T, •• .'" ■ ' •■- i '' COOPERATIVE COMPETITION 25 Illuminating Articles on Trade Associations with an introductory article by HERBERT HOOVER This discussion by business men, lawyers, economists and high government officials of the proper and legiti- mate field of the trade association is an example of the way the Neiv York Evemng Pott covers the field of business. Its reports of events and movements in the fields of finance and commerce make it an almost in- dispensable paper for the man who wants to know what other men are saying and doing concerning the problems that confront him. For additional copies address the Evening Pott, 20 Vesey Street, New York. Price 25 cents COOPERATIVE COMPETITION A discussion of the acute legal and economic perplexities confronting trade associations Reprinted from the pages of the New York Evening Post 20 Vesey Street New York City 'S^ OPERATIVE COMPETITION Trade Associations and the Future {This editorial appeared in the New York Evening Post on March 28, 1922.) ; ""Government and public wero quick to see the •vils potential in any bureau or association of busi- ness men formed in a given field to exchange in- formation as to production, stocks on hand, stand- ards, costs, and prices. They took early steps to legislate against the danger and have kept a sus- picious eye upon these new bodies. Their public benefits were left to be developed by far-sighted business men without public appreciation. We may now believe that this is changing. It is realized that ■we have the trade associations with us for better or ■worse. They are conservatively estimated to exceed a thousand in number, and the demand for greater business stability and more intelligent business opera- tion which they represent will steadily grow. At the outset many were organized in a purely selfish •pirit and officered by narrow and selfish men. The abuses stripped by the Lockwood committee were rot isolated abuses. But the best part of the busi- ness community is now determined to make such associations conform to the spirit as well as the letter «f the law. We have too long thought exclusively of what trade associations must not do; the series of articles which the Evening Post has published in the last fortnight has furnished a corrective by showing how much they can and should do. Secretary Hoover summarizes a large part of their proper activity when he says that they may cut off enormous wastes. They may distribute information which prevents overproduction; which enables producers to obtam their raw materials in the best markets; which im- proves manufacturing methods and by standardizing articles of commerce cheapens them. They may pre- vent wasteful overlapping in marketing, reduce cancellations, and advertise cooperatively. They may rreatly raise standards of business morals, and the newer type of trade association officer is keenly in- terested in doing so. They may enlarge our foreign trade An industry that is blind to changing market demands, or changing conditions of commerce or to ,„any other variable factors is an industry that Trows away wealth; an industry with the eyes fur- Si^ by an information bureau-for that isjha. a trade association largely is-conserves it- The prob Wm is^ save all the best elements of compet tion ^l^V^v^pg ^ piuch use as possible of cooperaUou. and the phrase "cooperative competition" is an ex- pressive one. " It' is only after we have understood the sound fun ions to be subserved by trade associations that we can guard against abuses by prohibitions and restrictions. Superficially, it may ^'^^ .^^"''^iJ^ prohibit any activity which tends tobmit compete tion But there is sound and unsound, healthy and unhealthy competition. A trade association which a«ts to prevent such ruinous price slashing that weaker firms must go to the wall, acts not to re- strain competition but to protect .and preserve it. An additional distinction was drawn by Mr. Edwin B Parker in the Evening Post last week. He point^l out that business men who are not joined in a trade association often compete in ignorant self-interest, while those in the right kind of trade assaciation compete in enlightened self-interest. That is, a manufacturer's eagerness to beat his rival by lower prices will not be lessened; but he will not be mis- led into flooding a market already full when he has an accurate knowledge of demand and stocks on hand. By all means let us make rigid laws against any practices that lessen true competition, that fix prices, that restrict production merely to raise prices, and that crush out trade rivals. But we must em- ploy the rule of reason. Because the application of this rule of reason in- volves a thorough appreciation of the economic com- plexities of the problem, the courts are not the agen- cies best fitted to administer it. The decisions of the Federal Supreme Court in the cases of trade associations prosecuted for violation of the anti-trust laws have not furni^ed a clear guide to other asso- ciations. Each case has been decided upon its own merits. The judicial opinions, far from marking out fixed principles, have been conflicting and confused in principle. State and national commissions seem the proper agencies to be granted the oversight of trade commission activities. They can act more quickly, expertly, and above all more consistently than the courts. The natural agency at Washington is the Federal Trade Commission, but its complete reorganization must precede the assumption of any such responsibility, _^ ^ OOPTBIQHT, 1822, N.T.KVEMNQ POST, INC CO-OPERATIVE COMPETITION March i8, 1922 TRADE ASSOCIATIONS SHOULD STAB ILIZE BUSI NESS Associations' Place in Law and Functions Should Be Determined — "Profound Necessity for Greater Stability in Our Produc- tion and Distribution" By HERBERT HOOVER Secretary of Commerce of the United States '' I am very glad indeed to see the Eve- ning Post undertake a thorough discus- sion of the organization, functions, and place in law of our various voluntary economic organizations, such as cham- bers of commerce and associations of manufacturers, distributers, bankers, farmers and workers. The problem involved is one that goes to the very foundation of our whole social and economic system. As a people we are saying at the same time that we must maintain competition in order that we should maintain individual initiative; that we will not have profiteering; that we will keep free the law of supply and demand; that we should have such a basis of business stability as prevents wholesale bankruptcy with its attendant depressions and unemployment. These principles do not altogether conflict, but they will require careful harnessing if they are to be driven in team. There is a profound necessity for greater stability in our production and distribution. One needs to search no further than our intermittent industries, our acute booms and depressions, for proof of that. Nor are boom.s and de- pressions theoretical things. They are vast destructions of enterprise, of capi- tal and of employment. The desire for greater stability is strong and persistent. It grows in force after periods of economic difficulty. Fol- lowing the great depression of the early nineties, we were afflicted with a flood of combinations and consolidations by the combining of capital. This was the natural result of the previous period of widespread bankruptcy and therefore a groping for something that would serv« as a basis of stability. The law very promptly stepped in to prevent the domination threatened by the combination of ownership with its elimination of competition and its strangling of equality of opportunity. The more recent form of this groping for stability is witnessed in the tremen- dous growth of economic associations of all kinds, especially during the last dec- ade. This is not alone a question of manufacturing and transportation in- dustries. It has been equally prevalent among farmers, among workers, and among distributers, until there are to- day of one kind or another probably 25,000 of these voluntary associations having economic objectives. The farmer and labor associations having been CO-OPERATIVE COMPETITION practically exempted from the restric- tions of the trade restraint laws, a vast majority of others are concerned in mat- ters that do not result in trade restraiht and are definite contributions to public welfare. While some minority of trade asso- ciatiohS do things that in effect restrain .competition, many of the activities of even this residue do not have this effect. Certain , traders, particularly in the , building material trades, have used the cloak of such organizations for direct feqnspiracy to restrain competition, and in fact some ingenious persons have worked out methods by which practical combinations for price and market con- trol were exerted. Their conspiracies were no more an essential part of asso- ciation work than the possessing of a brickbat is essentially murder. The functions of genuine chambers of com- merce and trade associations have no re- lation to the things prohibited by law and do make for public welfare. The functions that border upon trade re- straint, whether illegal or not, should be eliminated. It is a foolish approach, however, that would destroy the good in order to eliminate the evil. The studies carried out in the De- partment of Commerce during the last year convince me that there lies in these associations a road for the elimination of vast waste in our whole industrial system through the development of co- operation without destroying competi- tion. The legitimately formed associa- tions have contributed greatly to the im- provement of business morals and practices, have cheapened our produc- tion and distribution processes, have im- proved working conditions, have, by the statistics they publish of production and distribution, enabled our whole com- mercial public to form safer judgments as to their future policies. They have contributed to the advancement of our foreign commerce, and generally they have interested themselves in our eco- nomic welfare. These services should be preserved and even better organized. CO-OPERATIVE COMPETITION March i8, 1922 TRADE ASSOCIATIONS VITAL TO BUSINESS Their Activities Required to Restore Business Stability — Abuses of "Open Price" Methods Are Cohfined to a Small Number By WILLIAM 0. SCROGGS Secretary Hoover, in his article in to-day's Evening Post, puts his finger on a vital spot in the business situa- tion when he shows that the tremen- dous growth of trade associations in recent times is due to a "groping for stability." Critics of the existing in- dustrial order have laid much em- phasis upon the instability that comes from the lack of coordination between production and consumption, with the consequent alternations of periods of boom and depression. The need of effecting such coordination has beer, one of the compelling forces that have driven men who for most of their lives have been keen com- petitors Into organizations to promote their mutual welfare. The pa.st eighteen months have been an especially trying period for the business men of this country. Prices have not only declined in record-break- ing fashion but they have fallen so unequally as to create serious econom- ic maladjustments. The process of re- adjustment has been painful, but it would have been even more so if pro- ducei's and distributers had persisted in "going it alone." During the last decade, however, and especially under the stress of the war and its after- math, Amei-ican business men hav;? been slowly divesting themselves of their once rampant individualism t.nd have come in increasing degree to per- ceive the advantages inherent in col- lective action. Movement in All Groups This associative movement, as Sec- retary Hoover points out, is not con- fined to any particular group or class, and the organizations of manufactur- ers have their counterpart among farmers, laborers, lawyers, bankere, and even among such a supposedly cloistered group as college professors. Trade associations, or organizations of men engaged in the same line of busi- ness, had their beginning more than a generation ago, but their growth has been most pronounced during the last few years. They proved their usefulness during the war by bringing entire groups in a given line of business into harmonious cooperation with the Government through the instrumentality of the various war boards. With their as- sistance the Government was enabled to procure its necessary quota of war materials with a minimum of effort and delay. With their cooperation the production of non-essential commodi- ties was curtailed, supplies of raw ma- terials of which there was "not enough to go around" were allocated so as to give every producer an equal chance, and standardized methods and pat- terns were adopted so as to obtain the most economical use of labor and goods. Where trade associations did not already exist in the industries concerned with the war. the Govern- ment encouraged their formation, and collectively they played an enormously important part in mobilizing the na- tion's industries. Over 1 ,000 Associations To-day there are over a thousand trade associations of more than local importance, but there are still maiiy intelligent persons who have not yet learned that a trade association is not the same thing as a trade union. The tendency for producers and distrib- uters to resort to group cooperation has developed so far that there is now even an association of associations, or, more accurately, an association whose membership is made up of the execu- tive officers of individual trade asso- ciations. As one of the postulates to be em- phasized at the beginning of this se- ries of articles, it may be stated that the trade association is a necessity in modern industry. The prevention of business anarchy lies in some such co- operation. This may be obtained through the direct merger or amal- gamation of different units, or by em- ploying the principle of federation Past experience shows that from the viewpoint of public welfare, as well as from that of the business itself, the federation idea is preferable. Fed- eration allows that fuller play for in- dividual initiative which consolidation is likely to render imposeible. It tends also to prevent the topheaviness, the diffusion of responsibility, and the lack of directness o£.motivation which have sometimes undermined the efficiency of large-scale business organizations. Competition Can Be Kept Under the federation principle, as found in the modern trade associa tions, competition may still be retained as a vital factor in business, but in- stead of being of the old-fashioned, blindly bludgeoning sort, it is rendsrc^d intelligent, cooperative, and construc- tive. Under properly conducted trade associations there will still be com- petition in the matter of prices, as well as in the matter of quality of goods, but the ruinous effects of indis- criminate price-slashing and selling below cost will be avoided. Reasonable prices to the consumer and reasonable profits to the producer, without which there can be no such thing as really sound business, will become the guid- ing policy. The seller, however, can establish reasonable prices only when he hai* accurate knowledge of costs and of njarketing conditions. Possessing such knowledge, he can readily determine the price that will yield him a fair 'ij.^ profit. Obviously, when all concerns in a given line of business have such information at hand as a guide for making their prices, a long stride has been taken in that particular business in the direction of stabiliza- tion. When other industries upon which this one is dependent — as, for example, those producing raw ma- terials or machinery — are followins the same cooperative policy, it is evi- dent that the foundations for stable business have been still further strengthened. While the dissemination among the members of a trade of mformatlon with regard to production costs and general market conditions is one of the most important functions of tlie trade association, it is by no means the sole function. The distribution of data concerning 'he prices and best sources of raw materials, methods of eliininating waste and of utilizing by- products, the standardization of goods and of manufacturing processes, the handling of traffic problems of com- mon concern, the maintenance of a credit information bureau, the formu- lation of a uniform policy with re- gard to the vexatious problem of can- cellations, cooperative advertising, safeguarding the interests of the business when subjected to attack by legislative or other Government bod- ies, the suppression of untruthful ad- vertising, «nd the establishing of uni- form accounting methods are some of the other functions that come within the field of trade association activities. "Open Price" Operation From this list one Important form of activity has been purposely omitted t,i. . e cooperative: competition because of its questionable leeal status. This is the so-called "open price" op- eration, which, though not resorted to by all trade associations, has received more attention than any other on ac- count of the abuses which have been discovered in connection with it in the case of a few trades. The -open price" policy has its vehenaent critics and also its stout defenders. The De- partment of Justice and the Federal Trade Commission have set their faces ttrmly against it. The view of the latter agency was set forth by Presi- dent Harding in his address to Con- gress on April 12, 1921, in which, after referring to the failure of living costs to decline proportionately with prices In primary markets, he said: "I have asked the Federal Trade Commission for a report of its obser- vations, and it attributes in the main the failure to adjust consumers' costs to basic production costs to the ex- cnanse cr i.-ilt^i mation by 'open price associations,' which operate evidently within the law to the very great ad- vantage of their members and equal disadvantage to the consuming public." This statement served for the first time to direct the attention of the whole country to the subject of the "open price" association. About th>i same time came the exposure of cer- tain objectionable practices due to the "open price" tactics of the local build- ing trades In New York City. Then, towards the end of the year, came the decision of the United States Supreme Court in the Hardwood Lumber Manu- facturers' case (American Column and Liumber Company et al. vs. the United States), which has served further to discredit the "open price" association In the eyes of the American public. When "Open Prices" Overstep It is well to empnasize the fact, however, that not all trade associa- tions are of the "open price" variety. It is only when an association ex- changes among it.=! members daily price lists, sales figures, and other data designed to enlighten them as to the general trend of prices that it Is to b« placed In the category of those that are likely somo day to Pnd the iLttomey General of the United States and his corps of investigators and prosecutors after them in fu"l hue and cry. Even when an association has been employing the "open price" plan it does not follow that it has actually passed beyond the border line of things that are permissible. Opin- ions differ as to th-i full implication of the decision In the Hardwood Man- ufacturers' case. According to one view, the judgment of the Court was not directed against "open price" methods as such, but against the ob- jects for which these methods were employed. Others see in the decision the placing of all "open price" prac- tices under the ban of the anti-trust laws. The uncertainty due lo thi;> divergence of opinion among even the best-trained legal minds is proving most unfortunate for business. In defending the "open price" prac- tices the Hardwood Manufacturers' Association took the position that the data which it distributed among its members were of the same nature as that contained in newspapers with re- gard to the commodities and secuiities bought and sold on the organized ex- changes. The Court, however, point- ed out that there was a "distinguish- ing and suflftcicnt difference," in that the reports In the public press zo to both buyers and seller.^, whereas those of the association went to the sellers only. Moreover, in the case of the association, its price statistics passed to the members through the hands of skilled interpreters who.se duty it was to indicate "action likely to prove profitable in proportion as it is united- ly pursued." In short, the Court could see in the "open price" plan as oper- ated by this association an avowed purpose to maintain a sellers' marke' under any and "all conditions. The practices, therefore, were denounced as an old evil In a new dress and un- der a new name. New Definite Rules wag handed have become n conducting result in the opinions con- price associa- Since this decision down trade association extremely cautious 1 transactions that may Interchange of facts or cernlng prices. Open tions are desirous of seeing, definite rules laid down for their guidance, setting forth explicitly what they may do and what they may not do. There is nothing new in their complaint about the uncertainties of the law. The same thing was heard after the dissolution of the tobacco and oil com- binations in 1911. It is useless, how- ever, to look to the courts for relief In this direction. The formulation of definite rules of action tor the trade associations is the function of the ad- minietratlve rather than of the judicial branch of the Government. The courts can only pass upon each specific case that is brought within their cogni- zance and decide whether the facts as set forth are or are not In contra- 1 ention of the statutes. Some of the chafing at the recent decision is not due so much to the uncertainty of the law as construed b: the courts as to its absolute cer- tainty. The courts have made it clear that practices designed to restrain le- gitimate competition and essentially to fix prices, divide territory, or restrict output are unlawful. There is no un- certainty about that, and whether there are many cases in which busi- ness organizations are unwittingly re- sorting to such expedients is doubtful. The uncertainty consists mainly in their inability to discover in advance how far they may go in such directions v.ith impunity. The safe rule for trade associations to follow is to steer clear of any ac- tivities which tend to hamper the free operation of the laws of supoly and demand. The great majority of these organizations pursue such a course, and of the few who trespass some are punished. The oft-repeated assertion that the attitude of tho Oovcmment towards the "open price" s>stem threatens the existence of trade associations has little basis In fact. As has already been indicated, there are enough useful and socially desirable things that an association may legitimately do to keep it fully occupied without its straying off into the twilight zone of "open price" tac- tics. And there Is every reason to believe that In the pursuit of these legitimate functions the trade associa- tions will receive nothing but en- couragement and cot'peration from the Governmeat. CO-OPERATIVE CJOMPETITION March 20, 1922 SAYS LAW CURBS COMPETITION IN ORDER TO MAKE IT FREE Trade Associations Can Foster Rivalry — Attorney Advocates Free- dom to Serve Enlightened Self-interest — Bad Business Policy to Crush Competition — Value of Exchanging Information By EDWIN B. PARKER C4eneral (Jouneel of the Texas Company, Chairman of Priorities Division, War Industries Board, and in closest contact with Trade Associations during the war. No honest man who has given the problem any mature consideration will challenge the statement that trade associations legitimately conducted re- sult in benefits to their members and to the genei^al public. That organiza- tions in the form ol trade associations have been used as a cloak under which unlawful combinations have sometimes sought to conceal their real purposes and evade the law, there can be no doubt. Under the existing law there can be no combination, agreement, or under- standing, express or implied, direct or Indirect, tending to create a monopoly or unreasonable restraint of trade. Combinations in restraint of trade, masquerading in the form of trade as- sociations, may fool themselves into believing that they are fooling the rest of the world, but there is in store for them a rude awakening. The life of the law is reason, and the application of any rule of law can be safely made only when the reason of the rule is clearly understood. Con- stantly changli^ commercial, indus- trial, and ecoMVlt conditions require — not a deparloi* from fundamental principles — but a atuohlng out of the reasons underlying the rules and a broad intelligent application of them to such changed conditions. In order to clearly understand the law relating to combinations in trade, it is necessary to have In mind the gist of the economic doctrines which have accompanied and controlled the development of that law. Throughout the centuries competition has been ac- claimed the "life of trade," and this is tl.-e accepted foundation upon which rests this branch of economics. The principle of competition as expounded by the classical economists, Adam Smith, Rlcardo, and others, and as re- Pned by John Stuart Mil), furnishes th© foundation for our anti-trust leg- islation. The "law of supply and de- mand" is, according to their teachings, the most fundamental economic law, operating automatically by the inflexi- ble law of nature For its operation and for all purposes they assume two axioms: (1) That man always acts from the motive of "self-interest," and (3) That the principle of "compe- tition" is always present. This doctrine propounded in the latter part of the eighteenth century took a firm hold ou Anglo-American thought, and remained for years the cherished guide of business intelli- gence. In fad, with certain refine- ments, It is stil! our cherished guide. These refSnementa were contributed principally by one of tlie most power- ful minds of our race — John Stuart Mill, Ho found the older doctrine true in its outline, but he gave if a more workable meaning by refining certain of its definitions and subtracting a little from the assumption that it would always work automatically. He taught that while the "law of supply and demand" was sound and efficaci- ous, two of its axiomo needed more careful definition: (1) Competition would not do the work unless it was free, unrestrained and unhindered competition; and (2) Self-interest would not be a sure, prompt, and effective motive for the competitors unless it was en- lightened self-interest. It was with these accepted axioms in mind that, in the yeans just pre- ceding the enactment of the Sherman law in 1890, the people came to study the cure for the vicious practices it- tendant upon the numerous examples in our country of great mas.ses of capital so controlling high percent- ages of individual commodities that prices could be held indefinitely above the cost of production, plus a reason- able profit, and the natural law of "supply and demand" be set at naught. Everybody was willing to assume that an "enlightened self-in- terest" was the dominant motive among business men. The difficulty seemed to lie in the principle of com- petition. Competition was not "free"; it was being restrained, and for this reason the law of supply nnd demand could not operate expeditiously to produce the desired balance at which commodities would sell for cost, plus a reasonable profit, legislation de- signed to preserve "free competition" was therefore believed to be the cure, and the Federal Congre.ss began with a very simple statute, known as the "Sherman act," practically declara- tory of the common law, with appro- priate penalties. The effect of this act was to destroy certain forms without entirely reaching the sub- stance of the evil. Merciless and unrestricted competi- tion drove many compe'Uors, i-espond- ing to the law of self-preservation, to the "pool" and the "trust," through which industrial control was in a large measure obtained. Less powerful co.