illegal, provided always that whatever is done is not used as a scheme or device to curtail production or enhance prices, and does not have the effect of suppressing competition.37 A lower Federal court, in the strongest language, has sustained the propriety of the dissemination by an association of facts of this character, including price statistics, in the absence of any proof of express or tacit understandings to regulate price or production.38 This court called the bureau disseminating these facts "a bureau of intelligence and one which makes for real rather than artificial competition in trade." 39 The fact that the exchange of such information stabilized the market, and to a certain extent tended toward less deviation in price, in the absence of any agreement, was held not to be in violation of the law.

But where there is any effort to utilize the machinery adopted for such an interchange of facts, as part of a scheme to restrict production or fix prices, even in a tacit or implied way, the almost certain result is a violation of the law. In the recent decision of the United States Supreme Court involving the open price plan of the American Hardwood Manufacturers' Association, the court was unsparing in its condemnation of the plan, which involved, not only the mere interchange of information, but also frequent meetings, the withholding of such information from buyers, the analysis of such facts by an expert and the publication of letters and bulletins, urging increases in price and restriction in production, all of which resulted in a curtailment in production and contributed to an extraordinary increase in price.40 There was in this case, not the mere exchange of facts for common information, but meetings, recommendations, reports of the membership as to future markets, and other facts which created implied understandings to restrain trade, which of course made the entire plan unlawful. The court itself was careful to point out this distinction.

There would appear to be no sound basis in law for holding

37 See Appendix J.

38 United States vs American Linseed Oil Co. et al., 275 Fed. 939

(1921).

39 Ibid., 946.

40 American Column & Lumber Co. et al. vs United States, 14 Sup. Ct. Rep. 114 (1921).

that the mere exchange of information, without any further cooperative action is unlawful. Any association, however, planning to compile, distribute and broadcast the business facts of the industries secured from different members, in order to avoid any possibility of violation of law, should be exceedingly careful that this plan complies with the following requirements: First, only the naked facts should be circulated, without any recommendation of any officials of the association. As soon as any recommendations are made, the almost inevitable tendency is for a situation to arise where the members, or a considerable portion of them, cease to make their own individual judgment on the facts, but simply follow the recommendations made and an implied understanding in violation of the law arises.

Second, there should be no publication of prices.

While it is extremely doubtful that the mere circulation of prices on sales consummated is unlawful, yet the opposition of the government to the circulation of price information establishes a risk of public prosecution, which no association earnestly striving to comply with the law can afford to take.42 It is almost certain that the publication of high, low and average prices, on sales consummated by members of an association, will not be held to be unlawful. On the other hand, the publication of the individual prices identifying the members making them, not only creates an opportunity for the exercising of social pressure on the price-cutter, but also furnishes the basis on which a "follow the leader" plan can easily be made very effective. In a similar way it is unwise to publish individual figures of production. Accurate data on the total production of his industry, and the total demand is of aid to the manufacturer in determining his own business policy. The publication of individual

41 An investigation by the Federal Trade Commission, discloses 150 associations distributing price information: Letter, J. P. Yoder, Secretary, Jan. 23, 1922.

42 Most of the Government Departments which have given study to this question seem opposed to the so-called open price association, i.e., those exchanging prices, as not in the public interest. Letter, Federal Trade Commission to the President of the United States, April 18, 1921; Statement, Herbert Hoover, Secretary of Commerce, Official Summary, Conference of Trade Assn. Representatives, Washington, D. C., April 12, 1922, p. 3.

facts of production in an industry where there are several very large concerns may tend to cause the members of an association to follow the policy of some one of the larger concerns in whose judgment they have confidence with the result that a general policy of restriction of production could easily become effective in the industry.

Third, the data circulated should be accurate. The reporting of sales which were not bona fide, or the elimination of any data, such as very low prices made by some member, or the suppression of some facts on production designed to mislead the membership as to price or production conditions, so as either to bring about a possible enhancement of prices or curtailment of production or to deceive buyers who secure such information would be unlawful. The government has in the past brought several proceedings against organizations which have reported fictitious or "washed sales" or pretended purchases for the purposes of deception and restraint of competition.43

Fourth, there should be no meetings for the consideration of the facts gathered. The practice of holding frequent meetings for the consideration of such data, not only affords an opportunity for putting pressure on members who cut prices or enlarge their production, but also inevitably tends, through discussion of conditions and trends to tacit agreements to restrict production or fix prices. Under no conditions should meetings be held for the analysis and discussion of such facts unless an attorney who is not afraid to lose his retainer is present to control rigorously the limits of the discussion.

