period r'hen regulation had -o roved Manifestly inadequate.
Child Labor
The child labor question came u:o at the cotton te::tile hearings.
Hovever, the policy on the subject \7as dictated by the P.R.A. , which
prescribed a 16 year age minimum, but permitted exen"i:)tions in retail
tra.de and in the newspaper industry, Tlie problems under N.R.A. were,
first, that of v/orking out a formula to protect emr)loyers from undue
liability, while at the sane time safeguarding the aciininistration of the
clause; and second, that of developing protection for young '■'orkers from
ha.zardous occupations. Consequently, the technique of subraittini^, and
revisin.;;; liGts of hazardous occupations was developed. On the whole, the
available material indicates that child labor was materially reduced
under the IT.R.A,
Safet" and Health
Most 01 the codes had provisions to regulate conditions affecting
safety and health. A Committee on Standards of Safet3'- and Health was
established to assure compliance v/ith these provisions, and to arrange
for tie development of an adequate administrative setup within each in-
dustry.
Com-Qcny Towns, Houses and Stores
Tlie company toT^m presented two different problems. The first was
that of the company house. It had exhibited various abuses. '±^,11, A,
tried thjree different methods of handling this issue. In the firsl: place,
it set o. higher income minimum, which would permit the worker to trJ:e
care of the rent. Furthermore, it required that the company house shoiild
not becoiie a method of industrial slavery. Workers would not be corroell-
ed to live in these places. In some codes the regulations governed the
svans to be charged for housing.
The comocijiy store was controlled ''oy means of tvro core features. In
the first place, the scrip method of ^-age pa;^Tnent was prohibited; and
when this orohibition --as stayed, it i/as kept under consideration 'and
study. In tlie second place, many codes prohibited bu;tring at the comiDany
store from becoming a condition of employment.
Contracting
■Tl.e contracting problem is interwoven with oui' industrial structure,
941 2
-297-
It related to the issue of risk. Employers wish to shift as large a pro-
portion of this risk as possible to their employees. Their success de-
pends upon the type of piece work or the contracting system developed.
In the codes several tyijes of control, were established, to eliminate
contracting in some cases and it's abuses in others.
The following is a summary of tlie findings on this problem:
"This study deals with the labor aspects of certain types of con-
tracting: (1) Contracting of the sort generally meant when the term is
used in the women's clothing industry - the contractor receiving raw
materials or partly manufactured goods from the principal, assuming
general business responsibility for the manufacture of the garments, and
returning them to the principal; (2) contracting or subr-contracting
among employees on the employer's premises; (3) contracting with a non-
employee for the labor of .others to be used on the principal's premises,
and (4) contracting as it appears in the construction industry,
"Manj'- causes both labor and non-labor in origin, have operated in
the rise a;iad.persistence of contracting. There are consequences for la-
bor in the influences which bring about contracting, even though the lat-
ter are non-labor in origin. Contracting is not so much a special prob-
lem as it is an angle of approach to problems which somehow need treat-
ment,
"The Labor Advisory Board, in its efforts to deal with contracting,
started somewhat behind the first attempt on the part of the N.R.A, to
frame model code provisions. When it did begin, it stressed the prohibi-
tion of "inside" contracting and sub-contracting, and the application of
code provisions to contractors' operations. Later, while continuing to
em-ohasize the prohibition of inside contracting or sub-contracting, it
attempted to apply to the contractor either the provisions of the code
in question, or those of. the "code adopted for the industry covering such
work", or re.galations no less stringent, Finally, while continuing the
above iDrinciples, it developed two others — a prohibition of contract-
ing labor service to any one, and a stipulation that a member of an in-
dustry must pay the contractor enough to enable him "to comply with the
code as to wages, hours and conditions of employment, and in addition a
reasonable overhead. "
"Contracting provisions a";")peared chiefly in the codes of the follow-
ing industry groups: clothing, cons.truction, metal equipment, and stone
and cla^y- materials. The contracting provisions of the clothing codes
differ greatly from those of others and involved a more detailed treat-
ment of the problem, with provision for further investigation. Uon-
clothing codes conte.ined as a rule a provision requiring compliance on
the part of contractors with standards no less stringent, or with another
applicable code; and a provision to prohibit or restrict contracting or
sub-contracting among employees, and contracting with non-employees for
the labor service of others. Clothing codes usually had provisions re-
quiring sufficient payment by principal to contractor to cover code
wages and "reasonable overhead", registration of contractors, and uni-
form contracts.
9412
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Indus tr ial Homewo rk
Horae\7ork is a challe'n{;e to those interested in improving the condi-
tions under vrhich goods are made, '^he system is invariably character-
ized "by lo\7 v/ages, long hours, child labor, and unsanitary working condi-
tions. Homev/ork is particularly difficult to reg\ilate. Some question
whether re],ulation is possible at all. Competition among horaeworkers
tends to lov/er their earnings. Many such ^7orkers are on relief rolls.
Actual or otential com-oet: tion between homeworkers and factory 'workers
tends to lower the standards of the latter. Manufacturers using home-
work labor liave competitive advantages over manufacturers who do not,
and in \7hose plants higher standards are required by law and by union
agreement. By using homeworkers manuf acti;Lrers pass on to them certain
overhead costs. There is a question whether the homework system is
efficient from the point of view of management. Homework is decentral-
ized .production; no supervision is possible. Most people agree that
the evils of the homework system should be controlled. The choice lies
betv/een regulation, which some think impossible, and complete prohibi-
tion, v;hich others think would be too drastic and unfair to the home-
workers.
There was no s-oecific reference in the Recovery Act to homework.
The general objectives of the Act depend^d on code standards. Fair com-
petition was impossible to achieve unless such standards a"oplied to all
workers in f-m industry. Competitive factors made it inevitable that
Administrr.tion officials should deal with the homework problem, on the
insistence both of labor and of the members of industry. The homevork
problem is a T^art of the larger problem of the regulation of hours and
wages. One clause in the Act was claimed to have relation to homework.
This was the provision safeguarding the right of the individual to pur-
sue "ths vocation of manual labor and selling the products thereof,"
The legislative history and intent of the Act sho'- that the clause in
question was not aimed at industrial homework.
Development of N.R.A. Homework Policy
The roots of the N.R.A. homevrork policy lay in times before the
N.R,A, and in organizations outside it. The Labor Advisory Board carried
forwaid the A, P. of L. attitude that home-work should be eliminated. The
same ^^'osition was held by other labor and social organizations. The Con-
sumers* and Industrial Advisory Boards came around to the point of view
that homework should be abolished. Early codes prohibiting homework
served as precedents. The Homework Committee established by N.R.A,
sponsored an Executive Order allowing homework in cases o'f hardship.
This crystallized the N.R,A, policy as follows: Homework should be for-
bidden except in those instances allowed by the terms of the Executive
Order, This policy remained unclianged until the day of the Schechter
Decision,
The lack of current information about homework, and the administra^
tive difficulties .generated by the lack of uniformitj'- among, code provi-
sions on the subject, led to the establishment of an N.R.A. Homev/ork
Corapittee, Its chief purpose was to study the situation and to ma]:e re-c—
omriondations to the Administrator as to sound home\7ork policy. The
Comriitteets attempt to gather information through the medium of question-
naires addressed to industries bore no fruit. It must be recorded as a
failure.
-299-
Upon the Coranittee's recommendation the Administrator requested the
Department of Labor to conduct a field study, the findings of which- might
be used by the Committee as a basis for recomnendations. With its fact-
finding fimction turned over to the Department of Labor, the Committee
was transformed by office order into an advisory body. During this
phase of its life it gave assistance to Deputies whenever homework prob-
lems arose that required technical analysis or advice. Throughout its
existence the Committee was handicapped by the lack of basic informa-
tion, and the difficulty of getting it when needed. Voluntary aspects
of the code system served to defeat the Homework Committee's incipient
recomiiendations for the elimination of disharmonies among code provi-
sions on the subject.
The general policy of N,H.A, tovrard homework was that wherever
possible it should be prohibited in the codes. About 80 codes had
abolished homework by May, 1934. Some evidence was brought forward to
show that the prohibition of homework brought hardship on a few of the
older, crippled and generally most helpless workers. As a result, the
N.R.A. Committee s'oonsored an Executive Order, ^rhich ha,d the effect of
modifying code . prohibitions to the extent of permitting handicapped
persons, and those confined to their homes to care for them, to continue
doing homework. As the general policy was to prohibit homework, while
the purpose of the Executive Order was to relax the prohibition slightly,
it was necessary to set up careful regulations to eliminate the possi-
bility of abuse. Thus the Executive Order may be looked upon as the
first nation-wide attempt to re'^ulate homework, with uniform standards
for control established in all states.
The administration of the Executive Order on homework is largely
the story of the efforts of a propaganda organization to break do\7n the
code prohibitions thro-ugh publicity and litiga.tion. The first point of
attack was the exclusion of women with dependent children from the exempt-
ed classes listed in the Order. Administrative diff icu3.ties led to liti-
gation. In New York a Supreme Court Justice issued a writ of mandamus,
compelling the State Industrial Commissioner to issue a special homework
certificate to a homeworker who did not qualify under the Executive Or-
der. This decision was reversed by a higher court, A number of smaller
administrative problems caused no serious trouble.
On September 26, 1934, a conference of state officers authorized to
issue homework certificates under the Executive Order met in Boston to
discuss problems that had arisen. This conference adopted a resolution
which urged "that the National Recovery Administration prohibit in-
dustrial homework under all codes, subject to the provisions of the Ex-
ecutive Order," The Department of Labor records show that a total of
2,608 homevv'ork certificates v/ere issued to May 27, 1935, and that
2,457 applications were denied, 45 revoked, and 81 cancelled. In the
list of industries that used the largest number of certificates the Men^s
Neckwear Industry came first with 807.
A report entitled "Pennsylvania's Experience with Certificated Home-
workers", prepared by the Bureau of Women & Children, Pennsylvania De-
partment of Labor and Industry, concludes - "Homework can never be regu-
lated No matter how stringent the re.gulations, how great the enforce-
ment, how honest the investigators, the sweat-sho;os will continue to
exist unless homework is abolished. The conditions which exist are an
9412
-300-
integi'al part of industrial homework and only when processing of articles
in employees' homes is abolished can the conditions growing out of this
system of production disappear,"
9412
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SECTION 7(a) OF THE RECOVERY ACT
Taljle of Contents
I. SECTION 7(a) OF THE RECOVERY ACT
A. The Place of Section 7(a) in the Act
3, The Relation of Labor O'cjectives to Other Objectives of the
Act,
II. H0I7 SECTIOH 7(a) BECAI/E PART OF THE ACT
A, Early Expressions of Lusiness' Desire for Self-Regulation
B, Developments Under the Roosevelt Aclmini strati on
C, The Protection of Labor's Interest
III. Al^ITECEDENTS OF SECTION 7(a)
A. Findings of Public Commissions
B. Legislative Enactments
C. Effect of Previous Experience on Section 7(a) - An Evaluation
IV. LEGISLATIVE FASHIONING- OF SECTION 7(a)
A. Presidential Message
• B. Hearings before the House and Senate Cornmittees
C. Debate in the House and Senate
D. Conference Agreement
E. Analysis of Final Draft
V. interppj:tin(> the law
A. Early Interpretations
■ B. Resistence from Industry
C. Gro\7th of Policy in N.R.A.
D. Pressure Groups
VI. ENFORCING THE LAW
A. Adjudication vs. Enforcement
B. Confusion of Authority
C. Complexities of Enforcement Machinery
D. Limitations of Judicial Process
E. Lessons for the Future
VII. IMPLElyENTATION OF SECTION 7(a) - GENERAL BOARDS
A. National Labor Board
B. National Labor Relations Board
C. Second National Labor Relations Board
VIII, IlyDPLEliENTATION OF SECTION 7(a) - SPECIAL BOARDS
A. Steel Boards
B. Automobile Board
C. Petroleum Board
D, Textile Board
E, Longshoremen's Board
F, N,R,A, Code Boards
IX. THE technique: of SECTION 7(a): AN EVALUATION
A. Labor and Capital
B. Settlement of Labor Disputes
C. Collective Bargaining in a Competitive Economy
9412
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SECTION 7(a) OF THE BECOVSIY ACT
Preliminary Simi.iar:/ of Findirif^s
The cause, as distinct froK the occasion, of Section 7(a) of the
National Recovery Act \7as lahor's "belief in collective bargaining, ojid
its efforts to secure legislative safeguards for the practice, ■ Section
7(a) uas consequently in the line of succession of the Norris-LaGua.rc'-ia
Act, of the railv;ay lahor legislation, and of the war labor policy.
Section 7(a) undertook to give legal protection and status to col-
lective bargaining. The first device for its implementation r;d,s the
mandatory inclusion of Section 7(a) in the codes. Both in code drafting
and in code adninistration, in a majority of cases, horiever, the princi-
ple \7as not maintained. Labor boards of many t^rpes were created to ad-
vise, administer or decide on issues v/ith respect to Section 7(a), liul-
tiplicit^'' of machinery, however, did not compensate for the absence of
authority, to make the Section worl^ Still, though these Boards were un-
able to protect the Section, and to develop detailed policy to further
its objectives, they brought to the public attention the content and im-
portance of the union program.
Resort to a.dministrative and executive assistance to safeguard Sec-
tion 7(a) brought out structural weaJaiesses in our governmental macliiner^'*
for the differentiation of function and the delegation of power. The
obstructionist attempt of a minority of industries showed that our fail-
ure to delimit legislative, executive and judicial function, sjid to cre-
ate a system of administrative agencies equipped for the task delegated
to them, and our process of court reviev; with its attendant uncertainty
as to the status of legislation pending decision, could nullify Congres-
sional policy. The attempts of labor to meet the responsibilities of
Section 7(a) showed the force of its argument and the power of the labor
movement.
9412
-S03-
ORIGIN, ORGANIZATION AIu) OPErATIOIT 0? THE LABOR ADVISORY BOARD
10-1316 of Contents
I, Origin of the Lator Advisory Board
A. The Recovery Act: its Provisions with Regard to a Ls.bor Program
and the Re.sulting Implication as to the Part La-tor 'Jould Tclce in
Materializing It.
1, The Intent with Regard to La"bor Participation Indicated in
the Preliminary stages of Legislation
(a) Senate Finance Committee Hearings
("b) House Ways and Means Committee Hearings
(c) Conference called "by Secretary of Labor Perkins, March
31, 1933
B, President Roosevelt* s Statement of June 16, 1933, Announcing the
Machinery for Administration of the Act
II. Organization of the Labor Advisory Board
A. Appointment of the Labor Advisory Board
1« Membership - Representativeness
' 2« The Board* s Conception of its Functions
3, Its Place in Early Development of Procedure
B, The Staff of the Labor Advisory Board and its. Functions
C« The Relation of ,the Board to Labor in the Field - Trade Unions
and Labor Organizations
III* Operation of the Labor Advisory Board
A» In Relation to Code Negotiation
1, Types of Negotiation
B« In Rela-tion to Policy Formulation
G« In relation to Administration
1« Administrative Organization
2, Code Administration - Labor Representation, Amendments,
Exemptions
3, Code Compliance
4, Investigations
9412
-304-
ORIGIN. ORGAI^'IZATION AND OPERATION! 0? THE
LABOR AJYISORY BOARD
Preliminary Snimnary of 7indin>g:s
The Labor Advisorv Board \7as set u-o iviediately after the passage of
the Recovery Act, as part of the machinery for tripartite cooperation -ith
the government in its efforts tor/ard recovery. Like the Industrial and
the Consumer's Advisory Boards, the Labor Advisory Board membership com-
prised outstanding representatives from the groups for 'Those point of vieT?
it vjas the spokesman. The majority were officials of the American Federa-
tion of Labor, with one from the Woman's Trade Union League, Two members
were persons of recognized standing as interpreters of labor.
The labor members of the Board were in general fully occupied as
officers of national or international unions, which were trying to meet
the nexi responsibilities placed upon them by Section 7 (a). The Board,
consequently, had but limited com land over their time and. attention, in
spite of their interest and the pressing nature of the issues that arose
in connection with the N.R.A, It came, therefore, to rely increasingly
upon a staff collected to carry on details. This was true even as regards
the formulation of policy with respect to Section 7 (a).
The Labor Advisory Board had no specific duty or power save that of
advice, With the development of N.R.A, experience and policy the Board
increasingly visualized its own f^Jnction as embracing the recomnendation,
review, criticism and refusal to approve proposals affecting labor. It
made suggestions intended to further the machinery of labor participation
in the N.R.A., including administrative and legislative improvements in
code labor provisions, the appointment of labor members on a.dvisory rjid
administrative committees and coimcils, and labor research.
The Board's limitations lay in the absence of well defined functions,
and of authority or established method for carrying out its recoranenda^
tions.' Disagreements with the administrative divisions of the N.R.A.,
other demands upon its members' time, and differing and ill-clarified concei^ts
of the Board's functions further restricted its usefulness. Neverthe-
less, it was an important factor in increasing public understanding of
labor's g-cals and methods, and in formulating labor policy.
9412
-505-
LSGAL ASPECTS OF CSnTAIN LABOR PP-0BL5MS
I. MRHMW WAG-SS
Table of Con tents
I. Minim-am Wages on Puolic V/orks
A. Analysis of State and Federal Le^^islation
1. Extent of the Occ-ixoations and Industries
2. Specific. Statutory ;?.eference to Sex
3. Special Provisions
B. Analysis of Court Decisions to Determine the Extent to TiTnich
Such Legislation has "been Sustained or Hejected, and their Con-
stututional Bases
II, Minimum Wages in Private Industry •■ .
A. Analysis of State and Federal Legislation
1. The Extent of the Occupations and Industries Covered
2. Specific Statutory Reference to Sex
3, Minimum Kates of Wages Established
4, Special Provisions
B. Analysis of Court Decisions to Determine the Extent to Which
such Legislation has "been Sustained or Rejected, and their Con-
stitutional Bases
III, Comparative Discussion of State and Federal Decisions, ?irith Special
Reference to the Police P0'7er of the States to Enact Legislation on
Minimum Wages, when Considered v/ith the 14th Anendiaent of the Con-
stitution,
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LEGAL ASPECTS OF CE.RTAIN L^IBOR PllOBLEIAS
I. IvIINnvIirivI ^AGS LAWS
Preliminary S-ammary of Findin>^s
I. Federal Heffulations of Minimum War:es
A. Public Works
Powers; - Congress has the power to fix rainin-um wages for all labor-
ers, mechanics, and workmen employed by the United States, the territories
or the District of Colinnbia, and actually en^iraged in the construction or
repair of any of their public works, whether the '.^ork is to be performed
by-'reasons directly employed by the United States, the territories or the
District of Columbia, or by contractors or sub-contractors.
Congress has the power to require that all contiacts to which the
United States ia a party, and v/hich relate to the construction of any
public v-orks, shall contain the stipulation that the work shall be per-
formed on the basis of minimum wages fixed by Conf;ress.
Constitutional Basis; - The Constitutional br-.sis of the above powers
rests uroon the right of the Government to "orescribe the conditions upon
which it vdll permit work of a public character to be done for it,
5. Private Industries
1 • Minimum Wages for Women
Powers: - Congress does not have the power to fix a minimum wage for
women in private industries
Constitutional Basis r - - - - The Supreme Court has held that the
Fifth Anendment of the Unitea States Constitution gui'.rantees to the people
that the Federal Government shall not prohibit them from entering into
agreements \'ith respect to wages,
2. Minimum Wa?;es for Minors
Powers: - Congress has the power to fix a minimum wage for all
minors employed in the United States, territories or in the District of
Columbia,
Constitutional Basis: - The constitutional basis of the above men-
tioned pov;ers rests on the grant of power to the United States of ex-
clusive control over its property and over the territorial and insular
possessions and the District of Columbia, The legislative discretion
over such property and the inhabitants of such territories is necessarily
vested in Congress, subject to limitations as to reasonableness of the
particular enactment. In connection ^^ith the regulation of minimum wages
for minors reasonableness may be judged by giving due consideration to
the health, morals or safety of those involved,
II. State Re.-ailation of Minimum Wages
A. Public Works
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Foners: - Unless prohibited by the State constitution, a State
legislature has the povver to fix a minimum wage for all laborers, mechan-
ics, 01' v/orkmen eraDloyed by the State or by any of its 2oolitical sub-
divisions, and actually engaged in the construction or improvement of any
of its "oublic -rorks, \^hether the work is to be performed by the State or
a political subdivision, or by contractors or sub-contractors.
A State legislature has the power to require that all contracts to
v/hich the State or any of its political subdivisions is a party and which
relates to the construction of any of its public ^-orks shall contain a
stiiDulation that the work shall be performed on the basis of a minimum v;age
fixed 'o^r the legislature.
Constitutional Basis; - The constitutional basis of the above powers
found to exist in the States rests uioon the right of the Government to
prescribe the conditions upon which it will permit work of a public
character to be done for it*
B, Private Industries
Powers: - A State does not have the power to fix a minimum wage for
women in industries located ^dthin its bounda.ries.
Constitutional Basis; - The Supreme Court has held that the Four-
teenth Anendinent of the United States Constitution guarantees to the
citizens of erch State that the States will not prohibit them from mailing
agreements - ith respect to wages.
3, I.;inimum Wages for Minors
Power; - A State has power to fix minimum wages for minors for all
industries v/ithin its boundaries.
Constitutional Basis; - The constitutional basis of the above men-
tioned powers is the legitimate exercise of the State police power.
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I^GAI. ASP~.CTS OF Cl^rj.-JI' L^30R ?R03I^::S
II.- i.I.A.XIiruI;I EOIIRS
.Taljle of Contents
I# I.Iaxir.rui-.i Hours on PuIdIIc ^orks
A, Analysis of all State cue. FedereJ Legislation
1» Extent of the Occirpations and Industries Covered
2# Specific Statutory' Reference to Ses
3« . Weekly and Dally Linita.tions of I.Iaxinun Hours
4. Provision for Additional Corroensation for' S-ployees
Working in Sr.cess of the Liaximuni Eo'i.irs
5» Special Provisions
B. Analysis of Court Decisions to Deternine the Extent to Which
to which Such Legislation hc:s "been Sustained or Sejected, and
their Constitutional !3ases
II. I.Iaxinun Hours in Private Industry
A« Malysis of all Stat.e and Federal Legislation
1. The Extent of the Occupations and Industries Covered
2» Specific Statutory Reference to Sex
3. Weekly and Daily Limitations of i.iaxiniun Hours
4. Provision for Additional Coiipensation for .Employees
Working in Excess of the Mr.xinum Hours
5* Special Provisions
3« joJialysis of Court Decisions to Deternine the Extent to '.Thich
Such Legislation has 'oeen Sustained or Rejected, and their
Constitutional Bases
III. Comparative discussion of State and Federal Decisions, with S'oecial
Reference to the Police Power of the States to Enact Legislation
on- Maximum Hours, when Considered with the 14th. Amendment to the
Constitution.
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LEGAL ASPECTS 0? CERTAIN LABOR PROBLEMS
II. lIAXIIvIUIJ HOURS
Prel iminary Siimmary of Findin;2:s
I. federal Regalation of Honrs of- Lal)or
A. Fu."blic Works
Powers.- Congress has the power, to fix the mazim'um n'um'ber of
hoiirs of lahor of all laborers, mechanics, and workmen, irrespective of
sex or age, employed "by the United States, the territories or the
District of Columhia, and actually engaged in the construction or repair
of any of their puhlic works, whether the work Is to he performed "by
persons directly employed hy the United States, the territories or the
District of Columbia, or "by contractors or suhcontractors.
Congress has the power to require that all contracts to which
the United States, a territory or the District of Columhia is a partj?-,
and v/hich relate to the construction of any federal public works, shall
contain a stipulation that the work shall "be performed on the "basis of
a maximum number of hours fixed by Congress,
Irrespective of any power that it may have in limiting the hours
of labor in certain occupations, Congress has the power to declare that
a certain number of hours shall constitute a day's work for all laborers,
mechanics, and workmen employed by or on behalf of the United States,
the territories or the District of Columbia, on any of their public
works.
In the exercise of any or all of the above powers. Congress has
the power to provide for exceptions to or exemptions, from any of the
provisions of a particular statute, to fix penalties for violations, and
to make special provisions or appropriate classifications within o.ccu-
pational or industrial groups: provided, however, that such special
treatment or classifications are not arbitrary or discrimina^tory, but
are reasonable and of uniform operation, - • .. .
Constitutional Basis:- The constitutional basis of the above
powers found to exist in Congress rests uiobn the right of the government
to prescribe the conditions upon which it will permit work of a public
character to be done for it,
B, Private Industry
1. Interstate Commerce
Powers:- Congress has the power to fix a maximum number of
hours of labor of all em-oloyees of common carriers engaged in the'
transportation or movement of persons or property in interstate or
foreign commerce, even though such regulation may, in somie' measure, af-
fect intrastate commerce: provided, however, that the limitation is
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reasonable and has a direct relation to the dangers to passengers or
pro-perty incident to the strain of excessive hours of duty on the part
of such employees.
In the exercise of any or all of these pov/ers, Congress has the
power to provide for exceptions to or exem-otions from any of the pro-
visions of the particular statute, to fix penalties for violations and
to make siDecial provisions or appropriate classifications within the
occup<?tional or industrial groups: provided, however, that such
special treatment or classifications are not arbitrary or discriminatory,
"but are rea-sonable and of uniform operation.