-n- petitors were crushed and driven from the field by various disgraceful prac- tices, which have come to be known as "unfair competition," to whicn class belong misbranding, false adver- tisements, blacklists, boycotting, and the more modern devices, such as the "fighting brand."' the bogus indepen- dent concern, the rebate and the pref- erential contract. To cure these abuses. Congress in 1914 passed the Federal Trade Com- mission Act, declaring unlawful "»\\ unfair methods of competition," with- out defining them; and also the Clav- ton act prohibiting price iiscrimina- tlon, certain kinds of exclusive con- tracts. Intercorporate stockholdinj* and interlocking directorates, where the effect might be substtntially to les.sen competition or create a mono^ oly. This legislation drew its sop* port from at least two distinct sources The first was the growing belief that the Sherman act was insufficient tfl curb those bent upon r.ionopoly an4 restraint of trade so long as certain methods of competition were available to them. The second was the eleva- tion of business ethics and moraliiy to the point where business men be- gan to look with distaste upon tho mean, petty, and dishone&t methods of unfair competition that were com- monly employed and that had dis- graced commerce and industry for centuries. It if? interesting to note the some- what curious fact that the Govern- ment, In seeking more effectually to strike down monopolies, used as a weapon the enforced restriction of the free power of merciless competition. The law has curbed competition In order to make it free. We are now coming to see that the ultimate solu- tion lies not alone in keeping compe- tition free, but also in adding to the enlightenment of self-interest. In testing the legality of a trade ae- sotiation ami in determining what are its legitimate functions, the scope of its activities must he examined in the light of the first principles which have 10 CO-OPERATIVE COMPETITION been noticed and the economic rea- sons prompting the enactment of the statutes mentioned. The question must be plainly asked and frankly answered: Do such activities restrain or hamper free and fair competition among those abUag from motives of enlightened self-interest? The assembling and dls- senilnating of information of common interest to all members of an industry not only tends to make competition more free because based on more in- , telligence, but it furnishes informa- " tion to the competing agents fitting them to act quickly and promptly from the motive of enlightened self-interest, Ita distinguished from ignorant self- t)tterest. Without accurate knowledge •r the demand for his products and the stocks on hand to meet such demand, enlightened self-interest could not so •ffectively prompt increasing the out- put to meet a shortage in order to reap the benefits of high prices; which conduct in turn carries with it its own automatic cure in the form of in- creased production and lowered prices. Neither the common law nor the statutes. State or Federal, either in letter or spirit, seek to prevent any individual, firm or corporation from acquiring all available knowledge of facts, in order to act intelligently in the conduct of their business. No principle of law and no final decision condemns the formation and mainten- ance of an association of independent business competitors, each of whom re- mains free In the conduct of his busi- ness, having for its purpose th^ as- sembling, classifying, and disseminat- ing of Ipformation of common interest. That the tendency of such activities is to promote rather than restrain trade is, very properly, recognized by our Federal Government, in suggesting the formation of trade associations and Inviting their cooperation with the Government in the compilation and dissemination of information of this character. " The alternative is wholesale con- solidations. If competing units in Industry are denied the right to re- main competing units, and at the same time to cooperate in the ascer- tainment and dissemination of facts of common interest, knowledge of which Is essential to the introduction of econ- omies, to the elimination of waste and to the Intelligent conduct of their business, then these independent com- peting units will be driven to attain these ends through lawfully merging Into a comparatively few powerful corporations, with the resultant pro- portionate elimination of competition •which must inevitably follow. Even the most extreme and radical advocates of anti-trust legislation ad- mit that the large industries have a very distinct advantage over the small ones because of their facilities for gathering, digesting, and profiting from information and data affecting their interests concerning market con- ditions in every part of the country. Obviously the trade associations equipped to so serve, equally and with- out discrimination, all members of the industry, great and small, can put each and all of them in a more ad- vantageous position for the exercise of an enlightened .self-interest than any one member of the industry, how- ever strcmg, can through its Inde- pendent efforts attain,' and is, there- fore, rendering a signal service to the industry as a whole and at the same time is promoting fair and free com- petition in the public interest. In so far as the enlightenment of self-in- terest in industry is increased, Adam Smith's law of supply and demand is assisted in accurately functioning and reaching a true balance. It is believed that the so-called "Hardwood Case" (American Column and Lumber Company, et al., vs. The United States of America), decided December 19, 1321, by the Supreme Court of the United States, has In some quarters been misinterpreted and misunderstood. In that case the court simply decides that the particu- lar so-called "Open Competition Plan" as interpreted and administered by the American Hardwood Manufacturers' Association was intended to, and rfid Ir. fact, restrict production; wa.? In- tended to. and did in fact, increase — not equalize and stabilize — prices, and hence, notwithstanding the often re- peated — too often repeated — piotesta- tions of the officers of the association to the contrary, was Intended to, and did in fact, create a combination un- duly and unreasonably restraining free competition In interstate commerce. The Supreme Court, of course, decided the Hardwood case on the particular record before it. As a majority of the members of the court interpreted that record, the members of the Hard- wood Association were not frank in their avowal of the purpose of the formation and the effect of the o.uera- tion of the "Open Competition Plan." Perhaps they were not even trank with themselves. The lesson to be drawn from this decision is not that the law places an embargo on the dissemination of knowledge, making It available to all the world, but that enlightened self- interest will stop there and not seek either to fool Itself or, the rest of the world Into believing that through cunning devices it can arrest the normal operation of the law of sup- ply and demand without both the ef- fect and Its motives and purposes being detected. Certainly the Supreme Court of the United States has not questioned, and no one can successfully question, eithei' the legality or the beneficial re- sults both to the general public and to the members of an inda.stry flow- ing from the members of such indus- try, through a trade association, as- sembling, compiling In a condensed form, and promulgating data dealing with and Recording actual facts — closed transactions — affecting the in- dustry, stripped of all expressions of opinion or prophecy: from measures taken by such association to strength- en the industry in foreign fields, from the adoption of uniform terms; from the standardization of materials, proc- e.=ses. and products; from the stan- dardization of cost accounting, and from numerous other services such an association may render In matters af- fecting the common interest of its members as a whole. Such an association wisely conduct- ed will scrupulously avoid being a party to any agreement or under- standing, express or Implied, looking either to direct fixing or influencing of prices, or to fixing or regulating ' the volume of production so as to affect prices, or to the apportionment of territory betweef. lU. members or others, or to taking any measures curtailing or restraining free competi- tion. I firmly believe f.iat it is not putting it too strongly to say that, speaking generally, the business men of the United States realize that unfair methods in competition and unrea- sonable restraint In trade and com- merce, accomplished either directly or Indirectly, or by any device whatso- ever, will not be tolerated; that, all other considerations aside, it is in the long run bad business policy to pursue methods calculated to sup- press competition and crush and de- stroy competitors; that such methods. while possibly giving a temporary ad- vantage, are bound to react and de- stroy those responsible for them, and that the great masse* of the people demand, are entitled tj have, and are as far as lies within thel» power golrtg to have, fair play in business. The strong, established, and successful units in industry, in response to an increasingly enlightened self-interest, are rapidly coming to square f.ieir conduct with a realization of these wholesome truths. Their attitude will come to be more and more appre- ciated and their course applauded and supported by the increasingly en- lightened public which they serve. In this day of unrest, uprising, and revolutions throughout the world. It behooves the property ovjner, great and small, more than ever before to set an example of strict observance of the law, right or wrong, sound or unsound, so long as It is the law. A wholesome public opinion which de- mands the strict enforcement of all law is the strongest bulwark for the preservation of the rights of property. The men who unselfishly joined In fighting our country's battles In the mobilization of industry during the war will not halt now in whole- heartedly supporting our Government in the enforcement of its laws. They can and will live and prosper within the law; they can and will recognlzd the binding force of. and their obli- g:itIon scrupulously to respect, a law, whether they approve or disapprove It. They must and will realize that their salvation and the preservation of property rights lie In assisting all Governmental agencies In instilling in the mind of every citizen a whole- some respect fer the law as It is writ- ten, so long as It is the law; that as good citizens and good sportsmen they will in the conduct of their business play the game fairly; that they are strong eno\igh and resourceful enough to cooperate in a perfectly proper and legitimate way with respect to those matters of common concern where the law does not prohibit co- operation, and at the same time resist all temptation tending towards unlaw- ful combination. American Industry cannot afford to let, and I am convinced will not let, the opportunity pass to demon.strate to the world the value of cooperation by competing unit^ in any Industry in a manner to promote and stimulate full, fair, and free competition In the interest not only of an enlightened industry, but also of an enllghtene4 general public. CO-OPEEATIVE COMPETITION 11 March 21, 1922 URGES CHANGES IN THE ANTI- TRUST LAW; FOR FAIR PRICE FIXING ^ ^ Reasonable Projfits to Advantage of All — Suggests Federal Trade Commission Regulate Co-operation of Firms — Would Prohibit Combinations Where Their Operations Are Detrimental To Public A further liberalization of the anti- trust laws so as to permit trade asso- ciations in other fields than fai'ming and exporting to cooperate in stabi- lizing prices, under suitable limita- tions, will, in the opinion of Henry R. Seager, professor of political econ- omy at Columbia University, be a step in the right direction. In explaining his reasons for thi.3 conclusion, Mr. Seager who. from 1914 to 1921 was a member of the Federal Trade Commission of the United States Chamber of Commerce, first dwelt on the highly unsatisfactory results of the attempt to enforce the anti-trust law in its present form. He recalled that it had taken twenty- one years to bring about the dissolu- tion of the trust against which the act of 1890 was chielly aimed, the Standard Oil combination. As evidence of the futility of this long litigation h"fe cited declarations in tbe recent report of the Federal Trade Commission on the Pacific Coast Petroleum Industry that "the Standard Oil interests occupy the same dominant position in the petroleum industry of the United States as in California and usually take the initiative m price changes. The companies which were separated by the di.ssolution of 1911 do not com- pete or Invade each other's marketing territory to any Important extent." That there was still great uncer- tainty in raference to the application of the Sherman Act was illustrated, he pointed out. by the outcome of the recent dissolution suit against the United States Steel Corporation, de- cided In favor of the corporation, but by a bare 4 to 3 vote of the justices of the Supreme Court, with many indications that the two justices not participating would have sided with the minority had they voted, and thus reversed the decision. He then referred to the large num- ber of combinations found by the Lockwood Committee to be maintain- ing the prices of building materials in the New York market as evidence that the existing machinery for en- forcing that statute and the State anti-trust act was still quite inade- quate. Mr. Seager went on to explain that he did not ascribe the failure of the Government to make the anti-trust laws more effective primarily to the shortcomings either of the prosecut- ing officers of the Government or of .\merican business men. "The truth is," he said, "that in many of our basic industries concen- tration of production in large units has progressed to a point which en- ables a comparatively small number of large corporations to control the industries. In the case of steel rails, even as far back as 18.87. fifteen man- ufacturers controlled 90 per cent of the output of the country, and this was before the organization not only of the United States Steel Corporation but also of most of its constituent parts. Other important branches of the steel industry were similarly dominated, even at that early period, by less than a score of great manufacturing cor- porations. "Along with the concentration of control Into a few hands has gone a bitter educatiSnal process, which has convinced big business men that the cut-throat slashing of prices of old days was not only wasteful, but foolish. It is because of this convic- tion, probably, even more than be- cause of actual collusive action be- hind the scenes, that price slashing as regards petroleum and standard iron, steel, and other products, has not taken place, even in the period of industrial depression, through which we are now passing." "So long as a few business men are in a position to control the great in- dustries, and so long as those business men honestly and sincerely believe that stabilized prices are to the l>e«t interest, not only of themselves, but in the long run, of the public, the penalizing of combinations will not deter such men from acting in unison, even without formal agreements to do 80." "And stabilized prices high enougrb to provide reasonable profits are to the advantage of the public, a» well aa «f producers," he added. "We must have protection against combinations In reasonable restraint of trade, and' against the unfair and exclusive prac- tices to which monopolistic combina- tions have too trequently resorted, but we also need the stabilizing influence of cooperation in business, and eTen in price determination, If we are te avoid the wastes and losses of th« period when steel and our other great staples were alteraatety prince and pauper." Benefits of Policy As evidence of the probable benefits that might be expected to result from a further liberalization of the aat^ trus*. laws, Mr. Seager cited the entl- meration of the advantages of export trade associations given in the laat report of the Federal Trade Commis- sion: They put a stop to "the old prac- tice by foreign purchasers of playing off American competitiors one against the other." They facilitate the "coUeo< tion of information concerning for- eign market conditions, shipping fa- cilities, and requirements, foreign llsta, and packing practices, . and tb« ex- la CO-OPERATIVE COMPETITION change of constructive ideas among members." They permit "Joint advertising, joint selling offices and agents, and the pool- ing of administrative expense." They hasten shipments by permitting the distribution of large orders Simong members. They Improve the qualities of goods shipped by having inspections by the association. Many improvements in methods of handling, of packing, grading, and marlcing goods for expoj,-* have also been introduced. The importance of these benefits to American exporters Is further attested by the fact that forty-eight export associations, includ- ing over a thousand fii-m-s, represent- ing forty-three States, have already %eeii organized. "These associations." he said, "are prohibited from indulging in unfair practices towards non-member Amer- ican firms in the export business, and it is significant that, while the asso- ciations cover almost every important Jocanch of our export ti-ade. no com- ^Iaints have been made that they have used unfair methods." "Although it might be argued," he continued, "that this wa.s of little SJgniflcance, as the purchasers are all foreigners and so not in a position to complain to the Federal Trade Com- misslbn, the fact is that the prices charged seem to have b^en lower, rather than higher, than those charged in the home marlcet. "The situation as regards export as- sociations, each one of which must register under the Federal Trade Com- mission and submit to it an annual report on its operations, is in pleas- ant contrast with the situation as re- gards trade associations in the build- ing trades in New York City as re- cently revealed by the Lockwood com- mittee. This showed tha,; combina- tions to fix prices were numerous, but bnofuise in violation of the law the Bieps leading up to them were shrouded in mystery and their poli- cies soon developed into those of monopolistic conspiracies." Mr. Seager then emphasized the contrast between our situation and tbat In. some other countries, notably Germany. "There," he sAld, "assoclatlon.s have lottg been encouraged by the Govern- ment, and there coCperatlve regula- tion of prices was never .seriou.9ly at- tackeil as harmful to the public." "Regulation when necessary in Germany," he added, "is secu'-.d by the Government's taking over a por- tion Of the indu.stry and, by becoming itself a member of the association or cart ell, obtaining the power to con- trol in its price policy. Far be it from me to advocate the adoption by this country of^he German policy. It de- serves to be noted, however, that all students of the subject agree in crediting In large measure to the en- couragement given these combina- tions by the Government. Germany's remark^^le business expansion before ftie war, the speed with which she mobilized her industrial forces to prosecute the war, and her amazing industrial activity since the ftvar. Regulation Necessary "Some degree of regiilRtion will no doubt prove necessar.v, if wo follow the precedent set by the export trade and the farm cooperation acts and per- mit cooperation even with reference to prices in other industries. It will be more in harmony with our tradi- tional policy to look for such regu- lation not through Government own- ership and operation of Industry but through an agency like the Federal Trade Commisaion reorganized and expanded for this purpose, just as we are attempting the regulation of the railroads through the Interstate Com- merce Commission " When asked what kind of regula- tion he had in mind. Prof. Seager re- plied: "First and foremost, regulations in- suring adequate publicity with refer- ence to prices and costs and all re- lated aspects. "Second, a further development of ihe machinery already in existence for enabling the commission to put a stop to unfair methods of competition. "Third, should experience prove this to be necessary, an enlargement of the power of the commission to permit it to declare, when the facts so war- ranted, that prices established by joint action were unfair And unreasonable, and to require to substitution of fair prices, subject, of course, to court re- view, as are the rate decisions of the public service commission.s." Asked for his opinion of the value of the coming conference of repre.senta- lives of the trade associations called by Secretary Hoover, Mr. .Seager expressed high hopes of what it might accomplish. He pointed out that an arrangement by which the Department of Corrv- merce would act as a clearing house for the information in regard to Iiro- cluctlon, sales, costs, etc., that might be collected through the trade asso- f'iations would go far to check the misuse of this Information to the det- ilment of the public. lOxchange of Information and of oiiinion, even in reference to prices, he thought, would be shorn of most of its dangers if such Information were not kept secret by the members of the trade association concerned, but shared with the public. Given ma- chinery for adequate publicity with reference to the operation of trade associations, he believed that more liberal views in reference to their legitimate functions would soon come to prevail. In conclusion, Mr. Seager insisted that the change which he proposes would merely introduce into the statute the interpretation put upon it by the Supreme Court In its decision upholding the Steel Corporation. "Already in the Standard Oil deci- sion," he said, "the court held that only unreasonable restralts on compe- tition were prohibited. In the Steel decision the court went further and refused to regard as unreasonable the restraint growing out of the dominant position of the Steel Corporatl(>n in the steel industry since the evidence failed to show that this dominant posi- tion had been used to the detriment either of competitors or of the public. "Express declaration in the law that combinations prohibited were those whose operations were detrimental to the public would make the statute no less useful and workable than at pres- ent but would concentrate attention on the aspect that is really Important. If the law were so changed, the stabi- lization of prices which now so often results from the tacit, if not express, agreement of business men to make their prices uniform wou'd no longer be under the suspicion of involving violation of law, so long as the result- ing prices were fair and reasonable. "Under these conditions unfair and discriminatory methods would still be prohibited, consumers would still be protected from unreasonably high prices, and American business men would be able for the first time to enjoy all of the advantages and econ« omles that might result from coopera* tlve marketing." CO-OPERATIVE COMPETITION 18 March '22, 1922 FOR FULL TRADE REPORTS PROMOTE BUSINESS Buyer and Seller Are Aided by Publicity — Open Price and Open Competition Basis of Hoover's Plan — Adoption of Price Policy Would Mean Not Higher Prices, but Fair Prices Clark McK«rcher of McKercher * Link, lawyers, who has b«en active In trade movements, Is of the opinion that "the faithful collection and distribution at large of accurate trade data is in promotion of trade," and that full publicity to all branches of an in- dustry makes for fairness and legality in all trade association work. "With the exception of organizations having to do with agricultural products and wage scales to govern the price of labor, and certain operations in merchant marine made immune by special act of Congress," said Mr. Mc- Kercher. "I know of no existing trade organization whose members do an interstate commerce business, that has a price policy, if by that term you mean a definite agreement or secret understanding In any form whereby the selling price is predetermined or unduly influenced to a uniform scale." He added that his knowledge of the subject and interest In it was limited to that acquired as counsel on legal matters to industrial units and to some societies of national scope, but that investigation and research of means, ipethods, and results led un- avoidably to this conclusion. In response to a question about a possible contrary view in the minds of the publlc-at-Iarge, Mr. McKercher expressed the opinion that this, if it existed, was largely due to featuring in the public press Isolated cases of clear violations of law, of profiteering, and oppressive agreements calculated to control the distribution of commodi- ties, and largely confined to tlntra- state business, or Induced by local con- ditions. "I do not deny, of course," he said, "that such iniquities have bet-n charged and proved in prosecutions, but I affrpp with ihe Spcretary of Commerce to the effect that the abuses in cooperative work are the exception and not the rule. Change in Methods " This is especially true in price stru - ture. The prosecution in the 'Bath Tub Trust," held to be a subterfuge to control the price of the finished prod- uct by patent license manipulation, and the brakeshoe cases, showing the old plan of the Parks pool, were not the sole remedial features In the re- form of business methods of some years ago. The abandonment of these ancient forms of price and competition control was largely due to the com- plete change in methods of merchan- dizing. "In many trades the buyer finds a price more or less uniform. Without knowledge of actual conditions rhe buyer concludes immediately that there is some secret agreement be- tween competing producers to main- tain that uniform price. In nearly every case It will be found that in that trade there Is one great leader that marks the price path which every competitor must follow. "In nearly every case the one leader is not a member of any trade or- ganization. All others, not so well equipped In either manufacturing or sales facilities, must of course fol- low. They could not do business In staple products in any other way. Whether or not they are organized into a trade association has nothing to do with it. That is one of the reasons why trade organizations, as such, have no 'price p61lcy.' It would be useless. "The early days of the 'open price' and 'open competition' movement had a great influence. The first advocat ■ of these methods, the late Arthur .Terome Kddy, had a.s his main text in 1907 true publicity of all trade dat^i for the benefit and guidance of every one Interested, the producer. tk« merchant, and the consumer. Secretary Hoover's Plan "The soundness of his theory is exemplified in the permissive featurM of the moat recent official comment* on methods of trade associations witb reference to their relations with Qov- ernment institutions. It is the kefh note of Secretary Hoover's plan. ' "The adoption of this princlpl* Is of far crreater importance than is rs* fleeted In the desire of manufacturer merchants to keep within the tcchnl- cal rules of law. If of any value at all it must be considered as a funda- mental principle in trade economics. "That full publicity to all brancbea of an industry makes for fairness and legality in all trade aasociation work is clear. One prominent manufao- turer expressed It a few months ag« thus: " 'I believe that if my customer keeps himself Informed as to the demand of the buying public. If he learns the course and volume of production. If he even understands the margin be> tween my cost and my selling price, If he knows in a general way tba conditions of stocks, sales, and ahip* ments, he will be a better buyer, a better merchant. He will do less speculating. Hs will not induce me to manufacture goods not needed and which ultimately one of us must .«.^;stics that are necessary to the production of the commodities and the rendering of the services which the public must have. Without associated effort everr railroad in the country would still be maintaining Ks own gauge and there could be no through transportation of freight or passengers, and order for lumber or millwork could not be placed with any certainty as to what would be received, automobile tirea would not be interchangeable nor could one buy such a simple thing as a screw with more than half a chance of getting a right-hand one. The service rendered to the public by voluntary associations of pro- ducers in the field of standardization aloiie amounts to incalculable savings in costs, not counting the immeasur- able gain in reliability of product which standardization brings about. But statistics are no less essential 18 CO-OPERATIVE COMPETITION th&n 8tandardi2sation among the manifold helpful activities of trade associations, which there is no space here even to enumerate. What, then, do commerce and in- dustry in the United States demand as basic rights with respect to statis- tical information not only for the suc- cessful conduct of their own affairs but in order that they may serve the pub- lic adequately and efficiently? They assert that they have the in- herent right to collect and distribute through their trade organizations statistics as to volume of production, shipments, stocks, orders, costs, wage rates, market conditions as to iheir own and competing commodities, all Impartially compiled by a trained as- sociation executive and supplied with- out coloring by him to all who have a legitimate Interest In the matters dealt with. Only upon such' a basis of facts is it possible for the public to be serveJ in the manner it demands. Facts are sometimes disconcerting, but never 8o damaging as the gossip w^hich cir- culates when' facts are not available. Business done by daylight is perma- nently more successful than that (jone In darkness, and while the public may reap a temporary advantage from blind competition of either buyers or sellers, the public in the long run pays the bills for all economic losses. How Plan Works Because of the peculiar nature of tiieir business the manufacturers of newsprint paper have for years been ■tlbject to fill kinds of attacks by their eustomers, by politicians, and by no- toriety seekers; nevertheless, because information must be had If operations are to be successfully conducted, the manufacturers have built up a system of statistical reports among the best in the trade association field, the re/ suits of which are freely given to and used by their customers, by the trade and financial press, and by all Govern- ment bureaus interested in this par- ticular subject. An example of the kind of statistical work that is of value to many trade associations is the monthly tabulation of the volume of newspaper advertis- ing in New York City made by the Evening Post, which at this time indi- cates improved business cohditions. Comparing the total volume of news- paper advertising in the first two months of 1922 with the total foi- January and February, 1921, we find a gain of 6 per cent in lineage. The most notable feature is that while local advertising shows a small gain in 1922 over the large volume carried during the same period of 1921, foreign advertising shows an increase of 24 per cent, which is some indica- tion of the extent to which the manu- facturers of nationally advertised com- modities are vigorously fighting to bring the volume of their sales back to normal after the period of depression. Foreign advertising amounted to 18 per cent of the total volume of Nfew York City newspaper advertising dur- ing the first two months of 1922 and to 15 per cent of the total volume dur- ing the first two months of 1921. Dur- ing January and February, 1922, for- eign advertising wa% 20 pei. cent of the total volume of advertising carried In the morning papers, 17 per cent of the total in the evening papers, and 18 per cent of the total in Sunday papers. A progressive improvement is indicat- ed by comparisons of the separate months. The total volume of advertising of all kinds in all the issues of the New York City newspapers in January, • 1922, was 3.5 per cent more than in January, 1921, while in February, 1922, the increase was 8.5 per cent over the volume in February last year. Heavy increases are noted in automobile ad- vertising, while the volume of space devoted to dry goods, fu.