Price filing under NRA codes

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Price filing under NRA codes
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Baird, Enid, 1904-
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National Recovery Administration, Division of Review, Trade Practice Studies Section ( Washington, D.C.? )
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OFFICE OF NATIONAL RECOVERY ADMINISTRATION

DIVISION OF REVIEW















PRICE FILING UNDER NRA CODES

By

Enid Baird







WORK MATERIALS NO. 76

VOLUME I


















TRADE PRACTICE STUDIES SECTION

MARCH, 1936


















Digitized by the Internet Archive
in 2012












http://archive.org/details/pricender36unit






OFFICE OF NATIONAL RECOVERY ADI.IIIISTRATION

DIVISION OF REVIEW














PRICE FILING UITDER NRA CODES

By

Enid Baird






























TRADE PRACTICE STUDIES SECTION

MARCH, 1936


9826




MAGAZINES BOUND
By W.P. a,

!tt 1940







FOR.= RD
I

This study of price filing was prepared by Miss Enid Baird of the
Trade Practice Studies Section, Mr. Corwin D. Edwards in charge. The
statistical analyses and the chapter on Price Structures under Price
Filing were prepared by Mr. H. R. lohat. The chapter on Price Publicity
was prepared by Mr. Daniel Gerig, and Sections B and C of Chapter VI. by
Morrison Handsaker, Mr. C. A.. Pearce, Assistant Coordmnator of the section,
worked very closely with the Price Filing Unit in the development of the
report, and wrote Chapter II on the Statement of the Problem. Appendices
on the Asphalt Shingle and Roofing and Steel Castings Industries were
prepared by Mr. Frank Stocking and'Mr. Walter G. Keim, respectively.

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

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

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

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

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

Limitations of personnel and field work have forced the members of
this study unit to conduct their work on a smaller sample and with more
haste than was desirable. Their product is mimeographed as a definite
contribution to the literature of the subject and as a basis for further
work by interested'students. The opinions and findings are individual
and not officiaI utterances.

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

*L. C. Marshall
I Director, Division of Re-
view.
March 24, 1936.


9826


-i-





TABLE OF CONTENTS



Summary ......... . *. ..... ............................. .
Par


CHAPTER I

INTRODUCTION ............. ........ 7

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

II. The History of Price Filing.................................... 9

A. Pre-Eddv Plans............................................. 9
B. The "Eddy Plan"t......................................... 10
C. Developments Subsequent to 1912............................ 12
D. The "Cooperative Plan" of.the Department of Commerce....... 12
E. The Supreme Court Cases .................................... 14
1. The Hardwood Case...................................... 14
2. The Linseed Oil Case................................... 15
3. The Miaple Flooring Case................................ 17
4. The Cement Case .... .................................. 18
5. Summary, of the Four Cases.............................. 20
6. The Aooalachian Coals Case ............................. 21
7. Sugar Institute Case.. .............................. 22
F. The Federal Trade Commission Report........................ 23
1. Specific Observations Regarding Information Work of
Associations.. . .................................... 24
2. Economic Effects Indicated by Statistical Analysis..... 25
3. Recommendations ........................................ 26
4. Pre-N.R.A. Open Pripe Associations..................... 28
G. Trade Practice Conferences of Federal Trade Commission..... 28

III. The Definition of Price Filing................................ 29
A. Pre-N.R.A. Types of Price Filing........................... 29
B. The N.R.A. Type of Price Filing............................ 33

CHAPTER II

STATEmENT OF THE PROBLEM................... 36

I. The Economic. Problem ........................................... 36
A. Introduction ............................................... 36
B. The Meaning of Publicity in Perfect Competition............ 42
1. Purity ...... .. .. ...................................... 44
2. Mobility of Resources................................. 44
3. Rationality and Knowledge.............................. 45
C. The Role of Publicity in Im'erfect Competition............. 46
1. Price Publicity and Monopolistic Price Formation....... 48
a. The Farsightedness of River Sellers................ 50
b. Extent of the .Price and Other Data made available.. 53
c. The Interval Before Information Becomes Available
To Sellers and To Buyers........................... 61


-ii-


9826




Page
2. Price Publicity and Accessibility to the Market...... 63
a. Introduction historical meaning of "free" and
"ooen" market...................................... 63
b. Price filing and. discrimination.................. 64
c. Price filing and predatory price cutting ......... 67

D. Price Publlcity Under N. R. A. Codes The Scope of the
}resent Study........... .. .... ............... 7
E. The Control Function of Price Filing and the Present Study 69
F. The Price Structure Under Price Filing................... 73
1.' Relative Treatment of Different Customers by the
same concern ... .................................. 74
2. Degree of Uniformity in Price Among Competing Concerns 74
3. The Degree of Complexity in the Price Structure...... 76
4. The Frequency and Range of Price Change ............... 76
5. The Direction of Price Movements..................... 77
Price Changes as Evidence of the Monopolistic or
SComoetitive Character of Price Filing................ 78

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

III. *The Legal Problem..... .. ... ...............................82

CHAPTERi III

PUBLICITYY LTDER N.R.A. PRICE FILING PLiS......... 86

I. Functions of Price Publicity as Expressed by Code Proponents. 87
A. Maintenance of the Price Level........................... 87
1. Blanket Statements ................................ 87
2. Elimination of Panic, Uncer.tainty. and. Suspicion...... 88
3. Elimination of Indirect Concessions.................. 89
4. Protection from Misrepresentation of or Coercion by
buyers.. ......... .................. .. ............... 89
B. -Elimination'of Secrecy in Competition.................... 91
1. Elimination'of Secret Concessions................. ... 92
2. 'Making Comrpetition More Intelligent.................. 92
C. Elimination of Discrimination...................... : ...... 93
D. Advancement of Buyer Knowledge........................... 95


II. Collection of Price Information Under. N.R.A. ......
A. Agency "of Collection.........................
1. Issues and Controversies...................
2. Code* Requirements..........................
3. Agency of Collection Actually Established,.
4. Performance by Agencies....................
B. Participants in Price Filing..................
1. Issues and Controversies...................
2. Code Requir ements.........................
3. Code Authority Zxpansion or Modification of
Provisions .................................
4. Performance by Members....................
C. Information Included in Filing...............
1. Issues and Controversies... ................
2 Code Requirements.............. ...........


.........







Code
.............................. .....


Code Authority Expansion or Modification of Code Pro-
visibons., .............................. ..............
-iii-


9826


96
97
97
98
99
101
103
103
105

105
106
111
l111
112

113




Page
4. Performance by Members .................................. 115
*. 5. Obstacles in the Wlay of Including Fall Price Information 118
D. Products Included 'Tithin Price Filing....................... 120
I. Issues' ha. Coitroversies................................ 121
S2. Code Requlrempents ....................................... 122
...... 3 ode "Authority zExpansion or Modification of Code Require-


merits.
m... . . o ., "*.; ..... t ; ,s ,. . ....
E. Transactions Included"'Within Price Filing; ......
.. '1. "Issues and'Contr ve .... ,... .......
2. Code Requirements..... .. ........ .........
-.. 3.; "Cd, Authority E:-pansion or Modification of
ments...'. . ............. ...............
*.. .4. Pei'4fdrmaride by Members..'....'. . .......
-'. Geographic Scope of Filing.......... .......
... 1. Issues and Controversies..... ...............
...* ..2.' 'Code Requirements..................
3., Code Authority E:pansion or Modification of
ments ... ... ........................... ....
4. Performance by Members.....................
G. Mechanics of Collecting Prices.................
.I .. .tductioh'. ... . . ...............
2. Code Provisions. .... .......................
3's Co'eAuthority Expansion or Modification of
ments.......................................
H. Adherence to Filed Prices.......................
1. .Issues and Controversies...................
.* 2. "Code Requirements ...........................
3. Executive Order,,I'o. 6767, . ...... ;..., ....
S4. Code Authoritv Expannsion or Modification of


........ 122


Coie Require-





Code Require-
.,..........







Code Require-





.Code eu.ire-
C ode Require-


. .... erits... .... ........................ 146
.. 5; : Adherence Membrs........ .... ..................... 147

II. 'Disrhminriadti6n'd'Price Information Under N.R.A ................. 151
A. Issues and Controversies............. ......... ............... 151
B, Dissemiiati6n' to Members. ...... ...................... 152
ode "Pr6visions. .. ...... ............................ 152
.. ...2. Perf6rmance by Agency (as Conditioned by Code Authority
R liri. and Industry Vote).. ......................... 154
C. 'Dissemiriat on 'td 'Customers. .... ........................ 158
S ". 'Cde ron siats.... .. ........................158
2. Performance byAgency (as Conditioned by Code Athority
....l. li-'nis 'an'd Industry Vote)..... .................. 158

IV. Recap'itulation o'f "Evidence' Bearing on Nature and Extent of Publi-
city Provlided b y Price Filing Plans....:..... ..................... 163
SA. Publicity 'to Members... ....... ........... . .. .. . ..... 163
B. Publ'city t' "to Buyers.'. '... .......... .......... 183
i. i,,~ i e m i i i - i i i i I
.183
:: .......... .. . .. .. CHAPTER IV .

PRICE FILING AS A CONTROL DEVICE .................184

*Introduction .......... .,.. ........................... 184

II. -The Pattertn of'Co6itr6l Established By the Codes................. 187
A.' Control"over the.Pice 'Level Relation of Price Filing To
S Cost revisions. . . . . ................... 187
9826 **
iv-


131
131
133

133
135
138
138
138

139
140
141
141
142

142
142
143
L46
146





Page

I. Introduction ................................... 187
2. Prevalence of Cost and. I.inim'xa Price Provisions In
Codes in the Study-Sample............................ 191
3. Code Provisions. Conveying Power to Challenge and Void
Prices .................................. ............. 195
4. Code Authority Application of Cost Provisions........ 138
5. The Filing of Costs and Use of Price Filing in Connec-
tion with Cost Lists and Cost Manuals............... 201
a. The Malleable Iron Industry...................... 202
b. Marking Devices Industry......................... 202
c. The Folding Paper Box Industry................... 205

B. Control Over Price Changes The Waiting Period.......... 211
1. Waiting Period Requirements in Codes................. 211
2. Use as a Device for Coercion........................ 215
3. Use as a Period to Publicize Fully the Price Offers of
Cometitors ............ ........................ 221
a. To Afford Am-ole -Time for Dissemination........... 221
b. To Afford Opportunity to Mieet Price Changes and
Thus to Promote Stability in Prices.............. 223

C. Price Filing and .Control Over Certain Elements of the
Price Structure......................................... 230
1. Introduction ......................................... 230
2. Product Classification............................... 231
a. Metal Window Industry............................ 232
b. Steel Castings Industry..... .................... 233
c. business Furniture Industry...................... 235
d. Gas Appliances and Apparatus Industry............. 236
3. Customer Classification..................... .......... 242
a. Introduction. ................................... 242
b. Illustrations of the Use of Price Filing Plans in
Connection with Customer Classifications'......... 244
4. Geogirphic Price Arrangements ......................... 255
a. The Filing of Prices on a Delivered Basi-s........ 256
b. Price Filing and Basing Point Prices............. 258
c. Uniform Delivered Price Zones.................... 261
d. Other Forms of Delivered Pricing................. 263
e. Price Filing Zones and Ariti-DuIaping Zones ........ 266
5. Terms and Conditions of Sale......................... 269

D. Application of Price Filing Controls to Distributors..... 272
*1. Prohibition of Subterfu. e or Evasion of Price Filing
Requirement by Members through Use.of Distributors... 273
2. Elimination of Competitive Disadvantage Arising When
Distributors are Exemot front the Price Filing Require-
ments ......... ...................... ..... . 276
a. Policy Consideration Involved.................... 277
b. Code Provisions Extendinf Price Filing Require-
ments to Distributors ........................... 278
1. Distributors Included as Members of the Indus-
try.. .... ................... ...........278
2. Mandatory Contracts with Distributors....... 280
3. -Provisions Permitting Hembers to Require Con...
... tracts from Distributors..................... 289

~-V.-_____


9826




Page

4. Provisions Forbidding Members to Sell to Distribu-
tors Not Conforming to 'Trade Practice Provisions,
or Non-Cooperative. .... ... ................. 293
5. Requests for 'Code Amendments or Other Sanctions
To Bind Distributors to Filed Prices. ......... 295
3. Extra-Legal Attempts to Bind Distributors to Field
"Prices ......... ....................... .................. 298
4. Summary............................................... 313

E. Control Over Division of Business Through Statistical Report-
i ng and Share-the-Business Plans... ................... 315
1. Introduction ..................... ..................315
2. Share the Business Plan in Corrugated. Solid Fibre Ship-
oinrg Container Industry.......................... 316
3. The -nvelope Price Filing and Quota Plan.............. 320
a. .Organization of the Envelope Industry............. 320
b. "The Price Filing Provision............. .....321
c. 'The Budget- Plan....... 321
..... d. 'Breakdown of the Price Filing Plan. ............... 325
4. The Commodity Group Plan for the Candy 1,.anufacturing
Industry. ........................................ 326
5. Prevalence of Budget Plans....... .................. 329
6. The Eddy Plans and the Budget System.................. 329

CHAPTER V


PRICE STRUCTURES UNl'DER PRICE FILING ............


A. The Level and General Direction of Prices Under Price
.Filing. ..................................................
1. The Concept and Problem of Price Levels ..............
2. Examples of Higher Price Levels.......................
a. Steel Castings....................................
b. Fertilizer........................................
c. Asphalt Shingle and Roofing........................
3. Other Industries for Which There is Some Evidence of
Upward Price Trends........... ......................
4. Samples of Stable Price Levels........................
a. Laminated Phenolic Products......................
b. Steel Castings..... ..............................
c. Eiectri&c Fans.....................................


d. Food Service Equipment.............................
e. Fuse Group, Electrical Manufacturing Industry. .. .'.
5. Industries in Which the Price Level Declined..........
a. Flexible Cord....................................
b. Steel Castings.....................................
c. Radio Receiving Tubes ............................
d. Fractional Horse 'P6wer 'Mot6ors'....................
e. Macarnni.................. ......................
f. Domestic Electric Heating Applicances.............
g. Agricultural Insecticide and Fungicide............
h. Builders Suoplies.................................
6. An Industry for Which it is Difficult to Determine the
Price Level. .. . ............ ... .......................
a. Electric Arc Welding Apparatus...................
7. Intra-Industry Price Levels....................
-vi-


332


332
332
333
333
337
341

342
343
343
344
345
348
348
348
348
355
356
358
358
360
361
364

364
364
367


9826




Page

B. The Relative Treatment of Customers Und.r Price Filing.... 373
1. Cases in Which the, Trend was Toward More Uniform Treat-
ment of Customers .................. .................... 373
a-. Electric Fans... ................................... 373
2. Cases in 7nicn the Trend Was Toward a Wider Spread in
Prices to Different Customers. ........................ 375
a. Fractional HIorse Power !Totors..................... 375
b. Electric Arc Welding Appp-atus.................... 377

C. Degree of Price66 Uniformity Under Price Filing............. 377
1. Cases of Failure to Achieve Uniformity................ 378
a. Candy Manufacturing.. .. ............. ....... 378
b. Business Furniture ............................... 379
2. Cases Ini Which Some Uniformity Was Achieved........... 379
a. Fertilizer ........................................ 379
b. Valve and Fittings............................... 383
c. Electric Arc Welding Apparatus..................... 385
d. Pole Line Hardware Group.......................... 386
e. Wholesale Confectionary ........................... 388

D. Summary of the Cases: The Character of Prices Unde. Price
Filing .................................................... 388

CHAPTER VI

.R.A. A~. IISTIJIO:: OF OPEN PRICE PLA.NS........... 389

Introduction.......... ...... ........... ......................... .. .389
A. Supervisory Administration Action......................... 389

I. The Admrinis'trative Problem of Supervision ..................... 390
A. Diversity of Open Price Plans ............................ 390

II. Availability of Data on Which to Base Supervisory Administra-
tive Action........ ...... ............. ...................... 392
A. Available Records of Code Authority Actions............... 392
1. Importance of Missing Records ................ ......... 393
B. The Collection of Price Filings........................... 393
I. Absence of Collected Price Filing..................... 393

III. Formal Administrative Action ................................ 396
A. Infrequency of Formal.Action .............................. 396
B. Amendments Pertaining to Price Filing..................... 397
C. Administrative Orders Affecting Open Price Provisions of
Individual Codes..'. ... ...... ..................... ........399
1. Stays............................. ..... .. ...... 399
a. Stays on Waiting Periods.......................... 399
b. Temporary Stays.... ........ ........... 399
c. Permanent Sta.ys .......... ...................... 400
2. Interpretations....... ";. ........ 401

IV. Corrective Action Through Critical Supervision of Code Autho-
rity Activities.. . ............ ............ ... 403
A. Character of N.R.A. Supervision.......................... 403
B. Supervision Required Because of the Minuteness of Code
9826 Authority Regulations.............. ..................... 410
--vii-





Page


C. Administration Supervision and the Problem of Confusions
Between Code Authority and Trade Association Functions,,..
D. Supervision Preceding Action (Preventive).................


1. Rejection of Price Filings by Code Authority..
2. Mandatory Uniform Terms.......................
3. The Scope of the Code........................
4. Standard Price Filing Forms,..................
Supervision Subsequent to Action (Corrective).....
1. Price Fixing Activities......................
2. Suspension of Price Filing Plan.., ............
3. Irregular Allegations of Violation............
4. Supervision of Aonlication of Executive Order
and Administrative Order X-48. ................
5. Supervision Connected With Cost Formulae......
6. Availability of Filings to Members............
7. Classification of Customers..................
8. Rejection of Filings.........................
' 9.' miscellaneouss Items................. ............


No.6767


412
413
414
414
415
415
416
416
425
426

426
426
426
427
427
427


B. Compliance and Litigation Activities............................ 430


I. Compliance Activities by Code Authorities and the MRA ........
A. Code Authorityr Compliance Activities..... ................
1. Code Authority Methods for Handling Complaints........
2. Code Authority Compliance Difficulties................
B. NRA Compliance Activity.. .... ...... .......................
1. Volume and Disposition of Cases Handled by State
Offices. .. . ... ............. .........................
2. Difficulty of State Offices with Code Authority Pro-
cedures and with Changing Code Provisions.............
3. National and Regional NRA Compliance Procedure........
4. The Government Contracts Division.....................
II. Litigation Activities........................................
A. Number of Cases Handled......... .......................
B. Attitude of the Litigation Division Toward Prosecution
of Price Filing Cases................ ......................


430
430
430
433
435

435

437
438
439
441
441

441


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

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

II. First NRA Price Filing Period-June 16, 1933 through June 6,1934
Experimentation'and Search for a Policy....................... 445
A.. Six monthss of Price Filing Experimentation ................ 445
1. Reasons for Administrative Attitude................... 446
2. The Price Filing Plan in the Electrical Manufacturing
Code. .. ............................. 446
3. narly Dissent with .Respect to Price Filing Provisions. 447
a. The Code Analysis Division....................... 448
b. The Division of Research and Planning .............. 448
c. The Consumers' Advisory Board.................... 449
4. The Beginnings Qf Official MA Price Filing Policy.... 45C.
B, Six Months of Study and Search for Policy................. 452
1. Efforts to Ascertain the Results of Approved Price
Plans ...... . . . . . .. ......................... 452


-viii-


3826






2. Special Studies Unidertsken With an -Ee to Policy...... 456
a. Research and Planning Division Report............. 456
b. Consumers Advisory Board Report.................. 457
3. Farther Search For a Basic Policy..................... 459
4. Summary of the First Price Filing Period.............. 461

III. Second -'1- Price Filing Period June 7, 1934 to May 27, 1935-
Declaration, Clarification and Application of Policy.......... 462
A. Office Mviemorandum INo. 288 ................................. 462
1. Background of the Lemorandum .......................... 462
2. Principal Points as to Price Filing in Office Memoran-
dum no. 1n228 .............................. .... ...464
3. Differences Between Sudbmitted and Announced Draft...,. 464
4. Policy Connected With Application of the Policy....... 466
5. Reactions to the INew Policy.... ....................... 467
6. The Confidential Agent..... .. .. .............. ....... 471
7. E,-tent to .-hich -Iew Policy Was Incorporated in MA
Codes................................................... 473

B. Executive Order #6767 A Concession to Government Purchas-
ing Agents... .. ..... ..................................... 477
1. Essential Points Involved in Executive Order 6767..... 477
2. Relation of Order IT. 6767 to Price Filing Policy..... 478
3. Reactions to Order l'No. 6767. .......................... 479
a. Expressions of Industry Opinion................... 479
*b.- Attempts to Circumvent the Operation of the Order..480
C. Other Orders Affecting Price Filing Policy................ 483
1. Customer Classification............................... 483
2. "Free-Deals" or Premiums......... .................... 483
3. Advertising Allowances................................ 484
4. Forward Contracts .................................... 484
D. Interpretations and Advisory Opinions.................... 485

IV. Views on Price Filing Policyr in the Final Days of NR A......... 488
A. Open Price Policyr as Discussed at the Senate Finance Com-
mittee Hearing on the 'hA, March 1935........... .......... 488
B. Policy Views of Various Groups within the Administration.. 489
1. Consumers Advisory Board Recomiendations ............. 489
2. research and Planning Divisions' Recommendations...... 490
3. Other Policy Recommendations........... ................ 491
C. Final Statement of IE-A Price Filing Policy,............... 491


9826





TABLES


Page


Table I


Table
Table
Table
Table

Table

Table
Table


III

IV
.V
.7I


VII.
VI II


Table IX

Table X

Table.XI.


Table XII

Table XIII








Chart I

Chart II

Chart III


Original and Final Price Schedules Prevailing for
Eighteen Representative Steel Castings Under
the !'3A Codes ................................. 336
Percentage Changes .in Fertilizer Prices, 1933-1935... 337
Fertilizer Prices to Consumers ...................... 338
Number of Price Changes, Fertilizer Industry ......... 339
Course of Asphalt Shingle and Roofing Prices from
March 1933 .to End of Code Period.................. 341
The Original and-Final Price Ranges for Electric Fans
Under theNRA Code................................. 347
Price Trend.of Type q F Number 18 Rayon Flexible Cord.349
Price Trend of Number 18-1/64 Radio Wire, Solid Tin-
ned .................. ............................. 349
List Prices, Discounts and Most Favorable Net Prices
for Another type of Flexible Cord................. 350
Variation in the Prices to Purchasers of One Type of
Flexible Cord. ..................... 351
Number of Companies in the Electric Fan Industiy-
Offering Specified Quantity Discount Schedules
To.Specified Customer Classes................... 374
Trucking Allowances and Actual Freight Rates for
Zone 5 of the Fertilizer Industry................ 380
Terms of Payment Filed by Members of the Pole Line
Hardware group of the Electrical Manufacturing
Industry ........................ 387



CHARTS


List Prices, Discounts, and Net Prices For Type S.J.No.
18, Flexible Cord, Sept. 1933-Feb. 1935.......... 352
Changes in Treatment of Customer Classes, Large Mono
Cell-Dry Batterr Division....................... 368
Effects of Changing the Geographical Price Structure
On Rubber Covered Building Wire Prices............ 372


9826




APPE.D IX A

Price Filing in the Asphalt Shingle and Roofing Industry
.. TABLE -OF. CONTENTS

CHAPTER 1

DEVELOPMENT OF THE MODERN INDUSTRIAL AND REGULATORY SETTING...497

I* The Asphalt Shingle and Roofing Association.....................497
A* Size. .. ... 497
B. Activities...... ... ...498
II. Developments Within the Industry.............................499
A. Patent Rights .........499
1, Patent and Licensing Corporation.......................500
B. Combinations, 'Mergers and Absorptions.......................501
III. The Asphalt Shingle and Roofing Institute, 1928.................504
As Institute Activities. ............ .. .....504
l. Merchandising Plan........ ....... ..................... .505
a As Amended in 1929. ...... ........................ 505
2. Relationship.of Patent and Licensing Corporation........508
B. Position Under .the Anti-Trust Laws,......................... 508
C Validity Q.f Patents Questioned........*.*5........................511
1o Patent, and Licensing Corporation v. Weaver-Wall.........*511

.CHAPTER II

T-E .INDIUSTRY IN 1933.........................512

I. Size of the, jndus.t.ry........ a a.. . 0.... .. 0 . 0 a I a 00 .0 . 512
A. Number of lAexnb.ers............... ......... .......... .... 512
B Relative Size. of embers.. ............. ..................... 512
.14-

II. geographical Distribution. ....................... .... ......... 513
IIAI. Products and TeSes 0. ..... ....... .........513
IV. Types of Distribution..... . .. .9.......... ...... .514
V. Nature of the iarket............................................ 516
A. New Building...................... ...................516
vr. Competition ....... ...... ....... .......... ......517
VII. Production, Cost and Price Trend.. ..517
VIII. Effect of the Depression. .. ........ ...... ................. 520
IX. Pre-Code Probleas.. ....... .......... .......... ............. .....521

C -ATER III

ITOUSTRY PROGRAM FOR PRICE FILING.................... 522

I Proposals di g. ... ....... .. . ... ... ... ,0*522
II. Purposes to be Achieved Pie90 95........9. ..... .526

.CHAPTER IV

COIROVERSIES ARISIGE DURING CODE MAKING PERIOD...........528

I. Between Members 'of Industry .......... . ............ ... ..528
II. Member and. Customer Groups..A.c.hiev..0e ........99 9 9528
Ae Lumber Dealers.o,.,fn99stry ."999999 528

9826
-Ex--





B. The Roofing Contractors Association........................528
.'0 Mail Order Houses. ... .... ... . . . . .... .. ...... .529
III* Between Industry andN.R.A. ......................... ..........530
IV. The Effect of These Controversies ..............................530

CHAPTER V

RELATION OF PRIrE FILING TO OTHER CODE PROVISIONS........532

'I* 'Prohibitiri of Salos Below Cost............ ......... ....... 532
..I.. I.:isCee.l'aneo..s Sem."Relatdd.Provisions,........ .....533
... CHAPTER VI
*. .... .... . . I^ T
* .. ... -ADMrIrSTRATION OF PRICE FILING PLAN.................535

I* The Administrative Agency.... .... ... ....... 535
I * A Thetr 'Code' A thor eity ... . .. .. . . . ........ . ...... ... 535
...B h l Co' nde $9i ft ** d6 Aut ity* **600* ** *.00535
' B. Pwers and utid of the Code Authority....................536
.....C. 'Rules aid aRe'gulationis Promulgated "by the Code Authority....537
*Do Explanations and Interpretations........................... 539
I,* Bulletiris7... ..'.. ... . .. . .... . . . O . . . @ . 539
' ' 2. Explanations'.,'.'. .* .... .542
Unauthorizol Activities.......................544
1, Misclassification Meetings........................ ....544
2. "Soet-Up" Wprehouses..........546
3. Industry Advertising Program. ........................548
.. . . . a o & . a e .... .. ........ 548
1, Uniform Merchandising Plan ............... .. 548
. 2.' '*iq'uidated' Iramage' 'Agreemnent'...... .a...o ......... .550
... *3. 1.:i"is'ce'llaneoud 'P ods'ed Aenindments........ ............ 551

I I' Administration ry Ne.R .. ..a0... ... a....... 0a ..... 552
. . . .. . .4 0 0 D e e .
.... ...... .....4RAPTER VI I'"

SCOILArCE. .. ... ..... . .554

Ie, Enfor-cement "Azency..... .... .. ... ............... .... 554
II. "Methodds 'of Gaining Compl'iance.................................. 555
II. Number of Violat'ors* ,'... . ... 6 e0 ..... .....66 6 6 6 6 555
IV. Success of Enforcement Agencies .............................e... es ..556

.CHAPTER VIII

ECONOMIC EFFECTS OF PRICE FILING................557
t i'" Promotion of Pib ... ... ,557
*I. Promotion of P'r14ce* Stability................................. 557
II. Price Uniformity, o. a................................ ......... .. .558
As Merchandising Plans. .... ...........6.558
III. Price and Price Movements,. 0...................................559
SIV, Position of Distributors.*, .. .. ....... .. ...561
V. Increase in the Number of Manufacturers........................562
A Limitatibn or Contrbl of Production.............. a. ...... 563
Vie Diversion of' Sale to Substitute'Products.......................563




CHAPTER IX

OPINIONS AXNTD ATTITUDES OF INTERESTED PARTIES3.......... 564

I, Personal Opinions of Interested Individuals................,564
A. F. J." PatchAll, Administration Member of the Code
-...Authority ............564
B. J. S. Bryant, Secretary to the Code Authority and
Manager of the Intitute..... .....................
C. Mr. Stegman; Vice-President, Weaver-Wall Company......... 565
Di Herbert Abrahams, Chairman of Code Authority and
President of Ruberqid.... .. ............. .*..566
Ew -Ralph'Mulllr, Vice-President of the Cooper Company and
S-Member of the Code Authority.......,.*....... ...... 566

TABLE.S. AND CHARTS IN TEXT- :..............

