NATIONAL RECOVERY ADMINISTRATION
CODE OF FAIR~ COMPETITION
RETAIL TOBACCO TRADE
univ. ot L LY.
U.. UMENTS DEdl
Forsale bythe Superintendenot~orouments. Washington, D. C. - Prie Bcents
Approved Code No. 466--Amendment No. I
Registry No. 1615--30
AS APPROVED ON APRIL 23, 1935
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Approved Code No. 466---Amendment No. 1
AMENDMENT TO CODE OF FAIR COMPETITION
RE'ITAIL TOBACCO TRADE
As Approved on April 23, 1935
APPROVING AMENDMENT OF CODE OF PAIR COMPETITION FOR THE
RETAIL TOBACCO TRADE
An application having been duly made pursuant to and in full
compliance with the provisions of T'itle I of the Nliational Industrial
Recovery Act, approved June 16, 1933, for the approval of an
amendment to the Code of Fair Competition for the Retail Tobacco
Trade, and hearings having been held thereon and the annexed
.report on said amendment, containing findings with respect thereto,
having been made and directed to the President:
NOW, THIEREFiORE, on behalf of the President of the U~nited
States, the National Industrial Recovery Board, pursuant to au-
thority vested in it by Executive Orders of the President, including
Executive Order Number 6859, dated September 27, 1934, and other-
wise, does hereby incorporate by reference said annexed report and
does find that said amendment and the Code as constituted after
being amended comply in. all respects with the pertinent provisions
and will promote the policy and purposes of said Title of said Act
and does hlereby order that said amendment be and it is hereby
approved, and ~that the previous approval of said code is hereby
modified to include an approval of said code in its entirety as
NATIONAL INDUSTRIAL RECOVERY BOARD,
By W.r A. HARRIMAN, Aclministrative Ojfcer.
Approval recommended :
ALRMIN V. RLEHAY,
WAVSHINGTON, D. C.,
April a3, 1'935.
REPORT TO THE PRESIDENT
The Wh~ite House.
Smr: The Code Authority for the Retail Tobacco Trade has re-
quested that the Code of Fair Competition for said trade be amended
by striking out SCections 1 and 2, Part II of Article VI and sub-
stituting in theirplctoneScio.
The Sections of the Cwodne whih are beinga removed provide that
willfully destructive price cutting is an unfair method of competi-
tion and is forbidden. Furthermore, they provide that in cases of
emergency a basis for computing minimum prices on the products
affected mlay be: established upon thle recommendation of the Code
Authority with the approval of the National Recovery ALdminis-
The proposed amendment declares it to be an unfair trade prac-
tice and forbids the selling of tobacco products at less than merchan-
dise cost. Furthermore, it defines merchandise cost of cigarettes
to be the manufacturer's list price less 9.1%0 and the merchandise
cost of other tobacco products to be the manufacturer's list price
less 7.15r. In addition, the proposal states that. an allowance for the
cost of retail distribution, or any part thereof, may be recommended
by the Code Authorityr and may be fixed by the National Industrial
Recovery B~oard. If such an allowance is fixed, no member of the
trade may sell at a price which does not include such allowance.
This amendment has arisen from the fact that for a considerable
period of time tobacco products have been used as "loss leaders",
such use occurring primarily in those establishments whose principal
line of business consists in the selling of merchandise other than
tobacco products. This practice resulted in destructive price cutting
among members of the trade and on July 18, 1934, an emergency was
declared to exist in the. selling of cigarettes at retail. At that time,
an Administrative Order was approved which fixed the basis for
the computation of minimum retail cigarette prices. Said Order
became effective on July 16, 1934, for a ninety day period. At the
end of that time, it. was found that the causes leading to the emer-
gency hald not been removed and the Order has subsequently been
extendled from timne to time and is now dlue to terminate on April
A study of this situation has revealed that the causes of this
emergency do nlot y~ieldl to treatment on ant emergency basis and are
perhaps of a more permannent: nature? than was originally believed
to be the case. Consequently, in1 view of the fact that the emergency
Order has had a very1 beneficial effect upon the 1Retail TC1obacco Trade
as a whole, and particularly upon small enterprises engaged in the
distribution of cigarettes, the Code Authority has deemed it neces-
sary to so amnend the Code that the principles of said emergency
Order and its effects mary be continued. The Code Authority also
finds that tobacco products other than cigarettes have been used
ext~ensively as "' loss leaders and consequently, the proposed amendm-
ment. includes all tobacco products rather than cigarettes only.