-niture, and real estate has been especially well sustained. Examples of this kind might be cited without number. The recent exchange of letters among the department heads' at Washington has accomplished two things: (1) The importance and necessity of trade association activities have betn called to the attention of the public in conspicuous fashion. (2) It has been once more stated that agreements to fix prices, limit production, and div.de territory are il- legal and will be prosecuted, as they should be. •In short, every business man has the right to know all the essential tacts in connection with the produc- tion and distribution of his product or the furnishing of the type of ser- vice which he supplies, but he has no moral or legal right through agree- ment with his competitor to endeavor to bring about an artificial condition beneficial to himself and hurtful to the public. CO-OPERATIVE COMPETITION 19 March 25, ig22 TRADE GROUPS HAVE LEGITI MATE PURPOSES UNDER FEDERAL LAW Review of Late Court Decisions — Circulation of Reports of Business Conditions Not Construed as Against the Law By HENRY A. WISE Former United States District Attorney. The prosecution and conviction of the members of various combinations >9hose activities were disclosed as a result of the investigations by the Lockwood Committee, and the recent decisions by Judge Carpenter in the Linseed Oil case (United States vs. American Linseed Company et al.), and by the United States Supreme Court in the American Hardwood case (United States vs. American Column and X-umber Company, et al.), have Eivon rise to a very general discus- sion .-egarding trade associations. Many legul opinions h?"e been ex- pressed concerning the Supreme Court decision; and there have been almost as many views expressed as to the scope and effect of the decision as there have been opinions. There has also been much of editorial comment In our leading newspapers concerning this decision. Many of the writers appear to have assumed that the de- cision was a general and sweeping condemnation of every trade associa- tion regardless of its activities. A literal acceptance of this view would have undoubtedly resulted in a very serious upset to business in this country. But in the absence of a clear, tinetiuivocal, and most positive con- c!«Bination of trade associations as such, it was not to be expected that the business men of this country, most of whom are members of trade associa- tions, would give up what has become a necessary adjunct in their business merely because of a decision which the court limited to the activities as it said "here under discussion." Accordingly the discussion of the effect of this decision* upon legitimate trade associations has continued and the climax of the subject may be sai^ to have been reached in certain inter- departmental correspondence between the Attorney General of the United States and the Secretary of Commerce. Hoover Made Inquiries Mr. Hoover, because of his broaci, general business experience, and his undoubted knowledge of the value of the services rendered by legitimate trade associations, and, no doubt, rec- ognizing the harm to business gen- erally that would result should the Hardwood decision be construed as a general condemnation of trade asso- ciations, presented "an informal, inter- departmental inquiry'' to the Attorney General "regarding the present status of the law relating to legitimate trade associations and the extent that they may engage in legitimate cooperative activities." In presenting this inquiry, Mr. Hoover assumed that there are such things as "legitimate trade associa- tions," and that there are "legitimate cooperative activities" in which the members of such associations may en- gage. That he was correct in both as- sumptions seems to be beyond ques- tion. While the Attorney General, in his reply, was careful to avoid an un- equivocal commitment of himself to the approval of any of the suggested necessary activities of trade associa- tions as outlined by Mr. Hoover, yet the fact remains that the Attorney General did not attempt to charac- terize them as in and of themselves violation of the Anti-Trust Laws, or as having been denounced or con- demned by the Supreme Court in the Hardwood decision. Activities Specified Time and space will not pemnit of an enumeration of the "activities on the part of trade associations" which were specified by Mr. Hoover in-- hta inquiry, but amonjr them werethB gathering, compilation and distribution of the statistics of an industry show- ing production capacity, volume of. production, volume of distribution and consumption, and stocks on hand; maintenance of a standard system of cost accounting, standardization .of product, standardization of tradeterms and phrases, cooperative advertising', united effort regarding questions, of tariff, railroad rates, and like matters.^ While not condemning any of these suggested activities, the Attorney, Gehr eral carefully hedged by saying in ef- fect that "every case that came before him would have to be judged accord ing to the r.articular facts," and that if in the practice of any association "it shall develop that competition Is suppressed or prices are materially advanced this department must treat such a pr. — .^ . as it treats any other one which is violative of the anti- trust act." So it will be seen that all of this correspondence boils down to the simple statement that every case must be decided upon its particular facts, or as the Supreme Court said in the Hardwood case, upon the facts "here ur.der consideration." All, therefore, that can be gathered froni this correspondence is an as- sumption by Mr. Hoover tnat there are legitimate trade associations and leslti- mate trade association activities, ana an implied admission of the correctness of these assumptions by the Attorney General, coupled with a warning that no violation of the law will be tolerated merely because those engaged there!j» throw about themselves the cloak of being engaged in legitimate trade as- sociation activities. 20 COOPERATIVE COMPETITION The situations disclosed by the Lock- wood committee showed not Illegiti- mate trade associations, nor ti"»i!e as- sociations engaged in illegitimate prac- tices, for there is no such thing. The term trade association connotes legiti- mate cooperative efforts by those en- gaged in trade and Indtistry. When a group of men depart from this stand- ard and indulge in practices denounced by the law they become conspirators and their activities are criminal; the mere tact that they avail themselves of a legitimate instrumentality does not alter the character thereof, nor does the fact that such instrumentality is, in and of itself legitimate reduce in anywise their guilt. Therefore, these combinations, prosecuted and convicted as a result of the Lockwood committee disclosures, are not to be considered in the determination of the question: may there be traiie associa- tions ? The Hardwood Decision Nor does the decision of the Su- preme Court in the Hardwood case answer this inquiry. In that case the court, after a very full statement of the facts upon which it made its deci- sion, said that upon those facts It was "convinced . . . that the pur- pose and effect of the activities . . . liere under discussion, were to re- strict competition and thereby restrain interstate coraro.erce ... by con- certed action in curtailing production and increasing prices." It is needless to cite any authority to establish the fact that concerted action to restrict production and en- hance prices constitutes a violation of the anti-trust laws. Federal and State. But the court did not base this decision upon the fact that the offenders were members of a trade association which compiled and dis- tributed statistics. On the contrary, the court very elaborately enumerated the general scheme of the association, which :t characterized as the "paper plan." AftL. so doing it did not denounce this plan. It merely said that it "consti- tuted an organization througti which agreements, actual or Implied, could readily be arrived at and maintained if the members desired to make them," and recognizing that this was not enough to warrant a finding ot crimi- nal purpose, the court enumerated a grerft 1. umber of activities from which it concluded that the members of the association had the "purpose" to com- mit a crime which could be accom- plished by the use of the instru- n.entality which in and of itself the court did not condemn. Of course, a legitimate trade asso- ciation could be used in the commis- sion of a crime. So may a perfectly clean house be used for immoral pur- poses. So may a railroad organization be used for granting rebates and con- cessions, or for violating the Volstead law, but if every Instrumentality that may be diverted to an improper use is to be annihilated society must return to the most primitive stages, and even then the desired end will not have been reached. Need for Trade Groups The need for trade associations is demonstrated in the fact that there is one in practically every branch of in- dustry to-day. To answer this state- ment with the assertion that there is a criminal purpose back of every such association is to assert that we are a nation ot criminals. Accordingly, the absurdity of the answer Is manifest. The gi-owth and development of these associations and the necessity therefor are the result of conditions. Modern business is so great in volume and so complex in character that it is impossible for the Individual manu- facturer to inform himself of all of the necessary facts to enable hii.i to conduct his business intelligently. His markets are at great distances, his competitors are numerous. He must know the volume of supply and of de- mand. Without statistics he is at an absolute loss to know how to con- duct his business. Without knowl- edge ot who are his competitors and as to the character of such competi- tion he is at the mercy of the buyer. But one result can follow, and that is failure. As said by Judge Carpenter in his opinion in the Linseed case: "In order to obtain efficiency in business, as well as in any other human activ- ity, it is necessary to have reliable. Immediate, and adequate records. With the progress that has been made in the last centuiy, it is not to be ex- pected that business alone will stand still." It Is not to be believed that oi-r lawmakers have ordained tha; ■ ■ business is to be conducted by 11,.^ Knowledge of the essential facia .a our business Is a prerequisite to suc- cess. In creating these instrumentalities those engaged therein are obeying the admonitions contained in the following Scriptural advice: Get wladam, gM understaniiing ; Forget not, neither decline from the wordi of my mouth. Forsake her not, and ahe will punrue thee ; I«Te her and she will l^eep thee; Wisdom is the principal thing; therefore get wisdom." 4 ProT. 5, 6, 7. This knowledge can be obtained through cooperation through the medium of trade associations. That such knowledge may be availed of by unscrupulous men does not justify the denial of the right thereto to those who are engaged in honest effort. Without A ^sdom our industries must fail. A careful study of the Hardwood decision will not disclose any ban upon the pursuit of wisdom. While Justice is portrayed as being blindfolded, it is hardly to be believed that she will demand of the captains ot our Industry that they shall be similarly handicapped in the conduct of their business. Respect for the wisdom of our courts mipels us to the conclusion that they will not insist upon the business of I our country being conducted in tbt I paths of utter darkness. CO-OPERATIVE COMPETITION 21 March 2j, ig32 EUROPE REGULATING TRADE ASSOCIATIONS FOR PUBLIC BENEFIT Against Price Fixing — Drastic Laws Being Enacted to Curb Profiteer- ing Combinations — Public Welfare Requires Government Supervision of Trade Groups The rapid growth of trade asso- ciations is one of the outstanding fea- tures of present-day commerce. In this world-wide movement of commer- cial cooperation and organization, tha United States leads so far as size, number, and financial resources are concerned. In countries like Germany, Belgium, and France, organized busi- ness has all the advantages of long years of experience and mature de- velopment. In the states comprising the British Kmpire the movement is more recent, but at the same time characterized by an exceptionaf degree of activity and direction. In England alone there are considerably more than five hun- dred trade associations, and accord- ing to an ofHcial statement by the Board of Trade there is an Increasing tendency in every important branch of industry to the formation of trade associations having for their purpose the restriction of competition and the control of prices. The iron and steel Industry is one «f the best organized branches of Brit- ish business. There are thirty-five associations of manufacturers of pig iron, rolled products, castings, forg- ings, bar iron, and miscellaneous iron and steel products. The building industry is equally well organized. An analysis of the costs of materials entering into the construc- Uon of a number of groups of cottages (ihowed, according to official data, that on an average 42.07 per cent of the triaterialB used were uncontrolled, 32.25 per cent partially controlled, and 24. 6S per cent controlled by price combines of manufacturers and merchants, i Among the principal building mate- M 376 any combination for imposing re- By WILIAM NOTZ Hals controlled by associations deter- mining prices and output are tiles, lead pipe, wrought iron tubes, cement, wall paper, glass, boilers, and iron eastings. Many in Associations Some of the most representative trade associations in the United King- dom are found in the textile, brass, copper, tin, chemical, electrical, paint, and glass industries. These associations differ widely In character and functions. The various types range all the way from morj or IfBs informal temporary and local arrangements or understandings re- garding labor questions or the safe- guarding and promoting of the gen- eral interests of members, through the whole category of price agree- ments and schemes for control of output, up to the highly organized combines which operate through a central agency and are registered as limited liability companies under the British Companies Act. A large number of these acsocia- tions are concerned in one form or another with the regulation of price.s. Other activities Involve the collection and distribution of statistical in-flor- matlon, scientific and technical rts- csearch, ' ■ 'ardization and intt.r- change oi ^ .! data, collective adver- tising, joint purcha.sing of supplie?, and similar group activities for the promotion of the common interest. Thf; legal statu.^ of trade associations under British law is rather unique. They are precluded from registeiing: unde;- the Companies' Vets or the Partnership Acts, but they may regis- ter a.s trade unions, and the majority do so. Under the Trade Union Act of slrictive conditions on trade or busl- ne.ss is a trSde union. Operation un- der that act carries with it certain dis- advantages. For example, agreements between members of trade unions as to conditions on which uny member shall, or shall not. sell his goods, trans- act business, employ or be employed, cannot be enforced in a court of law. Methods have been found recently of overcoming these d rncultiea by forming limited liability companies ,Tnd registering the same under the Companies Act. Numerous trade as- sociations are not registered at all, and .some are believed to be purpo«ely car- ried on as secretly as possible. As Seen by the Public The public generally and the British Government authorities have followed the whole movement with considerable interest. Generally speaking, the ef- forts to eliminate wasteful methods and to strengthen the foundations of many trades by collective methods have met with public approval. In a number of instances, however, alarm has been occasioned by acts of certain associations which were believed to be pursuing purely profit-making ends detrimental to the public Interest. A special committee was appointed by the Minister of Reconstruction to inquire into the situation and report what action might be deemed neces- sary to safeguard the public Interest. The report of thir. ccma^ittee, r-^^a '» Parhament in 1919, calls attention "cj numerouy beneficial effects of trade associations. In their favor it is stated that they have made for more economic production, for an improved quality and variety of output, and for a very helpful interchange of technl- cal knowledge On the other hand, the committee 23 CO-OPERATIVE COMPETITION cited instances of exorbitant and ex- cessive prices fixed by certain associa- tions. Moreover, it quoted autliorities to the effect that the consumer would no doubt be at a disadvantage In dealing with certain combinations of producers. The committee also noted a great deal of distrust and suspicion on the part of the public with regard to the activities of associations and combina- tions and pointed out that the effect of BUch mistrust, whether well-founded or not, might be equally hurtful to the political and social stability of the state. As a remedy the committee recom- mended: (1) That an official tribunal of in- vestigation be established for pro- viding the fullest information as to the activities of trade associations and making the facts available to the public. (2) The establishing of further machinery for dealing promptly and effectively with such abuses as the tribunal might discover. Under the profiteering acts of 1919 and 1920 about fifty industries and I trades were investigated by official committees and reports presented to Parliament, in which the activities of trade associations were emphasized. In a report on the soap industry the committee recommended that Parlia- ment should authorize the Board of Trade to exercise surveillance over the existence, development and activi- ties of trade combinations. The report on flooring and roofing tiles recommended that wh>re associa. tions are controlling 60 per cent of more of an industry steps should be taken to safeguard the interests of the community and such associations should be required to publish state- ments, including among data the average profits and the average ratio of turnover to capital. Recently the Board of Trade announced that a Gov- ernment bin on the subject would be submitted to Parliament at an early Several of the oversea states of the British Empire have already en- acted legislation such as is contem- plated by the mother country. The most recent is the Profiteering Act, 1920, of the Union of South Africa, by which a board of control is estab- lished with wide powers of investiga- tion .and regulation of combinations, agreempnts, and arrangements having for t! eir purpose or effect the regu- lation of the price or output of com- modities or services produced or ren- dered in the Union or imported into the same. The board is empowered to assign certain of its powers to local committees and has been given power to prosecute offenders under the act. A similar agency has been estab- lished in New Zealand under the Board of Trade Act, 1919, which gives permanency to a previous war-time measure. This board is empowered to make and publish investigations. It may also make regulations with the approval of Parliament for the pre- vention or suppression of methods of competition in trading or business which are considered to be unfair or prejudicial to the industries of New Zealand or to the public welfare. Probably the most drastic legislation is found in the Commonwealth of Aus- tralia. Some of it goes back to pre- war times, like the Australian Indus- tries Preservation Act, 1906-1910. Numerous price regulation laws were enacted during the war. More recently renewed efforts have been made to regulate prices by such means as state competition, state purchase and distribution of supplies in the interests of consumers, regulation of external trade, and fixing maximum prices. The new Tariff Board has been given certain powers along this line. As indicative of the universal char- acter of the new orientation of Gov- ernment policy towards trade organi- zations, mention should be made of what is one of the most interesting new developments noted thus fai-. On July 7, 1921, the German Reichstag (passed a resolution directing the Ministry of .Economics to establish a cartel advisory board. According to a statement by the Minister in charge, the functions of this board shall be: (1) To prevent a one-sided develop- ment of profit-seeking policies on the part of cartels. (2) To encourage and promote cartel activities which are beneficial to the public welfare. (3) To stimulate production and in- crease output. (4) To formulate common principles for guidance in individual cases, ac- cording to which the limits of what is permissible and expedient may be de- termined in an objective way. An analysis of the most typical phases of the trade association move- ment throughout the world at the present time brings out a number of significant tacts. One of these con- sists in the increasing importance which price-fixing schemes have as- sumed in the economy of trade a-sso- clations. It is this factor primarily which has given rise to widespread distrust and alarm on the part of the public generally throughout the Brit- ish Empire, the Scandinavian coun- tries, in Germany, and in some of the Latin-American states. A number of very drastic statutory measures have been enacted cjong anti-profiteering lines, and further regulatory laws are under considera- tion. The consensus of opinion ap- pears to be that the public welfare requires Government jurisdiction and surveillance of trade associations and combinations which engage in price fixing and adequate protection of the consumer. On the other hand, we find what ap- pears to be sincere and universal popular approval of cooperative efforts of organized business which direct themselves towards the elimination of wasteful methods and the upbuilding of efficient and improved methods of production and distribution advan- tageous alike to the manufacturer and the consuming public and in harmony 1 with the public good. CO-OPERATIVE COMPETITION 23 HOW March 21, ig22 AUTOMOBILE MEN BANDED TOGETHER ARE Co-operate in Use of Development Patents — Cross-Licensing Pl^n Gives Devices to All Members of Group — Advantages of Trade Associations Shown in Their Chamber of Commerce Agreement By ALFRED REEVES General Manager, National Automobile Chamber of Commerce. Of all the cooperative actions by com- petitors in an Industry having for its purpose the maltingr of a better product to be sold at the lowest possible price to the public, the Cross-Licensing Pat- ents Agreement of the National Auto- tncbile Chamber of Commerce is con- sidered one of the most interesting. Under this plan more than 125 auto- mobile manufacturers interchange patent rights without the payment of money consideration; all with a view of making the modern American mo- tor car a composite of the best that the engineering brains of the industry has produced. More than seven years ago, follow- ing litigation in the Selden patent suit and some other suits on axles, the manufacturers came to the conclusion that long years of litigation were ahead unless they were able to devise some plan by which there could be an exchange of patent rights. More- over, if some cars were bad, the pub- lic would laclc faith in the motor vehicle and all manufacturers would suffer. The problem was to head the power of all the engineers and production men towards the betterment of this" new means of transportation. Wheth- er thfs problem to some degree has been solved is best shown by the 10,000,000 cars now running on our highways. The manufacturers felt that the in- dustry must be prosperous if any individual concern was prosperous, and that the product must be right without discouraging individuality in design and other features that would make for sales advantages by different com- panies. Development Patents The patents included are what are known- as "development patents"; such as moving a nut from one place to another, a slight change in the oiling system, setting of bearings at different angles, left-hand drive and centre control, certain changes in igni- tion systems, oil cups, fender mount- ings, radiator castings, carburetors, spring hangers, and other parts of cars important in themselves, but none of such an outstanding cnaracter that their use by other manufacturers would harm the originator. All these come under what i.s known as "Class A" patents, of \yhich there are now more than 600 in the Cross- Licensing Agreement, being the major portion of the patents affecting auto- mobiles, on which, incidentally, tens of thousands have been Issued from the Washington Patent Offlee. i The agreement covers patents limited largely to chassis units and parts. It does not include devices strictly applicable to trucks, fire ap- paratus, tractors, and similar articles that are still undergoing changes in construction. It does not affect design patent*, nor did it affect what are known -as "Class B" patents, which are pateijts of a radical character, far greater in importance than so-called "develop- ment patents," and which have been developed in the company's organiza- tion. Such patents are exclusiTely controlled by the manufacturing member. Seven years have gone , by under this Cross-Licensing Agreement, with the industry continuously prosperous. The agreement has three years more to run. For Mutual Benefit The great broad feature of thto whole plan is the fact that any auto- mobile company that has been in pro- duction for a year or more, which has a proper standing in the trade, and which conducts its business in legiti- mate fashion, is made welcome to the Chamber and given the rights under all the patents of the other members who are parties to the agreement. In return it contributes rights under sucn patents as it has and such patents as it takes out prior to 1925. There is always encouragement for invention, because the patent which a member takes out is his own property, and while hiis fellow members ma; use it, non-members cannot u.sq It without arranging with the owner, nor can manufacturers of tractors, stationary engines, and the like usa it without such consent., 2i CO-OPERATIVE COMPETITION There is incentive to invent, be- cause the company taking out a pat- ent generally has at least a year's start On other members and because being the first to do anything carries a leadership that brings reward. More- over, the companies must take out patents to protect themselves against their being taken out by outsiders. If it was a case of one company putting in a dozen patents as ag^ainst another company that had only one or two patents, the agreement could not have been concluded, but it was a case of a company putting In its five or ten patents and receiving? in return about 600 patents owned by 125 manufacturers. As to future patents, a company turning In anything it develops re- ceives everything that is developed by 125 companies. Design patents are not included, they being considered the trademark of the company product. The whole thought has been to eliminate patent litigation; to cement the industry in a cobperatlve spirit; to insure the production of better cars at lower costs, and to make the busi- ness not one of patents only but one of making and selling meritorious motor vehicles. By making provision to exclude a radical patent developed within the organization of a member, it provides ample encouragement for the continu- ation of research work by each com- pany. The industry has long since proved tor Itself that patent litigation seldom pays either side; that it disturbs thu industry and, certainly, in connection with minor patents, even when sus- tained, their advantage is of doubt- ful value. Charles Clifton, head of the Fierce- Arrow Motor Car Company and Presi- dent of the National Automobile Chamber of Commerce, has been a leading proponent of codperation in in- dustry for the past fifteen years, and there Is no greater evidence of his wide Influence than the Cross-Ltcenslng Agreement. Most of the excellent feature^ of this broad piece of cooperation are the work of C. C. Hanch, vice-president of the Lexington Motor Company, whose able leadership of N. A. C. C. patents committee resulted In motor vehicle builders being convinced of the advan- tages of the plan. CO-OPERATIVE COMPETITION ^. March 28, 1922 UNIFORM ACCOUNTING SYSTEMS URGED FOR TRADE ASSOCIATIONS Prevent Waste and Guard Against Losses in Business — Suggeste'dsas Promising- Field for Activities of All Trade Groups .