Finally, there should be a simultaneous publication of the data to the members and all other parties interested. This requirement of complete publicity has been stressed by government officials.44 The Supreme Court in the Hardwood Case gave considerable emphasis to the fact that the statistics of the

43 Decree, United States vs Chicago Butter & Egg Board, Decrees & Judgments in Federal Anti-Trust Cases, p. 261; Consent decree, United States vs Elgin Board of Trade, ibid., p. 402.

44 Address, Herbert Hoover, U. S. Secretary of Commerce, Official Summary, Conference of Trade Assn. Representatives, Washington, D. C., April 12, 1922, p. 14; Letter of Federal Trade Commission to the President of the United States, April 18, 1921, p. 3.

hardwood association were not distributed to the public. The publication of such data, while it may take away from the members of the association some advantages in trading, does not deprive the membership of the basic, economic benefits which flow from the limitation of speculation, the increased liquidity of supply, the freedom from misrepresentation and the comprehensive knowledge of the facts, which the publication of such statistics procures.

There can be little doubt that the compilation and broadcasting of the basic facts of an industry is one of the greatest of trade association activities. Misused it is vicious. And any association attempting to misuse such facts must expect ultimately to pay the penalty. But when used properly, the compilation and current publication of the basic facts of an industry, either by the government or by an association, is of real value in the maintenance and efficient operation of our competitive system.

CHAPTER V

THE STUDY OF COST AND ACCOUNTING METHODS

THE Federal Trade Commission, by its educational campaign several years ago urging the importance of an accurate knowledge of costs in our various industries, greatly stimulated the interest of business men and trade associations in this subject.1 Many trade associations have developed uniform cost accounting systems within the past few years.2 The Chamber of Commerce of the United States with its program for the more widespread use of cost systems has added great impetus to the move

1 The Commission has issued the following pamphlets of cost accounting which have had a very large circulation: "Fundamentals of a Cost System for Manufacturers," July 1, 1916; "A System of Accounts for Retail Merchants," July 15, 1916. See also numerous addresses of E. N. Hurley while Chairman of the Commission.

2 The following associations are a few of the associations which have adopted or are planning the adoption of cost accounting systems of some sort: American Warehousemen's Assn., National Assn. of Retail Clothiers, Portland Cement Assn., National Coal Assn., National Implement & Vehicle Assn., Associated Cooperage Industries of America, Flavoring Extract Mfrs'. Assn. of U. S., National Pipe & Supplies Assn., West Coast Lumbermen's Assn., Southern Pine Assn., Refractories Accountants' Institute, National Coffee Roasters' Assn., U. S. Potters' Assn., United Typothetæ of America, Laundry-owners' National Assn., American Photo-Engravers' Assn., National Wholesale Grocers' Assn., National Assn. of Ice Cream Mfrs., National Wholesale Druggists' Assn., National Warm Air Heating & Ventilating Assn., National Retail Jewelers' Assn., Cost Assn. of the Paper Industry, Paint Mfrs'. Assn. of the United States, Baggage Mfrs'. Assn., American Face Brick Assn., Associated General Contractors of America, Asphalt Assn., Steel Barrel Mfrs.' Assn., Interstate Cotton Seed Crushers' Assn., National Assn. of Finishers of Cotton Fabrics, Associated Mfrs. of Electrical Supplies, Electrical Mfrs'. Council, National Assn. of Farm Equipment Mfrs., American Foundrymen's Assn., Central Bureau of Dining Table Mfrs., National Alliance of Case Goods Assn., National Assn. of Steel Furniture Mfrs., National Assn. of Upholstered Furniture Mfrs., Associated Wooden Ware Mfrs., Webbing Mfrs. Exchange, American Bakers' Assn., International Stamp Mfrs'. Assn., Plywood Mfrs'.