Table *I List Prices, .Terns of Sales. and Net Prices for Indi-
... i.. vidual Shinglos by Principal CompaniesGrant-ed .to
Wholesale Carload Distributors.....*...,. ............ 567
Table.. I.I Asphalt' Shingle and Roofing Industry Shipments.......... 568
Prepared Roofing
Table III Asphalt Shingle and Roofing Industry Prices",...........570
Chart I Organization of the Asphalt Shingle and'Roofihg
. In stitute.... .... .. .... . ................ .. ... 572
Chart II Wholesale Prices for Individual-and- Strip: Shingles
.......* and'Slat S'Sufaced'd Medium Prepared Roofing,


1926-1935.....................
*~~~ ~ ~ e e 0. e. e 0.. o o .. ******* " F E X B ,w~ ',. :. o* e .o.,..


... PRICE FILING IN T'H STEEL CASTINGS INDUSTRY
...~....................................'/.... .
1:t :6tF C*ONT.ENTS

* ............AC.R. 5'OftdfID3STY.-......
.. . . ... ..
. *. T t........................
BACKGROU f t .. INDUSTRY..........


*..* ........ sS i ut o o 'l nt ; .. . .


-3, e Tescrdpti6 ldf' i important Copies... .....
4* .4. "Finadial 'Coditions of Industry............
5 F,-ail-re in the Industry...................
...... 6 Relationship of Earnings, Prices .4nd Volume.
* 7 l- w Mtter'iaJ Vrices'.'.'.'.'.... ...* . ..... . ....
..8. Classe's. o'f ?roductsa-,. .... ". ..*. "-. ... -
...... 9. Methvd-s of Manufacture.....................
10.- Market" To ndusry roucts............
S11 Competitive" Po duct't.s*.**,.*.".'..............*


..9. 9....573


.. .... ... 574

. ....... 574
9.* *9999 574



S. . .... 578
578
., .... .... .577
.. .. ... 580
... .... .. 580

S. . .. 580
9. ... . . 581

.581

. .0 0 .6583


II. Trade Association Organization and- Activity...................583
A. The Steel Founderst Society of America.... *...............583
I M em b er sh ip ......,, ..., ., , .. ; . . ......... ... .. 58 3
. .2*' 0iganizatione.... ....
S2. Organic zati on. .9 .. 9,....... ....... ..... .. .. ,586
3. Pricing Practices Prior tothe.Code.. ....99**..59
982i .. . .. ... . - ... :::






a. Introduction ..... ... ......* . .. ........ ......... 589
b, Early Forms of Price Listings and Practices
1912-1927 ............. ............................ .... ...589
c. Trade Association Activity- 1929-1933.............590

CHAPTER II.

FORMULATION OF THE CODE PROVISION.. ........ ... ..3..595

I. Proposals for Price Filing Under the Code.......................595
A0 Industry Program for Price Filing as Submitted.............595
B, Opoosition to the Proposed-Provisions......................596

II. The Price Filing Plan as-Approved and Amended................. .597
A. Analysis of the Open Price Provision as Apornvcd...........597
B. Amendrindts'Affecting Price Filing Provisions..,.,...........599
Co Functinnal Aspects of Other Code Provisions Integrated
with Peice Filing Provisions as Adopted....................605

CHAPTER III.

ORGANIZATION AfD MECHANICS OF OPERATION OF OPEN PRICE PLAN....60R

I. The Administrative Organization...............................606

II. Mechanics of Open Price Operation................. ...........607
A. Classification of Products............................ ...607
B, Quantity and Weight Differentials....... ... .. 609
0C Suggested Schedules Based on "Nmrmal" Price Levels........,610
D. Regulations Concerning Filing of Prices and Terms of
Sale ........ ...... ................................... .. 614
1. General Rules for Filing Prices........................614
2. Quotations .. .. ... .. . .............. ..... .. ...... ...616
3. Invoices and Discounts.............................. .0.616
4& Quantity on Order ,... 0....... 6 ......................616
5 Pattern Equipment.'. ...600.. 66.... 6..617
6. Machining..... ... ... ... ........ ....... ......... ... 617
?7 Inspdction Charges...... e. ....60 618
8. Back Charges for Welding...............................618
9. Pattern Insurance. o ...** 6 ......6 618
10. Responsibility for Damages,............. .......6....618
11, Summary. *' * J * 6 6 ** * 0 ** *. a 618
o, Filings for Different Distribution Channels.................619
1. Sales Representative, Manufacturer's Agent, etc.........619
2 middleman. I *. .* *. . 0 * * * e. *oe 6 6 0...0 .6... .. ... 619
S 3. Customer-User.-.. .. ... 6 6 *** 66 66 6 0 0 00
F, Dissemination of Price Filings (Publicity)..................621
I. Daily Price Reports. ....... ................... ...6.... 621
2. Quarterly Reports.................................. ....625
G, Filing Methods Employed by-Members..0. ................6600 627

CHAPTER TV.

DISCUSSION CONCERNING OPERATION OF THE OPEN PRICE PLAN.....U629

I, Cbmpliance and Enforcement... *-. ..00666.06.. .. .............6.... 629

II. Attitudes and Opinions 3f Interested Parties.................629
9826 xiv-






III. Ih1astjry Reactibhs' to' Office Memno*iandum 228 and Executive
Order 6767............... ............. ..................... 632

IV. Labbr Code' AUthbrity !nd NRA Attitudes... ....... .634

.......* CH. APTER V.

STATISTICAL ANALYSIS OF TYPES OF FILINGS RECEIVED.......... 638

I; Analysis of Filings Relating to Prices (for Customer-Users)....638
A' A Frequehcy of.Filing of ,New Low Prices and New Classification
'0Sche0ules. ....639
"" B " Ektent of Use' f Sf' aS6" AbI' Filings. ..640
C. Extent of Use of "Blanket" Filings.......... ............. 640
"D;' Use of' Withdraw'al's, *..... .640
1. The Nature ofWithdrawals..............................640
a. Removing Classifications ................... ...... .642
.b. Effective Period Before Withdrawal................. 642.
c. Price Changes Effected byWithdrawals.............643
... ..(I)- Lower Price' ."Schedhi'e's". ithdrawin'.............. 643
(2) Higher Price Schedules.Withdrawn............... 646
A: ..a..'3)" Saple" Caseb of a Large Number of Items With-
...drawn.. .. .... 647
....... 2, Phupobise of Withdrawals o..". .. .. ...........0648

II. 'Analysis bf'Filing"s' elating to. Discounts and Allowances.......650
'"'A. Discounts to Other Foundries (Middlemen)......... ........650
B. Allowances of Freight Charges to Railroads.................650
C' AlloW&hb' tb' Ciistomers' boh Patterns and Equipment........ .651

III. Anilysis6f'Filihgs'Rlatig' t""pribceEktiras".................0652
A. Description of Price Extra Practice.................... @52
B, Methods of Filing Price Extra Schedules................... .653

IV. Analysis of Filings Relating to Sales Contract. ................654
... .... . ....... CHAPTERCVI. "

*STATISTICAL ANALYSIS OF PRICES UNDER THE OPE1 PRICE PLAN...656

I. Stibject Matter and Method of Study Employed.......................656
A; "Sample of Pt'ducts.Selected for Study ......................656
B. Method of Analysis................ ....... ..657

II. Analysis of the Tabulations of Price Filings..................657
A* By Individual Product............ ..... ............ .. 657
1. Aeronautical Castings, N.0.C.B.N..... ..................657
2. Agricultural Machinery Combine Harvester Castings,
No0oC.B.N.... .... ....... ......... ............ .........,658
3. Automobile Axle Housings (Banjo Type)................659
4. Automobile Brake Clutch Pedal & Similar Levers (with
Foot pads)............................................. 659
5. Automobile Brake Brums 1 to 100 lbs..................660
6. Bread Slicing Machinery Castings, N.0.C.B.N.. .........660
7. Cylinders Hydraulic Accumulator Type,................660





8. Dredge Ball & Socket Joint Castings, Including Cases,
Balls, and Glands........... ..................... ....660
9. Electrical Machinery and Equipment Motor Frame
(Box . ..661
10'. -Gears Cbat' Tooth' and' Blahk. ......... 661
11. Heat Treating Furnace and Equipment, Carbonizing
hand Carbuti zing Boxes. ...' 662
" ". m o s ..0 . . 6 62m m e o o
12. Railroad Locomotive Driving Boxes (Friction Type)...662
13. Refinery Oil Castings Sectional "U" Bend Only.......663
14a Refractory and Brickyard Roller Tires. ................663
....15o Rolling Mill and Steel Flant Roll Housing amd Caps..664
16. Power Shovel and Dragline Bases Upper............ *.o664
17. Shoes or Treads ?ower Shoveland.Dragline............665
18. Valve Bodies,........ .... .. 665
S* * . <,, 4.e @ 0 0 @ c o .OO @ . O <
B General' Summary of the Price Data .... a .......... .. a 666

............ TABLES- AND CHARTS- TI TEXT

Table I- I-' Number of Firms, Employees and Capital Invested, 1929-
195... ......... ...... 574
Table 'I -Steel Foundries in the United States,'Arranped in
Groups According to Size,... ...................575
Table II'I Number of Foundries and Total Monthly Capacities, Ac-
cording to Geograohical Divisions, 1934................. .,575
Table IV- Comoanies Operating Two or More Foundries and the Divi-
sions" in" Whichtheyare Located....... ...................577
Table V Principal Companies by Size and. Monthly Capacity, 1934....578
Table VI Earnings and Capital Turnover for Select Group of
-Companies, 1924-1928.. ....... .... 6.. 580
Table VII --Growth'of Nhunber of Product Classifications During the
SCode Period... ............,......... .......*. ...... 608
Table VIII Unfinished Steel Castings-Price Per Lb. Net.............609
Table *- IX'-'Changes in Price Between Schedules for Various Weights
-.......-and quantities of Castings (Price Per Pound)......:..... 613
Table X- Average"Number of Filings per Foundry, by Divisions.......622
Table XI Number of Foundries Filing Genuine Withdrawals by Divi-
sions and by Months. ... .......... ....... .... ... ..641

Chart I Production of Steel Castings 1926-1935..................584
Chart II Malleable Iron Castings, by months, 1926-35................585
Chart III Geographic Divisions of the Steel Castings Industry.......668
Chart IV- Average Selling Price of Steel Castings, 1933-1935........671
Chart V Changes'in Production Costs of Steel Castings, 1933-1935..672





............... ......
> * 6 a S a
': ,. :," /.

*


9826








EXHIBIT I


EXHIBIT

- Tables No. I to XVI ....................................


Table I-A.

Table I-B.


Table II.


Table III.


Table IV.


Table V-A.




Table V-B.




Table V-C.




Table VI.


Table VII.


Table VIII


Table IX.


Table X-A.


Table

Table


X-B.

XI-A.


Table XI-B.


Table XII-A


Production of Commercial Steel Castings.......... 673

Per Cent of Capacity Utilized in the Production
of Commercial Steel Castings..................... 675

Average Selling Price of Steel Castings from
July, 1933, to September, 1935 ................... 678

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

Price and Production of Malleable Iron Castings
and Per Cent of Capacity Utilized................ 680

Average Number of Days Elapsing Between Date
Price was Filed and Date Price was Reported to
the Industry, Classified by Divisions and Type
of Filing ........................................ 681

Average Number of Days Elapsing Between Date
Price Was Filed and Date Price Was Reported
to the Industry, Classified by Divisions and
Type of Filing................................... 682

Lumber of Cases and Average Number of Days
Elapsing Between Date Price Was Filed and
Date Price Was Reported to the Industry,
Classified by Divisions and Type of Filing....... 683

Number of Low, New and High Price Filings
and All Types of Filings Made, by Division ....... 684

Number of Low,.New, and High Price Filings
and All Types of Filings, by Months.............. 685

Example of "Same as" Filings: "Rolling Mill
and Steel Plant Castings......................... 686

Frequency Distribution of Foundries Submitting
Blanket Filings, by Quarterly Reports............ 687

Type of Discounts Granted to Other Foundries
and Effective Date............................... .688

Frequency of Thpe of Discounts, by Months........ 689

Type of Freight Allowances Granted to Railroads
and Effective Dates.............................. 690

Frequency of Type of Freight Allowances, by
Months............................................ 691


Type of Pattern Allowances Granted to Foundries
and Effective Dates ..............................


~oco -xvii-


692


Page
672-A




Page


Table XII-B.


Table XIII-A.




Table XIII-B.


Table XIII-C.


Table XIV.


Table XV.


Table XVI


Frequency Distribution of Allowances on
Patterns, by Months........................... 693


Foundries Filling Sales Contracts Specifying
Prices Lo7er Than Current Filed Prices, Num-
ber of Customers, Products Affected, and
Length of Contracts... .... ......................

Frequency of Contracts and Customers Filed, by
IMonths. .........................................

Frequency of Contracts, Classified by Length of
Duration.........................................

Price Schedules Filed on Shoes or Trads -
Power Shovel and Dragline.......................

Price Schedules Filed on Aeronautical Castings -
NOC3IT. . .............. . .. .. .. .. ..
1031 ..................... .....................................

Price Schedules Filed on railroadd Locomotive
Driving Boxes, Friction Type....................


694


695


696


697


698


699


EXHIBIT II Commercial Resolutions............................... 700

I. Price Filing Procedure. ... ........................... 700
A. Formal "Call" for Price Filing...................... 700
B. Waiting Period for Price Revisions.................. 700
C. Prohibition of Sales Below Filed Prices ............. 700
D. Status of Rep-oair and Replacement Parts.............. 701
E. Filing of Sales Contracts.... ....................... 702
F. "Blanket Filings..... ....... ............ ...... .. 702
G. Filing of Prices to Meet Specific Competition ....... 703

II. Terms and Conditions of Sale; ......................... 703
A. Subsidizing or Financing of Customers............... 703
B. Furnishing Free Service and Goods................... 704
C. Guaranteeing Delivery Date.......................... 704
D. Lump Sun Bidding.................................... 704
E. Quantity on Order................................... 704

III. Distributive- Relationships............................. 705

IV. Geographical Price Structure........................... 705

V. Product Classifications ................................. 708

VI. Price Extras ............................................ 711


6- ji.-


9826




APPENDIX C

METHODOLOGY AND EXHIBITS OF MATERIALS PERTAINING
TO PRICE FILING STUDY


Table of Contents

Page
Exhibit I Methodology and Suggestions for Further Research........ 712

A. The Code Sample ............................................. 712
B. Selection of the Code Sample. .............................. .713
C. The Work Outline............................................ 714
D. Sources of Information and Research Procedure............... 746
E. Statistical Program for the Price Filing Unit............... 759
1. Subject Matter Outline.................................. 759
2. Methodology Outline................................. .. 766
3. Material Specification Outline.......................... 774
4. Inspection Study Outline........... ............. ....... 777
F. Suggestions for Further Research ............................ 783

Exhibit II Analysis of Price Filing Provisions Contained in
NIA Codes ............................................. 784

Exhibit III Alphabetical List of 191 Codes in Over-All Sample
for Price Filing Study............................... 793

Exhibit IV Open Price Plan for Folding Paper Box Industry......... 802

Exhibit V NRA. Policy Statements Relating to Price Filing......... 812

A. Text of Exhibit A of Office Memorandum No. 228............... 812
B. Text of Office Memorandum No. 260............................ 814
C. Text of Executive Order No. 6767............................ 815
D. Text of Administrative Order X-48........................... 816
E. Text of Office Memorandum No. 267........................... 817
F. Text of Office Memorandum No. 316.......................... 818
0. Text of Office Memorandum No. 326........................... 820
H. Text of Office Memorandum No. 327.......................... 823
I. Text of Office Memorandum No. 334....................o...... 824
J. Administrative Policy, New Series, No. 1................... 825


9826


-xix-





























































































































. . *





SUII i^RY

Frice filin-: roviz-ons ere aeionT the most frequent trade practice
provisions in :-.A co..es. In the Coni-ressional '.ebates rhich preceded the
pr.ssv':e of the XIiLA, i '.1-as indicated that price filing was expected to
be permissible in 'h1 co:'es. Prior to iTLA, thliere had "been price filing
rlins in nt least 150 i:-'ustries. Under the trade practice conference
procedure of the _eL.e_', Trade Conulission, Group II ri-les for the inde-
pendent public.?ticn ;nic. circulation of prices had been written in more
than 50 industries.

Since pre-coc'.e "'rice filing, although generally based on the ideas
of Arthur Jerome :C'.1.:-, took various forms, and since the price filing
systems under the co es -ere also various, pre-code and code price filing
systems differed to -various degrees. In general, however, pre-code sys-
tems tended to cover i;:-e voluntary filing of past transactions and often
the circulation of *r ice information without identification of individual
concerns. 1U --,rice filin- systems generally provicled for mandatory fil-
inC. of prices and ter::s of sale below which menjers could not sell, for
the circulation of t'.is )rice information in the forn of identified price
lists, and for prior- c-i--.ouncement of any chances, writhli or without a wait-
ing period. Usuall-- ?"-ese I1EA code systems were accompanied by direct
forms of price control, such as provisions against sale below cost or
provisions for uniformii- in some of the terms of sale.

Althou.-1h the or&-coo.e legal status of price filing' was not clear
because the leading' decisions of the Supreme Court '.ere subject to dif-
fering interpret-ti-)nis, it appears that to be legal a pre-code price
filing system neec.e:. to be divorced from use as a .evice for raising
price levels, anac. thirt if the system included the filing of future prices
or the identification of individual price lists, these characteristics
established some oueztion of its legality. By t-his standard, most KRA
price filing syrste-is ";1ld have been of dubious legality.

Price filin.j '7ns :p..vocated under NRA as a neans to promote competi-
tion by an increase in information about price, as a -.,ens to reduce dis-
crimination anon, cu.sto 'ers, and as a means to stabilize prices. It is
not clear that an increase in price information necessarily has the effect
of increasing the co::;'otitive character of the market. Since modern mar-
kets are ir.Tperfect, rc.-her than competitive in the sense in which con-
petition is custo].'..ril-" c..escribed by economists, there is a possibility
that increased information will be used in order to take more effective
advant^-e of the nonoJolistic elements in each concern! s market position,
ra.thfler than in orc.e" co compete more intensively'. There is also a pos-
sibility that incre7.sec'. information to buyers in the market may promote
uniformityr of prices not only when discrimination is decreased by such
uniformity, but .-lIso -.:'--ca it is thereby increased. These possibilities
do not depend upon the chr.rcter of price filing as such, but upon the
character and olay of incentives in the industry to nhicli it is applied.

The decree tc -.-hich any result is achieved bby price publicity, of
course, depends upon '.-he effectiveness with which prices are made public.
In more than half 'Uhe cages studies (a sample of 57 industriess, relative-
ly little effective publicity of prices to members of the industry seems
to have been a.ccomplis Led by the price filing system. In a much


9826





-2-


larger -:ro-)ortio:. of cases, relatively little publicity of prices to
buyers seciis to have resulted. In about a, dozen cases, it aopears that
substantially" complete publicity was achieved.

The effectiveness of publicity under price filing systems depended
upon a series of factors.

1. The agency which collected the prices needed to be effici-
ent and 6lso to function inmartially. When the collecting agency was
conmooseCI- of membersrs of the industry, any lack of impartiality might con-
vert the s-'stem into a device byr which favored individuals secured ad-
va.nce i:owledge about prices. Difficulties in 4he establishment of
collecting a-encies Elso appeared when choice has to be made between
local and n.stional centers for price filing.

2. A second requisite of full publicity was the filing of
prices b- all concerned i-.i the market. In certain cases, difficulty
arose because distributors w7ho sold in competition with manufacturers
in an industry were covered by different codes and could not be required
to file -)rices. nWhere efforts were made to solve this problem, they
seldom succeeded. Moreover, non-compliance with price filing provision'
by memnbe:s of the industr-- was -, significant interference with publicity.
In n.arly- half of the cases, almost every one filed; in about 405 of the
cases, som.ie.-where between half and9/10 of the industry filed; in about
15-o of the crses, a majority of the industry failed to file.

3. A third requisite of effective publicity is full informa-
tion abo-..t )rices and terms of sale--technically very difficult to se-
cure. Tcr-.is of. sale are so numerous that a full filing of them would
have be-:- burdensome to the members of some industries. Moreover, in
relativel-- :.'e- cases did the industry both alan for a sufficiently com-
plete filing scheme and win -RA's assent to its plan. Efforts were
const.".ntl- ui-nder -way to extend the scope of price filing either by code
amendment or b-- rules issued b, code authorities. A peculiarly difficult
problem i:'m securing conpolete information was the filing of customer
classifications, since there are great difficulties in the way of estab-
lishing ri-iC. customer classes, and since so long as any concern was free
to shift a customer fro,. one class to another it could use such shifts
to evade its filed prices.

4. Comoarability of products was also a requisite of code
publicit--, Difficultv- arose both in determining how far price filing
should bc e:-tend.ed in non-standard products and in finding ways of com-
paring th-e -rode.ucts of various producers when specifications were not
uniforri throughout the industry.

5. A full statement of special types of transactions often
was necess_.r- to publicity. Difficulties arose not only in the effort
to secure filing of distributors prices, which has been mentioned above,
but also efforts to secure filing of p-orices made by a concern to its
subsidiaries, nade in some industries to peculiarly large purchasers,
and nm-.C.e in several industries on long-term contracts. Reluctance to
meke public certain .'.rices and the inherent difficulties of applying the
filed .-):'ices of the present to contracts written in the p.st, were central
in this ,roblel.
9826









In the majority of c-ses studied, ho07ever, it appearedd that the
interest in such controls extended considerably past their uses as Cids
to more effective and accurc.to cornpoarab.ility and publicity of prices and
terms. Interested code -oroponents -rere o'.teiitly reluctant to place their
entire de)enc.ence fo.r price stc.bilit," tn6 rather ends of price control
unon the i'.irect Vnd uncertain action of nore complete exposure of
pricing pr.cactices. The:r sought, and often obtained, in the codal charter
for the -rice filing plan, secific liTlit-tions, or grants of pQower which
would per.it them to placeli'iitations, unon ura.ctices which they consid-
ered prejudicial to their individual ,anc coruon interests. WTithout this
authorization the price filing agenc:-.frequently found it possible by wayr-
of exercising necessary c.dn lnistrative discretion'to-impo'e, or suggest
strategic and co:mplementary controls over price levels, rice changes,
methods of distribution, geograp-ohic relations, various elements, of the
price structure, and even the division of business, .

Price filing under IMA codes thus wr- not merely a matter of prom.ptly
and full-7 broadcasting prospective racing orc.ctices of business rivals.
Rather in nany-i instances Ait-.was a going cooperative effort wherein the
devices of -ublicity and.direct controls -ere functionally related and
joined in focusing on certain major, group objectives'.

In other cases price filing- served clearr rlr in a. capacity of policing
conforma-i.nce to controls estc.blished by other code provisions or to more
or less precise standards of certain' interests of the industry. As an
outstanding example, cost provisions were almost invariably accompanied
by plans for price publicity and intimately related-in their ad&_.inistra-
tion.

Although the wviaiting period. was by :no means almys a necessary
element for either the publicity or control )roe-rem, it had a significant
and often strategic role to play in each,

The relative scarcity of statistical materir.l n-iakes it impossible'.
to present a broad picture,of the novem..rit of prices under price filing
i.n an adequate sample of different kinds of industries under different
.kinds of price filing systems, .Nevertheless, sufficient information is
available to T-ake clear that variety, rather than similarity, character-
iged such p-rice' movements. .

In certain industries, prices rose during the price filing period;
in others, the-r sho-ed little change.; instill others, they fell, some-
times sharpl1 There are cases in 7hich, within the some industry, one
group of prices declined and even. showed the characteristics of a price
war, while other orices'renained the same or rose slightly.

These changes "in i)-ice levels were sometimes accompanied by a de-
crease in the spread of prices from one customer group to another. In
other cases, the divergence of treatment among groups of customers in-
creased during the price filing -.eriod. There are instances in which,
under price filing, terms of -:.--T:ent, customer classifications, freight
charges, and- the 'i)ke become uniform,. There are other cases in which
efforts at unif6rmitv in terms of saIle broke down and were abandoned.
In some industries, prices and terms of sale remained unchanged during


9826






most of the co.Ie period; in others, t-he, cie.nje frecriently; and in still
others, rn early, chv-i *c was followed 'c, a period of r-elative stability.
It has not 'Leen possible to analyze tho. indiviJji_1 cases to the extent
necessary, tc iLeter;.ine .'._ethaer these varying rei-Ilts nly be correlated
',ith particular o:i-.'s o-: price filing systems or .ith particular chaarac-
teristics of the i'-tries affected.