^^i^ By PROF. MELVIN T. COPELAND Director of the Bureau of Business Kesearch, Harvard iUniversity, The development oi the trade asso- ciations during the last ten years prob- ably will be one of the outstanding features of this period when the time comes to view it from a historical standpoint. Although the growth of these institutions has in some cases been accompanied by abuses, and in other cases by the pursuance of well intentSoned methods that the courts have declared illegal, nevertheless, tht«e trade organizations are exerting a stronger and stronger beneficial In- fluence upon the business life of the country. These organizations are a real con- structive factor in the constant im- provement in business methods for which there is such urgent and con- stant demand. They are leadin?; to the acceptance of higher standards of business ethics. They are aiding in the preservation of individual initia- tive and in the maintenance of indi- vidual businesses that are economical as well as fully independent in opera- tion and control. These results are being accom- plished successfully, not through coercive measures but by educational influence, and one of the particularly significant features of the educational development of numerous trade asso- ciations is the introduction of uni- form accounting systems. This ap- pears to be an especially promising field lor the future development of the activities of these associations. Typothelae Led the Way One of the first trade associations to undertake an educational pro- gramme for better accounting was the United Typothetae of America, the na- tional association of master printers. About fifteen years ago the United Typothetse formulated a standard cost, system and undertook to secure its general adoption by its members. A vigorous campaign has been waged since that date for the purpose of se- curing its wider and wider use. Ac- cording to a report that was pub- lished in 1920, for example, it was stated that during the preceding year the accounting force of the associa- tion spent 722 weeks in the field and made over 1,000 installations of the cost system in plants in thirty-three States. Altogether several thousand printers are now using this standard system. The system has been amplified from time to time and now includes a standard accounting system, which is built around a standard cost finding system with complete sets of forms for cost finding and instructions for standard practice. Many of the members of the asso- ciation report to its department of re- search their individual annual records and in some cases make monthly re- ports of actual costs. These records are combined into composite state- ments showing significant ratios of ex- pense ani furnish the basis for a ptandard guide which provides de- tailed instructions for estimating prices on the brA of past experience. The controlIoTf!^ congress of the ■National Retail Dry Goods Associa- tion, to take another example, during the last two years, through its standardization committee, has worked out a detailed, thoroughgoing classifi- cation of accounts for department stores. The work of the last two years was a further development of another classification that this association pre pared in 1917. The National Association of Electri- cal Contractors and Dealers, the Na- tional Paper Box Manufacturers' As- sociation, and several other similar trade organlzatlon9*1iave'"'worke*>«»al uniform accounting «ystem9- The/Bu* reau of Business Research ofHarrard University has Issued standard ao« counting systems In coSperatioaJwitll the National Wholesale GroceraftAa* sociation, the American Natlona^'Re- tail Jewellers* Association, and thaiiMaM tional Shoe Retailers' Association, /as well as Independently for several othe» trades. Have EducationaMnfluenco These standard accounting"eysteiiu| differ in detail and scope, but all ot them are exerting a greater and.great- er educational Influence ia thertradea for which they have beeu prepared. In the case of progressive firms that previously have had good accounting systems, the standard systems fre- quently result only in minor improve* ments in practice; but among those firms that previously have not had an accurate knowledge of their costs and operating expenses, the standard sys- tems are revealing facts that are es- sential for sound business manage- ment. It has been the common experi- ence in every trade in which work of this sort has been undertaken to find numerous firms, frequently a sub- stantial portion of the entire number in the industry, which were operatinir without knowing accurately whether they were making money or losing it. Of course, not all the firms in any one of these trades have yet adopted the accounting system in its entirety, but oftentimes some of those that hav« been slow to put in the complete sys- tem have adopted some features of the standard plan, and thus are beinjr educated gradually to a better knowl- edge of their business. In ordinary times the most serious losses in busi- ness are those that are unknown. These standard accounting systems are resulting in uncovering nany losses which previously had been cver» es COOPERATIVE COMPETITION looked !n Urge numbers of plants anart. They were palpable covers for illegal acts ahd he knew it. "As evidencing the fact that I am not opposed to legitimate trade as- sociations as such, permit me to call your attention to the State Trade Com. mission Act that was pFeipared by me and was so ably at^d ear- ' nestly supported by your paper, which passed the Senate, and to the support of which so able and discriminating • lawyer and jurist as Gov. Miller was , finally converted, but which was not permitted to be brought to a. vote In the Assembly. "May I also call your attention to the 'Memorial to Congress' that was prepared by me and offered in the Legislature in connection with this bill, in which Congress was urged t» amend the Federal Trade Commi«aion Act so as to permit of th« licensing ti legitimate trade associations 7 Regulation of Associations "I take it from your very intelllgraiit discussion of the merits of that bill that you require no enlightetoient from me as to the terms «f the Tra4* Association Bill. In brief, it provKIw for the licensing, 8upervii«ion, aa4 regulation of all such associations antf forbids any corporation becoming a member of an association that is iiot: thus licensed. ■ . . "The suggestion of Mr. Hoover .tll»t . the Department of Commerce Act as a ■ sor^ of irresponsible supeir-l^verB- ment, subject to no law or right of : review in determining what such asso- ciations may or may not do is, upon the face of it, quite inadmlaslMe. TbK important function, of regulation - can only be safiely entrusted to a body whose decieibns are reviewable in tke courts. The Department of Commereo has' no such power aa Mr. Hoovar tiaa 28 CO-OPERATIVE COMPETITION endeavored to exercise, and I greatly fear that notwithstanding his well meant efforts the convention that he has called is likely to make confusion worse confounded." "The best thing he can do in the public interest Is to 'call off* that meeting and to recommend legisla- tion enlarging the jurisdiction of the Federal Trade Commission in the particulars indicated by the act that was before our Legislature or, per- haps, in an improved form. I have no pride of opinion on this subject. My anxiety is to find an instrumental- ity that will be able to automatically suppress the many criminal con- spiracies that are to-day masquerading under the guise of legitimate trade associations with which this country 1b infested, and that are mainly re- sponsible for maintaining the high wist of livinK. "I believe Mr. Hoover will find after he has carefully studied the operations of some of these apparently "innocu- ous" associations, that many of the thing^ he approves of having these associations permitted to do are de- structive to free competition, such as: "(1) Keeping competitors advised »t one another"s volume of supply and demand ; "(2) Of the character of their com- petition; "(3) Of closed transactions; "«) Stabillidn; the various types of articles that are manufactured in an industry; and other similar sugges- tions are fraught with far greater complications than he imagines. Many of them are mere links in a chain to throttle competition. Would "Stabilize" Prices "The exchange of information of supply and demand between compet- itors offers a way of maintaining tlie supply just sufficiently below the de- mand to maintain excessive prices. It is one of the favorite devices for re- stricting competition. An agreement between competitors 'stabilizing" their product, translated into practice, has in the past meant the cutting out of many competitive types of goods. It has been a brake upon initiative and ingenuity in devising improved ana more attractive types and has inevit- ably led to thfc 'stabilizing" of the prices of the 'stabilized' articles. The choice of the public Is thereby greatly restrict«d, and progress in the indus- try seriously retarded. If all competi- tors are parties to such an arrange- ment, new competition with an im- proved article, however meritorious, be- comes impossible. One could go on indefinitely multiplying answers to these specious contentions. "And yet there are many legitimatcT and useful things for the benefit of an industry that may be accom- plished through these trade associa- tions, but only if they are rigidly supervised at every step. The weapon they may wield under cover of their innocent purpose is so deadly, and so close to hand, and the temptation to seize and use it, cspesciaJly In times of depression, is so overpower- ing that unless there is an admini- strative policeman constantly on hand to keep peace, the public is bound to suffer. "Realizing the necessity of such an agency, my endeavor in formulating the Trade Commission Act was to supply that need, and to create a model for the regulation of like' as- sociations in interstate commerce. Meantime these well intentioned amateurish attempts to replace the laws of the land by irresponsible, un- regulated expedients should cease. They are causing infinite harm in leading business men to believe that they will be protected in doing things that they will find In the end offend against the law. They should know in no uncertain terms what they may and may not do in these associations. "That is what the proposed State Trade Commission Act was intended to accomplish. I sincerely hope Mr. Hoover will desist. Unless he docs so of his own accord Bomebody should stop him for his own good before it Is too late. "Very truly yours "Samuel Untbrmtto." Much 25. CO-OPERATIVE COMPETITlOKT 29 March 29, 1922. STANDARDIZATION OF PRODUCT MAKES FO R INDUSTR IAL GAIN It Cuts Out Waste, Simplifies Manufacture, and Reduces Capital Tied Up in Stock — Department of Commerce Could Organize Industries in Groups for Benefit of All By F. M. FEIKER Vice-President McGraw-Hill Company, Inc. Of the twenty-five or thirty specific ftctivities in which trade associations may do a constructive worli, non-i of- fers greater opportunity for collective action than standardization. A discus- sion of the opportunity for standard! - Ration through the medium of the trade association should not be clouded by too narrow an interpretation of this word "standardization." In a technical sense standardization involves two broad classes of activities — one, the inaniifacture of the product, the other, commercial questions of distribution. Standardization involving the manu- facture of products has to do with the setting >ip of specifications for the quality of raw matei'nis and finished product. The establishment of stan- dards of production involves questions of technical research, of improvement in methods, of design of apparatus, and equipment and appliances for the fabrication and manufacture of products. In this field of technical standardi- cation hundreds of committees of tech- nical societies and "of manufacturers' associations have been at work, and this great body of standardized manu- facturing practice has been a large factor la tb* relatively high standard of produottve efficiency which obtains la the American, manufacturing es- tablishments. To Eliminate Waste The second class of standardization of products is perhaps better termed "simplification" rather than standardi- sation, and involves dimensional stan- dardization of sizes and weights of ma- terials and products. This field of •Implification is one of the broad areas Into which the trade association may project itself in an attempt to eliminate wastes of distribution. For fifty years in this country we kitve been engaged In raising the standards of production In our manu- facturing processes, and by and large have attained a high degree of effi- ciency. In our "groping for stability," as Secretary Hoover termed It in his introductory article to this series, we are now making tentative analyses of our present methods of distribution and the field of simplification in va- riety, styles, and sizes in li^dustry of- fers a fascinating opportunity for the reduction of distribution wastes. This sortie into the simplification of excess variety, styles, and sizes should not be confused with an attempt to eliminate Individuality or styles in merchandise. It is rather an attempt to classify and analyze the component factors entering into the design and construction of a product or of a piece of equipment, and to arrive at an agreement with regard to those fea- tures of the products which do not involve questions of individuality or style, but the unnecessary duplication of parts, of sizes, and of varieties. It is possible by taking a "line of products" to simplifv that line in the direction of reducing the amount of capital tied up in stock for the manu- facturer, the wholesaler, and the re- tailer, and at the same time give the buyer the same opportunity for choice that already exists. Simplifies the Stock Instances of this character are many. Take the case of containers for paints and varnishes. It has been suggested that the half-gallon or two- quart can size for paint is unnecessary. It is a matter of common sense that if a buyer wishes two quarts of paint it is quite as simple to purcha.se two one-quart cans as it is to purchase one two-quart can, and It is equally obvious that if the two-quart sizes are eliminated it means the elimina- tion from the stock of the dealer of a more or less dead size carried in a wide variety of colors, let us Say, and in a wide variety of paints. Take another example from th« agricultural implement field. The styl* and character of a ploughshare to fit different styles and different condi- tions of work are a question of Indi- viduality. The manufacturer must continue to have his own Ideas of the proper design for a ploughshare to meet different working conditions, but it Is quite possible for an association of manufacturers, after careful survey of the buyers' needs, to decide upon what shall b^ a standard wagon tread and what shall be a series of wagon wheel heights. Such standards having been adopted, It is easy to see that this simplification of sizes and varieties makes It pos- sible for all manufacturers to buy material in quantities for wagon wheels cut to definite sizes, and there- fore, in turn, for the manufacturer who furbishes this bulk material to run his plant more efficiently. Elimi- nation of excess variety saves material from the tree to the wagon wheel. Sr^ch elementary standardization and simplv?ca,tions are being carried for- ward by many associations and at- tempts are being made by others to enter that more complex field of sim- pliflcation which has to do with tho relations between the market possibili- ties of equipment and products and the production problems of that prod- uct. These questions involve not only the acceptance of the simplification of sizes and dimensions for a group of manufacturers through the medium of the trade association, but an educa- tional campaign directed to the indi- vidual members of the association, ex- plaining the processes of simplifica- tion and standardization that have btcn worked out to the advantage of on(. factory, so as to make them the common practice of all. so CO-OPEEATIVE COMPETITION There are three groups having a ' definite interest In these programmes of standardization — the maker, the buyer, and the Government. During the war progress was made first by the Commercial Ecortomy Board and confirmed by the conservation division Of the War Industries^ Board in car- rjring forward the educational process among manufacturers so that certain ■impliflcattons were possible under the •tress of saving material or ooal or Increasing production for war needs. Some War-Learned Lessons Some manufacturers continued to take advantage of war-learned les- sons of simplifications, but it is one thing to set up standards and another to carry them out, and under sharply competitive conditions In a buyers' market It is very difficult to main- tain collective standards in an In- dustry. There is not space in this article to go into detail on this phase of the relation of trade association work to standardization, but it is one of the tWst important phases, and it is in this phase particularly that there Is an opportunity for the Government to function in a way not generally rec- ognized by the American business man. The average man in business states his complete philosophy with regard to the Government when he says: "The less I have to do with it the better." This attitude follows largely because the Government function in its con- tact with business has been a regula- tory function. In reorganizing the Department of Commerce it has been Secretary Hoover's idea thaft the De- partment of Commerce must be de- veloped on the basis of bringing to- gether the collective opinions of buyer and seller for the common ad\-9ntage Of both of them and of the public, and that, because the Department of Com- merce could take a neutral viewpoint tt could act as a centre point around which groups could gather represent- ing all phases and sides of a construc- tive programme for business. To make a programme of standardi- Ution "stick" It fc! necessary that It b« arrived at by mutual agreement of lUl parties concerned, that they have a common understanding of its basic desirability, and that all parties t--, an agreement have some definite place in which they can, on the one hand, lilace the final responsibility for the standard to be adopted, and. on the other hand, take advantage of the great educational force which is ex- erted when the Government stamp of approval is given to a programme of standardization. Perhap.s the ' simplest way to ex- plain the function of associations rep- resenting buyers, sellers, specifiers, and the Government through the De- partment of Commerce is to take a concrete illustration. A Concrete Case The National Paving Brick Manufac- turers' Association had tried for several years to get acceptance of a list of standard size of paving brick, which as manufacturers they believed were sound, but which would not be ac- cepted by the buyers. They brought their problem to the Department of Commerce with the suggestion that committees representing themselves and others representing buyers be brought together to discuss the oppor- tunity for the elimination of excess varieties and sizes. It is not necessary to expand the technique of this pn ■ eeding, except to ejnphasize the fact iiat the manufac- turers took the initiative to prepare a detailed report showing the sizes in use at the time, and this report was made the basis for calling together at a later date some thirty organizations representing the manufacturers, users, and engineers. There weie found to be some sixty-six sizes and varieties of paving brick. After a contej-ence last- ing one day, these sizes were reduced by mutual agreement from sixty-six to eleven, and a standing committee was appointed to function with the Department of Commerce for the pur- pose of considering the possibility of reducing the eleven sizes to three. The simplified list of sizes of bricks agreed upon is now in the proi' c^s of being ratified by (..c several asso- ciations whose representatives met at the Department of Commerce, and the finished standards are printed, having been issued by the Department of Commerce with a list of those sub- scribing to them. The steps In thig proceeding are ob- vious. (1) The need for the proposed simplification comes out of industry itself, and not from the Government into industry. (2) That branch o£ the industry which suggests the need presents a detailed analysis of that need as a basis for bringing together all those concerned. (3) The Department of Commerce acts as a focal point for this dis- cussion and adds the weight of its influence ag an educational force in maintaining the standards agreed upon between the parties represent- ing buyer, seller, and public. The Department of Commerce is thoroughly in a position to carry for- ward both the programmes for stand- ardization of production and the pro- grammes for the simplification ol sizes and variety. The Bureau of Standards, in itself the largest Gov- ernment research laboratory in the world, has done remarkable work along the line of production standard- ization, involving research and tech- nique. Under Secretary Hoover's di- rection there has been established as a branch of the Department of Com- merce a Division of Simplified Prac- tice which has for its function the undertaking of those groups of ac- tivities relating to the second broad group of problems of standardization — namely, simplification of variety and sizes. The opportunities for saving In ma- terials and capital invested by the sensible analysis of the areas for sim- plification in industry form one of the most constructive purposes of the trade association. Secretary Hoover has had the vision to see that the problem is really one of broad Indus- trial education, with the Initiative for the movement coming out of industry itself rather than out u f^overnment Into industry. Something over 150 contact committees of industrly have been set up, representing many differ- ent industries, and associated foi- col- lective action through the trade asso- ciations, and for the spre.^d of indus- trial information through the trad* and technical press. CO-OPERATT^ COMPETITION Tl March 30, 1922. FINDS GOVERNMENT AND TRADE GROUPS IN CLOSER R ELATIONS ,War Forced New Methods — Business Men Must, He Adds, Continue To Give Advice at Washington — ^Makes Plea for More Busi- ness in Government and Less Government in Business By HUGH P. BAKER American Paper and Pulp Association Business put a new vitality into the Government at Washington when the emergency of war forced a moderniza- tion of the antiquated departmental methods. If this new life is to con- tinue, if bureaucracy is not again to take the saddle, American business men must continue to Kive their coun- sel to their Government. When hundreds of the leadinK busi- ness men of the country left their offices and factories to give of their ability and energy towards the win- ning of the war. an influence upon the business of Government was ex- erted which will b© felt for years. Where antiquated and bureaucratic methods of work had become fixed in many of the departments of Govern- ment, resulting often in a hopeless attitude on the part of the employee desirous of giving service, the war- time Influx of aggressive thinking men. men accustomed to getting things done, caused such a stirring up and changing of Governmental activities that the same methods will never again be used or the same attitudes be shown towards the public as those which existed in many of the bureaus before the war. The effect of this stimulating change is difficult to measure, but it is ap- parent and it will persist and In the end will be tremendously beneficial to the business and industrial life of this country. Many trade associations were in ex- istence before the war, and many of them had honorable records of achieve- n-.ent in the development of better standards of business and better fel- lowship among men. Evils had crept into some o£ the associations, as eyils creep into any association of men. However, it was fortunate .indeed in the emergency of war that many in- dustries were already mobilized through their trade associations and that rep- resentatives of these associations could be called to Washington immediately to assist in the adjustment of busi- ness and of industry to the needs of a great war. Mobilized Industry The trade association quickly be- came known in the early war days as an effective mobilization of indus- try, for it was seen that accurate in- formation as to business and industry could be got promptly through the associations, which were almost with- out exception ready and willing to give the most complete information as to conditions In their particular groups. So valuable was the character of this service that the Gxivernment Is con- tinuing to call upon the trade associa- tion to-day for infoiTnation as to the industries. Many associations, appreciating the advantages to the groups which they represent of being on the ground to give vital trade information to gov- ernmental departments and members of Congress, have opened offices in Washington, which are serving also as channels through which the activities of the Government are taken out to their members throughout the coun- This give and take of information is not In any sense what has commonly been known as lobbying. It would ap. pear that the day of the old time lobbyist has passed and that we are to have located in Washington, work- ing through trade associations, intel- ligent, wideawake men who know their industries, who can give facts about the industries to the Federal depart- ments and to members of Congress. Every member of Congress cannot know what all of the great industries of the country are doing, their needs, and the effect upon them of various forms of legislation. Members of Con- gress should welcome a straightfor- ward and accurate presentation of facts and information as to a particu- lar industry or a particular line of business. The changed attitude of Government toward business may best be appreci- ated through relating the experiences of a trade secretary in his contact with Government departments and bureaus since the war. It should be added that the experience of business men with the Government during the war has hastened by Jaany years the con- version of the business man to the belief that the chief function of the Government Is service — rather than the erection of barriers against the business man and the citizen. Taking Active Interest ' ' ' Many a manufacturer who had. be- fore 1914, become convinced that it was better rto keep entirely laway from Washington and have as littlo as possible to do with thd Govern- ment is with caution now beginning to believe that it is his business as an American citizen to express him- self in Government. As he watches tariff and other legislation to-day he is being forcibly convinced that if agriculture and labor are important adjuncts to the proper carrying on of Government the business man and the manufacturer have equally im- portant functions in the Government. When the writer came into the American Paper and Pulp Association, a national federated organization made up of twenty affiliated associa- tions and sections, he found thfit the paper industry was as effectively or- ganized into associations as any of the other great industries of the country. The different groups of paper manu- facturers, organized for better con- tact among themselves, and for better information as to their own activities 82 COOPERATIVE COMPETITION and as to the trend of general busi- ness, make up this national federated organization. This association is doing no statis- tical work except of u ver> general character, but it has developed effec- j tive service to the industry along lines of such common problems as educa- tion, tariff, taxation, and raw mate- rials, coupled with newly developed ideas as to the application of forestry In the conservation of raw materials and contact with the Federal Goi'- ernment. One of the first experiences in the development of a better contact with the Federal Government was the representation by the association of the industry as a whole in the fram- ing of pending tariff legislation. l4 years past different individuals and groups of manufacturers had gone to Washington with widely divergent ideas, and the result was confusion on the part of those drafting the legislation, and suspicion and ill feel- ing on the part of the manufacturers. Through a tariff commission of this association, made up of representa- tives