ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION FOR THE FISCAL YEAR ENDED JUNE 30, 1927 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON 1927 FEDERAL TRADE COMMISSION C. W. HUNT, Chairman. WILLIAM E. HUMPHREY. ABRAM F. MYERS. J. F. NUGENT. EDGAR A. McCULLOCH. OTIS B. JOHNSON, Secretary CONTENTS Page Introduction 1 The report 5 Division of trade-practice conferences 7 Industries for which trade-practice conferences were concluded during the present fiscal year 8 Insecticide and disinfectant industries 8 Butter, egg, cheese, and poultry industries 9 Correspondence-school industry 9 Woven-furniture industry 10 Industries for which trade-practice conferences have been authorized but not held during the present fiscal year 11 Blanket industry 11 Motion-picture industry 11 Golf-ball Industry 11 Mop industry 11 Edible-oil industry 11 Pending proceedings for violations of trade-practice conference rules 12 The present status of the Clayton Act as administered by the Federal Trade Commission 13 Trial examiners’ division 18 Outline of procedure 18 Complaint 18 Stipulation 18 Export-trade section 20 Provisions of the export trade act 20 Associations operating under the export law 20 Exports during 1926 exceed $200,000,000 22 Advantages of the Webb law 23 Foreign-trade inquiries under section 6 (h) 24 Unfair competition in foreign countries during the past year 25 Economic division 28 Grain trade 29 Bread, flour, and grain 29 Electric power 30 Open-price associations 33 Lumber-trade associations 34 Petroleum prices 35 Panhandle oil situation 35 National wealth and income 35 Stock dividends 37 Cooperation with legal staff 37 Cooperation with other branches of the Government 38 Work on hand 38 Chief counsel 41 Outline of procedure 41 Summary of work, 1927 42 III IV CONTENT Chief counsel-Continued. Page Character of complaints 43 Price discrimination-Violation of section 2 of the Clayton Act and section 5 of the Federal Trade Commission act 43 Resale price maintenance--Violation of section 5 of the Federal Trade Commission act 44 Conspiracy to fix prices--Boycott section 5 of the Federal Trade Commission act 45 Commercial bribery--Violation of Section 5 of the Federal Trade Commission act 46 Misrepresentation of tools 47 Castile soap--Misrepresentation--Violation of section 5 of the Federal Trade Commission act 47 Acquisition of stock of competitors--Violation of section 7 of the Clayton Act 48 Misrepresentation of furniture-Violation of section 5 of the Federal Trade Commission act 48 “Havana” cigar cases-Misrepresentation and misbranding--Violation of section 5 of the Federal Trade Commission act 49 Orders to cease and desist 49 Northwest Chair Co.--Violation of section 5 of the Federal Trade Commission act 52 Atlanta Wholesale Confectioners Association, its officers and members-- Violation of section 5 of the Federal Trade Commission act 53 Acme Fountain Pen Co.--Violation of section 5 of the Federal Trade Commission act 54 Arnold Electric Co.--Price maintenance--Violation of section 5 of the Federal Trade Commission act 54 “Sheffield” silverware cases-Violation of section 5 of the Federal Trade Commission act 55 Philippine mahogany cases--Violation of section 5 of the Federal Trade Commission act 55 Twinplex Sales Co.-Commercial bribery--Violation of section 5 of the Federal Trade Commission act 56 Wisconsin Wholesale Grocers Association et al.--Violation of section 5 of the Federal Trade Commission act 57 Misrepresentation of paint--Violation of section 5 of the Federal Trade Commission act 57 Dismissal of complaints 58 Court cases 58 Cases in United States Supreme Court 59 The Claire Furnace Co. case--Investigation instituted by the commission upon its own motion, but after suggestions and conference with the Committee on Appropriations of the House of Representatives 59 The Swift case--Acquisition of stock in violation of section 7 of the Clayton Act 61 The Western Meat Co. case-Another instance of stock acquisition in violation of section 7 of the Clayton Act 62 The Thatcher Manufacturing Co. case-Violation of section 7 of the Clayton Act-- Milk bottles 63 Eastman Kodak Co. case 65 CONTENTS V Court cases--Continued. Cases in United States Supreme Court--Continued. Page Pacific States Paper Trade Association--Price fixing in paper products on the Pacific coast 67 The American Tobacco Co. case-Price agreements on tobacco products 68 Cases in the United States Circuit Courts of Appeals 69 The Proctor & Gamble Co. case-False advertising and misbranding--Soap 69 Arkansas Wholesale Grocers Association-Combination and conspiracy to lessen competition in groceries-Violation of section 5, Federal Trade Commission act 70 The Utah-Idaho Sugar Co. case-Suppression of competition in the manufacture and sale of beet sugar 72 Minneapolis Chamber of Commerce case 73 Pure Silk Hosiery Mills case--False advertising-False representations in sale of hosiery 75 The Armour case-Acquisition of stock in violation of section 7 of the Clayton Act 76 Louis Leavitt-Misrepresentation of paint 76 Ostermoor & Co. (Inc.) et al.