The imperfect -"._rafting of price filing provisions the lack of clar-
ity as to the Der:-issi-le scope of price fili:n-; activii", the efforts by
coc.e administrative <,-encies to extend their pro,;ran of action beyond the
limits set by the e.-act '.:orO ing of the codes, aic the frequent controver-
sies over the alleo.oed effects of price filing plrns united to make the ad-
ministration of :price filing provisions a major problem:. in the It.A. For
the mcst p-art, in the early period during which :-.ost of the codes were
written, price filing '.lns -ere adopted 7ith very brief consideration
and -rithout much evidence either as.t.o the probleo:s to which they would
be applied or as to the a-ninietr:.tive mP.chirne"-" they *would involve.
Even sat the end of the code-period, the 1 hae. collected very little
information about thie oper-"tion of price filing plans and considering
the number of co.es involved, had en--:-ed in :elstively little formal
adj-inistrptive actionn cuch as .7mendmrnnts, interpretations and stays of
code provisions or e::e:-otions therefrom. An inc'reailn.'i effort was being
made, however, to. r-."rvise tho activity : of coce authorities in adminis-
terinC oren price plcois, particularly for the --urpose of preventing
actions not au,:orized by the code. In certain cases, code authority
rules had bcen countera.-_nded and even the code provisions themselves had
been staved. *iore fre l.ecntly, however, an informal administrative super-
vision had Kevelooed c.s a C'e.sure of prevention c/(ainst abuses.

Violations of open )rice provisions .7ere a.ong the nost frequent of
code violations "nC. .e:.(.ed a great deal of the attention of the compli-
ance agencies. About )5, of the 'rnde practice com-liance cases were
violations of ,-rice filim ,, provisions.

As experience accio.lrLI-.ted, I'tA began to Cevelop a rather definite
policy about the prposes and extent of price filing Opposition of cer-
tain advisory groups :itiin I rA, and of comrplainants outside, first found
full expression in the price hearings of January, 1Q3)4, After these
hearings, a te_--orar> policy of refusing to ".Y'.'-o waiting periods in
new7 codes Was i n'ugu.rate(, and studies of the operation of open price
syste-.s rere u-.ertc-'en. In June, 1934,- Office i.ie-ioranc'.um No. 228 es-
tablishedci a definite policy as to price filin: provisions. They were to
be approved in a for:2 wv'ich was thought to ma-e the.., -oeable as publicity
devices but not -s c, :;.eais of price control. In site of widespread
opposition outpsil'e thoe [\ arni some relucta-nce to acceOt the policy on
the -art of ad:inist-r- tive personnel, this generL view of the function
of price filin reninecI the official policy t'eceforard. The appli-
I_ L'/ee was relatively
cation of the Dolic- to coo-es alreaiy ap'orovedl, ho'-wever, was relatively
slig'it; for it -as .eciC.ee.l that existing provisions should be modified
only "'hen they sio;:ec& clear evidence of abuse or of major .'ciinistr-'tive
difficulties.

As it uecv,-e clear that Office Memorandun 1.o. 22S did not change ex-
isting price filing -rovisions, the peculiarl-1 c.-i-:ficult problem of tie
bids unler price fili.y: in the aw.arding of contr: cts bo, government t pur-
cha-sing ,--ents was .e-.t rith by authorizing all bi"-oders to quote as
9926







much as 150 below, their filed -rices uoon such contracts. In sp-ite of
very strong opposition, this authorization remained in effect during the
rest of the life of LqA.

In a series of decisions rbout various technical difficulties in
securing adequate publicit- for terms of s-le, 1TRA took the view during
the winter of 1934-35 that code authority Lction to require adherence to
a rigid set of terms of sale was not acceptable, but that action to re-
quire fully .descriptive filing of the terms in use by particular concerns
was essential to the operation of )rice filing systems.

Shortly before the Schechter decision, a policy statement by the
INational Industrial Recovery Board reiterated the view that price filing
is acceptable for purposes of price publicity, set forth certain techni-
cal Gssentials of a. price filing plan, and held that, even when properly
limited, price filing provisions should aply only in industries in wThich -
price corxpetition tended to be excessive, -nd not in industries in which
there was danger of monopoly.

Appendices to this report contain detailed accounts of the exper-
ienc6 of the asphalt shingle and roofing and steel castings industries
with price filing provisions. A statement of the methods used in pre-
paring this report is also contained in the appendix.


98 26




-7-


CHAPT1R I

ITTTTP.ODUTCTI O'



I. THE IiTTRODUCTIOT OF PRICE FILING TO T-T :TA

The !TRa v-as virtually comminitted to an experiment with open price
rilans before the National Industrial Recovery Act had. been approved by
Congress. During the debate between Senator -7asner and. Senator 3orah
over the addition of the words 1"-orice fixing r-nd restraint of trade"
to tho anti-monooolyT clause of the.Act, rice filing was cited by Sena-
tor VT.agner as one of the more salutary measures which should be permitted
under the codes, but one which because of% oast anti-trust decisions,
night conceivably be denied to industry if the anti-monopoly clause were
broadened to include a prohibition pf activities in restraint of trade.
Senator 'agner explained that. what. he- wanted to see permitted
was the exchange of mtrketainformation, such as was declared illegal in
the American Linseed 1Oil C6-ran;r Case.(*) Senator ,.agner's comments
ignored the more liberal decisions of the Sunrene Court in the later
ilaule Flooring and Cement Cases,(**) in 1925, in which-it had been held
that such activities of o-oen *omDetition mere not unlarTful if properly
conducted without agreement or' concerted action. The choice of the
earlier case makes it fairly apj-arent that it was his intent to clear
away all doubts o6' the legality of open price activities under 1IRA by
placing them within the realm bf discretionary suspension of the anti-
trust la'ps. (***)



(i) United St-tes v. American Linseed Oil Comoany, (1923) 262 U. S.
371. This decision, rendered June 4, 1923, did not in the opin-
ion of most commentators actually declare the exchange of informa-
tion illegal, but conde'qrTed the total activities of the Asso-
ciation q-s constituting a combination in restraint of interstate
commerce within the meaning of the anti-trust acts, It did,
however, tend to discourse such activities by trade associations
until later'de6isions dcoveringprice reporting and exchange of
statistics. See Section E below,

(**) Maple Flooring Ja-nufacturers Association v. U.S. (1925) 268 U.S. 563
Cement Manufacturers Protective Association v. U. S. (1925) 268 U.S.
See Section E below.

(***')Cf. Lenl D' i .lltin 1n. _14, "O1en Price Systems and Illegal
Price Fixing under the VIrA with reference to iono-oolies and
R.estr-int of Trrnde"; FPA Files.-


9826





-8-


Congress, in defeating the Borah Amendment, seems to have
concurred in this sentiment. The way was oatently clear for industry
to propose forms of ooen price activity to be incorporated in codes of
fair com-oetition, with every reason to believe that these would be accept-
able to the Administration. Indeed, one commentary by an IfRA legal coun-
sel suggested that aotroval of o-oen rice *orooosaJs was almost mandatory
in the light of the Congressional action retorted above. (*) It is appar-
ent,.that price fixing, as such, was citarly condemned. However, it is
also quite clear that Congress definitely desired to avoid the former de-
cisions which outlawed any form of -orice listing, including the open
publication of prices. What the authors of the .ct had in mind was price
stability to eliminate the evils of ruthless competition. Henre open
price systems, free from urice-fixing, were valid under the NRA.

In the writing of the Codes rice filing provisions were in-
serted on a wholesale scale, without show of need or Qther special plea.
The limited suspension of the anti-trust laws in the enabling kct removed,
the legal restrictions and uncertainties created by the Supreme Court's
open price decisions. Conseouently, the typical TIR"' rice filing olan,
as discussed in Section III-B of this chapter, represented a marked
de-oarture from tradition.

There wps, in 1933, little information regarding the economics
of rice filing, whatever the t-rre. The Federal Trade Conmission had
made a study of omen orice association in 1929, but the results of its
statistical anal.rsis were admittedly"rather negative". (**) Price
filing was still an exoerirmental device. The present retort adds to the
growing body of experience regarding orice filing, the NRA exTerience
during the less than two tears of operation. Efforts are made herein
to contribute to the understanding of rice filing in general. Special
attention, however, is u id to the tyroe of rice filing peculiar to
INA.

Price filing provisions a'ooeared in the codes of four hundred
and forty-four industries. Three hundred pnd nineteen-of these made the
establishment of onrice filing mandatory, while one hundred and twenty-
five left ;he question of actual establishment to the decision of the
Code Authority or to industry vote. The results of a questionnaire
sent to fornher co&- *-'-.crity secretaries tfdictte.that tans"" ndustries-
dever put these provisions into operation, even when the -code had made
them mandatory. Precise information is lacking upon the point, but from
the returns received, there are indications that in as many as one-third
of these industries rice filing was never set un. This study has 1
Been confined to the experience in only fifty-seven of the industries
whose codes contained a price filing provision. The observations and
generalizations made herein are based upon this "sam-ole", excenoting where


(*) Undated memorandum entitled "Iliemorandum of Law Considering the
Legality of Code Provisions Regarding the Filing of Prices" by
George J. Feldman, Assistant Counsel oP Litigation Division of
NRA. In NRA Files.
(**) Opon'Price Trade A\ssoclations, Senate Doc. 226, 70:2, 1929, -oage 355.
See also Chapter I, section II below.


9826






otherwise noted. (*). Due to the care t.k.-n to select a s-,rmple which
would be, wvith respect to a nlumnber Qf diverse characteristics, a typi-
cal cross-secti.co.i of o-.-ifio. :id>.tries, it is felt, that the fic.i.-i;G
rest uron a b9se bro ', e:'-. to, ...o .. -jde. helyful sdg estions relative to
industry benorall;. 1

The remainder of this chpDter'is coicie'nLd with a history of
pre-iRi' price filing clans ajd co!rarative dlescriptive definitions of
price filinz before ana 'urder _?A. nily in this way-:can a degree of
historical per c-'ectiv., b, ,ind o T-,rice filing -ander 1PA.

II, T. -L i iISTC,il C.i TI.I-T

A Fr3-Ei .; lantg

a' t. J-h ^iti-,'ir J"cr r.e -r -as the first to set forth systematic-
allL f J'I -IL -r~ ;I~ "ts 1, he ta
all t*.-. ianasm- of ..icie filing itself as a cevice for the stabili-
zi ', .. '.:iness. cei'triC historical roots fro- 7."lich he-probably- re--
ceive5. h:i3 riir.ai ideas -ega.rCin. the .'ne7T ccmr.,-titdion" have been
pointed(' ort. The3c e.:l' de-velt 1->Munts are discussed by ;.]ilton Nelcon
in hi- bo- "u .-- --ic ,0ociations," (*).. eso. distin ai she's
thlr ,- t', .. "t. e. tr.--t! havr _t ed V" C to ine
Cq '. ,C3*"2 c. thse 's t-;s c 10r.. oeB' l~ t*"Ti^~ '
*th. ..-, In..,. ;::i -'"-e first coro isr., of iomrb .i ions in
vh ,. .*. or'.. L ssociations for I.he u Liie purpos- of siini
'ri i..... [ *, c, u -..,-..and (iivio:.i'h:: -inesi Dr a "erceniald e oasis.
mui a i,' -ro-..t.. l .from 1897 to 10514 Th-.'e a~ >.ciations
weri J n t'-,- ?'-,eopnent of price .'filin' because i,.embers
vere 'equi.' Ld .o rPI,'eEjt. rimo'hily their output,, orders taLfen, -and tonnage
shiq:e,:'. it ord-, r.:' t tCi-, contitroli could: be odj..iiistered. After being
checked *:.x cornm-pile:. the commissioner administering the plan, the
compiled. reports 7,-'e .:--e t to. memberss. Telson believes that this report-
ing tf a-t&isticu .I : L vei. EZdy his original inspiration.

.. : .:.:.'t,.*latj-.-I- aoandor ed about 1904 ,,s a result of more
vigoro.L. }-.-.. ern.m.-nir! .-. fto enforce The Sh-riman Act, were succ-eded
by t! C-.:...' r. Lical '.s:,soci-.tions., xhi.-h cort J.rtied .jr'til 19G7o
The i . ..- oT. :ro.uctinji-. order, and .-i r.,oents, a' ccn'i eem HoT-
ever. ". '.ie- r.^ b i. in.. .gr: e en s r: rin ri,- r T;. c ion,
bacce., K,. .. oen:. rty, T.t -moral obli-ation to-'albt"ue by ,he iDercent-
age I. i .. tIl shed earl.er mav have pcrsistedL Th- d'Lfference,
acco ,iiA 'e- 1. ,r : that
'"ti.c- yr.Do.z 1n d1,-1n1 so iii no longer that of determining; 3 what
pTen1'c.Jes ', c-ediLs ray be e.o .6ne-bers for exceeding or falling
,*'.;". 7 k.. h3ee in.; ..',b i informed aP :,o whether
t.' & :g *he s: ,-.- -- h.:l. Te position ii- the
i, c.:," .\ t-'." ti... 'v had previously occupied i, ( r)

S-*i K . t .for list ci ilh .iries included in the
*"., . w:. ,; .e ; '* icn of s&3: le,
('*) UiJL;-.. ity c I;.ois b-.1t.., ih'iUh,- Soc-il Sciences, Urbena.1923;
see pa-rtir.ularily Ciapter II
('* !* ') ite -o, 32,


9826






-10-


The third stage '7as that of the "Gary dinners". These ran from
1907 until 1Jll, when the Government brought suit against the United
States Steel Ooroortion. It r'.s front these, according to ''elson, that
Eddy received most of his stimulus. Eddy ras 3 close student of the
Gary methods and w',-s uick to r'.orecinte the possibilities of legal
methods of cooperation. The tV7o concepts introduced by Gar'-r, thich
Eddy/made the foundation stones for his ov'n system, -rere the spirit
of competitive coooerntion and the free and frpnl: exchange of infor-
mation between comnoetitors.

.B. The "Eddy Plan"

MI.*Eddjj invented the name of "o)en--orice association" .and ex-oounded
the theory of oden prices iL a book, "The "Tew Cometition", published
in 1912. As a lPr'er, he "-,a ,rticularly famiiliar rith anti-trust
cases rnd accordingl-' '7ith trrde association activities. In advocating
the use of "oien Drices" he wnn, sTe-king, b-' both a 1ohilosonhy and a
particular mechanism. His niloso -'hyr of "'o-oen competition" has been re-
oeatedly orojosed br later e::oonents of the -",lan and survives today,
almost unchanged. It is described as the 'hiloso Ah, of honesty and
o-oenness in business -- an o-oenness deofeided on both economic and eth-
ical grounds as one th.at lertds to cleaner cornoetitive oractices, to the
elimination of deception, secret prices, cuts, and rebates, and even-
tually to more stable and profitable business o-oerations.

Eddy advocated coo-oeretive ,ethods for Gutting this ohiloso-ohy in-
to practice through the onen oTrice association. This mechanism was de-
scribed in detail in his book, with instructions for using it in an in-
dustry such as the Construction Inhdustry, where work is done on contra-
cts awarded on the br.sis of oids. He indicated that with certain modi-
fications the olan vas adattable to manufacturing and distributing indus-
tries as well, but did not set forth these modifications at that tine.
briefly, Eddy's elan encomnnssed a orocedure some'vhat as follows:

(1) A unanimous agreement by re fibers of an association
to tell the truth about prices and other com-oetitive
elements.
(2) Selection of an absolutely- inartial secretary to
receive information front re'rnbers.
(3) Tiling '-ith this secretar- in a central office copies
of
(a) all inquiries;
(b) all bids;
(c) all contracts.
(4) The com-,ilation b-- the secretr:, of a weekly bulletin
-hich "'as to include an accurate estimate of volume of
"'or]: in sight. Edd', o-rosed the exchange of inquiries
for feir of collusive biddin;.
(5) The exchange of information concerning bids on one
of three b se.-, as r.cce-',t-ble to members.
(a) After the contr'-ct is :','arded;
(b) By interchanging bids as rar-,idly as the:'
are received; or
(c) (Preferable but the most difficult to attain),
the onen costing of all bids as received.
9826




-11-


(6) The reporting of the contracts as and when closed
to permit co'nir rison with the bids. :

Certain warnings given' by, 7 in connection with the open price
Dlan were repeated so emphatically that they became almost Tarts of the
Eddy Plan itself. These include:
(1) ITo bidder should be bound to adhere to his bid
for one fraction of a second..

(2)' There must be no agreement or implied obligation
not to cut bids or ..to conform to any prescribed
methods of oricing..

(3) The handling of reports should be a routine matter
with the Secretary's office acting only as a
clearing house.

(4) The introduction of the open rice plan should
proceed slowly on the basis of a growth of mutual
confidence.

(5) Inmproved conditions should not be expected immedia-
tely and relief in the form of better prices was uncertain.

In the later speeches and trade association practice Eddy
amplified his ideas somewhat, and gave some suggestions as to methods
of open price filing, in types of industries other than those using
contracts. The chief characteristic of such methods was to be the
prompt filing of list prices pnd all variations from them as made.

As counsel for various trade associations, Eddy sr,-j his plan put
into operation and subjected.to the test of experience. As a result
ofthis e:-perience, his attitude rega-rding the disclosing of information
about future prices was apparently changed from a critical to a favor-
able one. 'Jith this exception, the later expression of his views
is very similar to the earlier 9nes. In the constitution of the Nation-
al Fence i.'Ianufacturers, for which grouo Eddy was counsel, the object of
tae association wps stated to be:

"The bringin-; out into the 6oen of all competitive
conditions and the introduction of the ooen price policy,
to the end that wvhatev-r price.information is distributed
will be absolutely accurate arid confined to -ourely statis-
ticpl information reg-r ding sales and prices that have been
actually made. NTothin: herein stated permits any member of
the institute to file an- info-mption regarding any rice
which he expects to make or wo-ld like to attain.

"Io ':en.lties: There are no penalties of any kind or
character with the o-eration of the institute. Members may
or may- not file information called for by the reporting plan
hereinafter set forth; if they do not file they get no infor-
mation; if they do file they get like information in return.


9826





-12-


1"11o Secrecy: There is nothing, secret about either the
meetings or the ocoern.tions of the institute. All its pDro-
ceedings are reduced to writing and carefull-, preserved in
the minutes and the same will be duly filed with the Federal
Trade Commission unon their request. Customers may attend
meetings and become familiar with the operations of the ogani-
zation uron invitation. Members are free to write competitors
who are not members to attend meetings.

"Nio restraint: nTothing in the olan or operation of the
institute shall be understood or construed as directly or in-
directly restraining the freedom of any member to at all times
quote such prices and terms as he )leases, provided he reaoorts
to the secretary such transaction ns herein provided in the
re-orting nlian. "(*)

C. Developments Subsecquent to 1912

As Ilelson has pointed out, the onen ;rice movement wns further
nooularized by the ",abson Statisticql 0r,-pnization, which in both 1914
and 1915 devoted a session to it at conferences for manufacturers.
This organization also published, as a rart of its services to manufactur-
ers, a series of bulletins intended as guides to those industries which
were ready to introduce 'n o-en orice ol'n. iUany adaptations of the Eddy
mechanism for orice filin.- '-ere gradually established. Some of these,
though c-,lled ooen rice associations, abandoned many of the characteris-
tics specified in the Edd;r Plan. Some of these changes '"ere tne result
ofthe extension of the -olan to a wider variety of industries; others
w-iere influenced by the intervening court decisions bearing upon rice and
other statistical renortinCg ,-ctivities. In 1921 the Federal Trade Com-
mission made sortiot survey of ooen rice associations, and on the
basis of questionnaire returns from 1515 trade associations, report-
ed the existence of one -ndred and fifty oioen price associations which
were distributing or exchanging rmrice information. At about the same
time 11elson listed one hundred -nd seventeen associations which were
reputed to oe doing ooen rice ,ork. (**) The following "ourteen in-
dustries included in the rre3ent study, were re-oorted by him to be doing
open orice work at that time: asbestos, net-l lath, corner aMd brass
mill oroduicts, builders' suoolies, naoer rnd oulo, corda.:e and twine,
candy manufacturing, steel castings and business furniture.

D. The "Coonerative Plc.n" of the Deoartment of Comnerce.

During his ;ears as Sec-j.'et?.ry o'7 tne Derj.rtment of Commerce, [r.
Hoover wvas an active advocate of onoen rice iolans. In 19'l the Department
of Commerce beg-n the nublicn.tion of thie Survey of Current Business,
bpsed in large Dart on trede association statistics. A "Coonerrtive
Plan" for the distribution of statistics gathered -by trade associations
was developed. In- this, the Deoartment offered to receive, and give

(*) Federal Trade Commission, on. cit. 0. 10.

(**) Op cit., Annendi-Y, Exhibit I


9826






T.iK.e publicity to, the infoiration on production, prices, shipments,
ca-acity, stoc'.s, orders, igatges, etc., collected by trade -.s7'ciations.
The three princi-oal fe-.turcs of this pla vcre:

(1) 7(idest practical ,ub.icity

S (2) FTo identification of thie 'igreLLs Jith the bu-iness
of any,. individual, and

(3) The requirement that the other activities of the asso-
ci'tion "be reasonably far enough removed froni the
twilijit zone so as not to nae:e the association an
obvious target for legal attack', in the light of exist-
ing court decisions. 7-Thile there is no legal immunity
afforded to .:v association which enters this cooper.a-
tive arrrilgement, the e.epartnent obviously does not
care to cooperate w-ith an association along statisti-
cal lines when the association's other activities are
such that might easily bring about prosecution." (*)

Pursuait to the -noint of vie'- expressed i.- this plan, the De-oart-
i-ent of Commerce expressed itself as not in sy.mathy .rith open-price
associations "',hiich are collecting data on prices and sales of their
individual 'itmbers onC. circulating such individual data a. n to their
me:ibers together 7ith certain other activities." (**) Th:-. eiph',sis
in this stater.ient ras upon the questionable character of those open
price clans '-hich included Yith the distribution of prices the identi-
fication of the seller.

The decisions of the Suprene Court in the kei-erican Cola-, .vid
Lumber Compan-, and _ic-ericoa'i Lirnsecd Oil Cor.many cases (***) creo.ted a
state of muncertainty rega ing the future of open rrice s' teus. A
series of letters bet,-reen S-cr-tary Hoover and Attorney-General
Da.ugherty lduin 1922 and l95,, dil little to clarin> this situation, r
e:cc~pt to indicate the dive'e-ont vie'js of the tro correspondents on the
collection and dissemination to trade association members of detailed
trade statistics, including prices in closed transactions. (****) As
a result of the restrictive nature of the court decision in the
Americman Col.mn and". Luiber Com-.any case, Secr'et- -r Hoover in his annual


(*) The details of this plan are quoted in Federal Trade
CoTr-iission, op. cit., AL'_endi-: A, p. 377

(**) Staterient of Secretary Hoover before trade association
confore-ice in Washington, D. C., April 12, 1922, quoted
frormi Federal 2radc Connission, op. cit., p. S19

(***) See Section 3 below

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


9826





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report for 1922, called for a modification of the anti-trust laws,
which, under the court interpretation, "in some directions are out of
tune with our economic development"; he distinguished between those
cooperative activities which redounded to the public benefit and those
which were made the occasion of abuse. (*) Following the sweeping
adverse decision in the Amer-ican Linseed Oil Go.case, in his annual
report for 1924 he called for a nev'"legislative definition" of the per-
missible scope of cooperative activity, and cited over twenty functions
which cooperative procedure might -el.l be allowed to perform. (**)

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

E. The Supreme Court Cases

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

1. The Hardwood Case.

In American Column on". Lumber Company v. United States,257 US.
377 (1921), the court ras asked to pass upon the legality of the activi-
ties pursued by an association of hardwood manufacturers. The members
thereof, representing one-third of the hardwood output of the country


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

(**) Pp. 22-24

(**F) F.A. Fetter, The Lasquerade of Uonopoly., ITNew York, 1931, p. 219
Narcourt Brace and Company.

(****) The following discussion of the five Supreme Court decisions is
quoted in large part -from "Anti-trust Laws and Unfair Competi-
tion", by George J. Feldman, Work Materials, No 1, of the
Division of Review, ITRA, July 18, 1935, pages 25-31 Legal
Studies.


9826





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fo.rwarded to the central office of the association elaborate statisti-
cal reports of stock on hand, production, shipc,-:nts, prices, and names
of purchasers. The secretary of the association mailed to each con-
ccrn summaries of the statistical ..latter r'nd of reports containing the
vie-s of each member as to market conditions and production for the
following fe-: months together with expert an,.lyrsis of the reports, and
suggestions as to future prices and prc,,,'u,_tion. Members of the asso-
ciation held frequent meetings at whichh market conditions and produc-
tion were discussed. The maority of the court, speaking through
Justice Clark said at p-re 411:

"Convinced as 7e are, that the purpose and effect of
the activities of the 'Open Coi:petition Plan! here-
under discussion, were to restrict competition and
thereby restrain interstate commerce in the ianufac-
ture and sale of hardwood lumber by concerted action
in curtailing production .an in increasing prices, ve
agree iith the District Court that it constituted a
combination and consir-cr. in restraint of interstate
commerce within ,the,,meaLin;. of, the anti-trust act, of
1820 (26 Stat. 209) ...,nd the decree of that court must
be af.firnied."

The decision in this c,. s was not unanimous; Justice Holhues and Brandeis
delivered dissenting -topinions. The former contended that a combina-
tion to distribute knoAledge, notwithstanding its tendency to equalize
p:r'ices, was far frox: a combination in unreasonable restraint of trade.
Justice ..Brandeis, with wfho2 Justice iicKenna concurred, emphasized
that there :,as no coercion, monopoly, division of territory, or uniform
prices; tha.t all information distributed under the plan was made public,
and all re-oorts and ma:.'Iet letters were filed with the Department of
Justice and with the Federal Trade Coimmssion; that before the initia-
tion of the olan the l-ir-e lumber dLealers were able to take advantage
of the ignorance of the isolated producers; that editorial comrient and
free discussion were essential to rational competition and intelligent
conduct of business; that the majority had misconstrued the evidence
in concludin- that there was an-- purpose to curtE il production, or that
such restriction was in fact realized; that

"there is not'iin,: in the Shecrman Law to indicate that
Congress intend.ed to condemn cooperative action in the
exchange of infonration, merely because prophecy result-
ing_'from coLnent on the data- collected nay lead, for a
period, to higher market prices.... The illegality of
a combination under the Sherman Lan lies not in its
effect union the price level, but in the coercion thereby
effected....The evidence in this case, far from establish-
ing an illegal restraint of trade, presents, in my opinion,
an instance of co.imenedable effort by concerns engaged in
a chaotic industr' to make possible its intelligent conduct
under competitive conditions;"
and that the court's condemnation of those activities was difficult
to reconcile With its toleration under the Shermean Law of powerful
industrial mergers Paid consolidations.


