Chemistry and the Forest Products Laboratory of the Department of Agriculture have also been helpful. A number of associations, as has already been described in this chapter, have cooperated with these agencies with substantial benefits to themselves. When a governmental department is a service department, such as the Department of Commerce, rather than a regulatory department, work of unquestioned value can be accomplished in this way. When, however, the department is also a policing agency, there is danger of a demand being made for unreasonably strict standards, suitable for laboratory purposes, but utterly inapplicable to factory production. The Department of Commerce, of course, does not concern itself with regulation, and under the leadership of Secretary Hoover, is emphasizing the economic and business importance of standardization, and working in a fine spirit of coöperation with the trade associations of the country. Any association contemplating work for standardization, in any of its forms, should at the outset communicate with the Department of Commerce, in order to get the benefit of its experience and judgment, resulting from contact with many other trade organizations.

Legislation. Finally, standardization may be accomplished through legislation. By far the most important legislation of this type is the Food and Drug Act of 1906,64 under which the Secretary of Agriculture has fixed many minimum standards for food products and drugs. This legislation, while perhaps in some cases arbitrarily administered, has resulted in a great improvement in quality, and a lasting benefit, to the industries concerned and to the general public. The law establishing grading standards for grain 65 has also been helpful in stabilizing conditions in the grain trade and protecting the interests of the producer. Among other laws may be mentioned the apple grading law, the Insecticide Act, the Standard Barrel

66

67

64 Act of June 30, 1906, Ch. 3915, 34 Stat. L. 768, 3 Fed. Stat. Ann. 358.

65 U. S. Grain Standards Acts of Aug. 11, 1916, Ch. 313, 39 Stat. L. 482, Fed. Stat. Ann. Supp., 1918, p. 7.

66 Act of Aug. 3, 1912, Ch. 273, 37 Stat. L. 250, 1 Fed Stat. Ann. 237. 67 Act of April 26, 1910, Ch. 191, 36 Stat. L. 331, 1 Fed. Stat. Ann. 220.

Act, the Standard Container Act and the act authorizing the Secretary of Agriculture to establish standard grades for cotton.69

Usually legislation comes as a last resort, only when an industry fails to cope sincerely with its own problems. Most of the federal laws fixing standards have, therefore, been enacted to correct gross evils, which an industry itself failed to remedy. While the power of the government may be of invaluable assistance when there are elements in the industry which prefer to prosper through deception and fraud and the forcing of unpleasant conditions upon competitors, there are strong objections to handling standardization questions through legal enactment, except as a last resort. It increases enormously the difficulties of revision, for not only the industry itself must be persuaded as to the necessity, but also Congress must be convinced of the need as well as of the importance of the legislation, in contrast with any other pending measures. Few standards should ever be considered final. Standardization by law also subjects the industry to regulations, which at times may be theoretical and arbitrary, and utterly lacking in appreciation of the necessities of factory production. The fixing of standards by state laws should be avoided and fought to the limit, for their inevitable effect is to interfere artificially with the free flow of trade, to increase the difficulties of doing business, by the necessity of compliance with many different regulations. They may sometimes stifle competition arbitrarily, with consequent public injury.

Means of Enforcement. The laws, Federal and State, usually provide adequate means of enforcement and proper penalties. Such enactments as the Food and Drug Act, require a considerable inspection force scattered throughout the country. In the absence of legislation, the enforcement of standards must depend upon the voluntary action of an industry so far as ordinary manufactured articles are concerned. Where compliance with a standard rests solely within the volition of a

