ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION FOR THE FISCAL YEAR ENDED JUNE 30 1939 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: 1939 For sale by the Superintendent of Documents, Washington, D. C, - - - - Price 30 cents (paper) FEDERAL TRADE COMMISSION ROBERT E. FREER, Chairman 1 GARLAND S. FERGUSON CHARLES H. MARCH EWIN L. DAVIS WILLIAM A. AYRES OTIS B. JOHNSON, Secretary FEDERAL TRADE COMMISSIONERS--1915-41 Name State from which appointed Period of service Joseph E. Davies Wisconsin Mar.16, 1915-Mar. 18, 1918. Edward N. Hurley Illinois Mar.16, 1915-Jan. 31, 1917. William J. Harris Georgia Mar.16, 1915-May 31, 1918. Will H. Parry Washington Mar.16, 1915-A p r. 21, 1917. George Rublee New Hampshire Mar.16, 1915-May 14, 1916. William B. Colver Minnesota Mar.16, 1917-Sept. 25, 1920. John Franklin Fort New Jersey Mar. 16, 1917-Nov. 30,1919. Victor Murdock Kansas Sept. 4, 1917-Jan. 31, 1924. Huston Thompson Colorado Jan. 17, 1919-Sept. 25, 1926. Nelson B. Gaskill New Jersey Feb. l. 1921-Feb. 24, 1925. John Garland Pollard Virginia Mar. 6, 1920-Sept. 25, 1921. John F. Nugent Idaho Jan.15, 1921-Sept. 25, 1927. Vernon W. Van Fleet Indiana June 26, 1922-July 31, 1926. Charles W. Hunt Iowa June 16, 1924-Sept. 25,1932. William E. Humphrey Washington Feb.25, 1925-Oct. 7, 1933. Abram F. Myers Iowa Aug. 2, 1925-Jan. 15, 1929. Edgar A. McCulloch Arkansas Feb.11, 1927-Jan. 23, 1933. Garland S. Ferguson North Carolina Nov.14, 1927, Charles H. March Minnesota Feb. 1, 1929. Ewin L. Davis Tennessee May 26,1933. Raymond B. Stevens New Hampshire June 26, 1933-Sept. 25, 1933, James M. Landis Massachusetts Oct.10, 1933-June 30, 1934. George C. Mathews Wisconsin Oct.27, 1933-June 30,1934. William A. Ayres Kansas Aug. 23,1934. Robert E. Freer Ohio Aug.27, 1935. 1 Chairmanship rotates annually. Commissioner Davis will become chairman in January 1940. EXECUTIVE OFFICES OF THE COMMISSION Constitution Avenue at 6th Street, Washington, D. C. BRANCH OFFICES 45 Broadway, New York 548 Federal Office Building, 483 West Van Buren Street, San Francisco Chicago 801 Federal Building, Seattle 217 Custom House, New Orleans II LETTER OF SUBMITTAL To the Congress of the United States: I have the honor to submit herewith the Twenty-fifth Annual Report of the Federal Trade Commission for the fiscal year ended June 30, 1939. By direction of the Commission. ROBERT E. FREER, Chairman. III CONTENTS INTRODUCTION Page Powers and duties of the Commission 1 General legal activities 2 Trade-practice conferences 4 The Wheeler-Lea Act 4 Robinson-Patman Anti-discrimination Act 5 Temporary National Economic Committee 7 General investigations 9 Activities on behalf of the consumer 9 The Commissioners and their duties 9 How the Commission’s work is handled 11 Publications of the Commission 12 Recommendations 14 PART I. GENERAL INVESTIGATIONS Motor-vehicle industry 19 Resale price maintenance--1939 27 Millinery industry 28 PART II. GENERAL LEGAL WORK Description of procedure 33 Chart Facing 33 Legal investigation 37 Disposition of cases by stipulation 44 Representative complaints 45 Orders to cease and desist 58 Types of unfair methods and practices 82 Cases in the Federal courts 90 Tabular summary of legal work 114 PART III, TRADE-PRACTICE CONFERENCES Purposes of the trade-practice conference procedure 127 Trade-practice conference activities during the year 128 Types of practices covered in rules 129 Trade-practice conference proceedings pending 130 Rules of practice applicable 131 Group I and group II rules defined 131 PART IV. SPECIAL PROCEDURE IN CERTAIN TYPES OF ADVERTISING CASES Radio and periodical advertising 135 V VI CONTENTS PART V. FOREIGN-TRADE WORK Page The Export Trade Act 145 Exported goods valued at $161,244,820 in 1938 145 Forty-three export associations on file June 30, 1939 147 Services rendered by the associations 148 Advantages obtained by the export associations 150 Supplemental report on antidumping legislation 152 Trust laws and unfair competition in foreign countries 152 CONSUMER PROTECTION Commission activities on behalf of the purchaser show steady increase 163 Trade practice conference rules 164 Legal enforcement work and economic inquiries 166 FISCAL AFFAIRS Appropriation acts providing funds for Commission work 171 Appropriations and expenditures for fiscal year 171 Appropriations and expenditures, 1915-39 173 APPENDIXES Federal Trade Commission Act 177 Clayton Act 185 Robinson-Patman Act 190 Export Trade Act 191 Sherman Act 192 Miller-Tydings Act 194 Rules of practice 194 Statement of policy 202 Investigations, 1915-39 203 Index 225 INTRODUCTION POWERS AND DUTIES OF THE COMMISSION GENERAL LEGAL ACTIVITIES TRADE PRACTICE CONFERENCES THE WHEELER-LEA ACT ROBINSON-PATMAN ANTI-DISCRIMINATION ACT TEMPORARY NATIONAL ECONOMIC COMMITTEE GENERAL INVESTIGATIONS ACTIVITIES ON BEHALF OF THE CONSUMER THE COMMISSIONERS AND THEIR DUTIES HOW THE COMMISSION’S WORK IS HANDLED PUBLICATIONS OF THE COMMISSION RECOMMENDATIONS VII ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION FOR FISCAL