of every group of the industry, the whole tariff situation as affecting the paper industry was gone over carefully and a very sincere effort made to harmonize interests of all of the groups in a way that would let them present their needs at Washing- ton as a group and a unit. A more effective presentation has been made by the industry In tariff matters now pending than ever before. The Federal Government, main- tained in part by taxes paid by man- nfacturers, has developed a number of very effective agencies in Washing- ton tor service to this and other In- dustries. The Bureau of Standards of the Department of Commerce has a paper section, In which Is carried on research work of great value to the in- dustry. The changing attitude of manufacturers towards the Govern- ment, the developing spirit of coop- eration which originated during the war, brought the association to the appointment of an advisory commit- tee to work with the paper section of the Bureau of Standards, to interpret to the bureau the problems and the needs of the industry, and to take back to the Industry the results of the work of the bureau. The United States Forest Service, through the Forest Products Labora- tory at Madison, Wis., and in other ways, has given great service to the Industi-y, and is in a position to give more. So, tco, for several years the association has had within itself a very aggressive committee on forest conservation, which has repeatedly put paper manufacturers back of the activities of the Forest Products Laboratory at Madison and has called in the chief forester for consultation in prospective legislation, affecting the paper manufacturers owning timber- lands. This committee proposes to continue its aggressive activities until the Federal Government adopts some ktid of a constructive national forestry policy. The action of the present Adminis- tration in placing at the head of the Department of Commerce a man of recognized ability as an engineer and a business man, and especially as a leader among business men developed such confidence in the industry that the desire wts expressed at once among ppper manufacturers that some means ol' more effective cooperation with bureatis of the department be worked out. The result was the appointment by the association of an unusually representative committee of manufac- turers, taken not only from members of the association, but from the en- tire industry, to work especially with the Commodity Division of the Bureau of Foreign and Domestic Commerce, having to do with paper. While the industry does not believe that it should be represented ^Irectly in Washington, it does believe that through the Chamber of Commerce of the United States, which is the larg- est and most representative organ- ization of business men in Washing- ton, it should make its needs and Its service felt in cooperation with other American Industries. Co-operation Urged While it will take years to over- come, in the minds of manufacturers, the idea that the Government is In existence to hamper and annoy rather than to serve, and while It will take just as long for some Government employees to get over the Idea that every manufacturer who has any dealing with the Government is seek- ing a eelflsh end, there are strong evidences, as the result of the expe- riences of this and other associations, of a tendency towards cooperation rather than antagonism in the rela'- tlons of the Industry and the Govern- ment. There is a growing feeling also that as the manufacturer contributes more in support of the Government he should have more to say, as an obli- gation, as to how taxes are to be spent, emphasizing the fact that most of the Government's problems are eco- nomic and not political. The appeal which the presenf Administration 1* making upon the bails of more busi- ness in Government and less Govern- ment in buslnes.'i is a strong one. There is no doubt that the increas- ing recognition of the economic fac- tors entering into the carrying on ot business and of Government will make the trade association permanent in the development of our industries. As the average man honestly desires to be a good citizen, to play his part in his community and his Government, so the average trade association is hon- estly concerned with effective service to the industry which it represents and to the Government. When the Government recognizes fully that the trade association is a necessity in the national Industries Of to-day and to-morrow, and that It can be of tremendous assistance, not only to the Industry which gives it life, but also to the carrying on of Governmental activities, there will be less suspicion shown by the Govern- ment toward all trade associations. The trade association could and should play as important a part in peace activities as it did during the war. Trade associations recognJz* the necessity of limiting their activ- ities to what is best for ail of their membership and for the welfare of the community and the Government. There is no doubt that a plan will be worked out, possibly through a change in legislation, that will makm it possible for the trade association to serve Industry, and at the same time to assist tremendously in th« service which the Government is seek- ing to give to the peoplo of th* coun« try. COOPERATIVE COMPETITION 83 March 31, 1922 TRADE GROUPS CAN SIMPLIFY PRODUCT AN D SAV E MONEY Make Standard Sizes— Method Is Used to Advantage in the Paper Industry— Business Men Urged to Study Hoover's Plan for Co-operation in Trade Associations By EMMETT HAY NAYLOR Author of "Trade Associations, Their Organization and Management" On* day a. few years ago a, man came into my oflflce in a great state of nerves. "Is this Government trying to ruin my business?" he demanded. "Here I have received a, notice telling me that I have to cut out a great many lines of paper that I have made heretofore and put my whole business on a few weights ^nd sizes, and I do not intend to do It." After a few further remarks he calmed down sufficiently to allow me to talk it over with him. I pointed out that I did not thinic that the Government was attempting to regu- late his business out of existence, but that the War Industries Board, that had so offended him, was merely ask- ing him to simplify bis product so as to increase production and cut down costs. I asked him if there was any particular reason why there should be 80 many various sizes of paper, and the only reason he could give was that there has always been a demand for them. He did not realize that demand for a variation in a product is often merely a result of caprice with no particular reason behind it and that the public can be educated into confining its wants to a few standard products as well as a great variety. The thing that disturbed him was that he felt that any attempt towards standardiza- tion would Immediately take away from the individuality of iiis product. I asked him to forget the word "standardization" and rather call it Bimpliflcatlon as I realized that a few words like standardization, efficiency and psychology impressed a good many business men as theoretical and turned them against any proposition to which they were attached. F. M. Feiker has in this series of articles covered this subject so well in his general facts that my contribu- llon will merely be to show how sim- plification has worked in certain in- stances. So first let us consider the paper Industry. In the manufacture of high grade papers there used to be all kinds of sizes, weights, and colors, as every customer wanted something different and dIsUnotive. It finally got to d point where most of the mills were practically in a specialty business— that Is. every order was so different from other orders that the goods had to be specially made to meet all the different kinds of specifications on the order. This was most expensive, both from a production and distribu- tion standpoint. It finally came to such a pass that the mills, as a mat- ter of self-preservation, decided that something mr be done about it. As regards tiizcs, the manufaclurers of high grade papers cut down i/ie sizes from about 154 to 25 standard sizes, which, at the present time, meet all reasonable requirements. If, how- ever, any man wants a special size he can have it, but he will have to pay for the standard stock paper in the larger size from which his special size is cut. Thus the mill is saved the loss from waste in cutting as well as com- pensated for the extra labor. After the sizes were finally reduced, the question of uniform weights had to be settled. Customers felt that they must have a certain weight for a cer- tain purpose with the result that the paper manufacturers wore making so many different kinds of weights that it meant a large expense to them, whereas to distinguish between some of these weights would take a delicate testing machine. , In any fabricated article, such as cotton, woollen cloth, or paper, the weaving machines aave to l>e adjust- ed so that the weight of the product Will meet cerUin specifications. If th« machine can be adjusted at the begin- ning of the week to make a run of a uniform weight, no time is lost in adjusting the machine and the prod- uct can thus be stored and sold from stoclc. This not only slmpl.fl^ p,™ duction, but also allows the millg to increase production since they do not have to shut down and readjust a. they used to do for special orders. Hegular standard weight, wer* finally adopted by the paper manufac turers so that by this simplification of sizes and weights they were able to cut down on their opemting costs and thus pass on the benefit in lower prices to the consumers. Making Standard Sizes Then simplification of cover pap«r was advocated, first by the National Association of Purchasing Agents and then by the printers and paper mer- chants of the country through their associations. Everybody knows what a nuisance it is to receive all sizes and sorts of catalogues, which sel- dom fit a drawer and are generally thrown up on the top of a desk or bookcase to collect dust. If they ever are referred (o they are generally in such a dirty, dog-eared condition that the product advertised in the cata- logue makes a poor impression, just like a man with a soiled collar. And so two standard sizes and mul- tiples thereof of cover paper were adopted, which can be folded and al- way.s remain the same proportion throughout. These sizes are known as the hypotenuse size, meaning that the sizes adopted, whenever folded over or doubled, always maintain the same ratio in length and width. Now that ' all booklets are made in th:s standard m C50-0PEEATIVE COMPETI'TIOlir ■iBe, they fit the standard printing press and go into the standard cabinet a»inade by the office equipment people. Thus has the simplification of the catalogue business through the stand- ardization of the cover paper sizes been far-reaching and most satisfac- tory to aJl concerned. This elmpliflcatlon is true also in a number of other Industries. They even simplified bricks. A brick is a brick, I always thought. I had the same idea the first time I heard Mr. Taylor lec- ture about "efficient" shovelling. It seemed to me that the only way to shovel was just to shovel. And so with bricks. But the Department of Com- merce through the Bureau of Stand- ards recognized the brick as something else than to fill a hod or settle an ar- Crument. Bricks had to be simplified. The manufacturers, contractors, city paving commissions, and everybody but the ice cream and confidence men were called to "Washington and — well, bricks were simply slmplifled. A cer- tain brick of a certain size for a cer- tain purpose, and not a wide variety of qualities and sizes for the same pur- pose. And the corsets. Who on earth would dare standardize anything a woman wears? And yet it was done. I don't recall how many armored ibat- tleships were built from the steel thus saved — it really ran into thousands of tons. But in the corset industry the simplification of the product meant a remarkable saving to all manufactur- ers, and so, if old supply and demand do not get too Insistent, this simpli- fication is here to stay. Machines, machine tools, lumber, office equipment — the list is long and encouraging — all have been simplified or ought to toe. Did you ever think of bath tubs being simplified? They have been in many ways. For in- stance, the roll on a tub. Did you ever in sober moments notice that a bath tub has a roll? Well, it has. It is the roll or tumed-over edge that you so confidently grasp to pull your- self up from your matutinal ablution. These rolls were two inches, one and three-quarter tndttas, on« and ene-half inches, and so on down to one-half an inch wide, and every architect or con- tractor was always specifying a roll a quarter of an inch one way or the other, which the' supply house never had; hence delay, large stocks, loss. They cut out all of the nonsensical variations and simplified the roll, I be- lieve, to three widths. The same as to the length and width of a bath tub Then, of course, if the association wants to go further than simplifying its product, it can bring about, as has been done, a uniformity of raw materials in order to facilitate intelli- gent buying. If the raw material dealers have an association, get them to apply to their product the same simplification that the manufacturers have applied to theirs, and the pur- chasing agents of the manufacturers will enjoy the same benefits as the customers of the manufacturers enjoy through the dealing in standard arti- cles, whether they are raw material or convei;^ng products. There is one caution, however, as regards simplification which trade associations must bear in mind, and that is in establishing their standards that they do not build up so-called "trade customs" which impose a uni- form differential or cost for a special service on all mills for the same thing, ag costs in the different mills will vary. You cannot agree on a part of the price or cost any more than you can agree on the whole ' price or cost. You can,, however, in simplification state that it is custom- ary to make an extra charge and then see that this charge is tiased on your own actual cost of making the special run. But why, you will ask, is It neces- sary to do all this through a trade association? Wliy not let the Gov- ernment do it? There's the rub. As Mr. Peiker has pointed out, the De- partment of Commerce will assist in- dustries in simplifying their products, but does not wish to impose itself in a bureaucratic way in this or any other regard. No, the manufacturers must do it themselves. It must be forced upon them by circumstances or else they must recognize it as desir- able from an economic standpoint. They must appreciate that simplifica- tion is of money-making value, and on that score they will give' it favor- able consideration, which it would never receive if it were presented to them simply as a good Idea. And it manufacturers are to • co- operate in simplifying their product, the body through which they do it is their trade association. There is a distinct advantage in doing it them- selves rather than having it super- imposed upon them by some Govern- ment agency, for immediately, and justly, they could then cry "paternal- ism," "too much CTovernment in busl- nes.s," "bureaucracy," and other re- sentful epithets. Manufacturers will always work for and give good sup- port to something which they have done themselves and will vigorously oppose the very same thing if they think it is being wished on them from the outside. The usual procedure for simplifica- tion by an association is to appoint a committee of practical men who un- derstand all phases of production and distribution and who are bombproof to adverse criticism, and let them study the situation and prepare a gen- eral recommendation. Then at a meeting the members are given an opportunity to discuss it, and you need never fear but that it will be fully discussed. And you need not think that it is going to be accomplished in a month or two, as it is a process of first selling the idea, of educating the members into adopting it ajid then of policing it until it is a fixed prac- tice. But once it is in practice it will prove its own value so quickly that there will never be a question in the minds of the members but that sim- plification is one of the best things they ever did. However, let nie caution any trade association or especially its committee on simplification not to attempt to carry the matter too far. All that is necessary is to simplify on . funda- mentals, which is all that is necessary to do and all that the Department of Commerce asks the manufacturers to do. If you try to regulate the mix- tures of elements and the artisanship or expert ability which make up a product and give it its qualii;y and individuality, you will immediately find each manufacturer lustified in saying that the association or Govern- ment is trying to ruin his product. Simplification need not destroy in- dividuality of product, as you can have standard weights, sizes, and general designs, just as much as we all have standardized parts to our faces and jet. (hank the Lord, how few people look alike. It is the individuality be- hind the face that rnakes us look dif- ferent from one another, and it is the individuality behind the product that makes it a little d:*?'-ent from the other standard products and which gives its producer his selling points. The main advantage to an industry for its association to bring. about sim- plification of its product is, .as Mr. Feiker ipentioncd, that it eliminates waste. Just as ine ?edera,tea Amer- ican Engineering Societies, of which Mr. Hoover was chairman, made an investigation on the waste in various industries and showed how it could be eliminated by simplification, so It Is possible for a trade association, If it ha.s not already done so, to take up this idea which has been so ably CO-OPERATIVE COMPETITION advocated by our Secretary of Com- merce and apply it to Its industry. Mr. Hoover Is a practi-'ial engineer, who never lets theory interfere with getting practical results and he can appreciate in the effort which he Is making in the Department of Com- merce what all this means to the American industry. That surely ought to be proof enough for any trade as- sociation to take it up. But if you want further proof go to the trade associations which have brought about simplification by cooperative effort and you will find the highest satisfaction on the part of their members. But if you want to be sold right here and now on the benefits of sim- plification, 1 know of no better way than to close my argument with brief facts in outline form as prepared by the Chamber of Commerce of the United States of America, as follows: Gains to Manufacturer (1) Less capital tied up in (a) Raw materials, (b) Semi-finished stock, (c) Finished stock, (d) Jigs, dies, templates, and special machinery, (e) Storage floor space, (f) Repair parts. (2) More economical manufacture through (a) Larger units of production; reduced number of manufactur- ing units, (b) Longer runs, less frequent change, (c) Higher rates of individual pro- duction, (d) Accurate and proper estimat- ing for production, (e) More effective stock control, (f) Better and more simplified in- spection, (g) Less idle equipment; reduced amount of equipment. (h) Greater ease in securing raw materials, and conserving raw products, (i) Cheaper handling of stock, (j) Reduced clerical overhead, (k) Simplified and more accurate costing system, (1) Elimination of waste in experi- mentation and design, (m) Standardized material Inven- tories. (t) More eflScient labor due to (a) Making training of employees more simple, (b) Better earnings, through In- creased individual production made possible by longer runs, (c) Happier and more contented workmen, (d) Skill increased by repetitive process, (c) Less labor idle from preventa- ble causes. (f) More permanent employment as contrasted to present season- al employment, (g) Less difficulty in getting help. (4) Better service to the trade in (a) Better quality of product, (b) More prompt delivery, (c) Decreased quantity of sizes of packing required, (d) Fewer packages broken In transit, (e) Less chance of errors in ship- ment, (f) Less obsolete material. (5) More efficient sales force. (6) Increased rate of turnover. (7) Intensified sales momentum. (8) Easier financing. (9) Fewer factory shutdowns. (10) Compels attention to individu- ality in those features where there should be individuality, by preventing attempts at individuality In those fea- tures where individuality Is super- ficial and useless and where standardi- zation and quality should prevail. (11) Earlier plans and schedules. (12) Decrease in number of produc- tion processes. Gain to Wholesaler and Retailer (1) Increased rate of turnover due to (a) All live numbers; none obsolete, (b) Elimination of slow moving stock, (c) Staple line, easy to buy, quick to sefl, (d) More effective sales force, (e) Greater concentration of sales on fewer items, (f) Standard patterns that are proved best sellers. (3) Decreased capital investment in (a) Stock on hand, (b) Repair parts on hand, * (c) Storage space required. (3) Less stock depreciation and ob- solescence. (4) Decreased overhead on (a) Handling charges, (b) Clerical work. (6) Better service through (a) Lower prices, 35 (b) Quiciv'rr .mi niore reliable de- liveries. Gains to the Consumer (1) Better prices than would other- wise be po.ssible. (2) Better quality of product through ability of manufacturer to concentrate on better design and through the re- duction of manufacturing expense. (3) Better service on (a) Complete products, (b) Repair parts, (c) Prompt deliveries. Industrial Significance The important role which standard- ization plays in industrial evolution is not generally appreciated. Following are significant aspects of standardiza- tion when carried out on a sound engineering basis: (1) It enables buyers and sellers to speak the same language, and makes it possible to compel competitive sell- era to do likewise. (2) Better quality of product through ability of manufacturer to concfn- trate on better design and through the reduction of manufacturing ex- pense. (3) It lowers unit cost to the pub- lic by making mass production pos- sible, as has been so strikingly shown in the unification of Incandescent lamps and automobiles. (4) By simplifying the carryln* of stocks, it makes deliveries quicker and prices lower. (5) It decreases litigation and other factors tending to disorganize indus- try, the burden of which ultimately falls upon the public. (6) It eliminates indecision, both In production and utilization — a proHUt cause o£ inefficiency and waste. (7) It stabilizes production and em- ployment, by broadening the possible market, and by making it safe for the manufacturer to accumulate stock during periods of slack orders to an extent which would not be safe with an unstandardized product. (8) By focusing on essentials. It decreases selling expense, one of the serious problems of our economic system. • • (9) By concentrating on fewer tinea, it enables more thougnt and energy to be put into designs, so that they will be more efiBcient and economical S6 co-opp:rative competitio:n March 31, 1922 HELPS SMALL MAN IN BUSINESS FIGHT iTrade Group Keeps Him Posted on Market — Reports on C-mditions Carefully Compiled By PAUL T. CHERINGTON Secretary-Treasurer National Association of Wool Manufacturers It is said that Pancho Villa when at the height of his military career was told that some proposed action was contrary to the accepted rules of warfare. At this his simple, direct- acting soul was stirred to laughter and astonishment. Was it possible that anybody could seriously propose ham- pering warfare by rules? Perhaps no einglo episode in Villa's life as it has been related shows more clearly the backwardness which made his end certain. His sixteenth century ideas of war were barbaric. Associations for trade purposes may, in some cases, have defects, and they may need to have some of their activ- ities judged scrupulously, but they are increasingly valuable factors in the public interest. In the long run bhey will justify themselves on this one ground alone — their value to the pub- lic. There is no question as to their value to the several trades they are de- signed to serve. To be sure, many members of a trade do not belong to their trade association; others go in and come out at intervals. But there is general agreement as to the value of associations to the trades, or in- dustries. Their value to the general public is not so obvious. For that r«aaoa H la my purpose t!» eoealder that aspect of the case slone, and to call atten- tion to the puijftc value of an unques- tionable ax'Wmplishment; namely, their contribution in establishing fair and equitable rules of intelligent compe- tition. The Sherman law with its vague- ness as to what constitutes either "conspiracy" or "restraint" has never done anything so constructive in the public interest as the tonine up of standards of business ethics, the estab- lishment of rules and regulntions o! conduct, the determining of what is And what is not fair, which are among the achievements of these voluntary! make joint action compulsory in many associations of competitors. Much of the cruelty, cunning and ruthlessness of competitive warfare has been done away with, and the credit for this be- longs to the associations and not to regulative laws. Competition has become more intel- ligent through association effort. One of the chief advocates of associated et. forts makes this clear. He recalls how two runners, by competing in plain sight, gauge one another's strength and resources, and one wins the rare with the proper use of his powers. He then shows how much more real this contest is than one in which neither contestant knows what the other i.s doing. He continues: "To make the point still clearer — suppose the two "-unnors start at 'he same moment on the same track a;; under the first hypothesis, and for the first half they are side by side, and such instances; otherwise, the power- ful competitors have the ability to acquire and arrange the necessary knowledge, and the smaller ones lack it. The results are bad for every- body, and particularly tor the small competitors. Associated effort in industry and trade will some day be regarded as being as useful and natural a form of joint effort as any other form of civilized joint activity. Finally, in the emphasis they have placed on the value of real facts — ligiires which really represent condi- tions — the contribution of the associa- tions has been large and socially use- ful. Some men can do business satis- factorily on "hunches." Most men cannot safely depend on anything but facts. No one element in American busi- ness is in any way comparable with the ^sociations in the energy and skill with which important and useful fact material has been prepared and put into the hands of those who could use it to the be.«t public advantage. In many ca-ses the work begun by the associations has been taken up liy the Federal Government, and this the competition is real and keen. At | transfer has been with the willing sanction of the associations. If the trade associations of the country had to defend themselves solely on the strength of what they have done for Increasing respect for carefully com- piled facts, their past record would be amply justified. In brief, then, the trade associa- tions of the country have stood ror better, safer, more humane, and more intelligent methods of doing business. Their efforts have been in line with sane, civilized human progress. They have been in accord with similar progress in almost every line of joint human endeavor. The evils of guerilla competition will some day be recognized and the con- structive value of the association as a regulator of excesses in commer- cial warfare will be properly appre- ciated: There may be some dangers to be guarded against, but the in- dustries of the country as a rule have as fair a social sense as any part of society. They can be e.vpected to separate the good from the bad, for they have already been doing this. The main danger to the general pub- lic interest in the matter is that there may be too general adherence to six- teenth century ideas of the nature ot warfare. the end of the half mile the track divides, the diverging lines are separated by a barrier so high neither runner can know what the other is doing. What is the inevitable result? From the moment they lose sight of one another all real competition ceases, f-ach man puts forth all his strengt . nd runs until he collapses. That is false or pseudo competition." Equalizes Competitive Ability Joint action in attack on common problems of an industry has gone far towards equalizing the competitive ability of the small and the large com- petitor. Fear of one's industrial neighbors is no more wholesome or salutary in itself than fear of one's physical niii'4.''"