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2. The Linseed Oil Case

The Linseed Oil Case, decided June 4, 1923, holds a special
interest for this study because of the reference made to it by Senator
7agner in the debates on the fTational Industrirl Recovery Act.

In United State. v. Arerican Linseed Oil Co., 262 U. S. 371
(1923), twelve manufacturers of linseed oil entered into an agreement,
with Drovisions for a financial forfeiture in case of violation, end
for the maintenance of a bureau which gathered and distributed infor-
mation among the memberss as to price lists. itembers agreed to adhere
to schedules of prices and tenis which they furnished to the bureau
and to give notices of departure therefrom. They were required to
report all variations of price, name of prospective buyer, point of
shipment, exact price, terms and discounts, whether sales were made to
jobber, dealer or consumer, and to report all orders received, all such
information being treated as confidential and concealed from the buyers.
The information thus collected vas reported to the members through
statistical surveys made by the bureau. Each member was required to
furnish the bureau, upon request, information with regard to any buyer
and might require the bureau to secure similar data from all members
under specific conditions. The bureau made industrious efforts to pre-
vent sales at prices below the scheduled lists. Uonthlyr meetings were
held, at which "matters pertaining to the industry" were discussed.
The Court decided unanimously that the scheme was an illegal coibina-
tion under the Sherman Act, but the language of Justice McReynolds,
who spoke for the Court, reveals that the chief consideration was the
power which the combination was enabled to exercise over a competitive
market:

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

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


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3. The Maple Flooring Case

In ILnaple *!oo-in-, 7' 'rLufactures -iociation vs. United Stctes,
26,..63 (125), the association distributed among its members in-
formation as to the avera,-e cost of production, which was based iupoon
reports of individual costs of raw material and of operation. It
also compiled and distributed information concerning freight rates from
basing points to various markets, enabling members to quote delivered
prices.

Members reported information as to the quantity and tyrpe of
flooring sold, dates of sales and -nrices received, average freight
rotes, cor.unissions, stock on hand and unfilled orders, monthly produc-
tion and new orders. This information, which concerned only past trans-
actions and did not include namins of purchasers or current prices, was
sm-unarized by the Association and reported back to the members, without
revealing the identity of members inr. connection with specific informa-
tion. The reports prepared by the association !rere given wide publica-
tion through trade journals, and were cormmaunicated .to the Department
of Commerce. Monthly meetings were held by the members of the associa-
tion at which "problems of the industry" Iwere discussed, with no evi-
dence if discussion or agree:cnt upon prices. The majority of the
Court decided that in these activities no violation of the Sherman Act
was involved. The Hardwood and Linseed Oil cases were distinguished
on the ground that the facts in those cases revealed "concerted efforts"
of the defendants to curtail production and raise prices. But this
distinction is by no means convincing, particularly because the lan-
guage of the Court approving the activities in the present case is vir-
tually identical in reasoning, and point of view with the dissenting
opiinions in the Hardwood case:

"E::chan._e of price quotations of market commodities tends
to produce uniformity bf prices in the markets of the
world. Knowledge of the supplies of available merchan-
dise tends to prevent overproduction and to avoid the
econor.ic disturbances produced by business crises result-
ing from overproduction. But the natural effect of the
acquisition of wider and more scientific knowledge of
business conditions, on the minds of the individuals
engaged in commerce, and its consequent effect in stabil-
izing production and price, can hardly be deemed a-re-
straint of commerce or if so it cannot, we think, be said
to be an unreasonable restraint, or in any respect unlaw-
ful ....General knowledge that there is an accumulation of
surplus of any market commodity would undoubtedly tent to
diminish production, but the dissemination of that infor-
mation cannot in itself be said to be restraint upon'
commerce in any- legal sense. The manufacturer is free
to produce, but prudence and business foresight based on
that i-nowTledge influences free choice in favor of more
limited Droduction. Restraint upon free competition
begins when improper use is made of that information
through any concerted action which operated to restrain
the freedom of action of those who buy and sell.


9826




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.. .Person- 7ho -uinite in gatherinL anc. disseninating in-
formation in trade joui-als and statistical re.)orts on in-
dustry; who gather and, p-ublish statistics to the amount
of production of Goio.odities in interstate commerce, and. -ho
report nark.et prices, are not engaged in unlawful conspira-
cies in restraint of trade merely because the ultimate result
of their efforts :i", be to stabilize -prices or li;.it nro'.uc-
tion through a better understanding of economic lav s and a
more general ability to conform to the-i, for the simple reason
that the Sherman La'7 neither reveals economic laws nor
prohibits the gathering and dissemination of information."

4. The Cemient Case.

The fourth in a series of cases involving open price filing
which came before the Sr renc Court was Cenent M.anufacturers Protective
Association v. United Sta.tes, 268 U. S. (1925). In this case the
Court approved the cooperation of manufacturers in gathering and ex-
ci ngi.ng information concerning production and prices in so called
"specific job" contracts, general statistical information, and informa-
tion about transportation costs from various points of production.
A s/iecific job contract was a contract which obligated the manufacturer
to deliver at the stipulated price, to the contractor at sone future
date, the cement require,'' to complete a specified construction project,
with the understanding that the purchaser be allo-ed the advantage of
anyi decline in markett price, and without obligating hiT.1 to ta':e the
ce:-eent if he failed to secure the bid or if for any other reason he did
not desire delivery under the contract. The details of such contracts,
including names of contractors and specified construction projects
involved, were reported, by the members to the association; it employed
agents to visit the. jobs, and reported bac- to the members ftll infor-
mation regarding the contracts and the use of the cement shipped under
then. These activities -ere pursued in order to prevent contractors
in a period of rising prices from obtaining more cement than they were
entitledtb&' entering into contracts with several manufacturers for the
saie specific job. This was considered sufficient purpose by the Court
to excuse the reporting of detailed information, including n-ies of
buyers and sellers, and what amounted to espionage by the association.
In addition to suppl-ring information about specific job contracts,
members rendered monthly detailed reports concerning delinquent accounts
of their customers and concerning production, shipments, and stocks on
hand. The association compiled and distributed these, thus info:-iing
each member of the sourcr- and amount of cement available. meetings
were held at which minor subjects were discussed, bat such dangerous
issues as current prices, production, or m.arlet conditions were care-
fully avoided. The association also distributed to its members freight
books listing rates from basin, point to all marl-ets. The Court found
that the freight rate book enabled the manufacturer to calculate a
delivered price on the basis of his own mill price to points in nnigh-
boring territory, and to determine the'freight differential which he
must offset in his mill price in order to compete with manufacturers in
other territories. The Court refused to condonn the distribution of
credit information, on the ground that there was no evidence of any
unified conduct with respect to the persons to whom, or conditions
under which, credit was to be extended.; and further that the credit


9826




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inforip.tion merely aiu-ilified the inlivid'ja. judC"mcnt of the manufac-
turers. The compilation and distribuLion of general statistical infor-
mation ias a 'roved oin rcasonin' similar to tliat in the LEa-ole Flooring
cese. The Court declared that the te.idcnc. to bring about uniforraity
in price, apart frori any agreement or understanding for maintaining
prices, Mas insufficient to constitute a violation of' the anti-trust
la7s. The tt-aditional thcorny that uniformity of price is evidence of
price Lanipulation was rebutted by the opinions of economists, who said,
in effect, that in the case of a stanCardized product sold wholesale
to fully informed. professionp- buyers, uniformity of price Nas a sign
of free and active competition.


9826





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5. Summary of the Four Cases

In attempting to arrive at an esti'-ate of the Supreme Courtts
attitude to ard open price filing, one must emphasize that the Maple
Flooring and Cement Cases are far more significant than the two
earlier decisions. In fPct certain comment ators-have cohcluded'that-.he
two later cpses effectuall,, ave-rule the earlier ones. Though there
may be no need to accept this contention, it is nevertheless true that
the distinctions advanced by the Supreme Court itself, and further dis-
cussed by commentators, are tenuous. The Court pointed out in the Maple
Flooring. Case that the reports of sales and prices were solely concerned
with "past and closed transactions", as contrasted by the facts in the
Hardwood and Linseed Cases. Again, the statistics reported by the
Maple Flooring Association did not identify buyers and sellers, as was
true in the Hardwood Case. It is true that such identification was
present in the Cement Case with re.sard to specific job contracts, but
it was excused in view of the Association's commendable purpose in pre-
venting fraud b,,' contractors. Furthermore, the data collected by the
trade associations in the latter two cases were not treated as confi-
dential, in contrast to the policy pursued by the Linseed combination.
The distinction, however, is of questionable soundness, for the
publicity afforded by the Hardwood Association was much wider than that
which the Court found, by inference, in the Cement Case. There was no
evidence in either the Maple Flooring or the Cement Case of any obli-
gation or understanding on the part of the membersof the Association
to be guided in their business policies by the information supplied
through the Association. The distinction, however, is likewise diffi-
cult to follow, for the Court found such an understanding in the Hard-
wood Case, although there was no uniformity of prices, and refused to
draw the same inference in the Cer.ent Case, whej-e such uniformity
existed. In the Linseed Case the Court's finding of "concerted efforts"
was better supported by the fact that the combination was composed of a
small number of powerful concerns, and that their obedience was com-
pelled by means of forfeitures and penalties. It is possible to
isolate the Hardwood Case, when it is considered that the Court stressed
the "comments" and recommendationr1" with regard to production and
prices by and official of the Association. In the Maple F]ooring and
Cement Cases the Court emphasized that at the periodical meetings of
members of the Association there was no evidence that prices were
discussed. And the Supreme Court has distinguished between reports
of "past" sales and "current" or "future" transactions. Finally, the
Court expressed disapproval of the industrious efforts of the bureau
in the Linseed Case to secure compliance with published prices.

Though it appears evident that the attitude of the Supreme Court
towards the reporting of trade statistics underwent a substantial
change between the two earlier and two later decisions discussed above,
and that the distinctions sought to be established between the cases
are in large part tenuous and without t substantial basis, it is im-
possible not to conclude that n price filing scheme which is sought to
be used as a device for the raising of prices will be considered by the
Supreme Court as a violation of the Sherman Act.

A recent analysis of the anti-trust decisions relating to price
/
9826





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filing has classified, the presumptively le,:;l and illegal elements of
price filing systems. (*) In it are set forth in parallel columns,
as below, (I) a plan -.,;hich is prr.sumptivel, lawful, (II) a plan which
is clearly unlawful, and (III) thi modifications necessary to render
the second plan of probablee le.alit..


I. Presumptively lawful plan

1. Detailed reports to associa-
tion of all closed tr-tisactions.
2. Circulation of abstract,
statistical suimairies.
3. Availability of reports to
customers and th& public.
4. iTo agr-ement af-ecting free-
doni of price action.


II. Clearly unlawful plan

1. Filing ; current arid
future pi ices.
2. Circulation of prices
of individual sellers.
3. Non-disclosure of re-
ports to customer
and tlie public.
4. Akreei.ient not to de-
viate from filed prices,
without notification
of change to associa-
tion.
5. Immediate report by
association of all
price changes.
6. Waiting period.
7. Circulation of inter-
pretativu corn ents.
8. Penalties for non-
compliance with plan.


III. Changes necessary to reader Fian II. presumptively lawful

1. Detailed r:.-ports of .11l closed transaction aid filing
current a.id future prices.
2. Circulation of abstract, statistical summaries.
3. Availability of reports to customers and the public.
4. iTo agreement affecting freedom of price action.
5. ITo "'-aitin- period.
6. Yo interpretative comments.
7. Penalties- for- not fi.r:ishing a-curate..informAttion.
8. Use of imf-artiel statistical agency.

6. The Aclpalachian Coals Case.

The most recent decision inCicating tha attitude of the Court
toward cooperative activity is Apalachijan Coals, Inc. v. United States,
288, U. S. 344 (19335). Competing producers of bituminous coal in tie
so-called Apalachian territory; formed ; cooperation, to act as their
exclusive selling aTent, with authority to determine the prices at
which the coal mined by the individual member corporations was to be
sold. The producers controlled 73,; of the cor.mnercial production in
the immediate region where they mined, but only 12' of the total

(*) Milton Handler, "The Sugar Institute Case and the Present Status
of the Anti-Trust Laws", Columbia Law Review, January 1936. p.9






production east of the Mississippi River. The Court refuse(' to enjoin
the combination as a violation of the Sherman Act., on thie ground that
the restraint upon competition was, in the circur-stances of the industry,
reasonable. The Court emphasized that the question of the application
of the statute must be determined byv "a close and objective scrutiny of
particular con'itijons". It then.i described the ;rave economic conditions
with which the industry was oeset, because of over-expansion and over-
capitalization, diminishing consumption resulting,: from the use of sub-
stitute fuels, organized buying and detrimental market practices. The
Court emphasized the fact that the coal produced by members of the
combination was sold in competitive markets, and that vast volume
of other coal was actually and potentially available. In view of these
conditions it found that the elimination of price competition between
members of the corporation did not constitute a violation of the anti-
trust laws, saying, significantly, at page 373:

".....But the facts found do not establish,
and the evidence fails to show, that any
effect will be produced which in the cir-
cumstances of this industry will be detri-
mental to fair competition..." (under-
scoring supplied)

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

7. Sugar Institute Case

On March 30, 1951 the United States filed a petition in the
Western District Court of Jew York requesting the.dissolution and en-
joining of the Sugar Institute, and the enjoining of fifteen member
refineries and various individual officers from conspiring and violating
the anti-trust laws in the sale and distribution of domestic.refined
sugar. A decision was handed down.by Mack, C. J., in United States v.
The Sugar Institute, et al, D. C. S. D. N. Y. No. E-59-103, March 7, 1934
in whicn defendants v'ere enjoined from carrying on illegal activities;
but the Institute itself was not ordered to be dissolved because some of
its activities were proper and desirable. The decision was appealed to
the U. S. Supreme Court by the Institute, was argued in February, 1936,
and the appeal is now pending.

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


9826




-23-


meet competitors' announced prices, L'embers first announced prices
publicly, then notified t-he Institute, which reported the information
to me:ibers and nla"s agencies *":ithou-t comment. The Di-trict Coutrt en-
joined this plan, upon the basis tnart reporting, of current or "iture
prices and agreeing not to deviate from them until new price's were
announced were illegal under th. anti-trust la'vs.

The Institute's ])practic*- of collecting and distributing to
members statistics on capacities, production, deliveries, stock] on hand,
etc., was enjoined because the information ains not made available to
purchasers as well as to indut!.'u members. A boycott and blacklist
of parties who insisted on functioning both as brokers and warehousemen
was found illegal.. Agreements mron-. members fixi.r commissions to be
paid to brokers and undertaking not to deal with an,.' broker or warehouce-
man vho di not si:.Tn nugr-.ment to abide by- InstitLute rules, were
found to be unreasonable restraints. A universal s,.-stem of delivered
prices was found to be maintained by concerte',d action through the insti-
tute and was decl.rtd illegal; likewise an agreement for open announce-
ment of freight arplications. In addition to the practices noted, the
District Court found the follov.,ing to be illegal under the anti-trust
laws and specifically enjoined each of them; prohibition of pooling of
shipments by customers; agreem:.-nt not to use truckers affiliated ,'ith
w'arehousernen or brokers; agr-e. mentb not to absorb switching charges
from consignment points; agreement to reduce number of consimurient
points; agreement to malke- etra charges on less. than carload lots
ex-consigrnent; imrlie,'i areement not to enter into contracts calling
for delivery mo "e tnan thirty days ahead; prohibition of quantity dis-
counts; prohibition of "tollinr.", in ,,hic,;L members refined raw sugar
owned by non-refiners and re-tained part of sugar for their services;
prohibition of four-pa.,;'ent consi.rrment plans; prohibition of split
billing; limriitation of ani agreed methods of computing cash discounts;
implied agreement to abolish price Duarantees; prohibition of allowances
for used bags or containers; agreement not to sell under private brands;
limitations on resales for benefit of buyers; and requirement that
members report s.les of damrnn.ed or frozen stocks to the Institute.

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

F. The Federal Trade Commission Report

A comprehensive report on open price trade associations was madc
by the Federal Trade Commission in 1929 in response to a resolution by
Senator L'TcKellar in 1925. (**) The material contained in this. report
is invaluable as a backgr-ound for th.e present report, both as regards the
experience in individual industries an.d the comparative findings recor-
ded. The summary of conclusions r-nd recommendations have been reviewed
here as r- focus from '-hich to record the experience disclosed in the
present report.

(*) See Chapter II, for- a discussion of the signific-ance of this case
in relation to the future of cooperative activities, including
price filing.
(**) Senate Dooument .To. 226, 70th Congress, 2nd Session.


9826




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1. Specific Qbservations Regarding Information
Work of Associations

The report states that the com.npilation and distribution of
trade statistics resembles standardization \,ork, and that it can be
most efficiently and econoric[,lt- performed by a trade association or
similar or, anization. That tzade and price information as distributed
by a trade association can be used to facilitate illegal restraint of
trade is considered"no more fundamentally an ortument against its corm-
pi'lation and distribution than is the fact that standardization can
likewise be misused." (*) In support of this the Commission refers.
to a familiar principle of law; namely, that the purpose, rather than the
implement employed, determines thie le.:ality of an act. T'nese con-
clusions nave been reiterated and confirmed in previous NRA reports on
price filing. The;o are paraphrased her- to distinguish the contribution
of the ITA experiment to the omnovledge of the economic effects of open
price associations.

The following conclusions concerning the distribution of informa-
tion were made: (**)

1. Information should be given equal publicity
whether it records favorable or unfavorable
trends, and should be dealt with objectively
and truthfill;-.

2. There is no economic ground for objecting to
the compilation and proper: publication of
general average market prices, provided the
average is correct and truthful.

6. Both cost nid price reports are legitimate;
any undue restraint in connection with them
is due to their use rather than their in-
trinsic nature.

4. The tendenc;r to regard information assembled
as for members only is one of the chief ob-
jections to the vray it is used.

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

6. Stability, of the price level from month to
month may also result, despite changes in costs
of production; this is due to the fact that
sellers are discouraged from cutting prices
by the .mo,.vlecde that the l)rwer level will be
met imr.idiately. This is most prevalent in

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





- 25 -


forms of price reporti:'.I ''herein deviations
from announced net prices are reported and
distri-b'.ted as soon as ,maie. This is economi-
call-y l,_ss desirable than mere uniformity of
prices.

7. Prevention, "by price reporting, of lower prices
to buyers who impose lower costs of distribution
on sellers is an illegitimate use arid an improper
restriction of trade.

8. Pull publicity of information to non-sellers, except
for cost reports, is of more significance to the
public F;,enerally than to expert purchasing agents.

9. Because of the deterrent effect of the suspicions
evoked by comnrilations, the correlation of price
rep.orti!,,-. with the violation of tie anti-trust
laws through price a.,ree:.ients, is probably less
than that of general trade association work with
such violations.

10. If the pub-lic is acequatel;' re-presented, stand-
ardization of trade Dr-:ctices suc-i as credit terms,
period of forward-deliverr contracts, methods of
comrp.utin:_ prices, etc., is no .iore objectionable
and quite as desirable as it is for pviysical
commodities. The same dniers and the saie elements
of justification hold.

11. Stabilization of a single line of business may be
obtained at considerable exr.ense to the rest of
society. ; tne probler:i of stabilization is much
larger a-,d. rorn corrmplicated tian is generally
reco-nized in trade association circles.

2. Economic Effects Indicated by Statistical Analysis

An effort wias made by the doraTission to determine through statistical
analyses the effects of the open-price practice. The conclusions arrived
at were admittedly negative. (*) The matter of price uniformity was
investigated thoroughly. for only the Lumber Industry. In the branches
of that industry oxq..ined, no evidence of uniformity was found to show
that price reporti,.g wns being used as an instrument of price agreement.
Insufficient personnel prevented similar intensive investigations of
other industries.

The question of stability of prices or the degree of constance over
a period of time was treated in a broader field of investigation.


(*) Pages 355-358, Ibid


9826




-26-


Price series com riled by the -overnment and other agencies
for various industries, and. those obtainable directly from
the re-iorts of onen-grice associations, oere used. A compari-
son between wholesale prices of commodities of industries
with o-oen **-rice associations an':.' those of commodities of
industries without ope.i nirice associations also yielded
negative results. Prices of ope:-, price conmurodities showed
no greater stability then those of other commodities. In
fact, they showed a trifle less constancy in their movements
fror month to month.

The output of members of open-price associations was
found to be much less stable than their prices. Recognizing
the narrowness of the basis, a comparison between the stabil-
ity of operation (production, sales, si-.i-ments, etc.) of open
price industries and industries which used merely trade statis-
tics, indicated that the latter group achieved more stabil-
ity.

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

"A negative result is not a meaningless
or uniroortant result. In this case it means
that open-price work is only one among a
inultin-olicity of causes affecting prices that
are at least equally important with it, or
else that there are one or tv'o other causes
wvorsii: in a direction similar to it that
are of sufficiently .oriinrting importance to
swarp its effects. Fro'.i this point of view,
the situation might well c[ll for further con-
sideration from a different angle."(*)

3. Reccmmnendations (**)

Ihe commission recommended that Congress pass legisla-
tion requiring all trade associations whose members engaLed in
intersttid comaierce to procure a Federal license. Among the
conditions proposed for this license was included the proviso that
all files, records, accounts, correspo.ndence and other documents
of the association be av:,ilable for inspection of specified Govern-
ment authorities, and that such associations make such periodic
or special reports regarding their organization, business, or
practices as may be required by such authorities. Duplicate
copies of all statistical reports submitted by members and of all



(*) Page 358, Ibid.

(**) Pages 366-373,',Ibid.


r'826




...: .. I -


compiled re-ports issued by the associations to members were to
be filed with Euch authorities. This recommendation was designed
to make available to the public more information:regarding trade
associations .nd to facilitate the supervision of their activities.

To modifications of the anti-trust laws or none distinctly
relevant to open price activity rere suggested by the commission,
with one mine r exception. It was rocomrnended that legislation
be enacted clarifying the legal status of the practice of identify-
ing the seller in disseminating prices, and that the preferable
solution was to forbid such identification. It stated that;

"The general purpose of identifying the seller
undoubtedly is to enable competitors to verify
rumors of prices made on particular contracts,
and esnccially to check up on the 'lying buyer'.
Whether that is all that i-s intended is the
critical point. If the information is used in
any way to bring pressure upon sellers who are
out of line, so as to make them conform to the
ideas of the majority of the association, in-
stead of each being allowed to act on his own
individual judgment, such purpose and use make
the practice illegal. If such employment of
th. kind of re-orted data in question is usual
and to be expected, the type of ro.-.ort should
itself be definitely branded as illegal. The
legitimate use it may serve should be provided
for in some other way."(*)

The alternative method of verification proposed was for sellers
to com-municate directly with competitors. This method would be
more :rompt and to the point, would lessen the-possibilities of
coercion through an open price system, and could be used for
verifying allegations regarding quotations as well as closed
prices.

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

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



(*): Page 369, Ibid'


9826




. -28-


making methods. As far as the nature of this supervision is con-
cerned:

"Administrative supervision of the degree and
kind recorunended;.... is primarily that the word
supervisiont in a strict sense means, namely,
comprehensive and adequate observation .'nd know-
ledge of the facts, vith only such elements of
control as enlightenment gives. To carry out
this conception of super-uisionr, the principal
need is authority ,to 'obtain full knowledge and
to keep the public informed. :"(*)

4. Pre-iRA Open Price Associations

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


asphalt single and roofing
business furniture ;,
candy manufacturing,
copper
cordage and twine ."
electric manufacturing :.
funeral supply
industrial alco'. 1.
marble quarrying and finishing
metal lath "-
pa-er and pulpo
j. salt producing **."
* rubber manufacturing- ,
steel casting .
structural clay products
tat manufacturing ,. .


G.Trade Pi'actice Conferences of Federal Trad.e Commission

Proceeding under the voluntary arrangement involved in ,the Trade
*Practice Conferences held under the jurisdiction of the Federal
Trade Coinmission, a number of industries have since 1919 set up
rules of fair competition as a result of these conferences. An
analysis of the rules relative' to open price systems which were
formulated in these conferences was included in a current report
of the 1TRA Division of Review. (**) This analysis covered the


(*) P. 373, Ibid.

(**) "Trade-Practice Conference Rules of the Federal Trade Commission
(1919-1965);" AClassification For Comproairs6n With Trade-Prac-
tice Provisions of NRA Codes", S. P. Kaidonovsky, February 29,
1926; (TradCe Practice Studies Section, Division of Review).


9826


* r ,




-29-


period from 1919 to 1936 and included the rules of 143' conferences.
The rules vere classifiedby the commission into two groups;
"Group I"II rules are those approved and accepted by the commission
as covering unfair methods of competition within the meaning of
the Act which are violative of law; "Group II" rules are those
accepted by the commission covering practices not contrary to
law but condemned by industry opinion as improper standards of
business conduct or a-pproved as desirable standards to be fol-
lowed.

All but one of the provisions dealing with open price
systems fell into Group II. A provision requiring, independent
publication and circularization of price lists by individual
members of the industry, was approved for fifty-five industries.
Aprovision making terms of sale a definite part of price lists
was approved for forty-nine industries. A provision requiring
the pasting of prices by distributors at point of delivery was
approved for two industries. Strict adherence to published
prices and terms of sale was recommended in one industry. Devia-
tion from -oosted prices was concrermncd in two industries. In a
third in'-lustry, such deviation was condemned as an unfair trade
p-oractice, an.'., included among Group I provisions as contrary to
law.
III. TIHU DEFIiTI0J OF PRICO FILIUG

A. Pre-iTT ?T,-ocs of Price Filinv:

Any satisfactory definition of price filing must be derived
from description and example of typical plans.' It is evident that
methods of rice reporting used in the past were diverse in charac-
ter. Those advocated by EddIy for industries engaged in con-
struction or other contract work were described in Section II-B,
above. The more elaborate -"open competition" plans reviewed in
the Supreme Court cases have also been noted.

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

"1. Price lists, whether gross or net, or changes
and modifications of price lists.
2. Specific prices on individual transactions,
including bids cn contracts let.
3. Variation of prices, inclu,.inf' frequency
distribution and range.
4. Average prices or average "values".
5. Indexes of changes in prices.


(*) Se p. 36 Ibid.


9826








;6. AC. create s'les ii. '.ol La'- '.-,'hen accompanied
by corres o.ni in t]ua't:'.ties, if th,' unit of
quantity is tolerably homogeneous."