--Misrepresentation--Mattresses 77 Max Rope Co. (Inc.) --Misrepresentations--Rope 77 Standard Education Society case-Misrepresentations--Books 78 Franklin Coal Co. case-Misrepresentations 78 Harriet Hubbard Ayer (Inc.) case--Resale price maintenance 79 Cream of Wheat Co.--Resale price maintenance case-Cereal 80 J. W. Kobi Co.--Resale price maintenance 82 F. W. Dobe case-Sundry misrepresentations of correspondence school and the inducements offered by it 82 Sea Island Thread Co.--Misbranding of cotton thread 82 The B. Paul case-Misrepresentation of hair dye-section 5, Federal Trade Commission Act 83 Jones Hardwood Co.--Misrepresentation of woods of the Philippine Islands-- Violation of section 5 of the Federal Trade Commission Act 83 Case in Courts of District of Columbia 83 The Mannered Coal Co. case 83 The Shade Shop case-Appropriation and simulation of trade name 84 Millers’ National Federation case--Investigation by Commission in response to resolution of the United States Senate 84 Royal Baking Powder case--Violation of Section 5 of the Federal Trade Commission Act 86 Methods of competition condemned 87 Chief examiner’s division 93 Outline of procedure 93 Summary of work, 1927 94 Board of review 96 Outline of procedure 96 Summary of work, 1927 97 Administrative division 98 Personnel 98 Publications 100 Library 100 VI CONTENTS Administrative division--Continued. Page Fiscal affairs 101 Appropriations, expenditures, liabilities, and balances 101 Statement of costs for the fiscal year ended June 30, 1927 101 Detailed statement of costs for the fiscal year ended June 30, 1927 101 Adjustments 102 Tables summarizing work of legal division and court proceedings 1915-1927 104 1. Preliminary investigations 104 2. Applications for complaint 104 3. Complaints 104 4. Petitions for review--United States Circuit Courts of Appeals 105 5. Petitions for review--Supreme Court of the United States 105 6. Petitions for enforcement--Lower courts 106 7. Petitions for enforcement--Supreme Court of the United States 106 8. Petitions for rehearing, modification, etc.--Lower courts 106 9. Petitions for rehearing, modification, etc.--Supreme Court of the United States 107 10. Mandamus, injunction, etc.--Lower courts 107 11. Mandamus, injunction, etc.--Supreme Court of the United States 107 12. Rehearing, modification, etc.--Lower courts 108 EXHIBITS 1. Procedure and policy 111 2. Federal Trade Commission act 114 3. Provisions of the Clayton Act which concern the Federal Trade Commission 120 4. Export trade act 124 5. Rules of practice before the commission 126 6. Proceedings disposed of July 1, 1926, to June 30, 1927 131 Orders to cease and desist 131 Orders of dismissal 139 7. Complaints pending July 1, 1927, and status 146 8. Stipulations published after deleting name of respondents 178 9. Statements of trade practice conferences 213 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION FOR THE FISCAL YEAR ENDED JUNE 30, 1927 INTRODUCTION To the Senate and House of Representatives: New conceptions of the part the Federal Trade Commission occupies in the commercial life of the Nation have come into practice recently, and in the fiscal year that closed June 30, 1927, they resulted in far-reaching development. The newer policies have principally to do with the idea of self-regulation in business and industry, and it has been possible to progress in these directions without overstepping the bounds of the commission’s powers as laid down by law. “Helping business to help itself” wherever and whenever it can be done consistently without prejudice to the best interests of the public as a whole is the principle of this new policy. A new constructive agency known as the trade practice conference division is proving of substantial assistance to the commissioners and to industry and business in the fundamental work of the commission--the elimination of unfair practices in commercial competition. This procedure permits an industry to make its own rules of business conduct; to establish its own law merchant, in cooperation with the commission. Cooperation with business also is carried on by the commission through the recently adopted practice permitting a prospective respondent to have an informal hearing before the board of review before a complaint is issued. The primary purpose of the hearing is to afford the proposed respondent an opportunity to show cause why complaint should not issue against it, and also afford the com-mission an opportunity to secure all possible facts