Constitutional Basis;- The constitutional basis of these pouers
rests on the power of Congress to regulate interstate and foreign
commerce*.
2. Territorial Jurisdiction
Powers r>- Congress has the power to fix a maximum number of hours
of labor for women employees in particular occupations located in the
Territories or the District of Columbia, provided that v/ork of long
continued duration in such occupations is detrimental to the health and
morals of such women employees, or of the general public.
Congress has the power to fix a maximum number of hours of
labor for all child employees in any gainful occupation in the terri-
tories or the District of Columbia: provided that such regulation is
reasonable and tends to promote their health, morals and general well
being.
In the exercise of any or all of these powers, Congress has the
power to provide exceptions to or exem-otions from any of the provisions
of the particular statute, such as exempting domestic or agricultural
occupations, to provide penalties for violations, to make special pro-
visions, such as for cases of emergencies, or to make appropriate
classifications within the occupational or industrial groups: provided,
however, that such special treatment or classifications are not arbi~
trary or discriminatory, but are reasonable and of uniform operation.
Constitutional Basis;- The constitutional basis of the above
iDOwers rests on the grant of power to the United States of exclusive
control over its property, its territorial and insular possessions, and
the District of Columbia. The legislative discretion over such property
and over the inhabitants of such territories is necessarily vested in
Congress, subject to limitations as to the reasonableness of the -oar-
ticular enactment. In connection with regulation of hours of labor
reasonableness may be Judged by giving due consideration to the health,
or mcrals, or safety of the emioloyees involved, or of the people at
large.
II. State Regulation of Hours of Labor
A» Public Works
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Poners:- Unle^ss prohibited by the state constitution, a state
legislature has the power to fix a maximum number of hours of labor for
all laborers, mechanics and workmen, irrespective of sex or age, employed
by the ^tate or by o,ny of its political subdivisions, and actually en-
gaged in the construction or improvement of any of its public works,
whether the wdrk is to be performed by the state or any of its political
subdivisions, or by contractors or subcontractors.
A state legislature has the pover to require that all contracts
to which the state or any of its political subdivisions is a party, and
which relate to the construction of any of its public vorks, shall con-
tain a stipulation that the v;ork shall be performed on the basis of a
maximum number of hours fixed by the legislature.
Irrespective of any power that it may have for the limitation of
hours in certain occupations, the legislature has the power to declare
that a certain number of hours shall constitute a day's work for all
laborers, mechanics and workmen employed by or on behalf of the state or
any of its political subdivisions on its public works.
In the exercise of any or all of these pov^ers, the legislature
has the power to provide for exceptions to or exemptions from any of the
provisions of a particular statute, to fix penalties for violations, to
make special provisions, such as for emergencies, and to make classifica-
tions' within the occupational or industrial groups: provided, however,
that such special treatment or classifications are not. arbitrary or dis-
criminate rj?-, but are reasonable and of uniform operation.
Constitutional Basis:-- The constitutional basis of the above
powers found to exist in the states rests in some cases on the proprie-
tary right of the state to condition the terms of its contracts, and in
others upon the right of the government to prescribe the conditions upon
which it will permit work of a public chara.cter to be done for it.
The constitutional basis of the above powers found to exist in
the political subdivisions of the states rests on the power of direction
of the principal (the state) to its agent (its political subdivision).
B. Private Industry
Powers;- A state legislature has the power to fix a maximum num-
ber of hours of labor for women employees in particular occupations, by
reason of their sex and physical structure, provided that labor for long
consecutive hours in such occupations impairs the health, morals, or
safety of such women employees, and that the regulation protects the
future of the race.
A state legislature has the power to fix a maximum number of hours
of labor in any gainful occupation for all child employees by reason of
their tender years, provided that such regulation is reasonable and tends
to conserve the health and morals of such children employees.
In the exercise of anY or all of these powers, a state legisla-
ture has the power to provide for exceptions to or exemptions from any of
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the provisions of the particular statute, such as exempting children on
farm or domestic work, to fix penalties for violations, to make special
provisions, such as for cases of emergencies and to make classifications
within the occupational or industrial groups: provided, however, that
such special treatment or classifications are not arbitrary or discrimi-
natory, "but are reasonable and of uniform operation.
A state legislature has the power to fix a maximum number of
hours of labor for all employees, irrespective of sex or age, while em-
ployed in occupations which in their nature are hazardous (such as work
in underground mines), or which are nroven to be peculiarly detrimental
to the life or limb or health of the employees (such as work in mills,
factories, or manufacturing establishments).
A state legislature has the power to fix a maximum number of
hours of labor for all employees, irrespective of sex or age, engaged in
the transportation of persons or property (as in connection with street
railvAaj'"5, elevators or motor vehicles), provided that such regulation is
reasonable and has a direct relation to the safety of the public.
The probabilities are that a state legislature has the power to
fix a maximum number of hours for all employees engaged in occupations
charged with public interest for a limited or temporary period, if it is
to prevent a state-wide paralysis of commerce or to protect the safety of
the public from an impending catastrophe, such as a strike.
In the exercise of any or all of these powers, a state legisla-
ture has the power to provide for exceptions to or exemptions from ejiy
of the provisions of the particular statute, such as excepting repairmen,
to fix penalties for violations, to malce special provisions, such as for
cases of emergency, and to make appropriate classifications within the
occupational or industrial groups: provided, however, that the special
treatment or classifications are not arbitrary or discriminatory, but are
reasonable and of uniform operation.
Constitutional Basis;- The constitutional basis of any or all of
the above powers rests in the inherent power of the state to guard and
promote the health, morals, safety, or general welfare of the people
within the jurisdiction, commonly referred to as the police power.
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L30AL ASPECTS OF CERTAIN LA30R PROBLB^S
III. IIIDUSTRIAL HOMEWORK
Table of Contents
I. The Homework Problem
A. Definition of Homework
B. Causes and Growth
C. Harrnfal Social and Economic Effects
D. Evaluation of the Effectiveness of Extra- Legislative Remedies
II. State Legislation and Court Decisions
A. Power of the States to Enact Homework Laws
B. Historical Development of State Legislation and Court Decisions
Thereunder
C. Summary of Existing State Legislation
III. Federal Legislation and Court Decisions
A. Power of the Federal G-ovemment to Enact Homework Laws, and
Limitations Thereon
IV. Conclusions and Recommendations
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LEOAL ASPECTS OF CERTAIN LABOR PROBLEMS
III. INDUSTRIAL HOt/IEWORK
Preliminary Summary of gindin,q:s
I. federal Povrer to Regulate
A. Pablic Contracts
Powers;- Congress has the po'^er to require, in the performance
of all contracts to which the United States, any of its territories or the
District of Columbia is a party, that no material to "be furnished there-
under shall he manufactured in whole or in part in any home, but that such-
material sh^ll be produced in regularly organized factories or plants
meeting sanitary and other requirements which Congress may specify.
Congress may also establish exceptions to the above, provided such s;oecial
requirements are reasonable and of uniform application, and are not arbi-
trary or discriminatory.
Constitutional Basis:- The constitutional basis for the fore-
going is the power of Congress to authorize government contracts upon its
own terms.
B. -Private Industry . ' '
Po;,^i*s:- Congress has the power to require, within the District
of Columbia, and any of the territories, that no foodstuffs, preparations
of tobacco, wearing apparel, bedding, or other products designed for inti-
mate personal consumption or use and produced for sale, shall be manufac-
tured in whole or in part in a home, and that such home manufacture for
sale of all other articles shall be conducted only in conformance with
regulations which Congress may prescribe. Congress may also establish
exceT)tions to the above, provided such special requirements are reasonable
and of uniform application and are not arbitrary or discriminatory.
Congress may prohibit the transportation from all states, terri-
tories or districts of the United States, into another state, territory,
or district, of products manufactured under conditions which violate laws
of the place of destination designed to protect the public health.
Constitutional Basis;- The constitutional basis for the powers
enumerated in the last paragraph but one is the right of Congress to enact,
for those areas under its exclusive jurisdiction, reasonable legislation
affecting the public health and general welfare. The basis for the powers
set forth in the last paragraph a.bove is the right of Congress to regulate
interstate commerce.
II. State Power to Regulate
A, Public Contracts
Powers.*" -A. State legislature has the power to require, in the
performance of all contracts to which the State or anir of its political
subdivisions is a party, that no material to be furnished thereunder shall
be manufactured in whole or in part in any home, but that such material
shall be produced in regularly organized factories or plants meeting
sanitar^^ ai^.d other requirements which the legislature may specify. A State
legislature may also establish exceptions to the above, provided such
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special requirements are reasonable and of imiform application, and are
not arbitrary or discriminatory.
Constitutional Basis:- The constitutional basis for the fore-
going is the power of the State to contract upon its own terms.
B. Private Industry
Powers:- A State legislature has the power to require, within
the State, that no foodstuffs, preparations of tobacco, wearing apparel,
bedding, or other -oroducts designed for intimate personal consumption or
use and produced for sale, shall be manufactured in whole or in part in
a home, and that such home manufacture for sale of all other articles
shall be conducted only in conformance with regulations which the State
may prescribe. The legislature ma;^'' also establish exceptions to the
above, provided they are reasonable and of uniform application, and are
not arbitrary or discriminatory.
Constitutional Basis;- The constitutional basis for the
foregoing is the policy power of the State to regulate within its juris-
diction matters affecting the public health and general welfare.
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LEGAL ASPECTS OF CERTAIN LABOR PROBLEMS
IV. CHILD LABOR
Table of Contents
I. The Child Lator Problem
A» Definition of Child Lnhor
B. Its Causes and Growth
C. Harmful Social and Economic Effects of Child La.hor
D. Evaluation of the Effectiveness of Extra-Legislative
Remedies "•
II» Sta.te Legislation and Court Decisions
A. Power of the States to Ena,ct Child Labor Laws
B. Historical Development of State Legislation and Court
Decisions Thereunder
C. Summary of Existing State Legislation
III. Federal Legislation and Court Decisions
A» Power of the Federal Government to Enact Child Labor
Laws, and Limitations Thereon
IV, Conclusions and Recommendations
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LEGAL ASPECTS OF CERTAIII LABOR PROBLBIS
IV. CHILD LABOR
Preliminary Smmiary of Eindin>q:s
I . Federal Power to RefeTilate
A. Public Contracts
Powers. Congress has the power to require, in the performance
of all contracts to which the United States, any of its territories or the
District of ColTJinbia is a party, that no minor "below a specified age shall
be employed at any work whatsoever, that occupations which are hazardous
in character or dangerous to health shall be restricted to minors above a
specified age, and that the hours of employraent of all minors shall not ex-
ceed a specified dail^'" and weekly maximum number. Congress may also
establish exceptions to the above, provided such special requirements are
reasonable and of uniform a,pplication, and are not arbiti-ary or
di s.criminato ry ,
Constitutional Basis. The constitutional basis for tne fore-
going is the power of Congress to authorize government contracts upon its
own terms.
B. Private Industry
Powers. Congress has the power to require, within the District
of Columbia or any of the territories of the United States, that no minor
below B. specified age shall be employed at any work whatsoever, that
occupations which are hazardous in character or dangerous to health shall
be restricted to minors above a specified age, and that the hours of employ-
ment of all minors shall not exceed specified daily and weekly maxima.
Congress may also establish exceptions to the above, provided such special
requirements are reasonable and of uniform application, and are not arbitrary
or discriminatory.
Constitutional Basis. The constitutional basis for the foregoing
is the power of Congress to enact, for those areas Tinder its exclusive
jurisdiction, reasonable legislation affecting the public health and general
welfare.
I I . S.tate Power To Regulate
A. Public Contracts
Powers. A State legislature has the power to require, in the
performance of all contracts to which the State or any of its political
subdivisions is a party, that no minor below a specified age shall be employ-
ed at any work whatsoever, that occupations which are hazardous in character
or dangerous to health shall be restricted to minors above a specified age,
and that the hours of employment of all minors shall not exceed a specified
daily and weekly maximum number. The legislature may also establish excep-
tions to the above, provided such special requirements are reasonable and of
uniform application, and are not arbitrary or discriminatory,
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Constitutional Basis* The constitutional "basis for the fore-
goin^^^ is the power of the State to contract upon its own terms.
B. Private Industry
Powers. A State legislature has the power to require, within the
State, that no minor below a specified age shall "be employed at any work
whatsoever, that occupations which are hazardous in character or danger-
ous to health shall "be restricted to minors a"bove a specified age, and
that the hours of employment of all minors shall not exceed a specified
daily and weekly raaxiiraim number. The legislature may also make special
provisions which provide exceptions to the above, provided such special
provisions are reasonable and of uniform application, and are not
arbitrary or discriminatory.
Constitutional Basis. The constitutional basis for the fore-
going is the police power of the State to regulate, within its
jurisdiction, matters affecting the public hea.lth and general welfare.
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LEGAL ASPECTS OF CERTAIN LASOR PROBLEMS
V^ RIGHT OF INDIVIRJAL EMPLOYEES TO ElIFORCE
COLLECTIVE BARGAINING AGREEIvIBIITS
Table of Contents
I. The Trend of State Decisions To\7ard the Sustaining of
Employees' Rights to Enforce provisions of Collective
<
Sargaining Agreements
II. The Theories Underlying the Employee's Right to
Enforce Such Agreements
III. Sw-iiLary of the present State of the Law
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LEGAL ASPS GTS OF CBRTAIIT LABOR PROBLEMS
V. RI&HT OF INDIVIDUAL EI'.iPLOYEES TO ENFORCE COLLECTIVE BARGAIFIHG
preliminary Sur.iiaary of Findings
I. General
The question of the right of an individual employee to enforce the
provisions of a union agreement with an employer has "been before only tuo
Federrl and fourteen state courts,
II. States TJhere Not Adjudicated
No case upon this question has "been adjudicated in any of the fol-
lovang states: Alabama, Arizona, California, Colorado, Connecticut,
Delanaxe, ITlorida, Georgia, Idaho, Illinois, Iowa, Kansas, Louisiana,
Maine, li^jrylsnd, Michigan, Minnesota, Montana, Nevada, New HaJiipshire,
New Jersey, New Mexico, North: Carolina, North Dakota, Oklahoma, Penn~
sylvsiiia, l^iode Island, South Dakota, Utah, Vermont, Virginia, Wash-'
ington, Wisconsin, and Wyoming.
III. Courts Holding Against Enforcement by Emrployee
That the individual employee cannot, under any theory of the law,
enforce the provisions of such collective bargaining agreements has been
held by the two Federal courts and the courts of the following states:
Indiana, Texas, and West Virginia,
;om
IV. Recovery on "Custom and Usage" Theory
The e:;Tployee has been permitted to recover on the theory of "custt
and us£^^e" -> i.e., that the parties impliedly contracted in accordance uith
the terms of the collective bargaining agreement - in the courts of the
following states: Arkansas, Kentuclcy, Massachusetts, Oregon and Tennessee,
V. Recovery on "Agency" Theory
Recovery by the employee has been allowed on the "agency" theory, -
i.e., that the labor union was the agent for each one of its members, and
that the collective bargaining agreement was binding upon the employer Just
as though a separate contract had been signed with each employee - in the
follov/ing state court: New York.
VI. Recovery on "Third Party Beneficiary" Theory
The courts of the following states have penaitted recovery on the
"third party beneficiary" theory; - i.e., that the employer and. the union
entered into a contract which vested in the employee, as a beneficiary
under the contract, certa.in rights upon which he was entitled to recover:
Mississippi, Missouri, Nebraska, Ohio, South Carolina,
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STATISTICAL .U'ALYSIS OF LilBOR PRQVISIQl'S OF TIiS CODES
Ta"ble of Contents
PART I. IITTRODUCTION
I, i.Iethod and scope of the Study
A. The r.R.A. Codes and the Employees Covered
3. The Co4©s as Statistical Units
C# Chai%"es in Code Provisions
D, Classific.'tion of Codes "by Industry G-roups
E» Srau-iary ,
PART II. HOICS OP LABOR
II. Basic Plour Provisions
A. Ti-e Length of the Basic 7eek
3, Hours per Day ajid Days per Week
C» l.Iethods Used to Provide Elasticity
D» Hour Provisions in the Ilajor Codes
E» Sumr.iary .... ■
1. The Problems of Code Hour Provisions
III. Elasticity in Hours Through Averaging ?rovisio:as
A. Definition of an Averaging provision
B» The origin and Distribution of Averaging Provisions
C» The Amount of Elasticity Involved
D» Averaging Provisions in the Major Codes -
E, The Decline of the Averaging Provision
IV, General Overtime Provisions
A« The Nature of General Overtime Provisions
B» Origin and Distribution of Overtime Provisions
C. Extent of Elasticity Through General Overtime
D, General Overtime in the Hajor Codes
E» The Problem of Future Regulation
V. Special Period Provisions
A. Origin of the Peal^ period Provision
3» Distribution of Pea]<: Period by Iiidustry Groups
C. Extent of Elasticity in Peak Periods
D. pealc Period Provisions in the Codes
E. Emergency Periods
F. The Problem of Future Regulation
VI. Hours for Clerical and Office TTorkers
A» Difficulties in Statistics on Office TTorlcers' Hours
3« Precedents on Office Hours
C« Special Hour Provisions for Office and Clerical Workers
D, I.Iethods of Providing Elasticity for Office and Clerical Workers
E» Hours of Office Workers Compared with Basic Hours
F. Hours of Clerical Workers in I'.iajor Codes
G# Concentration of Office Workers' Hours Around 40 per Week
H, The Problem of Fature Regulation
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VII. Slrsticity for Soecial Gro^.ips of Er.i23lp--ee3
A, Precedents for S.:xe;:)ted Occujations
3. Illasticity for I.iaintenance and Hepa,ir
C. Other Excepted Occupations
D, TiiC Problen of Futiiro llogulation .
VIII. liiscellancous Hour Provisions
A» Confornity with Other Lans or Agreor.ients
L. PiOorts on Hours
C, Definitions of Working Time
L, Stahilization, Sharing of TJorh, and Production Control
S, Lliscellaneous Hour Provisions in liajor Codes
F. Appraisal of Miscellaneous Hour Provisions
IX. Surinarj'' bj^ Groups of Industries
PART IIIo TTAG-ES
X, Basic Uage Provisions
A. Purchasing Power: Tiie Purpose of IT.Pt.A. 7age Provisions
2. laninun Wage for Basic Eriployoos
C, l.iethods Used to Provide Elasticity in Wa^es
D. Wage Provisions in the i.Iajor Codes
■"■'■".•'■
XI. 'Tage Differentials: Basic Employees
A» I^pes of Differentials
B^ iunounts of Differentials
C. Differentials in the Major Codes
D. rne Problen of Differentials
XI I . Sub; .J n i nurn Ra t e s
A. '..orien Workers
B. Learners and Apprentices
C. Office Boys and Girls
D» Old and Handle a"oioed Workers
IJ. Other Subninimun Groups
P. The Problen of Subnininun Rates
XIII. Wa<:;e Provisions for Special Groups
A. Office and Clerical Workers
B. Outside and Connission Sa.lesnen
C. Watchnen
XIV. Wa.ges Above the Hinimun
A. Tiie Purpose of the Provisions
B. rne Classification of the Provisions
C. Tlie Use of Each T^rpe of Provision
D. Wages Above the ivlininu.i in i.Iajor Codes
E. The Problen of Wares Above the Liininwa
XV» Miscellaneous Wage Provisions
A. Method of Wage Paynent
3. Safeguards on Wage Payments
C. iliscellaneous Provisions
D. Miscellaneous Wage Provisions in Major Codes
941^
-323-
XVI, S"Lir.'.:iai'y of V'age Provisions by Industry Groiros
PART IV. SUIvn-jlHY AlJD CONCLUSIONS
XVII, An Aj"oraisal of the Code Labor Provisions
9412
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STATISTICAL ANALYSIS OF LABOR
PIiOVISIOlv'S OF TI{E COIffiS
Preljpiinory Sun.'nary of Findin;.^s
Pui" '0S8. Sco'oe, and Method of the Study
The -ourpose of this study is to su:inarize the labor provisions of
the 573 codes, so that the reader may cora-:)rohend the enormous body of
administrative labor le.jislation that constituted the Federal law on
hoiirs and uages under the N.R.A. in 1933-1935,
The complete report is a statistical study, with frequency tables
of the occurrence of certain code provisions, the code being the imit
of coujitinj. To offset variations in the number of' employees covered
by single codes - from 70 to 2,400,000 - the more important parts of
the various tables are v/eighted by the number of employees concerned.
The provisions of the codes covering 50,000 employees or more are pre-
sented in greater detail, since these major codes cover 82.6 percent of
the 22,554,000 employees under industrial groups. The study is an over-
simplification of a very complex variety of codes and of code provisions,
Houi^ Provisions - The Hours Ceiling
Tl^.e codes are classified according to the hours ceiling set for
"basic em;olo3'-ees". The basic employees under each code are those
corresponding to the P.R.A. "factory or mechanical workers or artisans"
or, in non-manufacturing industries, the group conprising the largest
number of emploj^'ees. The resulting distribution is:
Employees
Number
covered
Pe
r cent age of
Weehl:^ hours
of Codes
(thousands)
Em'')loyees
Less than 40
hours
43
2,179
9.7
40 hours
487
12,898
57.2
More than 40
hours
Total
48
7,477
33.1
578
22,554
100.0
In this classification the 40-hour codes include not only the 115
which established a flat maximum of 40 hours, but also codes providing
(1) an average of 40 hours over a specified period; (2) a basic 40-
hour vreel: with additional hours (limited or unlinited) whenever the
employer wished, provided that specified penalty rates were paid; (3)
a basic 40-hour week with longer hours (with or without limits and Ith
or without overtime payments) at certain times - peak ■'^e^iods, emer;^ncy
repair periods, and other amergencies; or (4) sor.e combination of these
elasticities. For some purposes many of the codes classified in the
40-hour group are more-than-40-hour codes, and some classified in the
less- than- 40- hour group are 40-hour codes
A special analysis has been made of the codes having a maximum
week of less than 40 hours, since these are the nearest to the P.R.A.
standard of 35 hours for factory workers, and of those with a maximum
of uore than 40 hours. The latter apply chiefly to the groups which
were allowed 40 hours under the P.R.A. — Sales, Service, Banking and
9412
-325-
Transoortation,
Consideration has "been ^iven also to code standards -"ith respect to
hours per day and days per v/eek.
Means of Providing: Elasticity in Hours
The provisions to which the codes resorted to provide s^officient
fleiiihility in the hours are next considered. In the case of "basic
eraolo3'-ees the princroal devices for securing such elasticity occur as
folloTTs:
lluj liber
Employees
Percentage
of Codes
(thousands)
of
erar)loyees
139
6,283
27.9
114
4,243
18.8
29C
10,773
47.8
103
8,487
37,6
Provision
Avera.'.in?; of hours
General overtime
Peak Tjeriod
Emergency period
In 115 codes, covering 4,394,000 employees, or 19.5 per cent of
the total under codes, none of these four devices appears.
I7ith respect to each device for securing elasticity, certain provi-
sions came to be considered as representing the proper N.H.A. standard,
to which a substantial number of codes conformed. The figures sho-j, how-
ever, that as a rule a majority of the employees concerned were covered
by provisions less strict th-an the N.R.A. standard, because of the loose
provisions in sone of the major codes, mainly the early ones,
Eot:ts of Office Workers
Though the study has concentrated on basic employees, attention has
been paid to tr^e code provisions for other groups. The hour provisions
for office ^,'orkers have been examined oarticalsrly, because the P,R,A».
set longer hours for such employees than for factory -r/orkers (thcu':h not
more than 40 in any week) and because there is an impression that tl-ie
codes adhered to this precedent. Tlie following.; tables su'inarize the
code provisions:
Ho-ijs of Office Workers
Cor-':"^..red with Those of Basic Employees
Hours longer or looser
Hours shorter
Hours the sa,me
No special provision for office workers, and
basic hou2 s assumed to apply
Total
Ni'jnber of
Codes
178
39
53
3G8
578
S412
—526—
Woekly Hoiirs of Office Workers
Leso than 40 hours
40 hours*
More than 40 hours
Number of
Codes
16
497
65
Total
578
* Including codes which provided 40 hoiirs with en a^vera-jing period or a
Ijealz period.
Wa.:2:e Provisions - The ^JTage Floor
The codes have been first classified by the minimum wage prescrib-
ed for male productive employees, who are considered the basic group.
This is more difficult than the classification of maximum hours, both
because of the greater range of minimum "'a.^es from code to code, and
because of the differentials that result in many cases, in two or more
minimum rates for basic employees. The fi-gures belo-.7 summarize a count
made, by industry groups, of the numbers of codes having minimum rr.tes
v/ithin each of the ranges specified;
Hwaber of Codes Providing a Minim\im 7ag:e;
Hourly
■f rate
for
male
At
a Flat
Rate
^ith di
.fi
"erentials
productive
workers
Hi-hes
it
Lowest
Ovei- '
iO^
23
28
3
40^
151
133
8
S5 to
odd
67
80
67
oO to
34d
31
51
139
25 to
29 d
4
5
51
20 to
24(7
1
..
14
Under
20.?