^rs. Common i4BlK»-ms of un industry not only la.i 1'* best attat'ked by common action; from every possible public point of view they ought to be altacked in this particular way. It would be in the public interest to CO-OPERATIVE COMPETITION 37 'April I, 1922 GARMENT MEN CUT COSTS THRU THE TRADE GROUP PLAN How System Works — Uniform Cost Accounting Provided for AU Needle Trades — Supplies Purchased for Members at Low Rates— Income Tax Returns Checked Up By A. F. ALLISON Of the International Association of Garment Manufacturers The ti-ade association, at Its beat, represents cooperative brain power. Behind the scenes in modern indus- trial life, we find conditions increas- ingly complex. But in front of the curtain Mr. and Mrs. Average Man and Woman, and their children are fed, clothed, amused, transported from one part of the country to another, with ever increasing: ease. What if each one of us, as a consumer, were to be asked to produce all our own food, make all our own clothing from fabrics also produced entirely through our own efforts, supply our own means of transportation, and, in short, du- plicate, by our own efforts, any or all of the necessaries of modern lifi? We would be staggered at the prob- lem confronting us, and .several life- times would be too Ehort for us to gain skill sufficient for the thousands of tasks which are an industrial com- monplace. It we were not entirely isolated from other men and women we would instinctively turn towards cooperation as the only way out of an impossible situation. Under primi- tive conditions we would realize the true essence of cof.)peration, its neces- sity it we were to regain anf of the question as to cause or source. Any problem can be solved most conveniences and living conditions readily liy reducing it to fundamen- tals. The work of trade associations Is based on the fact that no one man or woman can in a lifetime store up sufBcient knowledge con- cerning any industo'. working alone, to equal the progress made by a group of men and women who share their ideas and cooperate to Improve their skill and judgment. Competition which is based on trickery does not thrive in an at- mosphere of cooperation. A horse trader cannot afford to expose his tricks to his competitors, becauEe bis tricks arc his stock in trade. But a man who makes a real vocation of breeding horses for the market can afford to meet with his competi- tors and discuss his methods and theirs, because if he is really eincere :n his work he will not only give, but he will get Information, and even dis- counting the information others will give him, he will gain from the very effort he makes clearly to state to others what he himself knows. So he has two strings to his bow; his self-improvement is thereby doubly in- sured. The horse trader is a spurious sport; the horse breeder is a true sportsman. There are r.i. : y "horse traders" in other lines of business to-day. But, fortunately, there are far more "horse breeders." The sportsmen outnum- ber the aports, muck-rakers, and pro- fessional pessimists to the contrary. And the sportsmen are the backbone of the trade association movement. To-day there are many organiza- tions like the International Associa- tion of Garment Manufacturers, founded and conducted on the prin- ciple of cooperative education and economy. To establish a medium for sharing ideas with one anoiher is the glad privilege of business men whose minds are open for improvements and progress. Organization founded on narrow visioned price and profit con- siderations, no matter how cleverly their leal character may be disguised by high-priced lawyers, and no matter how limitless the funds greed places at their disposal, must grow weaker from dissension within and attacks from without. Recently alarums have resounded, much agitation has been heard con- cerning "open price" activities of trade associations. Let all bo cei'tatn of what they are discussing. Ope»i shop advocates have learned the bit- ter lesson that it does not pay to dis- cuss a term without care in definition. The term "open price" with quotation marks behind and before may really mean closed price, in the same way that the term "open shop" has been misused to describe "closed shop" conditions. It would be witless to say that the present discussion concerning "open price" activities will not help or harm trade associations. Public misunderstandings are always danger- ous. But far more dangerous to the welfare of trade associations Is the Insidious propaganda of "easy-money" advocates. Selfish price agreements are Inevitably broken for the tempo- rary greater advantage of the indi- viduals concerned. And when such price agreements fail, as they always must in a declining market, those who were misled Into this spurious form of cooperation thenceforth refuse to participate in clean cooperative effort, for a taste of forbidden fruit has weakened their will power and the mental effort required for educational cooperation is beyond them. But this is not a weakness in trade associations so much as it is a weak- ness of human nature, with whicls We must contend m any rorm of en- deavor. There is a certain form of weakness, however, which trade associations will do well to avoid, which is derived from their strength. Many men belong to trade associations almost as a matter of habit. Yearly dues are paid as an established custom in business. The need for some sort of a trade organi- zation is so thoroughly recognized that the specific application of trade asso- ciation work to the individual busi- ness is often disregarded. This breeds carelessnes.s in the. handling of association funds. Every- body's money is nobody's worry. This should i.ot be. Every cent paid for trade association membership Is a tax on business. It is a useful or an ei- 3S CO-OPERATIVE COMPETITION •^ trava£a.nt expenditure In proportion to the value received. It may be ex- travagantly small as well as extrava- gantly large. Some men are disposed to false economies. They will send a boy to do a man's job. and then wonder why they lose many times over what they tried to save by cut- ting their expenses below a productive basis. A trade association which truly serves is Worthy of its hire. Service is usefulness. A trade as- sociation can be useful in many ways. Its greatest usefulness to-day is to help cut costs of doing business. Everything useful has a fair price and value. But there seldom is a time when such fair price and value can be readily determined. Without en- tering the realms of activity sacred to the memory of the Pooh-Bah of Open Price, a trade association may perform a very useful tunction in helping its members to maintain sane, well-balanced judgment as to facts and' conditions, when everything in a business way seems flying to ex- tremes. A trade association may be. well or- ganized, to all outward appearances, to be of constructive usefulness to Its business community, and yet to a cer- tain extent fail to be most useful be- cause of illogical lack of sound, busi- ness principles and practices in the manasrement of its own funds. Here enters the old argument between the "promoter type" and the "reason-why typo" of business man. Unfortunately, trade associations seem to require more promotion ac- tivities than management. Business men do not spring up, fully armed, to defend and to uphold their trade as- sociation. Honey catches more flies than vinegar, but the men who spe- cialize in Grade A honey, guaranteed to increase association membership and income, are not the kind of men Who like to keep close tab on cost sheets. .. In Garment Industry 14 tjie case Of-the International As- sociation, of Garment Manufacturers, we have made a virtue of a necessity, such being a not uncommon happen- ing in other walks of life. Our dues income,, based on a flat. rate of $50 per member, is strictly limited. Our men- bership is widely scattered. We are not a professionalized organization: in other words, our members do not pay their dues for credit bureau sei-vice; neither are we necessary to them for collective bargaining with labor, for we are strictly a trade organization comprising both union and non-union manufacturers. And we have entirely shunned even the most innocent form of "open price" activity. It is evident that we have been obliged to lead the simple, frugal life to which all business is now turning. And the first principle of the frugal life is to know why, whei-e, and what for before you spend your money. The second principle is to be sure you get what you pay for. And therefore we developed our cost accounting plan, crude but work- able. We have been told that tnis is the first time on record a trade asso- ciation has taken its own medicine be- fore preaching cost accounting to its membership. Whether or not that be true, we are satisfied that we could not have made progi-ess and attained our present position in the trade if we had not based our work upon accu- rate knowledge of our costs. Thus, in developing our service-use- fulness to our members, while we have been tempted, at times, to try out more or less Utopian schemes, in the main we have kept our cost figures in mind and have confined ourselves to work which is not only useful but which can be justified on the basis of results per dollar invested. We believe that a trade association, properly conducted, is a real 1,000 per cent investment. In the first place, it is a non-profit making institution. In the second place, if it deserves and gets the confidence of its members, it has access to information and possesses an advisory staff, composed of member-executives, which cannot be hired by the largest corporation. But good advice, precious and rare though it. may be, is hard to rate in dollars and cents, so we constantly endeavor to show our members\ that we can be useful to them in ways which mean definite pocketbook or checkbook savings. Saved Money for Members For example, we register trade- marks in the United States Patent Office without service charge. Over a hundred members found us useful in this respect last year. And we do not let them overlook the fact that they saved enough on one or two such Jobs to equal their year's dues. .We check up a member's Federal tax returns and advise him if it is over-paid or under-paid. In doing this we give double service, as we are use- ful not only for the work we actually do. but also because we keep our members out of the clutches of the income tax "experts." who will usual- ly promise much and do little for a tee of $25 to $150, payable in advance. We were useful over $60,000 worth to one member, who had over-paid his taxes to that extent. And we find also that edvLCating the taxpayer is an important job for a trade association, because the Depart- ment of Internal Revenue has fount! this task almo.st an impossibility. Government officials appreciate and gladly cooperate with any well planned and honest attempt along such educational lines. We make ourselves useful in traffla work. We do not try to duplicate the work of local traffic bureaus, but we have found a great field of use- fulness in respect to general traffic matters, all .of which have a very specific application to transportation costs on materials and finished products. In the export field we are useful in a definitely practical way. We tell a, manufacturer exactly ,.'how to pack, label, and shin goods to foreign coun- tries; We prepare merchandising data of all kinds, including lists of adver- tising mediums, and advertising sug- gestions for whatever country a mem- ber may inquire about; we give com- plete data, credit ratings, and other useful information concerning pros- pective foreign customers; and we furnish accurate, up-tc-date lists of prospective customers in any for- eign country, TtirougTi our factory supply depart- ment we furnish members with of- fice and factory supplies at prices which demonstrate actual savings of from 5 per cent to 25 per cent or more. We purchase these supplies in wholesale quantities, on open market, at lower prices than individual buyers could obtain. Almost any manufac- turer will use a thousand dollars' worth of factory and office supplies in a year. Buying them through us as an association member he saves an average of at least 10 per cent. That is being useful, we think — to return to a member $100 for his $50 yearly dues. Our membership list covers thirty- eight States and four Provinces of Canada. New York is headquarters for' piece goods, the most important raw material for the needle trades. Compai'atively few manufacturers can afford to maintain New York buying hc-dquarters and yet, without some means for keeping in clcse personal touch with this primary market, they are handicapped. Our textile depart- ment serves our members as an acceptable substitute for a resident buying partner. Also, through this department we facilitate sale or ex- CO-OPERATIVE COMPETITION 39 change 6t surplus piece goods, aided by regular bulletin service; test fabrics, search the market for spe- cial materials, and in many ways often save a member the expense of a spe- cial trip to the market. All the activities thus far men- tioned, while useful, are more or less supplementary to the basic research and educational work for which this association was founded. We antici- pated the present marked tendency of industrial engineering firms to work with and through trade organizations, by setting up, three years ago, our Bureau of Factory Practice and In- dustrial Relations, dedicated to scien- tific research and exposition of stand- ard mantfacturing methods in the needle trades. "" We bought brains cooperatively and thus made available to the large num- ber of small manufacturers the best and highest priced talent at a co- operatively low fee. Because the "bureau," as a part of the associa;tion work, is a non-profit making institution, and also because it shares our headquarters and thus, at' no sacrifice in ■ eflSoiency, is con- ducted at a comparatively low cost, we are able to offer this industrial engineering service for a year for $100. Member subscribers receive at least twenty-five regular research re- ports plus a reasonable number of special reports. Several of our re- ports, if offered commercially, would alone command a price of $100. Cost Accounting System About two years ago we organized a. uniform cost accounting commit- tee. After nearly a year of continu- ous study and investigation we adopt- ed a plan, which has since been termed one of the most practical and effective yet evolved for this type of work. Probably no committee ever faced a more hopeless situation. The nee- dle trades are fairly chaotic, from the standpoint of cooperation. There is Uttle fraternizing among the various branches of the industry, except those Which havB become affiliated with our association. And yet our commit- tee felt that it would fall below its self-imposed standard of achieve- ment if it could not develop and bring forth a uniform cost accounting plan which would be applicable to all, rather than a special few, of the several branches of the industry. For years we have urged general recognition of the community of in- terest which underlies surface differ- ences between all the apparel, clothing and garment, or needle trades manu- facturers. Furthermore, we believe in the industrial economy of non-duplica. tion of effort. The various associa- tions affiliated with us do not each, separately, conduct work which can better be done forall through a central, ized department. And it was in firm accordance with this principle that our uniform cost committee proceed- ed in its undertaking. Miller, Franklin, Basset & Co., cost engineers, were engaged to prepare a uniform cost system, to set standards for cost accounting in the needle trades, which would apply, with the always necessary minor changes, to any plant producing garments of any type. This has been done and the finished work is being offered to the entire industry. But we are not satisfied to do a good general job. Our habit of figuring results in dollars and cents has a firm hold on us, so we go a step further. We have arranged to buy cooperative- ly, for a group, or an individual, ex- pert cost installation service, at a great saving in price. We supply work, men as well as standards for the job of cost installation. Send Out Trade Letter I might go on multiplying instances wherein we have proved our -useful- ness. I have not yet touched upon our trade-service letter, for example, although this business digest, issued each week, is welcomed and consid- ered very useful by our members. Our departmentalization might also be of interest, as it has a- direct bear- ing upon our capacity for usefulness. Questions have been raised as to the value of our cost system to uj. whether we do not go too much into detail when we charp-e off our rent, on a floor space basis, to departments: when we keep job tickets showing la- bor and material costs on our mimeo- graph work; when we apportion dur payroll to departments; when we es- tablish a centoal purchasing depart- ment and insist that ' all purchase requisitions shall be signed by the as- sociation executive in general charge. Men unfamiliar with our organiza- tion have told me that it must cost us far more than we save to check and compile these cost records. When manufacturers are urged to install adequate cost metho(^s they often make the same objection. But if our experience is any criterion, no man need hesitate over the cost of instal- ling simple business records as a basis for cost control. An association office is the last placs in the world, unfortunately, in whicTi many business men would look for a cost accounting installation, and yet we avoid "red tape," get good results without an additional clerk, and I be- lieve it really costs us less to handle cur business right than it would if we were trying to operate without the centr.^I control established through our records. And now I may conclude by stating: my firm belief that sound, sane prog- ress in the industrial life of this coun- try depends to no small extent upon the right-minded organization and com- petent management of our trade asso- ciations. Free land no longer provides an outlet for the individual energy of our people. We are groping forward into a period of world-wide competi- tion, rendered all the more severe by constantly improving means and methods of transportation. If we are to continue to avoid encouraging great combinations of capital, such as are encouraged in all competing countries, and if we are to continue to develop the individual type of American busi- ness enterprise, we must more- and more encourage cooperative competi- tion, as exemplified in our trade asso- ciations, or make way for a mors effi- cient order. N 40 CO-OPERATIVE COMPETITION WORLD'S MARKETS NEARER TO TRADE ASSOCIATIONS Trade Groups Extend Selling Field— List of Buyers Abroad Com- piled and Basis Established for Credit Rating During recent years leading trade associations have found many oppor- tunities to render practical service for members interested in the foreign field. Indeed, any industry dependent upon overseas markets for raw material or as an outlet for its finished products would find value in such a service. Therefore a well organized offlce to handle problems growing out of inter- national trade has become a perma- nent feature in the work of several prominent associations. Heretofore trade bodies accom- plished a greac deal with tlieir own facilities. Now they have strong sup- plemental aid in the new industrial divisions of the Department of Com- merce, established through the efforts of Secretary Hoover. The.se divisions will not replace the foreign commerce functions of trade associations. They ara designed to extend their work by providing additional valuable ■ services not before available to American in- dustries. There are a number of important foreign activities undertaken by trade associations that have been of practi- cal Value to their members, and it is believed that the public will be Inter- ested in Uiief comment on them. Foreign Credits an.' Advertising The compilation of a reliable list of foreign Importers is a big task that Ti as undertaken by one organization. It was not the idea at the outset to establish a credit rating service; the association merely wanted to gather all available names of i:oreign buyers of its product and, throug'.i the aid of bnnks and other reliable agencies, get a general line on the importance of existing firms and eliminate "dead wood." To facilitate the Inquiry abroad spe- cial forms calling for detailed infor- mation were printed in several Ian- By EDWARD A. BRAND Secretary Tanners' Council guages and eup:?lied to the agencies which made the investigation. The returns to the interrogatory enabled the association to remove from its records hundreds of firms which had ceased to exist and this alone saved an immense sum in postage and use- lees circularization. As regards credit reports, th" as- sociation has on file at present ratings on more than 4,000 buyers scattered all over the world. The data are to complete that exchange arrange- ments have been effected with other institutions maintaining similar ser- vices. CoSperative advertising through such mediums as house organs and handbooks speoially prepared for for- eign disetribution is an activity that has procured many profitable business connections for American firms. And success in distributing this literature was augmented by the complete records of overseas buyers. Last year the Tanners' Council col- lected a fund of $35,000 in subscriptions and for advertising space to publish an international cable code for use by the hide and ,lea:her trades. The code was compiled bv an expert in charge of similar work for {he Federal Govern- ment during the war. There are two sections of the book — one for gehe^al use and another devoted to hides, lea- ther, and tanning materials. The only other code dmiing with the special subject.s named was- published in Great Britain forty years ago. This publica- tion has enabled its users to cut their cable bills in half. Adjusting Trade Disputes Adjustment of complaints arising out of sales of goods to foreign firms ia another important task undertaken by a trade organization. Regardless of whether the controversy grows out of a sale by a member or non-member, the association believes it to be Its duty to adjust it and thereupon pre- serve the good name of American products in foreign markets. In 1920, When domestic trade in cer- tain products began to decline, it was felt by an interested association that something ought to be done for its members to enable them to hold at least a portion of their foreign busi- ness. It was therefore instrumental in having a number of firms in the industry tie in with an Edge-law bank in a position to offer long-time credit facilities. Much valuable work is done in co- ordinating and publishing tariff rates, marking regutetlons and changes In patent and trade-mark laws of for- eign countries relating to spfecific commodities. Finally, trade associations actively cooperate with the Department of Commerce and the National Chamber in improving statistics of imports and exports, arranging meetings for re- turning commercial attaches and con- sular officers, distributing foreign samples, and making known to mem- bers generally its facilities for devel- oping foreign commerce. ^ There are other activities of lesser importance that might be mentioned, but those stated give an adequate idea of what is being done by trade organ- izations to solve the foreign problems of their members. There is much work ahead for Industries which de- pend upon foreiau sources for M or a part of their raw materials. When conditions again become normal there will be keen competition in the world markets for the better grades and se- lections of such materials and the data in the hands of trade assocla* tions will be found of great valuQ. CO-OPERATIVE COMPETITION il April 3, 1922 PRESENT LAWS SUFFICIENT TO CURB TRADE ASSOCIATIONS "Bad" Associations Would Not File Reports With State — Legitimate Groups Can Accomplish Purpose by Co-operating With Hoover By GILBERT H. MONTAGUE Counsel in many anti-trust proceedings and Federal Trade Commission inves- tigations and author of '"Business Competition and the Law." On Mau-ch 17, 1922, a bill sponsored bv the Lockwood committee on hous- iDK passed the New York State Sen- ate, forbidding any corporation or cor- poration oBBcial to participate in any "organization, arrangement, under- standing, or agreement of or between corporations ... of which actual or potential competitors engaged in the same or similar clasi!es of business are members," or to participate in any "club, society, institute, exchange, bu- reau or other body ... of which such actual or potential competitors are members," until after the State Department of Trade and Commerce, to be created by the bill, shall have investigated the members, officers, dues, assessments, plans, purposes, metliods, practices, constitution and by-laws of such association, and the uses to which its dues and assessments are put, and shall have Issued a license authorizing It to transact business. Any corporation, corporation official, «• person, the bill continues, who "be- oomes a party with a corporation" to any activity of any unlicensed as- sociation, or does "any act In, to- ward or tending to the consummation of such purposes of any such un- licensed association," shall, in the case of a corporation, be fined not less than |l,e00 nor mors than $20,000, and in the case of a person must be Im- prisoned at least three months and not more than one year, and in addi- tion may also be fined not more tiian $20,000. Prcyvisions of Measure An association shall not be licensed, the bill provides, if the proposed State Deplirtinei&t of Trade and Commerce finds that the association's activities wiU (1) "tend to prevent, restrain, limit •p~r«atzlsfc>«oni9atItloB|f (2) "tend to fix, prescribe or advise or suggest the fixing of the price of any such article or commodity," <3) "tend to restrain, limit, restrict or diminish the output or supply, to divide or apportion the territory be- tween actual or potential competitors or to encourage such competitors to keep out of or fail to enter any given territory in competition with one an- other." (4) "fall to effect a more beneficent, efficient, and economical production, marketing, transportation, or distri- bution of any such article or com- modity in free and open competition," (5) "tend or is calculated to pro- mote or encourage unreasonable prof- its to the members or to any member of such association or to any other person, firm, or corporation engaged in a similar business," (6) "be discriminatory between per- sons or localities or injurious to the Intereists of the State," (7) "be in any other manner calcu- lated to interfere with unrestricted competition or is otherwise adverse to the public welfare." No right of appeal to, or review by, the courts is provided in the bill, in event that an association is denied a license. Besides the powers above described, the bill intrusts the iJioposed State Department of Trade and Commerce generally with the "encouragement, development, assurance, protection," and regulation" of "free and open competition in the production, man- ufacture, marketing, purchase, sale, exchange, use, hiring, storing, and distribution of any article or com- modity in common -jse," and specifical- ly with investigating the cost of such articles and commodities and "secur- ing the production, manufacture, mar- keting, purchase, sale, use, hiring, dis- tribution, and exchange of such arti- cles and commodities upon a fair basis and at prices regulated solely by competitive conditions, uncontrolled by restraints or restrictions of any kind." The proposed State Department of Trade and Commerce, according to the bin, shall have "full access to and the right to inspect and take copies of all books of account, documents, cor- respondence, and other papers relat- ing to the business and affairs of alt corporations. Joint stock associations, trade organizations, and other' bodies" whose activities In any way compiitw or affect trade or commerce within the State. Failed in Assembly This bill was not introduced until March 2, 1922, when the New York Legislature was on the eve of ad- journment. Because the Assembly failed to pass the bill in the tumult of its closing session scarcely two weeks later, the counsel of the Lockwood committee on housing importuned Gov. Miller to reconvene the Leg- islature in extraordinary session for the purpose of enacting this bill. The Governor, whose sympathies are ap- parently with the genera'- purpose of the bill, showed sound judgthent in replying: "I am unwilling to coerce the Leg- islature into taking hasty action upon a measure of such vast Importance by calling an extraordinary session. You have been studying this subject for months, and as a result of this study you have produced a bill just before the Legislature adjourned. 