APPENDIX J CORRESPONDENCE BETWEEN DEPARTMENT OF COMMERCE AND DEPARTMENT OF JUSTICE UPON THE ACTIVITIES OF TRADE ASSOCIATIONS DEPARTMENT OF COMMERCE February 3, 1922. My dear Mr. Attorney General: The situation regarding the activities of legitimate trade associations is more disturbing now than at any time since we first discussed the matter, and since Mr. Lamb was advised by Colonel Goff and Mr. Fowler that it was your desire that I present an informal, inter-departmental inquiry regarding the present status of the law relating to legitimate trade associations and the extent that they may engage in legitimate coöperative activities, I have made a further survey of the matter, and the questions hereinafter presented seem to me to be vital to trade associations based on present information secured through recent investigation. It may not be out of place to call your attention to the organic act which created the Department of Commerce, which imposed upon the Department the duty "to foster, promote, and develop the foreign and domestic commerce, the mining, manufacturing, shipping, and fishery industries, and the transportation facilities of the United States." In obeying the commands of the statute, it seemed to me that the Department should employ all available legal means to get into the closest possible touch with industry in all its forms and secure the best information possible regarding the needs and necessities of trade and commerce. If the Department has to help, aid, and assist industry, it must, of course, be conversant with the facts and conditions influencing the carrying on of trade. The existence of a large number of trade associations being well known prompted me to make inquiry regarding their forms of organization and the functions they were performing to ascertain whether or not they could be utilized as a means for 'securing trade information that would properly aid the Department in performing its duties. My inquiry into the affairs of trade associations was not with the idea of creating a new scheme for carrying on business, but solely for the purpose of ascertaining whether or not they could properly be utilized in furnishing information that would not only be helpful to the Department and to the commercial world but to the public generally, always keeping in mind that whatever activities were carried on by such associations, they should of necessity be within the terms of existing law. In the course of my inquiry, I discovered that certain trade associations were involved in litigation which questioned the legality of their performances, and, by reason of the litigation, there was much doubt and confusion regarding the legal limits within which trade associations could properly operate. This situation seemed to call for conferences with your Department, which you have graciously afforded, and although no definite determination has heretofore been reached regarding the policy to be pursued, I realize the difficulties that confront you in attempting to reach a proper conclusion, and while a public announcement from you would have been most helpful to all, I most heartily acquiesce in your suggestion that the matter be presented as an informal, interdepartmental inquiry for my guidance in performing the duties imposed upon me by the organic act creating this Department. So much has been said in the various conferences, coupled with lapse of time, in order to obviate excusable failures in memory as to the matters that have heretofore been discussed and to make clear the position and views of this Department, I desire to offer some preliminary observations regarding trade associations before asking the specific questions heretofore set forth in various informal memoranda and upon which I desire the informal expression of your views. Commercial progress in industry has always been measured by the advance in knowledge of those engaged in industry. It is impossible for men to acquire or secure all possible knowledge at one time. Its acquisition is a growth resulting from continuous, intelligent inquiry. The knowledge of an industry that is necessary and essential to its success must embrace all facts and circumstances that will in any way influence that industry. These facts and circumstances must include economic conditions as well as scientific facts to the extent that science is called into play in its operation and all commercial conditions that make for efficient production, merchandising, and distribution. No one will dispute the foregoing statements; they are fundamental and necessary to the life of trade and commerce. The difficulty seems to lie in the determination of the means and methods that may be adopted to secure this necessary information. Little, if any, trouble is experienced in securing the admission that an individual may secure knowledge of these facts by any means that would not constitute an individual crime, and that he may use the information in such manner as his best judgment may tell him will bring him the greatest benefit. But when two individuals engaged in the same line of industry undertake to provide a means for securing facts necessary and essential to the economic and efficient conduct of their respective organizations, this form of endeavor seems to at once assume an aspect of difficulty that, in my judgment, is in no way justified by a proper consideration of the underlying necessities therefor. The individual sets up some form of instrumentality to secure the information without which, in the management of his business, he would be groping in the dark. His competitor across the street does the same thing, and each, securing his information in his own way, uses it as he sees fit, and the action of either one has not offended the majesty of the law. Yet, if the two seek to join the instrumentality each has used for information purposes and the same information is received through one instrumentality and the information given to each and it is used in the same way that it was before, it is suggested that the collective activity in the use of the consolidated instrumentality should not be permitted because of the greater ease and facility thereby afforded for the two individuals to make improper use of the information so acquired. In other words, the objection does not go to the instrumentality, but to the abuse of the information that may be secured through the collective means. The principle is the same whether two or two hundred join together in securing the information. No form of legislation has ever yet been devised, nor has man, with all of his genius for invention, even been able to devise a rule or regulation that would prevent men from committing crimes if they are so minded. The best that can be done is to forbid the doing of certain acts or to command the doing of others, prescribing proper punishments in the case of the commission on the one hand and the omission on the other; and when legislation takes that form, rules and regulations and administrative constructions which have for their objective the making of the prohibited thing more difficult will always include within their terms the law-abiding citizen as well as the prospective criminal. We have had criminals since the beginning of time, and human nature can not be changed by legislation. The criminally inclined represent a small minority, and it may be said in a general way that, excepting offenses against persons and property, most of the criminal statutes regulating trade and commerce and forbidding