3
1
5
No loi
76 r limit
Total
—
—
11
280
298
298
This table shows th^t the wage floor in the codes turned out to be
a wage staircase, v,'ith two staircases in the codes -rith differentials,
Tlie weighting of the table oy the percentage of emr)loyees covered
by each rate changes the picutre to the following:
Percentage of total employees covered
by codes providing a minira'om wf^ge;
Hourly rate for male
•Qi-oductive workers
Over 40rf
40^
35 to 39^
30 to 34{iJ
25 to 29^^
20 to 24f,^
Under 20 ^:-
No lower limit
Total 19.2
a/ Less than one tenth of one percent.
At a flat
With di
fferentials
rate
Hi
^chest ra
11.6
.te
Lowest rate
1.4
1.3
14.3
26.9
4,7
1.7
19,3
6.6
1.2
13.2
21.2
a/
4.7
23.8
.1
M«
7,0
.5
.1
3,9
—
—
12.3
80.8
80,8
-327-
This shows that althoii^^h nearly half the codes had one flat mimiminn
rate for male productive workers, more than four fifths of the employees
were under codes with differentials. Of the latter, furthermore, seven
tenths were covered "by codes in which the top rate was 35 cents or more
per hour. ?ive-sixths, however, were covered hy codes in which the
"bottom rate was less than 35 cents per hour, and almost three- tenths "by
codes with a bottom rate of less than 25 cents.
Means of Frovidin;? Elasticity in 'iJa^es
A detailed analysis has been made of the two main devices for se-
curing- elasticity in '-'ages - differentials in the minim"am rates for
male -^^roductive workers, and subminimiim rates for certain other groups.
The differentials are expressed in terms of the location of the nlant -
North or South, in a metropolitan center or a hinterland, in a big city
or in a small town: of the 1929 rate? of the division of the industrv*
or of soiie combination of these variables. An analysis shoves the geogra,"ohic
differential to have been by f ar the most common. An analysis of the
amount of the differentials shows great diversity in the code provisions,
as indicated by the following figures:
Amount of differential
(cents per hour)
Number of Codes
Under 5^
5(^
e' to 9^
10^
11 to 14^
Over 156
Hot specified
73
66
58
40
16
19
14
12
Tiie analysis which has been made of the subminimmn wage provisions
is summarized below, in terms of codes:
Subminimum
group
Number of Codes Which Provided for the
Specified Subminimi.im. groups:
Female v-orkers
Les,rners
Apprentices
Office boys and girls
Old and handica/oped persons
Exemption
A
subrain-
A limita-
A limi-
from basic
imum wage
tion of
tation
minimum
rate
the number
of the
wage
exempted
period
of exem^o—
tion
158
158
213
209
197
201
70
27
49
68
274
274
239
^—r— .
.s 376
103
94
,, ,^, ^
It is impossible to tell how many employees are covered by these
various provisions. Since the total number of employees under the codes
having each provision is of some s ignif icance , the tables have been weighted
by these figures, with the results shown below:
9412
^(528-
Number of
Submininnjn -^roup
Codes
?enale v/orkers
158
Office "boys and
,,irls
•274
Old and handicapped
persons
376
Learners and appren-
tices
264
Employees covered
Thousands Percent of total
3,658
6 , 917
8,786
11,696
16.2
30.7
59.0
51.9
Waf;e Provisions Coverin.? Office ITorkers and Other Special G-roups
A total of 383 codes, covering 60 percent of the employees under
codes, provided a special minimum wage for office and c lerical workers,
as compared with 270 codes providing special hours. The weekly wa.'?;e
rates were found to he distributed as follows;
Number of codes providing- a minimum wage;
With differentials
Weekly rate
At
a flat
rate
Hi.
-^hest rate Lowest rate
Less than $14,00
5
5 54
$14,00 te $14.99
33
11 103
$15.00
130
103 8
More than $15,00
48
48 2
Total
216
167
167
Thus core codes provided for flat minimum rates than for differen-
tials; but, as in the case of the minimum \7ages for basic emploj'-ees, when
those in each group are weighted by the employees affected the codes ^rith
differentials are found to cover over four fifths of the total.
An analysis has Ijeen made of the kind and amount of differentials in
167 codes. The most frequent jjype was a population differential, follow?-
ing the precedent of the P.R.A. The raost frequent amount was $1,00 (in
85 codes), with $2,00 in 46, $3,00 in 21, and more than $3,00 in 15,
9412
-329-
SUIvlIlAJlY AITD 3VALUATI0!:T 0? TH3 HESULTG
OF II. a. A. LA3CR SXPERIBITCE
To^ole of Contents
I. iUi S valuation
A. Conception of Problem
3, Objectives
C, Policy
D, Standards and Their Development
E, Administration
F« Enforcement
•G. Conflicts
II, Sium-aary of Re suits
A, , Statistical'
B, lion—Statistical
III, Labor Conditions Since the Invalidation of iOA Codes
A« Status of Labor in Society
3, Wages, . '
C, . Hours '
D, Conditions of Eraplo^nnent
9412
-330-
SU:.n.IA.HY MP SVALUATIOII OF THZ HS SUITS
OF II.R.A. LA3CR EXPSRIEFCS
Preliminary Smnraai?/ of Findings
The labor provisions of the Na.tional Industrial Recovery Act uere
based upon three theories: the relation of shorter hours to reeiiTploy—
ment, the relation of increased wages to the e:cpansion of purchasing
power, and the relation of collective bargaining to the labor partner* s
cooperation in the productive effort necessary for industrial recovery,
G-overninent policy with respect to these theories, embodied in* the
National Industrial Recovery Act, stimulated a volume of initial co-
operative effort toward recovery, that helped to give impetus toward
lifting industry out of the slough of depression. Once recovery seemed
under way, however, these theories were challenged to the point, in some
instances, of violent opposition. Evaluation of their soundness requires
analysis of the methods for implementation and the degree of compliance,
a.s well as an estimate of their specific effects as distinct from those
of the other forces malting for recovery. The history of the improvement
following the enactment of the National Industrial Recovery Act and of
the recession following the Schechter decision support the principles
enunciated, and lay the onus of proof upon their critics.
9412
« « ■
-331-
SUHVEY OF LABOn COHDITIONS III TIC TZPJIITOIIY OF EA.WAII
Tal)le. of Contents
CHA.PT2R I. IKTP.ODUCTION
I, General Piarposes of the Siirvey
A. To Ascertain the Effect on Wages and Hours of the Termination
of II.S.A. Codes
!!• To Determine the Wages cud Hours to l^e Recomnended in Po'ssilDle
Fdtiu-e Industrial Legislation
C, To Paint for the First Time an Accurate Picture of the Condi-
tion of Indus tris.l Labor in Hav/aii
II. Limitation of the Survey to Workers Earnin;^ Less than $30 a We el: »
III. Tiie Racial Problem:
A. As It Affected i",R,A. Codification
B# Its Influence on the Unionization of Labor
C, Its Effect on the Emplo^nnent at Manual LE'.bor of Educated
Citizens of Oriental Ancestry
IV. Tlie Stress Laid by the Survey on Education
CHAPTER II. FACTS OBTAIIIED FROIu WORIERS' REPORTS
I. ITui.iber end. Percentage of Replies
II. Drifter Employment
A. Consistency of Labor in Following the Same Trade
D, Periods of Unemployment
III. Education of Workers, by School Years
IV. Idle Period Bet\.'een Leaving School and Finding Employment
V. Sa.rnings in Relation to Education
VI. Wage Decreases Following the Schechter Decision
A. hourly Wage, Currrent and under IT.R.A.
D, Daily VJage, Current a,nd under N.R.A.
C. ^Jeclzly Wage, Current and under il.R.A.
D. Overtime Wage, Current and under II.R.A*
VII. Hour Increase Since the Schechter Decision
A, Hours of Work per Day, Current and imder K.R.A.
B, Hours of Work per Week, Current and under IT.R.A,
C, Hours of Overtime Each Week, Current and under N.R.A.
VIII. Average Age of Workers
IX. Rela.tion of Temporary to Permanent Work
X. ".rcrkGrs* Family Income
XI. Per Capita Income of Workers' Families
9412
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XII« Stiiciv of Establishj.icnts iReverting to pre-lT«."...:i, ^-orking Conditior.:
n.s a Result of the Schechter Decision
CHAPTER III. CClTCLoSIO:^-S
I, Drifter Ernplo^Tient and Unccplo^/nent
II. Tlie ZZdTicated Uneirolo.-'-ed
III. Effects of the Schechter Decision
IV. Tlie l.-e of TJorkers — Probahle Effect on Em-olojTient of Old-A^e
Pension and Hetireinent Schenes
V« Pai'.ily Incomes
VI, The r.-'je of Sstablislrinent '.Thich Reverted to Pre-H.H.A. Conditions
Follcv;ing the Schechter Decision
CHAPTER. IV. Pi^OSLEIiS
I. ?ro;per Wages and Hoiurs for the Retail Trade
II. Proper Uages c?iid HO'Jts for the Restaurajit Trade ,
III. Pro'Der '/ages and Hours for the Graphic Arts Industry
• r
IV, Proper Wages and Hours for the .Autonohile Industrjr
V. Pro-^er Wages raid Hours for i.Ianufacturing Industries
VI, Proper Wages and Hours for the Crnning Industry
9412#
SECTIOII "C"
TMDE PMCTICS S^fUDIES
THAJa PIIA.CTIC3 SIUpiES. SICTIOH
Page
BASING POIIITS IN THE LIIvS INDUSTRY - (T. K. Urdahl)
Table of Contents 336
Sujmnar;^ 338
CHAlItlELS OF DISTRIBUTION - (l. S. Moise)
Table of Contents 378
Siuninaiy 381
DESIGN PIRACY - (A. C. Johnston)
Sumnarj,'" 333
DEVELOPl'EENT AND CONTROL OF C012.I0DITY INFOSIJATIOi: -
(H. D. Llulford)
Table of Contents. 402
Sumraaiy 405
GEOGRAPHIC PRICE STRUCTURE - (Gustav Seidler)
Table of Contents 384
Soiminarj^ 389
LOSS LIMITATION - (Mark Llerrell)
Table of Contents 367
S-unmary 374
MINIMlB/i PRICE DEVICES - (Max Kossoris)
Table of Contents 393
Summary 398
PRICE PILING - (E. Baird and H. R. Mohat)
Table of Contents 359
Summai^'' 364
PRICE STUDY OF THE FERTILIZER INDUSTRY - (S. Wiiitney)
Table of Contents 351
Summary ' 356
PRODUCTION AND CAPACITY CONTROL - (H. B. Drury)
Table of Contents. '341
STommary • 348
9412
-1-
DESIGN PIRACY
Table of Contents
CHAPTER I. C-EITEHAL BACKGROUrlT
I. Historical Development
(including statement of significant steps of develOxoment of the
problem' and efforts to deal with it)
II. Definitions and Delineation of the Scope of tne Study
A. Definitions of "Design", "Design piracy" , "Style" and
"Fashion" , "Novelty" and "Originality"
B. Sources Investigated and J,iethods of Investigation
III. Design piracy as, a Trade practice . ^ , •
A. Industries Concerned ' .
1. Those in TTliich the Value of the products- is. Affected by
Design. (As shbV/n by sub.je.cts of design, patents, etc)
2. Those Concerning IJhich There Is Evide-nce That Design piracy
Is an Important problem. ( Shovm by trade -practice conference
miles, appearances at congressional hearings, NEA code pro-
visions and privately conducted controls)
B. The ImpcrtaxLce of Fashion
1. Relation between Fashion Industries and Those in ^ich
Design Piracy Is an Important Problem
2. Industrial Aspects of Fashion
C. Design piracy in Representative Industries
1. Nature of Designs and Methods of Embodying Them in Products
2. Types of Distribution
3. Copyists, and Methods of tne Copyists
4. SignificaJice of Copying to Designers, Manufacturers of
'Original Products, Distributors, Copyists,, etc.
CPL4PTSR II. PROBLELiS INCIDENT TO T?3 COITTRCX OF PIRACY
I. Conflicting Opinions of Opposing Factions
A. Ex-pressed Vie\7s of proponents of Control
3. ExDressed Viers of Opponents
II. Major Issues Raised
A. Econoi-iic Issues
1. Effect on Voluiae of Business
2. Effect on Designers
3, Effect on Copyists and Distributors of Copied Goods
4, Effect on Consumers
(a) prices
(b) Availability of Current Fashions
(c) Uniformity vs. Individuality
B. Legal Issues
1. Constitutionality of Legislation
2. Legality of private Contrbls
-ii"
C. Idininistrative Issues
1. Operability of a Comprehensive Plan
2. Enforcealiility
D, Issues Relating to the Scope of Legal Control
1. problems Concerning the Contribution to be Required
as a Condition to the Grant of protection
2, problems Relating to the Mature of the protection
(a) As to the Type of Operations Which iiay be Controlled
(1) Exclusive Right to Make, Use and Vend
(2) Copyright
(3) Exclusive Right to Select Qp.ality of Articles
in Which the Design May be Embodied
(4) others
(b) As to the Elements of Design to be Protected
(1) The Design as a Whole
(2) Any Feature of a Design
(3) The Ideas Enbodied in a Design
( c) As to the Scope of implication of protection
(1) All Designs for Articles of Manufacture
(2) Designs for products of Selected Industries
(d) As to the Term of protection .-.
.(.1) Length of the Terra
(2) Beginning of the Term '
a. Upon Formal Grant of Right
b. Upon Application of the Work
c. Upon the Date of Origination of the Work
CHAPTER III. DESIG.y PROTECTION BY EXISTIIlG LAW
I, Law Enforced in the United States
A. I'Ton-Statutory Rights and Remedies
B. Federal Trade Commission
C. Copyright Laws
D. Design patent Laws
II, Foreign Laws (France, Germany, Japan, Great Britain)
III. Coniparison of Methods
IV. Adequacy of Existing U. S. Law as Means ^for Protecting Designs
CHAPTER IV. PRE- CODE ACTIVITIES TOWARD FURTHER PROGRESS
I. proposed Legislation
A. Vestal Bills
B. Sirovich Bills
II. Trade Association Activities
A. Systems Controlled Entirely by private Means
1. Design Registration Bureau of the American Federation of
Textiles
(a) Designs Protected
(b) Nature of the Bureau
(c) procedure
-rill-
(d) iviethods of Secaring Coiiipliajice !7itii the Rales of
the Bureau
(e) Expansion of Functions of the Bureau
(f ) Results of Operation
(1) Volume of Designs Registered
(2) Compliance
(3) Effects
2, privately Conducted Systems in Other Industries
(a) Boot and Shoe Industry: The Shoe Fashion Guild
("b) The Bress Manufacturing Industry
(1) The Dress Creators' League of America
(2) The Fashion Originators' Guild
(3) The National .Association of Style Creators, Inc.
(c) Lace Manufacturing Industry
(d) Ladies' Handbag Industry
(e) Millinery Industry
(f) Medium and Low priced Jewelry Industry
B. Trade practice Conferences (industries participating and
nature of action taken)
III. Coinparison and Analysis of Features of All these plans in the Light
of Major Issues, (including appraisal of constitutionality of pro-
posed legislation and legality of privately conducted systems)
CHAPTER V. THE REGULATION OF DESIGN PIRACY L^TDSR NRA CODES
I. Scope of the File Survey
II. Inception of the Code provisions
A. Comment on Disclosures of Files
B. Dress Industry
C. Fur Industry
D. Furniture Industry
E. Lace Industry
F. Ladies' Handhag Industry
G. Medium and Low priced Jewelry Industry
H. Millinery Industry
I. Rayon and Silk Dyeing and printing Industry
J. Silk Textile Industry
IC. Toy and playthings Industry
III. Steps Leading to the Approval or Disapproval of Code provisions
A. Sponsoring Groups
B. Recorded Sentiments of persons or Classes Liatle to be
Affected by the proposed provisions
1, In support of the Provisions
2. In Opposition to the provisions
C. Attitudes and Action of NRA Officials
IV. Analysis of Code provisions on Design piracy and plans for the
Administration of Same
A. Substantive Enactments of Operative provisions
B. Administration of Operative provisions
1, General Plan
"IV-
2, Particular plans
. (a) Leather
("b) Furniture
(c) Ivledium and Low priced Jewolry
(d) Comment
V. Operation of Code plans
A. ilijjii'ber of Designs Registered
B. Conrplaints of Violations, and Disposition Thereof
C. affects of PlsiiG on Designers, Manufacturers, Distributors,-
and Consumers
D. Post-Code Attitudes Concerning the pl.-ins
VI. Legal Problems Incident to Code Re^gulation of Piracy
VII. Summarization and Comparison of Code Regulation with Other
Efforts, in the Light of Major Issues
CHAPTER VI. OTHER ACTIVITIES DURING ALID SUBSEQUENT TO THE CODS PERIOD
I, Further proposed Legislation
A. liye Bill
B. O'Malley Bill
C. Duffy Bill
II. E::pansicn of Trade Association Activities
III. Voluntary Agreements Under the National Industrial Recovery Act,
as aJiiended,
IV. Comparison and Analysis of Features of These Devices
A. Scope and Effectiveness
B. Effects (Actual or anticipated)
C. Legal Issues
1, Constitutionality of Legislation
2, Legality of private Controls
3, Legal Effect of Voluntary Agreements
V. A Review of the Design Situation Today
CHAPTER VII. AITALYSIG OF ISSUES
I. Critical Treatment of Major Issues (presentation to follov/
substantially the statement of issues included in Chapter II )
II. General Findings (To "be outlined in detail upon conclusion of
study)
III. Issues Requiring Further Investigation, and Suggested Methods
(To "be outlined in detail upon conclusion of study)
-V-
APPEITDICES
Su.nm£,ries of Available Information With Respect to Design piracy
in the Tollowing Industries; -
j^pendix
A. Kress
B. Fur
C . rurni ture
D. Lace
E. Ladies' Handtag
E. liedium and Lov/ priced J.e^jTelry
G, Millinery
H. Sill: Textile
I, Toy and playthings
J, Similar Summary Treating Collectively the Information Relating
to Other Industries Studied
(other aropendices will "be used to present detailed data on subjects
trea.ted generally in the text)
-VI-
-333-
TRADE PRA.CTICE STUDISS
DESIGII PI5ACY
Prelimin.iry Simmary of Eindirijg^s
I. BaCKGHOUIID
The practice of copying ornainental designs for articles of manu-
facture — design piracy — is a very old one, which has been dealt with in
some manner "by every leading nation. In the United States it has "be-
come important within the last 25 years, due to the increasing importance
of fashion and the growth of large-scale production and of competition.
Its effects are felt principally in the fashion industries, such as those
producing women's apparel, v/hich are characterized "by rapid style shifts
and constantly changing designs.
Our Design Patent Laws were first enacted in 1842, at a time when
design piracj'- was not an important problem, and they have continued in
force without substantial changes since the amendments of 1902, They do
not fully meet the needs of manufacturers in the highly seasonal indus-
tries, who develop and introduce novel items,
(1) They are inadequate administratively, because designs must be
developed, processed and marketed rapidly and in great numbers to meet
fashion trends. Expense prevents the patenting of all at the point of
development, while delay in obtaining patents for those designs that
have proven commercially successful makes it likely that the protection
obtained will be useless. The copyist already will have had an opportun-
ity to process and market copies,
(2) They are inadequate substantively, because protection is limited
to designs which differ from all designs previously published in such
manner as to be termed inventions. Fashion trends tend to recur, neces-
sitating the re- introduction of old designs or adaptations thereof.
Common law and the equitable principles enforced by courts, the
Copj-right Laws, and the Federal Trade Commission, as constituted today,
are of no practical value to those who would prevent the copying of designs.
II, 1T.R.A. CODES
Through the medium of the N,S.Ao Codes manufacturers ajid processers
in a large variety of industries endeavored to curb design piracy. Only
a few code files, relating to fashion or novelty products, however, re-
vealed important activity in connection with design piracy provisions.
The present evidence on the need for protection in codified indus-
tries and on the economic structure of those industries as it affects the
design problem is meagre. Aside from the fact that code-sponsoring groups
were truly representative, there is little data concerning the sentiment
of members of the industries with respect to design protection. The files
of at least three industries, however, disclosed a decided clash 'of opin-
ions. Arguments in favor of design protection, as an aid to manufacturers,
9412
distri"butors, consumers, laljor and design creation were met "by equally
cogent ones intended to shoTj that the same interests uould "be adversely
affected. There was a noticeatle lack of reference to the possibility
of a reward for designers,
'The policy of the N.R.A, '^ith respect to design piracy provisions
was a changing one. At first, "broad provisions were approved readily
in some codes, disapioroved in others. Later, there "^as an effort to
limit ap'oroval to provisions intended to prevent consumer deception^ The
Consumers' Advisory Board was the most consistent opponent to all de-
sign piracy clauses.
Operative provisions in approved codes varied widely. There w?,s no
consistency in connection with requirements for protection, or with the
kind, scope or duration of protection afforded. The administration of
these provisions, likewise, followed the ideas and needs of the parti-
cular industries concerned, was lacking in uniforrr.ity. Differing in-
terpretations of similar words were followed. Plans of administration
embodied substantive rules not prescribed. by the code provisions them-
selves. The general tendency was to provide trade protection for all
newly-introduced designs.
The file surveys disclose no reliable data on the operation and
effects of code provisions. Interested parties have claimed that de-
sign protection under the codes was highly beneficial to a few indus-
tries, With respect to others, isolated statements indicate that the
provisions did not meet expectations,
III. 0TE5R SYSTEL.:S FOR COKTRQL OF PIHACY .
A. PRIVATELY CCiOUCTED SYSTSIIS
In the fashion industries there is a growing movement toward pro-
tecting designs through private agencies. _ The Silk -Textile industry
has operated a comprehensive system, with apparent success, since 1928,
There is evidence of a recent movement toward the establishment of
guilds, in the Boot and Show, Dress, and Millinery industries, to en-
list retailer cooperation against the marketing of articles embodying
designs copied from originals produced hy guild members.
Sources investigated disclosed no data on the details of opera,tlons .
and the economic effects of these privately-conducted systems,
B. FORSIGiJ LAWS
The design laws of all leading foreign countries, with the possible
exception of Japan, provide on their face more complete protection for
designs than is given by the statutes of the United States. The opera-
tion and effects of those laws have not been investigated; hence their
significance for a consideration of the design prcblem cannot be stated.
IV, COHSTITl'TIOiTAL ISSUE5
There appears to be ample authority, under the Patent and Copyright
Clause of the Constitution of the United States, for Congress to enact
9412
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general legislation that would provide increased protection for indus-
trial designs. The principal limita,tion is that the legislation must
tend to advance the useful arts ly predicating the grant of rights on
the existence of a creating of the mind. Originality is necessary. Under
the Constitution, therefore, Congress may not prohibit the copying of
all designs which have merely "been adopted or copied by the first user
- with one exception. Legislation based upon the Coranerce Clause of the
Constitution might protect such designs vi^hen used in interstate commerce,
V. GENERAL . '
There is a strong tendenc3/' ajaong producers of highljr-styled goods
embodying newly-introduced designs to employ private controls in the
effort to prevent copying. These controls, like similar ones set up
under i:T,R«A, codes, afford wide op;oortunities for abuse-, although there
is no evidence that abuses have occurred.
Varying tyipes of proposed legislation heretofore considered by Con-
gress raise many issues requiring further investigation. Would the
economic effects of complete design protection be desirable? Is there
any system for securing comprehensive protection, which is capable of
reasonably effective administration and enforcement? Assuming the pos-'
sibility of arriving at such a system, there remain undetermined many '
additional questions concerning the scope of control and the possible
imTDact of such control upon our economic structure.
9412
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TRAJE PRACTICE STUDIES
BASING POINT SYSTSi.: IN THE Lli.E INDUSTRY'
Ta"ble of Contents
!• Tlie Evolution of the Multiple Basing Point S'^sten in the Line In-
dustry
A. Price Basing -iethods in jii-iericoji Industry
B. Industrial Background of Basing Point Systens
C. The Liultiple Basing Point Systen in the Line Industry
The systen nas not in general, use prior to the Code in the
Li:.ie Industry
1, Evidence fron Trade Conferences from the federal Tr.ado
Commission's Price Bases Inquir;/ and from Research ond
Planning Questionnaire.
D« The Importance of the Rate Book in Qu.oting Prices
1, Alleged need for a rate feook to assist snail producers
II. Tlie Line Industry under Its Code of Fair Competition
A« General Survey of the Lime Industry Code
B# Ilethods of Selecting the Code Authority and its. i^mctions
in the Line Industry
C. Tiie Pov;ers Exercised ^oy the District Control Connittees
D. Group Control and Limitations on Independent Producers in
(piloting Mill Base Prices
E. Apparent Lack of Confidence in the "Confidential Agencies"
of the Code Authority to whom Industry is Required to send
Reports
III. Tlie Effects of the Basing Point System on the Lime Industry
A. Trend of Production and Ca-'oacitj" in Large and Small Plants
1« The trend is reflected "by a sharp decline in the nun"ber
of the small volants and an increase of 49 per cent in the
ca,pacity of the group of superplants.
2. The excessive e:rpansion of plant capacity is due to the
economies of large-scale highly mechanized units coupled with
high lime prices
3. Tlie Extent of Crosshauling Prior to and under the Code
1.. The nature and significance of crosshauling
2. Crosshauling is uneconomical in many industries
am The causes of crosshauling
4» Extent of crosshauling in the Lime Industry
5. Crosshauls in cement con;->arer' V7ith crossliauls in lime
products
6. Cross-shipments of lime prior to the Code
?• Crosshauling under the Code
8. Production and consur;v^tion areas
9. Crossha.uls reflected Dy the per ton freight revenue fron
lime shipments on American railroads
10. The effect of crosshauD.s and other basing point practices
on consui.iers
C« Varying Mill-Net Prices as a Result of Freight Absorption
and other Basing Point Practices
D. Opposition of Producers in District 5-B to the Br.sing Point
System
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33. The Attitude of Line Producers to the Basing Point System,
Prior to ajid IXiring the Code Period
!• licsing Point Prices; Tiie social point of view vs. the
business nian*s point of vievr.