1 think the_ Legislature Is entitled to ample time to study your produc- tion."' '" What is the necessitv for this bill, which would confer upon the pro- posed State Department of Tr^de aitd 43 CO-OPERATIVE COMPETITION Commerce duties and powers exceed- ing those possessed by the Federal' Trade Commission, or by any other commission. State or Federal? To encourage "good" associations —"so that business men could know what they could lawfully do," to quote Gov. Miller — and to exterminate "bad" associations would be a fair summary of all the arguments for the bill. Neither of these alms, however, is accomplished by the bill. With no compensating benefits of substantial Importance, it would turn loose upon the trade and commerce of the iState all the evils of practically uncon- trolled bureaucracy. Business men, even if they make to the proposed State Department of Trade and Commerce the fullest dis- closures, and affiliate only with asso- ciations licensed by the department and conforming to all its regulations. Would nevertheless never "know what they could lawfully do." Except in Bo far as immunity may be obtained by testifying under subpoena in some hos- tile proceeding, nothing in the bill protects licensed associations, or busi- Bess men affiliated with licensed as- sociations, from indictment and prose- cution under New York statutes against restrkints of trade comprised In the Penal Code and the Donnelly Anti-Trust Act. Neither of these Btatutes is repealed or in any way modified by the bill. Federal Law in Force Nothing in the bill, of course, can In any way prevent injunction pro- ceedings or criminal prosecution by the Attorney General of the United States or the local United States At- torney -under the Federal Sherman act • nd Clayton act, both of which acts may be violated by licensed associa- tions whose members may all be resi- dent and doing business only within m» State. Nor can anything in the bill pre- ▼ent proceedings against licensed as- sociations and their members by the Federal Trade Commission in the en- forcement of the Clayton act and the Federal Trade Commission Act forbid- ding so-called "unfair methods of competition in commerce." Even as to the transactions ap- proved by the proposed State Depart- ment of Trade and Commerce, there- fore, every form of prosecution, in- junction proceeding, and criminal ac- tion now afforded by existing State and' Federal laws may be invoked by thf Attorney General of the State, the Atttorney General of the United States, the United States Attorney of tills District, and the Federal Trade Commission. How illusory is the hope that with the enactment of the bill "business men could know what they could law- fully do" appears from the fact that lt.bor unions, farmers, gardeners, dairy men, livestock farmers, and fruit growers are significantly excepted from the bill. Few associations, compared with the entire number of trade associations, carry on any activities that raise any legal questions whatsoever. Most "good" associations, as the Federal Trade Commission's recent in- vestigation and Secretary Hoover's re- cent correspondence with Attorney General Daugherty have shown, con- centrate their activities upon stand- ardization of quality, grades and tech- nical designations, elimination of wasteful prc:-sses, prevention of dis- honest practices, handling of group insurance, cooperative representation on legislative questions and transpor- tation matters, cooperation with Gov- c-nment departments and bureaus, and a limited service of uniform cost accounting and statistical trade in- formation which have never been legally questioned. Most of the largest and most suc- cessful trade associations have limited their activities to this category, and are as free from the opportunity or the temptation to the abuses con- demned by the Lockwood Committee on Housing and by the Supreme Court in the hardwood manufacturers' case as are the Lockwood committee and the Supreme Court themselves. Only a relatively few associations, according to the Federal Trade Com- mission's recent investigation, have ever attempted any interchange of trade information regarding demand, supply, and prices, in which field alone can possibly arise the abuses which the Lockwood committee and the Su- preme Court have denounced. Hoover Plan Approved Eliminating from consideration those "open price associations" that have been commercialized and ex- ploited by so-called "'association lawyers" and professional "associa- tion secretaries" of the promoter type, the residuum of "good" associations that desire the legitimate interchange of ^rade informatidfi regarding de- mand, supply, and prices can best ac- complish their lawful purpose through District Attorney of this County, the I cooperating with Secretary Hoover in the programme outlined in his corre- spondence with Attorney General Daugherty, rather than through the dubious authority of the proposed State Department of Trade and Com- merce. To imagine that this bill will ex- terminate "bad" associations, of the deliberately criminal t; pe, exposed by the ability and perseverance of the Lockwood Committee on Housing and its counsel, is to imagine that combi- nations of this type will ever operate in the open. Such associations and their mem- bers will never file data with the pro- posed State Department of Trade and Commerce. In the future, as the Lockwood Committee on Housing has found in its own experience, prose- cutions and injunction proceedings and criminal actions under the State and Federal anti-trust laws will be the only remedy. Under the recent Supreme Court de- cision in the Hardwood Manufactur- ers' Association case every abuse of tr."ide associations, as regards inter- state commerce, which the Lockwood Committee on Housing has reported can be stopped by injunction pro- ceedings and criminal prosecution under th? Sherman act and the Clay- ton act. Under the recent SupVeme Court decision defining the Federal Trade Commission's jurisdiction the enor- mous powers of investigation and prosecution possessed by the commis- sion extend to every combination in violation of the Sherman act, or the Clayton act, as well as to that indefi- nite class of combinations and trans- actions outside these acts, which the Supreme Court intimates may fall within the Federal Trade Commission Act's prohibition against "unfair methods of competition in commerce." With the Sherman act, the Clayton act, the Federal Trade Commission act, and the State Penal Code, and Donnelly anti-trust act strengthened by the New York Legislature in 1921, and with the sweeping powers of In- vestigation and prosecution now pos- sessed under these laws by the At- torney General of the United States, the local United States Attorney, the Federal Trade Commission, the At- torney General of the State, and the local District Attorney, it would seem that Government supervision and Government corrective measures, both Federal and State, are already more than sufficient to cope with any pos- sible dereliction on the part of trad* associations. COOPERATIVE COMPETITION 43 April 4, 1922 TRADE GROUPS CAN AID WITH MARKET AND COST REPORTS Uniform Systems Help in Production and Distribution — ^Can Be No Criticism if There Be No Understanding to Make Illegal Use of Information By WILLIAM E. LAMB Solicitor of the Department of Commerce The producing interests of the coun- try have for a long period of time sought through study and experiment for the most suitable means to in- crease their efficiency in the matter of production. As a result of this many wasteful methods have been discontinued and economies substituted that to-day make unit costs possible that are lower in percentage increase than the increases in many of the factors involved in operating expense. It was not so long ago th£ft little If any attention was given to unit costs of production. The question of gain or loss was usually determined by the balance sheet at the end of the year. If that showed that the amount of money on hand exceeded that paid out in operation and a sum sufficient to pay a fair return on the capital in- vested it was assumed that the busi- ness was prosperous and the result dpe to careful management. A gradual increase in the cost or expense of the factors entering into production was observed, however, without corresponding increase in price of the finished article, as prices for standard articles remained fairly constant for a considerable period prior to 1914, with the result that the balances at the end of each year con- tinued to decrease. This situation could not be remedied by an auto- matic increase in price of the finished product, and a hope that improved methods of production might furnish the solution led to observation and research that resulted in great ad- vancement in economic effort. Out of this grew the desire to know the cost of a given finished article, and to-day there are numerous methods or systems of cost account- ing or cost finding that may be said to produce reasonably accurate re- sults. There is not much difficulty In de- termining factors that may properly be taken into account in finding cost, especially in instances where a plant produces but one article, but great dif- ficulty is experienced in determining the portion of the expense properly chargeable to these proper factors that shall be allocated to various articles produced by one plant, as well as the means employed in arriving at auch allocations. Differences of opinion and prefer- ences for one or another of the va- rious cost finding systems have not been in the interest of uniformity of method, and many industries have un- dertaken, through trade association organization, to reach a standard method of cost finding or cost account- ing that would be most suitable and appropriate for a particular industry. There are to-day many trade asso- ciations covering a large field of di- versified industry that have devised a standard system of cost accounting for their respective members which is used by each solely for the purpose of ascertaining whether or not his plant is being efficiently operated. If any particular item- of cost seems to be out of line, he is then in a position to seek the proper remedy. There has been some suggestion that the adoption of uniform methods of cost accounting or cost finding for a given industry might lead to uni- form price fixing. There is, however, no relation between cost and price unless a plant is running at normal capacity and there is a steady and even demand for the product. Unit costs are kept at low levels only when the volume of production is lai-ge, and if a plant is running on half time or quarter time unit costs increase cor- respondingly as volume decreases. If under these circumstances cost is related to price, the highest price would prevail during the period of least demand and of smallest produc- tion, while during periods of the great- est demand and consequent capacity production bringing low costs, low prices would result. Experience shows that neither of these results will fol- low under the conditions. It may be said, therefore, that a trade associa- tion havl.iB as one of fts purposes the perfection and unification of sound cost-finding methods is in a field of most helpful endeavor. Many of the economies in production may be . di- rectly attributed to work of this char- acter, and, with the experience of th« t>ast, no doubt a continuation of the effort will show marked beneficial ad- vancement. The great, Intensive effort that has been made in production efficiency has not attended the merchandising or dis- tribution of products. It seems to be the belief that once the proper level of economic production is reached salesmanship will do the rest. Suc- cessful methods of selling may not re- sult in sound methods of merchandis- ing or distributing. A mere sale by a producer to a dustomer may appear on the surface to be all that the pro- ducer needs to do in the way of mer- chandising. There are, however, many things to be taken into account besides getting the signed order which is the evidence of the sale. The goods sold must be of a kind and character that the pur- chaser can dispose of in his available territory of consumption. They must, therefore, be suitable to the needs and necessities of the consuming commu- nity. The volume sold must be properl.v related to the potential buying power goods are finally to be consumed, and of the public in the district where th« u CO-OPERATIVE COMPETITION the distance from producer to pur- chaser must be such as to make prod- ucts as ready available to tlM pur- chaser from a transportation stand- point as the goods of other producers may be to the purchaser's competitors in the same territory. It may l>e oonceded that sales can be made without taldng any of these trade elements into account, but with aU of these conditions against the purchaser there would be but one sale, for if the purchaser survived and was again in the marltet the pro- ducer could not sell him a second time. Proper merchandising requires steady customers, and customers can be se- cured and kept through satisfactory service, and that service necessitates furnishing a purchaser with the kind, character, and volume of the goods suitable for the needs and require- ments of the purchaser's customers and at proper and seasonable times. There are few great industries which have demonstrated that the widest and most even distribution of merchandise is attained by always having the goods as near as possible to the purchaser, to the end that he may purchase and have delivered at once such amounts as will meet his Immediate needs without fear of sud- den slumps, with consequent loss on the merchandise unsold. Relation of Costs to Sales It Is true that low selling coats may be the result of large individual sales. In ordinary times this course may be raccesafullr pursued, but when un- settled conditions arise purchasers wax no longer buy beyond immediate requirements, and unless supply is in the immediate vicinity this courss means added transportation waste and added costs of selling. One of the most pertinent facts for the determinatio;i of any producer is the amount that he ought to produce. In considering this he should know the productive capacity of his competitors, and. for current purposes, should as- certain the actual production for prop- erly selected periods. Actual produc- tion figures are valuable only as throwing light upon immediate condi- tions. After the period is passed, the actual production during that time may have little if any bearing upon future conduct, and taken alone, pro- ductive capacity is of little value. To make information of that kind of ser- vice, it should be coupled with actual distribution titstistics. Compilation of figures showing dis- tribution of given products by dis- tricts according to grade, brand, size, or quality, or by such other form of designation as may be suitable for the commodity furnishes a record from which the intelligent business man can draw proper conclusion.s. A record of that kind will show him that, regardless of general business condi- tions, a certain volume of the com- modity In which he was interested was actually distributed in the vari- ous territories during the period taken. If this record is regnforced with the volumes of stocks on hand, wholesale and retail. In the various consuming districts, each producer has a start- ing point to determine the volume he will produce for the next period. Year by year, distribution records and sta- tistics become of greater value, espe- cially when years of normal produc- tion and distribution are reached. What Statistics Show Statistics regarding distribution of the character indicated, when coupled with production and capacity statis- tics for the same period, become of great value for current purposes. The volume of production by districts, coupled with capacity to produce, will show, in the case of plants, whether they are running on full time or less. The reports of their distribution by districts with stocks on hand therein, both wholesale and retail, will show the territories of distribution that are overloaded, as well as those that-taay be short in supply. No sensible business man is going to attempt the merchandising of his i rod- uct in a territory that is already over- stocked, and especially is this true It the statistics demonstrate that the actual distribution for the period taken, coupled with stocks on hand, substantially equal the normal capac- ity to consume. The districts that show a lack of requisite supply will be the ones that wil receive attention, and sane and intelligent distribution will result. It is the character of distribution that keeps an even and steady supply in the consuming territories at all times that is commensurate with an even and steady demand. A study of production and distributing figures will also enable producers and dis- tributers to determine when the point of saturation has been reached in given coniftming territories, and then, instead of a continued oversupply in those territories, new markets will be sought for the surplus. Trade associations collecting statis- tical Information regarding produtlob and distribution along the lines indi- cated and furnishing the same to the public and to their members appear to be perfoiTning a service of l>eneflt to the public and to the commercial world, and, if there is no understand- ing, concealed or otherwise, to make unlawful use of the information so obtained, they are not likely to b^ subjected to criticism. CO-OPERATIVE COMPETITION 15 April 4, 1922 HOW TRADE GROUPS CUT OUT WASTE Benefits of Co-operation in Music Industries — Market Expansion a Great Problem — Standardization of Methods Aimed At By ALFRED L. SMITH General Manager Music Industries Chamber of Commerce; Vice-President American Trade Association Executives. It would not be surprising it the public receives an erroneous impres- sion of the purposes and general ac- tivities ot trade associations from the disclosures of improper practices of certain associations In the building industry and from the recent Supreme Court decision in the so-called "Hard- wood-Lumber case," which has stim- ulated discussion ot "open-price" ac- tivities and their relation to the pub- lic welfare. The building associatlona were not real trade associations, as their ac- tivities were conttned cWeHy, if not exclusively, to the practices com- plained of. The Hardwood-Lurnber case, on the other hand, was con- cerned with an activity which had hitherto never been declared illegal or contrary to public interest. Even so, this type of activity has never been carried on by more than a lim- ited number ot trade associations, most ot which have also carried on many important activities entirely unrelated to statistics or prices. Naturally, since f.ie Hardwood- Lumber caso referred only to an "open- price" plan, the defenders ot trade as- sociations have confined themselves to the question in dispute, which means, of course, that they have talked chiefly about open-price activities and have said very little about the great variety of Important trade association work entirely unrelated thereto. It would be a pity if as a result the pub- lic should get the impression that "open-price'" or even statistical work In general constitutes the chief ac- tivity of most trade associations. Many Problems to Solve Industries, as distinct from individu- al business Arms, have many and grave problems. The real purpose of a trade association- la to provide a medium through which members ot an industry can take up cooperatively all those problems pertaining primarily to the industry as such and which can- not be met successfully by members of the industry acting individually. The activities of a trade association are determined by the needs of its particular industry. Few, if any, ac- tivities are common to a great major- ity of associations. There are, how- ever, a number ot qreneral lines of ac- tivity which most associations carry on to a greater or less extent. The impelling need of an Industry for constant expansion of its market constitutes one of the greatest de- mands for trade association assist- ance. Such activities as national co- operative advertising of the industry's product, development of new uses for it, educational work to instruct con- sumers how to use it, and the cooper- ative development of new foreign mar- kets are but a few of the recognized market expansion activities of trade associations. One great problem of industry to- day js elimination ot waste and im- provement of quality. While the actu- al improvement of quality and the in- troduction of new methods must take place in the individual business con- cern, nevertheless no concern caii pro- ceed far by itself. It is largely de- pendent upon and must cooperate v/ith fellow members of the trade, as well as with those from whom it buys ma- terials and to whom it sells. Typical of this type of trade association activi- ties is the campaign for "standardiza- tion," or "simplification," as it is often railed. The trade asociation is .-ibi^o- lutel> essential to such work. In Field of Legislation There' is . a contsant stream of legislation of almost every conceiva- ble n,iture pouring into Congress anfl. the law-making bodies of the variou.s States. Much of this legislation vitally concerns business. Trade associations are the only effective medium through which industries can inform Congress of the probable result of such legisla- tion on business and make helpful suggestions. Obviously, legislative work is not only necessary to tha proper development and protection of the industry, but also Is helpful to Congre.ss. As a result of the great multiplicity of legislation. Government bureaus and commissions having to do with the a-ssl.stance, as well as regulation of business, a trade association must maintain constant contact -witll Washington. Every trade association alms to give direct service to members In all mat- ters in which the individual cannot act successfully or lacks adequate facili- ties. There is an endless variety of such service. Transportation is a fer- tile field for service, as in auditing freight bills and routing shipments. In many cases the association can best represent the individual, as when petitioning public bodies or in pre- senting claims to railroads. The com- pilation and distribution of credit in- formation is a common service. The development of cost systems is indic- ative of another type of service. Many industries are subject to special legislation, as taxation, and this re- sults in frequent demands for direct assistance, especially of inforraationaj character. Reliable information is the real basis of successful business. Only the very largest individual business con- cerns can command the necessary fa- cilities for adequate research investi- gation. The trade association is 46 COOPERATIVE COMPETITION therefore called upon by members, and not Infrequently by the public and the fJovernment, to furnish important In- formation requiring prompt and care- ful Investlgration. For illustration, trade associations make investigations and report on such a variety of sub- jects as nature and sources of raw materials, wage payment systems, best methods of packing, and directories of buyers. Statistical Information usually con- stitutes but a Dart of the general In- formation compiled by trade associa- tions. Most of them gather such in- formation as number of firms en- gaped in the industry, number of em- ployees and normal and capacity out- put, but a comparatively few compile current statistics, such as stock on haiid, volume of sales, shipments, and th» great controversial subject — prices. Value of Current Statistics IB the belief of the writer, the fur- niahing of current statistics is a valu- able work which should be promoted rather than curtailed, both In the in- terest of Industry and the public, nevertheless, if trade associations should be forbidden to distribute any curi'ent statistical information what- soever, the work of comparatively tew associations would be ' interfered filth seriously. The Music Industries Chamber of Commerce embraces the entire music laduatry, includias both production and merchandising of ail types of mu- sical instruments and supplies. Its regular activities number about fifty, of which only six include the furnish- ing of information to members and only" two relate to statistical infor- mation, neither being current statis- tics. Twenty activities are for the promotion of music among the masses of the people, which is the basis of the music industry, the following be- ing typical: Cooperation with musical organiza- tions like national federation of music clubs, national music supervisors' con- ference, music department of women's clubs, in their work of developing music. Cooperation in promoting musical activities in industrial plants; that is. music in Industry. Work for proper appropriation for music from public funds. Cooperation and promotion o£ local music weeks. Cooperation and promotion of local music memory contests. Assisting universities to develop ex- tension work in music. Furtherance of movement to give school credits for music studied out- side. Promotion of the idea of municipal music commissions to develop officially music activities of a democratc char- acter. Campaign of education with music supervisors, teachers, organists, cbaiu- bers of commerce, public spirited in- dividuals, and organizations like the National Child Welfare Association to give more attention to music pro- motion. The chamber is engaged constantly in export trade development, legislative activities, eliminating bad business practices, and furnishing credit in- formation. Much preliminary work has already been done in the matter of standardization and it is expected that plans will soon be completed for the intensive development of this work. .\ national cooperative advertising cam- paign Is now under consideration. The music industry realizes that ita prosperity depends largely upon keep, ing the agencies of distribution active. The Chamber's Trade Service Bureau, whose purpose it is to assist in the improvement of methods in the musio business, is therefore devoting most of its time to giving service to the music merchant. Music advertising copy has been prepared and is available to mer. chants for local cooperative campaigns. Musical instrument advertising copy of timely importance is furnished to mer- chants. The gathering and distribution of merchandising ideas are important, and typical business forms in use through- out the merchandising end of the trade have been gathered for the information of members. In cooperation with the chamber, several universities have uil> dertaken researcli work In cost M> counting for retail music merchanta. CO-OPERATIVE COMPETITION 47 April 5, 1922 PAINT AND VARNISH MEN REACH BUYER THROUGH TRADE GROUP Joint Campaign With "Save the Surface" Appeal to the Public Aided Entire Industry-Co-operation in Promoting General Busi- ness Basis of the Trade Association By ERNEST T. TRIGG President of the National Paint, Oil, and Varnish Association; Chairman of the committee conducting the "Save the Surface" campaign" Under the Sherman anti-trust law, all business is divided Into buyer and seller and it is the broad function of the law to protect the buyer against the seller and the seller against him- self. The relation of the buyer and seller has gone through a most remarkable evolution, indeed, since the time when that relation was actually expressed by a maxim of the common law — caveat emptor, let the buyer beware. At that remote time the responsibility was thrown almost entirely upon the buyer to get what he paid for and he fared as best he might. The first stages of the development of our great national resources, with necessarily great amounts of Invested capital, were carried out with a good deal of that old feeling — let the buyer beware — still active. The injustices involved, however, soon became so obvious under a condition where so many people were dependent in so many vital ways upon the services or products of the so-called trusts that the Government crystallized public opinion in the Sherman anti-trust law for the control and regulation of the trusts in their relation of sellers to millions of individual buyers. Great as these aggregates of busi- ness were, they are dwarfed by com- parison with the units now dealt with by the Sherman anti-trust law in its application to whole industries as they have come to be expressed in recent years in trade associations. The Sherman law has made clear that through iio kind of cooperation can the responsibility of the seller to the buyer be evaded. This very responsibility has been one of the most potent forces in calling trade associations into ex- istence. It was foupd that t«ade associations wei'e the best means of meeting this responsibility to millions of buyers, since it made possible certain stand- ards of quality in product and busi- ness methods. The services rendered by trade associations have been large- ly the means, not of evading the law, but of making It unnecessary for the law to apply to any part, of that in- dustry. The foregoing principle of respon- sibility to the buyer has been kept In mind in the paint and varnish in- dustry in the organization of its sev- eral associations. The parent organi- zation is the National Paint, Oil and Varnish Association, founded in 1888, but not incoporated until 1915. Later, in cooperation with the parent asso- ciation, the paint manufacturers formed the Paint Manufacturers' As- sociation of the United States in 1899. followed by the National Varnish Manufacturers' Association, with the same relation to the parent organiza- tion, in 1903. What Has Been Done The work of these three associations upon a definite and constructive pro- gramme can be summed up under the following objectives: ■ (1) Creating through cooperative experience the best possible products for public use. This is done through the mainte- nance of tne finest physical and chemical research laboratory on paints and varnishes in the world. This work is carried on entirely through the associations and includes research development of raw mate- rials. Improvements In processes of manufacture, and durability tests of the finished products. (2) Benefiting the public through the reduction of manufacturing costs "oy the reduction of overhead through quantity production; by Improving: manufacturing processes and by elim- inating waste m the industry through the discontinuance of unnecessary shades and slaes of packages in maT- keting the products. (3) The maintenance of high bus- iness standards through the operation of an unfair competition bureau. (4) The reduction of individual busi- ness hazards by making available th» best methods of cost accounting In th* production of paint and varnish. (5) Avoidance of trade misunder- standing through the standardization of trade names and descriptions ol products. (6) Reducing fire hazards on the part of the members by inspection, education, and counsel on insurance. (7) The promotion of civic cleanli- ness and public health through the co- operation of public officials and civic organizations in promoting "clean-up and paint-up" campaigns. (8) From the sales viewpoint, mak- ing available to the public better products at better prices, ade pos- sible by educating the public to the economic need for paints and var- nishes. This is accomplished by what is known as the "Save the Surface Campaign" operated under (execu- tive management of the educational bureau, in which all branches of the industry have cooperated. (9) And finally, gearing the entire industry to one common objective which is expressed in the line now familiar throughout the whole paint and varnish Industry as its goal — "Make 1922 the greatest nalnt and varnish year" — as the first step towards doubling the industry by 1926. This is being carried out by the or> 48 CO-OPERATIVE COMPETITION ganization of "Save the Surface" sales- men's clubs among paint and var- nish salesmen in all parta of the country: by the organization of "Save the Surface" paint and varnish dealers' associations, and by having commit- tees In each city stimulate action and guide coSperatlve effort towards the common objective. Every unit of the trade has been enlisted, including master painters, dealers, jobbers, manufacturers, and salesmen. "Save the Surface" The limitations of this article pre- vent a description of all these vari- ring of 1920, however, the Com- mission wa* enjoined *)y the Su- yteme Court of the District of Col- umbia from requiring periodic re- ports from the companies in the coal and steel Industries regarding pro- duction cost, prices, etc. This work was acordlngly dropped pending de- «l81on by the Supreme Court as to tb» Commission's authority. the law the power to make authorita- tive rulings upon such matters as are proposed by your letter," wrote Chair- man Gaskill. "The commission is de- sirous of cooperating with business, however, and in proper cases where it can, by the expression of what is merely an opinion, stated in general principles, contribute to the elimina- tion of legal uncertainties, doe& not hesitate to do so. The application of these principles, however, to particu- lar cases as they arise must depend upon the facts adduced in the particu. lar case." Last October the commission made a special Inquiry into the activities of trade associations. The commissioi^ sent out 2,760 questionnaires to trade associations In response to a request for Information from the chairman of the joint commission of agricur- tural Inquiry of the tnlted States Con- gress. Replies were received from 1,673 showing the following activities: Associations collecting and ex- changing prloe Information..... 