YEAR ENDED JUNE 30, 1939 INTRODUCTION POWERS AND DUTIES OF THE COMMISSION The Federal Trade Commission herewith submits its report for the fiscal year, July 1, 1938, to June 30, 1939. Organized March 16, 1915, under the Federal Trade Commission Act, approved September 26, 1914, which was amended March 21, 1938, the Commission is an administrative tribunal. In performing its functions, the Commission’s duties fall into two categories: (1) Legal activities in enforcement of the laws it administers, and (2) general investigations of economic conditions in domestic industry and interstate and foreign commerce. Legal activities1 have to do with (1) prevention and correction of unfair methods of competition and unfair or deceptive acts or practices, in accordance with section 5 of the Federal Trade Commission Act, in which it is declared that unfair methods of competition and unfair or deceptive acts and practices in commerce are unlawful; (2) administration of section 2 of the Clayton Act, as amended by the Robinson-Patman Act, dealing with price and other discriminations, and Sections 3, 7, and 8 of the Clayton Act dealing with tying and exclusive contracts, acquisitions of capital stock, and interlocking directorates, respectively, and (3) administration of the Webb- Pomerene or Export Trade Act, aimed at promotion of foreign trade by permitting the organization of associations to engage exclusively in export trade, and providing that nothing contained in the Sherman Act shall be construed as declaring to be illegal any combinations or “‘associations” entered into for the sole purpose of engaging in, and actually solely engaged in, export trade: Provided, further, however, ‘That the same are not in restraint of trade within the United States. 1 As respects certain special and limited fields excepted from the Commission’s jurisdiction, see second paragraph of section 5 of the Federal Trade Commission Act in appendix, p.178, and discussion of the Commission’s functions and duties under applicable sections of the Clayton Act, pp.83,89. 1 2 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION In connection with its foreign-trade work, the Commission has the power under section 6 (h) of the Federal Trade Commission Act-- to investigate, from time to time, trade conditions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or traders, or other conditions, may affect the foreign trade of the United States, and to report to Congress thereon, with such recommendations as it deems advisable. The general investigational and economic work of the Commission arises chiefly under section 6 (a), (b), and (d) of the Federal Trade Commission Act, giving the Commission power: (a) To gather and compile information concerning, and to investigate, from time to time, the organization, business, conduct, practices, and management of any corporation engaged in commerce, excepting banks and common carriers * * * and its relation to other corporations and to individuals, associations, and partnerships. (b) To require, by general or special orders, corporations engaged in commerce, excepting banks, and common carriers subject to the act to regulate commerce * * * to file with the Commission in such form as the Commission may prescribe annual or special, or both annual and special, reports or answers in writing to specific questions, furnishing to the Commission such information as it may require as to the organization, business, conduct, practices, management, and relation to other corporations, partnerships, and individuals of the respective corporations filing such reports or answers in writing. * * * * * * * * * * (d) Upon the direction of the President or either House of Congress to investigate and report the facts relating to any alleged violations of the anti-trust acts by any corporation. An investigation under section 6 (d) of the organic act, when requested by Congress, is undertaken by the Commission as a result of a concurrent resolution of both Houses. This is in conformity with. the United States Code (48 Stat. 291, 15 U. S. C. A., sec. 46a), and the Independent Offices Appropriation Act, 1934 (Public, No. 78, 73d Cong.). GENERAL LEGAL ACTIVITIES Upon authority of the acts which it administers, the Commission, during the fiscal year ended June 30, 1939, continued to direct its efforts toward the correction and elimination of unlawful practices prohibited by those statutes. Cases before the Commission.--The Commission made approximately 1,650 investigations in cases which were in a preliminary stage or had not progressed to the status of formal complaint or stipulation. These cases were disposed of either by progression to the status. of formal complaint, by stipulation, or by closing. The Commission approved a total of 600 stipulations to cease and desist, executed by parties against whom informal proceedings had been instituted. Of these, 329 were cases in which false and mis- GENERAL LEGAL ACTIVITIES 3 leading advertising in newspapers, magazines, or by radio broadcast, was involved.