IV, HiG Effects of the Basing Point Systen on Prices
A. Taq IJat^ire of Coiapetitive and llonopoly Prices
B. Conpetition under the Line Code Basing Point System
C. Analysis of Prices of Liiae Products
1. Lime prices as reflected "by riill-net returns 1907-1935
2» Plant net values and methods of oroduction of lime compar-
ed with cement
3. "Tiheat production and line- production compared
Dm Effect of the Marketing Provisions of the Lime Code on Prices
1. Increased uniformity and rigidity of prices
E. Code vs. Pre-code Prices
!• The report of the Lime Code Authority
2. Have lime prices increased under the Code
3» The effect of the Code on the average plant net per ton
value and on shi"onents
4, Price statistics on lime products do not reflect consum-
er* s prices
5* Tl-xe effect of the Code on plant-net-lime values and on
• gross receipts of line producers reflected by the replies
to the 1j,Pl.A. Questionnaire
'V. The Effect of the Basing Point System on the Consumer
A. Price Discrimination Against the Consumer
1# Agriculture as a consumer of lime
2. Discrimination against consumers of agricultural lime
3« Hydrated Lime as a means of increasing prices and its use
under the basing "ooint system
B. Freight-rail and Truck - as a 1 leans of Increasing Delivered
Lime Prices
1. The effect on consumers of the all-rail-freight element
in delivered j^rices
2. Arbitrarjr charge s for truck and L.C.L. shipments
C. Discrimination in the Price Structure
VI. Findings, Conclusions and Pecommendations
A. Findings
B. Conclusions
C. PlG commendations
1. Further inve'stigations are recommended
D. Additional l.Iaterials Needed to Continue the Investigation:
S-aggested Sources and Methods of Seciiring the Necessary Data
9412
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TRAJE PIIACTICE STUDIES
BASING POIi'T SYSTEi; III TIE LIliE liDUSTRY
Preliminary Suiir.iary of Findiiy^s
ilr.stry Priojl
1 • ?lio Basing Point S:^'stern nas not in General Use in the Line InC.
to the Cod.e.
The evidence ;3resented shows conclusivel-r that some of the l^xger lime
producors made use of what nay "be regarded as the precusor of the ■b^sin/^ ■:)oi
system i, e., the quoting of "delivery prices to meet comoetition" cJiL the
absorbin-^i of freight in so doing. ^Tnil^e some of these prices v^ere :noted f,
certain group rate rail centers, there were no established basing points rr.di
regular' s^-stem of open price filing. The Lime Code attempted to force these
practices upon all line producers in the coimtrv.
2 . .%ie Code of Fair Corn-petition for the Lime Indiistr?^^ a-Q-pears to have been
drawn wi in such a v/ay that the large -producers oxercise a 'ore-3or.c".crriit
influence in its adiinistration
Sixteen of the 20 members of the Code Authorit^^ were selected >- the
national Lime Association which in 1933 represented onl^ 23 per cent -.^i the
number of plcjits and 55 per cent of the total lime tonnage. The -porers e::er
cised by the Code Authority directly, and indirectly thro-ijgh the District
Cor.mitteos, appear to have d-£inged profoundly the marketing practices of the
Lime Ir.dustr--, by providing uniform identical prices in each district, -nc. Ij,
promotin;'" -uniform terms and c onditions of sale. The latter usuaJl;' Te-rsesenr
the first step in the effective control of the price structiire of rn industry
3. .Ttie Code. Ayoears to have Intensified the Forces vfhich in the Past lir.ve
BroLVJit about the Grrduo-l Disa-Q-i^earance of the Small Lime Producer c\iC. a
^a'oid Increase in the- Size and I'umber of Lar,r;:e Plants Cover 40^000 tons
:oer anniir:) .
IHie chief factors in the process of elimination of small plants ap-^ear
have been the use of delivered prices with freight absoriotion by the large
producers, rjid of high oressure salesmanshi'p in diverting to thom.selvos the
natural merkcts of nearly one thousand lime producers, v;ho have been displac
since 1908 by less than 500 plants in 1934.
1
4» Tlie Basing Point System in the Lime Code Legalized and Perfected a ".."ethod
of Price Discrimination laiown as "Quoting Delivered Prices to ^ic-at Co::"-
-petition"
This practice appeaxs to be the chief cause of the excessive e:7-<a-ision o
lim.e plai-t capacity, to a point where less thpn. one-third of the potential
capaxjity v/ill suffice for the normal demand for lime products at the -jrevaili
high prices.
9412
-339- ■
5. The Easing point System in the Code with its Comrplement - Open price
lalinjS: witli a Waiting period - A,opoars to "be Responsi"ble for the
Extraordinary Stability and Rigidity of the price Structure of Lime
products.
The :aarketing practices under the Code "brought a"bout a complete
freezing of the prices of certain types of lime. According to Bureau of
Labor Statistics reports the price changes which had "been registered prior
to the Code continued for nearly two months, after which price changes
disappeared altogether,
6. Lime prices to Consumers Appear to have "been Increased Excessively
under the Code,
Some of these increases were registered immediately prior to the adoption
'Of the Code, Basing point prices, which generally were lower than the prices
to final consxiraers, were also excessively high, as indicated "by the wide di-
vergence "between mill net and basing point prices. The markup between mill
net returns and the basing point prices for several large producers Taried
from 15 to 87 per cent,
7. The Basing point System and its precursor, "QiAoting Delivered prices to
Keet Corjpetition" has Resulted in an Enormous Amount of Uneconomical
Crosshauling.
Unnecessary crosshauls represent a huge burden on lime consumers. Forty-
three and fifty-five per cent of the plant net value of lime represents the
average freight paid in 1934 and in 1932, respectivelyo
8. The Marketing Practices of the Lime Industry Appear to have Resulted in
price Discrimination against Consumers of Agricultural and Building Lime.
Relatively higher prices on agricultural lime, and what appear to be
excessively high prices for hydrated lime, represent a very real burden on
the farmer, the Construction Industry and ultimately the home owner. Further-
more, the single basing point for finishing lime ( G-ibsonburg) appears to be
unjustifiable when used by producers outside of the Ohio districts.
9. There Aooears to be Evidence of Concerted Action in Fixing prices at
Basing Points in some Districts.
The marketing practices under the Code tend to eliminate price competi-
tion at most of the basing points, resulting in excessively high base prices
in nearly all the lime districts,
10. The Economies of Production Resulting from Highly Mechanized Labor
Sa.ving plants have not been Passed on to the Consumer.
With the marketing practices in operation under the Code and used prior
to the Code "by some large companies, the economies of large scale production
appear to have been wasted in the absorption of freight, heavy selling ex-
penses and other useless expenditures. The Lime Industry stands first among
the durable goods industries ,of the country in its maintenance of high prices
- nearly twice as high as thay wera "before the war and before the modern .
labor saving inventions had oeen installed.
941
o
-340-
11. Under the Operation of the Code the Large prodacerg have Increased
their G-ro!:r> profitc Far Lore tnan the Smaller Plants.
T/hereas the small plants (less than 10,000 tons per year) increased the
value of their shipments less than 25 per cent, the larger (over 15,000 tons
per anniim) increased the value of their shipments from 40 to 68 per cent.
This trend, if continued, would hasten the extermination of the small li.ae
producer,
12, These Findings and Tentative Conclusions do not Represent Any Indictment
of the Individual liemhers of the Lime Industry, "but Rather en Attenrpt
to De.jict the Actual Operations and the Effects of Marketing Practices
on the Industry and on Society.
The lime producers who inaugurated the practices were engaged primarily
in an effort to make their "business pay, and many of them may have "been com-
pletely ignorant of the long range indirect effects of their efforts. Hotv^
ever, the evidence point's strongly to a considera'ble amcont of concerted
action eind discrimination, which seems to constitute restraint of trade and
to be contrary to tiie spirit of the law.
9412
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TRADE PBACTICE STUDIES
PHODUCTION AlID CAPACITY CONTROL UNDER THE NRA
Table of Contents
SUMMARY
PART I
IIITRODUCTICN
CHAPTER I. EVEITTS ICEADIIJG TO INCLUSION OF PRODUCTION AND CAPACITY
CONTROL PROVISIONS IN NRA CODES
I. Pools and Trusts of the Latter Nineteenth Century
A. Significance of the Pool aiid Trust Movement from the Standpoint
of Production Control
II. The Trade Association Movement
A. Trade Associations Prior to 1890
B. The Period 1890 - 1911
C. Efforts at Indirect Control Through Open-Price Associations-
The War Growth
D. The Legality of Statistical Activities of Trade Associations
1. Hardwood Lumber Decision
2» Ambiguity in'*th6 Government's Attitude Towards
Statistical Activities of Trade Associations
3. Maple Flooring and Cement Decisions
E. Cost Systems as a Means of Controlling Production
III. Other Forms of Production Control in the Period Immediately
Preceding the NRA , . .. ■
A. Group Action, Other than along Statistical and Accounting Lines.
B. The I.Iovement toward Industrial Integration
C. Cartel! zation Versus Integration as an Instrument of Control
IV. The Concept of Industrial Planning ■.-.■.
V. Authorization of Production aiid Capacity Control under the
National Industrial Recovery Act
VI. Inclusion of Production and Capacity Control in the Codes
VII. To what Extent may \7e E:qoect that the Problems which caused Industry
to seek Production Control will continue, or recur, in the future?
9412
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PART II
CASE STUDIES OE THE PRINCIPAL EEEORTS AT
PRODUCTION OR CAPACITY CONTROL
CHAPTER II. PRODUCTION AND CAPACITY CONTROL AS A CURE FOR SICK INDUSTRIES
I. The Conception of a Sick Industry
II. Lumber
A. Economic Condition of the Industry
B. Pre-Code Efforts at Control
C. Results of Code Operation
1. The Administrative Set- Up
2. Functioning of Administrative Machinery
3. Effects of Production Control and Miniraiira Price Provisions on
Quantity of Lumber Produced
4. Effects of Allocation on Internal Structure and
Functioning of the Industry
5. Conservation Aspects of Production Control
6. Importation of Red Cedar Shingles
7. Importation of Mahogany
8. Failure of Price Control
Do Outlook for the Future
(Each of the remaining sections of this chapter, dealing with
the industries listed "below, will take up
(a) Special features of each industry which let to
its classification as a "sick industry";
("b ) Pre-code attempts at control;
(c) The character, operation and results of code
efforts at control; and perhaps
(d) An analysis of the present situation.
III. Other Industries Treated Are:
1. Cotton Textiles
2. Si He Textiles
3. Copper
4. Furniture
5. Atlantic Mackerel
6. Paper
7. Pyrotechnic Manufacturing
8. Machines Waste Manufacturing
CHAPTER III. INVENTORY CONTROL
I. The Inventory Problem
A. General Theory
B. Restriction of Production
II. Carpet and Rug Industry
A. Economic Organization of Industry
B. Institute of Carpet and Rug Manufacturers of America
C. Pre Code Conditions
D. Effect of Code
9412
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III. Carbon Black Industry
A, Production and Inventory Control
'3, Fu.nctionint: of Code Authority
IV. Wool Textile Sales Yarn
V« Other Industries Having Inventory Control
VI. Inventory Problems in Industries Having no Inventory Control
VII, Inventory Control as a Production Control Device
Cha^Dter IV. PRODUCTION CONTROLS AIIvffiD AT ^'AINTAININQ PRICE AT
LEVELS HIGHER THAN THEY WOULD EE UNDER FREE COMPETITION
I. Glass Container Industry
A, Pre-Code Control Within Industry
B, Conflict Between Code Authority and Administration •
1* Effect on Public Interest
II, Corrugated and Solid Fibre Shipping Container Industry
III. Paper Board ■ ■ ,
A. Price Stabilization by Stevenson Plan
IV. Unsuccessful Attempts to Establish Allocation of Production
V. Other Industries in which the Maintenance of Profit Levels was
an Outstanding Issue
Chapter V. REGULATION OF SERVICE IN INDUSTRIES HAVING PUBLIC
UTILITY CHARACTERISTICS
I. What Constitute Public Utility Characteristics?
A, Effect of Large Fixed Localized Investment
B. Type of Industry Affected
II, Ice Industry
A, NRA Certification of Capacity
B, Oklahoma Ice Law: Port Worth Plan
C, Production Limitation - Price Fixing
III, Motion Picture Exhibition
A. Previous Work by Federal Trade Commission
B. Production and Capacity Control
1. Zoning and Clearance
2, Block System of Film Distribution
3. New Theater Construction
4, Restrictions on Exhibitions
IV, Motor Vehicle Parking and Storage
V, Motor Bus, and Transit
A, Effect of NRA Certification on Federal and State Governments
9412
-344-
Chapter VI. EFFORTS TO PREVENT EXTElTSIOi: OF PLAIIT CAPACITY IN
I INDUSTRIES NOT HAVING PUBLIC UTILITY CKARACTSRISTICS
I. Rayon and Silk Dyeing and Printing Industry
A. Effect of Inter-company Relationships
II, Lace Industry
A. Reasons for Code Authority Attitude Toward Capacity Increase
III. Throvang Industry •
A. Code Aiithority Attitude on Introduction of New Machinery
1, Effects
IV, Other Textile Industries
V, Structural Clay Products Industry
A, Justification of Policy of Code Authority
VI, Clay Drain Tile
VII, Floor and Wall Clay Tile Industry
VIII, Clay and Shale Roofing Tile Industry
IX, Cement Industry
A, Conditions Within Industry
I), Efforts to Secure Production Control Before and During NRA
1, Administrative Problems Involved
X, American G-lassware
A, Problem Presented by the Code Authority Trying to Prevent the
ouners of a burned plant from putting it back into operation
XI, Steel Industry ' .
A, Degree of Control, Past and Present
B, Plant Expansion vs Public Interest
XII. Other Industries ' ■
Chapter VII. PRODUCTION CONTROL AS AN AID IN SPREADING El^LOYlvENT
I, General Purpose of Plant Hour Limitations in the Garment Trades
A, Effect on Labor-hour Limitations
B, Relationship to Curtailed Production
C, Relationship to Migration of Industry, Efficiency of Operar-
tion. Introduction of Machinery
II, Dress Manufacturing
III. Coat and Suit Industry
IV. Men^s Clothing
V, Cotton Garment Industry
9412
i
-345-
VI. Millinery
*
VII, Hat Industry
A» Metropolitan New York vs other Mamifacturers regarding
Multiple Shifts
VIII, Other Garment Industries
IX, Wallpaper Manufacturing
X, Effects on Employment of Machine-Hour and Lator-Hour Limitations
in Other Industries
XI, Reduction of Seasonality in the Automobile Industry
.A. Effect of NRA on, Annual Show, Seasonal Production, etc.
Chapter VIII, EFEOETS TO PROTECT ONE SECTION 01^ AN INDUSTRY
AGAINST COMPETITION BY ANOTHER SECTION
I, Cast Iron Soil Pipe
A, Alabama Manufacturers vs Northern Manufacturers regarding
27-hour Plan Day
II. Crushed Stone, Sand and Gravel and Slag
A, Portable Plants
III, Dental Laboratory
A, Effect of Hour Limitations on small Laboratories
IV, Other Industries in which Production Control was a Eactor in
Internal Conflict
Chapter IX. PRODUCTION OR CAPACITY CONTROL AS AN INSTRUMENT OE
CONSERVATION
I, Fisheries
A, Reasons for Ineffectiveness of Production Control Provisions
II* Other Industries
III. General Findings Regarding Attitude in Code Administration with
Reference to Conservation
A, Immediate considerations. Favored Over long run conserva^-
tion interests
Chapter X. CONTROLS FOR TFJ: PURPOSE OF REGULATING CONSUl.lPTION OR
RESTRICTING CERTAIN TYPES OF PRODUCTIVE ACTIVITY
I. Distilled Spirits, and Brewing
A, Regulation of production for the purpose of diminishing con-
sumption - or conserving materials, labor power, or avail-
ability of equipment - might, in the case of war or other
emergency, become one of the most important fields for the
exercise of production control.
9412
-346-
II. Abolition of Home Work
III. ITight Work for Women
A, Sociological and Economic Effects of Provision Found in Some
Converted Paper Products Codes
1. Future Control is Possible
IV* Reduction of Number of Contractors in Coat and Suit Industry
A, Effect of Code in Enforcing Safety Provisions
Chapter XI. PRODUCTION CONTROLS INTRODUCED LARGELY IN IMITATION OF
PROVISIONS WORKED OUT IN OTHER CODES
I. Such Provisions Appear in Wool TeztiLe, Upholstery and Drapery
Textile, Paper Products, etc.
PART III V ^-
' , «...
GENERAL FINDINGS
Chapter XII c ECONOMIC EFFECTS .OF PRODUCTION AND CAPACITY CONTROL/
I. General Feeling of Security
II. Distribution of Business among Firms •
III. Curtailment of Total Production
IV. Limitations on Increased CapS-city
V. Inventory Control
VI. Prices
VII. Profits
VIII. Wages
IX. Spreading of Employment
X. Efficiency of Operation and the Construction and Use of
Machinery . .
Chapter XIII. PROBLEMS IN THE ADMINISTRATION OF PRODUCTION
AND CAPACITY' CONTROLS
I. Confusion as to Objectives
II. Lack of Information
III. Diffusion of Responsibility
IV. Lack of Adaptation to Established Business Relations
9412
>-547- ■
Vw Production Control as an Instriiraent of Discrimination
VI, Getting an Industry to Agree on a. Program
VIX» Compliance
nil. Terminal Facilities
IXe Relation of Production Control to the Efficient Conduct of
Industry
X. Detailed Evaluation of Production Control Provisions
Chapter XIV. POST-rCODS DEVELOPMENTS V:iTH RESPECT TO
PRODUCTION CONTROL.
CHAPTER XV. PROBLSl'IS POR EURT^iER RESEARCH
APPEICDICES.-
Appendix A, Efforts of the LtiralDer Industry at production control
prior to IIRA,
Appendix B. Report on Meeting of Executive Committee of the Joint
Conference Committee (ap-pointed under Article X of the
Lumher Code) held in Washington, D. C, Octoher 24-25,
1935, for the ..Purpose of Considering Future Government
, Policies with Reference to Luinher,
(Decision as to r/hat other ADpendices will
a.r)pear in the Pinal Report cannot as yet "be
made • )
9412
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TBADE PRACTICE STUDIES
PRODUCTION AKD CAPACITY CONTROL UNDER THE NRA
Siimmary of Preliminary EindiniPrs
Restrictions on production or ^a-oacity ar.peared in NRA codes in a
n-umlDer of forms, the chief of which vrere the following:
(1) Assignment to each memher of an industry of a definite
production cjj.ota - as in Lumber and Petroleum.
(2) Limitation on the hours for which equipment could "be worked
(and sometimes on the number of units that could "be
operated) - as in most of the Textile Codes
(3) P.estrictions on the installation of capacity, as in Ice,
Steel and numerous other Industries varying widely in
character
(4) Inventory control, as in the Carpet and Rug and the Carton
Black industries.
Altogether, the codes of more than one hundred industries contained
production control provisions of some type ~ ranging all the way from
absolute limitations and prohibitions to provisions 'which merely sug-
gested that the Code Authority make a study of conditions in an indus-
try, and submit recommendations to the Administrator with respect to
menas for coordinating production and consumption. The industries in
which production controls were actually set up included many of the
most important in the country. However, there were a number of out-
standing codes - such as those for Bituminous Coal and for Machinery
Manufacturing - in which production controls were conspicuously ab-
sent.
An. important objective of the study of production and capacity
control under the N.R.A. has been to determine the effect of these pro-
visions. This task has been complicated by the fact that, in the case
of most of the more ambitious programs, there had been prior efforts to
do much the same thing by industry action. The anti-trust laws had
constituted a threat to such industry action. Moreover, controls which
were practiced by the majority in an industry were sometimes rendered
only partially effective because of independent action taken by minori-
ties. HoT/ever, examination of the pre-code period shows that in many
cases a considerable degree of effectiveness had been attained by inr-
dustry production control measures. Those exercising such controls
were usually eager to obtain, through the N.R.A. , the sanction of
Government approval; but in some instances it is doubtful as to whether
such approval changed the existing situation in any material way.
Another difficulty in determining the result of production control
arises from the fact that in many industries production would not in any
9412
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case have exceeded the limitations prescrited. Indeed, it is safe to
say, generally speaking, that production controls did not appreciably
curtail total output - except as production may have "been reduced
somev/hat voluntarily, "because of a slackening of demand following price
increases. Some of the latter were protahly stimulated "by the fact that
the industry had production control. It is douhtful, however, whether
the raising of prices because of production control did in fact check
production to any extent. For in several of the industries in which
production control was a very imTDortant factor in the total situation,
there were considerable increases in production. In Lumber and Cotton
Textiles, for instance, substantial increases in production were re-
sponsible for troublesome expansion of inventories. Eventually this
led to more rigorous restrictions on production, and to consequent
curtailment of output. Nevertheless, for a rather protracted period,
the net effect of these codes ap-oears to have been a stimulation of
production.
Another reason for the failure of production control to cause much
restriction of production lay in the attitude of the N.R.A., which was.
in general one of reluctance to apply restrictions. Many proposals to
put production controls, in codes were rejected or radically modified.
Where the code gave the Administration discretion, the policy came, to
an increasing extent, to be one of permitting additions to capacity; and
of allowing exemptions to restrictions on production in the case of firms
whose business activities would otherwise have been seriously hampered.
This policy was not, however, applied uniformly — partly because
Code Authorities sometimes took a strong contrary position. One of the
principal lessons which may be drawn from the code experience is the
danger that is inherent in an attempt to apply broad restrictive measures
to industrial conditions which are far from uniform. Reduction of ma+i
chine hours to 40 means one thing to a plant v;hich has been operating
50 hours; and something very different and much more disturbing to a
company whose business and equipment have long been organised on the
basis of 16- or 24-hour operation. A prohibition of the introduction of
new machinery may be welcomed by a. large concern which has equipment in
excess; but may impose a real handicap on a comDotitor who has never ac-
quired equipment beyond that necessary to meet his orders — perhaps on
a basis of double or triple shifts.
Notwithstanding the often negative and sometimes harmful results of
production controls under the codes, it is doubtful whether those in-
dustries that had to bear the heaviest burden in the way of increasing
wages and spreading employment could have been won to cooperation with
the Administration's labor program without the promise of the measure
of security that production control appeared to offer. Production con-
trol also placed limitations on the ability of the more aggressive con-
cerns in an industry - whether through wage-cutting, or through superior
efficiency in operation or in securing business - to overwhelm their
competitors. Such limitations on competition may well have made it
easier for some of the weaker concerns in an industry to come up to
common minimum standards on hours and wages.
9412
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The question of future attitude toward production control presents
a difficult problem. It has not "been possible in this brief saanmary to
describe the underlying conditions in industry which have led indus-
trialists for many years past to seek some measure of iDroduction con-
trol, or to consider the effects of production control on these more
permanent problems. Without attempting to pass Judgment as to whether
the precise measures of control sought were warranted, the conditions
that gave rise to them were frequently such as to warrant group efforts
to remedj'- them in the interest of the public, as well as in that of the
industries concerned - provided, of course, that this could be done
without serious harm in other directions.
The efforts in connection with the codes to change some of these
conditions through production or capacity controls revealed many weak-
nesses and dangers. In addition to the hardships that tened to fall en
particular members of industries, the N.R.A, never developed a suffi-
ciently fundamental and comprehensive policy as to what it was attempt-
ing to accomplish. There was a tendency to protect existing interests
without giving sufficient consideration to whether the long-run national
interest might not warrant changes. Usually, also, the Administration
did not have sufficient information as to conditions in the industries
whose production and capacity were being regulated.
On the other hand, it is important to recognize that a refusal of
the Government to interest itself in production control would not have
meant that activities along that line, with the dangers inevitably ac-
companying their possible advantages, would cease. Efforts at such con-
trol were widespread before IJ.Jl.A. One reason why most of the well-
organized industries do not now wnt a continuation of II.R.A, is be-
cause many members feel they have progressed far enough in the technique
of production contirol to get along by themselves.
This raises two questions. First, how long will these industries
be able to do something really effective with respect to control of pro-
duction? Second, to the extent that they do succeed will the public
interest be sufficiently protected?
With reference to the first of these questions, many of those most
familiar with the management of trade associations believe that industry
controls will at most function only intermittently. Periods of control
will probably alternate v;ith -oeriods of confusion. With reference to
the second issue, IT.R.A, experience has shown that the unchecked admin-
istration of controls by bodies solely representative of industries are
likely to give rise to actions that discriminate against some members,
besides being prejudicial to the public interest.
