ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION FOR THE FISCAL YEAR ENDED JUNE 30 1936 UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON: 1936 For Sale by the Superintendent of Documents, Washington, D. C - - - Price 20 cents (Paper cover) FEDERAL TRADE COMMISSION Charles H. March, Chairman 1 William A. Ayres, Vice Chairman Garland S. Ferguson, Jr. Ewin L. Davis Robert E Freer Otis B. Johnson, Secretary FEDERAL TRADE COMMISSIONERS--1915-36 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. EXECUTIVE OFFICES OF THE COMMISSION 815 Connecticut Avenue NW., Washington, D. C. BRANCH OFFICES 45 Broadway, New York 544 Federal Office Building, San Francisco 433 West Van Buren Street, Chicago 801 Federal Building, Seattle 1 Chairmanship rotates annually. Commissioner Ayres will become chairman in January 1938. II LETTER OF SUBMITTAL To the Congress of the United States: I have the honor to submit herewith the Twenty-second Annual Report of the Federal Trade Commission for the fiscal year ending June 30, 1936. By direction of the Commission: CHARLES H. MARCH, Chairman III CONTENTS. INTRODUCTION Page Powers and duties of the Commission 1 General legal activities 5 Trade-practice conferences 6 General investigations 7 Commissioners and their duties 9 How commission work is handled 10 Robinson-Patman Borah-Van Nuys Act 12 Commission publications 15 Recommendations 16 PART I. GENERAL INVESTIGATIONS Milk and dairy products 21 Agricultural income 27 Steel sheet piling (collusive bidding) 30 Textile industries 32 Electric and gas utilities 34 Petroleum decree 39 Price bases--Range boiler industry 39 PART II. GENERAL LEGAL WORK Description of procedure 43 Chart Facing p. 43 Legal investigation 46 Consolidations and mergers 47 Cases settled by stipulation 50 Representative complaints 51 Orders to cease and desist 57 Types of unfair competition 64 Cases in the Federal courts 71 Tabular summary of legal work 87 PART III. TRADE PRACTICE CONFERENCES History and purpose of procedure 97 Voluntary agreements 98 Trade practice conference proceedings 98 Outline of trade conference procedure 99 Group I and group II rules 101 PART IV. SPECIAL PROCEDURE IN CERTAIN TYPES OF ADVERTISING CASES Newspaper, magazine and radio ADVERTISING 105 v VI CONTENTS PART V. FOREIGN-TRADE WORK Page Provisions of Export Trade Act (Webb-Pomerene law) 113 Export associations in 1935 113 Advantages in export trade combination 115 Foreign Trade Series No.2 115 Associations filing papers 115 Trust laws and unfair competition abroad 116 FISCAL AFFAIRS Appropriation acts providing funds for commission work 127 Allotments from other appropriations 128 Appropriations, allotments and expenditures 128 APPENDIXES Federal Trade Commission Act 135 Sherman Act 141 Clayton Act 142 Robinson-Patman Anti-Price Discrimination Act 145 Export Trade Act 149 Rules of practice 151 Investigations, 1915-36 157 Index 177 INTRODUCTION POWERS AND DUTIES OF THE COMMISSION GENERAL LEGAL ACTIVITIES TRADE PRACTICE CONFERENCES GENERAL INVESTIGATIONS COMMISSIONERS AND THEIR DUTIES HOW COMMISSION WORK IS HANDLED ROBINSON-PATMAN BORAH-VAN NUYS ACT COMMISSION PUBLICATIONS RECOMMENDATIONS 1 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 1935- 36. Organized March 16, 1915, under the Federal Trade Commission Act, approved September 26, 1914, the Commission is an administrative body exercising quasi- judicial functions. These functions are chiefly, (1) to prevent unfair methods of competition in interstate commerce; (2) to make investigations at the direction of Congress, the President, the Attorney General, or upon its own initiative; (3) to report facts in regard to alleged violations of the antitrust laws; (4) to prevent price discriminations, exclusive dealing contracts, capital stock acquisitions, and interlocking directorates in violation of the Clayton Act; and (5) to prevent unfair methods of competition in export trade in violation of the Federal Trade Commission Act as extended by the Webb-Pomerene Act (Export Trade Act). During the fiscal year, the Commission’s statutory authority was broadened by the passage by the Congress, at its last session, of the Robinson-Patman Borah-Van Nuys Act, Public, No. 692, approved June 19, 1936, amending section 2 of the Clayton Act making price discriminations unlawful. Under the Federal Trade Commission Act 1 the duties of the Corn-mission 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 Commission’s organic act, in which it is declared that “unfair methods of competition in commerce are hereby declared unlawful.” This phrase is not further defined in the act. In the first case in which the Supreme Court had occasion to consider this language, namely, that of F. T. C. v. Gratz (253 U. S. 421), the Court associated with the phrase those practices “opposed to good morals be- 1 Copies of the Federal Trade Commission Act, Sherman Act, Clayton Act, Robinson Patman Borah- Van Nuys Act, and Export Trade Act may be obtained on application to the Federal Trade Commission or Government Printing Office, Washington, D. C. Texts of these acts also appear beginning at p.135 of this report. 3 4 ANNUAL REPORT OF THE FEDERAL TRADE COMMISSION cause characterized by deception, bad faith, fraud, or oppression, or as against public policy because of their dangerous tendency unduly to hinder competition or create monopoly.” In a later case, in which it had occasion to consider the phrase (F. T. C. v. R. F. Keppel Bro., Inc., 291 U. S. 304), the Supreme Court upheld, as involving an unfair method of competition, the Commission’s order prohibiting the sale of candies largely for ultimate resale through schemes of chance. The Court pointed out that in defining the powers of the Commission Congress advisedly adopted this phrase, “which, as this Court has said, does not admit of precise definition, but the meaning and application of which must be arrived at by what this Court elsewhere has called ‘the gradual process of judicial inclusion and exclusion.’” 2 In another decision (A. L. A. Schechter Poultry Corp. et al. v. United States, 295 U. S. 495), the Supreme Court said: “* * * What are ‘unfair methods of competition’ are thus to be determined in particular instances, upon evidence, in the light of particular competitive conditions, and of what is found to be a specific and substantial public interest. * * *” In this general connection, it should be noted that under the pro-visions of section 5 of the Federal Trade Commission Act the Com mission is to proceed only if it appears to it that the particular proceeding would be “to the interest of the public.” It accordingly does not concern itself with purely private competitive controversies which have no public significance. Legal activities of the Commission, besides enforcement of its organic act, include administration of section 2 of the Clayton Act, dealing with unlawful price discriminations, as amended by the Robinson-Patman Borah-Van Nuys Act, and sections 3, 7, and 8 of the Clayton Act dealing, respectively, with unlawful “tying” contracts, unlawful stock acquisitions, and unlawful interlocking directorates The Webb-Pomerene, or Export Trade Act, also administered by the Commission, has for its purpose the promotion of export trade. It exempts from the provisions of the antitrust laws associations of American exporters engaged solely in export trade. The economic work of the Commission arises chiefly under section 6 (a), (b), and (d) of the organic 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. 2 Typical methods of competition condemned by the Commission as unfair are described on p. 64. GENERAL LEGAL ACTIVITIES 5 (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 an special, report 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.