141 Associations compiling and dis- tributing other statistics 376 Non-statistical associations 76S Inactive or disbanded 161 Incomplete replies , 227 According to the Information sup- jlled by the associations there were 141 out of a total of 1,673 sending in replies to the questionnaire, which dis- tributed or exchanged information re- garding prices in closed transactions. Nine associations indicated that they had recently discontinued the collec- tion and exchange of information re- garding their selling prices pending the decision of the United States Su- I that Congress purposely struck out o' 1 preme Court in the Haidwood cafe. As already indicated, much of the criticism of the Commission has come from business men who think that it has been too much of a policing body and too llMle of an or- ganization designed to help business steer a straight coure through the entanglements of the anti-trust acts. Over and above the defence against this charge that the law does not give tUem as wide powers in this direction a£ had been anticipated the commis- sion takes the ground that a body of information for the guidance of busi- ness generally is gradually being built up by successive decisions in Individ- ual cases. "The publication of Its decisions in collected volumes Is expected to go far tow,ard removing misunderstand- ings and bringing to the attention of business inen the fact that the com- mission is rapidly building up a body of business law which will afford them that 'advice, definite guidance, and in- formation' which the President sug- gested that such a commission, could and would supply," says the corn- mission in its anual report for 1921. Helps Associations Moreover, Th certain Instances the commission has not hesitated to do what it can by way of constructive help. Several good examples of this are available. For Instance, on July 18 laal year the commission wrote a let,4fr to F. J. Moss of the American Sagfc and Door Company in Kansas (•y, giving its views In respect to the f ducational work of trade assocl.itlons In connection with cost acounting. "You doubtless recognize the fact ] CO-OPERATIVE CUM PETIT ION 53 April 6, 1922 INDUSTRIAL GROUPS URGED TO ORGANIZE Says Trade Associations Must Be Enlarged — Suggests They Include All Related Lines and Labor in Any Given Business "Business at the present time starts Its operations at the wrong end." "The Tvrong end'.'" "Yes, business men; the brick manufacturers up the Hudson Hiver, for Instance, make so many bricks of <>o many different kinds during t'.ie year and then try to sell them. They begin at th» wrong end. They should first have found out what kind of bricks were wanted and how many and then filled the demand. "How would they get this informa- tion aa to the demand?" "Through a properly organized trade association made up of ali tae trades having to do with the building indus- try — iftrchltects, engineers, contract- ors, sub-contractors, labor unions, real estate dealers, and financiers, all of them should be in this industry asso- ciation. In such an organization each group or individual would realize his functional relation to the rest of the Industry, learn its needs, and so be able to act intelligently in his busi- ness, and tlius the whole industry would benefit." In this way Robert D. Kohn, archi- tect, chairman of the executive com- mittee of the National Congress of the Building and Construction In- dustry, expressed what he said should be the fundamental philosophy of all trade associations. "Functional consciousness," he said, "where each man realizes his de- pendence upon the others in the in- dustry, should be the fundamental philosophy of all associations, and the idea, in my opinion, should be ex- tended to the State, where the different industries and professions should real- ize their functional positions in the body politic and their Interdependence. "We have now," Mr. Kohn <:on- tinued, "innumerable trade associa- tions which are made up of trades, or even parts of trades. There are the lilemakers' associations and the clay products associations, the plumbers' association, and the pipe manufac- By R. D. KOHN, Architect turers' organization, the cotton fin- Lshers' association, and numberless other groups, each working: in part for its selfish interests and not even realizing its relations with the rest of its own industry, much less the rest of all industry. What we should have are industry associations where all those taking part in a great industry, such as building or manufacturing cotton goods, act together, realizing their functional part in the whole process." "Has there ever been auch an or- ganiaatlon started?" Mr. Kohn was asked. "Yes, during the war in certain Government departments where in some cases action was taken in (Ws way, some business was started at the right end, and now there is the Building Congress, which is an asso- ciation of all connected In the build- ing industry, among other things try- inir to develop that angle for the in- dustry." '■Just how do you mean that dur- ing the war business was started at the right end on occasion?" "I will give you a personal expe- rience," replied Mr. Kohn. "When I was chief of production for housing for tl^e Shipping Board I found after many sad failures that the only way to get results was through bringing together in advance all th>se people who would have a part in the design or construction of the housea. for example, if the board should say that 250 men were to be sent to build ships in Portsmouth, and that accom- modations were needed there within a certain period, we did not start by making plans and! specifications of the buildings and then calling on con- tractors for the different tra''.°s and telling them that they had ro do such and sit( h things. Made Comprehensive Plans "We would call architect engineer, chief of construction, transportation chief, and all the rest together first and tell them the problem. Then the lumber man, perhaps, would say: 'I can get a million feet of lumber from the South in three weeks,' and the brick man might say that he could lay his hands on so many thousand bricks from New Hampshire. Then perhaps the transportation man would say that troops were being moved from the Chicago district to Newport News and that all shipments from points south of that line would bo held up, but from Pennsylvania he could get suitable materials of another kind, and so it would go and we would work the problem out, actually designing the buildings in such a way as to use the most easily available material." "In other words, you found out first what your demand and supply were and then made your plans?" Mr. Kohn was asked. "Yes, we reversed the usual order of doing business, but, more Important, we got all the branches of the work functioning together, appreciating the other man's problems, obtaining accu- rate information as to demand, sup- ply, costs, and so on. This i? what the trade associations should do." "You said that the Building Con- gress was doing the same thing. You mean that in this body all the people connected with the building industry meet and discuss what the demand for building is likely to be, how it can best be filled, what the requirements in supplies win be, and so on?" "Yes, and no; that is only one of the problems they discuss. When each element in the industry understands the part it plays in the whole, we can go a great deal further. 1 will give you an example of what it might do. At the present time you see the Build. ing Trades Employers' Association suggesting that there should oe a re- duction in wages in certain trades and the BuMding Trades Council replying with the threat of a strike. "To say that such things should be settled by arbitration is merely a 64 COOPERATIVE COMPETITION makeshift — the relative dependence of an industry on any one element in it has never been worked out, hence the relative share of the proceeds which that element shall receive (if it is to be based on such a scheme) is purely a guess or an arbitrary sum related to what it received last year or the year before. With a fully organized as- sociation, which as yet the Building Congress is not, the matter might be eettled differently. In fact it might never come up in the form in which it has. "Every one connected with the in- dustry, all of whom would be affected should there be a strike, would under- stand the whole condition of the in- dustry. It would be seen, for example, tliat the demand for houses in the out- lying parts of the city which were to rent at ten dollars a room Is great just now. This means work for the brick- layers, carpenters, plasterers, and others, but none for the steel erectors or concrete mixers and handlers. "After this matter of demand had been brought out before the whole in- dustry it would be decided advisable perhaps that the demand for work where the steel erectors and concrete men are employed should be stimu- lated by lowering costs. The steel workers would find it advisable for the time being to take a reduction In wages, the cement manufacturers to make reduced prices, and so on along the line. This is but a crude ex- Maple and not based on actual facts, but will serve as an illustration. "In this and other ways each group or trade within the industry woufd be brought to appreciate its functional part in the whole and would appre- ciate that intelligent self-interest de- manded a sacrifice in one place to bring a greater gain elsewhere." "Just how and when was the Build- ing Congress organized, Mr. Kohn?" "It had its beginning in 1»20, when there was a meeting of a number of those in the industry at Atlantic City and an organizing committee was formed. The idea won favor because when the architects started by ac- knowledging that they had failed in realizing their responsibility to the rest of the building world, that they had probably been the cause of some of the ills of the industry, contractors, labor, and the rest followed suit, and the idea of correction aU along the line took hold. _ ^ . . In One Big Group "The purpose of the organizatlo.i was to bring together in cooperation every element concerned in the build- ing industry in a movement indended to promote the efBciency and improve the quality and extent of the service rendered, and develop an understand- ing of interdependence within the building Industry so that each part of the industry would work with every other part for the benefit of the indus- try and the nation. "As it has worked out, the active organization has not been the national body but those local groups which have been developed in tue different cities, New York, Boston. Portland, Seattle, and so on." "Has the New York group accom- plished anything really definite as yet?" "Yes," replied Mr. Kohn. "We have suggested a system of apprenticeship training for the improvement of the skilled laborers. It has been notice- able in the industry that the type ot workers has fallen off in recent years. At a meeting this was brought up and a frank discussion took place. "As the result, a committee was ap- pointed to study the situation and suggest a remedy which It has just done. It made a large number of recommendations, too many for me to enumerate, but the main point Is that there is not an attempt by employers to establish their school, which the labor men do not want, or the setting up of a 'labor* college. It does not mean the superimposing of any new organization. Its purpose is rather to bring together the established em- ployers' associations, labor unions, and the existing educational facilities for the purpose of building up the apprenticeship and supplying the in- creased number of skilled mechanics needed in the industry." "Does this Building Congress mean the cutting out of the trade associa- tions, such as the plumbers' associa- tion, the tile makers' association, and so on, and does it mean that if a person joins this organization he can- not belong to any other?" May Belong to Other Bodies "The answer to both those questions is. No. Membership- In the Building Congress can be as an Individual, a firm, or an association, and a mem- ber can belong to any other group with which he has dealings. The same would be the case It similar organiza- tions were formed in other indu.stries: for example, many textile mills have both woollen and cotton departments, and would belong to the industry -as- isociation of both the woollen and cot- ton industries. "The chief thing to remember in discussing trade or industry associa- tions is that absolutely free competi- tion in the old sense of the word is no longer possible or desirable. It be- comes ruthless and ruins all but the strongest. The competition must be- come one of merit of product and a new motive for all of industry must be found — but that Is another subject, which would lead me far astray. For the time being associations of some kind are necessary, and in my opinion the broad, all-embracing association Including the whole industry is the real solution of the problem. "We have seen Mr. Untermyer at- tacking trade associations through the Lockwood committee. He has only scratched the surface and has not got down to fundamentals. I believe that the extension of the idea of the Build- ing Congress which was started well before Mr. Untermyer began his work will get nearer to the bottom of the matter." "Are you not likely to come Into conflict with the laws with a group of this kind?" "Why should we, since we are really only an educational body? We know that the laws as they now are are most impetfect and possibly we may run afoul of them, but Mr. Hoover has said 'we are on the right track,' and he ought to know, "The real point of my talk Is to point out that trade associations as they are now organized do not reach the full limit of their usefulness. They must be broadened to include whole industries and above all include labor. Then each individual will eventually realize his place in the whole and can act as a funAional part of the whole, because he knows where ne belongs and not blindly do himself and the rest of the Industry harm by his blunder- ing. It is a new form of democrac.v in industry that I am hoping to see studied through such all-inclusive 'trade associations' as the Congress ot the Building Industry," CO-OPERATIVE COMPETITION 65 April 7, 1922 HOOVER AND COMMISSION WORK ON TRADE GROUP PLANS Many Big Questions Still to Be Settled-Commerce Department Urges Co-operation With Associations — Trade Commission Says It Is Authorized to Regulate Trade and Collect Information By HAROLD PHELPS STOKES While business men generally In- dorsed the Federal Trade Commission project when the proposal to create such a body was first under discussion and entertained great hopes of what it might accomplish, they have been far from satisfied with the way the com- mission has worked out. That "advice, definite guidance, and information ' which President Wilson hoped it might furnish was denied the com- mission in the law creating it. Th« commission developed into an almost purely regulatory and policing body, and paid too little attention to con- structive assistance to suit the busi- ness community. Business men thought that what with the Sherman act and the Clayton act, the courts and the Department of Justice, there were enough policemen around already. In addition to that they took exception to many of the men appointed to the Trade Commis- sion, some of whom they regarded as muckrakers, others as politicians and mediocrities. They have not been convinced that the personnel of the commission generally took a large view of its function. Consequently, when Hoover cojrne into the Government and started In 10 reorganize the Department of Com- merc ■ and make it of wider practical usef 11:1. ess to the business community, frade association secretaries and oth- ers interested in association activities flocked over to his department to see what satisfaction they could get there. In the meantime Hoover himself had been dWginc into tho activities of trade associations on his own hook. As early as last July he began Unk- ing up the bureaus in the department with the different trades in such a way as to facilitate the flow of infor- Biation la both directions— from the agents of the Department of Com- merce here and abroad to the trades, and from the trades in turn to the Department of Commerce. He found that the quickest way to get informa- tion from the trades was through the trade associations ; and conversely, that the information which came in from abroad could most effectively be given to business men through the trade associations. He made up his mind, therefore, that it was necessary to establlah the closest possible contact with those bodies. What Hoover Is Doing With this object in view, conferences with trade association representatives continued all summer long and into the fall. A number of associations ap- pointed permanent groups to deal with the department. There are now up- wards of seventy such committees who speak In all for no less than 156,000 firms. This work is steadily expand- ing. Dy means of these committees the 'jepartment is able to got In toucn very rapidly with the who'e trade In case of emergency, and through them, as indicated, is enabled to give out to the trade such available trade infor- mation as may come to the depart- ment. The department also deals with in- dependents directly, and in some c.ises has been able to bring them and the associations together for their mutual benefit. The department has even un- dertaken to get trade associations un- der way in certain branches where they seemed to be needed, notably In the industrial machinery field. In- quiry developed the fact that there were 25,0pO trade associations of one sort and another, of which number some one thousand were national in scope. While this closer cooperation be- tween the trade associations and th« Department of Commerce was beingr effected, the Supreme Court handed down its decision in the American Column & Lumber Co. case, in whicli the practices of the American Hard- wood Manufacturers Association were declared to violate the Sherman anti- trust law. This decision left the trade associations generally IH con- siderable confusion as to what prac- tices were legitimate and what prac- tices Tvere not. In Hn attempt to clear up some of these uncertainties, Secretary Hoover embarked on a correspondence with the Attorney General, the purport of which is now familiar to all those Interested In trade associations. In his letter to the Attorney General, dated February 3, the Secretary ot Commerce called attention to the or- ganic act which created the Depart- ment and which Imposed upon It the duty "to foster, promote, and develop the foreign and domestic commerce, the mining, manufacturing, shipping, and fisheries Industries, and the trans- portation facilities of the United States." Asked Daugherty's Views To determine how far the trade asso- ciations could go, and how closely he could cooperate with them, Mr. Jloover addressed to the Attorney General eleven questions lelating to the legiti- macy of cost accounting, trade names, standardization, credit information. In- surance, advertising, welfare. Joint representation. Government relatisoai collection of statistics, and price irrfot^ mation. It is noteworthy that In ad- dressing this request for an informal opinion to the Attorney General, the Secretary i.: Commerce ignored the Trade Commission altogether. With certain warnings and e-"*»«»» 66 CO-OPERATIVE COMPETITION tlona as to standardized costs and uni- form trade marks, the Attorney Gen- erai replied that he could "now see nothing Illegal In the exercise of the other activities mentioned, provided always that whatever is done is not used as a scheme or device to curtail production and enhance prices and does not have the effect of suppressing competition.'* Further, Mr. Daugherty took much the same ground that the Trade Com- mission has taken all along when he said that it was "Imossible to deter- mine in advance just what the effect of a plan when put into actual opera, tlon may be," adding that this was especially true with reference to trade associations whose members are vital- ly interested In "stabilizing prices." In order to realize more fully the department's desire for close coopera- tion with the trade associations Sec- retary Hoover has called a conference for April 12th. At that time repre- sentatives of the trade associations will come to Washington to talk over the programme with officials of the department and decide on the best way to collect the available informa- tion and disseminate it to the public and the associations themselvesi; The first thing will be to compile a list of the organizations which will volun- tarjly furnish to the Government •tatlgtlcal information Judged permis- ■Ible under the Attorney General's opinion. Questions to Be Settled lATger questions of the relation of Government agencies to the trade as- sociations remain to be settled. At present governmental functions in this respect are apportioned mainly as follows: Congress, legislative; the courts, judicial; the trade commis- sion, regulatory; the Commerce De- partment, promotive, and the Depart- ment of Justice, prosecutions. Some want to give wider authority to the Department of Commerce; some to the Federal Trade Commission; some to both. In behalf of the Department of Commerce It is argued that the de- partment is In the closest touch with business; that it has special .'acilities for collecting statistics, that what Is particularly needed is affirmative ac- tion rather than further regulation, and that the Trade Commission Is 'April 7, 1922 "little more than an adjunct of the Department of Justice." In behalf of the Trade Commission it is argued that that body was spe- cially constituted to regulate trade £Cnd to collect information with regard to trade practices; that whereas the Department of Commerce must rely on voluntary information the Trade Commission has power to compel In- formation and to punish misstate- ments as perjury; that the Trade Commission's work gives it a very thorough understanding of the prac- tices of trade associations; that the Department of Commerce being pri- marily an agency of promotion is likely to be prejudiced in favor of "big business'" and that the TracU- Commission is an impartial body pri- marily designed to represent the pub- lic interest, and is therefore a better qualified body to handle this problem. Many specific proposals have been made. Samuel Untermyer, for in- stance, wants the Federal Trade Com- mission act amended so as to permit licensing of legitimate trade associa- tions. He would give the commission power to supervise and regulate all such associations and forbid any cor- poration from becoming a member of an unlicensed association. Prof. Sea- ger of Columbia In a previous article in this series has suggested that the Federal Trade Commission be reor- ganized and expanded so that it can regulate trade much as the Interstate Commerce Coimnission regulates the railroads. Professor Seager is particularly in- terested in adequate publicity with reference to prices and costs, the further development of machinery en- abling the commission to put a atop to unfair methods of competition, and perhaps an enlargement of the power of the coramLssion to permit it to de- clare, when the facts so warrant, that prices established by joint action are unfair and unreasonable. Others would like to see the Trade commission left as a purely regu- latory and policing body and the De- partment of Commerce given wide op- portunity to do the constructive side of the work in promoting the legiti- mate activities of trade associations. Perhaps a solution lies In expand- ing both facilities. The Denartment of Commerce would then be relied on to collect and ^saemiuate ■tatistical information in the most effective man- ner, and the authority of the Trade Commission would be extended to per- mit It to perform its regulatory func- tions in a more constructive way through interpretation and advice. The commission would then call on the Department of Commerce at any time for all information available and would avoid duplicaUon by collecting for itself only such information as could not be furnished by the De- partment of Commerce. Political and psychological factors also enter into this problem. The Federal Trade Commission is pretty well discredited with the rank and file of business men. That element In Congress which reflects business In- terests is reluctant to give the com- mission any further powers. On the ether hand, men like Senator Capper, Senator Norris, and the others who represent agricultural communities can be lounted upon to keep a very Jealous eye on the regulatory func- tions of the Government. The progressives and the farmers generally have always urged the reg- ulation of "big business" and have backed up such agencies as the Fed- eral Trade Commission. These ele- ments are strong in Congress to-day, and they will view with suspicion the transfer from the Trade Commission to the Department of Commerce of any functions which might seem to weaken enforcement of the law with regard to restraint of trade. One definite proposal Is now omM* Congress, at least in a tentative way. On Monday of this week Senator Edge of New Jersey introduced a bill giving wide authority to the Federal Trade Commission to regulate trade associa- tions. Under th'e provisions of the Edge bill, trade statistic.s would be filed with the commission and the com;..;,a- sion would be authorized to publish them. Furthermore, any trade asso- ciation might request from the com- mission a specific ruling on its pro- posed plan of organization. The bill goes into donsiderable detail as to just how the relations between the trade associations and the commission are to be worked out. It was introduced by Senator Kdge so that the joint commit. tee of inquiry which he proposed at the sa.ae time might have a. deflnlt* plan to go oa. Aocmwcv The news you w^ant in Finance and Business The Evening Post's staff of trained financial reporters gather all the significant news and comments concerning the day's happenings in Wall Street. 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JUHll 1948 2lurf50P6 2i0rt52PB 0CT311952 llBRARY USE APR 7 APR? 1955 LI.) lJl-100-/(-9.'-l7(A5702sl6)476 -1312 ^t RECDLD ^fcBl LU - Y 7 72 -5^ P" 6 f^