For these reasons it would appear that, if group action is to be
undertalcen in an effort to solve the major production and capacity
problems with which industry has long been confronted, the government
will have to take some part - in the way either of helping to carry
through Measures that it believes are desirable, or of checking others
that it feels would be un(iesirable. Before the Government can act ef-
fectively in these respects, however, it will be necessary to develop a
much clearer policy as to what ends are to be desired, and as to what
means are practicable, than has yet been done,
9412
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TRAD3 FRACTICa STUDIES
PRICE STUDY or THE FERTILIZER IlIDUSTRY
Taible of Contents
CHIPTER I. SUBJECT Aim SOURCES OF THE STUDY
I, SalDject
A, Principal Subject: the Open Price Plan of the Fertilizer
Industry
B. Incidental Satject: Fertilizer Trends and Practices Re-
flected in the Price Schedules filed with the National
Fertilizer Association
II. Sources
A. Principal Source:
1« Filed Price Schedules
B, Sah si diary Sources:
1. Field Trips
2. HRA Files
3. Articles
III. Leading Issues in the Field of Open Prices
CHAPTER II. OPERATION OF THE OPEN PRICE PLAN-
I. The Code Provision
II. i.Iechanics of the Plan
A. Division of the Country Into Zones and Siih-Zones
B. How Price Schedules Were Exchanged and Made Effective
III. Administration of the Plan
A, Regulations of the Code Authority
B. Regulations of NRA
IV. Extent of Price Filing
A, Numher of Schedules Filed in the Whole Country and in
Selected Zones
1» Total Number Filed by Months
2« Percentage Filed to Meet Competition
B. Number of Schedules Filed by Each Company: Frequency
Distribution
V, Complexity of the Plan
A. The Rule that Slight Changes Required Filing Complete
Schedules
B. Effects
1. Discouragement of Changes
2» Cost of Filing Especially to Small Companies
CHAPTER III. PURPOSE OF THE OPEN PRICE PLAN
I. Publicity of Prices
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A. Expressed Purpose of the Plan
B« Degree of Publicity Achieved
1. Among Sellers
2, Among Buyers
C, Comparison with Situation Prior to the Code
II. Sta'Dilization of the Market
A, I]ffect of Open Price Plan as Envisaged 5y Its Sponsors
B# Degree of Stahilization Achieved
CHAPTI3 IT. COI^ETITION AND COOPERATION UNDER THE OPEN PRICE PLAIC
I. Control by the Code Authority
A, Evidence on Whether It Suggested Prices or Terms
B, Effect of Its Regulations on Prices and Terms
II. Control of Zone Committees
A. Organization of Zone Committees
B. Evidence on ^IHiether They Suggested Prices or Terms
C. Effect of Their Recommendations on Prices and Terms
III. Agreement Among Producers
A. Evidence on Whether They Discussed Prices and Terms Before
!iril:lng Them
B. Com-parison With Situation Prior to the Code
IV. price Leadership
A. Description of Price Leadership in Fertilizer and the lO-day
Waiting Period
B. Extent of Leadership "by Different Producers (big vs. small)
1. In General
2. Price Advances vs. Declines
C. price "Following"
; 1. Extent to Which Price Leaders '.7ere Followed
2. Speed With Which Price Leaders Were Followed
3. Explanation of Delays in Meeting Competition
Where Found
D. The Waiting Period
1. Advantages
(a) Convenience in Operation of the Price
Filing System
(b) Efficiency in Making Prices Known to All Producers
(c) Danger of A Price Cutter Stealing the Market At the
Peak of the Selling Season
2. Danger
(a) Possibility of Agreement on Uniform Prices or Terms
(b) Actual Analysis of Schedules Withdrawn During the
Waiting Period
CHAPTER V. EFFECT ON PRICES
I. Description cf the Products of the Industry
II. Price Trends Reflected in the Schedules
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A, Mixed Fertilizers
B» Materials
1« Nitrogen
2» Phosphoric Acid
3« Potash
III. Compaxi-.ons With Other Prices
A, ^Bar.-au of Labor Statistics Price Series on Fertilizers and
Ho,terials
S, Other Industrial Products
C, Classes of Products Sold to and Sold hy Farmers
IV. Analysis of Price Movements, Prior to and Under the Code
A» Frequency of Changes
B# Size of Changes
V, Analysis of Price Uniformity, Prior to and Under the Code
VI, Effect on Differentials Between the Grades
A» Regular Mixed Fertilizers
B. "Tobacco Grades", "Truck Grades", and Other Special Ferti-
lizers
VII. Charges for Special Mixtures Not On the Regular Schedules
CHAPTER VI. EFFECT ON PRODUCTS OFFERED
I» ITuLfoer of Products Offered
A. By Large and Small Companies ,
B» Prior to and Under the Code
II, Cheiiges in the Number of Products Offered
A. Changes Due to Competition
R. Reductions by NRA
1, Practical Effect of Reductions
2. Reaction of the Industry
III* Home Mixing by Farmers
A* Cost
B. Trend Under the Code
CHAPTER VII. EFFECT ON METHODS OF DISTRIBUTION
I« Sales Direct to Consumers
A# In general
B* Governmental Agencies
C. Farm Cooperatives
II. SsJLes Through Distributors
A, Change from Dealer Distribution to Commission i^ency System
B, Effects of the Change
C, Reaction of Dealers
III. Agent's Compensation, Before, During and Since th« Code
\
tl2
-354-
CHAPTER VIII. EFFECT ON TERlviS OF SALE ' •
I. Trends in Terms of Sale
A. Crrload vs. less-Than-Carload Shipments
B. Cuantity riscounts
C. Mrnner of Packing ....
!♦ Allowances for Shipment in Bulk •- "
2« Extras for Shipment in Odd-Sized Bags - - • f
D» Cash Discounts
II. Degree of Uniformity in Terms of Sale
III, Significance of Changes in Terms of Sale •
A. Importance as Methods of Competition * ■
B. Effect on Purchasing Hahits
1, Effect of Quantity Discounts on Amounts Purchased
2, Effect of Cash Discounts on Time of Payment ■ '
CHAPTER IX. GEOGRAPHIC FACTORS
I. Extent of Interstate Commerce in Fertilizers
II, Relation Between Prices and Terms in Different Zones
A» Degree of Correspondence in Changes
B, Degree of Uniformity in Prices and Terms at Any One Time
C, Effect of Variation in Crops Grown
III. The Delivered Price System
A. The Changes Before, During, and Since the Code
B, Effect of the Delivered Price System
1. 'Ihsorption of Freight
2. Cross-Hauling
3. Uniformity of Prices
IV, Trucking Allowances
A. Trends .. • .
B. Reaction of Truckers
CHAPTER X. GENERAL RESULTS
I# Comi^liance
II. Effect
A, On Producers in General
B, On Small Firms
C, On Consumers
III. General Success
CHAPTER XI. ISSUES IN THE STUDY OF OPEN PRICES
I. Issues on 7/hich Light is Shed By the present Study
A. Statement of Problems T?hich are:
!• Conclusively Answered ' , <
9412
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2» Partially Answered
B. Heconciliation of These Findings Viiith Those of Other SfU-dies
in This Field
II. Outstanding Issues on HThich Light may be Shed 3y Further :study
of Fertilizer Industry
III, Suggested Lines of Further Study
=12
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TRADE PRACTICE STUDIES
PRICE STITJY OF THE FERTILIZER IirpUSTRY
Preliminary Summary of Findirii'^s
The purpose of the fertilizer industry in adoptin^^ open prices in
its Code was to inform all producers of all prices current in the mrx-
ket. Since it was hoped by this means to discourage price cutting, price
stahilization may he termed a coordinate purpose of the plan.
It does not appear that the National Fertilizer Association, which
served as filing agency, urged particular lines of action on the meraoers
of the industry, or favored any company or group.
The regulations issued "by the Code Authority were in line with the
instructions laid down in the Code, hut they must have tended to in-
crease ujiiforinity in prices and in terms of sale, since they increased
uniformity in the bases of quotation.
The recommendations of the Zone Committees looking toward standcrcV-
izatior-. of marketing practices v/ere seldom adopted, hut they were some-
times put into effect by general consent; and by this means as well as
by the regulations of the Code Authority uniformity was increased through
the coopere.tion fostered by the Code,
There exists scattered indications that producers occasionally
knew of each other' s plans before adopting specific price policies; but
the m<?.ss of evidence showing independent action is so great that it must
be presumed that such cooperation was little uore frequent under the Code
than before.
The system of price leadership is well developed in the fertilizer
industry. One company issues a new price schedule and the rest fall in
line.
The majority of companies do not follow the price leader at onco,
but allow a lapse of several days or longer. Usually this is because the
price change has occurred during an inactive season in the market, but
soi.ietines it has meant that the companies which delayed the issue of their
schedules veve taking advantage of the interval to make sales on the old
terms.
There was no particular distinction between price leadership on
price advances and on declines. The same companies led in both, and the
delays in following were about the same in both.
The 10"Clay waiting period does not appear to have been misused to
bring pressure to bear on small companies.
The price schedules were made available to buyers as well as to
sellers.
9412
-357-
The com"olexit,y of the r.rice schedules "/as very (^roat, due partly to
the nO.in^s of the N.R.A. that competition could only te met by filing
identical schedules, and to th-at of the Code Authority that changes could
only "be made effective ty filing complete schedules. This complexity re-
sulted in a good deal of expense to the producers,
Prices on most products rose sli;^htly londer the 0T;en nrice plan, "but
somewhat less than did prices in other industries. Many other factors
"beside the open price plan undoubtedly cohtri"buted to "bring a"bout this re-
sult.
No si;^ificant change in the frequency and size of price movements
can he o"b3erved under the open price plan, as compared to the pre-code
period.
Price uniformity increased distinctly under the Code, tut had ex-
isted in considerable degree previously. The increase was mainly H.ue to
the fact that all parties had constantly at hand reliable information on
the state of the market.
Competition in the offering of additional grades continued ijnder the
open price plaji. The industry welcomed the reduction of grades.
Tnile the available figures indicate that the differential betvreen
the price of mixed fertilizers and that of the materials contained in
then - the differential that constitutes the cash saving to farmers v/ho
buy the materials and do their ovm mixing - increased under the Code,
they are not conclusive. There is no evidence that the anoi;jtit of home
mixing actually increased,
Trro basic chs.nges in the methods of 'jistribution were made shortly
after the adoption of the Code. The first was the cha-nge from the S3''stem
of selling to independent dealers for resale to farmers to that of ship-
ping to agents (the sane -oersons as the dealers) on consignment. This
c"ha,nge was due to a desire to control the ultimate distribution of the
product more closely - for example, to prevent excessive mark-ups. So
far as kno\m few dealers objected to the change. In some districts the
change was not uniformly made, and the result was a less stable ms-rket.
The second c'r^ange was in the method of quotation - which ha.d pre-
viously been on a "dealer delivered" basis, although sovne comnanies
quoted P,0,B. plant but which became almost imiformly "delivered at tine
farm". This increased price uniformity, but seems to have been a^ccept—
able to dealers and farmers,
Tlie delivered price system involved the absorT;tion of freight on
distant shipments, a factor present before the Code among fhe com-nanies
which sold on a "dealer, delivered" basis. Cross-hauling, however, does
not appear to be an important evil in the industry,
Q,u£ijatit7 discounts were almost ujniversally adopted under the Code
as a result of an N,R.A, Administrative Order,
9412
-358-
Cash discounts were increased early in the Code and made somewhat
more uniform. Later they were decreased again, although remaining hi£;h-
er then the original scale.
Terms of sale were generally uniform among the producers, "but not
completely so.
The price schedules show that there is considerable interstate
commerce in the fertilizer industry.
Terns of sale were a good deo.l alike in the different zones. Prices
changed at about the same times, but there v/ere differentials between
zones « c'ue chiefly to the location of important plants and to the
freight structures.
The industry reduced the trucking allowances to consumers shortly
after the commencement of the open price plan. This was authorized by
the Code, but caused some complaint on the part of truckers.
Compliance was reasonably good until the last.Treeks of the Code.- 1
In other v;ords complaints against companies for selling at other than
their scheduled terms usually turned out to be unfounded, or were cor-
rected by halving the offender sign a compliance agrecmei^^.
It appears that small companies benefited under the open price
plan, increasing their percentage of the business.
IJo ferti?iz3r producer or buyer contacted in the course of the
study eiKpressed dissatisfaction with the open-price plan. It apperxs
to have been almost universally popular.
9412
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TRADE PHACTICE STUDIES
A LIMITED SUKVEY OF PRICE EILIITG UNDER N.R.A. CODES
Table of Contents
CHAPTER I. INTRODUCTION
I. The Introduction of Price Filing to the N.R.A.
II. The History of Price Filing
III. The Definition of Price Filing
CHAPTER II. STATElvIENT OF THE PROBLEM
I. The Problem as a Whole
A. The Role of Price Filing in Competition
1. Price Filing Itself a Control
2. The Dual Function of Price Filing
(a) Publicity
(b) Compliance or Further Control
3. Publicity and Free Competition, Impe.rfect Competition and
'Fair' Competition
4. Price Filing Plans as lueans for Further Control
(a) Price Filing as a Check of Compliance with other' Controls
Established
(b) Inc or]-) oration of Other Controls as Part of Price Filing
Plan itself
5. The Economic Problem - Summary Statement
B. Publicity under N.R.A. Price Filing Plans
C. Control under N.R.A. Price Piling Plans
D. The Economic Consequences of Price Filing under N.R.A. Codes
E. The Elements of Price Filing Plans in N.R.A. Codes
P. The Administrative Aspects of Price Filing
G-. The Q,uestion of the Legal Status of Price Filing
II. The Present Study
A. Prevalence of Price Filing in N.R.A. Codes
B. Limitations of the Present Study in Scope, Materials and
Analysis
C. The Sample and What It Is
D. The Methods and Procedure
CHAPTER III. . PUBLICITY UNDER NRA PRICE FILING PLANS
I. Purposes and Functions of Publicity as Expressed by Code Proponents
II. Publicity Requirements under N.R.A. Price Filing Plans
A. Code Provisions Pertaining to Publicity
B. Expansion or Modification of Publicity Requirements by Code
Authority Action
C. Administrative Modifications by N.R.A.
9412
-Seo-
ul. Nature and Extent of Publicity Realized under N.R.A.
A. Data Available for Dissemination as Conditioned by Scope of
Price Filing and Participation of Members
B. Character of Dissemination of Data by Administrative Agency
C. Obstacles to Fall Publicity
CHAPTER IV. CONTROL UNDER N.R.A. PRICE FILING PLANS
I. The Desire for Control as Revealed by Industry Proposals
II. Control Requirements Set Up in Connection rith the Price Filing Pro-
visions in the Codes
A. Control Over the Price Level
1, By Cost and Minimum Price Provisions
2. By Adherence to Filed Prices
B. Control Over Price Changes
1. The Waiting Period as a Deterrent
2. The Limitations Against Discrimination
C. Control Over the Price Structure
1. Uniform or Maximum Discounts and Terms
2. Product Classifications
3. Customer Classifications
4. G-eogranhic Price Stinieture
D. Controls Over Channels of Trade
1. Recognition or Non-Recognition of Customary Channels of
Trade
2. Mandatory Trade Differentials
3. Inclusion or Exclusion of Distributors from Jurisdiction of
Price Filing
E. The Integrated Pattern of Control Provisions in Price Filing
Codes
III. Expansion or Modification of the Control Requirements by Code Auth-
ority Action
A. Rules and Regulations to G-overn Price Filing
B. The Immediate Objectives of Code Authority Regulations Pertain-
ing to Control Through the Price Filing Plan
C. Basis of Authority for Code Authority Regulations
IV, Nature and Extent of Control Realized under N.R.A. Price Filing
Plans
A. Conformance to Control Requirements
1. Evasions and Subterfuges
B. Factors Determining the Effectiveness of Control
1. The Product and Its Market
2. Nature of the Industry and Degree of Organization
3. The Price Filing Provisions and the Code as Approved by
N.R.A.
4. The Relative Comx^lexity of the Price Structure
5. The Administrative Lethods Employed
6. Enforcement Efforts
C. Application of Controls to Distributors
D. Need for Other Supplementary Controls to Accomplish Desired Ends
1. Statistical Reporting and Share- the-Business Plans
9412
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2. Production Controls
3. Cost Controls
4. Resale Price Maintenance
CHAPTER V. THE ECONOMIC EETECTS OF PRICE PILING UNDER N.R.A. CODES
I. The Elimination of Ignorance
A. Elimination of the Lying Buyer
B. Elimination of Bid Shopping
C. Elimination of Secret Rebates on Concessions
D. Alteration of the Position of Favored Buyers
E. Other Effects of the Elimination of Ignorance
II. Effects on Leadership in Price Changes (*)
(*) This topic and others follovring will be developed so far as
practical in terms of the following questions:
A. What changes can he traced to Price Filing
B. Do Changes Appear in the Nominal Price or in Terms and Conditions
of Sale?
C. Wliat is the Explanation of any Changes Observed?
D. Can They be Attributed to the Publicity or to Control Aspects of
Price Filing?
III. Effects on the Price Level
IV. Effects on Stability or Flexibility of Prices
V. Effects on Frequency and Magnitude of Price Changes
VI. Effects on Uniformity of prices and of Terras and Conditions of Sale
VII. Effects on the Price Structure, e.g.
A. Standardization of Products
B. Simplification of Price Structure
VIII. Effects on Channels of Trade
IX. Effect on Geographic Competitive Relations of Members and Customers
X. Effects on General Competitive Position of Members
XI. The Issues of Public Policy Raised by the Indicated Economic Effects
CHAPTER VI. THE COMPONENT ELEMENTS OF PRICE FILING PLANS (*)
(*) Topics under this Chapter will be developed in terms of the
purposes and controversies expressed in connection with the various
elements, their prevalence in N.R.A. codes, their operation and ob-
served effects.
I. Past Prices vs. Current or Future Prices
II. Mandator^/ vs. Voluntary Plans, and Participation in Plans
III. The Waiting Period Requirement
9412
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IV. The Identification of Sellers and/or Eioyers
V. The (Question of Idandatory Customer Classification
VI. The Required Filing of AH Terms and Conditions of Sale
VII. The Adherence to the Actual Filed Price
VIII. Manner and Extent of Dissemination
IX. The Agency to Administer Price Filing
X. The Use of a Standard Price Filing Form
XI. The Scope of Price Filing, and the Area of Application of Prices
Filed
XII. The Products Included Within the Price Filing Requirement
XIII. The Transactions Included Within the Price Filing Requirement
XIV. The No-Selling Below Cost Restriction
XV. The Provisions for Meeting Competition
XVI. Other Significant Elements
CHAPTER VII. N.R.A. AEIvIINI STRATI ON OF PRICE FILING
I. Supervisory Administrative Action
A, The Administrative Pov-ers Reserved to N.R.A. and those Delegated
B, The Nature and Extent of Supervision Exercised
1. Receipt of Information on Rulings and of Actual Price Filings
2, Review of Code Authority Regulations
3. Formal Administrative Action in Sta^'-s, Exemptions, Orders,
Amendments, etc.
4, Investigation and Correction of Unauthorized Activities
II. Compliance and Enforcement Activity of the N.R.A.
A. Compliance Experience
B. Litigation Experience
III, N.R.A. Policy Concerning Price Filing Provisions and Its Component
Elements
A. A Resume' of policy Developments
1. The Development from No Policy to a Policy - June 16, 1933
through June 7, 1934
2. The Introduction of Limitations and Safeguards - Office
Memoranda Pertaining to Price Filing
3. Formulation of Policy for Code Revision
B. Application of Policy
C. Extent to Wliich N.R.A. policy Declarations v/ere Made Effective
Through Changes in price Filing Provisions
9412
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CHAPTER VIII. FINDINGS AND CONCLUSIONS
APPENDICES
APPENDIX A E3chibits of Materials Pertaining to Price Filing Study
EXHIBIT I Preliminary Outline for Open Price Investigation
EXHIBIT II Distribution of N.R.A. Codes, by Industry Divisions, by
Size and by Time of Code Operations
EXElIB.n: III Alphabetical List of 191 Codes in Over-All Sample for Price
Filing Study
EXHIBIT IV Open Price Plan for the Folding Paper Box Industry
EXHIBIT V N.R.A. Policy Statements Relating to Price Piling
EXHIBIT VI Statistical' Program for the Price Filing Unit
(a) Subject Matter Outline
(b) Methodology Outline
(c) Material Specifications Outline
(d) Inspection Study Outline
APPENDIX B Price Filing in the Asphalt Shingle and Roofing Industry
APPENDIX C Price Filin>r in the Steel Castings Industry
APPENDIX D Price Filing in the Baking Industry
APPENDIX E Price Filing in the Gas Appliance Industry
9412
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TRADE PRACxIC^ S INDIES
A LIl.IITED SURVEY OF ?:^:ICE EILITO UiZ)ER N.R.A. CODES
Preliminr'Tv Sui.inary of Pindin.^;s
The price filing plans authorized by IT.R.A. codes were not truly
government exioeriraenfs with price filin^;;, ' despite their varied and maii-
datory character. They r^ere not a controlled sajnple rnd v/ere not sub-
ject to informed critical observrtion or supervision. The ori;ginal pro--
visions were too dissinilar to fall into any well-defined- clrsses; they
operated in every conceivable t^npe of industry and competitive situation,
within almost every known combination of code restrictions, and under
diverse administrative management. They were subjected to changing pol-
icy standards, unevenly applied to open price systems that had already
reached one or another -sta^e of confusion, congealraent or "operating
smoothness.
r ^
The most characteristic form of price filing under N.R.A. codes
involved the mandatory filing of present or future prices below which
sales might not take place, the inclusion of all terms of sales in the
filing, and the dissemination of identified price lists to competitors,
through the medium of a central office, usually that of the Code Author-
ity.
The major differences betv-een the N.R.A, ti^pe of price filing plaJis
and those of the pre-code period were: (a) the change from voluntary fil-
ing by a group of industr;^,'- members to the mandatory filing by all members
of 3Ji industry; (b) the change from the reporting of past transactions
to the reporting of present or of future quotations (with a waiting per^
iod); (c) the isolation of price re-oortinf; as a plan more or less dis-
tinct from other statistical renorting.
Price filing appears to serve tv^o clearly distinguishable functions
- publicity function and the control or compliance function. These are
frequently embodied in the same lolan, and are confused in the minds of
both of those industry members who participate in the plans and of those
who seek to ascertain their effects and the desirable public policy to-
ward them.
Price filing plans under the 1T,R.A, were designed primarily for the
latter function. They were the "chec-:ing" rather than the "market" in-
formation t'-pe of open price provision, in that publicity was to serve as
a measure of individual compliance with other price or trade practice
provisions (including no sales belo^,/ cost provisions), as well as aji aid
to improved knowledge about price levels and price chand^es.
As a publicity device, price filing was expected to deter price
cutting and to prevent uneconomic discrimination among buyers. There is
f ragmen tarj'- evidence that it did have this result in some instances; but
the findings are not as yet substantiated by quantitative evidence. In
some instances it seems to have deterred, in other to have promoted price
cutting. It appears very generally to have promoted price uniformity.
The effectiveness of the device as a deterrent to discrimination was
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limited "by the common practice of permitting customers to have access only
to the price filin-^^s aT)plica"ble to their ovm class.
The effectiveness of price filing in giving publicity to prices uas
limited "by a number of other factors: (a) Dissemination of filed prices
was usually undertalcen only to memters and was comparatively rare in
the case of customers, ("b) Frequent failure to file, widespread evasion
of filed prices, and the filing of minimum rather than actual selling
prices were common obstacles to publicity.
Very wide discretionary powers were left to Code Authorities in con-
nection with the operation of open price filing provisions. One use of
these powers v;as progressively to extend requirements for the publica-
tion and regularizing of all terms and conditions of sale. Price filing
requirements a"opear to have served frequently as an impetus for standard-
ization and uniform classification of products, customer groups, dis-
counts, differentials, and other terms and conditions of sale. Exceptions
to this trend, in the direction of increased differentiation in terms and
conditions of sale may appear, however, from more detailed studies,.
The rules and regulations of Code Authorities pursuant to price filing
provisions shaded imperceptibly into regulations designed to convert the
price' filing system into a tool for price control. Efforts to use price
filing as an instrument of Joint action to maintain prices were general.
These efforts were not in most cases in the form of collusive agreements
or of overt price fixing, but in that of an organized program to restrict
individual freedom in pricin^^ practices, and to secure conformity to a
pre-determined price minimum and/or price structure. Thus we find rela-
tively fev\r recorded cases of pressure or coercive activity to require the
filing of a specified net price, but very extensive evidence of efforts
to compel members to abide by code or extra-code regulations concerning
certain elements of price, cost floors, methods of quotation, established
differentials, etc,
A very close relationship between cost provisions and price filing
provisions appears, v/ith the cost provision frequently used to establish
Code Authority control over filed prices, and vice versa. The effec-
tiveness of this control was limited and weakened by the progressive re«
luctajLce of the 1T,R,A. to approve mandatory cost accounting systems or
to enforce cost restrictions,
Tlie administrative problems connected with the operation of price
filing were many and vajried. Many arose from the code provisions them-
selves, which were characteristically too broad or too narrov; for a
regulatory device to be administered by a combination of private and
public authority.
Code provisions proved relatively pliable so far as Code Authority
innovations were concerned, because of the wide powers granted in early
codes and of the lack of specific limitations and definition of detailed
procedures or powers. Administrative interference or corrective action
was largely negative in character, since amendments and modifications of
existing provisions were made dependant on industry cooperation, N,E»A«
policy on price filing was not formulated until June, 1934, when more
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than 300 codes had already teen written. The General trend was to sur-
ro"UJid price filing systems with safeguards against abuse, and to limit
the f-u^iction of these systems more definitely to effective publicity.