68 Act of March 4, 1915, Ch. 158, 38 Stat. L. 1186, 1 Fed. Stat. Ann. 236.

69 Agricultural Appropriation Act of March 23, 1908, Ch. 192, 1 Fed. Stat. Ann. 239.

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manufacturer about the only method of enforcement is the edu cation of the distributor and the consumer.as to the benefits resulting from the use of the standard articles.A common insignia, the property of the association, which may be applied only to products complying with the standard, may effectively tie up with such a campaign of education. Sometimes, too, the effect of the development of fixed standards by a majority of the industries, compels rather surprising changes in the raw material markets; and these changes practically compel recalcitrants to get in line as a matter of business economy. Association standards and grades can also be specified in all contracts. Where the article is inherently difficult to standardize, as, for example, is the case with bulk commodities, such as lumber, coal, and so on, it is necessary to back such standards with an inspection system. Such a system must be efficient and fair, if good-will between buyer and seller is to be maintained. The great lumber associations, such as the Southern Pine Association, the National Hardwood Lumber Association, and others maintain inspection bureaus, which have acquired a wide reputation through the lumber industry. Where goods are purposely sold as of a certain standard when they are in fact off grade, it is probable the Federal Trade Commission has jurisdiction to suppress the practice; for this would seem to be clearly a practice unfair to competitors who sell their products honestly.

Legality of Standardization. Any reasonable standardization program, evolved in a fair spirit, giving consideration to the judgment of all factors in the industry, and the interests of the public, can scarcely run afoul of the law. There is no doubt that the standardization of sizes and types has in it an element of public danger, in that it establishes common units for price comparisons, thus making price fixing agreements very easy of attainment. The fact that such an activity can be. used to accomplish an unlawful end does not, however, make it unlawful. It is the actual use for improper purposes which is unlawful. Standardization should never be used as a cloak for the elimination of the cheaper grades of a commodity, thus forcing only the high-priced goods on the public. The elimination by agreement of the low-priced goods from competition, is probably unlawful. But so long as a reasonable variety of standard

products is offered to the public, including the low-priced goods, and the adoption of: the standards results in substantial economic benefits, which are shared with all branches of the industry, and with the consuming public, it is difficult to conceive of an association becoming involved in any legal difficulties so far as the Federal Anti-Trust Laws are concerned. The Attorey General of the United States has expressed the opinion that àn association may properly standardize qualities, grades, processes, machinery, and technical terms, as long as such activities are not used as a scheme to curtail production or enhance prices, and do not have the effect of suppressing competition.7° Any association which projects its standardization program in a fair, competitive spirit need not fear the possibility of prosecution. But any association which attempts to employ this method as a device for the elimination of competition must expect inevitably to be called to account, for the Supreme Court has repeatedly stated that it will not permit a restraint of trade to be accomplished by any subterfuge or indirection.

70 See letters of Hon. Herbert Hoover, Secretary of Commerce, Feb. 3, 1922, and Hon. H. M. Daugherty, Attorney General, Feb. 8, 1922, Appendix J.

CHAPTER VII

INDUSTRIAL RESEARCH

Value of Research.-The value of organized research, not only to industry, but to the national welfare is receiving wide recognition.

These words of Samuel Gompers, President of the American Federation of Labor, are significant of the broadening attitude of Labor.

"To-day no one disputes the fundamental service which research makes to progress and to maintaining the fabric of civilized life. Whatever help research and science can offer, Labor will welcome." 1

Indicative of the modern business man's opinion, is this statement of John J. Carty, Vice-president of the American Telephone and Telegraph Company:

...

"The importance of scientific research to our American industries can not be exaggerated. . . . Enough is already known to justify me in saying, that unless the manufacturers of the United States establish research departments as integral parts of their own internal organizations, our industries will tend to fall behind those of other countries." 2

Could the attitude of Labor and of Industry toward this great activity be more emphatically stated?

The Facts Fortify Such Opinions.—The remarkable coöperation of science, industry and government in Germany, a story not yet fully told, not only placed that country, within a few years, in the forefront of industrial powers, but also gave her a paralyzing control over great portions of American industry, largely by reason of the exclusive possession of processes and methods evolved from scientific research. The representative of

1 Leaflet, Personnel Research Federation, August, 1921; issued by National Research Council.

2 "Science and Industry," John J. Carty, Vice-president, American Telephone & Telegraph Co., Cir. 8, National Research Council, p. 2.