ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION FOR THE FISCAL YEAR ENDED JUNE 30 1934 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: 1934 For sale by the Superintendent of Documents, Washington. D.C. - - - - Price 15 cents FEDERAL TRADE COMMISSION GARLAND S. FERGUSON, Jr., Chairman 1 EWIN L. DAVIS, Vice Chairman CHARLES H. MARCH WILLIAM A. AYRES OTIS B. JOHNSON, Secretary 1 Chairmanship rotates annually. Commissioner Davis will become chairman in January 1935. FEDERAL TRADE COMMISSIONERS--1915-34 Name State from which appointed Period of service Joseph E. Davies Wisconsin Mar.16, 1915-Mar. 18, 1918. William J. Harris Georgia Mar.16, 1915-May 31, 1918. Edward N. Hurley Illinois Mar.16, 1915-Jan. 31, 1917. 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, Jr. 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. EXECUTIVE OFFICES OF THE COMMISSION 2001 Constitution Avenue NW. Washington BRANCH OFFICES 45 Broadway 544 Market Street New York San Francisco 608 South Dearborn Street 801 Federal Building Chicago Seattle TEMPORARY BRANCH OFFICES 80 Federal Street 5 Post Office Building Boston Memphis 422 Post Office Building 208 Federal Building Atlanta Minneapolis 117 Custom House Building 526 Post Office Building New Orleans Kansas City, Mo. 460 Federal Building Dallas II CONTENTS INTRODUCTION Page Powers and duties of the Commission 1 Work under the National Industrial Recovery Act 2 General legal activities 4 Changes in policy and rules 6 General investigations 6 Cooperation with Government departments 8 Securities Act of 1933 10 How the Commission work is handled 11 The commissioners and their duties 12 Publications of the Commission 14 PART I. GENERAL INVESTIGATIONS Power and gas utilities 17 Salaries inquiry 25 Steel-code inquiry 28 Gasoline prices 30 Chain-store inquiry 30 Price bases 32 Milk investigation 32 PART II. ADMINISTRATION OF THE SECURITIES ACT OF 1933 Purposes of the act 37 Activities transferred to new commission, September 1, 1934 37 Examination of registration statements 38 Distribution of proceeds 39 Rules, regulations, and forms for registration 40 Investigation of alleged violations 41 PART III. GENERAL LEGAL WORK Description of procedure 45 Chart Facing p. 45 Legal investigation 48 Legal work under the National Industrial Recovery Act 49 Consolidations and mergers 52 Stipulations to end unfair trade practices 53 Representative complaints 54 Orders to cease and desist 61 Types of unfair competition 69 Cases in the Federal courts 74 III IV CONTENTS PART IV. TRADE PRACTICE CONFERENCES Page Rules accepted by 2,400 members of industries 93 Trade practice rules for industries published 94 Cooperation with National Recovery Administration 94 History and purpose of trade practice conference procedure 95 Results attained from the trade practice conference 96 Trade practice conference procedure 96 I. Method of applying for a trade practice conference 96 II. Procedure following authorization by Commission 97 PART V. SPECIAL PROCEDURE IN CERTAIN TYPES OF ADVERTISING CASES Newspaper, periodical, and radio advertising 101 Publishers and advertising agencies cooperate 103 PART VI. FOREIGN TRADE WORK The Webb-Pomerene Law or Export Trade Act 107 Webb Law exports in 1933 107 Forty-five Webb Law Associations now in operation 109 Report on antidumping legislation and other import regulations in United States and foreign countries 110 Trust laws and unfair competition in foreign countries 110 FISCAL AFFAIRS Appropriations, allotments, and expenditures 119 EXHIBITS Federal Trade Commission Act 125 Sherman Antitrust Act 131 Sections of the Clayton Act administered by the Federal Trade Commission 133 Export Trade Act 137 Sections of The National Industrial Recovery Act in which the Federal Trade Commission has jurisdiction 139 Rules of practice 141 Index 147 INTRODUCTION POWERS AND DUTIES OF THE COMMISSION WORK UNDER THE N.I.R.A. GENERAL LEGAL ACTIVITIES CHANGES IN POLICY AND RULES GENERAL INVESTIGATIONS COOPERATION WITH DEPARTMENTS SECURITIES ACT OF 1933 HOW COMMISSION WORK IS HANDLED COMMISSIONERS AND THEIR DUTIES COMMISSION PUBLICATIONS v ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION INTRODUCTION POWERS AND DUTIES OF THE COMMISSION The Federal Trade Commission herewith submits its report for the fiscal year 1933- 34. Organized March 16, 1915, under its organic act, approved