Even a.s thus limited, the last policy statement says that they should be
applied to competitive but not to serai-monopoly industries. Application
of policy to effect changes v/as greatly handicapped by the reluctance
of industries to open up the plans to revision.
There was a conspicuous absence of Administrative investigation of
the need for proposed price filing plans at the time of their introduc-
tion, and a corresponding lack of current supervision or observation of
their operation and results after approval.
One result of this spasmodic supervision is the absence in n,R,A»
files of any body of collected price filings sufficient to perriit a
statistical analysis of the primary economic results on price ' ;■,
levels, price stability, uniformity, etc, ' . •
'The effectiveness of price filing performance, and the success of
plans in achieving the desired ends of publicity and control, were li-
mited in many industries by difficulties arising from lack of standard-
ization of the product by ambiguities or loopholes in the provision,
by evr.sion of the provisions through subterfuge and otherwise, by the
-presence of large numbers of small enterprises, and by the fact that
distributors in competition with direct sellers were not bound by the
price filing requirements.
Administration of price filing provisions was apparently easier
and more effective in industries in which the structure of prices was
simple or fcr.Vialized, either prior to the code or by virtue of code pro-
visions.
The frequent demand for supplementary controls over costs, produc-
tion, resale prices, e tc, would indicate that price filing alone is not
deemed sufficient to secure effective price control in many industries*
There is some evidence that control is facilitated by the use of a market
reporting system, which includes other statistical data in addition to
prices.
F-Jirther and more definite findings on the economical results of
price filing plans must await the completion of statistical case studies
and the analysis of other work materials.
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TRAJ33 PRACTICE STUDIES
LOSS LIMITATION
Table of Contents
CHAPTER I. IlITRODUCTION
I. Definition of Loss Leader Selling
.•/
II. Definition of Loss Limitation Devices
III. Sta.ter.ient of the Issues
A» Industrial Issues
B, Social Issues
CHAPTER II. ECONOMIC BACKGROUND
I. Conditions Out of Which Loss Leader Selling Arose
II. The iiechanics of Loss Leader Selling
A* As Used "by Manufacturers
1. Manufacturers Dumping
3« As Used "by Wholesalers
1« Joint Sales
C. As Used by Retailers
III. The Groups Affected by Loss Leader Selling
A» The Producers
1. The Effect on Volume
2, The Effect on Selling Policies
B. The Wholesraers
1« The Effect upon Volume
2, The Effect on Buying Policies
C. The Retailers
1. The Effect vcoon the Volume
2. The Effect upon Buying Policies
G, The Effect upon the General Level of Prices
4, The Effect upon General Level of Brand Prices used as
' Loss Leaders
D. On Consumers
!• Resume of Effects on Prevailing Price Levels
2. Effeccts on the Availability of Merchandise
3. Effects on the Q;uality of the Product
E. Interpretation of the Interplay of Interests in the Trade
Before and During the Code
1. Strategy of Invaders, to Gain Control of the Field
(a) Manufacturers
(b) TTholesflers
(c) Retailers
2. Strategy of Those in Power, to Remain in Power
(a) Manufacturers
(b) Wholesalers
(c) Retailers
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CHAPTER III. NON-LEGISLATIVE PRICE STABILIZATION DEVICES
I» Meo.sures Employed in Trade Making for Adoption of Non-Legislative
Price Stabilization
A« Refusal-to-B-uy
B» Sabotage (Sv/itching ajnd Disparagement)
C» Trade Propaganda
D» Intra- Indus try Politics
II. Descri-tion and Evaluation of Methods of Non-Legislative Price
Stabilization
A. RGfusal-to-Se;Ll
1» Purpose of Refusal-to-Sell Policies
2« Basis of Legal Rights to Refuse to Sell
3, The Principle of the Device
4« Mechanics of Operation of Refusal-to-Sell Devices
5« Legal Limitations on Right to Refuse to Sell
6, Recent Use of Refusal-to-Sell'
7, Effects of Refusal-to-Sell Policies
B« Consignment Selling Used as a Price Stabilization Device
1» Purpose of Consignment Selling
2« Ba-sis of Legality of Price Stabilization by Consignment
Selling
5. Mechanics of Operation of Consignment Selling
4, Effects Reported by Manufacturers Experienced in Use of th©
Device
C« Manufacturer-Dealer Cooperative Arraiigeraents
D« Education of Dealers in Benefits of Price Stabilization
CHAPTER IV. FEDERAL LEGISLATIVE PRICE CONTROL DEVICES
I. Pre-code Proposals
A. Stevens Bill
B. Metz Bill
C. Capoer-Kelly Bill
II. Loss Limitation Provision of Retail Drug Code
A* Historical Development of Provision
1. Relation of "Manufacturer's Wholesale List Price per Dozen"
to Merchandise Costs of Large and Small Retail Druggists
2. Development of Ap"Droved "Cost Plus 10^" Provision
3. Development of Amendment of March 1934
4. Development of Amendment of September 1934
B. Alignment of Opposing Forces
1» Proponents
(a) Small Independent Druggists, Established National
Chains, Non-Cut-Rate Wholesalers and a few Manufacturers
2. Opponents
(a) Cut-Rate Independent Drug Store, Small Chains, Cosmetic
Shops, and Department Stores
C. Issues seen by Opposing Forces
1. ProDonents
(a) Importance of Small Drugv:ist to Society
(b) Necessity of Price Stabilization to Maintenance of
Small Druggist's Existence
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2. Op-Donents
(a) Danger to Public Welfare from Protecting a Particular
Class
(b) Curtailment of Opponents' Individual Liberties
D, Operation of Provision
1, Administrative Difficulties and Inherent Limitations
2, Compliance and Litigation
3, Attitudes of Interested Parties
E. Effects of Provision
!• From the Industry's. Viewpoint
2. From the Social Viewpoint
[II. Loss Limitation Provision of Retail Food and Grocery Code
A« Conditions in Trade- prior to Code
1. Statistics
2. Classes of Members
B« Evolution of Loss Limitation Provision
1. Original Proposal
2. Changes Proposed
3» Approved Provision "Cost plus Labor Mark~Up"
C. Issues seen by Proponents of Provision
!• Protection to Small Retail G-rocers
D. Issues seen by Opponents of Provision
1, Danger to Public Welfare from Protecting a Particular Class
2. CurtailmEnt of Proponents' Individual Liberties
E» Establishment of Labor Mark-Up of 6^
E. Problem of Transportation Charges in Lqss Limitation Provision
G. Difficulties Involved in NRA Administration of Provision
H« Successes and Failures of Code Authority Administration
I. Effects of Provision
1. Effects on Trade
2. Effects on Consumer
3. Effects on Allied Industries
4» Report of Conferences and Qp.estionnaires
5, Changes Suggested
IV, Comparison of Drug Code Loss Limitation Provision with Loss
Limitation Provision in Grocery Code and other Codes
V, Post-code Federal Price Stabilization Proposals
A* Patman Bill
B« Proposed Federal Enabling Act Relating to State Permissive
Price Contract Statutes
C» Proposed Amendment to Federal Trade Commission Act
CHAPTER V. STATE LEGISLATIVE PRICE STABILIZATION DEVICES
«
I. California Legislative Price Stabilization Devices
A. Legal History
1. The Law Prior to 1931
2« Fair Trade Law of 1931 and Amendment of 1933
(a) The law Stated and Interpreted
(b) A Review of Cases Arising under the Law
3. The Unfair Practices Act of 1935
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B» Analysis of Political Forces "behind the Legislative Devices
C« Developments in the G-rocery Trade
!• The Extent and Nature of the Use of the Fair Trade Law
2« Attitudes of Members of The Trade
3. Reasons for the Slight Use of the Fair Trade Law
4, Present Attempts to Set Up Minimum Prices under the Unfair
Practices Act of 1935
D. Developments in the Drug Trade .
1, Developments Prior to 1933
2, Period of the Retail Drug Code •
3, Developments under Anendment 1-^
4, Analysis of Conditions in the Trade Prior to the Passage of
Anendiient 1-h, (Especially the Extent of Price-Cutting as
Indicated by Price Studies)
5, Attitudes of Members of Trade
6, Procedure of Enforcement
(a) Methods Employed
(b) Legal Remedies
(1) Types and Terms of Contracts
(2) Use of Restraining Orders and Injunctions
7, Effectiveness of Enforcement
(a) Administrative Difficulties
(b). Degree of Enforcement in the Trade
8, Effects upon Retail Prices aiid Margins
(a) Average Retail Minimum Contractual Margins by Classes
of Products
(b) Comparison with Margins in Great Britain
(c) Margins on Selected Specific Items (Based upon an
Examination of Contracts).
(d) Comparison of Advertised Drug Prices in San Francisco
Examiner during First Six Months of 1933 with Contractual
Prices in 1934
(e) Comparison of Advertised Drug Prices in Stocktpn during
First Six Months of 1933 with Contractual Pricgs in 1934
(f ) Same as (d) and (e) for Los Angeles
(g) Same as (d), (e) and (f) for Modesto
(h) Same as (d), (e), (f), and (g) for Rural Centers
(i) Comparison of Pre-Contr actual and Contractual Prices on
105 items in 20 Independent Drug Stores
(j) Comparison of California Contractual Prices with Pricey
on Identical Items in Portland, Oregon and Tacoma,
Washington in Period before Oregon and Washington had
Fair Trade Laws and in Branches of a Firm Doing Business
in All Three States
(k) Comparison of California Contractual Prices with Boston
Prices, (Small sample)
(1) Comparison of California Contractual Prices with Canadian
Prices. (Small sample)
9, Competitive Adjustments in the Market Traceable to Resale
Price Maintenance
10, Economic Effects of the Application of the Fair Trade Act
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II. Other State Permissive Contractual Str.tutes
A» ITev; York
B. UevT Jersey
C. PennsylvaJiia
D. Maryland
E. Illinois
F. TJisconsin
G-» Iowa
H, Oregon
I« Washington
III. Other Types of Price Stabilization Legislation in States (other
than California)
A» Ner; Jersey Unfair Competition Law
!>, Connecticut Retail Drug Law
CHAPTER V. POST CODE STRATEGY OF INTERESTS IN THE DRUG TRADE
I. Strategy of Invaders to Gain Control of the Field
A« Manufacturers
B. Wholesalers
C. Retailers
II, Stra.tegy of Those in Power to Remain in Power
A» Manufacturers
B. Wholesalers
C. Retailers
CHAPTER VI.* COI^IPAEIATIVE AITALYSIS OF PRICE STABILIZATION
DEVICES DISCUSSED
I. Adpiinistrative and Legal Difficulties
II. Cost of Operating the Devices
III. Evaluation of the Relative Effectiveness of Such Device
IV. CompaTison of the Unique Advantages of Each Device
■ CHAPTER VII. LEGAL ANALYSIS OF RESALE PRICE MAINTENANCE
I. Statement of the Problem
II. Development of the Law of Restraint of Trade
A. Early Economic Background
B. Modern Manifestation Compared with Ancient Idea
C. Economic Barometers used "by Court to Measure Whether a &iven
Device Harms the Public Interest
III. Development of Law of Unfair Competition
A. Early Economic Background
* This Chapter probably will not appear in the January 15, 1936 report of
this Study.
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B. Development of Good Will Tlieorjr
C. General Econonic Struct-jre of Resale Price I^intenance as a
Ller chandi s in<p; Technique
D. Reason nhj'- Resale Price ilaintenance ^as Gondenned as in
Restraint of Grade
IV. Analysis of Recent Supreme Court Decisions Bearing on Resale Price
Maintenance
A, Dr. Miles case; Col^^ate casp', and Ijceciinut case,
1. Extent and Adequacy of Factual Inforr.iation "before Court
2. Data Necessary to a Determination of Such Cases
3. Value of Cases as 5\iti-ire Precedents
B. Appalachian Coals Case
1. Extent aind Adeqioacy of Factiaal Information iDefore Court
2. Development of "Rule of Reason"
V. ITecessitj'' for Economic Facts and Economic Viewpoint in Future
Litigation
Involving Resale Price Maintenance
VI. Extent and Adequacy of Factual Material before IIRA Warranting, from
a Legal Viewpoint, Code Resale Price ■ Maintenance
CHAPTER IX. - MATERIALS l^TEDED FOR A COlylPLETE ANALYSIS
OF THE PROBLEl'.!
I, Factual Information on Costs, Prices, Volur.ies, Margins and Profits,
and Merchandising Policies
A. Of Retailers using Loss Leaders, and Their Competitors
B. Of YJholesalers Servicing Retailers Using Loss Leaders, and
Those Servicing Their Competitors
C. Of Mianufacturers whose Products are used as Loss Leaders,
or liave teen used as Loss Leaders, and Other Manufacturers
II, Factual Information on the Shift in Distribution of Commodities
through the Various Intermediar;'' Channels as a Result of Loss Leader
Selling and Loss Limitation Devices.
A. Private Brands vs. Standard Brands
III. An Evaluation of the Techniques Available for Collection of Such Data
A. Primary/- Source Material
1. Througli Interviews
2. Through Q,uestionnaires
3. Statements made at Public Hearings
4. Correspondence
5. Newspaper Advertisements
6. Price Studies
B, Secondary Source Materials
1. Government Surveys
2. Academic Surveys
3. Trade-Sponsored Surveys
4. Trade Journal Articles
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IV, Theories to "be examined and Evaluated
7. Reconmended Techniaues to "be Srnployed
VI. Samples of Questionnaires and Interview Questions Developed for the
Use of Tliis Study
VII. Suggested Coverage for a Study.
9412
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TB.AD'E PPjICjIGE STUDIES
LOSS LL.lITATIOiNr
Frelirainary Sii.".iMary of ?indin.^_s
Ee-rl3'" in the period vrhen codes were bein,^ lornulated N.R.A. adopt-
ed the policy of prohibiting loss leac.er selling, in order to assist
small inder)endent merchants in maintaining and exi^anding era-nloyrQent .?-nd
wages. Consequently, many of the retail codes for trade? dealing in
over-the-coimter merchandise contained loss lir.itation Torovisions.
I.Iany in the N.R.A. felt tii^t the loss linitation ^ro visions in the
retail codes would lead to increased prices to consumers and to un-
warrantedly high profits for manufacturers end. wholesalers, since the
prices of the latter would of necessity be the base for the scheme.
The attem-ots under the loss li'-nitation provisions of the retail
codes merely reflect a movement which was in operation through various
devices, prior to the K.R.A. and which has continued through the same
devices and through state legislation since the collapse of the lorogram.
Because of limitations of time and personnel the study has center-
ed upon the retail grocery and retail drug trades because of the im-
portance of loss leader selling in these lines, and because of the fact
that different methods of control were atter.ipted in each.
Loss limitation nrovisions in the various retail codes differed
from one another in principle. The Retail Drug, Reta,il Booksellers and
Retail Tobacco codes established base prices, which were the same for
both small and large outlets throughout the country. The Retail Pood
and Grocery and Retail Trade codes established minimum prices based on
the individual merchant's invoice cost, which varied greatly in small
and in la.rge outlets.
The Drug Code loss limitation provision established, as a minimum
price, the manufacturer's v7holesale list price per dozen, which is an in-
tegral part of the pricing structure of the drug industry and the near-
est practicable approach to the small dealer's cost. The Booksellers'
Code provision established prices at the full publisher-consumer price.
The Retail Tobacco Code set a price lying between the small dealer's
cost and the top consumer price.
The Retail Trade Code and the Retail Pood and Grocery Code each
established, as a minimijm -nrice, the net delivered invoice cost or re-
pla.cement cost, vrhichever was lower, plus a raark-u^3 for labor costs.
The mark-up established for groceries was 6 per cent, and that under the
Retail Trade code 10 per cent. In both of these codes there was a pro-
vision permit tin{;, the small dealer with a high invoice cost to meet the
prices of competitors who bought more advantageously.
The two sections of the report dealing with the drug and grocery
trades' experience during the N.R.A. will illustrate tlie administra^
tive difficulties and that inherent problems th.^^t arose from the at-
tempt to stabilize i:)rices in these trades.
9412
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Experience -under the loss limitation provisions of the various
codes v/as "brief; hence, little material appears in N.R.A. files on the
effects. However, such data as have "been gathered from the files and
by independent studies indicate that T)rices to the consumer decreased,
on the average, on highly advertised dru^ products during the operation
of the Drug Code's loss limitation provisions. At the same time the
small raemhers of the trade, althoiigh they took on an additional lahof
"burden, found themselves in a better financial condition. Complete ex-
planation of the seeming paradox of decreasing consumer prices carjiot
be given v/ithout further study, but it is the belief of some representa-
tives of N,R,A. pnd of the retail drug trade who vrere responsible for
the administration of iiie code that the following factors account for it;
(a) In the pre-code period the average cut-price store using standard
di-ug products as loss leaders found it necessary to slash prices on
a relativelj'- small number of products in order to attract patron-
age. Such a merchant, under the terms of the code, had to raise
prices on these products, but found it necessary to reduce a v/ide
list of products to the code minimum to obtain an advertising ad-
vantage,
(b) The small merchant who previously had not entered the price-cutting
field or v/ho , through oitter experience, had found he could not
survive cut-price competition, now began to cut because there was,
for the first time, a fixed limit to the process.
(c) During the code period, more than 100 prominent manufacturers re-
duced the manufacturer's wholesale list "orice on their products,
while very few raised prices. It is believed that this reduction
occurred because the Code minimum on certain products was consider-
ably higher than the competitive cut price, and the manufacturer
could not afford to have the price raised by the amount of the
difference. Another factor which caused manufacturers to reduce
their prices was the lowering of prices on substitute private brand
products by cut price stores. Cut price stores did this when they
found that the bottom Code price on standard drug products did not
bring in the trade, because the small independent merchant had ag-
gressively entered the price competition field.
S]
The individual invoice cost basis of the loss limitation provision
of the Retail Grocery Code seemed to be the only method of loss leader
control suitable to the competitive alinmment of that trade, and adapta-
ble to its inherent pricing structure. Since it was practically im-
possible to obtain the invoice cost of the merchant unless he voluntar-
ily offered it, and because in this provision merchants were permitted
to meet competition, there is very little data bearing on its effects.
It is believed by leaders in the trade that this loss limitation provi-
sion aided the small merchant. From a comparative study, ho?/ever, it
v;ould seem that the provision for the grocery trade was not as effective
as the one in the Drug Code in accomplishing what -as intended. The
following facts are indicative:
(a) Whereas the drug trade has about one- sixth as many outlets as the
grocery field, the number of compliance, litigation and court cases
resulting from the loss limitation provision in the former case,
was much greater. The same comparison can be made between the re-
QA1 O
-376-
tail Cxvi'?; and the gene.rnl retail trades. The retail totacco provision
prohibitin,^ sales of cigarettes at less than tv.'o for 25 cents led to a
great many com2olianQe, litigation and court cases. It is "believed that
the tobacco and drug provisions hpo. this effect because they acco^ipli sh-
ed subst£',ntially the purpose for nhich they vrere desi2;ned.
(b) At ihe hearing before the Senate Finance Cor.iraittee for the renev:al
of I'l.n.A. the Retail drug, tobacco and booksellers' trades were
r.ilitantly acti\^e in requesting Congress to reneu the Act, and
■oarticularly to continue the loss limitation provisions in their
codes. This testimony stood out in contrast to the lulcewarn sup-
"oort of the retail grocery trade and the active o-o-nosition of the
Chairman and Vice-Chairman of the General lletail Code Authority.
In the section of this study dealing- ith the opera-tion of the re-
tail grocery code it can be seen that difficulties v;ere encountered in
administering the e::ceptions to the loss limitation -orovision, v/hich
provided tiiat, under certain conditions, merchants could sell belov; the
code minimum. These sane difficulties nere encountered in the drug code.
No evidence that retail grocery prices decreased as did retail drug
prices during the code period can be found in the 1^3lA files or in in-
dependent studies. In the latter there are some indications to the con-
trary. It is difficult to -'eigh this evidence because of the other con-
ditions uhich developed at the saine time in agriculture and in the food
industry as a whole. No evidence has been discovered to sho'7 that
\T rices on standard drug products '-^ere higher during the code r)eriod,
Ex'^erience under state control measures in the state of California
should be of iiroortance to legi-slators and to members of trade, since
this is the only "olace vvhere such laws have been in effect long enough
to produce results.
The California Fair Trade Act vras passed in 1931 and amended in
1933. It -"c^s enacted primarily because of the demands of organized in-
depende;it dealers. It permits- manufacturers to contract for resale
prices on their trade marked products in intra-state comnerce. To date,
the la^7 is being employed in only a minority of trades; the vddest ex-
perience under it is in the drug trade. In the latter retail margins
under contract average about 31 per cent; contractual prices have in-
creased about 25 per cent over loss leader ac'vertised prices, whereas
prices in independent drug stores appear to have decreased slightly. In
a nuj.iber of trades attempts ai'e being made to employ the California Un-
fair Practices Act of 1935, which prohibits sales belo^- cost of merchan-
dise, plus operating expenses. During the past year the California Fair
Trade la'.v was. introduced in twenty four states and passed in New York,
New Jersey, Pennsylvania, Maryland, Wisconsin, Illinois, Iowa, Washing-
ton and Oregon. The experience in these nine states has been so short
that no evaluation can be made at present. The results in California,
however, should be of assistance in indicating vhat can be expected else-
where, Connecticut vetoed the Fair Trade law, but passed the Retail
Price Control law instead. This is simply the fair trade practice pro-
visions of the Retail Drug Code,
941
o
-377-
This recent adoption of state price control laws has "been caused "by
the revival of the pressure for the Capper-Kelly Bill, r^hich was repeated-
ly introduced in Congress from 1914, after the Miles Decision, and until
the passa^^e of the National Industrial Recovery Act, The chara.cter of
the sponsorship for the state Fair Trade Laws ( Junior- Capper-Kelly Bill)
has changed and it is today primarily a retailer's movement. The various
state retail groups are "backing Senator Tydings in a proposal to amend
the Sherman An ti- Trust lav;s. He plans to introduce this amendment at
the next session of Congress, This proposal is a substitute for the
Capper-Kelly measure. This bill aims to facilitate operation ■under the
State Fair Trade laws "by exempting such operation from the Sherman Act,
The em.phasis of the part of the study relating to resale price
maintenance is laid on the. failure of the courts to consider the economic
yardstick to be used for determin.ihg whether the practice does or does
not restrain trade unreasonably. The material now collected and digested
indicates that past Supreme Court decisions were made upon an inadequate
factual foundation, and hence do not necessarily stand as precedents for
future actions, in which the court has the complete picture in the records.
9412
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THALE PRA.CTICE STUDIES
PROVISIONS AFrECTIFG CHAKIELS OF DISTRIBUTION
Tal)le of Contents
I. THE PROBLEM
A. General relation of distribution practices to tne difficulties
encountered by industry durinf^ the depression period.
1. The Nature of the problem as seen "by Industry.
(a) Viewpoint and analysis of the reasons for depressed
conditions.
(1) General conditions
(2) Conflicting distribution methods
(3) Unfair trade practices of manufacturers and
distributors.
2. The Nature of the problem as seen by the Distributors,
(a) Attitude and opinions of distributors as to reasons
for depressed conditions,
(1) General conditions
(2) Conflicting distribution methods
(3) Unfair trade practices of majiuf acturers and
distributors.
3. Analysis of the Nature of the Problem from an Economic
or Social Viewpoint
II. THE SOLUTIONS SUGGESTED
A. programs suggested by industry as solution to problem
1, prohibition of sales to certain distributors
2, Reduction of distributor' s margin
(a) The benefits contemplated by manufacturers from such
a prograDi
(b) The disadvantages foreseen by certain manufacturers
( c) The position of distributors under such a program
(d) The public interest in such a program
(1) The probable effect of the program on small
enterprise
(2) potentialities for monopoly in the program
(3) The probable effect on economic distribution
(4) The probable effect on prices
(5) The difficulties inherent in public administra-
tion of such a program
3, Resale price maintenance
(The same analysis and discussion as is set forth under
1 above)
4, protection of distributor's margin
(The same analysis and discussion as is set forth under
1 above,
B. Various devices appearing in each of the programs discussed in
II-A.
1, Customer classification.
(a) Different types of provisions
(b) Relation to other devices
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2. Resale price control
(a) Different t'fjes of provisions
("b) Relation to other devices
3. Trade discoimts or differentials
(Sa^.e as 1 atove)
4. Q,uf>,ntity disco-imts
(Sane as 1 a"bove)
5. Di&co\mtG or lorico differentials other than tra.de or quantity.
(Sane as 1 above)
6. Restrictions on "brokerage payments.
(Sarie as 1 above)
7. Restrictions on sales to certain types or classes of outlets,
(Same as 1 above)
8. , Restrictions on consi^^nnent sales
(Sane as 1 above)
9. Restrictions on size or manner of nakin/3 shipments
(Same as 1 above)
10, Price discrimination
( Same as 1 above )
11. Other devices
C. Effect of N.R.A. policy on programs and devices
1. !T;R.A. policy'- as a force to either support or to alter any of
the programs or devices. . .
2. Changes made in the programs or devices to make the same
conform to policy.
D, Alternative Prograans.