acts that seem against sound public policy have been made necessary for the control of the minority. None of these statutes, however, has undertaken to prevent the doing of a thing that would result in benefit to the public, but the restriction has been against the doing of the thing in an unlawful way. These statutes have not condemned lawful institutions or instrumentalities for the carrying on of commerce merely because someone might possibly abuse their use. The laws have condemned the abuse, and punishments have been prescribed for those who may be found guilty of the abuse. Therefore, the fact that the minority may be known to violate given laws does not establish a principle that the primary means, lawful in itself, which they have adopted for the purpose of performing the unlawful acts, should be entirely abolished and its use forbidden by law-abiding citizens. Each unlawful use of the means is merely an individual case of the violation of a law. Trade associations have been in existence for many years. The great majority are legitimate, both in form of organization and in activity. The minority, while lawfully organized under articles expressing lawful purposes, may engage in activities that are evidence of purpose contrary to and outside of the declared purposes in the articles of organization. Again, a trade association may have lawful form of organization and the activities of its officers may be clearly within the purposes declared in the association charter, and yet members of the organization may, by unlawful confederation, use the information lawfully secured for unlawful purposes. It may, therefore, truthfully be said that the line dividing the good association and the bad, the proper activity from the improper one, and the lawful activities of the officers of an association from the unlawful acts of the membership, can not be determined, in every instance, with singular ease. It is my belief, however, that it is more easy to determine the forms of organizations and activities that are generally recognized as good than to determine in advance those that may be bad, because in the latter instance, the peculiar facts relating to each association the subject of inquiry may determine whether the organization or its members are operating in violation of law. It is with much earnestness that I claim there is propriety, generally speaking, in trade associations. Their lawful field of endeavor is large, and their activities work for promotion and advancement of the public welfare and for progressive economic organization. In making this statement, I am not unmindful of the fact that the impression exists with a small minority that individual prohibited acts may be accomplished by organization under the disguise of a trade association. However, to make my position clear regarding the trade associations, the existence of which I advocate, I desire to say that I have always taken the view that no body of men could combine in the form of a trade organization and do any act or thing forbidden by law if they were undertaken by them outside of a trade organization. The character of trade organization the existence of which should be preserved is one that carries lawful purposes only in its articles of association; its activities must be in harmony with its declared purposes. The articles of association, with their lawful, declared purposes, must not be used as a mask to hide unlawful purposes. In other words, the organization can not be used to conceal or disguise any contract, combination, conspiracy, agreement, or understanding, secret or otherwise, on the part of the officers of the organization or on the part of the membership or any part thereof to engage in activities in restraint of trade or otherwise in violation of the anti-trust laws. There has been much information collected by legitimate trade associations in which the general public has no interest whatsoever, yet information of this class has always been freely offered to the daily and the trade press, as well as to any governmental agency that might desire the information as a matter of statistical record. On the other hand, certain statistical data are collected by trade organizations that would be of vast value to the public generally if published in practical, available form. Many of the trade associations securing and disseminating the statistical data mentioned have restricted the same to its membership, while others have undertaken to give the same to the public through the daily and the trade press concurrently with its members. The trade associations of the latter class are in the minority. Information lawfully secured regarding trade and economic conditions made public for the information of everyone can not be harmful. Information secured solely for the benefit of members and of a character that puts the membership, by reason of the information, in a position of advantage as compared with the public without such information can not be sanctioned by sound public policy. The act of securing the information and the use of it by the members of a particular organization may be perfectly lawful in itself, but it is my belief that good morals and a sense of fair dealing require the giving of the information secured in this collective manner to the public generally, to the end that all persons engaged in commercial transactions involving the information in question will be on an even footing. The activities of trade associations that have received the greatest criticism involve the collection of statistics relating to volume of production, capacity to produce by districts of production, wages, consumption of products in domestic and foreign trade, distribution thereof including volume of distribution by districts, together with figures as to stocks on hand, wholesale and retail, by districts, coupled with information as to price, either in the form of individual reports of each member distributed to every other member or the individual prices reported to the association and by the latter compiled and averaged by districts for certain specified periods. If information regarding production, capacity, and distribution by districts, with average prices for grades, brands, sizes, styles, or qualities sold in the respective districts for specified periods of time could be given to the public at the same time that such information is available to the members of an association, in my judgment, great public good would result. With this information available, everyone dealing in the products of a given industry, whether buyer or seller, would have the same information regarding conditions and, in dealing with one another, would have knowledge of the same facts upon which to form their judgments as to the proper course to pursue. A majority of the associations collecting data of the nature indicated have distributed same only to members of the association, while others have undertaken to give the information to the public through the daily and trade papers. Publication of the information by these associations in the daily press has not been general, and its availability to the public has been largely through the medium of trade papers, and through the daily press to the extent that the latter may have been utilized. When published through trade papers this information should be released to members only after such publication. It should be borne in mind that the criticism aimed at this form of activity has not involved the instrumentality for securing it or the sub |