In Appendix B of its re*-ort the commInission classified under
eleven types the open price associations identified during its
investigation. This classification indicates more clearly
than any other the diverse for.s of "r-ice filing in operation
during the period preceding the iNational Industrial Recovery
Act. The following different methods of price reporting were
recognized:

1. Associations reporting or exchanging bids on
contracts ("ddy type).
2. Associations'repoTting or exchanging all
deviations from net price lists previously
coramunicatedc. (Eddy type operated by 0. 0.
Sl.oore, an associate of Eddy)
0. Associations listing indiviC'ual sales or
reporting sales with a high degree of
specialization i.e., by grade, descrip-
tion, origin, destination, etc. and also
indication: those of each member whether by
npzPino the seller or by classification or
distinctive ma liv. of the entire (Version
of Eddy' tj e).
4. Associations listing individual sales but
so handling them that the reports contain
no internal evidence of the identity of the
sellers.
5. Associations reporting sales with a degree
of specialization, i. e., by grade, descrip-
tion, origin, destination, etc., but without
evidence of their identity.
6. Associations slio''ing prices in the fori.i of a
list of quantities sold at each specific price
or of a frequency distribution, or showing the
range of pri-ces high and lo-: ,'ith some division
by commodities or districts.
7. Associations reporti.-g average prices or
average values for products that are comnoara-
tively homogeneous.
8. Associations reporting quantities scld and
corresponding axgregate prices or values for
somewhat homogeneous products.
9. Associations w,,hose memberse2change price
lists through the medium, of the organization
or receive compiled information referring to
such lists or changes in them.
10. Groups of subscribers to the service of some
4rice-reporting bureau.
11. Associates not listed in the above groups thatau.
11. Lssociations not listed in the above groups that


9826






furnish price-information service utilizing data
su- -lied by members.

This classification should be supplemented by a description
of a typical reporting plan in use by several trade associations
in 1929 which falls under the second type listed above. This
type was distinctly of the Eddy sort, applicable to manufacturing
industries and based on the reporting or exchange of net price
lists anc. all deviations from such lists. The plan was used
in the Cash Check_ Manufacturers Industry and was organized by
lir. 0. L. Moore.(*) The outline of this plan, prepared by this
associate, r:as as follows:

"1. D:ch member will file with the secretary a copy
of his complete price list, of what are commonly
Imown among the trade as tear-off and punch
checks, in force anc. in effect May 1, 1920, to-
gether with discount- sheets and any variations
anu modifications in prices, terms, deliveries,
etc., it being the intent of this paragraph that
eac'. member shall file not only his current print-
ed list showing maximum and minimum prices but
also any discounts or other considerations he
may offer directly or indirectly to secure trade,
or an,- discretion he may allow his salesmen as
regards departures from the list or as regards
inducements to customers to secure trade. And
in this connection, each member 'iill state
whether or not his corrm-ian;.' or his salesmen are
perrm-itted to distribute any gratui'ties or gifts
for the purpose of influencing trade.

"112. In addition to the fore'oing, each member will
file from day to day andC as soon as made any
revisions of his price list, in whole or in
part, and aiy concessions from same that may
be made, in prices, discounts, terms, rebates,
allowances, inducements of any kind, or by way
of quantities or in the accepting of orders of
contracts.

"3. From the foregoing price information, the secre-
tary will comnile the following:

"A sheet or report, showin-; opposite the
name of each member (which np.me may be
indicated by number if desired), that
member's base price for each of the



(*) P. .390, Ibid. Mr. M:oore was operating similar plans in nine
trade associations at the time the Commission report was pub-
lished.


39!6









fol2Lowiing styles;***


"TIhis coi-jil-[tion bill be mailed to each member
contribution, his price information.

"2ach revision of price list and each concession
therefrom' -'ill be i;Laediately reported by the
secretary to all members that are reporting
their price infori.iation.

"The secretary will obtain from members advise
as to their normal average monthly production
(both quantity anO. value) of flat tear-off
and punch chec.:s.

1uach member vill reort to the secretary monthly
on blanks furnished for that purpose informa-
tion es to the actual quantity and value of
his shipments of flat tear-off and punch
checks for the current month.

"-:-orm the info nation received from members,
the secretary will com-pile a monthly report
s showing:

"(a) 'Q-Liantity en' value of shipments
reported by all members.

"(b) Percenta:e of e-.c;- meciiber's actual
quantity an'?. value of shipments to
normal.

t 1o fijares rd:.rrTin- a mermiber's actual produc-
tion are to be disclosed to any other member."

Using a functional bpcis of classification, the commission
divided open price plans into two .main types, the checking type and t]
market service type.(*) The systematic pooling of price lists
either by cxchan=e or central filing, dotailed price information,
and identification of the seller vere deemed the prevalent char-
acteristics of the checkin-' type plan. The basic purpose was
the checking of buyers' statements about prices charged by
competitors. The market service type often confined the in-
formation to avcrae prices, indexes of price movements, or
total quantities solU and total dollar values, placing loss
enriphasis on detail and identification of the seller. The basic



(*) pp. 41-45, Ibid.


9826






purpose was t. throw light upon the general price movements in
the market.

B. The "T-A 17e of Price FilinL.

The price filing plans established under NPA codes were no
more susceptible to precise definition than were their precLe-
cessors, However, they were fairly uniform in a number of part-
culars, and by combining these a hypothetical but nevertheless
typical plan can be offered which illustrates the PEA tjpe. The
typical -elan was mandatory as to establishment and participa-
tion by members. It required the filinL of prices, and all
sterns -n conditions of sale toget'-.or with any revisions thereof.
the code authority vas designated as the central agency of ad-
ministration. Adherence to prices at least as high as those
filed was required at all times, but sales above filed prices
were frequently -:ormitted, before revision of prices the plan
required either prior announcement or a waiting period. Identified
prices were required to be distributed to members. The price fil-
in; plan was-us-jally accomonnied by some type of no-selling be-
low cost provisions, or limitations on indirect price concessions,
or both.(*)

It is evident that the IT- type, when viewed from the
perspective of previous mechanisms, represented a very special-
ized and also a previously quite unicom'.ion plan. The two major
characteristics setting it apart from those existing before were
the reporting of present or future prices rather than past and
closed transactions, and the complete sepa-ation of price report-
in, of trade statistics. Provisions were included in a number
of codes for the collection of trade statistics, but they were
not integrated with the price filing plan.

Ther detailed price information provided for by the N. R. A
plans suggests that functionally they belong to the "checking"
type of plan identified in the Federal Trade Commission report.

Two illustrative code provisions relating to price filing
are quoted below. These cannot be described as "typical" in the
sense that all of the codes were similar to them; but they do
indicate the generall manner in which the codes provided for
price filing.(**) The first provision quoted is that which was



(*) See A:-.endix C. Zxhibit II for a tabulation of the frequency
with which the various elements of price filing appeared in
the 44! price filing plans.

(**) The .odel co.e provision, contained in Office Meuorandum Ho.228
which appeared in about ninety of the codes is reproduced in
Appendix C, Z-xhibit V. Other examples may be found in A-pendix
B for Steel Castin--, Amoendix A for Asphalt Shingle and- Roof-
ing, anc: A-.-ondix C, Exhibit IV for Folding Paper Box.


9826


-33-




-34--


in the Ladder Ianufacturin: Code:

"Since it has been the general recognized practice
of the industry- to sell products on the basis of
printed price lists with discoLunt sheets distributed
to the trade, each member of the industry shall,
v'ithin ten days of the effective date of this Code,
file irith the Code Authority -nrice lists and dis-
count sheets, showing his current prices and dis-
counts to the various classes of customers as herein-
before defined. Revised price lists and discount sheets
may be filed from time to time thereafter with the Code
Authority by any member of the industry, to become
effective upon a date specified by such member of the
industry, which date shall not be loss than ten days
after the filing jf such revised prices at the office
of the Code Authority. Cogies of such revised prices,
with notice .of the effective -late, shall be immediately
sent to all known members of the industry, who may file,
if they so desire, revisions of their price lists and/or
discount sheeoots, which, if filed not less than five days
)revious to such effective date, shall take effect upon
the date w-hen the revised price list or discount sheet -
first file.! shell o into e.ffect.

"ITo member of tie in".ustry shall sell or exchange any
ladders or laL greater or on more favorable terms than the schedules of
such member on file at the office of the Code Authority
as hereinbefore provided.

"The operation of the foreroing provisions shall at all
times be subject to the -,-o)roval of the Administrator."(*)

.As an cxai.T-le of thos. provisions which left more .
retail to the discretion of the Code Authority, there may be
cited the one in the Set Up Penor Box manufacturing Code:

"Each member shall, on or before 30 days after the
effective date of this code, file with the Code
Authority complete-schedules in such form, and with
respect to such items as the Code Authority may pre-
scribe, of prices, terms, and. conditions of sale for
domestic *on-sumption includingg all differentials,
discounts, trade allowances, special charges, and prac-
tice re.,arding samples) of all products offered for sale
byl such member, "nd shall so file all subsequent changes



(*) Codes of Fair Competition, as approved, Government Printing Of-
fice, Vol. II, pate 627.


98.6




-35-


therein or revisions thereof at least 24 hnurs
prior to the effective time of any such changes or
revisions. The Code Authority shll, u-on request,
furnish r.ny person concerned, whether or not a member
of thej Industry, a co y of t11 such schedules and of
all changes ?ndc revisions thereof.

"Excent in fulfillment of bona fid. contracts existing
oni the effective date of this Cod-La, no mi.ember shall
sell any products of the Industr-' for oromestic con-
slurption rt.t a orice or .,rices lo'.ver tUia-., or upon
trr.ns or conditions more favorable than stated in his
prices schedules thcn ono file -rovidod, hoovr., that
discontinued lines or dR.ma e.C. CIood- or seconds or
distress merc-andise required to bo sold to liquidate
a defunct business, ay be disnpoeei of in such manner
and on such terms and conditions as the Code Authority
may an.provo. "i(*)

The actual form which the price filinci provisions took in the
cedes varied froi. sirmle an;.-ricmrr.cnts tlat prices were to be made
public to the most elaborate morc'andisin. ..>l-ns. The lack of uni-
formity in 1IRA -)rice filinG, plans is attributable to several
factors: The varyin- demands of the spcnsori'ig -*roup, the date
of approval of tel- code in relation to developing TIRA policy,
and the ex-oansion or modification of the code provision by, the
Code Authority.


(*) Cod.es of lair Cometition, as a:.irovod, Covcnire-nt printing
Office, Vol. IV, p. 250.




- 36 -


CHAPTER II

STATSE.IT C2 F TE PROBLKEi


A stud;- of price filing under .R.A. codes involves essentially the
same problems for initial investigation thiat'are raised by any other trade
practice provision e.g., to examine .(l) the nature of the device and
its variations, (2) the industry situations to which it was addressed,
(3) the ends it w7js intended-to accorm:lish, (4) the machinery that was
devised for its admni:,istration, (5) the difficulties encountered in its
application and the way these difficulties were resolved, (6) the extent
to which the intended purposes were accomplished; as well as any other
effects not contemplated, (7) the comparative experience and results
under different codes, and under dissiviilar circumstances, and (8) the
issues of public interest involved in the experience and results dis-
closed. As a basis for present discussion these have been more broadly
classified as the economic, the admi istrative and the legal problems.

I. THE ECONOI:IC PROBLEM

A. Introduction

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

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

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


9826




-37-


Price filing has been variously regarded and described as j)?rox-
imatinf-Lg price fixing, oras aapproximating- the idecl- of the. op.n i-mra et;
.as tending ti cnntril and. limit price competition, or cmverscly, to
ie'ia2G competition more effective; as designed to protect sellers against
buyers, or, again, to protect buyers against sellers; to lower prices
or to raise prices; to accelerate the'movement of prices in whichever
direction they arc headed; or as encouraging or reducing discrimir.tion
between buyers.

E:aamination of the ordinary price filing provisions incor"orateC"
in the codes resolves none of these pra6.oxes. They stipulated only
thc.t -rices and price changes should be Ennounced, Publicity was re-
quired as the initial objective-an end in itself. The expectedC or in-
ten'.ed effects of such publicity on competitti&V relations or on prices
were not stated. ,

That there vwas no general agreement, on2 what those effects mijht
or should be is clearly evident from the 'c:pressed desires of code
proponents in submitting price, filing provisaionS, and from the contro-
versial and involved discussions that preceded and accompanied the slow
development of I. R. A. policy concerning price filing. (*)

One obvious part of the problem of price filing, therefore, is to
reconcile, or at least to explain, the diverse concepts about price
filing and its functions, and to try to integrate them into a coherent
statement nf the economic role of price filing and its potential use-
fulness as a device for modifying or regulation competition.

The IIiRB attempted just such an integration of view on prices
filing in the statement of ACiministrativc Policy, issued April 23, 1935.
(**) This was written in the light of the accumulated experience with
-orice filing under the codes., and undertoo"' to translate that e.xper-
ience into a clear statement of the nature and objectives of price
filing:, as accepted by the Aeministration, and to set forth specific
policyy criteria for the form and contents of open price provisions, and
the proper field for their application in codes. It was prepared and
issued as a working guide for the anticipated revisi-n of existing
price filing provisions and hence can not be ta:en as a complete or
wel-rounC.ed discussion of the underlying economic concepts. 2But it is
by far the mist explicit statement available of the IIRA administration
view of the purposes of price filing and the economic function it w'as
expectcd to perform. Excerpts of the statement, as included in the


(*) Thie various statements of purposes anid the intended objectives
of price publicity by industry members are discussed on p. 79
Chapter III. The chronological development of IRA policy ndCL a
discussion of its effects on code operations is contained in
Chapter VI.

() These views, of course, were these of various administrative
officials and did not necessarily include those of industry
iiermbers. See Appendix C Ex. V. for text of this statement.





-38-


Summary of Policy Statements issu.ed in M,"-, 197F, pr. for that reason
reproduced here to normit a closer examination of th- ideas ex-
oressd. (*)

The statement begins '-ith the nassertion that "onen -rice filing
is a mere device", "hose

"potentialities for benefit or mischief depend unon the ruroose
to -hich it is put and the methods -hich attend its us0. The
standard by -hich it should be judged is oric nmal-ing similar to
that afforded by an o-oen and competitive mar-et. such as an organ.-
ized commodity exchange."

"The i-oal of an o-nn and coMoetitive market can seldom be fully
attained. It is honed to aruroximate its objectives b" o-oon -orice
filing under aunronriate circumstances. It is possible for the
ooon file to allo- buyers and sellers to accomodatp their activi-
tins to comnetitivo conditions, to fix limits on the spread of
quotations at any riven time, and to tend to make orince perform
its industrial function. Omen price filing should. so far as
possible t- made to furnish a nublic record of rice movements,
provide a chrclc on discrimination among customers, give the small
enternriso information about the activities of his larger competi-
tors, reduce the amount of decertion among buyers and sellers,
give the parties concerned a fuller knowledge of conditions
affecting the market, and. nromnte and safegaird the integrity of
the process of comnrtiti're Doric0 malinr." (**)

The broad range of cono:nic iR-as touched unon by these paragraphs
suggests the need of a protracted -xcursion into the theories of
coroatition, the industrial function of uric0, nnd the intricacies of
orice-mal-ing as a Drelude to our study of rice filing e.-oprience
under the TBTA. The necessity of just such a basic analysis was urged
by several economists "ho mr- psil-ed in Fe.bniary, 1934, by Leon
Henderson, to make suggstions concerning the proper sco-nO and
direction of a special study of or nn orice, associations to be conducted
by the IMA nrior to the Code Authority conferences of March, 1934.

T-o authorities -ore particularly insistent upon the need for
linking any study of urine filing with a broader analysis of the entire


(*) The statement w'as necessprily a compromise of the opinions of
those individuals -oarticirating in its noroparation, and may in
certain respects balance administrative judgment against final
economic judgment.

(**) Summary of Policy Statements, compiled May 1935, by Alvin Bro'-n.
Items 1710, 1711, o. 49.


9826




-39-


Pricing system and --ith the underlying economic philosophies of price
regulation, either under orivat- or government aus-onices. (*)


(*) Lov-r'tt S. L-"on, :-ecuti--- vice-nresident of the Brookings
Institution, later Dpouty Assistant Administrator of Policy in the
NRA, -rot0 as follo'-s in F-bruary 1934:

"It -ill b- iTmoossib.l", he said, "to arrive at a really
satisfactory decision on oo'n prices unless the data -hich are
disclosed by an investigation are related to a clear under-
stpnding of the function of -orices in our economic organization,
Orien nricps are but on- T.hase of a price structure. Th- oone
price association is bhi.it one method 6f price announcement, Any
judgment as to -heth-r open price n-lans are desirable and in
what form, if at all, must be related to more general thought
on Dricks. It -ill b- of primary significance, therefore-
indeed, it -ill be ess-ntial to a satisfactory analysis of this
problem to proceed with a thorough understanding of the role
of prices in an Pconomic system... It will be necessary for
a satisfactory analysis of this problem to determine whether
prices are to bp considers in relation to an economic system
of private -nterorise, private o-vnership, and competition (that
is, essentinlly. th- ro'pitalistic system) or '7hhther they. are to
be considered in rl-tion to a nlan 7hich embodies increased
-lIments of govrnmr.ntal o-rnershio or governmental price
fixing, cartelization, or some other form of economic order
mor socialistic than that to "rhich re have been accustomed.
The role -hi.h can be assigned to prices, the effects which can
be achi-ved by thmn, differ-according to the. system in which
they o-ocrate....."(*)

(*) Exc-rpt of ltter contain-d in F.R.A. Press Releage No. 3473,
Fabritary 26, 1931. ;

Myron W. Wat'.-ins, Prof-ssor of Ecohomics at Nqw York University,
and author of s-veral books on trAde association activities, regu-
lation of co-rometitive '-r.cticc. aiid anti-trust legislation, also
urged tho neRd of a basic analysis of th- co.omp titive structure
before any attempt was mvde to examine and evaluate the factual
e:xprience of YRA "Tith price filing provisions.

"The first orobl-m for consideration in a study of price
policies und-r the nodrs seems to me to be that of determining
--hat m-thod of orici r-aulation the Administration has in view...
The futility of orocorinp u-on a concrete, detailed study of
pricing provisions in the Codes or uoon a factual investigation
of ho- those -orovisions have worked out in practice, without
first dis-oosing of this basic issue, if not. finally, at least
tentatively, should b o Ppnarent. IlTot one of the most common
tyops of Trice provisions found in the. Codes can be said to be
-ith-r good. or bad ner s-. Not even the essential -rovision
of all or.n rrice arrangements; the obligatory filing at some
common point of th- oricn terms unon whichh alon.each of the


9826




-4C-


various ent-rorises in an industry is prepared to accent orders, can be
said of itself either to promote or to obstruct the establishment of fair
prices. It all depends upon how one is en',eavoring to insure fair prices,
in the first oboce, which in turn aeoenas, or should depend, u-on what one
conceives fair prices to be. That, finally, is a question of ethics; the
nature of the interests or values which one regards as deserving of oara-
mount consi:errtion....."(*K

In lieu of the critical analysis of alternative economic uhilo-
so:'lies sug.estea Dv these writers it will be assuned that the intention
of Nj. was (as cle: rly indicated by the statement on p-orice filing quoted
above" to resto-e and make effective free and ooen competition so far as
possible unaer modern conditions of economic enterprise.

Even so it seems necess rv to define just w'-hat is nme-nt Dv "free and
oren" conoetition as used here Pnd to undertake rn analysis of the inherent
possibilities anC. limitations of orice filing as a means of attaining such
"free" nd "ooen" com.oetition (**' before a descri-otiom and evaluation of
the experience with ourice filing plans under TNRA codes is undertaken.

The need for such an analys 's- xists auit- auart from the announced
object i'es of a particular administrative orzaniz tion such r.s the TRA.
It is apparent even in the original thesis of' :r. Tddy--that knowledge of
marked conditions is essential to true competition; hence the supplying
of that 'knowledge in the form of oublicit- primarilyy of prices and price
offers) will contribute a wholesale regime of fa,.ir competition based on
knowledge rather thn on ignorance rand secrecy.

One.writer, i.;ilton JTels :relson, has assumed that Fr. Eddv believed
his conception of 1'nowlede, as an essential to competition, was an
oriTinal contribution ot economic thought, when in.fact it was merely a
reinteration of a well-known concept of classical edorfdmv. (***) Mr.
lielson joints out that economists, in formulating the la,,.of "oerfect"
competition, based upon demand 'and surelyy relationships, have predicated
it ucon the assumption thot buyers and sellers h.Ve enough knowledge of
market factors to be conscious of their own interests as bargainers and
have the desire and enough freedom of action to oursue those interests
intelligently. He then oroceeds to criticize Mr. Eddy's theory of open
prices on the grounds that it leaves out of consideration the buying
class, and hence is utterly inadequate as a solution to the problem of
achieving true or "perfect" competition. So long as "knowledge" is to
be supplied onl- to sellers and is withheld from b'.yers, it can not contri-
bute to any nearer no-roach to ideal competitive conditions and will serve
only "to give redress to one industrial class, namely sellers....."(*



(* Ibid.

(**) See below,' pp. 62-4 for historical significance of the "free" and
"open" market.

(***) Nelson, po. cit- ., p. 196.

(****' See, also, Fetter, F. A., T"he Icasouerade of I monopoly, pp., 262-263,
(1931, JTew York


9826




-41-.


This criticism is obviously pertinent and was clearly, although
somewhat belatedly, reco.gnizoed by the NPA, which sought in later policy
declarations to insure *.)rice publicity to customers as well as sellers.
But there are other eouall'- oertinent observations that should be made
concerning L.r. Edc..y's theory if it is to be cmalyzed in terms of the
theory of "perfect" co-ipetition referred to oy iMIr. Telson.


9826




-42-


B. The leaning of Publicity in Perfect Cormoetition.

"Perfect co'-Tetition" has, during the past 150 years, been a
conion field of ropeculation brby those economists "Tho are non often la-
belled the "oure theorists. Startin: ':ith certain assurotions about
human nature and. indiviCual liberty, equality, and. property, that
xrriters vere concerned -ith demonstrating by a -orocess of logic the man-
ner in whichh commodity values -rere determined and income distributed in
wages, interest, an. -orofit. The assumptions, frequently not explicit
or '-iell articulated, *-ere the ass-unotions of perfect competition. The
deduction of the reasoning process was that perfect competition, more
surely than any other organization of economic activity and resources,
rould maximize tie '-ealth of the nation and most justly distribute this
health.

The "end" of .-erfect competition has been variously exproressed as
ma,::inizinm thie national income or individual utilities; securing to
each the product of his efforts; re-rardin.-; enterprise in proportion to
its efficiency; distributing resources among different places and occu-
pations in such a way as to raise the national income to a maximum po-
sition; anc the minimizing. of prices to a level vhich pays for expense
and trouble of -oroduction---which in turn, therefore, forces the great-
est efficiency and.. .highest quality. Thlie maintenance of an equilibrium
bet-reen various industries and lines of economic activity such as to
make irmossible general oiz over-all de-pression "was another beneficial
result so:etiTies p-oointeC out.

kiong other things, it -ins demonstrated that in any industry under
perfect competition -erices are unifor.:m (differing only by amount of
varying delivery- costs) and are just sufficient to return to the most
inefficient roeducer hic costs of production.

It is entirelyr clear that the assu nptions of a perfect competitive
sy-stem have never been identical -7ith the realities of economic beha-
vior. This is true, it :aay be noted, if for no other reason than that
the assumptions of perfect knowlede and -perfect mobility of resources
froi- one indu-str-' to another eliminate the essential fact of timeliness-
first b:- eliminati,-- thie uncertainties of the future and, second, by
supposing that nove;.ient is static. (*) The historical meaning of the


(*) In a perfectly competitive marl-et deviations from equilibrium
price could not occur. "there would be neither movement towards
an equilibrium nor oscillations about it." It (the equilibrium price)
1 'Tbul" coe:-ist rith the -iarl:et through the realization of sta-
bility at a single stroke the market cones into existence."
Chamfberlain, EtC:ardC, Theor-, of ioncoolistic Com'oetition, p. 26
(1933) Harvard University Press.
Neo-classical economists, particularly Alfred Marshall (see his
Principles, 9th ed., pp.330-37S) have introduced timeliness
through the conceptual d-evice of short and lon;7 periods, conclud-
ing that the shorter the period of time the greater must be the
share of attention to de.-iand; and the longer the period the more
inroortant will be the influence of cost -oroduction. This device


9926





- 43 -


concept of "Perfect competition" lies not in its use as a scientific ex-
planc'.'Uion of economic behaviour but rather in its meaning as a social
desidcratu-.mn, .n "ethical ideal-type", a criterion for the control of
cconoi.Ac .hchavior. (*) Frankly recognized as such, "perfect competition"
i,7 a useful concent--not because it is strictly attainable but because,
within ;he lij.,itations imposed by human nature, it may be possible to
apprj-. m.re nearly than before this widely accepted standard for control
of econ-:mic rivalry and bargaining in a system of private enterprise
and capitalism. (**)

Cont'd.
while recognizing that mobility and production are time consuming,
co-itins an important element of static analysis in that it carries
an assum-otion of constancy in the individual's reactions to a
c.r.n in_ social and economic environment, Mclillan &c Company,
Tnr: nric.

(*) E:-cc't as it may have been employed for "pedagogic illustration" -
See Commons, John R., Institutional. Economics, pp. .724-728 (1934));
also hic diEcussion of "ethical ideal-types", ibid., pp. 741-748.
Mc7.illan & Company, Xew. York.

(**) 0o., i bid, pp. 342-318 and 711. "The present report has 'in large part
been oriented to this end of public policy--not because the authors
neces-arily prefer it to other possible ends-- but because it makes
e:c--licit a -Goal of reulation which appears to be the most widely
acce-otfed anck one which legislators, courts, and the National Industrial
Recovcr,- Board a-ecar to have in mind when they refer to "promoting
comjr.ietition", "eliminating monopolistic practices", the "ideal of an
onei End competitive market", "competitive price making", etc. It may
be ca-.!ied and end nf "fair competition" in the sense that it represents
thac balv'ncin- and conflicting interests which is most widely accepted
as -iust a-nd. fair. This does not moan, however, that the reader will
not find in this report evidence bearing on the relation of price
filing, to t'ther specific goals of public policy (which may or ma; not
op compatible with the standard of perfect competition). For example,
scatte: cc' through the report mag be found material bearing on the
incij.cence of price filing on the small business man; on the function
of price filing in reducing, the social "illth" of secrecy and sus-
picion; c7 the social costs of bargaining and negotiating over a
-'ice,








I .