1. Sui-^gestions for different approach to problems and of
substitute programs,
(a) From members of industry''
(b) Prom distributors
(c) Prom N.R.A. Advisory Boards
2. Arguments presented in favor of such alternative.
3. Arguments presented against such alternative,
3. Reasons that each of the programs v.'-as suggested,
1. The corporate structiire of the industry,
2. The nature of the product, i.e., size, weight, value.
3. The prior experience of the industry in other types of programs
4. The prior adoption of a program which was in operation or
being developed.
5. Distributor organization and distributor pressure.
6. Trade Association activity.
7 . Other reasons
P. The programs as suggested and as aroroved.
1, Changes made in code during period of consideration.
(a) The codes as proposed and as approved.
(b) The eliminations from and additions to original proposals
III. TILE CODHS lY. OPERATION
A. Those codes coming under Program 1.
1. Administration by Code Authority
2. Trade Association activity
3. N.R.A. activity.
4. Extensions of the code beyond original intent.
5. Compliance difficulties experienced.
9412
-.380-
B. Those codes coning under Progra:.! 2.
(Tlie sane analysis and discission as is set forth under A a"bove)
C. Those codes coming under Program 3.
(The sane analysis and discussion as is set forth under A above)
IV. RESULTS.
A. Analysis of effects of the codes in operation.
1. Those codes coming under Program 1.
(a) Administrative problems involved.
(h) Evidence of injury'- or benefits to manufacturers bj'' types
(c) Evidence of injury or benefits to distributors by types
(d) Evidence of injurj'' or benefits to the public
2. Those programs under Program 2.
(The same analysis and discussion as is set forth under 1
above)
3. Those programs under Program 3.
(T-ie same analysis aiid discussion as is set forth under
1 above)
V. THE LAI7
1. Status of programs under lav; immediately prior to N.R.A.
2. Adjudications by courts and Federal Trade Commission in
connection rrith particular industries which had attempted
any of the progrsims and had been tried.
VI. GOKCLUSIOIIS
1. Relative merits of each of the programs
(a) To accomplish immediate ends sought by Industry
(b) To s.ccomplish beneficial results uJ.timatel;^ for industry*"
(c) To accomplish beneficial results immediately for the
public
• (d) To accomplish beneficial results ultimately for the
public
(e) From an administrative or operative standpoint
2.- Relative merits of the various devices and combinations of
devices utilized to make the programs operative
3. Possibilities present under the N.R.A. to meet the problems
through other programs or means
9412
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.iira.de peactice studies
provisions afj'ectiiig channels of dishtlbutiolj
Proliiainary SiJinnary of Eindin^s
This is c. brief simncxy of findings nith respect to trade practice
provisions afiect-ing cliannela of distribution. They are "based on the
materials in individual summaries prepared "by menlDers of the Unit, or in
r/orl: sheets, or in preliminary summaries of the work on individual indus-
tries.
Eor pur-QOses of claritj^ these findings are divided into three general
classes, Eirst, those concerning the industry prohlem; second, those con-
cerning the progre-ms developed to meet the prohlen; and third, those uith
regard to the operation and effect of the programs so developed.
Problem to "be Met h'^ Industr^'- .
The pro"blem results from the many methods of distri"bution in use
within given industries, together \7ith the existence of an unstQ,"ble price
structure, and the efforts "by industry to control then.
It has "been foijnd, in general, that three tj'-pes of distri""Dution exist:
Direct sales by manufacturers; direct sales combined r/ith sales through
distributors; and sales bjr raanufactiiTers solely to distributors.
It has lilienise been found, generally speahing, that accepted practices
have been developed for which price quoting make possible the comparison
between manufacturers.
It has been found that the lacl: of uniformity in distribution channels
acted as an obstacle in the way of any program looking toward price stabil-
ity. Manufactnjrers selling both wholesalers and retailers found that
wholesalers undercut their prices to retailers, and manufacturers selling
direct to retailers felt the effects of price cutting by wholesalers selling
the products of other manufacturers.
Programs Develo-oed to Meet the Problem.
The programs developed undertook to promote price sta.bility by eliminat-
ing price competition between manufacturers and distributors, or by control-
ling such competition. To accomplish this end three alternative programs
were developed,
(a) The first contemplated the prohibition of sales to wholesalers
or the rediiction of the wholesaler's operating margin, either to eliminate
wholesalers from competition or to make it impossible for them profitably'"
to -undersell the manufact-ujrer,
Tliis program was SPoplied by the Salt and Cement Industries
through reducing or eliminating distributor margins. The Asbestos
Industr^^ and the Wood Cased Lead Pencil Industry also adopted it
in part.
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i
(b) Resale price maintenance contracts - that is, policies of refus- ,
ing to sell anless the resale prices of naniifacturerc were observed - or ||
other methods for the control of v/holesalers' prices V7ere contemplated by
the second t^roe of program.
Tliis program ?/as adopted by the Business Fixrniture, the
Carpet and Riig, and the Valve and Fitting Industries, through an
attempt at rigid customer classification, the establishment of
definite differentials between classes of buyers, and requirements
that distributors maintain prices established by the man-'jfacturers.
(c) Tiic third tirpe of program contemplated primary'' reliance by manu-
facturers on distributors, which meant that certain direct sales by manufac-
turers were restricted and the operating margin of the distributors protect*
even tho-ogh some loss of direct sales 'h'f the manufacturers resulted.
This program was adopted by the Lumber and Plumbing Fixtures
Industries, both of v/hich attempted to protect middlemen by re-
stricting manufacturers' sales and by establishing differentials.
Operation and Effects of the Programs.
The present findings with regard to the operation and effect of the pre
grams are tentative. Those industries which adopted the first program refei
red :to above met with the greatest amount of success. The Salt Industry,
the Cement Industry'-, and the Brake Lining Division of the Asbestos Ind-Astry
succeeded i:i effecting a division between the manufactuj*er market and the
distributor market. Each of them have a few large members who are generally
the price leaders, and xfho dominate in the establishment of practices.
Prior to the code these industries had succeeded in developing considerable
degrees of price uniformity. Under different circoi.istances, consequently,
this tj'^oe of program might not "orove equally successful. In these Indus triej
the large maniifa.cturers seem to have an unusurl ability to sell directly,'' to
a major portion of the market, and in these operations distributors appear t(
be not all essential. These industries, moreover, were not entirely depend-j
ent on the suoport of the Administration for success in their code program.
They could accomplish much without the N.R.A; and the latter, in all probabi]
ity, served principally to facilitate programs already'' in progress.
The Wood Cased Lead Pencil Industry was found to have failed to operate
satisfactorily under the first program. Here there was a conflict between
manufacturers; and the proposals affecting distribution were complicated by
the need of eli?ninating or reducing bitter price competition between manufac-
turers, before the elimination of competition between manufacturers and
distributors could be effective. To accomplish this N.R.A. support was neces^
sary. This being refused, the program failed.
The industries adopting the second program B described above did not
meet with any narked success. Of these the Business Furniture Industry came
nearest to accomplishing its objective. Government support was necessary to
make resale n^ice maintenance programs effective. Such suroiDort was given with
reluctance, if at all; and even with it enforcement was difficult.
9412
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Of the three pro{r;rams it would appear that the last v/as the least
successful. A part of the res"jilt, possihly, can be attrilDuted to the fail-
ure of the II. R. A. to support the plan whole-heartedly. At least, the
unwillini;p.iess of the N.R.A. to spprove certain proposals interfered with
the carr^'-ing out of the prograns as planned. In the two codes studied
which contained this program a practically complete "breakdown developed in
its adininistration.
9412
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TRADE PHACTICS STUDIES
GI10C-EJU?iilC PHICS STHJCTUBES
m
Taljle of ContentG
CHAPTER I. TRADE FRA.CTICES A'^D ECQKOT/IC ISSUES INVOLVED
I. C-eog-i^'aijhic pricing-; pro vi clone; in KEA Codec
" II. G-eograohic pricing practiceo Defined
A. practicec Rer:arding Trancportation Charfres
1. F. 0. B. pricing
2, Delivered pricing
3. practicec Re^-arding the price Hairing procecc within
Certain Areac
1. price Filing Zones
2. Anti-Dumping Zones ("Market Areas")
III. possilDle Criteria as to the Soundness of the Reviewed practices
fron the point of Vie^v of Public policy
IV. Structural Characteristics of Industries Involved
V. Brief Analysis of Some lii^ortaiit Aspects of the Operation of
Geographic pricing Methods
A. Introductory Remarks Regarding Location of Industries and
Transportation Cost
B. Analysis of the Operation of Various G-eographic pricing Methods
1. F. 0. B. Mill pricing
2. Delivered pricing
(Based Upon Other than Actual Freight Charges)
(a) Basing Points and Freight Equalization
("b) Uniform Delivered prices
C. G-eneral Concluding Remarks
CHAPTER II. THE BASING FOIITT PRACTICE Ii: TIiE IRQII AIID STEEL IITDUSTRY
I. CoiiTpetitive Structure of the Iron and Steel Industry
A. Products
B. processes
C. Costs
D. Corporate Structure and Organization
E. Geographical Distribution of production and Consumption
F. Character and Channels of Distribution
G. Price Leadership
II. price Levels
I. profits
J. Causes and Advantages of the Basing point System
II. Pre-Code Basing Point Systems Maintained "by the Industry
A» Inception of the Pittsburgh plus System
(Transition from Zone System)
3. Causes of and Methods Used in Maintaining the Pittsburgh
plus System
C. Defections and Concessions from the Pittsburgh Plus System
D. Effects of the Pittsburgh plus System
E. The Abrogation of the Pittsburgh Plus System and Its Effects
in the Pre-Depression period
F. The Multiple Basing Point System During the Depression 1929-1933
9412
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III. Code of Fair Conpetition for the Iron and Steel Industry
A. The Code and Its Origin
1, Motives and Interests Determining the Character of the Code
2, . Code provisions
B. Administration of the Code
1/ Code Authority
2a iIRA Administration
C. Coi.olaints and protests
IV. Effects of tiie Iron and Steel Code
A. General Effects
1. Eli:-iination of Secret Price Cutting
2. price Leadership
5, Extras
4, Channels of Distribution
5. Resale Price Maintenance
5. Restriction on ITew Capacity
7, Costs
8, price Levels ■
9, profits
B» Effects of the Multiple Basing Point System
1. Evaluation of the Location and Uurnher of Basing Points
Relative to the Volume of Production at Major producing Points
2. Evaluation of the Location and ITumter of Basing points in
Relation to the Costs of Production at Various Points
3. Location of Basing points in Areas of Deficit Production
4. Effects of the Location of Basing Points on the Relative
Competitive Positions of Integrated and Non-integrated
Rolling and Drawing Mills
5. Effects on Price Leadership
6. Comparison of Amount of Freight Assorted "by sellers and
Fictitious Freight paid "by Buyers
7. Effects of the All Rail Freight provision on Prices
B. Stability of Production and profits
C. Effects of the Ahrogation of the Code
1» Adherence to the Basing Point System
2, Open pricing
3, price Levels
4, production and Capacity
V. Alternative Courses for Dealing vath the Problems Engendered hy the
Present Easing Point System
A. Abrogation of the System
1. Effects of the Establishment of a Delivered Pric^ System
Irrespective of a Uniform Price Formula
2. Effects of the Establishment of an F.0.3. Mill price System
23. Devices for the Control of the Operation of the Multiple Basing
Point System
1. Effects of the Establishment of Hew Basing points
2. Effects of the Establishment of Restrictions on the Privilege
of Freight Absorption
C. Possible Effects of the present Trends in the Industry Regardless
of Control Attempts on the Multiple Basing Point System and the
C-eographical price Structure
1, The Geographical Shift and Decentralization of the Industry
2. Trend Toward Integration
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0. Increasing Industry position of some Relatively Smaller Cor.i-
panies aiid Declininj^ position of the United States Steel
Corporation
4, Changinf: Character of products, procesnes and Costs
5, Increase in Water Tronsportation
VI. Conclusions
CHA?T]:R III. BASING POINT. F?:SIC-HT 5QUALIZATICN AI'D ZOI'ING SYSTSMS
IN THE LUI.aSR AllD TIliBliTa PRQUJCTS INDUSTRIES
I, The LumlDer Industry prior to the Code
A. Description of the Industry
B. Chief problems of the Industry
II. Cost protection prices and Their Administration "onder the Code
III. C-eographic pricing practices in the Li-Uiiber and Tinber products
Industries
A. Before the Code
B. During the Period of Cost protection prices under the Code
(November 7, 19o3, to December 22, 1934)
1. P.O. 3. I.ill or Delivered Pricing with Buyers Paying Actual
Freight Charges From Origin to Destination
2. Basing Point Delivered pricing
3. Uniform Delivered prices to All Destinations and to
Destinations within Defined Zones
4. Freight Equalization (With Coi.Tpeting Mill Nearest Destination
5. Mill Group Prices
6. Limitations Upon Freight Absorption
IV. RuJ.es and Regulations for Delivered Pricing in Effect Under the
~". Codifi by Divisions and Subdivisions
A. Loc~ging and Lumber Division
1, Softwoods (Eight Subdivisions)
'2, Hardwoods
(a) Hardwood Division (Seven Subdivisions)
3. Flooring (Two Divisions)
C. Fabricating Divisions (Five Divisions - Twelve Subdivisions)
D. Imported Lumber
1. All Divisions
E. Since the Suspension of Cost protection prices
CHAPTER IV. ANTI-DUMPING MEASUFiES IN THS ICE PRODUCTION INDUSTRY
I. General Industry Background
A. Development of Demand for Ice
1. Types of Markets
2, Competition with Mechanical Refrigeration
3. Standardized Type of product
4, Response to Price Changes
3. Production and Distribution of Ice
1. Natural and Artificial Ice - Production and Sales Voluraes
2. Development of productive Capacity
(a) New Plants
(b) Large and Small Ownership
3. Over-Capacity in Depression
4. Analysis of Cost of production
9412
-S87-
5. Types of Distribution
6, Traditional Size of Markets
C. Atteiipts at Control Before Code
II. The Code and Its General Administration
A. Origin of the Code
B. provisions of the Approved Code
C. Adr;iinistration of the Code
III. The Ai'^ti-DuTTpin^ provision and Its Operation
A. General Econoniic Characterization
B. Classification of Cases of Market Determination
CHAPTER V. THE EA5IIIG FOIITT PPJlCTICE IV. THE CEIvIEITT IITDUSTRY
I. Historical Development of Pricing practices
II. Structural Industry Factors Functionally Related to the Basing
Point practice
A. Grovrth of Capacity
B. Seasonality and Regional Distribution of Sales
C. Rate of Operation and production Cost
D. Single Mill Cor.ipanies and Chain Companies
III. The Cement Code
IV. Effects of the Operation of the Basing point practice on Sales
Distribution, prices and profits
CHAPTER VI. FREIGHT EQUALIZATIOH AITD t.IARKETING ZONES IN THE SALT INDUSTRY
I, Stnicture of the Industry
A. production Districts
B» Corporate Structure
C. Distribution Channels
D, Trade Association Activities
II. System of Marketing Zones and Zone pricing
III. Effects of the Zone System on Sales Distribution, prices and profits
CHAPTER VI I>. THE BASIITG POINT SYSTEI.: IN THE LIIIE HHJUSTRY
(This chapter will follow the treatment of the sub-
ject as provided by the Special Studies Section)
CHAPTIH VIII. FREIGHT EQUALIZATION. ZONES AI'D BASING POINTS IN A
FJI.I3SR OF IlIDUSTRIES OF LIIIOR SIGITIFICAITCE
I, The Basing point System in the Cast Iron Soil Pipe Industry
II. Freight Equalization in the Wall^japer Industry-
Ill. Zoning Systems
A. Fertilizer Industry
B. Asphalt Shingle and Roofing Industry
C. Business Furniture Industry
D. Cordage and Twine Industry
bl2
-388-
CHAPTER IX. FURTHER LIIIZS OF AI'ALYSIS HSQUIR5J3 FOR A FINAL DETSmillTAJ
TIQN OF TIlE CIIARACTIIR AlID EFFECTS OF GEOGRAPHIC PRICIiIG
PRACTICES
I. Geographic pricing practices Not Sufficiently Covered in the present
Report and Methods for Their Treatraent
II. Character and Availability of Statistical Data Necessary for a
Satisfactory Conpletion of the Study of Geographic pricing I.Iethods
APPEITDIX. GEOGRAPHIC PRICING ASPECTS OF THE- SUGAR INSTITUTE CASE
9412
. . -389-
-■ TRAIffl PRACTICE STUDIES
GEOGRAPHIC PRICE STRUCTURES
Prelininary Summary of Findings
I. C-eograpilic pricing provisions in N. R. A. Codes
A survey of the first; 554 codes (including 750 amendments and 195
supplements) shows that 155 of them had some provision relating to trans-
portation 'costs or to other aspects -of geographic pricing. Of these 98
were concerned with the question of f.o.b, or delivered pricing. Of the
latter 52 provided for. f.o.t. point of origin selling, 29 provided for
selling on a delivered basis, and 21 permitted either arrangement.
A group of 90 jCodes' dealt with different kinds of transportation
allo\7ances arid'- with prepayment of freight. Forty-four of them prohibited
such prepe.yinent or any discriminatory allowances, while 43 permitted some
form of .freight equalization or similar concessions. Only four codes
contained explicit basing point provisions, while two or three others
provided for freight equalization points that resemble basing points in
certain respects, .though the functional differences are substantial.
A number of industries - at least three of them of fair size and
importance' - had' no basing point provisions in their codes, although it
is knovm that basing po.int: systems established in pre-code days continued
to be in operation. These , instances are of interest from the point of
view of N. R* A. problems, because other code provisions, not expressly
referring to the basing point practice, supported it in an indirect way.
In addition, geographic pricing devices, other than the transportation
provisions mentioned above, were incorporated in. some 16 codes in the form
of price-filing and anti-dumping zones. Finally, there is a group of codes,
.some 12 in number, which contained provisions enabling or directing the
Code Authority to set up some form of transportation regulations after
approval.
Only a small number of the codes that had provisions relating to
transportation charges or to other geographical pricing practices could be
given detailed treatment. Among these the Iron and Steel, the Cement and
the Lime Industries and certain divisions of the Lumber Industry have been
analyzed because of the significance of their basing point systems. Only
brief reference could be made to the Cast Iron Soil pipe basing point
practice. Freight equalization has been studied in all divisions of the
Lumber Industry where it found application, and in the Wallpaper Industry,
Zoning systems of various kinds have been treated in the Ice and Salt In-
dustries and, more cursorily, in the Fertilizer, Asphalt Shingle, Business
Furniture and Cordage and Twine Industries.
II. Structural Industry Characteristics Functionally Related to
Geographic Pricing practices
The analysis of the above named industries suggests that significant
geographic pricing practices have as a rule arisen in functional inter-
relation with basic factors in economic structure. This suggests that
9412
there are limits to the possibility of modifying or eradicating such
practices successfully by court decree or by administrative action, with-
out tailing steps to reshape gradually the entire industry structure.
The most essential common traits of industries that use basing points
or uniform delivered pricing by zones, are the following:
(a) The pattern of competition is far removed from the atomistic
one that imderlies the theory of free competitive prices. It is typical
of the industries examined that they have relatively small numbers of
producers, each of whom supplies a significant portion of the total volume
of sales. This situation frequently results in price leadership and in a
high degree of price stability.
(b) T;^/pically, the products of these industries are highly standard-
ized, and are not sold upon any real or claimed difference in quality.
They axe of a heavy and bulky nature, so that the cost of transportation
is an important element in the ultimate cost to the consumer. This point
gains further weight if production is concentrated in limited districts,
while consumption is spread more widely through the country.
Under these conditions the competitive. 'advantage of location in
proximity to the main consuming areas or to the cheapest transportation
facilities, such as waterways, is further accentuated and may become
virtually decisive. These things intensify the desire of all producers
not so fa.vorably located, and frequently of large and powerful companies
with mills in different locations, to establish some control over this
factor. Flirt he rmo re, a heavy overhead cost is generally prominent in the
processes of production under consideration. This factor intensifies both
the urge toward a steady and possibly a high rate of operation, and the
resistance to the lowering of prices in any local market by any producer.
(C) Another important aspect relates to the historical pattern of
growth of the major basing point industries, and to a type of competition
between old and new production districts which tends to follow from this
pattern. Characteristically, during the earlier stages production was
concentrated in a limited area, such as the Pittsburgh district for steel
or the Lehigh Valley for cement. As a result of movements of population
and with the industrialization of an ever growing part of the country new
facilities v/ere set up in regions distant from the original centers.
At first these new production points enjoyed high price levels determin
by the prices in the industries* old centers plus freight rates from the
latter. But as the productive capacity of the new districts grew, es-
pecially v;here favorable conditions of raw material assembly, cheap labor
or the like promoted their easy ejcpansion (in the Great Lakes region, the
South, etc.), the dangers of over-capacity and of a ruthless struggle for
markets arose. Frequently, under the leadership of large cor.rpanies with
mills in both the old and the new production regions, the industries in
question met this situation by developing schemes to strengthen the exist-
ing price leadership, and thus to shift the struggle between regions from
the field of price competition to other forms of competition for volume.
9412
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III. Classification of G-eographic pricing practices According to their
G-eneral Economic Effects
'• The econoraic effects of the various geographic pricing practices are
divided into two cljisses. The first regards the effects on the general
price level aside from any regional differences. The second concerns the
variation in results as between geographic sections of the economic
comiiiunity,
TTith respect to the first point, the most significant distinction
appears to "be "between practices tending to sharpen price competition, and
thus to force price levels down, and practices tending to cur"b excessive
price competition and to facilitate price leadership and sta"bilization.
In the former group "belong all freight allowances (which may "be coupled
with f,o."b, or delivered pricing) and, in particu.lar, the practice of
sellers of a'bsorbing freight on sales to more or less distant markets.
Under the latter category fall all schemes that "bring freight absorptions
into some orderly system of equalization - especially all limitations on the
amount of freight that may "be a'bsor"bed - as well as "basing point systems
with a rigidly controlled num"ber of "basing points.
iriexi"ble "basing point systems, with su"bstantially free choice of new
"basing points as frequently as circumstances necessitate, have an intern-
mediate position. Under their operation the lowest com"bination of "base
price plus freight charge which is economically possi"ble in terms of pro-
duction and transportation costs, seems theoretically assured for all mar-
kets. Practically, however, there is a counteracting tendency in the fact
that the notoriety of "basing point changes, and of changes of "basing point
prices, imposes some degree of restraint on firms who otherwise might "be
inclined to choose a new "basing point with a lower "basic price.
r.o."b. and delivered pricing as such are not quite determinate in
their effects, and may differ in their character under different accom-
panying coiidi lions. Anti-dumping zones belong definitely in the second
group of practices tending to curb price coi-Toetition, As to price filing
zones, judgD.ent must be reserved until the results of the study of the
price filing Unit are available.
The classification of geographic pricing practices into two main
groups, with respect to their effect on price competition, serves to reduce
one aspect of the problem to the more general one of price cutting and
price fixing. A treatment of this latter lies beyond the scope of the
present study.
■^.Tith regard to the second T^oint mentioned above - the examination of
the relative advantages and disadvantages wrought for different localities
and regions by the operation of the various geographic pricing practices -
the nature of the matter prevents broad generalization. The complexity
of the individual situation must be taken into consideration in every case.
In general, it may be said ?;ith regard to the development of interregional
economic relations that two basically different lines of policy are possible.
9412
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First, the highest degree of specialization in the field of its test
natural equipment may "be encouraged for each region; second, a "balanced
develO;^ment of as many different lines of economic activity as possible
may "be regarded as preferable,
Axiother aspect of importance relates to econonies or waste in
transportation resulting from different systems of geographic pricing.
Only detailed case studies coxi prove trhether any geographic pricing
system leads in a given industry to wasteful cross hauling, which might
"be avoided or reduced under another system, or prevents transportation
econo;.iies which another system would tend to promote.
9412
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MIMirOlA PRICE DEVICES
Talile of Contents
CKIPTER I. SUMIvIiiBY
CHAPTER II. STATEMENT OE THE PROBLEM
I. The Problem
A« Discontent of Industries with Price Levels Brought About through
Laissez Eaire Method of Price Determination
1, Laissez Faire Theory
(a) Predicated on Automatic, Mechanical Adjustments
(h) Basic Assumptions
■ .. Economic Man will do what is best for Him
Sum Total of best Results for Individuals
is for Best Interests of Society
Publicity of Pacts Necessary to Act .
Intelligently for Self-interest
Mobility of Capital and Labor
Elimination of High Cost or Inefficient
producers
2» Price Levels in 1933 Compared with Earlier Years
(a) Flexible Prices
(b) Managed Prices
3, Effects of Depressed Price Levels
(a) Economic Effects
Bankrup t i c i e s
Competition by Reorganized Concerns, having
Wiped Out Large Parts of Fixed Costs
Undesirable Competitive Price Practices
Effects on Distribution Channels
(b) Social Effects
Unemployment
Decreasing Wage Rates and Earnings
II» Proposed Minimum Price Devices
A, Fixed Prices
1« Purpose: to Fix a "Reasonable" Price below which No In-
dustry Member could Sell
(a) proposed Primarily by Natural Resource Industries
and Service Trades
(b) Presumably Predicated on Costs
2, Extent to Which Ua^d under Codes
3, Implications of Device
(a) Same Price for All Types of Competitors
(b) May Hurt Whole Industry if Too High because of Adverse
Effect on Active Denaiids
(c) May Deprive Efficient and Low Cost Producers of Price
Advantages
(d) May Result in High Prices to Public
(e) May Penalize All but Low Cost Producers
9412
-394-
and re crease Supply if Too Low
(f) Others - i.e. Effect on Redistribution of Volume to
Individual Concerns, etc,
B» Emergency Prices
1, What is an "Emergency"?