Th-e Deputy Admilinistrator in his final report to the National In-
dust~rial Recovery Board on said amendment of said Code having
found as herein set forth and on the behalf of all proceedings in this
The NTational Industrial 1RecoveryT Board finds that:
(a) The Am~endment of said Code and the Code as amnended are
well designed to promote the policies and. purposes of Title I of the
National ICndustral. Recovery Act, including the removal of obstruc-
tions to the fre~ ~flowP of interstate and foreign commerce which tend
to diminish the amount thereof, and will provide for the general
welfare by promoting the organization of industry for the purpose
of cooperative action among trade groups, by inducing and maintain-
ing united action of labor and manaagemnent under adequate govern-
mental sanction and supervision, by eliminating unfair competitive
practices, by promoting the fullest possible utilization of the pres-
ent productive capacity~ of industries, by avoiding undue restriction
of production (except as mlay be temporarily required), by increasin
the consumption of industrial and agricultural productsthog
increazsmng purchasing power, by reducing and relieving unemploy-
ment, by improving standards of labor, and by otherwise rehabilitat-
(b) The Code as amended complies in all respects with the perti-
nent provisions of said T1Citle of said Act, including without limitation
subsection (a) of Section 3, subsection (a) of Section 7 and sub-
sect~ion (b) of Section. 10 thereof.
(c) Th Code empowTers the Code Authority for the Retail T1Cobacco
Trade to present the aforesaid amendment on behalf of th~e trade
as a whole.
(d) The amendment and the Code as amended are not designed
to and will not permit monopolies or monopolistic practices.
(e) The amendment and the Code as amended are not designed
to and will not eliminate or oppress small enterprises and will not
operate to discriminate against them.
(f) Those engaged in other steps of the economic process have not
been deprived of the right to be heard prior to approval of said
(g) The loss leader practice sought to be removed by the pro-
posed amendment results either in efforts by the tobacconist to make
up the loss by charging more than a reasonable profit for other
articles, or in driving the small tobacconist with little capital out of
legitimate business. I~t works back against the tobacco grower, and
the labor which he employs.
FEor these reasons the amendment has been approved.
For the Nationlal Industrial Recovery Board:
W. A. H-ARRIMAN,
APrn, 23, 1935.
AMENDMnENT TO CODE OF FAIR COMPETITION FO~R
THE RETAIL TOBACCO TRADE
Amend Part II of Article VI of the Code of Fair Comlpetition for
the Retail Tobacco Trade by striking out Sections 1 and 2 thereof
and substituting therefore the following:
SECTIO)N 1. Loss L;imitat'on, Pr~ov1ision : Me;~~rch~7anie Cost. -It is
thereby declared to be an unfair trade practice, anrd it is hereby for-
bidden, to sell tobacco products, which at the timne may~ be subject
to th~e provisions of this Part II, at less than merchland~ise cost.
(a) Any sale of cigarettes at a pr1ice which is below the manufac-
. turer's list price less nine andt one teztnth percent (9.1%~), and any sale
of other tobacco products, at a price which is below the manufac-
turer's list price less seven and one tenth percent (7.1%~), shall be
d~eemled to be a sale below merchandise cost. Any change by th
manufacturer in the discount from his list price occurring after thte
effective date of this provision shall be translates into an equivalent;
change of his list price and all calculations above referred to shall
be balsedl on such equivalent list price.
(b) From, time to time, the Codle Authority may recommend review
anlld reconsid~eration,, or the Natioinal Industrial Recovery Board ~may
cause this provision to be reviewed or reconsidered and appropriate
SECTION. 2. L088 Limitation Pr'ovjison: -DiStribuionl ClostS."-A
allowance for costs of retail distribution, or any part thereof, many be
recommended by the Code Authlority, and may be fixed by thec Na-
tional Industrial Rlecovery Board, and thereafter no member of the
trade shall sell at a price which. does not include such allowance for
costs of retail distribution so fixed. From time to time, the Code Au-
thority may recommend review and reconsidleration, or the Natonal
Industrial Recovery Board m~ay cause any determination hlereunder
to be reviewed or reconsidered and appropriate action taken.
Approved Codel No. 464~--Amendment No. 1.
Registry No. 16i15-30.
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