982,




-44-


In order to indicate the meaning of publicity in relation to
perfect competition, it is necess cry briefly to summarize the ess'en-
tial elements or attributes of this competition.. They may be called:
purity (from monopolistic elements); mobility (and fluidity of resour-
ces); and rationality and kno'.7lee. (*)

S 1- Purity. "1onoroly ordinarily means control over supply, and
therefore over price. A sole prerequLisiteto puro competition is in-
dicated--that no one have any degree of such control." (**) First, the
nrmaber of sellers and of buyers must be large enough that the influence
of any one of them on the total supply or demand, and hence on price,
is entirely negligible; or if not entirely so, too slight to make it
north while for him to exercise it. A second requirement is that the
commoc'.ity- itself must be perfectly homogeneous or standardized and ap-
"penr in the same market; otherwise the seller of a "different" product
would possess some degree of control over the price of his particular
species of product. Moreover, the seller must be perfectly standard-
ized. "Anything that ma:es buyers jgrefer one seller to another, be it
personality, reputation, convenient location, or the tone of the shop,
differentiates the thing purchased to that degree, for what is bought
is really a bundle of utilities., of which these are a part." (**)

Finally, it should be pointed. out that implicit in pure competi-
tion is the assumption of accessibility or of equality of opportunity-
that sellers and. buyers have an equal opportunity to enter and partici_-.
pate in a market. The possible obstacles are many but may in the main
be classified as follows:

(1) Discrimination b;y which is meant a difference in p-orice
between customers which coes-not reflect the difference in the cost of
producing for and selling to them or the value of services rendered
the seller by these customers.

(2) Pripiatnry rnrmneti.tinn which is the use of sellers (or buyers)
of superior resource to handicap or ruin weaker competitors or to
prevent entirely a potential competitor from entering a market.

2-. Nobility of resources. A second element of perfect competition
is perfect mobility of resources to those industries which are making
a greater return on investment than is enjoyed elsewhere, and similar-
ly away from those industries in which the rate of return is depressed
below the level found, elsewhere. Under such circumstances the net
revenue of all industries '-ill be identical, and variations will not
occur even momentarily,. The forces of supply and demand guided by

(*) Other assumptions which need not be discussed here include the
absence of fraud and violence and. the negotiability of commo-
dities and_ debts--see Commons, op. ciJt,op.339-339, 775-776.

(**) Chamberlain, or. cit., p. 7

(***) Ibid, page g


9826




-45-


desire for profit and through the nmed.iuri of mobility effect a perfect
equilibrium betv'een industries, and6 society is supplied with the goods
it most desires at p-orices devoid of elements other than necessary costs
of production.

This assumes that capital is fluid or will move in precisely the
amount necessary to equalize the revenue of the attracting industry
with that of others, whether the amount be one dollar or one million
dollars. It assumes, moreover, that there will ..be no hesi-tation or
loss involveC in abandoning productive equipment which for the moment
is failing to yeilz' a return equivalent to that which is enjoyed in
other places. Finally, as pointed out above, it contains the contra-
dictory assumption that movement is static or without element of time.
It has meaning only as an ideal which might be approached but never
attained.

3 Rationality and knowledge. There is assumed finally an "eco-
nor.iC man" who acts '-ith -oerfect reason in the direction of his best
Pecuniary interest anI -'hose knowledge of opportunities--all of which
lie in the future--is complete. Here again time has, been left out of
the picture and again thc.t which is -resented is an ideal.

Appolied more specifically to the market this' implied that all
buyers'. 1oi7 of the offers of all sellers and likewise sellers are a-
ware of the prices which each of the indivic&aal buyers is willing to
pay. The oppoortunities a.nd freedom for trading or for moving to other
markets are conclete because they are all known.

Where this .kno--leClge exists sellers have no interest in the pori-
ces obtained by cCmpeCtitors inasmruch as such implies that they have an
interest in maintaining or cutting prices, which is incompatible with
the assumptions c. the purity of competition (*), viz., that the num-
ber of sellers is sufficiently large so that no one can exercise any
control over supo'ly and hence over price.

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

Such a deduction involves the technique of static analysis, i.e.,
holding other factors constant except the one being considered and in-
vestigated. Theze writers, however, fail to make e:policit the nature
of the assumptions of constant factors. Specifically, they have as-
sumed that the other elements of perfect competition are present and


(*) Above, o. 44.


9826




-46-


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

If these imperfections are forces tending a'ray from the trua
competitive rice and are active in character, there remains the possi-
bility that price publicity Will enhance rather than counteract their
effects. Thus to give equal knowledge of prices .ihen there is unequal
influence or rower to act on that knowledge might conceivably result in
a rice further from the perfect competitive price rather than closer
to it. This possibility 77ill be exolored in the next section.

C. The Role of Publicity in Imnoerfect Competition

Modern industry, with its concentration of production in large
units, the aggregation of tremendous capital assets under corporate
control, and extreme product differentiation backed by huge advertis-
ing outlays and other indirect forns of selling competition has so
hastened the trend away from conditions of "perfect competition" that
the assumpotions of this theory have little in common With the facts of
the present business 7orld. Every market is to a greater or less ex-
tent "imoerfect." Each producer is obligated to choose not only the
amount he rill -orodu-ce, but also a price o0 prices at which he will
offer or sell his -oroduct at any tinle. Alvrays he must choose that
price 7ith regardC to the amount and kind of goods others are produc-
ing and the prices they are quoting, since the pricing and production
fabrics of corroetitors can seriously affect his ow7n volume of sales and
profits. (*)


(M) As Professor Chamberlain, in introducing his theory of "IMonopo-
listic Competition", states:

"Because most prices involve monopoly elements, it is mono-
polistic competition that most people think]: of in connection
with the simple word "competition". In fact, it may almost be
said that under pure cormoetition the buyers and sellers do not
really compete in the sense in whichh the w7ord is currently used.
One never hears of 'com-oetition' in connection with great mar-
kets, and the phrases -orice cutting', 'underselling', 'unfair
competition', 'meeting conmoetition', Isecuring a market', etc.
are unknlo 1o wonderr the principles of such a market seem so
unreal when applied to the 'business' world where these terms
have meaning. They are based on the supposition that each sell-
er accepts the'market -price and can dispose of his entire supply
without materially affecting it. Thus, there is no problem of
choosing a price policy, no problem of adapting the product more
exactly to the .buyers (real or fancied) Wants, no problem of ad-
vertising in order to change their wanti. The theory of pure
competition could hardly be expected to fit facts so far differ-
ent from its assumptions." See Chamberlain, oo. cit., p. 10
op. Robinson,' Joan, The Economics of Imroerfect Competition,
pp. gS-90 (1933).




-47-


An oatt.- i:'.t --'i). be -in.''- ii "-h'.t fol':o-,'s to. indicate in summary
manner the ;os:ibi?.itic >.'"ercdl by publicity through price filing
aned :disse.in, io.i :o:' Ltr_.en't:.e:--i:"" tend&6ncy a.:ay front perfect com-
petition or, o:n tL: o'ter '-uaC, for contri jutin; to a greater attain-
ment o2' tnis en,'.. TJ. in; :o21.olistic or T"impure" conroetition as.,a
point'of departure th'e up'ro -cl" "rill. be to Guaye.t, first, conditions
under 7hich ;publicit" cf r-ic. (*) nmay accentuate monopolistic price
formation; and., second. circ',i-tances under which it may promote or
prevent .access to the rar:-.et. (**)


(*) 3:,- sellers. i1o atteipmt Will be maCde to discuss the economic im-
,?lic.ftion of a possiblee system of publicity of buyers' prices.

(**) The benrin-' of 0 'rice publicity of the type provic'.ed for under 17?A
coc.es uon a thi'C.d attriblate of perfect competition, viz., mobil-
ity of resources (see above, pa.es 44-45 ) is too indirect and re-
:jote to justify discussion in'this report.


9S26




-48-


1. Rice rullicity and i'ono ilistic Price Formation

By re, .-fn c thie fact tK'.t *... r ..! ._o-olistic or "impure" competi-
tion every sele or L.as zo0le d.o-. 2 o01 cm'itrol over supply, the starting
point of a ther,-. cf mrono.nl "c c'L.o titien is not pure competition
but pure monopoly. Price ti,,d :'" U.'...: cy is a calculated, managed
price set at a figure which 7ilil :I.-.., 2.' the monopolist's total revenue;
"he is able to maintain it theri-e bct.ube ex hypothesi there is no one to
cut uider him. .... it represents a balance of opposing forces of loss
and gain, which renders the total profit a maximum." ( )

The monopolist in setting his optimumr price must c-nsider two
things: one, the volume of sales that he may Pxpect r --..y given price-
which is a consideration of the competition of subst" t a goods and of
elasticity of the demand for his product; and, t'wo, ni costs of pro-
ducing the goods which he can sell at any price which he settles upon.

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

l"If each comoctitor asnsumes his rival's price will not be changed,
he can, by setting, his own slightly lower command the market and dispose
of his entire output, increasing his profits virtually in proportion to
the increase in his sales. His rival making the same assumption will
cut still lower, and the do-nrnard movement -"ill continue..... until no
further price change can be made without disadvantage to someone, the
equilibrium price... (being) the purely competitive one for unly two
sellers, and, of course, for any greater number. If the full power of
the seller to alter his price, even to the disadvantage of the buyer, is
recognized, however, price will oscillate over an area which becomes "-.
narrower and approaches more closely the purely competitive figure as
the number of sellers becomes large......."*)














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

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

(***) Chamberlain, op. cit., pp, 36 and 54. For his demonstration see
pages 34-46.,


9826






-49-


A much more re,-listic hm)bot1ci,7 ho'/yve.r, is that the seller
will r.co.'in e in d.;-tkr:,.ni:, .i o*/ KlicT ta-'t his rivals :policies
will be determined a e st ii ,rt jy hii3 o -n. 3or exam-ole, before
mki--: a -orice cut to i icre-. o ,:G.s xr: of the market, i '11--ill
probably consider -ht] !-r rsuc r( action 1 ill be imet by his rivals
and thus prevent the rccrual of -nz, profitt to himself. To render
his profit a m:.m::, the seller '-il! tp.ke into acco-it "his total
influence upon price, indirect :.s ',ell 2s direct, As long as each
seller lookl:s to his ultimate interest and '-nors that interest,
prices .'.ill be determined at a lcvel 7hich -ill maximize the total
profits of all-the level, which would maintain if there were a
single seller controlling the entire supply. "If sellers have re-
,.ard for their total influence uoon price, the price ,,ill be a
monopoly one. (*) It is this action which hereinbelow will be
called "Conooolistic price fornmation."

LCeore Oroceding rith this consideration, it is necessary to
point out that the discussion of price formation -hich has iraredi-
atel3~ preceded has oroceded upon the assurToticn that the Oroduct
and sellers competing for a given market -ere perfectl-> standardized.
Circumstances are much different: Either because a sellers oro-
duct is different functionally or in quality, in appearance or
style, or because he possesses n le.,ll. protected trade mark or
trade nhae, or because of his personality, race, color, or character
of establishment, it mq-- be said that each seller enjoys some de-
gree of monopoly. Yet, even under "absoluteH monopoly there is
not an entire absence of competition since there are always sub-
stitute goods--however im-perfect.' The degree of competition be-
tween differentiated products is an obvious function of the extent
of the differentiation.

".. )Z.ic' cut by one utomobilfe manufacturer, for instance, af-
fects:Y epecial-ly the soles' of those other manufacturers -rhose
p;'",.uct is in a.-.ro::.im'-.tely the same price class, and probably
ca-,.v.se mLuci less disturbance outside of th'- se bounds,..........
Evi,-ntit-', a (competitive) group may be large or small, depend-
in-g u,:'i:, tihe degree of genera-lity -iven to the classification..
C-i.r ctoristically, any individual seller is in close competi-
tion 'it]. no more than a feu, out of the group, and he :;,i, seek
to :-,void price competition for the very reason given as apply-
ing to smrll members--that his cut -ill force those in closest
cr.t-,-etition 'ith him to follow suit." (**)

Competition is not limited to price. Product differ ntiation
is a comr.etitive devi.ce. The- quality of the product may be im-
prove d. or deteriorated, its appearance changed, or a Ynyriad of


(*) IOid, 54; see also 4p, 46-51.'*

(**) I.id., lp. 102-103.


9826




-*50-


additionr-l services mdn. ,--tr-s ':c'.C. T.int is more, it may be of ad-
vantage to e-'wnd fandr- in rcl-'tlvt "n oth`:r forms of sales pro-
motion in .an effort to o.tild x' cu:'to:!.r ,'oor'will.

Thc.oretic'-11-, if .-.&ch ;pllcr .rt fully advised of the oros-
pective price, prodlfact, rind 1-'.v...rti; :" .icies of his com-oetitors,
price, just as in the o Le of ti.- s-.[n '..'-irdized -product, would be a
mono-jol'T one and prodCuct diffcrenti-.tion and. advertising would be at
the level and of the kind whichh vould. obt,.in under mure monopolyy where
the.- re .resent .devices employed to attrr.ct the consumerst dollar from
substitute products. (*) But the problem of knov.'ing the probable dcom-
petitive -oolicies of rival- becom-nes infinitely more comolex tith three
v.ri -L' lps to consider in:istr-.d of the single one of price; and oubli-
citZ of price offers as a me-ins of promoting this knowledge is mani-
fest!- of much less potential significance.

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

(a) The farsightedness and unanimity of rivrl sellers in
acting in the direction of their ultimate best interests;

(b) The e-tent of the price and other data available, first,-
to riv-l sell.-cI"s :..nd, second., to buyers; and

(c) The interv-il oe-fore r.for-:ation becomes available to
sellers -.ld to buyers. (**)

a- ThE f'-rsi'trxtedanss of rival sellers. It has been seen
abov.,- thrt the degree of :niono.)olistic rice form.tion in any market de-
pends Lncn ,fnether sellt-rs t'dIe into consieer[Ltion their "indirect"
as :ell -s "(-irect" influence vi)nn rice. here competitors independently
determine uni-on anCd '-dhere to th;,.t zAingle rice r-hich '-ill maximize the
tot-LI net return of the industr.r tie-v -il. .iave hELd regard for -their
total influence., upoi.nr'ice--'irect and. indirect-and o rice will be the
mono;olLr one. Un6.er suci'- circ'rmnstnnces *nric, changes rould be dictated
only by such considerations -s flucru.itinw costs pjnd changing prices
of substitute products-the fr-ctors hiich the pure monopolist looks to
in deter mining his prices. These price changes would be effected simul-
taneousl:r and in the sni-e magnitude by tne independent movement of com-
petitors.

(*) Ibid., :. lOn-lO., 170-171. It should not be assumed that
prices under monopolistic competition -ill al-'ays be at a level
-bove costs. It is true,.'houever, that costs will usually> be
higher and production le5a than under pure conroetition. Ibid.
pp. 175-176.
(**) Cp. ChrmbeKai;,op. cit., n.51-53. Since he does not mention it
specifically, evidently Chamberlain minimizes the practical im-
porta,.nce of the second factor as a. condition to monopolistic price
formation.


9826




-51-


This, however, assumes degree of f-.rzightedness which
probably is not aopproximated in -any of the contenmoorary markets. It
means that each rival is a.i:are of the ultimin'te consequences of com.-
petitive price cuttin- and will not, therefore, initiate any downward
movene;nt from the monool;ry price. This condition of joint interest
will be violated f:htn the individual riv.-,ls see no further than their
presumed immediate advantage of cutting under their comoetitorst prices
to enlarge thereby their sh.re of the av.il-'.jle market. However, even
though the individual seller were fully a-'re of the ultimate results
of such competitive price cutting-that the immediate advantages to
be derived will lar-ely cancel out through competitive price meet-
ing and prices will work downward until they reach the purely com-
petitive level where there are no monopoly gains--he may nevertheless
act contrary to his own best interest in -iintaining his own price
if he is uncertain bout whether his competitors are likewise
aware of.the results of their price cutting. If there is a strong
presuLmption that these competitors have regard only for their im-
mediate interests it would be foolish for him to proceed deliberately
by maintaining his own price. (*)

Lionopolistic price formation then as one significant factor de-
oends u-oon .the extent to 7hich business rivals are mutually con-
fident that each is aware that immediate gains from price cutting
may not be realized because price reductions will be met and that
each is like-rise a rrre that such competitive price cutting will in
any case eventually lower prices to a level which will only suffi-
ciently cover costs to justify remaining in business. The degree
of such -,areness or farsightedness existing in business is largely
indeterrinant. It depends upon a number of factors which them-
selves are not determinant--in:nsmuch as it raises essentially the
question of individual behavior in highly vA:ied and changing en-
vironments, The number of sellers in any market may be so many as
never to raise the question in the mind of any one that his policy
may so affect the market of his rivals that they will promptly meet
or follow the price which he sets. Or where product differentiation
and advertisingg are important 96mpetitive devices the seller may have
no reason to assume that a price reduction on his part will be met
by price cuts from competitors rather than by more energy devoted to
dressing up attractively their products or to persuading the con-
sumer of their particular merits. Or, again, individual sellers
may interpret the general market situation--and so their long-run
interest--quite differently some feeling, for example, that it is
best to un.loa.d their entire goods on hand whatever the immediate
cost, -thereas others feel and act in directly the opposite manner.
Or, price cutting on the part of some may be interpreted to be de-
signed to open upo a new market or secure large or special contracts
of another character to which the others may be, in one instance,
entirely indifferent 6r, in another instance, willing to enter into


(*) See Ibid.., -oa-es 51-63 for discussion of this factor of un-
certrainty.


9826





com-etition at '-hateveT the oosible immediate sacrifice.

It is irobbl, true in an.jr cPc, t,:.t business rivals are not
conscious of the alti1' T.e ijivlicotions of competitive pricing e::ce-ot
through long n-,.d c.i'f'icult e,:-...ricnce. A lesson once learned may be
entirely forgotten because of tihe '.wle rlnce of ner and inexperienced
members or because of major indLustry kh(-vals brought about by
factors outside of the industry's control. In the course of re-
peated experiences they maZr have learned that in the long run they
are best off and most secure by follo-ing the leadership of some con-
cern in whose judgment of market factors they have confidence or for
whose power for damaging retaliatory action they have respect. The
influence-of the leader in monopolistic pricing is of particular
sigaiificnxice, it ma" be noted, where rice increases are in question:
A concern, attempting to lead in a price increase, '-hich commands
little respect or has little po er may fail in its purpose entirely
because of 'the immediate gain at its expense which rivals see in
keeping their price at prevailing levels. In the absence of an in-
fluential leader or in the absence of collusion or agreement price in-
cre-...es may be made ,-ith gre-.t difficulty in an imperfect market.

It is difficult to see wherein a system of rice publicity
through price filin, cn in itself contribute to improving the "far-
sightedness" of business rivals in lookinC at the ultimately unfortunate
consequences to them of competitive price-cutting-except through
expanding the contacts and influence of the more enlightened members;
or, more -orobably, in contributing to the experience of following a
leaner; 'hose pricing policies are more precisely or extensively
publicized or who in turn become more fully rware of and hence
better able-to act against tnose '7ho were unwilling to follow.

It is probable, however, that much the more potentially im-
oortant contributions of rice filing to monopoly pricing, may come
from t'lro other fn.ctors referred to above, i.e., (1) by increasing
the.knowledge of competitors' prices and (2) by reducing the in-
terval or time lag before these prices bec:ne known. The
possible bearing of price filing on these factors '1ill be dis-
:.cussed in the two sections which irmediately follow..

Before proceeding, however, it must be strongly cautioned that
however great may be the. contribution of price filing to fully
and. promptly to apprising sellers of their rival's price policies
it will not. follow, that monopolistic price formation 7ill thereby
necessarily be promoted. To the e-:tent tnat "farsightedness",
viz., the extent to which business men in forming their o'm price
policies are aware of and consider possible reactions or Pric,?
which rivals will make as a consequence of their o'mn, is not itself
promoted by -orice filing, the result may be to intensify com-
petitive price cutting, inasmuch as competitors in their eagerness
for gain will know more .recisE-ly what prices to undercut; or if
competitors in another industry were already possessed. with some
degree of farsightedness the result may, on the other hand, be a
very d-efinite tendency to'-'ards monopolistic pricing because of the
appreciation that price reduction now openly publicized will be
promptly met.
9826







The inifeterminateness of the problem makes it prticulirly im-
port-i-nt to c.sceirtiin in 7Thrt *1-lononts conceived to be the functions
of price of.icit.; whether :or e.::.l the. loo-.d upon it as a
possible Dr( vontive of competitive price cutting or as an aid. to
price stability,; or 'eth-er the ilnini7ed thle publicity aspect and-
sought th-rough price policy pl,-ins a me.was to a more direct control
over ;rices.

b .Extent of the price andl other data made available.

Eco:i-nrisic in their writings almost universally have trentedi price as
9 single datum (*)-a misconception which perhaps has been encouraged
by the orevlence of index numbers of simple price series. It is of
doubotful propriety to speak simnly3 of "price" in the case of any
mann."ccturing industry tod.y; rhat exists end what the business man
faces in determining his own policy is for a cingle concern -:nd a
single jrodluct a comolicated "going" price structure which may be a
composite of so rnany distinct pnd flexible elements that even the
abstraction of a net price hs little rieaning, and the list price is
nothing iimioe than a point of departure an. of the various elements per-
haps the le-st representative. (**)



(*) Cr at the most 7-hat see-s to be a list )rice to the wholesale or
'etvil trcde ,ith fev discounts that are handled merely as simple
coznst,rit adjustments to be applied to list prices throughout the
given "-e:io& of time.

(**) .s a. exa.:n ,le of the price strLacture of a modern industry, the
structure for the "stanC-rd" companies in the original filing
b-,,- the Fractional Horse Power lotor Group of the Electrical Fana-
facturing Industry under the ,code involved the following:
1. Customer classifications mand the discounts to these
clr sses.
2. Ter:;:s of sale,.
l. Deliver" policy.
4. DefLinition of the customer classifications.
5. "Liultipliers" for certain individual purchasers with-
in given customer classifications.
6. Quantity discounts to all classes for unit shipment
of 10 or more motors.
7. Discount plan for Clas~s "G" purchasers (resale ma-
chinery manufacturers) based on quantity and shipping
reouireuIents.
8. Motor prices (general purpose and special application
motor prices are both subject to discounts). ,
Electrical modifications
in. Mechanical modifications.
11. Motor d.imensicrns.


9826





That h-s .iven ri;,e to this i.bi. '.litous method of indirect pricing
has never been sstemntic.llyr e-:por.d. (*) although the suggestion
may be mrclde tltnt it reflects i-u :,-rt the delibp.rate confusion by
business rivals to conce-l frr.: c'.- no't -ier the true nature of their
price conc,-ssioni.s. This concr."!.-..it-nt .i; have arisen, however, not
only .-s a device to re(..ucC- ,.icc ':it.-out tile !:nor-ledge of competitors
but l.Iso of buyers. A reduction to '.-vi.rtLculrr buyc.rs or cl.n.sses of
buyers is -cssi'jle even .e-.re te seller Coes not '-ish to go as far
as to reduce -rices to all. b-L,,rs?--if the -ctun1 rice can be con-
cp-..led byr such devices ,z.s rebates -nd special allowances.

A second e-mplanntion of the prevalence of indirect pricing may'
be thie f-ct that buyers vary so grer.tl-,T in circumstance that it is
more 2tr.tPgic, convenient or more economical to em)loy- a rice
structure fler-ible enough to Vllo'.- for these variations. Obvious
cases in -)oint are ,'iscounts for c-sh -oa,,ments and for quantity
purch-.ses and allowances for advertising performed by buyers. Or
as hc.s been frequently pointed o,..t, the nominal price m-y become
custo2.iJ:ied and le'.re to the indirect elements the function of nro-
vidinr: fle-ibility. A cus.ton..ry price mlay be established, because the
product is repeatedly purchased, :-Ps in the case of chewing gum, or
through nation-wide advertising; as in the. cise of cigarettes. Such
devices or .rEmir-.&s and free deals often accom.)any the sale of this
kind of product.

The variety of indirect -.-rice elements :.and other means of oro-
motin.g a s.le is '-ell illu.stratedC. by the tyTnes of restrictions im-
posed in iPA codcs. Ariong goner-l types of codal restrictions (usu-
ally a jlyin: irres..ective of class or location of buy.er) .vere those
prinmr.ril relating to (1) tine of buyers payment (**); (2) risks
of buyers (***); (3) giving of additional goods or services (****);

(*) See, however, Lyon, Le'-erett, 3., Broolings Institution, Free
Deals (1933) and Avertising Allorrances (1932)

(**) E.g., cash discounts, periods of free credit, interest beyond
free credit period, datings, termras of installment selling, and
deferred payment, anticipation of-bills, etc.

(***) Eg,, product guarantees, maintenance guarantees', allowances on
defective goods or discontinued lines, price guarantees, resale
guarantees, approval selling, consignment selling, offers with-
out time limit, assuming liability for non-performance caused
by non-controllable factors or for error in plans or. patent in-
fringements, agreements indefinite as to time and quantity, etc.

(****) E.g., free deals, premiums, coupons, samples, prices, sales
promotion ar.ards, special containers, display materials, dem-
onstrating, estir.iating, inspecting, crating or pAcking, ware-
housing and storing, etc.


9826




A.OC -

(4) giving favors or financial assistance to buyers (*); (5) payment
or diversion of colnissions or fees to customer (**); (6) allowances
for payments or v.lai r-nder!d by buy-%c ( *),

I.-ore intrinsic-lly secret d'vicos by ,which concessions may be
granted arc illuztr-ted. by the follo'rini; devices ,.-hich wVrere often
prohibited or restricted by IT-A codes. (****)

Thus the seller in promoting his sales is by no means con-
fined to reducing a hjrpothetical single-unit price. He may liber-
alize his terms of payment, mraske greater allowances, assume a greater
share of the buyers' risks, "throw in" additional or supplementary
goods or services; or, if he anticipates that his action would be
nullified through being .:iromptly met by competitors who have ways of
finding out about it, he still may resort to an understanding with
the buyer v'hereby the latter may avoid full performance with the
terms of the formal agreement or contract; or he may conspire with
the buyer to falsify the terms of the agreement; or he may make no
formal or written agrecrient. Publicity, if to be completely effec-
tive, imnlics, however, that every element of price and every under-
st njding with the buyer be known.

But, ?s pointed out above, the. seller who does not wish to
make the extensive price reduction which would be effective if
granted to oll of his customers, rziy confine it to single buyers or
groups of buyers. Pricin. devices such as :uantity and volume dis-
counts, variation in tr-.de differentials, diversion of brokers feQs
and _a-'ticul-arly a.ny kind of rebate are directly and appropriately
adapted to the purpose as is the creation or "splitting off" of a
new, classification of customers to whom it is desired to grant a
favorable price.

(*) E.g., entertainment, gifts, paying buyers' personal expenses,
subsidizing, etc.

(*.) E.g., splitting o- commissions, fee splitting, payment of brok-
eragr; to ctner thnn bona fide broker, eta.

(***) E.g., for tr-&e-ins, labels, advertising, containers, installa-
tions, space hired, cart.:-e, etc.