(a) Looseness of Concept
2, Purpose of Device
(a) To Allow Price Panic to Quiet Down
(b) To Permit Industry to Develop a Solution for Cause of
Emergency
(c) To Indicate that Government will Not Tolerate "Destruc-
tive" Price Tactics
3« Extent to Which Used under Codes
4, Implication of Device
(a) To be used for Short, Temporary Period
(b) Same Problem as Raised above for Jized Pricer. but
Applied to Short Period of Time
C, Cost Protection
1, Underlying Theory
(a) Selling Below Cost an Unfair Competitive Practice
(b) Cost Recovery Essential to Prevent Bankruptcy and to
Permit Paying Code u'ages and Shortening Hours
(c) Prices will be Low because of Effect of Low Cost
Producers
2« Purpose; to fix a i.iniraura Price Base Predicated on Cost (of
Individual or Whole Industry) which shall be flexible rctl.cr
than Fixed and Bear a Definite Relation to Cost. Predicated
on Use of Standard Cost System for All Members of An Industry
3, Extent to which Used Under Codes
(a) Variation of ]?evice
4, Implication of Device
(a) Assumption that "Cost" Can Be Determined Accurately
(b) Belief that there is No Need to Sell Below Cost and that
it is Due to Unfair Practices
(c) Failure to Realize Need for or Wisdom of Selling Below
Cost under; Given Conditions
(d) Failure to Realize that Device may be Harmful by Raising
Prices
(e) Other Implications
5, Device Usually Coupled ?/ith Open Price Selling
(a) Lowest Filed Price Usually Prevailed
(b) In Absence of Effective Collusion or Pressure Low Cost
Producers Set Price Level
III. IIRA Policy
A, Slow Development of Policy
1« Absence of Policy during Early Stages
2. Chronological Development
B, ::Lfect of Shifting NRA Policy on Code Provisions
C, ri;!--.! Attitude against Price Fixing and Cost Recovery Prin-
ciples but for Emergency Prices
1. Attitude toward Mandatory Cost Systems
(a) Reasons Advanced for Policy
(b) Failure to Approve Proposed Cost Systems
9412
I
(c) Effect of This on Existin?^ Code Provisions
2. Negative Attitude Toward Enforcing Provisions Contrary to
Prevailing Policy-
Failure to Keep Adequately Informed on Experiences with Function-
ing of Minimum Price Devices
1. Inadequacy of Administration MemlDer Scheme
2. Lack of Under stariding on Part of Deputies
3. Extra-Codal Activities on Part of Code Authorities
CHAPTiia III. BASIC INDUSTRY PROBLEMS TO WHICH DEVICES VJESE APPLIED
!• Natural Resource Industries
A, Lack of Demand
B, Pressure of Fixed Charges
C, Competition from Substitute products
D, Others
II, I.icnufacturing Industries - Producer Goods
A, Lack of Demand - Dependent on Fortunes of Other Industries
B. Pressure of Fixed Charges
C, Competition from Substitute Products
D. Cost advantages of Integrated Producers or Producer -
Distributors
H. Excessive Guarantees or Servicing
F, Others - i,e# New Processes etc.
III. ■:caTufac-'.,uring Industries - Consumer Goods
Considerations Same as for II.
IV. Distribution Trades
A. Distribution at Lower^Cost Than through U^aal, Established
Channels
B« Distribution by Manufacturers
C« Failure of Manufacturers to Observe Usual Differentials between
Various Steps of Distributors
D, Others
?♦ Service Trades
A. Heavj'- Influx of New Competitors
B. Free Services and Extra Accomodations
C, Lack of Quality Standards
D, Others
CHAPTER IV. APPLICATION OF MINIMUIvI PRICE DEVICES TO BASIC PROBI^EMS -
IffiTHODS USED Al^ RESULTS
I. Natural Resource Industries
A» Ilethod of Determining Prices or Price Floors
1» Considerations of Costs
(a) Elements
(b) Method of Computation
2« Considerations of Competitive Groups
3# Dominance by Specific Groups
B» Effects of Minimum price or Device
1. On Price Levels
-396-
2» On volume
3, On Competition of Substitute Products
4, On Distribution of Volume between Industry Groups f?Jid
Individuals
5, On Development of Subterfuges
6,. On Compldtmce Problems
(a.) Extent
(b) Difficulty of Determining "Cost" or Violation
(c) Damage Usually Done when Violation Discovered
II, I.l£?imfacturing Industries - Producer Goods
Considerations same as for !•
III. Lc'iiufacturing Industries - Consumer Goods
Considerations same as for I,
IV. Distribution Trades
Considerations same as for I,
V, Service Trades
Considerations same as for I,
CRAPTER V. CONCLUSIONS - EFFECTIVENESS OP MINILUM PRICE DEVICES
)f
I. Device Usually Directed against Symptons rather than to Causes o:
low Price Levels
A, To be Effective, must be Supplemented by -
1, Production Control
2« Curtailing Access to Industry
3# Effective Policing
4, Prompt and Sufficiently Heavy Punitive Devices or Preventa-
tive Devices
II. In Absence of Other Regulatory Features, Minimum Price Regulation
Tends to Fail
A, E:::periences of Industries Who Used Devices
III. Elements Essential for Success of Minimum Price Regulation under
Codes
A, Small Number of Industry Members
B, Large Capital Requirements or Difficulty of Entering Industry
C, Strong Industry Organization
D, I/illingness to Submit to and Abide by Regulation
E, Unavailability of Substitute Products at Low Prices
IV, I.iininium Price Devices as Public Policy
A. Price Fixing
1. Rigidity
5, S:.iergency Prices
1, May be Desirable uncer Certain Conditions
C. Cost Recovery
1. Essentially Unacceptable
D, Absence of Well Formulated Policy
1, Which Tenets of Laissez Faire Shall be Kept, which Modified,
Which Abandoned?
941 P.
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2» TThat is Ultimate Goal
' ' " AFFEIIDIX
I, Legal Aspects of Mininnuii Price Devices
A» Historical Review
B. Self Regulation "by Industry
C. Regulation by Government
D. Possibilities
Im Industrial Self Regulation
2» Governinental Regulation
. 3, Combination of Self Governmental Regulation with Particulsjr
Reference to >Experiencer3 under Codes
II. Price Regulation Prior to Codes
■ A# U.Sc Experience
1« . 'Jar Industries Board
B, foreign Experiences
1, German Cartels
2. English Trusts
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TBADE PRACTICB STUDIES
MI1III.'IUII PRIGS DEVICES
PrelJEiinar;';' Sunmary of Findinyxs
Tlie prelininarj^ conclusions that follow are "based on the anal^^'sis of
regulatin{^ experience under the Codes for the follov/ing industries:
Cleaning!- ar.d I>'-eing, Fur Dressing and Di'-eing, Ice, Tfe-ste Paper, i^gricultural
Insecticide, Cast Iron Soil Pipe, Coffee, Luggage and Fancy Leather Goods,
Limestone, Scren Machine Products, 'TliroTring, Hardnood Distillation, Malleatle
Iron, Fire Extinguishing Appliances, Paper DistrilDuting Trade, and Paint,
Varnisji and Lacquer, The findings will "be exaiiined further in the light of
additional facts to "be estaolished concerning these industries and the
additional industries and trades to "he examined - i.e., tohacco, lun"ber,
ruther tire, etc., and are subject to revision. The selection of industries
was "based on the variety of price reg-olating devices used, and the industrial
prohlens presented.
A , General Conclusions Concerning Price He.c^Tulation
1. As a general rule price regulations were not directed toward
the solution of "basic industry'' proolems, Tiiey were aimed at a
syr.ipton - i.e., as low price level - rather than at the causes.
The "casic causes in the 16 industries a.na,lyzed thus fr.r nay "be
surinarized as follows:
a The pressure of fixed charges due to the existence of
capacities far in excess of current active demand,
"b. Increasing unit production costs "because of lower volume,
aside from the incidence of overhead.
c. Decreasing prices of substitute products.
d, Tlie straggle "by individual producers for the maintenance
or the increase of -volume, v/here demand was inelastic and
would not increase sufficiently'' or at least not proportion-
ately, when prices fell. Price competition in this
sit-iaation could only serve to redistri"bute the available
volume to individual industry'' members at lower price levels,
and could not increase it for the industr^^ as a whole,
2. Code Authorities, as spokesmen for industries seemed generally to
underestimate the extent to which price and demand were functions of
each other, and to which increased prices could affect demand adverse-
ly, Wliere demand was flexi"ble, the choice usually was made on the
side of higlier prices without extensive analysis of the possi"bility
that a large turnover with a small unit profit might be preferable to
a snail turnover at a higher price,
3. VTncre an industry'' 's products competed with substitute products
which sold at lower prices or were more desirable at the same or
even somewhat higher prices, a minimum price or cost floor became
irrelevant or even damaging,
9412
-'o'jdr*
4. Wliere the capital necessar"' to enter an industry was snail, attempts
at price fixing tended to fail, "because the price was apt to attract
additional capacity or competitors into the industr;^.^ and to thas
further aggravate the problem.
5. Where there was a marked variation in methods of production or
distrihution, the fixed price or ar'bitrar;'' cost "base struck at some
specific minority group, tending to deprive it of an inherent
competitive advantage, sometimes even threatening to drive it or
part of it out of "business.
6. Fnere an industry price or price floor was set, concerns which
prior to the code had depended on price differentials to attract
"business tended to "be injured, "because the "business apparently went
to concerns with esta"blished reputations who were marketing well
advertised trademarked products, often with quality guarantees.
Price regulator^'" schemes often failed to melze allowance for compe-
tition "based on price differentials and at times may have heen
directed against it.
7. Fiiere an industry price floor was set - rather than one predicated
on individual cost - the tendency was to set it higher than the
prevailing price level.
8. Price control features of codes were at times used to accomplish
the same results as pre-code price fixing, illegal under the anti-
trust laws.
9. Cohesiveness among industr^.^ mem"bers and t'he vitality and degree of
control exercised "b^'' Code Authorities were much more important for
tiie svLccess of a ninimuji price plan than such elements as standardi-
zation of products or knowledge of costs, Tlie most essential requi-
site for the successful functioning of price regulation was the
willingness of industry,'' nem"bers to have their prices regulated,
10. Generally, IIRA. failed to keep itself well informed as to the
actual operation of or as to experience vrith price regulatory devices.
B, The Pixed Price
1. In the a"bsence of quality standards, a fixed price meant little.
Chances for resorting to su"bterfuges were a'bundant.
2. In the a"bsence of "basic controls, such as regulation of production
or the limitation of entry into the industry, fixed prices failed to
stick. Attempts to induce indr.strjr mem'bers to sell for less tha.n the
• prices fixed were generally successful,
3. Neither 11. R. A. nor industr^^ had sufficient data on which to "base
fixed prices. In the hurr;,' to determine prices in the ahsence of
such data, fixed prices were often predicated on industry/' 's desire,
shaved down "by II.R.A. for the saJce of safety.
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C . Emergency Prices
1. No definite standards appear to liave "been used "by N»R.A. to determine
wlie.t constituted emergencies.
2. Emer{^ency prices v;ere generally'- set on ver;;r fragnentarjr data,
3. Emergency price declarations appeared as a role to have aimed at
the accomplishment of one or nore of the following res'olts:
.a To permit an industry'- to quiet do\7n from a price panic and
resume normal activities,
"b To declare a truce during which the emergency situation
might correct itself or the industry'- might develop a
corrective,
c To ma]ce clear that the Government vrill not tolerate
destructive price cutting.
From the analyses of the indiistries studied thus far, it appears
that these ohjectives were seldom realized.
L . Cost Floor Protection
1. The term "cost" lends itself to a variety of interpretations. Host
difficult or deteniination are (l) the selection of elements to "be
Included, and (s) the allocation of fixed cliarges or joint costs,
IT.R.A. distinguished between cost systems as such and cost formulae
used for the determination of price floors. Tiie latter, if approved
"by H.H.A, were considera'bl:'" less inclusive as to cost elements, and
provided for the allocation of fixed charges more stringently than
, the cost systems or formulae generally proposed "by Code Authorities,
2. Ignorance of costs, so often claimed "by Code Authorities as an
important cause for improper pricing policies, does' not appear to
have "been of as great significance as was claimed. Prices often had
no relation to -oast or present costs, "but had to "be adjusted to what
the pulDlic was willing or ahle to -pay, C-enerally, present necessity
or future anticipations were more important factors than costs
predicated on past experience,
3. "Cost" s3/stems or formulae proposed "by Code Authorities contained
so man^'- ar"bitrary features that actually they were price determining
formula-e, and could not "be used to establish an individual concern's
cost,
4. 3y ar"bitrary provisions -^ such as prescribing that concerns manu-
facturing their own raw materials nevertheless had to calculate raw
material costs as thoiigh they had "boT3ght on the 'open market, or
providing that overhead coi:2d not "be figured at less thaji 33 per cent
of the total of raw material cost plus labor — Code Authorities
attempted to deprive low cost producers of the right to reflect those
costs in lov;er prices,
9412
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5. In industries containing iDOth. integrated and non-integrated
operations, the success of price regulation depended generally on
the good will of the integrated concerns, who were in position to
cut prices "because of lower costs or of greater flexilDility in
allocating them,
6. Where individual cost was the criterion, conrpliance was difficult
to obtain "because! (a) A violation had to he proved "by the hooks
of the alleged violator, who could refuse access to them; and
(h) even if access was had to the necessary records, the determina-
tion of actual cost v/as difficult,
7. If a violation was proved, the damage had generally "been done
"because:., (a) Either the violator had o"btained the "business he \7as
after at the expense of code ahiding mem'bers, or ("b) competitors,
unv/illing to let him ta]:e the "business, had followed his price
dovmward, with the result that the price level had "been "broken.
8. Lack of definite MIA. policy during the first year or year and a
half permitted Code Authorities to flounder and to incur useless
expenses in developing cost s^T'stems which I'ffiA in most instances
refused to approve.
E. Additional I7ork to "be Done
Additional work with the industries covered, as well as analysis of
the experiences of other and important industries, is essential to verify and
amplify the preliminary?- conclusions stated. In addition, attempts should "be
made to determine whether price regulation, even if ultimately unsuccessful,
did not have some effects, temporary or lasting, of a nature felt to "be "bene-
ficial "by the industries concerned. The U.R.A. files examined permit no
conclusions on this point.
9412
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Tr'ole of 3onteiil:s
CHj;p?in I. Tj:-c~mj!K'^
1. The l.ieaning of Co-Tiiodity Infor. iption
A. General Scooe of the Study; The J'roolens Involved
in Suo'clying Accurate Inforiation, .and Dlinino.ting
Deceptive R'^presentations, \/'ith ResT)fict to Co i:;odities
1. Bought
2. Sold
3. Exchanged in Cornier ce
B, lelp.tion Estueen the T^-'O Sections of the Study -
I.asrepresentation and Dece-ntion, and Standards and
La oe ling
iupt::h ii. kispjipezszinitation md deception
I, General' Backf^round
A» Nature and Extent of l.:isrepresentative practices
Dealt \7ith in the Stuc^Ly _■
B« Egononic Consequences of the Practices
C. Develop'-^.cjnt of. Control of the Practices: Bri^f
Tracing of the Principal Line of Development, through
thd- Co . ion Law, the Pederal Trade CoEiraission Act, and
the ;niA Codes
II. The Conmon Law
A« G-ro -th of the Coranon La'7 Affecting Misrepresentation;
Its Scope and limitations
I
III. The Federal Trac.e Com lission
A. Legal Basis of the Federal Trade Coraiission Control of
i.Iisrepresentation
1. Comparison v/ith the Common Law
B. Types of wisrepresentative Practices Condemned "by the
Federal Trade CoTiiissi m in Orders to Cease and Desist
C. Administration end Procedure of the I'ederal Trade Com-
: .ission in Dealing --ith kisreTDresentation
D« P.e suits of the Operation of the Federal Trade Commission
Act in this field
IV. The mA Codes
A. General Viev; of the Code Provisions Affecting
Misrepresentation and Dece-otion
1. Comparison with Psderal Trade Cori-iission Law
B. Adi -inistration and Procedure under rlEA
1. CoToarison ' ith Federal Trade Commission
C. Htisults of Operation of the Code Provisions
1. General View of tha Available Evidence
2. Summary of Data for Specific Codes
3. Necessity for Additional Information
9'--12
-403-
V. Other iiisrepresentation Control
A, J'ederal Legislation
!• Nature and Scope of Control Provided "by Other Federal laus
such as the
(a) Food & Drug Act
(b) Securities Act
(c) Federal Alcohol Control Act
(d) Postal Laws
B, Some Tj'pes of State Statutes
1» False Advertising
2, MislDranding
3, State NBA Legislation
C« Private Agencies
1» Trade Associations
2, Better Business Bureaus
VI, General Su'nmary
A. Preliminary Findings as to Misrepresentation and Deception
B, Suggestions for Further Study
CHAPTER III. STANDARDS AND LABELING
I, The Meaning of Standards
A. General Definition of Standards as Applied to Commodities in
Commerce
1, Brief Analysis of the Principal Types of Standards
2, Methods of Application
3, Purposes Designed to "be Effected iDy Them
II. Stands.rds and Labeling in the Codes
A, General Survey of the Standards and Labeling Provisions
1, Number of Codes Containing Each
2, Breakdown by Principal Types
3, Enabling Provisions, etc,
;il. Operation of the Provisions
A, Cross-Section View of the Principal Types of Standards and
Labeling Provisions in the Codes, and their effect in opera-
tion as Illustrated by Specific Code Experience
1. Mandatory Minimum Standards
2, Mandatory Maximum Standards
3» Grade Standards and Labeling
4, Labeling for Identity
5« Substandard Labeling
5, Simplification
7, Miscellaneous Standards Provisions
B, Results of the Enabling Provisions with Respect to Standards
and Labeling
C, Necessity for More Comprehensive Information Concerning Opera-
tion of the Provisions
IV, Other Standardizing Agencies
A» General Survey of the Methods and Results of Other Standard-
izing Agencies and Activities
-404-
1, Food and Drug Administration
2, Bureau of Standards
3, American Standards Association
4, American Society for Testing Materials
5, Consumer Groups
6, State Legislation
V. Legal Problems Involving Standards
A, Consideration of Some of the More Important Legal Aspects of
Regulations Affecting Standards and Labeling
VI. General Summary
A» Preliminarj'- Findings Concerning the Standards and Labeling
Provisions
B. Suggestions for Further Study
9412
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TRADB PRA-CTICE STUDIES
DEVELOPMENT AITO CONTROL OE COMODITY INF0RI1A.TI0N
Fro ?Limi nary Smnmary of Findings
PART ONE ~ MI5PJ:PPE,SENTATI0N AND DECEPTION
Since Misrepresentative and deceptive practices .in commerce are al-
ready accepted as basically -onlaT/ful, no question of general policy as
to their control arises j The principa.1 subjects for consideration re-
late to form of lav^ and methods of administration.
The available data are not yet sufficient to form a "basis for judg-
ment as to the effectiveness of the code me.thod of control of misrepre-
sentative practices. In particular, since much of the effective compli-
ance work in this field appears to have been done by the Code Authorities
without recourse to NTIA, a more comprehensive record of their activities
and ejqperience is essential to such a judgment,
■ Nevertheless, the evidence at hand indicates that where such prac-
tices constituted a serious industry problem, an active and capable Code
Authority was often able to apply the provisions for their elimination
with a considerable degree of success, and with a minimum of assistance
from NRA enforcement agencies or from the courts.
The support of some measure of authority was found essential, how-
ever; sjid a chief difficulty encountered by the Code Authorities in se— •
curing compliance with the misrepresentation provisions was the progres-
sive loss of prestige by NEIA among their industry members, due to delaj'^s
and uncertainties of enforcement, even in cases of flagra.nt violation.
Especially they complained of the frequent acceptances of certificates
of compliance in such cases, in place of the penalties provided by the
Act,
As compared with the principal public agency previously dealing with
the subject, the Federal Trade Commission, the N,R,A, and its codes as
they were meant to operate, were more comprehensive in their declaration
of the law of unfair competition affecting misrepresentation, were under
fewer legal restrictions, in its application, were more decentralized and
direct in their potential machinery of enforcement, and possessed, in the
Code Authority system, an informal mediui'n for obtaining compliance only
distantly approached by the volimtary cooperation afforded the Commission
by some trade associations.
Through its machinery for code amendment and intei*pretation, also,
the N»R,A« provided a flexible and responsible medium for adapting the
general law of misrepresentation to the immediate problems of individual
industries, vdth the adequate protection of the interests of industry
members apparently afforded, in cases of non-compliance, by the rights
of hearing, protest and appeal, with ultimate court review.
9412
-406-
\7ith respect to the Federal Trade Commission itself, a r^reat deaJL
of vr-liialDle \7ork in the field of misrepresentation has "been done l)y it,
OoGta,cle3 to its most effective functioning; have "been found in the dual
statutory requirement to shoT7 both public interest and actual or poten-
tial injury to competitors; in the extent of judicial reviev;; and in
the delays incident to the methods provided for making fully opera^tive
the Comnission's restraining orders.
It is believed tliat these difficulties might be materially less-
ened by ?jnending Section 5 of the Federal Trade Commission Act in such
a ucy as to malce misrepresentative practices unla\7ful in themselves,
rather than as forms of unfair competition, and by certain procedural
changes, such as ha.ve been suggested in various quarters, including
recommendations by the Commission itself.
PART TWO - STAMDAHDS AlID LABEL I NO
As in the case of misrepresentation the data at present available
concerning the operation of the code provisions affecting standards
and labeling are insufficient for the formation of conclusive judg-
ments. Furthermore, the problems of stands.rds are so complica.ted, ?Jid
differ to such an extent as bet\7een different industries, that conclu-
sions concerning them should be largely in terms of the considerations
affecting the individual industry, or related industry groups.
From a general vie":, hov/ever, the extent cf inclusion in the
codes of some form of provision conerning standards or labeling, or
both, indicates that these subjects were of interest and importance to
industry members or consumers in more than one-third of the total nun^-
ber codified,
TThere standards provisions v/ere initiated or actively supported
by industries themselves, in the process of codification or later,
they T/ere characteristically predicated on industry interests, TThere
such interests were not concerned, even though provisions were incor-
porated into the codes, at the instance of consumer groups, for ex-
aiiiple, they remained largely without effect.
Standards provisions which were restrictive in nature and manda^
tory in their terras, and which had the effect of prohibiting either
the najiufacture or the sale of certain products, practically always
proved unenforceable, apart from their dubious legality. On the
other hand, provisions aiming to prevent the unfair competition of
inferior products, by means of sub-standard labeling requirements,
met with some measure of success.
The subject of standards is obviously nearly related to that of
prices, since price comparisons have little meaning except in rela-
tion to comparable commodities. In most instan.ces the industries
seeking to incorporate standards provisions in their codes v/ere franld.y
interested in protecting the price structure. In many cases standardi-
zation or classification of products was made mandatory for price filing
purposes. In one or two instances a more direct attempt was made to
linlc standardization v/ith price uniformity. In many instances
9412
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standardization seems to have been looked upon as a useful, or even a
necessary adjunct to measures aiming at price regulation.
As in the case of misrepresentation provisions, failures of en-'
forcement tended to v/caken compliance with those relating to standards
and lalDeling. The extent of policing required to check up on o"bservance
proved a handicap to the Code Authorities, Ena"bling clauses failed to
"bring atout effective action in some cases, due to deadlocks "between in-
dustry'- groups, consumers and WoR.A, as to the form of the standards to
he £:dopted. In many other cases no attempt was made to take action un«
der such clauses, due to lack of interest or of funds for the purpose.
In the case of soma industries in ^7hich standardization is carried
on most effectively in practice the suoject was not "brought up in con-
nection with the codes at all. In a num'ber of others standards already
adopted in conjunction with the Bureau of Standards or some other agency
were incoiporated in the codes without change, indicating that that had
been found p-jLfficient for the needs of the industries concerned.
In general it appears that the N,R,A, code system, depending upon
agreement between industry and the Administration for the adoption of
provisions, v;as not adequate to promote standards activity in the public
interest, unless industry interests were also sufficiently involved.
The formulation of a standards program for any industry must be
carried out in terns of its individual problems, with full consideration
for the most suitable form, and for the interests of all elements
of the industry itself, of competitive industries and of the consuming
public, whether industrial or ultimate. Specific provision for the
periodic review and revision of the standards adopted, to give scope for
industry development and to allow for corrections based upon experience,
should be incorporated in ever;,' prograjn at the time of adoption. Any
attempt to make operative a mandatory standards or labeling program re-
quires the assent and cooperation of the industry, if elaborate official
policing is to be avoided,
Much of the specific code experience with regard to standards has
to do with controversies arising in the course of the adoption or the
atoinistration of the provisions, as this is the type of material which
would most naturally find its way into the record. It is probable that
the story of some of the most successful code work in standards is to
be learned only by direct contact with the industries themselves.
In addition to its immediate effect upon standardization during
the code period, the IT.R.A, gave a widespread impetus to interest in
the subject, which in many instances, has tended to persist down to the
present time. Evaluation of these results, also, must wait upon more
corrplete davelopment of the subject by means of industry contacts.
9412#