September 26, 1914, the Federal Trade Commission is both a quasi-judicial and administrative body whose chief are (1) to prevent unfair practices in interstate commerce, (2) to make investigations at the request of either branch of Congress, the President, the Attorney General, or upon its own initiative, and (3) to report facts in regard to alleged violations of the antitrust laws. Under the Federal Trade Commission Act,1 the duties of the Commission are divided into two broad classes, legal and economic. Legal activities have largely to do with the prevention and correction of unfair methods of competition in accordance with section 5 of the organic act, in which it is declared that “unfair methods of competition in commerce are hereby declared unlawful.” The economic work of the Commission arises chiefly under section 6 (a) of the organic act giving the Commission power “ 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.” Besides its organic act, the Commission enforces sections 2, 3, 7, and 8 of the Clayton Act, dealing, respectively, with unlawful price discriminations, so-called “ tying “ contracts, stock acquisitions which lessen competition or tend to create a monopoly, and interlocking directorates. 1 Copies of the Federal Trade commission Act, National Industrial Recovery Act, Sherman Act, Clayton Act, and Export Trade Act may be obtained on application to the Federal Trade Commission or Government Printing Office, Washington. 1 2 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION The Commission also administers the Webb-Pomerene law, or Export Trade Act. This act is intended to promote export trade and exempts associations of American exporters engaged solely in export trade from the provisions of the antitrust laws. Also under section 6 (h) of the Federal Trade Commission Act, the Commission has power-- 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. More recently, the Commission has had additional duties arising from the passage of the National Industrial Recovery Act, approved June 16, 1933, and during the fiscal year for which this report is made, the Commission was also charged with the administration of the Securities Act of 1933, approved May 27, 1933. By the provi- sions of the act known as the Securities Exchange Act of 1934, approved June 6, 1934, administration of the Securities Act of 1933 was transferred to the jurisdiction of the Securities and Exchange Commission, this transfer occurring on September 1, 1934. The work of the Federal Trade Commission has been substantially increased by reason of the passage of the National Industrial Recovery Act, section 3 (b) of which act provides that violations of codes set up as standards of fair competition by the National Recovery Administration shall be deemed unfair methods of competition within the meaning of the Federal Trade Commission Act. WORK UNDER NATIONAL INDUSTRIAL RECOVERY ACT Under section 3 (b) of the National Industrial Recovery Act, the Commission, in the event the provisions of a code are violated, may proceed in the same manner as with regard to violations of section 5 of the Federal Trade Commission Act. In order to avoid duplication of effort and overlapping of work, the Federal Trade Commission and the National Recovery Administration have cooperated in handling complaints of this nature. As a rule, the Commission does not proceed with formal action until it has first consulted with the N.R.A., and an effort made through that organization to obtain compliance. Section 6 (c) of the National Industrial Recovery Act provides that the Federal Trade Commission, upon request of the President, shall make such investigations as may be necessary to enable the President to enforce the provisions of the act. Pursuant to this section, the National Recovery Administration referred 100 cases to the Federal Trade Commission for investigation during the last fiscal WORK UNDER NATIONAL INDUSTRIAL RECOVERY ACT 3 year. Seventy-six of these cases have been completed and returned to N.R.A. These investigations have ranged from a simple matter of ascertaining the facts relative to an alleged violation of the labor provisions of a code by a single company to a general survey covering several States made for the purpose of ascertaining the effect of the operation of a code on a large group of producers in a given industry.