(****) E.g., denrrting from credit terms of contract, settlement of
olc'. accounts at less than full value, permitting buyers' cancel-
lation, retroactive settlements or adjustments, etc.
Acceotin;, in payment: Securities, real or personal prop-rty,
buyers' capital stock, etc.
Oral aCireement s,.offers, orders, false billing, offers, orders;
misdated invoices,.contrnacts, orders, offers; invoices, orders or
offers omitting terms of sale, or specifications; split billing,
luniz sum offers, etc,





9826




-56-


The ahov- e,-".Q.lleE should safficaie'ntly indicate the number and
variety of the o'poCr.tunities -..v-il-r.ble to the business m-.n to effect
concessions by .-ins- other thr-'n direct or nomin1il price reduction,
The i.ir.ieC.i'-'te t-;!.: is to rt-.amine th -orobleras which face systematic
price publicit2; in bringing to light not onl-, the nominal price changes
and changes in other f-irl' obvious price elements but all of the
various and devious devices th',.t m'y be employed to-r-Ird the same end.

In the first place, the dat-. must be filed in such a manner as
to be informative rnd reap.ily intelligible to competitors. The very
nature of certain terms of s-lenmvy nake this difficult. Terms of
pmrriient vhich vary according to the risks represented by different
buyers, rllov.ances for services rendered by vArious customers, the
assunra)tion of liability for defective product through -oroduct guaran-
tees or through a policy of accepting or allowing for the return of
merch^nLiise, the rssumotions, through guarantees against price ad-
vances or declines, of the customers risk of changing price levels-
these are examples of terms the exact magnitude of whichh may vary fro:-.
buyer to buyer or which cannot b. determined precisely in advance of
the sales agreement. In filing, an industry member granting this
kind"of selling terry mriny necessarily be limited td a general state-
ment that he e.g., '7ill guar-ntee products against defects in
material or w:orkm-.nship or ; ill guar-ntee against rice: decline; or
he may- e.g., file only the most f.kvorable 'credit terms which he ,sill
grant or the most librar.l advertising or trade-in allowances nhich he
will trpke. In both cases the competitor 'lacks the information 17ith
which'to ascertain or-cisely the actual price terms which will
close the tronsxction.

A more serious obsta-.cle is the reluctance of the industry mem-
ber to file his pricing policies in an intelligible manner. 7hen they
are complex and varied he may deliberately confuse them or he may
consider it too hindersopne to order then. in a manner nrcessarytp
make then e-.sy to comjr'-hend a.'id strictly accurate. This is, how-
ever, but a part of P broader consideration of the willingness of the
industry member to -dhere to his filed prices Pnd terms. -Thenever
there is a prospect of iiimedi-te "dv.ntLCe through price reduction
there will be r drive fot indlir-ct and. secret pricing. This urge may
be intensified by systematic rice filing -nd dissemination due to
the fact that 'the kno' -lede of competitors' price offers obtained
from the filing agency m.iy afford'a more precise objective at which
to shoot--a, level of prices vhich ri'mn, be unCdercut ,rith profit. It
may be t'-hat this will not be carried out by filing the price con-
cession for fear that competitors will retaliate; a more effective
procedure may be to do it secretly w-ithout filing the new and loner
priee; or the s:-,ie end may be d.ccomolished by a secret agreement with
the customer that the latter -ill receive a rebate or need not pay in
full the -price ocenly- agreed upon -nd. filed. This is a. matter of e
ev sion of filed prices and may be accomplished by devices so illusive
in 'c-ar',-cter as to escape detection by the most efficient enforcement
agencies. It is to be distinguished from other cases of non-adherence,
amoi.uiting to complete indifference to the filing requirement, which
arises from the f:'ct that the enforcement agencies are withoutt suffi-
cient power, leg-'l, economic, or moral, to force compliance with the


93235




-57-


rules estr-Uishcd for filing-; and cdhprence. '

A third orob'o. -n fr.cin- .-n or:- iaed program of price publicity
through price .ilinr: irises from thec div ruit, of products and sellers
which ere usv.J.ll[- brnr'.mnt unCcer the scope of a price filing system.
It is a -proble.m of obt0iin.-: information -- Qich -ill describe the pro-
ducts or services --,lich are offered in order tha t there can be a
significant basis for c-mpunrin,_ the prices which are asked. This
problem aould not e-.:ist if the price filing plan wYere confined to com-
petitors selling identical products or services. But it has already
been observed that, in most cases, vendors possess a product dis-
tin,.iishr.ble in srme respect from others either because of difference
in c:a-.lityr or function, in appearance or style, or in brand or trade
m-l": In defining an industry, for purpose of price filing it is not
f='.,.ile to draw7 lines according to sellers of identical products;
there are too feW cases of such identity and what is more important,
the seller is vitally interested in the prices of at least some of the
mort closely competitive products. Where industry lines are defined
without esDeci-.l reference to price filing, as they were in most
in-.trnces under HFRA codes, it is likely that there will be cases
of vencldo's having an interest in some but not all of the pricing
policies of other industry rei.mbers-a situation which will depend
upon the extent of differentiation in the products defined Tithin
the scope of the industry (*) and cases, too, of members of some in-
dustries having a direct inti'rest in the pricing policies of mem-
bers defined within the :cope of another industry--a situation which
will C.epend up-on the extent to which slightly differentiated but
closely competitive product- are for some reason classified into
se-o.ra.te industries. This latter situation, it may be noted, may
cause serious difficult:' or render filing without vwLue, where the
price offers for the products of one industry are publicized through
price filing when those of closely substitute non-industry products
are -iot brought unr.er th.- same plan.

Returning to the problem of requiring information about the
nature of the products for which prices are filed, one expedient
which the industry may follow is to reduce the amount of product diff-
erentiation by estrblishin, throutrh organized control a greater de-
gree of product standc.rdization. It m~r fi:: rigid or absolute product
specific-.tions from -hich membi-rs are prohibited from departing, or
it may adopt the more feasible -' ?ro.ch of setting up minimum stand-
ards. If the latter, it is clear that only partial publicity of prod-
uct characteristics will be afforded, Where, however, it is not
possible or feasible to reduce actually, the extent of product differen-
tiation through standcjrdization, an effort may be made to force mem-
bers to file, together -ith price information, descriptions of the
products offered for sale# The need for such infnrixtion, it may be
noted, arises particularly where products are going through a con-
tinued and raAid process of obsolescence and discontinuLtion. Such a
pro';ram fir.ces the manifest difficulties of obtaining data which are
informative anld rer.dily compr-hiensivle as vell as the possibilities of
ev-.sion -nd non-adherence, Practic-lly, this approach offers a solu-
tion only for those )roducts which already possess mny, common charac-
teristics. Strictly non-standa-rd, such as made-to-orc'er, products

(*) It is indeed quite likely that organized -rice filing will bring to
9826 light the ex:cistence of competitive products of which the competitor
had not previously been aware.




-.538-


may never be brought, e:fecti-v'ml,. -ithin ,in.: 9 rg.-nized -olanI of price
publicity,.

In short, thc ir'C.Altry m-?y. h,-.ve to l-el, in lar-ge p-.-'t u.oon the
general .nd- none-too-cert -in 1]roio l,.d.e formed by v-rious members of
the productss whichh 5.re rio;t clos.il- cc'01Ctitive ''ith their ovwn.
This means that the price cd.t.a dis;u7-.,innte-d must be identified by
the ncjie of. the concern filing tihemn. Identific-tion of the seller
becoi.es an important part of the price informp.tion.

*ES.c-lly cogent re..sons for seller identificrti.on arise from the
fact that even though the product may be. standardized the industry
members may for reasons of reputation, personality, race or color
var, co:-sidera.bly in their ability to attract the buyer. The com-
petitor must 1-no-. not only %7h-.t prices but .'hose prices he has to
meet. Si7milnrly, identification is essential W7here there is a rec-
ogni'ed. ler-.der or here there is e. dominating member "hose ill-iill
com.aetitors 'ill hesit-.te to incur. .

Relrted to the orobler. discussed above, in th-.t it arises out
of the manner in which industries a.re defined for purposes of price
filing and -'orth soecific mention bec-iuse of the importance -hich it
assum-ed under iTY codes, is the situ.tic.n faced by nanufa.cturers
selling in direct competition .-ith distributors -hen the latter are
not -ithin the scope of tae jlan, -,ind espo-cirlly, "hen in some de-
gree they havr- the benefit of the oputblicity of the manufacturers
prices. This problem nr-:es itself felt "here some part of the pro-
ducts of an industry are cold directly, to the consumer .when another
part -.aresold through intermediate channels such as viholesa.lers or
jobbPrs. It is sufficient to say, a.t this ooint, that if the manu-
facturers c-.anot force th.- distributors into the -orice filing plan
or ai'e unable to co-atrol t.-ieir ..jrices, they may be 'sufficiently em-
barr.-.ssed by the competition of the. distributors -to abandon their
plan for publicity.

A fifth problem 'ihich a :roor'n of effective oPrice publicity may
Encounter grors out of the task f scins the agency in disseminating
the information received It has thus far been assumed that every
bit of information filed --ith the agncy.is automatically, distributed
to members. But where there are many industry members filing extensive
and co.Tolicated prices'.and terras, on a large number of products, the
mechanical job of distributing all of the inforrMItion to all of the
industr:-y members is li'k ely to be.too difficult or costly to carry
out. The ends of full publicity .il be- defeated to the extent
that such expedients as the"follor.ingare, adopted: The distribution of
but cart of the filed information as, for example, the lowest price
on file; the distribution:to.any.-member of datr on only,, those pro-
duct.-s vWhich are directly competitive -sith his oywn; or:the'requirement thai
members Yishing to see the prices filed.by rivals must come to the
offices of the a-,ency -7here the filed information is made available
for ins-pection. The agency, moreover, even though it '-:ere possible,
may not be interested in distributing completely the information


9826








filed V1Tith it. Specifiall;. it m!y be more interested in using the
filed data as a me ns o0' d..etermin.nij,- the extent of departure from a
level of prices -.-reed byr or im'oosed uoon thie industry members. The
use of price filing as a means of policinv cnfornnce rith standards
set up by the concerted action of the -J'ro..I is discussedd below. (*)

Thus far the discussion ha.s been confined to the problem of pub-
licizing price information for the benefit of sellers. It has been
seen that the extent of monopolistic rice formation through the in-
dependent action of competitors deoends among other factors upon the
extent to which business men are a1are of the prospective price
policies of their rivals. An organized program of price filing and
dissemination, while a potentially effective instrument in supplying
this information, faces certain fun "-mental difficulties in the "ay
of effective publicity which have been suggested. A remaining phase
of the problem of extent of publicity afforded and its bearing on
monoolistic price formation is the nature and e::tent of the information
m?.e av.-ilable to buyers.

before proceeding to the question of publicity to buyers, how-
ever, it should be emphasized that price filing plans are limited by
their very nature to affording information about only one of the com-
petitive methods employed by business rivals, namely, price com-
petition. Competition vuhere products are differentiated may, as it
has been seen above, (**) tkrice the form of varying the quality of
the -roduct through impr-ov meat or deterioration; or of advertising and
other forms of sales' promotion or persuasion. If these latter methods
are of strategic impoortance in an industry, price publicity will
have a limited significance; and price filing plans will fall short
of e-_posing completely competitive devices in use if it fails, as
by its very nature it 17ill, to bring to light the product and adver-
tising policies of business rivals. Thus it may be that through
price publicityy prices and terms of sale become completely stable and
aniforn only to. result in an intensification of competition in pro-
duct or advertising. It is perhaps with this situation in mind that
some industries consider as a necessary supplement to price filing a
plan for the collection and dissemination of data covering the pro--
duction or sales of individ-ual concerns in order that 'fhey may know
whether they are preserving their share of the total market. The
functions and uses of this supplementary control device are dis-
cussed in detail below. (***)

(*) Belo-', r,,-e 71.

(**) Above, page 49.

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


9826




.o60


It remDins to be again emphasized that rice publicity through filing
and &isseminotion whilee -iotenti-.ly n. instrument for promoting monopoly
price cannot eff'-ctuat.,: corn 2 ete mono )oly :rower because it aids in the
control of but one of throe co-D.etitive devices which are employed in
many contemoorr-?r industries.

The customers interest in .:no' ir:-. tro- orice offers of rival
sellers is the obvious one of bein.'r in a -position to make the most
adyant?- -eous selection among potential opportunities, and, thus,
make the best of possible bargains. It does not follow, however, that
without such 1:nol71edge buyers will be completely at the mercy of
sellers or th,..t any price may prevail in a market. As long as rival
sellers are a'rare of each others' price offe--s they will protect their
competitive positionn by, making known to buyers their owni prices and
terms; or Emy buyer can presuiiably obtain the prices which com-
peting sellers '.Till ask of him by asking for them. But to the extent
that buyers -,re not aware of the existence of zIl sellers in a market,
those sellers' to minom they, are confined by their own ignorance, have
a decree of monoroly control whichh they riould not otherwise possess.
Organized -,rice publicity if extended to buyers, therefore, has a
potenti.lity for pr.-motin ; competitive pricing. The extent of the
publicity to buyers '-ill de eoend u,:on the amount of information filed
by sellers and their adherence to their stated terms ns mentioned
above. It will likewise depend uoon the rmount of information which
the filing aEency--.n -.gency of the sellers-is willing or his re-
quired to mahe .-vailzble to then.

From the st.ndpioint of the buyers and for implications res-
pecting the competitive market, two other aspects of publicity to
buyers are si:nificqnt. On? reiatts to the L.uetion of '-"hen the in-
formation is received by.buyers as compared 'ith when it is re-
ceived by rival sellers--which is discussed in the next section; the
other is a matter of knowledge by the individual buyer of the prices
which are being offered to competing buyers-a question of discrimi-
nation which is discussed further below. (*)



(*) Below, pages 63-67.


9826







c The int-rva.l before i-'or*,:'rin beco:ies available t-
seller- and 1.o _.0 s. f .1:.. -..tic prices are to be achieved,
business mien ,,.,. rnot or.n. 'i! : ,r E Of the pricing policies of
rivals but qlso mairt nav.- t.is "inj s ,iati,'n in sufficient time to eliminate
the advantage of any ono of tLie:-i irn initiating pripe cut. In other
words, to the extert there is p I"-" ocetheen the time a price'reduction
is announced by P seller and time tne co:apetitors ]edrn about it there
is incentive tor competitive rrice reduction tv. the. individual to en-
large his share 'of the available mar.ket.. Price publicity through
organized filing will, depending upon the sreed.."ith which 'filed in-
formation is disseminate, zhcrten this lag. *'. .

At ore extreme are those plans whichh are limited, to the collec-
tiorn and dissemination .-f past prices or prices':on closed transactions.
Uniorthis arre.gement so:.ie time, obviously, has elapsed between the
original making of a price and when it becomes known by competitors--
a lag.,which Plwpys exists but which will vary according to the frequency
with which these prices are collected and the rapidity with which
distributed to trade members.

Price filing under UFA codes, however, extended in practically
every instance to tne filin- oi price offers for all transactions taking
place in the future until a new price was filed. The lag here would
depend upon the interval bet' een ti.e time the price offers became effective
and tne time tn;y, are received by ,tAier industry members. Under the rules
of tie filing plan, the effective date might-be the time the price list
was mailed, or wired to the goncy; ,'hen no'i-f-ication was received from
the agency that the list had been received; IOr:'.whken the distribution
of the list other industry mumoers had been completed. The rapidity
of the distribution cf price lists would vary from the case where are
wired or telephoned iimediatel-'r upon receipt to the case where they
are not sent out at all ut nme-.el, awaited inspection by the interested
member in the ao:ency's office.

Where P waiting ieroid of several days is provided before a
price :nay become efiective, there is likely-to be no las. Thus, in
many codes a -piting period of as mucii Pz ten days was recuired--
ample time to distribute the lists to all industry members. One
theory behind the waiting period is -Irecisely .trit of affording
members oo, ortunitv to meet tne prices Tfiled by. the competitors.
In this respect it loses much oi its zignifacance and meaning if the
lists are not ir'mediatelv distributed t'- members but merely made avail-
able for inspection or mailed only upon specific request.

A given lag of time or absence of lag may, however, vary in
significance as bet,-een different types oi industries and markets--
depending upon. the speed of the'buyers' adjustment to a new price as
compared with that of the sellerss. To quote from one writer who has
commented.on this p6int;

"IMr. Clark, thinks.' o0 the waiting period as a
means of permitting simultaneous.%and uniform price
change, -,s compared ,ith the delay in the ddmpeti-
tive market between the initiation of price change


9826








by one concern and its imitation by others. This
comprarison seems to be b sed onl- upon the new op-
rortun.ities which h vroerr 21 the seller's side of
the market. In cases involving e considerable num-
ber -f siiall. producers, 1,jrAtlcss it is true that a
waiting period enables these enterprises tw kno, of
price changes Pnd to adjust their own price policies
much more rapidly than they could otherwise do. If,
howeever, the prices filed ire available to buyers,
there may be an increase in the speed of the buyers'
adjustment zu a new price as well Ps in the speed
-f the sellers' adjustment thereto. In market with-
out price filin" the competitive incentive to reduce
prices, Ps described by Mr. Clark, would aroear where
the adjustments of sellers are sufficiently slow com-
pared to the adjustment made by some buyers that an
appreciable volume of sales is shifted to the concern
which initiates the price .reduction. In a market with price
filing_ and vith a vr,'iting ocriod, the question i- still
one of the relative rpce at '-hich information spreads
on the tvwo sides of the market. Granted that all com-
reti.n-ive sellers adjust their prices withinn the wait-
ing period, it .nay be. that buyers who modify their
purchasing plans when a price reduction is initiated
do not t-t their information Quickly enough to modify
their clans agpin as competitors meet the new price.
The degree to which buyers' adjustments are quickly
raade presumably depends.upon the degree to '-hich
purenase is !aPQoe by :eltivelv few concerns in rela-
tivel-' rlrge quantities.

"All this seems to Te to mean tha-t wnen there are
lrrgt numbers i: s'nalL cuyvers an(; sellers the waiting- .
perioc uoes not automatically deprive buyers of an- incentive
to favor tne concern 'rnicn initiates P rice cut and hence
does not autonaticall-. oeurrive sellers oi the incentive to
take thL ltaao. .nen ouyters no sellers Pre relatively
few and transactions relatively l&r'-e, t:is fnct in it-
sel. interferes ,'itn tic type of competitive price adjustment
'which 11r, Clark hr-s in Aind". (w)



(*) Memorandum from Corwin-rDv Edwards to L, C, ,.:rshall, ir. Claik's
Theory Concerning tne -;aiting Period in Open Price Systems",
pages 1-2 (October 7, 193b,) in NRMIA-files. Fcr i,-r. Clark's f'ill
statement, see Iieinorandut from L. C, marshal] to All Section
Heads and Unit chiefs, "An Interesting Issue", (August 29, 1935),
nmimeograrhed, in NRA files.
< .4


9826





OnlJ o0:e :.cint nee,-', m. ttion i'. co:inection ,ith the above: Price
filin., ra; c.,.:n.e a p';viou:;;. existL, relr,.tionship in an industry either
by speeding" up r-:.ltively the :.,.1..irs1 -:*j-htment or by *.per'in: up
relatively tn,. bu,,.-rs n i'u st .;,t t. -'ice ch.ngcs. This will depend
upon the e-':tent tnd r';i:i,'it." v'it> '.iii information is disseminated to
sellers as co,.prire, vritn buyers. T., pr-esu:mption, W.:i'- price filing
is administe.ed by the sellers, is t'it the sellers will in this re-
spect be favored.

It has been shown that monopolistic price formation through the
independent action of sellers in a market depends upon the three factors
of farsighte.dness by business mef: in acting toward the end of their best
interests, the extent of the knowled possessed about the pricing po-
licies of conrpetitors and the time la between the announcement of a
price change by.r one seller ana the knowledge of this change by competi-
tors. Conditions under which p-'ice publicity through price filing and
dissemination miy contribute to tnese ends h;,ve been suggested.

Implicit in pure competition :nd a necessary condition of perfect
competition fi's accessibility to tne mna-ket on the par* of buyers and
sellers. (*) In tne section whicn follows an attem .... will be made to
su'gest the ways in which price filing may promote o:' prevent accessi-
bility on the pnrt of buyers and sellers to a market.

2. Price Publicity and Accessibility to the Market.

(a) Int,-oduction histor'ic.ral meaning of a "free" and openn'
mr* :ke t

Thne perfect market is a "free" anrl, "open" market in the sense that
everyone has equal opportunity in or equal access to it. Rules bov._.rning
conduct in such a market had their origin in feudalism and early mer-
cantilism here "o,-i:,_ to the v3akness of governmen-t and the violence
and perjury, o- the people, it .as necessary to encourage powerful lords
to set up mnrl:ets and to protect them from the ii-roads of robbers and
liars". (**) These mnr.:-its were eventually governed by the decision of
the common-lav courts ,'"ich Li.;veloi:ed the principle of the "market overt"
or the "public, free an:.. oqu'-,l nIr--et". In order that all traders might
have equal access to this mnmi:et, the principle of publicity of trans-
actions was developed vwhereby the sales of goods must be in a place that
is "overt and open, not in a back room warehouse, etc." and "not in the
night" but between the :isin- and setting of the sun. (***)

Practices and customs rreventinr secrecy and concealment were up-
held in the case of one of the modern organized markets by the Supreme
Court in Chicago Board of Trade v. United States (****) wher3 the rule
in question prohibited members from making secret sales and purchases
during the time when the board was not in session. The Court in the case
upheld the purpose of equal opportunity or equal access to the market

(*) Above, page 44.
(**) Commons, op. ci't. p. 775
(***) Ibid, pp. 775-776
(****) 24,3 U. S. 231 (191F). .


9826




I t.
-64-

to prevent monopoly .and discrimination through "publicity, or as nearly
perfect mknor'ledge ofall the facts b.,, all parties as the circumstances
will permit." (*)

The bearinr7 of publicity through organized price filing on the
issue of equ:-il access to the market must be examined, however, with
competitive market situations vastly;, different from organized commodity
exchanges in mind. Specifically, the bearing of price filing on two
kinds of interference prevalent in the unorganized and imperfect
markets with which NIRA codes dealt must be investigated. These inter-
ferences may b called discrimination and predatory price cutting. (**)

(b)- P--ic. filing hnd discrimii.wition.

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

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

(*) Commons, op. cit., page 713
(**) See above, page 44 for definitions.
(***) Above, pag;e 55,


9826






'classed as retailerss", for examplee' -f inforiatiLon about price terms
to concerns cl-isei" as "mnil order io,.cs11 or "department stores", when
both ar:- co:--:ti.,: fo-r the .n rne ......': my in effect entirely defeat
this functi,0.i o .'ic,- Tebli itry. 'T b i-irP' sphere of indifference
to the price t., r '.it.jd tj members of other classifications is 'not
in fact, definitely dt. ;_rni..ible in advance. It is conceivable that
concerns desigL,*itca as "1'h.,lesalers" or "jobbers", although not th.re-
tofore in such !i position, mn:y as a result of a special price be placed
in a position to compete directly with other establishments labelled
as retailers. Customer classifications do not necessarily have a
functional significance; they may for any seller represent a flexible
and strategic device designed to accommodate a changing price policy
with respect to individual customers.

Discrimination may be along geographical lines also. Unless com-
pensated for by differences in other elements of the price, any policy
which forces a customer to pay for more of the cost of transportation
than is paid by his competitors is a discriminatory one. Where freight
is a minor element inii th.- cost of placing the product in the hands of
the buye', this tape of discrimination, of course, is not of great
consequence. In other c tses it may be, and effective price publicity
to buyers irres,.ective of location rmny serve to reduce it.

It should not be3 concluded that sellers have no interest in the
kine of discrimination discussed above or that price publicity
limited to sellrrs will ,'ontzibute nothing to its elimination. The
very incentive for th., discrimination, as in the case of other price
reductions, may not exis-t if rival sellers are aware of it in time and
are in a position to meet it. Whether they can meet it will depend upon
the possibility of establishing contacts with the buyers for whom the
discrimination is pn'oposed.- which may be difficult, for example,
v'her- "the initiating seller has a long-established contact with a
large buyin- est.ablishirient. But if the initiating discrimination
should be met by comp.-ti;j sellers through extending similar terms to
buyers similarly situated, t-e incidence of the discrimination is the
more disastrous foi" 'thoss bu;,ers against whom it is practiced.

Two other typ-,s of isc.-iin-ition m:iyr be distinguished; for these
price publicity m,;, be a v-,2;, uncertain tool of correction. One of
these is discrimin-ition where exercised by a seller who possesses
complete or a hiTh Oee;ree of monopoly of the products of an industry.'
The motive is to maximize th total profits of the concern through
making the best price adjust;:ient to the varying demands of different
classes of customers. The fact that those buyers who are discriminated
against are aware of this special price given to buyers with whom
they compete does not place them in a position thereby to correct the
situation; they cannot effectively demand similar concessions because
by the terms of the situation they are dependent upon the seller for
some, if not all, of their merchandise.

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


9826


"55-





,, "66
p.0.

distributors who compete directly with jo'tbers or wholesalers and in-
dependent retailers throutih v.,hom the complaining, manuf-Icturers distri-
bute their pr-oducts. These sell,.-s do not hove sufficient resources
to i.,ieet or enable their dlistribu-tors to meet coinsist-,ntly the lower
prices of their larger c'iv;ils; n.'it,:r c-ui they, afford to'abandon their
precent distribution channels and bqra:xin for th., business of the
lar.e buyers in the s., me terms as their competitors.

Price publicity,, however, is not irithout some bearing on th? dis-
crimnination of monopolists. If through price filing such discrimina-
tions are brought to light, the;- may become a target of impassioned
opinions and condemnation on the grounds of trade ethics which may
ultimrately- lessen consumer goodwill for the products of the monopolist.
Or if i.'iscrimination is illegal, as it is under the Clayton Act, price
filin- may, serve to call the illegal practice to the attention of the
enforcement ageency. It is probable that any plan fo-- making effective
publicity of such transactions would be forcibly imposed upon the
industry without the consent of the monopolists and in face of their
probable sabotage.

A third form of discrimination may arise as a result of coercion
by buyers either by :-ingle po,,erful buyers or by smaller buyers
actin- in unison through medium of a boycott. Price publicity through
filing and dissemination if Jffective at all would, as in the case
above, serve as a corrective by exposing these discriminatory trans-
actions for conieLeniation by ;roup opinion or by, a public agency
chargePd with thu duty of administering a law which prohibits them.

In this connection should be noted a possibility that certain .
forms of price discrininn.tion may be increased by price publicity.
Discrimination consists not only of unlike treatment of similar
customers, but of identical treatment of dissimilar customers. To
insist upon uniform prices mi4ht oe as truly discriminatory as to
Frant varying prices where no special advantage exists. Yet the
large buyer is often under attack by his smaller competitors re-
gardCless of the efficiency of his bu;'ing. practices. The seller may be
exposed to a tacit boycott if .ie is icovmn to ..ive the large buyer any
considerable advantage, ".uhethr lIgitimat- or not.


9826





-67-


C. Price Fili i -,nd Preptcor Price Cuttin;i.

The d.vic.s o:f -,r' .ptorr c: r)etitien are various. OfLparticular
interest here is >rizec cutti !.7 'ror the ujuroose of orevonting the entrance
of ne" memu'j.r to ,i.kot rr of ruininr- or driving out of the market an
exi ;tinr r-r. -,eoo itor. publicityy of predatory -rices, it mn-r .be srid at
once, -ill :niot ,rin 11.utcir tic corrective. That whichh i-,-es -)re-
ator'r co- )etitio'-i -ossible is -.o.'oolyr )ow.ers. .xcept as publicity in.y
e:: )ose the -uiltr concernn to the ef 'ective loral pressuree of -rou)
o oi:ion or ins-ire n fe-r n' )rcusecution its ef-'.'ect will be incon-
seaue.itirl.
On the other h-nd, there is a prop''ility th"t in some cases -orice
publicity -il! intensify or i LS jire -reuatory price cutting. A concern
a.ctivel- inte'ester' i. eli:iinntia,. its weaker rivals 'resu.iblr will
attack : their -)rices '-,it:. noe -;recisiou P.nd econolyr if it knows
s ecificall-r '-'hpt the- Pre. Or it ::wlo ie thrt -)rice publicity will for
the first time '.ri'-.-.7 i:o ti, *a..ttention of a do'iinating; concern the exist-
ence of si,'.ll 'Jut ef 'ectivc co ),titors --%,-i.st whom it ma! )roceed in an
a-ressive c.rm)ji,-n of e7:t-r,-inmtiohn.

D. Price PuL'.)licit ci, .t cie r -. Codes The Sco-)e of the2
Present. Stad-:

I'he receding ; scctioi cc '1.leteC. the sum 2ary of ,ossi)ilities
offered b; wDu'licit-- thrMu *h rice nili.; n disselAinmtion for strength-
ening a tendenc- .n"r- from perfectt con)etition of for contributing to
a greater Pttailiment of t'-i.3 ideal. It has been seen first that the
publicity of prices -ill -ccentuate -ono-olistic -rice fornmtipn depend-
ing uoon its -ction. on tilcse fnct ors:

(a) The "p-si htIo-i3s "ith which rival sellers
beh .'ve i:-, th.-- di -ection of their ultimate
best interests.

It '--s concluded th c the L.-ring of Pr'ice filing on the rniut-al
fWorenes.s b)y busii ,ss ri.'rl.s o' the consequences of their oTn -pricing
nn. sellii-" policies ".: iror- j. netli'ible 'ece-.t a.s it co.-tributed to
e-:)eriencet i.i follo-'i:v" -n i'.iL -strr leader, it ,- e'i.;hasized because
the degree of .*iutunl r '. 'eness or foresi'hted.n-ss ,ns indeterminn.te
:rice nublicit-, throu'r, -irice filing .iA"'t resuLlt either in an intens-
ifi-stio: of competitive r'ice cutti'q; or in mono-Dolisitic pricing.

(b) The e'-:teit o- t:ie price and other dr-t-
r.ir..Le a.v il,", ,le.

It ,-T.s a.p,-rent th t 'rice fili'a; had. direct -nd obvious function
in extendIin.g to sellers inforrn-otion about the )rospectivp price
policies of co, )etitors -ud Lie endin- u-mon the de ree of "farsi-hted-
ness" ,ossessed in nro iotin- .0 io-)olistic. )rice formation. It vas
concl'uaed, ho,-rever, thr t iost Alans for price filing 7 and dissenrination
would encowuiter 'duinistration difficulties which h iwouild almost certain
defeat in ,art the enL[ of con'lete and efi'ective publicity.


9826






-68-

Price filing hria 11i obvious end, Lt ':rs seen too, in )ronotinu]-
publicity of prices to ouy/ers ,.rnd, com.secue '.tly, in ireventin- in
some deree lio:io ol.istic rice co-itrol; the obstacles in the ray of
enlrr;ing the publicityy to buyers ,,e-e considere. to be greater even
than in the case of sellers.

(c) The interv,7. 'Le.'o.'e tie )rice i 'for 1ptio.
becoes avr.ilrb.e to sellers an- buyers.-

On the interval, '-hich -,oLld be shortened b-.- )rice filin'; and
dissemination, beteeA. the defective idrte of the )rice list and the
date it "'as receiver. b co 7)etitors de1)en,.eQi the r-.)iditr of -orice
adjust-ient ,,nc. hence the extenL of .onoiolistic )rice formnptio-:-..
How-ever, even wider a "-'P.itigi7 periodd here the interval night be
negrtive, it '-rs found thrt incentive for i'litirtii--: a price cut could
be present de )endi.w- u :,on the ,-)ee,:. of the buyers' adjustment to a.
ne o.)rice co .,ared '-ith th-t of the sellers'.

In the second lI.-ce, it -"-s o2serve4[ th-'t :,rice )ublicit'r 1-ould
oro-iote or preventt nccos,;i ilit.,, o, necessar- condition to a "free"
a.nd "o.-en" ma.rket, de-oendin.- o0 the e.-;:tent it r-educed:

(n) Discri linotor pricir"-

It -'ns a) aren'tt that '-rhere it de.)ended uwo:. secrecy orice filing
na-. r .:cod chr-nce of retducing or eliminating discrimination, the chief
qualification bein: the -.ind and -' ioQuit of infor action made available
to buyers; but th-t r-,here discrimination ,rs b:.-cked .) .- monopolyy porer
)ossessed by either sellers or ou;'ers the v.al.ue of )rice -.mublicit- as
a corrective device r:- lir.iited to cffordin-: a tnrget for aggressive
groue, o .inion or ev-idence for )rosocutio:i.

(b) Predc.tor-' .'ice cuttiit,'.-

It '-as concluded thrt rice filing, like-Aise uraight be significant
in ex)osing the :-uiltyr co-Acern to .ioril pressuree or .)rosecutioi; but
that, Ot the other hanJ., it ii.:ht af:"orrd a. do inrting concern a. more
precise objective on i-hicn to focus its destructive tactics.

Liiitptio"- of material (e) cnd insufficient tine hrve made it
inoossible to ei)lore little iore thln r frngient of the functioning
of orice fili '- )la:ns inder :'7.1 codes in terms of the uoroble-i developed
above. Positive evidence '-ith respect to either the ef e-.ts of iAt
price filing; -lans on moiooolistic )rice for',-irtion or on the maP.tter of
accessibility t.o the market -'s not readil-T' p.vPilr.ble. This "as
particularly true of the later question and the i-roortant issue of
discrininatio:in. (*) Inforritlon -hich indicates the amount of

(*) See aopendi-: C,L::ibit I*

(**) This a difficult subject o. i.vesti ;Ption in any case witnesss s
the two-year investigation by the 7ederrl I'ra.e Commission into
the question of Good-'esr's pile-wedlr discriminatory prices to
Sears Roebuck) boecruse P.iong other thi'-;s of the need for pre-
cise and accurate cost data.
9826





-69-


3ublicit, ,c.chieied -%n7 i1-C;, n'c-: eli-ninated particular1. on the -part of
buvie.-s a.'ai io-ever, re'res-"T. i ..':rt'nt evidence of an indirect chrract-
er r. to tie e1.i Ain' tao:. of ti.r' '-ind of dis .i?: riin1tion -7hich depends uo-
on secrt.c'".

S )ecific'c.ll, it 's o:.;iile to collect a considerable amount of
evidence be.-.rini- o0 t:ie amountt of )uolicity to industry members and to
custo',er '-rhich resulted fro;i the o ratioio. of -orice filing plans. This
evidence is )resented iL1L Cha' terZII and covers the code provisionss for
public, the -*nrinstrrtive iauli-.js e:-inf or odifying the code
provisions t.ie vierfor'iance of ieriuers in filing co-rl.ete information
,bout tiiei- 'iricin: policies n.il in v&hering to these -policies once
annouLr.ced, and the rmoninn-:-r, tne e:'-cnt of and ra-idity .,ith T7hich the
filed in.forniation '-as distri .uted or made available to sellers and
to custo:e3. The iate: i'-1 c-ri,- on the disse.ui-ivtion of filed inform-'-
a.tio:i contains iuch evideiice of value oh the question of the length of
the interval oet-ee:- t-ic. ,r.:e .rice lists were e-'fective and the. date
theIr -ere receive-.. .-" indu.atr- .ieTriers and custov.iers. In the course of
presenting thi c icteri?.i the difficulties encountered .by the filing
asenc: in ndministerin.- the 1r:i rnre touched on.

But even this evid-cice i. aot conclusive since it offers little
thrt is definite about the e: ent of otublicity orior to the inception
of the )rice filing lanns. So-ie observations on this point are made.

Because of their i- ',ort..ice in indicating not onir the -ootential
or ho)ed for results ,nw. thu:; 1.-:ion other thi-,s the de 7ree of
"farsi.htedness3" -osses-.ed, ,iut -Iso as possiblee evidence as to the
actu.a results of )rice )obi icitv, considerable attention is !iven in
Chapter III to the intended functions of price -y.ublicity both as origin-
ally exoLounded by code ?ro o. nent. and- as signifiec ih their behaviour
under the ..rns. ...

Attention hFs thus f-r .;e.-i directed *ria..rily at vrhat aay be
calledI the "'jublicit' f-)nction" of )rice filing, There renoains to be
discussed --hot ha.s ;ieen tej cd t-.,, "control function" of -orice filing.

TLhe contrc. f-':-nc-.io'. of :-ic fili-:, a:id the
n.ess<.nt -,tud:."-

The rir.mr, 'nL essentia.l Vi. of -rice -lublicit-7 under filing plan3
to -,hicni nttentic thus .'-r ha.s 'een -lostly devoted is :}ricisely that
of mal.in,- 1 no,-n the )ricin.. jo.icies of sellers to their conpetitors
and to )xrers; ore -iti .ate frictions and -ossibl.e effects of price
pu)licit- hn,-e ,een su, ',*- teL. To be distinguished are the control
functions of Drice filin.: '1Lanis ""ose primary a.is nxre

(i) "s a oart of the :-rice filing ilan itself to establish
.imitatio:' on thc yricin- policiess of oarticixanting
:ei.')ers rnL

(2) To su--ol-,, infor:i.tion 7ith w-hich to police the observ-
ance of r.iles un.de outside, of the -rice filing plan.


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There must first be distinguished from these essentially control
elements of price filing plans those rules and regulations established
to make possible effective rice D--oublicity. Systems of price publicity
themselves are in -ort a composite of various working rules desiGned to
secure and. distribute price inforImation. Thur industry members are oro-
hibited from makinL sales except ,t the prices and terms which they have
filed v with the collectin. a-enc,7; and third a ency is required to distri-
bute filed -price lists to members and nerh&aps to customers, immediately
upon recei-ot. As obstacles to effective publicity arise new regulations
may be ac-ootcd.

However, as soon as these rules extend to the actual restriction of
elements of the particinoaLing members' pricing policies, they case to
have the effect solely of promoting orice publicity and represent in fact
a direct form of price control. In brief, that which h could not be accom-
plished through a system of mandatory' price publicity, where restrictions
are limited to, but ma-e not -o'operly extend beyond, exposing all elements
of a price -rolicy, or structure, is sought to be accomplished by the fixing
or "stabilizing" of rice or otherwise dictating the kind of prices which
can be made.

RegiTulations then which in some manner determine the .cind of or esta-
blish li,.i ts to the prices that mav be charged b, participating members -
whether" these regulations are a part of the original provisions or whether
they are issued b- fiat in the administration of the system represent the
first of the control phases of price filing. The variety which these rules
may take is limited only by tic variety of the elements whicn may prevail
in the p-ice structure of an industry. As examples: Requirements may be
imposed as to the method of quoting for delivery that prices shall be
on a delivered f.o.b. basis; that no freight shall be allowed or that frei
shall be equalized; that cash discounts shall not be given or shall not be
greater tha-i a specified per uent; that product guarantees mayr not be granr
or the return of merchandise accepted; that free deals and premiums may not
be given; that advertising, o:r trade-in allowances may not exceed a certain
maximiLum; that discounts for quantity or volume purchases may not be extend
past a s-,ecified figure; or the manner in which h members may classify their
customers anay be rigidly defined as mav the discounts which can be granted
to these customers. Stabilization of the elements of the price structure
either by the original provision or in the administration of price filing
plans under the IRA may or ma. not have been designed merely to make order
publicity and comparability of filed prices possible. The essential point
is that ;he- represented an integral part of the body of working rules go-
vernini:; participation in the filing plan, and may not be disregarded in
interpreting the meaning and significance o price filing under ,TRA coces.

As such, these rules hve the effect of modifying onrice competition
in a manna;r which is more direct and sure than the elimination of price
competition through publicit-- alone--which as was seen above depends for
its effectiveness on a larae number of variables that are highly uncertain
in character.

It is taue, of course, that -provisions similar to the above were in-
coro.rated. in ITRA codes quite apart from open -orice provisions and


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'-,ithout a@r/ oste.isi-le relation to then. Althou,Th investi--z;tion of the
functions, o:-er-tio:., :-n.. effects of t'ise code provisions ,is quite
beyond the scope of thi c 'esent stu, so-ie observatio-'s are made in
Chapter IV :s to their fuictionnl bc'.yrin ona price filin,-.

Another control1 Ps)ect of -orico filing ho-cvor, relates direct-
ly to the function.'. be.-ri.iw of -orice filin' on other coLe provisions
or sche-ies of -,rice co.,tro1. in effect --ithin an industry: It has been
called the -,nlicin- or co :.)li.nce function of -rice filyin:7. Under the
codes )rice filin:1 o ler- ted to si ..l7 the enforce e,.t cjency of the
industr-- '-ith iiif-rmntion -"itnh -hich to check: the 'embers' conformance
to other code -'roviiions. The', vere usualbr Miniiun price provisions of
iiv bre..-, cost_! rineu .rc nu oiioso
T7hich )rohibitions ,."init selling belo-. cost represented the most im-
portnnt tyne; :nbL in so."e instances the?- ere .:,,re livited in scope
a-.l -in., o0i?. to rice elements such as mp:zirmlu- ternis of ')P'.:lents,
discounts, or pI-,,pfceu.

In so le 2,se the -)rice re!i.ations '-orea not aojoproved throuW;h
form..l code )roceuure 'ut -ere estfflisheCl by the industry a -ency un-
officially ^nd informally. The de,ree of -recision enjoyed by these
informal sttondr-rs varied froui o-en pro-aul,,tion and broad cost by the
code authorities to veiled suj ;estion on s,)ecific occasion about the
desirbility of maintrinin; price. The sanctions employed against the
price cutteT in these instances ;iight ran ;e fro:i the nere focusing of
group opinion to '::ressive s:'les effort directed tor!Crd his custo-ers.

The distinction between these tvro control f-.mcti-ons of price
filing plans, -rhile necessary fro- an,1 anal-'tical standpoint to dis-
tin,-uish clearly the control fro:n the -I ilicity -7:s-,ects of price fi'.in-,
has not )een used formnally in the or.' .nization of the evidence presented
in Cha)ter IV,"Pri,:e rilin: as Co-trol evic'9'. It -s frequently
impossible to distinguish the activities of the industry avsency as be-
lo.iging to one rather thrn the other category. --'e -rice-filing agency
was usually the code eauthorit-r which -rdninistered other of the code
provisions anid served as the a 'ency for establishing And enforcing in-
formol rules and -,,';reements. Thus, the -)rice datr, collected "ay have
been used as a check on the conformance of nei)ers to restrictions
imposed in the ad.3inistr.-tion of the price-filinj pl-on or of some other
code provision. In any cse it seemed :nost significant to group the
evidence -round the objectives of the c ntrols to 7rhich price filing -7as
related or a.s - part, indica,,.ting he-re -)ossible the 'Iind of a role
:)lrayed in the entire goin- l )lai of industry control.

It was found possible e to state the role of -rice filing in effects.
ing on -- so ie of the nain objectives of ind.itr3r control under the codes-
control over the )rice level, over >rice ch'ei.O2, over various elements
of the price structure, over channels of distribution, and over the
division of business. This -rou-:in*- of objectives though necessary for
anal-,tical purposes is, of course, so:e-fiPt artificial In each group,
moreove.-, o.l'' sone of the various roles of -rice filingT ere treated.
Thus the discussion of control over the -rice level was confined to the
functional relationship of price filin.- to cost provisionss and activi-
ties; and the control over -rice chxn[ges to n discussion of the waiting
period. It should be noted at this point that other than .urelr control


98265




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functions of -anitin:- periods, includin, the iniort-,nt one of affordinj
time for &istributiig filer- ?rice 'ofi':.'ei's before the-.- ')econe effective,
are discussed. in Chapter IV -r.s -rell.
















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9826




Full Text



















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j-A',, Iluch the same condition .s that outlined above may prevail- in the
& case of customer classifications. it oiten happens that producers are
,.! interested in different channels of distribution. Under such conditions,
A K. unless -)rices are compared for the s ne cartoraer classes and the spae
.j^, "quantities, et cetera, the result has little significance except as a
i i:. .test of the range of prices in the industry.

:!. AnoUther consideration that L:ust be kept in mind arises from the fact
*.! ,as discussed above (*) that competition takes place not only in price but
-throgh -)ro.uct differentiation--in the quality of the product, in trade
marking rncL use of brands, in sapolei.ientary services, etc., and in adver-
tising ?,id other forms of sales promotion. In some industries there uivy
t be no products which are standard for all producers. Of if the product-
^ is stanLdard in terms of its physicall characteristics, it may command a
varying amount of consumer preference, due to tne good will established
Through narx-ing, branding, advertising, etc. In tnese cases, it is
i probable that for anh identical product different prices may be commanded
'; by different vendors. Thus strict uniformity in prices for an identical
product is not inconsistent with the existence of differentials, and the
problem becomes one of determining whetherr tnere has been a tendency for
the prevailing differentials to ncrrow or, on the other hand, to be
lengthened. A like problem exists in those industries where the basic
pnysical products, although siiLilar and closely competitive as between
riv.l sellers, are enough different to result in rice variation.
Finally, dominant concerns, in some instances, may disregard their irm-
media.te aC.vantage eand voluntarily allow to smn.ller rivals producing the
identical productt c. slight price differentials, which becomes a persis-
tent cha.r..cteritic of the price structure.

3. The degree of complexity i.i thc rice stricture.

A seoprate question is ,'.,eticr the trend of the price structure is
tovard., t-ie inclusion of uore c.stoTrer classes end more terms of scle, or
torc'6. redaction in their -nu-,ber. Insofer as ti-iha various .price struc-
tures of co.zpeting concerns are )ublicied to buyers and sellers, it is
concei_-;'jle that eyci concern --ill ...v:.e its rice structure more corrolex
by 7do-)ting classifications .-,hich aopear in the rice structures of its
rivals; or, c.ltcrna.ti-ely, thzt under pressure thLe more unusual customer
classes r.nd terms of sole will be abandoned, .xnd only, those types of
variatio-' ma-intained %thich are general in the industry. The first -l-
ternative would produce a :aore com..-,lex )rice structure, the second a more
simrrole one.

4. The frequency ajd range of orice ch-ange.

The characteristics of tne rice stricture thus far discussed ore
all aspects of the net change :inich occurred under rice filing. Ques-
tion also arises as to hox, often and within what range of fluctuation
changes occurred. This question gains a-dcitional interest because -rice
filin.; is often advocated as a enetns of producing stability in prices.

An e-:xtreme possibility vould be the absence of all change from the

(K) PF'es 49-50.


9826








..)
medium ] si7ed olants J\ small p;lan:ts. Accor(ii. .' to the re-.ort, the fi.--
ures indIcated that since the effective date of the code, the small and
,-iedivua sized prlnts had secured a larger proportion of the business
availa&ole t 'an the-n had enjo-e$'. during th-e past three ears, while the
large plcnts had suffered a corresp.o.r, 'iv dCecline in their share of the
total business.

d. 3rec".oDwn df the Price 'ilin- Plan.

W ven at this early date it was beco:inm apprent that rigid enforce-
:..e:nt of the code along the lines ,rescribe& in the "Open Price Plan" '.-.s
not possible, and that violations were in maeny cases rc-L.ting in a losc
of established by 7ins.ss by those uemibers w.-ho" cmulied .with the plan.
Steps were talcen at the Hoveuber, 193Z, sesrnion to relieve such members
from the effects of these violations, b,- :!e.ns of the followinG resolu-.
tion: (*)
", I_ TA ithas ot et 1"r
"71IAS it Ihas ot yet proved. )ractical to .-revent certain
:an-.u'v.cturers anCd -istrib-utors fror.i selling below the filed
prices pro.,ideed for by the Open Price provisions of the 2n-
veloie Code, and, '.U"ZCAS this practicee works great injury
to those inu_"actturors and- distributors -ho adhere to such
filed prices, the Code Authority, subject to appiroval by a'
i.ieetin5 of the I:,.Zustr-, hereby rules that :m.ibcrs of the
Industry, in defense of business from their established
customers or from established caisto:-er's of their distributors,
ncy meet bona fide knovn como-etitive prices, provided that a
co,.alete record of every such transaction shall be filed wTith
the Administrative Agency immediately a.nd -.rther rules that
it will accept for filir.j, schedules of prices and terms of
sale containing the following reservations:

"UTie right is hereby reserved, in defense of business
from our established customers or from established
ci.somters of our distributors, to meet bona fide kIcnown
competitive )rices.

"For the purpose of this ruling an established cus-
tomer shall be defined as one, a substantial portion
of whose business has been enjoyed by such member
directly. or through a distributor."

The difficulties that ap.oearced in the-operation of the Open Price Plan
follo-.ied in large part the issuance of Office Le-iorarndum 267, dated July
30, 19C'-, forbidding the use of cmadatory customocr classification under
open price -lan.. The code authorit- 'classifications had been in effect
without IBA sanction until Ap3ril '35., when ::r. G. K. Hrmill, Assistant
Deput- of the Pr.per Division, submitted thel:- for advisory opinion. Later
he disap-)roved the Bulletin setting forth the defined classes of trade.

(*) ninutes o- ieceting, november IZ4, :.-{R files











-326-


Almost simultaneously with thi action, the code authority voted to stay
the Open Price Plan in the industry. Thiq decisio'i, coupled with the
imminent termination of existing IBA legislation and the expected re-
vision of c" :.s, led the deputy to refrain from any official order of
disarm proval.

The relatively short period of operation covered by industry re-
ports prevents any real analysis of the effects of the quota plan but
they do suggest the possible uses to which such corollary statistics
could be put. They raise the basic issue of the economic justification
for efforts to stabilize production on the basis of past volume of sales
and existing excess capacity, mand the further question as to whether the
attempt to prevent shifts of business that might occur under open price
filing would not defeat one of the 6.stensible purposes of those plans
in preventing any wholesome adjustments thet might take place with open
prices any improved competitive conditions that night arise through them,

4. The Commodity Group Plarn. for the Candy Manufacturing Industry.

One further experience with a budget plan in connection with price
filing is afforded by the candy manufacturing industry. The history of
this pln, and the course of its operation, would indicate that it was
first sponsored by Dun & Bradstreet, Inc., who had been appointed by the
code authority at its first meeting as the agency to handle price filing.
The minutes of the code authority meeting on July 15, 1934, report that
Mr. H. B. Ludlum, representative of Dun & Bradstreet, Inc., (a former
official in the IRA who participated in the first Price Hearings, in
January, 1934), reported at length on the e:cerience of Dun & Bradstreet,
Inc., in receiving ri-nd filing price lists, and made a number of suggestion
and recommendations for the organization of the plan. 1r. Shannon, IBA
legal counsel, suggested that Dun & Bradstreet, Inc., be allowed to draw
up the rules for the price filing plan. A committee to draw up classi-
fications an., products s of the industry an. to determine the separate
classes of bu,oers to be recognized in the filing of prices was appointed
to assist. These classifications included definitions of buyers meant to
conform closely with those in the Wholesale ConfectiGners'-,' Code. (*)

The price filing plan as finally developed was called the Commodity
Group Plan. The code authority at various times utilized the services of
Ernst and Ernst, cost accountants, Dun & Bradstreet, Inc., as confidential.
agents of the code authority and later, Stevenson, Jordan and Harrison to '
operr-te the Commodity Group Plan, so that nothing short of an elaborate
case history would give a complete story of its development. The Commod.i
Plan was operated in conjunction with the detailed customer classification!
plan mentioned above, which was not sanctioned by the NRA. It was appar- :
ently developed in its final form after informal attempts at price fixing ,
in the industry. (**)


(*) The definitions were revised frequently in later meetings of the cod
authority and vere used during most of the period of code operation,
although members were informed by the deputy administrator in Septemul
ber, 1934, that such classification was not permitted under existing
I.ReA. policy.

(**) See D* 424 below.











































































































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:


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'-77-


initial filing of prices and terms until the end of the o-rice filing
period. Only less extreme would be tie ;-dja, tment of the )rice structure
Is by one refiling in nhich every change it included. Usually, however,
there .-ere re-eated altera.tions in the .-ricel, and tertas of sale. Then
these alterations occurred frequently at the beginning of the orice fil-
ing period, and less frequently at the close, it may be assumed thct
relative stability 7was developed. Then the chane'es were not thus concen-
trE.tec., sut tie lIcter variations filed '.ere confined within relatively
t narrow limits, the stability- ao-ears to have been different in 'kind but
S equally: reel. Absence of any stabilizing influence is indicated .ihen
fluctuations 'ere as wide in extent and as frequent at tne end of the
filing period Es at the beginning.


5. The direction of price movements .


A further question is whetner net prices during the price filing
period rose, fell, or remained a;..roximately the same. Where the trend
of price changes ras relatively sli,-t, the difficulty in determii-Lj net
prices obscures the character of the movement, and the price level clar be
regarded as unchanging. Considerable changes' in :.rice levels ma;' be
traced in spite of this difficulty.

Price movements are more remotely connected W. ith price filing than
are the internal adjustments of the rice structure discussed in the :re-
ceding paragraphs. The price structure is sufficiently complicated that
price filin-g )robably adds to gener:,l knowledge about it; and in certain
cases the _lsy of competitive i-.ait. tion in the adjustment of parts of this
structure aopears clearly in the filings. The broaC.er movements of the
industryls price level, however, depend in large oart upon influences in
the ucrkct to which rice filing may nave only c. collateral relationship.
During the I1A period, for exarwole, the trend of prices '7as gener?.ll..y u.-
ward as a. -rt of the emergence froi de-ression. Hence only colnsicuous
price chances simultaneous with marked alterations of the price filing
system are even )resmunptivel.- tra-ceable to price fi-in-.


.1.
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9826